Yahoo Dodges Most Class Claims Over Massive Data Breaches

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By Jimmy H. Koo

Yahoo! Inc. has had most of the customer class allegations over data breaches of more than a billion user accounts trimmed by a federal district court ( In re Yahoo! Inc. Customer Data Sec. Breach Litig. , 2017 BL 306071, N.D. Cal., No. 16-MD-02752-LHK, 8/30/17 ).

The action doesn’t completely end the customer class litigation over the series of data breaches, but it does substantially reduce the scope of the litigation that has been hanging over the company’s acquisition by Verizon Communications Inc. In June, Yahoo shareholders approved the $4.48 billion sale of the company’s main web properties to Verizon. Yahoo dropped its purchase price by approximately $350 million after revealing its discovery of the data breaches.

After shedding its web properties, Yahoo recast itself as management investment company Altaba Inc., which has a market capitalization of $61.4 billion, according to Bloomberg data.

Judge Lucy H. Koh of the U.S. District Court for the Northern District of California held Aug. 30 that Yahoo won’t have to face class federal Stored Communications Act claims that it failed to take “commercially reasonable steps to safeguard” communications and “knowingly divulged” the communications.

The court additionally dismissed California Online Privacy Protection Act class claims, because the statute doesn’t provide a private right of action.

The court dismissed class California Customer Records Act (CRA) claims of non-California plaintiffs, but the Sunnyvale, Calif.-based tech company must face California resident class CRA claims that it failed to notify customers about some of the data breaches that allowed hackers to forge authentication access and remain logged in to the hacked email accounts indefinitely.

Trimmed Claims

According to the consolidated class complaint, Yahoo disclosed in September 2016 that two separate data breaches—one in 2013 and another in 2014—compromised up to 1 billion user accounts. By the time Yahoo agreed to lower its purchase price, the tech company had started notifying approximately 32 million users that they had been targeted in additional breaches.

Plaintiffs claimed their personally identifiable information (PII) has been compromised as a result of the data breaches, and that hackers used the stolen information to create false tax returns, open fraudulent bank accounts, and steal government benefits, among other damages.

Yahoo moved to dismiss the consolidated class complaint, arguing that the plaintiffs lack standing to file suit because they only alleged “vague and unspecified” harms. The court held that the plaintiffs had suffered sufficient injury to sue by asserting “concrete and imminent threat of future harm” and loss of PII. However, that holding didn’t prevent the court from then dismissing most of the plaintiffs’ claims.

Hunton & Williams LLP and Chapman Spingola LLP represent Yahoo. Labaton Sucharow LLP; Morgan & Morgan PA; Robbins Geller Rudman Dowd LLP; and Carney Bates & Pulliam PLLC represent the plaintiffs.

To contact the reporter on this story: Jimmy H. Koo in Washington at jkoo@bna.com

To contact the editor responsible for this story: Donald Aplin at daplin@bna.com

For More Information

The court's ruling is available at http://src.bna.com/r9d.

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