• by Wendy Davis , Staff Writer @wendyndavis, May 27, 2015

In a blow to Yahoo, a federal judge has ruled that the company must face a class-action lawsuit for allegedly intercepting email messages in order to surround them with ads.

The lawsuit, which was filed in 2013 by four Web users -- Cody Baker, Brian Pincus, Halima Nobles, and Rebecca Abrams -- alleges that Yahoo violates email users' privacy by scanning their messages without consent. Yahoo's terms of service provide that the company analyzes email in order to display ads, but the people who are suing didn't have Yahoo email accounts themselves, and therefore never agreed to the company's terms of service.

U.S. District Court Judge Lucy Koh in the Northern District of California previously rejected Yahoo's bid to dismiss the case outright.

After losing that early round in the case, Yahoo argued that the lawsuit doesn't lend itself to class-action treatment. The company said that one of the key unresolved issues turns on whether Web users consented to the scans, and that consent needs to be litigated on a user-by-user basis.

U.S. District Court Judge Lucy Koh in the Northern District of California ruled against Yahoo on that point. She said that the consumers who are suing have raised the kinds of “common” questions that don't require separate determinations for every affected Web user.

“Although Yahoo may be correct that consent could present legal and factual questions that are not common to the proposed class, that observation does not bear on whether plaintiffs have identified other common legal and factual questions that are significant to plaintiffs’ claims and capable of classwide resolution,” Koh said in a 44-page ruling issued late Tuesday.

That ruling is something of a surprise, given that Koh previously came to the opposite conclusion in a lawsuit involving Gmail. In that matter, a group of Web users argued that Google violated privacy laws by scanning messages in order to surround them with ads.

Koh ruled in the Gmail dispute that the consumers could proceed with their allegations, but refused to allow them to do so in a class-action. Instead, she said they could only proceed as individuals. The users settled their dispute with Google soon after that decision.

Late last year, Yahoo and the consumers attempted to resolve the matter, but were unable to reach a resolution. Of course, Yahoo could still settle with the consumers, but the company appears to be in a weaker bargaining position now that it has lost this latest round in the dispute.