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Target, MasterCard settlement not a sure thing

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Target, MasterCard settlement not a sure thing

Plaintiff attorneys' efforts to scuttle the proposed $19 million settlement announced last month between Target Corp. and MasterCard International Inc., particularly in light of a presiding judge's expressed unhappiness with its terms, casts some doubt on the proposal's ultimate success.

Last month, Minneapolis-based Target Corp. announced it had entered into a settlement agreement with Purchase, New York-based MasterCard International Inc. to pay up to $19 million pretax in connection with losses sustained by banks and other credit card issuers stemming from the retailer's 2013 data breach, which affected about 40 million credit cards.

Any bank accepting payment must do so by May 20, and the settlement is conditioned on issuers representing at least 90% of the eligible MasterCard accounts accepting the offer

Plaintiff attorneys representing banks and credit unions, however, filed a motion seeking an injunction against the settlement, claiming the terms were inadequate.

In ruling on the motion, Judge Paul A. Magnuson of the U.S. District Court in St. Paul, Minnesota, said, “Plaintiffs' lead counsel's issues with the settlement are understandable, but they are also not susceptible of a legal remedy.” Defendants can communicate with putative class members before class certification without court approval, he said.

“The Court agrees with plaintiffs' counsel that the terms of the settlement do not appear altogether fair or reasonable,” Judge Magnuson said. “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,'” said the judge, in citing an earlier ruling. “Although the settlement may not 'pass the smell test' as the saying goes, it is not serious misconduct.”

Judge's options currently limited

“What the court is saying here is that before a class is certified, the judge's duties or authority over settlements are limited,” unless there is actual misconduct, said Peter S. Selvin, an attorney with Troy Gould P.C. in Los Angeles who is not involved in the case.

One of the plaintiff attorneys in the case, Karl L. Cambronne, a partner with Chestnut Cambronne P.A. in Minneapolis, said the settlement amounts to issuers getting only 10 cents on the dollar for their costs associated with the data breach.

“We think the banks are going to see through this being what it is — an attempt to buy claims for pennies on the dollar,” he said.

Barry Goheen, a partner with law firm King & Spalding L.L.P. in Atlanta who is not involved in the case, said the settlement would not have been put before the court if Target and MasterCard “were not confident that the court would ultimately approve it,” otherwise “it really would be an incredible waste of time and money.”

But at the same time, he said, “there is no guarantee” that a large enough number of issuers will not opt out so as to put the settlement at risk.

He added that Judge Magnuson's remarks are “kind of a shot over the bow and kind of a warning” that the settlement will not be rubber-stamped.

Spokesmen for MasterCard and Target could not immediately be reached for comment.

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