U.S. District Judge Staci Yandle announced the settlement on Feb. 3, and gave the parties 60 days to consummate it.
Plaintiff Carol Sparks, a lawyer in St. Jacob, alleged that Yahoo violated state law by intercepting messages between its users and users of other providers.
The case started as an offshoot of a federal class action in California, and settlement in Illinois followed settlement of the California action.
Yahoo agreed in the California settlement to change the processing of all incoming and outgoing email.
U.S. District Judge Lucy Koh of San Jose, who had set trial to begin on Feb. 8, will review the settlement at a hearing on March 16.
Koh disappointed plaintiffs last May, by certifying a California class action rather than a national one.
The Goldenberg Heller firm of Edwardsville filed the Illinois suit a week later, seeking a statewide class action on behalf of Kaylynn Rehberger of Highland.
Lawyers Thomas Rosenfeld and Kevin Green wrote that Yahoo claimed a right to scan and analyze all incoming and outgoing messages from a user’s account.
They wrote that Yahoo did not charge for basic service but subjected its users to advertising when using its mail service, and that Yahoo increased revenues by obtaining details about users.
Callis entered her appearance in the suit 16 days after it was filed.
She had joined Goldenberg Heller after losing a race for Congress in 2014.
The lawyers added Sparks as a plaintiff in September, claiming Yahoo intercepted confidential messages she sent to Yahoo users and received from them.
Rehberger dismissed her claims on Nov. 2.
On Nov. 5, Yahoo counsel Peter Herzog of St. Louis asked for oral argument on a pending motion to dismiss the suit.
Herzog wrote that the suit presented the novel issue of whether Yahoo could be held liable under the Illinois eavesdropping statute or the common law of intrusion upon seclusion for scanning messages its subscribers authorized it to scan.
Sparks didn’t respond to the motion, and the suit lay dormant while Koh prepared for trial in San Jose.
On Jan. 7, the parties in Koh's court moved for preliminary approval of a settlement that would award $4 million to class counsel and $5,000 each to four plaintiffs.
“Yahoo will only access incoming email content for advertising purposes after it has been placed in Yahoo Mail subscribers’ inboxes, and will only access outgoing email for advertising purposes after it has been placed in Yahoo Mail subscribers’ sent email folders,” they wrote.