Yahoo 2013 Annual Report Download - page 115

On December 12, 2012 and December 13, 2012, respectively, Yahoo! Mexico and the Company appealed the
judgment to a three-magistrate panel of the Superior Court of Justice for the Federal District (the “Superior
Court”). On May 15, 2013, the Superior Court reversed the judgment, overturned all monetary awards against the
Company and reduced the monetary award against Yahoo! Mexico to $172,500. The Superior Court affirmed the
award of $2.6 million in favor of Yahoo! Mexico on its counterclaim.
Plaintiffs have appealed the Superior Court’s decision to the Mexican Federal Civil Collegiate Court for the First
Circuit (“Collegiate Court”). The Company has appealed the Superior Court’s decision not to award it statutory
costs in the underlying proceeding. Yahoo! Mexico has appealed the Superior Court’s award of $172,500, the
Superior Court’s decision not to award it additional moneys beyond the $2.6 million award on its counterclaims,
and the Superior Court’s decision not to award it statutory costs. In the pending appeals, review is limited to
whether the Superior Court’s decision is unconstitutional, unlawful, or both.
The Company believes the plaintiffs’ claims are without legal or factual merit. First, the plaintiffs’ claims are
based on agreements that were either terminated by agreement with releases or had expired or terminated in
accordance with their terms, a non-binding letter of intent pursuant to which no definitive agreements were ever
entered into by the parties, and correspondence that did not constitute agreements. Second, the loss of profits of
the type claimed by plaintiffs are not awardable under Mexico law because they were not a direct and immediate
consequence of a breach of contract. Of the $2.75 billion in total damages alleged by plaintiffs, more than $2.4
billion were for loss of profits. Third, the plaintiffs’ alleged damages and loss of profits were further precluded
by the agreements at issue through, among other things, contractual and legal limitations of liability. Fourth, the
plaintiffs’ pleadings in the complaint, as well as documentary evidence filed by the plaintiffs in support of their
allegations, were generally deficient to support or establish plaintiffs’ claims. Fifth, the decision failed to
consider substantially all of the defenses asserted by the Company and Yahoo! Mexico. Finally, the Company
believes that the law clerk who entered the judgment lacked the requisite authority to issue the judgment.
The Company has not recorded an accrual for the judgment, which was reversed, as explained above. The
Company cannot assure the ultimate outcome of the pending or further appeals.
The Company has determined, based on current knowledge, that the amount or range of reasonably possible
losses, including reasonably possible losses in excess of amounts already accrued, is not reasonably estimable
with respect to certain matters described above. The Company has also determined, based on current knowledge,
that the aggregate amount or range of losses that are estimable with respect to the Company’s legal proceedings,
including the matters described above other than the Mexico matter, would not have a material adverse effect on
the Company’s consolidated financial position, results of operations or cash flows. Amounts accrued as of
December 31, 2013 were not material. The ultimate outcome of legal proceedings involves judgments, estimates
and inherent uncertainties, and cannot be predicted with certainty. In the event of a determination adverse to
Yahoo, its subsidiaries, directors, or officers in these matters, the Company may incur substantial monetary
liability, and be required to change its business practices. Either of these events could have a material adverse
effect on the Company’s financial position, results of operations, or cash flows. The Company may also incur
substantial legal fees, which are expensed as incurred, in defending against these claims.
Note 13 S TOCKHOLDERS ’E QUITY
The Board has the authority to issue up to 10 million shares of preferred stock and to determine the price, rights,
preferences, privileges, and restrictions, including voting rights, of those shares without any further vote or action
by the stockholders.
Stock Repurchases. The Company repurchases its common stock from time to time in part to reduce the dilutive
effects of its stock options, awards, and employee stock purchase plan.
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