Class action lawyer blasts Target’s data breach deal with MasterCard

April 16, 2015

(Reuters) – When I saw news Wednesday that Target had reached a $19 million settlement with MasterCard to reimburse issuers of MasterCard-branded cards for costs associated with Target’s gigantic 2013 data breach, I thought there was something strange about the announcement. Target has been embroiled in multidistrict litigation over the data breach since 2014, including consolidated class actions by financial institutions that claim to have spent billions of dollars to replace compromised cards and beef up customer service operations because of the data breach. Last December, U.S. District Judge Paul Magnuson of St. Paul, Minnesota, refused to dismiss the banks’ case.

Yet Target reached its deal with MasterCard outside of the multidistrict litigation. The only mention of the banks’ class action against the company in Target’s announcement Wednesday was near the end of the document, when the company said banks that participate in the MasterCard deal will have to release their class action claims.

Turns out I wasn’t the only one with questions about the MasterCard deal, or about Target’s ongoing negotiations with Visa. According to Charles “Bucky” Zimmerman of Zimmerman Reed, class counsel in the banks’ case before Judge Magnuson, Target is attempting an improper end run around the class action to obtain “a quick, early, cheap-money” deal.

“Trust me, we are taking appropriate action to make the court aware,” Zimmerman said. “Our position is that they are having communications with class members without us being in the room  And they’re doing it outside of the MDL. We think that is wrong.”

Zimmerman said the banks that would have to sign releases to participate in the MasterCard settlement are members of the class he represents. (The class has not yet been certified.) He said Target was attempting to use MasterCard, which has its own agreements with the banks that issue cards under its brand, to shed itself of class members’ claims without the court scrutiny class actions are subject to.

He said lawyers for the class intend to explain in a filing before Judge Magnuson why the judge should block Target’s maneuver and why, if he does not, MasterCard issuer banks should not participate in the settlement. Target’s announcement said that its agreement with MasterCard is off unless 90 percent of the eligible issuing banks agree to participate in the deal before May 20. It’s going to be an interesting month for Target and the class action lawyers as they compete for the allegiance of those MasterCard banks.

I ran Zimmerman’s accusations past a media representative for Target, who said the company does not comment on pending litigation and otherwise referred me to the settlement announcement. A MasterCard representative sent me an email response to questions about Zimmerman’s assertions: “MasterCard and Target have worked to bring the matter to a fair conclusion,” it said. “Each impacted bank and credit union has the opportunity to determine whether they will accept the terms and distribution of the settlement.”.

Target is represented in the data breach litigation by Ropes & Gray.

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