Yahoo 2008 Annual Report Download - page 108

Yahoo! Inc.
Notes to Consolidated Financial Statements—(Continued)
and improper practices by the underwriters, and seek unspecified damages. Similar complaints were filed in the
same court against numerous public companies that conducted IPOs of their common stock since the mid-1990s.
All of these lawsuits were consolidated for pretrial purposes before Judge Shira Scheindlin. 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 claims
against certain defendants, including Overture. Between June 2004 and June 2007, plaintiffs and issuer
defendants, including Overture, reached a settlement, but due to certain conditions not being met the settlement
did not receive court approval. On March 26, 2008, the district court denied defendants’ motions to dismiss
except as to Section 11 claims raised by some plaintiffs who sold their securities for a price in excess of the
initial offering price and those who purchased outside the previously certified class period. Initial briefing on the
class certification motion was completed in April 2008. The plaintiffs’ class certification motion then was
withdrawn without prejudice on October 10, 2008. The Company intends to defend the case vigorously.
In May 2007, two purported class actions were commenced by plaintiffs Ellen Brodsky and Manfred Hacker,
asserting claims arising under the federal securities laws against the Company and certain individual defendants.
These actions were ordered consolidated in the U.S. District Court for the Central District of California and, on
December 21, 2007, a Consolidated Amended Complaint was filed against Yahoo! and certain individual
defendants, including current and former officers and a former director and officer. Plaintiffs purport to represent a
class of persons who purchased the Company’s common stock between April 8, 2004 and July 18, 2006. Plaintiffs
allege that defendants engaged in a scheme to inflate the Company’s stock price by making false and misleading
statements regarding the Company’s operations, financial results, and future business prospects in violation of
Section 10(b) of the Exchange Act and SEC Rule 10b-5. Plaintiffs also allege that the individual defendants
engaged in insider trading in violation of Section 20(A) of the Exchange Act, and as control persons are subject to
liability under Section 20(A) of the Exchange Act. Plaintiffs seek compensatory damages, injunctive relief,
disgorgement of alleged insider trading proceeds, and other equitable relief. On March 10, 2008, the Court granted
defendants’ motion to transfer the action to the U.S. District Court for the Northern District of California. On
October 7, 2008, the Court granted defendants’ motion to dismiss the Consolidated Amended Complaint with leave
to amend. Plaintiffs filed their Second Amended Consolidated Complaint on December 19, 2008. On February 2,
2009, defendants filed a motion to dismiss, which is scheduled for hearing on April 23, 2009.
On May 15, 2007, a stockholder derivative complaint was filed in the California Superior Court, Santa Clara
County, by Greg Brockwell against members of the Board and selected officers alleging breaches of fiduciary
duties and corporate waste similar to the allegations in the Brodsky/Hacker class action litigation. The Brockwell
action was voluntarily dismissed with prejudice as to plaintiff and without prejudice as to Yahoo! stockholders
and the Company, derivatively, on February 3, 2009.
On June 14, 2007, a second stockholder derivative action was filed in the U.S. District Court for the Central
District of California by Jill Watkins against members of the Board and selected officers. The complaint filed by
Plaintiff Watkins is substantially similar to the complaint filed by Plaintiff Brockwell, with the addition of a
claim for relief for alleged violation of Section 10(b) of the Exchange Act, and Watkins agreed to coordinate her
action with the federal class action litigation. On April 29, 2008, the federal court in Los Angeles granted
defendants’ motion to transfer the Watkins action to the U.S. District Court for the Northern District of
California, and declined to decide the Plaintiff’s motion to amend the complaint. On January 12, 2009, Watkins
filed a new motion for leave to file an amended complaint seeking to substitute a new plaintiff, seeking to add a
derivative claim alleging violations of Section 20A of the Exchange Act, seeking to add a class claim for alleged
violations of Section 14(a) of the Exchange Act, seeking to add a class claim for alleged breach of fiduciary duty,
and seeking to allege claims relating to Microsoft’s unsolicited proposal to acquire Yahoo! Inc. on February 1,
2008.
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