Target Will Pay Banks $39M for Data Breach

(CN) — A federal judge approved Target's plan to pay $39 million to banks that issued credit and debit cards used during the store's 2013 data breach that affected 40 million customers.

It was the holiday shopping season in late 2013, when unidentified computer hackers gained virtually unfettered access to Target Corp.'s computer system.

Ultimately, more than 40 million consumers' financial information was extracted, according to court records.

A slough of lawsuits ensued, filed by consumers, as well as the financial institutions that issued the credit and debit cards used at Target stores during the data breach period.

The Judicial Panel on Multidistrict Litigation consolidated the cases in Minneapolis Federal Court.

U.S. District Judge Paul Magnuson certified the financial-institution plaintiff class in September 2015.

Months later, Magnuson finalized approval of a $10 million settlement for the consumer plaintiffs on Nov. 17.

In December, Target agreed to pay $39 million to the financial-institution plaintiffs.

Magnuson approved the deal Thursday, also awarding the banks $19.9 million in attorney's fees and costs.

"There were significant hurdles to success in this litigation that make settlement appropriate," the judge wrote. "A large percentage of the putative class, representing 68 percent of all compromised cards, accepted early settlement offers from Target through Visa and MasterCard, and thereby released their claims against Target. These settlements reduced the class substantially and similarly reduced the amount of any possible recovery. Thus, although the class's claims had merit, the expense of further litigation combined with the class's reduced leverage make this settlement fair and reasonable."

According to the ruling, only 45 banks have sought to opt out of the settlement.

"This number represents only 1.6 percent of all eligible compromised accounts," Magnuson wrote. "Institutions representing more than 67 percent of eligible compromised accounts have filed claims for compensation from the settlement fund. No class members have objected to the settlement. All of these facts establish that the settlement is fair, reasonable, and adequate, and weigh in favor of the settlement."

Settlement class representatives are Umpqua Bank, Mutual Bank, Village Bank, CSE Federal Credit Union and First Federal Savings of Lorain.

The financial plaintiffs' attorney — Charles Zimmerman with Zimmerman Reed in Minneapolis — said the ruling was "an excellent result for the banks and credit unions of the U.S. and will provide to them a significant recovery for losses suffered in the Target data breach."

"We believe the court's comments and opinions are the best source of news material," Zimmerman wrote. "We are proud of the work and the results achieved in this landmark case."

Target's attorneys did not return requests for comment Monday. They are Michael Agoglia, Rebekah Kaufman, Jack Londen, David McDowell, Harold McElhinny, and Nancy Thomas with Morrison & Foerster in San Francisco; Sterling Brennan with Mashoff Brennan in Irvine, Calif.; Fred Burnside with Davis Wright Tremaine in Seattle; Robert Flanders Jr with Hinckley, Allen & Snyder in Providence, R.I.; Patrick Kenny with Armstrong Teasdale in St. Louis; Douglas Meal and Michelle Visser with Ropes & Gray in Boston; Michael Ponto and Wendy Wildung with Faegre Baker Daniels in Minneapolis; and William Waddell Jr. with Friday, Eldredge & Clark in Little Rock, Ark.

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