In what appears to be one of the largest derivative lawsuit settlements ever, Alphabet, Google’s parent company, has agreed to provide $500 million over ten years to fund the reconstruction of the company’s global compliance structure. The lawsuit and its settlement follow in the wake of extensive federal and state antitrust enforcement activity against the company. The settlement is subject to court approval. A copy of the plaintiffs’ unopposed May 30, 2025, motion for preliminary approval of the settlement can be found here.
Background
In 2021, two plaintiff shareholders filed separate shareholder derivative complaints against certain directors and officers of Alphabet. The two complaints ultimately were consolidated. In their consolidated amended complaint, the plaintiffs alleged that under the management and oversight of the company’s board, the company engaged in “systematic anticompetitive behavior across several core business operations, including advertising, searching and Google Play services.” The plaintiffs alleged that this anticompetitive conduct “broadly exposed the Company to antitrust investigations and enforcement actions by the U.S. Department of Justice, states’ attorneys general,” and other authorities.
In their consolidated complaint, the plaintiffs asserted claims for breach of fiduciary duty, unjust enrichment, and corporate waste. Each of the claims related to alleged anticompetitive business practices and decisions and sought to hold Alphabet’s leadership responsible for allegedly exposing the Company to government investigations and lawsuits, as well as to other related civil litigation.
The motion for preliminary court approval recites that the parties engaged in ongoing efforts to resolve the derivative litigation, including engaging in extensive ADR proceedings, inclusive of several in-person mediation sessions. On April 9, 2025, the parties executed a memorandum of understanding specifying terms to resolve the action. The terms were subsequently approved by the parties’ respective governing authorities.
The Settlement
The settlement provides $500 million in funding for “comprehensive reforms, over 10 years, that require Alphabet and it main subsidiary, Google LLC, to completely revamp and rebuild its global compliance structure, both at the board and executive level.” The motion for preliminary court approval asserts that the settlement will “transform the regulatory and compliance environment at Google and will provide individual benefits to the Company and its shareholders in the years to come.”
Among other things, the settlement requires the company to create a new Board Risk and Compliance Committee, to address compliance oversight responsibilities that had been addressed by the Board’s Audit and Compliance Committee. The settlement also specifies that the company has designed and committed to the implementation of advanced, elaborate internal compliance mechanisms, which are detailed in the motion for preliminary settlement.
Discussion
This settlement is by any measure one of the largest ever derivative lawsuit settlements. Many readers know that I have been maintaining a running tally of the largest derivative settlements. My updated list of the largest derivative settlements can be found here. The dollar value of this settlement among derivative settlements arguably is exceeded only by the Tesla board compensation derivative suit, which, as discussed here, settled in July 2023 for a nominal stated value of $735 million. It is important to note that much of the value of the Tesla settlement was in the form of stock and options the defendants returned to the company, arguably making the actual economic value of the settlement less than the settlement’s nominally stated $735 million.
The nominally stated $500 million value of this settlement is also subject to the observation that the funds are to be paid over the course of 10 years, making the actual present value of the settlement something less than the stated $500 million value. Nevertheless, despite this present value concern, this new Alphabet settlement is clearly one of the largest derivative suit settlements ever, and arguably at least the second largest of all time.
Observers may note an unusual feature of the settlement, which is that the company itself is to fund the amounts to be paid to institute the promised governance reforms. This funding mechanism could support the argument that the settlement itself is a cost to the company, rather than a financial benefit to the company. Several other recent settlements, including Alphabet’s $310 million August 2020 settlement (discussed here) of #MeToo-related derivative litigation, have this same attribute, that the company agrees to undertake an expense to resolve derivative litigation.
Some readers may wonder, given the size of the settlement, how much the plaintiffs’ lawyers’ hope to claim for their fees. The motion for preliminary approvalt, at least, is silent on this point. The motion says only, with respect to the efforts to settle the case, that “the parties did not discuss the appropriateness of any amount of attorney’s fees and expenses before all other terms of the Settlement were agreed upon, and the Settling Parties understood at all ties that the Settlement was not contingent upon agreement or payment of any attorneys’ fees and expenses to Plaintiffs’ Lead Counsel.”
One further feature of this massive settlement is the fact that the derivative suits themselves arose in the wake of underlying antitrust and anticompetitive conduct enforcement actions and related civil litigation. I have long observed on this blog (most recently here) the long-standing phenomenon of class action securities litigation arising in the wake of antitrust enforcement activity. The derivative litigation here shows that the litigation activity following on in the wake of antitrust enforcement action is not limited just to class action securities lawsuits, but also includes the possibility of derivative litigation as well.
The magnitude of this settlement underscores the seriousness and importance of antitrust enforcement follow on civil litigation as a source of director and officer liability exposure, and it also highlights the potential significance of antitrust enforcement follow-on derivative litigation as well. Civil litigation in the wake of regulatory enforcement activity remains a significant source of potential corporate director and officer liability exposure.
One final note. The preliminary motion itself does not state the source of the funds that will pay for the corporate governance reforms. There is nothing in the motion to suggest that funds for the settlement might come, for example, from D&O insurance. To the contrary, the motion itself seems to suggest pretty strongly that the funds are to come from the company itself, rather than from any other source.