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Attorneys Dispute Target's MasterCard Settlement

Emergency hearing to address retailer’s proposed $19 million settlement.

Attorneys Dispute Target's MasterCard Settlement
Last week Minneapolis-based Target Corp. announced a $19 million settlement agreement with MasterCard International Inc. for card issuers related to the fallout of the retailer’s data breach that surfaced in late 2013. But attorneys representing banks, credit unions and other card issuers in litigation against Target promptly denounced the deal.
 
Karl Cambronne of the Minneapolis-based Chestnut Cambronne law firm tells Twin Cities Business that his legal team will file new documents in federal court in St. Paul this afternoon, seeking to nullify Target’s touted settlement.
 
“Essentially Target is trying to end run the court here,” says Cambronne. “They’re telling the world that $19 million is going to fix everything. It’s just a number pulled out of the air that has no basis in reality.”
 
Cambronne says that information that has come to light during the discovery process of the legal case indicates that the damages are much higher.
 
“We’ve got some indication that the MasterCard damages exceed $100 million dollars,” says Cambronne, who adds that he expects damages related to Visa cards to be even higher.
 
“Visa and their counsel are watching closely what happens here,” says Cambronne.
 
In the wake of Target’s April 15 announcement, Cambronne said that they sought an “emergency hearing” before the court to address the matter. The hearing will be held on Monday morning, April 27 – but not in the Twin Cities. U.S. District Court Judge Paul Magnuson will hear the matter in Fort Myers, Florida, because the judge is there at the moment helping to alleviate a court backlog in Florida.


Chestnut Cambronne and Minneapolis-based law firm Zimmerman Reed are part of a coalition of attorneys across the U.S. representing banks and financial institutions. The attorneys are seeking class action status in the case.
 
A Target spokesman declined further comment on the case, referring back to the company’s April 15 statement.
 
According to the company’s announcement last week: “Target has agreed to fund up to $19 million pre-tax in alternative recovery payments, depending on the extent of eligible issuer acceptances.  The settlement is conditioned on issuers of at least 90 percent of the eligible MasterCard accounts accepting their alternative recovery offers, either directly or through their sponsoring issuers, by May 20, 2015.  The estimated costs of this settlement are already reflected in the data breach liabilities that Target established during fiscal 2013 and 2014.”
 
Cambronne says that he has no idea how many MasterCard issuers may want to accept Target’s deal: “Hopefully banks are sophisticated enough to know that they’re being jobbed here. We’ll see what happens. It may be academic.”
 
Target’s most recent annual filing with the U.S. Securities and Exchange Commission tallied $252 million in total expenses related to the data breach through January 31, 2015. Target noted that it expected those costs to offset by $90 million in insurance proceeds, reducing its net expenses to $162 million.
 
Cambronne notes that there’s another key factor in the legal battle: a relatively new Minnesota law passed in 2007 which allows financial institutions to be reimbursed by retailers in the event of a data breach.
 
“We have a unique state statute here that makes Target responsible,” says Cambronne. “Minnesota and the state of Washington are the only ones who have that type of statute. In the event of a data breach, it says merchants pay banks for their losses.” 
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