(CN) - Yahoo and its board of directors face a class action for allegedly instituting policies making acquisitions by outside firms almost impossible.     Louisiana Municipal Police Employees' Retirement System claims that Yahoo has caused "irreparable" harm as a result of the company's attempts to stymie any acquisition bids that "[aim] to replace the current Board and/or dilute or eliminate the power of Yahoo's co-founder, director Jerry Yang ... at the expense of Yahoo's Public Shareholders."
     According to the claim, Yahoo's "market capitalization, which is approximately $19.5 billion, and its extraordinary business challenges, make it highly unlikely that a fully-priced bid could come from any single bidder."
     Plaintiff says it is more likely that groups of investors would be interested in making bid for the firm, called "club bids ... consisting of private equity funds, public company investors, and others." But Yahoo has made it difficult to do that because it has instituted a "no cross talk" clause or provision which "prohibits any potential bidder who signs that agreement from conferring with any other potential bidder as to a purchase of Yahoo as a whole. Thus, Yahoo is requiring those who sign the Confidentiality Agreement to use any information they receive to confine themselves to a bid for only a minority stake."
     The clause is not a good fit for the company, plaintiff alleges, because it is a "classic tough sell." Yahoo purportedly received a bid from Microsoft in February 2008, but Yang took prompt action to "make a Microsoft bid, at no matter how high a premium, impossible," the complaint alleges. "He convinced the Board to approve a 'no hand' severance plan that allowed employees to enjoy extraordinary severance benefits if they resigned from the Company within two years of any acquisition." Yang also allegedly "threatened to ink a business deal with Google if Microsoft persisted in its efforts."
     Despite Microsoft offering a nearly 70 percent premium to Yahoo, or $31 a share, its efforts were rebuffed. Plaintiffs claim Yahoo's prices are currently hovering around $15 per share, and have dropped down to just over $9 during the time since Microsoft's offer was made three years ago.
     Plaintiffs allege shareholders "have seen their Company decimated in value by consistently poor business decisions."     
     The class is represented by Robert D. Goldberg of Biggs and Battaglia in Wilmington, Del., and by Jeffrey C. Block, Jason M. Leviton and Scott A. Mays of Block & Leviton LLP in Boston.