Target Corporation has agreed to pay financial institutions almost $40 million to settle a class-action suit related to its massive 2013 data breach.
According to an announcement from the attorneys representing the plaintiffs, the proposed settlement of up to $39,357,938.38 will apply to all U.S. financial institutions that issued payment cards put at risk as a result of the data breach. That includes up to $20,250,000 that will go directly to members of the class action and to pay for the notice and administration of the settlement. The remaining $19,107,939.38 will fund MasterCard's Account Data Compromise program, according to the announcement.
“This settlement is a strong and important result for those financial institutions that sustained losses as a result of the Target data breach, providing compensation well beyond what the card brand networks offered,” said co-lead plaintiffs' counsel Charles Zimmerman of Zimmerman Reed PLLP and Karl Cambronne of Chestnut Cambronne PA. “It also sets an important precedent that financial institutions should not always have to bear the burden of extensive costs related to merchant data breaches over which they have no control.”
The proposed settlement amount is in addition to amounts provided by Target through Visa's Global Compromised Account Recovery Program, according to court documents filed Wednesday. According to the documents, under the settlement, financial institutions will have the option to either receive at least $1.50 per compromised card over and above what they receive from MasterCard or Visa, or up to 60% of their total fraud, reissuance and other costs related to the data breach, less what they get from MasterCard or Visa. Financial institutions that choose the 60% option will need to submit proof of their claims, the documents said.
The settlement also required Target to forfeit its rights to challenge MasterCard's assessment, according to the announcement.
“This will directly result in MasterCard distributing that money to issuers that have not yet settled their claims with Target,” Cambronne and Zimmerman explained a court document filed Wednesday.
However, the settlement will only apply to financial institutions that did not previously release their claims against Target. That could mean financial institutions that participated in settlements offered by Visa or MasterCard could be left out.
In a statement to CU Times, a Target spokesperson said, “We are pleased that the process is continuing to move forward.”
A hearing to give preliminary approval to the settlement is scheduled in Minnesota District Court for Wednesday afternoon. If the settlement receives approval, as many as 7,000 financial institutions and 20,000 senior executives will receive formal notices, according to court documents. A final approval hearing will be held next year for the court to determine if the settlement is fair, reasonable and adequate, according to the announcement.
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