Mark Bates has been named as a co-defendant in the case, which was filed in the U.S. District Court for the Eastern District of Texas.
Bates created the Candyman site in 2001 that functioned as a child porn distribution ring. The site was shut down following a yearlong FBI investigation. Bates eventually was sentenced to 30 years in prison and now is facing charges in civil court.
Among child porn evidence collected by the FBI at the time, Bates allegedly posted nude photos of the young plaintiff on the site that were taken by a former neighbor of the boy's family.
The suit contends that Yahoo was fully aware of the illegal activities occurring on the web group and that it failed to take the appropriate action in a more timely manner to protect the plaintiff and the other children featured on the site.
The FBI estimates that there were more than 7,000 Candyman group members with around 2,400 located outside the United States.
Yahoo was not available to comment on the case.