Verizon Requires $350 Million Discount and Yahoo Share in Data Breach Liability — Good Deal?

UPDATE: Yahoo Shareholders Sue Over Massive Data Breaches (Law 360 paywall)

hacked-1Verizon and Yahoo have renegotiated their deal in the wake of Yahoo’s revelations of its past data breaches. Verizon had agreed to pay $4.8 billion for Yahoo’s Internet business in July 2016, but that was before Yahoo disclosed that it had two of the largest data breaches in history back in 2013 and 2014. Verizon renegotiated the terms of the deal after that revelation; here are the new terms:

  • Verizon will pay $4.48 billion.
  • Perhaps more importantly, Verizon and Yahoo will share the legal and regulatory liabilities arising from the breach under these terms:
    • Yahoo will be fully responsible or any cash liabilities incurred following the deal’s closing arising from shareholder lawsuits and Securities and Exchange Commission investigations related to the breaches.
    • Yahoo will be responsible for 50% of any liabilities related to any third-party litigation and non-SEC government investigations related to the breaches.

One thing that will be important to see is how the deal terms allocated responsibility for any other data breaches that have occurred but have not yet been discovered. Also, if there is applicable insurance coverage, how would such insurance be applied?

Is this a win for Yahoo? The answer to that will likely depend on the outcome of the data breach litigation and regulatory enforcement actions. This could be substantial. Remember “the paranoids“?

Is it a win for Verizon? Probably. It saved $350 million and is only incurring 50% of the liability for a limited bundle of risks. But, what happens if Yahoo ends up insolvent before all of these liabilities shake out and Yahoo can’t pony up its share?

Source: Verizon shaves $350 million from Yahoo price

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Shawn Tuma (@shawnetuma) is a business lawyer with an internationally recognized reputation in cybersecurity, computer fraud, and data privacy law. He is a Cybersecurity & Data Privacy Partner at Scheef & Stone, LLP, a full-service commercial law firm in Texas that represents businesses of all sizes throughout the United States and, through its Mackrell International network, around the world.

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