Judge denies Yahoo's bid to dismiss data breach lawsuits

Verizon-owned Yahoo must defend itself against data breach claims

A US federal judge has ordered Yahoo to face legal action over a series of data breaches that exposed the personal data of three billion users.

US District judge Lucy Koh rejected a bid from Verizon Communications, the firm that bought Yahoo's internet business in June last year, to dismiss a number of claims, including for negligence and breach of contract. However, some other claims were dismissed.

Plaintiffs accused Yahoo of taking too long to disclose three data breaches that occurred from 2013 and 2016. Yahoo eventually admitted the breaches, but only when it had agreed to be acquired by Verizon, leading to Verizon dramatically reducing its bid.

The filing mentions several customers whose data was breached by criminals and used to file fraudulent tax returns or credit card charges. Others had to purchase credit monitoring services to check on their credit and finances.

However, Yahoo moved to dismiss many claims including those for negligence and breach of contract. An amended complaint from plaintiffs came after Yahoo raised its estimates over the extent of compromised accounts.

In a 48-page decision published last Friday, Koh said that the arguments raised in Yahoo's motion to dismiss - such as criticising users for not reading its privacy policy and for continuing to use Yahoo Mail after the attacks - were "unpersuasive". She added that the amended complaint showed that security was an important factor in plaintiffs' decision to use Yahoo.

"Plaintiffs' allegations are sufficient to show that they would have behaved differently had defendants disclosed the security weaknesses of the Yahoo Mail System," Koh said.

Koh added that customers may have "taken measures to protect themselves" if they were aware of the breaches sooner.

The judge agreed to dismiss claims of violations of California's unfair competition law, but upheld the claim of another plaintiff who had paid for Yahoo's premium email service.

"Even if his annual fee did not provide for security measures above and beyond those for free accounts, Plaintiff Mortensen pleads that Defendants' representations about security formed part of the reason for him to use Yahoo! Mail in the first place and to pay $19.95 per year for the premium email service," Koh said.

Overall, the judge denied Yahoo 10 motions to dismiss while granting six, meaning that Yahoo will have to defend itself in court or make a settlement.

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