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Yahoo’s $80 Million Securities Class Action Settlement Stemming from Data Breach an Outlier, but Reinforces Potential Viability of Similar Securities Suits

September 11, 2018

Fenwick securities enforcement co-chair Michael Dicke spoke with The Recorder about the $80 million settlement that Yahoo Inc.—now known as Altaba—reached to settle claims that the company misled investors about four data breaches which affected as many as 3 billion Yahoo accounts.

U.S. District Judge Lucy Koh of the Northern District of California gave final approval to the settlement, which comes more than four months after Yahoo also agreed to pay $35 million to settle U.S. Securities and Exchange Commission claims that the company misled investors about a 2014 data breach affecting than 500 million user accounts.

Dicke, formerly the head of enforcement for the SEC’s San Francisco regional office, said that the settlements could potentially pave the way for future securities lawsuits targeting companies whose stock prices were detrimentally impacted in the wake of large data breaches. But he cautioned that plaintiffs still must link their losses to inadequate breach disclosures.

Dicke told The Recorder that while Yahoo’s case is something of an “outlier,” it has made companies pay greater attention to whether a particular breach is potentially “material” information that should be disclosed to investors.

He added that in the Yahoo case, the stock drop caused after Yahoo disclosed the breach may have been more extensive than typical cases: “The breadth of the breach and then the amount of attention on it likely caused more of a market reaction than in a typical breach,” he said.

For more information, see Dicke’s article on takeaways from the SEC’s first enforcement action for failure to disclose a data breach and the resulting $35 million settlement Yahoo faced.

The full article is available through The Recorder (subscription required).​​​​​​​​