Banks void $19M Target settlement

MINNEAPOLIS -- The proposed $19 million settlement between MasterCard and Target Corp. over the Minneapolis-based retailer's 2013 data breach has been voided after the pact failed to attract enough support from banks.

As part of the proposed out-of-court agreement, at least 90 percent of banks affected by the breach had to approve the settlement by Wednesday for it to take effect. But Target and MasterCard have both confirmed that threshold was not met by the deadline.

The latest development appears to send the dispute between financial institutions and Target back to a federal lawsuit that is seeking class-action status and is making its way through U.S. District Court in St. Paul. But at the same time, MasterCard appears to be working on an alternative.

"At this stage we will continue to work to resolve the matter," MasterCard said in a statement without elaborating on what action it might take.

The company added that the alternative recovery offers were an effort to provide banks with a more certain and prompt payment for a portion of the costs they incurred such as for issuing new cards and fraud losses. If it had gone through, banks would have been reimbursed their share of the settlement in the coming months.

Target had no further comment.

The news was well received by the lead plaintiffs' attorneys in that federal lawsuit who had unsuccessfully tried to block that settlement, saying the issue should be resolved as part of the court process and claiming that the MasterCard settlement was not a good deal for the banks.

"We are pleased that financial institutions have resoundingly rejected Target and MasterCard's attempt to avoid fully reimbursing the losses suffered during one of the largest data breaches in U.S. history," attorneys Charles Zimmerman and Karl Cambronne said in a joint statement.

A federal judge denied attempts by those attorneys to block the MasterCard settlement earlier this month since the lawsuit before his court had not yet been certified as a class action. But he did offer some harsh words about the proposed settlement, saying it does not pass a smell test.

"The court agrees with the plaintiffs' counsel that the terms of the settlement do not appear altogether fair or reasonable," U.S. District Judge Paul Magnuson wrote.

Business on 05/23/2015

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