Yahoo Ordered to Face Privacy Claims Over Scanned E-Mail

Yahoo! Inc. (YHOO) was ordered to face claims it illegally shared the content of e-mails in the latest ruling to hold Internet companies accountable for how they convert users’ personal data into advertising dollars.

Privacy lawsuits against Yahoo, Google Inc. (GOOGL) and LinkedIn Corp. (LNKD) are gaining more attention after a ruling by U.S. District Judge Lucy H. Koh in March that Google’s privacy policy was vague and possibly misleading about how it mined e-mails for information. The most popular search engine later changed its user terms.

The cases are requiring Koh and her colleagues in San Jose, California, to reconcile wiretap laws written in the landline-phone era with users’ concerns about how companies use the troves of data generated when people send e-mails and surf online.

Koh yesterday allowed e-mail users to pursue Yahoo’s alleged violation of a California anti-wiretapping and anti-eavesdropping law that prohibits unauthorized interceptions of communications. The judge rejected Yahoo’s claims that the law can’t be applied because e-mails it received en-route to a recipient are in electronic storage rather than in transit. Concluding she couldn’t know that until the case is more developed and the two sides exchange information, Koh said the lawsuit could go forward on that allegation.

‘Important Message’

David Straite, a lawyer representing the users, said in an e-mail that part of the ruling “sends an important message, one that we’ve seen in other cases, that Silicon Valley must respect the California legislature’s decision to provide greater privacy protections than the federal government does.”

Sara Gorman, a spokeswoman for Sunnyvale, California-based Yahoo, declined to comment on the decision.

Koh granted Yahoo’s request to throw out an invasion of privacy claim under California’s constitution. She also dismissed a federal wiretap claim that the company’s terms of service don’t notify users that their e-mails with non-subscribers of Yahoo Mail will be intercepted, scanned and analyzed to create user profiles and for advertising purposes. The judge also set aside a claim that Yahoo failed to properly disclose it would collect and store the content of users’ e-mails for future use.

Koh permitted users to go forward with an allegation brought under a different provision in wiretap law that Yahoo illegally disclosed to third parties the content of e-mails between Yahoo Mail users and people with non-Yahoo addresses.

The judge is presiding over a group of lawsuits filed against Yahoo last year that seek class-action status.

The case is Holland v. Yahoo! Inc., 13-cv-04980, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg

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