• by Wendy Davis  @wendyndavis, November 6, 2012

Yahoo is asking a federal judge to dismiss a lawsuit alleging that the company violates a California law by scanning emails in order to send ads to users.

Yahoo argues that the federal Electronic Communications Privacy Act allows email providers such as itself to record and monitor emails on its servers. The company contends that the federal law trumps California's Invasion of Privacy Act -- a state wiretap law that prohibits companies from intercepting communications without the consent of all parties.

Yahoo's court papers, filed last week, come in response to a potential class-action lawsuit brought by Alabama resident Carson Penkava. He alleges that Yahoo violates the California law by "intercepting" messages sent from non-Yahoo email accounts to recipients who use Yahoo.

Penkava, who doesn't use Yahoo for email, says he never agreed to the interception. He argues that scanning the messages for keywords and then serving contextual ads infringes his privacy rights under California's law.

But Yahoo says that the sweeping federal Electronic Communications Privacy Act trumps a California state law. The comprehensive federal statute, which outlines the privacy rights of email users, says service providers can intercept emails with permission from one of the parties.

"Congress’s intent was that states not be permitted to strike a different balance between users’ privacy and the provision of electronic communications services nationwide to their users," Yahoo argues. "While the California legislature has the authority to create laws aimed at protecting privacy by prohibiting certain forms of surveillance, California cannot pursue this goal in a manner that conflicts with Congress’s regulatory scheme."

Yahoo also argues that as a practical matter, it must scan messages in order to send them to the correct recipients. "It is therefore not objectively reasonable for Plaintiff to believe that emails he sends to Yahoo subscribers are 'confidential,'" Yahoo argues.

The lawsuit is in front of U.S. District Court Judge Lucy Koh in San Jose, Calif.

Google also faces a potential class-action lawsuit in federal court stemming from contextual ads in email. That lawsuit, filed by Texas resident Keith Dunbar, is pending before Koh.