On May 15, 2015, the Ninth Circuit Court of Appeals affirmed the dismissal of a putative securities fraud class action against Yahoo!  In re: Yahoo! Inc. Sec. Litig., No. 11-cv-02732 (9th Cir. May 15, 2015).

In 2011, Yahoo shareholders filed a securities fraud suit against Yahoo, alleging that in connection with its $41 billion investment with Alibaba.com (China’s largest e-commerce company), Yahoo failed to disclose that Alibaba’s most valuable asset (Alipay) had been transferred at much less than market value to another private company.  The shareholders alleged that Yahoo’s material omissions caused the stock to trade at artificially high prices.

In its original disclosure, Yahoo, however, expressly noted that its figures did not include estimates of Alibaba’s privately held businesses.  The Ninth Circuit affirmed that this statement “neither stated nor implied anything” regarding the value of Alipay or its restricting.  The shareholders also alleged that, in a later statement, Yahoo only disclosed that Alipay had been transferred to another private company, and did not provide any additional details regarding the sale, such as the amount of the sale.  The Ninth Circuit again affirmed that the statement did not create an impression of a state of affairs that actually materially differed from the one that actually existed, and therefore could not constitute a material misrepresentation.  The Ninth Circuit also concluded by noting that, even though there is no “duty to correct” a statement, Yahoo acted reasonably by providing additional information regarding the transaction six weeks later.

Accordingly, the Ninth Circuit affirmed the district court’s dismissal of the suit.  A full copy of the Ninth Circuit’s decision is available here.