(CN) – The Eighth Circuit ruled that a federal judge must take a second look at the deal that would create a $10 million fund to reimburse victims of Target’s customer data breach that happened during the 2013 holiday shopping season.
In 2013, Target announced that a security breach compromised the credit and debit card data and personal information of up to 110 million of its customers, according to the Eighth Circuit’s Feb. 1 ruling.
Investigators believe the security breach, which occurred in November and December 2013, was carried out by thieves who installed software on Target's payment terminals to capture credit information. The breach affected over 1,700 of Target's 1,900 stores.
Within months of Target’s announcement, consumers initiated a class-action lawsuit against the mega retailer in Minnesota federal court, which led to U.S. District Judge Paul Magnuson’s approval of the parties' proposed settlement agreement.
The deal requires Target to set up a $10 million settlement fund. Class members with documented losses would be compensated first from the fund, and the remaining balance would be distributed equally among class members with undocumented losses, according to court records.
The agreement would also force Target to pay fees requested by the class counsel up to $6.75 million.
Class members Leif Olson and Jim Sciaroni both disagreed with the proposed settlement that would require Target Corp. to set up a $10 million settlement fund for the class, alleging inadequate compensation and excessive attorneys' fees.
They also objected to the lower court's order requiring them to post a $49,000 bond to cover the costs of the appeal.
Despite the fact that Olson is a class member, he has not incurred any costs making him eligible for compensation from the settlement fund, according to the ruling. As a consequence, he is bound under the settlement to release Target from liability for any claims he may someday have, should the breach damage him in the future.
The Star Tribune reported that Target lawyers admitted to the Eighth Circuit panel that nearly 99 percent of class members would receive no monetary settlement.
Citing the question of whether a conflict exists when class members who cannot claim money from a settlement fund are represented by class member who can, the Eighth Circuit ruled last week that the lower court did not conduct a meaningful analysis of class certification.
The St. Louis-based appeals court remanded the case for a new review of the issue.
“The record provides an inadequate basis for effective appellate review because the district court failed to articulate its analysis of the numerous disputed issues of law and fact regarding the propriety of class certification,” Judge Bobby Shepherd wrote for a three-judge panel. “We accordingly remand this case to the district court with instructions to conduct and articulate a rigorous analysis of Rule 23(a)’s certification prerequisites as applied to this case, which must expressly evaluate the arguments raised in Olson’s objection.”
The Eighth Circuit also ruled to reduce the bond amount to reflect only costs the class members would recover should they succeed in any issues remaining on appeal, following the lower court's reconsideration of class certification.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.