In another development in the multi-faceted litigation arising from Target’s December 2013 data breach, Defendant Target announced a tentative $19 million settlement with non-party MasterCard, to resolve claims of MasterCard-issuing financial institutions against Target. The proposed settlement was announced on April 15 and requires the agreement of financial institutions that issued at least 90 percent of the MasterCard accounts. 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. Those institutions that accept the deal will, in exchange, drop any further claims against Target, while those that reject it will be free to continue to litigate against Target with other financial institutions.
What makes this proposed settlement somewhat unusual is that it occurred without the involvement of class action Plaintiff’s lead counsel and without the imprimatur of the Court. And it leaves a relatively short time frame – until May 20 – for the affected financial institutions class Plaintiffs (those that issued MasterCard payment cards involved in the breach) to accept or reject the terms of the settlement and release their claims. This quick turn of events follows the Court’s earlier preliminary March 19, 2015 approval of the settlement of the separate consumer class action lawsuit against Target, as noted in our April 9, 2015 blog post.
In response to the proposed settlement, lawyers representing the financial institutions class asked the Court to block the deal because of the lack of notice to Plaintiff’s lead counsel and the short time frame for banks to decide whether to accept the proposed deal and give up their claims in the litigation. In their request to the Court, Plaintiffs sought a wide-ranging injunction against the settlement, asking the Court to void any releases MasterCard has received from putative Plaintiffs, to enjoin Target and MasterCard from invoking the jurisdiction of a court other than this Court to enforce the terms of their settlement, to enjoin MasterCard and Target from communicating with the putative class absent prior approval of the Court, and to order Target to issue a curative notice incorporating Plaintiffs’ lead counsel’s criticisms of the settlement.
On May 7, 2015, federal Judge Paul Magnuson denied that request. Although the Court questioned defense counsel’s approach in excluding Plaintiffs’ lead counsel and even commented that “the terms of the settlement do not appear altogether fair or reasonable,” the Court still rejected Plaintiffs’ request to enjoin the settlement because there was no evidence presented that Target or MasterCard had made misleading or coercive statement. The Court noted that the “law permits a defendant or a non-party to communicate with and 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.”
Stay tuned for further developments in this interesting data breach litigation.
