$800M Reserved for Yahoo Data Breach Class Action Lawsuits

The former Yahoo owner, Altaba, has been ordered to set aside $800 million for claimants in the Canadian Yahoo data breach class action lawsuits.

Canadian Yahoo Data Breach Class Action Lawsuits 

On Oct.19, 2020, a Delaware Vice Chancellor J. Travis Laster ruled that Yahoo’s former owner Altaba needs to secure about $800 million in funds for a possible liability in the Canadian Yahoo data breach class action lawsuits before it can distribute billions of dollars to stockholders.

The lead plaintiff in the Saskatchewan Yahoo data breach class action lawsuit, Emily Larocque, requested another $1 billion to be reserved for the class action lawsuit’s privacy violations claims. 

Another Yahoo data breach class action lawsuit in Ontario was settled for over $20 million. The claimants were victims of a data breach that violated millions of Canadians from 2013 to 2016.

The Yahoo class action lawsuits in Canada have delayed Altaba’s plan to distribute $5.6 billion to shareholders. In September 2019, the shareholders already received about $27 billion after the business’ disbandment. 

Vice Chancellor Laster reportedly said the two Canadian Yahoo lawsuits “create a conundrum for this proceeding.”

The opinion said, “For purposes of the interim distribution, the company shall reserve $1.05 billion Canadian for the Canadian actions claim. This amount is not a valuation, nor does it reflect any determination by this court about the likely outcome in the Canadian actions. It rather reflects the amount of security which, at this stage of the proceeding, is necessary to permit an interim distribution to be made based on undisputed facts,” reported Law360.

Larocque’s lawyer E.F. Anthony Merchant reportedly argued that Altaba reserving $20 million for the Ontario Yahoo data breach class action lawsuit is not enough. 

Merchant explained to Law360, saying, Larocque will “continue pursuit of the class action litigation in respect of the statutory privacy breaches that occurred in Canada to ensure meaningful compensation is ultimately paid to the five million Canadians whose privacy rights were repeatedly breached.”

VC Rules Altaba Must Set Aside Millions Before Shareholder Distribution

Altaba must set aside the massive fund before it can allocate about $5.6 billion to stockholders as a part of a larger $40 billion plan to wind down the business.

Vice Chancellor Laster added that Altaba’s offer to reserve $250 million for additional unknown claims is “ample.” The Vice Chancellor added that when the full amount of funds are set aside, Altaba can begin to distribute allotments to stockholders. 

Vice Chancellor Laster had some apprehension about Altaba’s inquiry to allocate the $5.6 billion distribution to stockholders prior to the last evidentiary hearing on the liquidating action using an “interim distribution.” An interim distribution can be done if a court decides a business has supplied an appropriate amount of safeguarded funds to pay creditors. 

“When signing off on an interim distribution, a court is forced to predict what its predictive determination might be, with limited if any ability to correct matters later if the evidence at a final hearing indicates that the initial prediction was imprudent,” Vice Chancellor Laster explained.

He added, “To minimize the risk of error, interim distributions should be limited to scenarios in which the company’s potential exposure is quite clear,” according to Law360.

Altaba Faces Challenges After Merger 

The claims started in 2017 when Verizon Communications Inc. acquired the internet leader in its early stages for $4.5 billion. 

After the acquisition, Altaba was reportedly selling its passive investments in Alibaba Group Holding Ltd. and Yahoo Japan Corp., The investments into the firms added up to the company’s $74 billion valuation. 

Vice Chancellor Laster explained, “once a court-approved interim distribution is made, it is highly unlikely, bordering on impossible, that the money could be clawed back from the stockholders,” wrote Law360.

The Vice Chancellor deduced that if Altaba wanted to make an “interim distribution to its stockholders” then $1.05 billion in funds needed to be set for the Canadian class action lawsuit. 

If there were future unknown claims, they would associate with the working business, the claims would be Verizon’s responsibility.

After distributions to shareholders, the company’s assets will approximate to about $7.3 billion, according to the Vice Chancellor.

In September 2020, about $3.1 billion of Altaba’s reserved funds would go to cover Verizon’s tax burden.

What do you think about $800 million being set aside for claimants in the Canadian Yahoo data breach class action lawsuits? Do you think that will be enough to cover the class action settlements? Share your thoughts in the comments section below!

Emily Larocque and Class Members are represented E.F. Anthony Merchant QC of Merchant Law Group LLP, and David G. Holmes, Kevin S. Mann, Christopher P. Simon of Cross & Simon LLC.

Natalia Karasik and Class Members are represented by Theodore Charney of Charney Lawyers PC.

The Yahoo Data Breach Class Action Lawsuit is Natalia Karasik, et al. v. Yahoo! Inc., et al., Case No. CV-16-566248-00CP, in the Ontario Superior Court of Justice.

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