• by Wendy Davis  @wendyndavis, March 17, 2016

A federal judge has tentatively approved Yahoo's settlement of a lawsuit accusing it of violating a California privacy law by scanning email messages for ad-targeting purposes.

The deal requires Yahoo to add new language to its privacy policy, and to make some technical changes to the way it scans emails, but doesn't require the company to otherwise change its ad-targeting efforts. The agreement doesn't call for Yahoo to pay monetary damages to Web users whose privacy allegedly was violated, but provides for payments of up to $4 million to the attorneys who brought the case.

"The settlement agreement appears to be the result of serious, informed, non-collusive negotiations conducted at arms length by the parties," U.S. District Court Judge Lucy Koh wrote Wednesday in a ruling granting the deal preliminary approval.

If finalized, the deal will resolve a lawsuit filed in 2013 by a group of Web users who alleged that Yahoo violated several statutes, including a California privacy law, by scanning messages in order to surround them with ads, without first obtaining all parties' consent. California requires that senders as well as recipients consent to the interception of electronic communications.

Yahoo's terms of service provided that the company analyzes email in order to display ads, but the people who are suing alleged that they didn't have Yahoo email accounts, and therefore never agreed to the company's terms of service.

As part of the settlement, Yahoo says it will add the following paragraph to its Privacy Center page: “Yahoo analyzes and stores all communications content, including email content from incoming and outgoing mail.”

The company's Yahoo Mail page also will include a new bullet point stating: "Yahoo may share keywords, package tracking and product identification numbers with third parties in order to enhance your user experience and provide targeted ads.”

The engineering changes that Yahoo promised to make appear to relate solely on Yahoo's technical operations. The court papers say that the company will now retrieve incoming email from the servers only after Yahoo Mail users can access the emails in their inboxes. Outgoing emails will only be retrieved from servers when the messages are accessible by Yahoo Mail users.

News of the settlement will be communicated to Web users via banner ads, which Advertising.com will display on "a collection of popular websites," Koh wrote in the preliminary approval order.

"Advertising.com represents that it will ensure these ads will make 75,000,000 unique impressions upon Internet users, with no single user receiving more than three impressions," Koh wrote, adding that the banners will contain links to a website that offers details about the settlement, including how to object to it.

Koh will hold a hearing in August about whether to grant the deal final approval.

Google is facing a similar lawsuit, filed in September by San Francisco resident Daniel Matera. Koh has delayed that lawsuit until after the Supreme Court decides whether consumers can sue in federal court without proving they suffered an economic injury.