Yahoo 2007 Annual Report Download - page 103

1933 and the Securities Exchange Act of 1934 involving undisclosed compensation to the underwriters, and
improper practices by the underwriters, and seek unspecified damages. Similar complaints were filed in the same
court against numerous public companies that conducted initial public offerings of their common stock since the
mid-1990s. All of these lawsuits were consolidated for pretrial purposes before Judge Shira Scheindlin. On
April 19, 2002, plaintiffs filed an amended complaint, alleging Rule 10b-5 claims of fraud. On July 15, 2002, the
issuers filed an omnibus motion to dismiss for failure to comply with applicable pleading standards. On October 8,
2002, the Court entered an Order of Dismissal as to all of the individual defendants in the Overture IPO litigation,
without prejudice. On February 19, 2003, the Court denied the motion to dismiss the Rule 10b-5 claims against
certain defendants, including Overture. In June 2004, a stipulation of settlement and release of claims against the
issuer defendants, including Overture, was submitted to the Court for approval. On August 31, 2005, the Court
preliminarily approved the settlement. In December 2006, the appellate court overturned the certification of classes
in the six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings.
Since class certification, which was a condition of the settlement, was not met, the parties stipulated to terminate the
settlement. On June 25, 2007, the Court entered an order terminating the proposed settlement based upon this
stipulation. Plaintiffs have filed amended master allegations and amended complaints in the six test cases. It is
uncertain whether there will be any future settlement. If a settlement is not reached, and litigation against Overture
continues, the Company intends to defend the case vigorously.
On May 11, 2007, the first of two purported securities class action lawsuits was filed against Yahoo! Inc. and certain
of its officers, members of the Board of Directors and former officers. The first lawsuit was filed in the United
States District Court, Central District of California by plaintiff Ellen Rosenthal Brodsky and the second lawsuit was
filed in the United States District Court, Central District of California by plaintiff Manfred Hacker. The two cases
were consolidated in the United States District Court for the Central District of California, and a consolidated
complaint was filed on December 21, 2007. In the consolidated amended complaint, the plaintiffs allege, among
other things, violation of the Securities Exchange Act of 1934 sections 10(b), 20(a) and 20(A), as well as
Rule 10b-5. The plaintiffs generally claim that Yahoo! issued false, deceptive or misleading statements concerning
its advertising business, financial results, and sales and growth potential between April 8, 2004 and July 18, 2006.
The consolidated amended complaint seeks unspecified compensatory damages, injunctive relief, costs and
attorneys’ fees. The Company believes this case is without merit and intends to defend it vigorously.
On May 15, 2007, the first of two shareholder derivative actions was filed in the Superior Court of Santa Clara
County by plaintiff Greg Brockwell against certain officers and members of the Board of Directors of Yahoo! Inc.
purportedly on behalf of Yahoo! Inc. The second derivative action was filed in the United States District Court for
the Central District of California on June 14, 2007 by plaintiff Jill Watkins. The derivative actions, which include
allegations of substantially identical facts to the purported securities class action, attempt to state various claims
under federal and California law for trading by defendants on alleged material non-public information, and
allegations of breaches of fiduciary duties relating to financial reporting, misappropriation of information, abuse of
control and waste of corporate assets. The federal derivative action includes an additional claim for alleged
violation of Section 10(b) of the Securities Exchange Act of 1934. The derivative actions seek unspecified
damages, equitable and injunctive relief, including, among other things, changes to corporate governance and
internal procedures, restitution and disgorgement of profits and compensation received by defendants, costs and
attorneys’ fees.
Since February 1, 2008, four separate shareholder lawsuits have been filed in the California Superior Court,
Santa Clara County, against Yahoo! Inc., members of the Board of Directors and selected former officers by
plaintiffs Edward Fritsche, the Thomas Stone Trust, Tom Turberg and the Congregation Beth Aaron (the “California
Lawsuits”). The plaintiffs in the California Lawsuits purport to assert class claims on behalf of all Yahoo!
stockholders, except defendants and their affiliates. In addition, certain of the plaintiffs in the California Lawsuits
purport to assert shareholder derivative claims on behalf of Yahoo! Inc. The complaints allege that the Yahoo!
Board of Directors breached fiduciary duties in connection with Microsoft’s unsolicited proposal to acquire Yahoo!.
The plaintiffs in two of the California lawsuits allege that Microsoft’s February 1, 2008 unsolicited proposal to
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Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)