A class action lawsuit brought in 2006 by several Yahoo! pay-per-click search advertising customers has been settled, one of the parties involved who received an e-mail about the settlement informs us. In the e-mail, administrator Rust Consulting lets the concerned parties (”all persons that purchased, directly or indirectly, Yahoo! pay-per-click advertising in the U.S. marketplace”) know that the court has granted preliminary approval of the Settlement and has provisionally certified the Settlement Class.

The lawsuit (PDF) alleges that customers contracted for targeted ad placements through two products, “Sponsored Search” and “Content Match” (and predecessor products provided by Overture and GoTo.com) and that Yahoo! breached its contract with its customers by allowing Yahoo! ads to be displayed in spyware, domain name parking sites (bulk registration sites), pop-ups, pop-unders and typosquatting sites. According to the message, which is reproduced on a dedicated website about the case, plaintiffs brought claims for breach of contract, unjust enrichment, misrepresentation, civil conspiracy, and unfair business practices.

Interesting tidbits about the lawsuit:

During the course of the Action, Yahoo! has produced over 1.5 million pages of documents and hundreds of gigabytes of data. Yahoo! employees testified at deposition. The plaintiffs or class representatives did much of the same. Yahoo! has apparently entered into the proposed settlement to avoid further expense, inconvenience and the burden of drawn-out litigation.

In addition, the Sunnyvale company has agreed to launch a new filtering option for ads, and to make some other modifications to the way it handles disclosures and click fraud investigations:

Yahoo! has agreed to develop and offer a new ad placement option that will enable Yahoo! Ad customers to control where their Yahoo! Ads appear. The Ad Placement Option will allow Yahoo! Ad customers to specify that their Sponsored Search ads should be displayed only on websites and other Internet properties owned or operated by Yahoo!, and the websites of certain “Premium” distribution partners. According to the docs, Yahoo! has agreed to make best efforts to launch the Ad Placement Option as early as the first quarter of 2010, but in no event later than September 30, 2010. Yahoo! will maintain the Ad Placement Option for at least two years from the date of its launch.

Yahoo! will post enhanced disclosures on the “Traffic Quality” portion of its website about where Yahoo! Ads may appear on the Internet. These disclosures will provide information about the Ad Placement Option, including a link to a Yahoo! webpage with instructions for using the Ad Placement Option. The company will also modify its click investigation request tool to allow advertisers to ask questions or request investigations regarding certain Yahoo! advertising partners. Yahoo! will also add language to the Traffic Quality section of Yahoo!’s website notifying advertisers that they can request investigations of partners.

As part of the settlement, Yahoo! has also agreed to pay pay a $20 refund to eligible Class members who are out of business (I’m sure they’ll be relieved). Claims forms must be submitted to the administrator by March 22, 2010.

One thing is for sure: the lawyers have won this case.

Yahoo! will pay the costs of notice and claims administration, as well as the plaintiffs’ attorneys’ fees and costs, and service awards to the Class Representatives. The attorneys’ fees amount up to $4,170,000, plus reimbursement of expenses of approximately $100,000, and for service awards to the three Class Representatives of $10,000 each. I’m convinced the lawyers are yodeling all the way to the bank.

For your reference: Google settled a similar case back in March 2006 for $90 million.

You can access the court documents here.