Legal Challenge to Target Data Breach Settlement Nixed
A federal judge has turned aside a legal challenge to the previously announced $19 settlement between Minneapolis-based Target Corp. and MasterCard International Inc.
Target announced the settlement on April 15, but quickly came under fire from attorneys representing banks, credit union and other credit card issuers in litigation with Target over the data breach that came to light in late 2013 for the retailer. The attorneys challenging Target filed a motion for a preliminary injunction to seeking to nullify the announced settlement.
But in an order filed on Thursday, U.S. District Court Judge Paul Magnuson denied the motion for a preliminary injunction to block the Target/MasterCard settlement, noting, “The Court has almost no authority to oversee such settlements.”
The coalition of attorneys suing Target is seeking class action status in its action, but the class has not yet been certified. Magnuson’s order also indicates: “The law permits a defendant or a non-party to communicate with and to settle with putative class members at any time before class certification without Court approval or input as long as those communications are not misleading or coercive.”
A Target media representative did not immediately respond to a request for comment on Friday.
The judge’s order does shed some new light on the negotiations between Target and MasterCard.
According to Judge Magnuson’s order: “The settlement arose out of MasterCard’s demand that Target pay more than $26 million to MasterCard-issuing banks for damages arising out of the data breach. The parties eventually agreed that Target would pay MasterCard $19 million. On April 16, 2015, MasterCard sent to its issuer banks an estimate of the amount of damages each bank had suffered in the Target data breach and offered to pay the bank a fixed percentage of the MasterCard-estimated amount. Any bank accepting that payment must do so by May 20, and is also required to release its claims against Target in this litigation.”
But despite denying the motion, Magnuson’s order offered some sympathy for the plaintiffs: “The Court agrees with Plaintiffs’ counsel that the terms of the
settlement do not appear altogether fair or reasonable. At the very least, the way this issue has arisen is neither fair nor is it how the Court expects attorneys to conduct themselves in litigating matters before the Court. But the Court cannot enjoin a proposed settlement in this situation because it suspects that neither the settlement nor the putative class’s options are completely fair. The Court may act only if there is ‘misconduct of a serious nature.’ Although the settlement may not ‘pass the smell test,’ as the saying goes, it is not serious misconduct.”
Target’s announcement of the settlement in April indicated that the deal was conditioned on at least 90 percent of eligible MasterCard issuers agreeing to the settlement by May 20. It is not yet clear if that standard will be met.
Charles Zimmerman of Zimmerman Reed and Karl Cambronne of Chestnut Cambronne, are the co-lead plaintiffs’ counsel in the data breach litigation against Target. Both firms are based in Minneapolis.
In a joint statement issued by the attorneys, Zimmerman and Cambronne said: “The Court’s opinion is a harsh indictment of the ‘settlement’ proposed by Target and MasterCard, and should give financial institutions great pause before accepting this flawed and inadequate agreement. …We will continue communicating with financial institutions about the importance of rejecting this Target-MasterCard ‘settlement’ in order to seek proper compensation for losses resulting from this data breach.”