Seen & Heard: Yahoo Faces Litigation for Data Breaches

It was a head slap for Verizon when a US judge ruled this week that Yahoo will face nationwide litigation over the three large data breaches that took place before Verizon bought Yahoo.

Reuters reported that US District Judge Lucy Koh ruled Wednesday night that Yahoo Inc. (Nasdaq: YHOO) was on the hook for litigation from more than 1 billion email users nationwide who saw their personal information compromised by the three data breaches.

Verizon Communications Inc. (NYSE: VZ) completed its $4.76 billion deal to buy Yahoo's core Internet assets in June after the two companies agreed in February to cut $350 million off of the price tag due to the data breaches. Also in February, both companies agreed to share certain legal and regulatory liabilities arising from Yahoo's breaches. (See Seen & Heard: Verizon Gets Cold Feet on Yahoo Deal, and Verizon Shaves $350M Off of Yahoo Deal.) The judge's ruling was a setback for Verizon's attempts to limit potential liability, according to Reuters.

Yahoo's 1 billion email users were hacked in 2013, which included more than 150,000 US government employees, but Yahoo was slow to disclose it. A second breach occurred in 2014 while the third took place in 2015 and 2016.

According to Reuters, Koh rejected Yahoo's position that the breach victims lacked the standing to sue, and said they could pursue some breach of contract and unfair competition claims. Koh turned down other claims, but said the plaintiffs could revise their complaint to address her concerns.

Koh wrote that "All plaintiffs have alleged a risk of future identity theft, in addition to loss of value of their personal identification information," in the 93-page ruling.

Yahoo's position was that the breaches took "a triumph of criminal persistence" and that no security system was invulnerable to hacking, according to Reuters.

Verizon declined to comment to Reuters on the pending litigation.

Verizon first announced its intention to buy Yahoo's core Internet assets in July of last year. Yahoo's assets were folded into a new Verizon subsidiary called Oath. (See Verizon Betting Big on Yahoo's Assets and Seen & Heard: Yahoo CEO Exits via Platinum Parachute.)

— Mike Robuck, Editor, Telco Transformation