Patricia Spain, a Yahoo shareholder, filed a lawsuit against the company in Santa Clara County Superior Court, on allegations of failing to immediately disclose two massive data breaches. The lawsuit, which targets company’s directors, said that Yahoo violated its fiduciary duty by making late disclosure.
According to the lawsuit, this late disclosure led to important financial issues for the company, which lost no less than $350 million. The loss was registered by the company when Yahoo reduced its planned sale price in its deal with Verizon. The $4.8 billion sale was reduced by $350 million.
The lawsuit names some important people at Yahoo, including the company’s Chief Executive Officer Marisa Mayer, but also Yahoo’s former general counsel Ronald Bell. Other directors are mentioned in the lawsuit as well, but the legal action also targets Verizon. Verizon announced its intentions to acquire Yahoo’s operating assets in 2017 for the price of $4.8 billion. The deal was first revealed in July, 2016.
The deal’s price was influenced by two massive data breaches revealed by Yahoo. The first breach was revealed by the company in September 2016, and occurred in 2014, Yahoo announcing that no less than 500,000 user accounts were stolen. The data accessed by third parties included a lot of personal and sensitive information, such as names, email addresses, but also dates of birth and passwords.
However, that was not all. 2016 had definitely been a difficult year for the tech giant, which in December announced another breach, an even larger one, affecting no less than 1 billion user accounts. The breach occurred in 2013 and compromised a lot of user data. After the 2016 announcements on the 2014 and 2013 breaches, Yahoo and Verizon negotiated a new deal.
So, the amount that Verizon was willing to pay was reduced from $4.8 billion to $4.48 billion. According to the new lawsuit, the reduced price was a direct consequence of the two breaches. The plaintiff said that although Yahoo’s executives knew about the breaches sooner, it failed to reveal them to Verizon, the public and US authorities. The lawsuit seeks class action status, representing over 8,000 company shareholders.