Yahoo 2010 Annual Report Download - page 99

See Note 16—“Search Agreement with Microsoft Corporation” for a description of the Company’s Search and
Advertising Services and Sales Agreement and License Agreement with Microsoft.
Contingencies. From time to time, third parties assert patent infringement claims against Yahoo!. Currently, the
Company is engaged in lawsuits regarding patent issues and has been notified of other potential patent disputes.
In addition, from time to time, the Company is subject to other legal proceedings and claims in the ordinary
course of business, including claims of alleged infringement of trademarks, copyrights, trade secrets, and other
intellectual property rights, claims related to employment matters, and a variety of other claims, including claims
alleging defamation, invasion of privacy, or similar claims arising in connection with the Company’s e-mail,
message boards, photo and video sites, auction sites, shopping services, and other communications and
community features.
On July 12, 2001, the first of several purported securities class action lawsuits was filed in the U.S. District Court
for the Southern District of New York against certain underwriters involved in Overture Services Inc.’s
(“Overture”) IPO, Overture, and certain of Overture’s former officers and directors. The court consolidated the
cases against Overture. Plaintiffs allege, among other things, violations of the Securities Act of 1933 and the
Securities Exchange Act of 1934 (the “Exchange Act”) 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 IPOs of their common stock since the mid-1990s.
All of these lawsuits were consolidated. On October 5, 2009, the court granted class certification and granted
final approval of a stipulated global settlement and plan of allocation. On October 6, 2010, various individuals
objecting to the settlement filed opening appeal briefs with the U.S. Court of Appeals for the Second Circuit, and
in early February 2011 Yahoo! and other appellees filed reply briefs in support of the settlement.
On June 14, 2007, a 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 the
plaintiff alleged breaches of fiduciary duties and corporate waste, similar to the allegations in a former class
action relating to stock price declines during the period April 2004 to July 2006, and alleged violation of
Section 10(b) of the Exchange Act. On July 16, 2009, the plaintiff Watkins voluntarily dismissed the action
against all defendants without prejudice. On July 17, 2009, plaintiff Miguel Leyte-Vidal, who had substituted in
as plaintiff prior to the dismissal of the federal Watkins action, re-filed a shareholder derivative action in Santa
Clara County Superior Court against members of the Board and selected officers. The Santa Clara County
Superior Court derivative action purports to assert causes of action on behalf of the Company for violation of
specified provisions of the California Corporations Code, for breaches of fiduciary duty regarding financial
accounting and insider selling and for unjust enrichment. The court sustained Yahoo!’s demurrer, which
challenged the sufficiency of the claim. Plaintiff filed an amended complaint on June 21, 2010. On January 28,
2011, the court granted Yahoo!’s demurrer to the amended complaint with leave to amend.
Plaintiff Congregation Beth Aaron voluntarily dismissed an action filed in Santa Clara County Superior Court
and, on December 3, 2008, re-filed in the U.S. District Court for the Northern District of California alleging
claims for breach of fiduciary duty and corporate waste in connection with Yahoo!’s consideration of proposals
by Microsoft to purchase all or a part of Yahoo! in 2008, adoption of severance plans, and the June 12, 2008
agreement between Google Inc. and Yahoo!. Plaintiff filed an amended complaint on February 20, 2009. The
complaint also alleged claims under Section 14(a) of the Exchange Act for alleged false statements or omissions
in Yahoo!’s June 9, 2008 proxy statement regarding the severance plans and for control person liability under
Section 20(a) of the Exchange Act, and also alleged that the defendants’ decision to settle similar Microsoft-
related Delaware lawsuits constituted an independent breach of fiduciary duty. The complaint sought unspecified
compensatory damages, injunctive relief, and an award of plaintiffs’ attorneys’ fees and costs. On October 21,
2010, the U.S. Court of Appeals for the Ninth Circuit affirmed the lower court’s dismissal of all of Congregation
Beth Aaron’s claims. The dismissal is final as no further appeal was taken.
Based on current knowledge, the Company does not believe that the aggregate amount of liability that is
reasonably possible with respect to the foregoing legal proceedings or claims would have a material adverse
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