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The best defense sometimes requires a good offense. At least that’s what Internet portal Yahoo Inc. is arguing in a suit against its insurer. Yahoo — which became tangled in an international dispute over the sale of Nazi memorabilia on the company’s auction site — wants its insurer to pay legal costs for the successful declaratory relief action it filed in California. Yahoo’s attorneys argue that while they may have been the first to file in the United States, the suit was “purely defensive” because it sought to nullify a French order. U.S. District Judge Jeremy Fogel, of the Northern District of California, sided with Sunnyvale, Calif.-based Yahoo in the underlying suit last November, saying the French order violated the U.S. company’s speech rights and was impossible to comply with. In the coverage suit, Yahoo lawyer Richard Seabolt said the French court’s order had “disastrous consequences” for the Internet industry as a whole, and had to be countered in the United States. “The French court’s order was not technically possible; Yahoo could not prevent access to certain content on its U.S. site by French citizens,” wrote Seabolt, a partner at San Francisco’s Hancock Rothert & Bunshoft. The coverage suit, filed last week in Santa Clara County Superior Court, says Gulf Underwriters Insurance Co. Inc. told Yahoo in February of 2001 that its $5 million policy covered the defense of the French action, but didn’t cover the declaratory relief suit in San Jose. In his papers in Yahoo v. Gulf Underwriters Insurance, CV808117, Seabolt noted that Fogel himself described the declaratory relief suit as “defensive” in his order, and said the suit addressed the same issues that were litigated in France. Seabolt said he could not comment about the suit, and Gulf Underwriters did not return calls. According to court documents, Yahoo purchased the $5 million “special errors and omissions liability” policy with a $100,000 deductible in May 1999. Yahoo, which retained O’Melveny & Myers and Cooley Godward to represent it in the declaratory relief action, did not indicate in the complaint its total legal bills for the dispute. The saga began in April 2000 when French student and anti-hate groups filed suit in French court arguing that Yahoo’s English-language auctions of Nazi photographs, coins, stamps and texts broke French anti-Nazi laws. In November 2000, a French judge ordered Yahoo to do whatever was necessary to block access, even if it meant reconfiguring the Santa Clara-based company’s servers, or face stiff penalties. Yahoo filed its declaratory relief action in San Jose federal court against the two groups a month later. The French groups, represented by Coudert Brothers, have appealed Fogel’s ruling to the 9th U.S. Circuit Court of Appeals.

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