On April 24, 2018, the SEC announced the settlement of its investigation of Yahoo! Inc.,
now known as Altaba Inc., related to the Funds previously disclosed data breaches disclosed on September 22, 2016 and in the 2016
10-K
filed on March 1, 2016. The Fund agreed to settle with the
SEC, without admitting or denying the allegations described in the SEC Order. The Order requires the Fund to cease and desist from any further violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Section 13(a) of the
Securities Exchange Act of 1934 and Rules
12b-20,
13a-1,
13a-11,
13a-13,
and
13a-15.
Other Legal Contingencies
On January 27, 2016, a stockholder action captioned
UCFW Local 1500 Pension Fund v. Marissa Mayer, et al.,
3:16-cv-00478-RS,
was filed in the U.S. District Court for the Northern District of California against the Fund, and certain
then-current and former officers and directors of the Fund. On April 29, 2016, the plaintiff filed an amended complaint. The amended complaint asserted derivative claims, purportedly on behalf of the Fund, for violations of the 1940 Act, breach
of fiduciary duty, unjust enrichment, violations of Delaware General Corporation Law Section 124, and violations of California Business & Professions Code Section 17200. The amended complaint sought to rescind the Funds
employment contracts with the individual defendants because those defendants allegedly caused the Fund to illegally operate as an unregistered investment company. The plaintiff sought disgorgement in favor of the Fund, rescission, and an award of
attorneys fees and costs. In addition, the amended complaint asserted a direct claim against the Fund for alleged violation of Delaware General Corporation Law Section 124(1), based on the allegation that the Fund had illegally operated
as an unregistered investment company. Pursuant to this claim, the plaintiff sought injunctive relief preventing the Fund from entering into any future contracts, including any contracts to sell its assets. On October 19, 2016, the District
Court dismissed the amended complaint, with leave to amend. On November 18, 2016, the plaintiff filed a second amended complaint seeking substantially the same relief as it did in the amended complaint. On February 10, 2017, the District
Court dismissed the second amended complaint with prejudice. On March 10, 2017, the plaintiff filed a notice of appeal, which was docketed in the United States Court of Appeals for the Ninth Circuit as Case
No. 17-15435.
On July 12, 2018, the Ninth Circuit issued a decision affirming the District Courts dismissal. This case is now resolved.
In January 2017, a stockholder action was filed in the U.S. District Court for the Northern District of California against the Fund and certain
of its former officers,
In re Yahoo! Inc. Securities Litigation
, Case
No. 5:17-cv-00373-LHK
(federal securities
class action). In March 2017, a similar stockholder action captioned
Talukder v. Yahoo! Inc., et al
., was filed in the U.S. District Court for the Northern District of California. In April 2017, the Court consolidated the two cases. In
June, the plaintiffs filed a first amended complaint purporting to represent a class of investors who purchased or otherwise acquired the Funds stock between April 30, 2013 and December 14, 2016. The complaint asserted claims under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act) and Rule
10b-5
promulgated thereunder. The complaint alleged that the Funds public disclosures about its
business, operations, and compliance policies were materially misleading in light of the Security Incidents discussed under
Security Incidents Contingencies
above. The complaint sought class certification, damages, interest, and
an award of attorneys fees and costs. On September 7, 2018, the Court granted final approval to a class action settlement reached by the parties. This case is now resolved.
In February 2017, stockholder derivative actions were filed in the U.S. District Court for the Northern District of California purportedly on
behalf of the Fund against certain of its then-current and former directors and officers,
In re: Yahoo! Inc. Shareholder Derivative Litigation
, Case
No. 5:17-cv-00787-LHK
(federal shareholder derivative litigation). The complaints allege that defendants failed to disclose the Security Incidents and caused or allowed the Fund to
issue materially false and misleading statements in its public filings and other public statements. The complaints assert derivative claims, purportedly on behalf of the Fund, for breach of fiduciary duty, unjust enrichment, and violations of
Sections 14(a) and 20(a) of the Exchange Act. The complaints seek unspecified damages, disgorgement of profits and compensation obtained by the defendants, an award of attorneys fees and costs, and other related injunctive and equitable forms
of relief. In May 2017, the Court consolidated the two cases, and on July 6, 2017, plaintiffs filed a consolidated stockholder derivative complaint asserting the same claims, as well as claims of insider trading, purportedly on behalf of Yahoo,
against certain defendants under California Corporations Code sections 25402 and 25403. In September 2017, the Court granted a joint motion to stay the federal shareholder derivative litigation pending resolution of the federal securities class
action and the federal consumer class action.
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