The suit accused Yahoo! and its ownership group of failing to properly disclose and remedy the 2014 breach that resulted in some 3 billion Yahoo!-hosted email accounts being exposed to hackers.
A motion by the web service provider's parent company Verizon to have the complaint thrown out of court has been denied by Judge Lucy Koh. The breaches were not made public until after Verizon announced its plans to purchase the company for almost $4.5 billion.
US District judge Lucy Koh rejected a bid from Verizon Communications, the firm that bought Yahoo's internet business in June a year ago, to dismiss a number of claims, including for negligence and breach of contract. Koh dismissed some other claims.
The judge agreed to dismiss claims of violations of California's unfair competition law, but upheld the claim of another plaintiff who had paid for Yahoo's premium email service.
A Verizon spokesman had no immediate comment on Monday. Lawyers for Yahoo shareholders are requesting $20 million in legal fees.
"Plaintiffs' allegations are sufficient to show that they would have behaved differently had Defendants disclosed the security weaknesses of the Yahoo Mail system", Koh wrote in her ruling.
While Yahoo initially reported one billion users were exposed by one hack and 500 million exposed by another, the company revised its figures previous year and disclosed that three billion users in total were put at risk as a result of the hacks.
If you're one of the US-based victims of these breaches and are seeking some sort of retribution/compensation, you can take your chance against the company knowing that your case will go forward.
In seeking a dismissal, Yahoo said it has always been the target of "relentless criminal attacks", and the plaintiffs' "20/20 hindsight" did not cast doubt on its "unending" efforts to thwart "constantly evolving security threats".
The Canadian, Karim Baratov, pleaded guilty to identity theft and conspiracy charges in November, while the other three remain at large in Russia, Reuters reported. The other three are reportedly at large in Russian Federation.