NEW YORK (TheStreet) -- In the latest installment of companies playing Big Brother, Yahoo!  (YHOO) is facing allegations it scanned Yahoo! Mail emails to glean data for targeted advertising, a practice in violation of users’ rights to privacy.

The plaintiffs, residents of San Bruno, Calif., who are lobbying for class-action status, argue that Yahoo! shared the content of emails sent between Yahoo! Mail accounts and external email servers with third parties for the purposes of data collection and targeted advertising.

In the U.S. District Court, Northern District of California (San Jose), District Judge Lucy Koh ruled plaintiffs can move forward with the claims against Yahoo!.

However, in a mixed ruling, the court dismissed claims its terms of service fail to adequately notify that its Yahoo! Mail correspondence might be used to build advertising profiles of its users.

Not without a certain level of hypocrisy, only last week Yahoo! announced plans to create a more secure email service through end-to-end encryption, a means of scrambling data so it is unreadable to hackers.

--Written by Keris Alison Lahiff in New York.

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