• by Wendy Davis , Staff Writer @wendyndavis, December 8, 2009

Dodging a bullet, Yahoo has convinced a federal district court judge to dismiss a privacy lawsuit brought by Chinese dissidents in exile.

The lawsuit, brought last year by Cunzhu Zheng -- one of the leaders of the 1989 Tiannamen Square protests -- along with government critics Liu Guokai and Tao Jun, alleges that Yahoo violated a federal wiretapping law by revealing the identities of email account holders.

The dissidents, now in the U.S., say they learned that Yahoo had unmasked account holders after other Chinese critics were imprisoned. Zheng alleges in the court papers that he is now afraid to return to China.

Zheng and the others sought class-action status to represent all Chinese citizens "who have suffered physical injuries, emotional distress, detention, arrest, torture, imprisonment, death in custody, seizure of property, and/or fear of returning to the [People's Republic of China] because of their activities of communicating with each other and circulating messages, journals and articles that support the democracy movement."

They argued in their legal papers that Yahoo's alleged disclosure of their names violated the federal Electronic Communications Privacy Act. But the case didn't get far: U.S. District Court Judge Maxine Chesney quietly dismissed the lawsuit last week on the ground that the wiretap law doesn't apply abroad.

In the court of public opinion, however, the company's decision to cooperate with the Chinese authorities hasn't gone over well. In 2004, the company disclosed information to the Chinese authorities that resulted in prison terms for two dissidents -- Shi Tao and Wang Xiaoning.

News of Yahoo's role in the case sparked a 2007 congressional hearing in which lawmakers publicly criticized former CEO Jerry Yang and others. Shortly after that hearing, Yahoo settled a civil lawsuit brought by the families of the imprisoned critics.

Yahoo also sold its China division to Alibaba Group and became a minority stakeholder in 2005. Last year, Yahoo, Google and Microsoft agreed to a new voluntary code of conduct for dealing with repressive regimes, which calls on the companies to interpret governmental requests for information narrowly.