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Update: Yahoo Hires Mexico Law Firm in $2.7B Lawsuit

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December 31, 2012

After losing a lawsuit in Mexico and getting handed a $2.7 billion judgment against it by the court, Yahoo has hired new legal help in the country. A Mexico City based firm is now involved in the appeal.

Mexico City, Mexico - After losing a lawsuit in Mexico and getting handed a $2.7 billion judgment against it by the court, Yahoo has hired new legal help in the country.

A recent news report in the Mexican publication "AM" says that a new law firm, Quijano Cortina y de la Torre, was involved in filing an appeal on behalf of Yahoo, to be heard in February 2013. That firm's name had not appeared previously in legal documents and a partner there, Francisco Xavier Cortina, has confirmed that the California based company has hired his firm to represent it.

The case involves a failed partnership with a Mexican company, Worldwide Directories, to publish print and online telephone directories in Mexico. When Yahoo unilaterally terminated its contracts, the plaintiffs sued Yahoo and Yahoo de Mexico for "breach of contract, breach of promise, and lost profits arising from contracts."


This book could cost Yahoo $2.7 billion

The companies had taken steps to expand the partnership internationally which is why the damages ended up being in the billions of dollars.

The Federal Court in Mexico appears to have agreed that Yahoo broke the law in terminating its agreements and caused Worldwide Directories substantial damages, in the form of the profits it might have achieved had it successfully launched - not just the business in Mexico - but potential gains in countries such as France, Korea, and Australia.

Worldwide Directories, Yahoo, and the court all hired financial experts to run studies and calculate damages in the case and in the end, here's what the court decided Yahoo owed the plaintiff:

• $94.7 million in damages for Mexico*
• $53.2 million for Puerto Rico
• $408.6 million for Australia
• $125.2 million for New Zealand
• $536.2 million for Japan
• $688.9 million for France
• $20.3 million for Costa Rica
• $20.9 million for Panama
• $20.7 million for the Dominican Republic
• $582.4 million for the U.S. Hispanic market
• $28.2 million for expenses incurred in operating Yahoo Paginas Utiles in Mexico
• $150,000 for a detailed market-research study which Worldwide Directories paid for but Yahoo never delivered.

*Note:The total in the judgment doesn't add up to the $2.7 billion figure reported by Yahoo in an SEC filing revealing the outcome of the case. The wording of the judgment about damages in Mexico is also unclear. First, a figure of $94 million is cited, followed by an "updated" figure of $269 million.

Yahoo has said it plans to "vigorously" appeal the judgment against it, which it has characterized as "non-final." As with civil cases in the US, cases can be appealed in the Mexican courts. The judgment is also not final in that the court has not finished calculating all the damages it says Yahoo owes Worldwide Directories.

Damages haven't yet been calculated for:

• Use of Worldwide Directories' database and trademarks
• Unspecified moral damages (the equivalent of punitive damages under Mexican law)
• Planned expansion to Peru, Ecuador, El Salvador, Guatemala, Venezuela, Colombia & Korea.

Carlos Bazan-Canabal, a former Yahoo executive who is a cofounder of Worldwide Directories and the main plaintiff in the case, has stated that he believes those additional damages could bring the total to $3.5 billion.

The courts also sentenced Worldwide Directories to pay Yahoo $2.6 million plus interest in a counterclaim.

If the judgment is upheld, Yahoo could face the loss of a large portion of its cash reserves, some of which it had planned to distribute to shareholders and some of which it may have hoped to use for acquisitions.

Quijano Cortina y de la Torre is a small, five-lawyer boutique firm based in Mexico City, according to Chambers and Partners, a guide to law firms. It specializes in commercial and civil litigation.

Yahoo has already had one change of legal representation: The lawyer who originally handled its defense in the case, Fabio Corominas de la Pera, is no longer with Baker & McKenzie, the multinational law firm representing Yahoo. A new lawyer with the firm, Alfonso Cortez-Fernandez, is now handling the case. It is not clear what the Mexico City law firm's role is.

Worldwide Directories, has hired Orrick Herrington & Sutcliffe to represent his company in the United States.