Saturday, May 23, 2015 - Banks and credit unions involved in multidistrict litigation against Target Corp. for the retailer‘s massive 2013 data breach combined to void a $19 million settlement reached between Target and MasterCard. The settlement, which was agreed upon between the two companies out-of-court, would have been used to reimburse financial institutions for fraud coverage and the reissuing of cars following the data breach. The settlement needed 90 percent approval to pass however, and the deal was nixed after that quota was not reached.
The banks and credit unions that opposed the deal are acting as plaintiffs in the multidistrict litigation against Target over similar issues the settlement deal was meant to cover. Lawyers representing the plaintiffs claimed that the deal reached with MasterCard would have been far beneath the amount they are aiming to win in federal court.
Target however disagreed with this assessment, countering that the deal would have covered more than 70 percent of the banks losses connected to the data breach. This was much larger than the pennies on the dollar totals the banks reported the settlement capable of reimbursing. However this total was calculated by MasterCard, which is not a party to the multidistrict litigation. Plaintiffs scoffed at trusting the figures given by MasterCard as they had no stake in the outcome of a possible MDL settlement.
Layers for the plaintiffs claimed that the settlement had been described to media outlets as an agreement that would cover all the costs the banks incurred as a result of the data breach, far from the 71.4 percent of the maximum amount recoverable that MasterCard claimed would be covered. They also claimed that Target had not included the financial institutions in the talks in efforts to release them from the claims. These were among the main reasons the banks and credit unions did not agree to the proposed settlement.
Prior to the quota nixing the settlement, Target appealed to the judge presiding over the MDL between the retailer and banks in hopes of blocking the plaintiffs‘ motion for preliminary injunction. The retailer claimed that the MasterCard settlement would not affect any individual case in the MDL as concerned parties would be allowed to pursue litigation elsewhere if they opted out of the proposed settlement. Banks were worried about setting a precedent in these negotiations with such a small settlement, especially given that the lion‘s share of customers had cards issued with Visa. A small settlement with MasterCard could precede a more damaging small settlement with Visa for the MDL plaintiffs.
The federal judge overseeing the case between MasterCard and Target stopped short of blocking the settlement outright before the banks and credit unions failed to reach the 90 percent quota. The judge did however did make it known that the deal reached between Target and MasterCard did not seem to reimburse those affected by card reissues and fraud fees fairly.
Target reached a $10 million settlement in March to resolve claims against the company from customers that were affected by the breach. There seems to be a larger gap between the retailer and banks affected by the breach in terms of how much the data hacks cost the latter.