Icahn and shareholders raise pressure on Yahoo board

Funds controlled by Icahn held about 59 million shares and options, or 4.28 percent of Yahoo, as of June 7.

Yahoo is still engaged in talks with Microsoft but Yahoo executives have described the contacts as focusing on an alternate deal or partnership.

"A July trial on the validity of the severance plans is imperative for Yahoo shareholders," lawyers for the funds said in a filing on Monday with the Delaware Court of Chancery.

"The court should decide plaintiffs' challenges to the severance plans before the next director election takes place, and before further harm becomes irreparable," wrote the attorneys from law firms Bernstein Litowitz Berger & Grossmann LLP and Bouchard Margules & Friedlander.

The Delaware Court of Chancery holds trials without juries. Many corporate disputes and merger battles are fought there. The court's chief judge, Chancellor William Chandler III, is presiding over the Yahoo litigation.

The Sunnyvale, California-based company has said previously that it believes the lawsuit is without merit.

The lawsuit, filed by the City of Detroit's Police and Fire Retirement System and General Retirement System, was originally filed in February. It contends that Yahoo CEO Jerry Yang conspired with co-founder David Filo on how to maintain Yahoo's independence in the face of Microsoft's buyout bid because they had a personal interest in keeping Yahoo a stand-alone company.

Yahoo stock closed down 18 cents at $26.40 in Nasdaq trade on Tuesday, amid weak trading across the Internet sector.