Photo: Getty Images/Jemal Countess
We’ve gotten a look at the full sentencing documents in the Mexican case where a court handed Yahoo a staggering $2.7 billion judgment against it.Worldwide Directories, a former partner of Yahoo in a Mexican telephone-directory project called Yahoo Paginas Utiles, sued the Internet giant in 2011 for breach of contract and other claims in the 49th Civil Court of the Federal District in Mexico City.
Everyone’s been scratching their heads: Yahoo does not make a material amount of revenue from Mexico and doesn’t have substantial assets in the country. So how could anything it did there cost it $2.7 billion?
(Yahoo declined to comment when asked about the judgment, but has said it plans to appeal, citing what it claims are “numerous” errors by the court, though it didn’t offer specifics.)
The answer lies in the vast ambitions Worldwide Directories had to expand overseas. It had reached agreements with Yahoo Mexico to study entering other markets, and had begun talks with Yahoo subsidiaries abroad. It had an agreement to launch a telephone directory in Puerto Rico.
While the directory business has declined in recent years, printed directories still generate considerable cash flow—and the partnership embraced both print and online directories.
The court 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 in those countries.
Worldwide Directories, Yahoo, and the court all hired financial experts to run studies and calculate damages in the case.
In the end, here’s what the court decided Yahoo owed Worldwide Directories:
- $28.2 million for expenses incurred in operating Yahoo Paginas Utiles in Mexico
- $150,000 for a market-research study which Worldwide Directories paid for but Yahoo never delivered
- $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
*(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. We’ve asked both Yahoo and Worldwide Directories for clarification. )
Damages haven’t yet been calculated for:
- Use of Worldwide Directories’ database and trademarks
- Planned expansions to Peru, Ecuador, El Salvador, Guatemala, Venezuela, Colombia, and Korea
- Unspecified moral damages (the rough equivalent of punitive damages under Mexican law)
Carlos Bazan-Canabal, a plaintiff in the case, has told Business Insider he believes those additional damages could bring the total to $3.5 billion.
Worldwide Directories was also sentenced to pay Yahoo $2.6 million plus interest in a counterclaim.