Yahoo Inc.

Type of Case:

Bottini & Bottini, Inc. and Cotchett Pitre & McCarthy LLP have filed two shareholder lawsuits alleging claims related to the sale of Yahoo's operating assets to Verizon Inc. After entering into the agreement with Verizon in July 2016, Yahoo subsequently disclosed that “senior executives” and legal staff knew about a massive data breach back in 2014 – one of the largest in U.S. history, impacting five hundred million customers – yet failed to inform impacted users and shareholders until at least September 23, 2016 – two months after Yahoo entered into the proposed transaction with Verizon Communications, Inc. (“Verizon”). In addition, Yahoo subsequently disclosed on December 14, 2016 for the first time that it had been subject to an even larger hack, involving one billion users, in 2013 which involved sensitive user information, including names, telephone numbers, dates of birth, encrypted passwords and unencrypted security questions that could be used to reset a password. The two attacks are the largest known security breaches of one company’s computer network.

The lawsuit also includes a class action claim against Verizon, which is set to acquire Yahoo for $4.8 billion in Q2 2017. As alleged in the lawsuit, after Yahoo announced the security breaches, Verizon and Yahoo’s management negotiated a $350 million reduction in the purchase price that will allow Yahoo’s executives to keep golden parachutes worth millions of dollars after the deal closes.

The lawsuit is pending in the Complex Department of the Santa Clara Superior Court and is being presided over by the Hon. Brian C. Walsh.