A judge has denied a request by five financial institutions to stop a proposed $19 million settlement between MasterCard and Target, putting issuers on a short May 20 deadline to decide whether they'll accept the offer.

The opinion came after attorneys Charles Zimmerman of Zimmerman Reed and Karl Cambronne of Chestnut Cambronne asked for an injunction on behalf of Umpqua Bank, Mutual Bank, Village Bank, CSE FCU and First Federal Savings of Lorain on April 21.

The proposed settlement was in response to a data breach in late 2013 involving millions of credit and debit cards, as well as personal information of Target customers.

In an April 27 hearing, Cambronne and Zimmerman argued the proposed settlement amount was far below issuers' actual damages, was improperly calculated, was negotiated without consulting the issuers, could pressure issuers to accept the offer for fear of losing the ability to issue MasterCard products, and unfairly required issuers to forfeit certain rights to sue under Minnesota's Plastic Card Security Act. Target is headquartered in Minnesota.

However, the lack of class action status in the matter appeared to have made a significant difference.

“The law permits a defendant or a non-party to communicate with and to settle with putative class members at any time before class certification without Court approval or input as long as those communications are not misleading or coercive,” U.S. District Court Judge Paul Magnuson wrote in the opinion.

There's been no evidence of coercion to accept MasterCard's offer, he added.

Though Target and MasterCard appeared to have prevailed, Magnuson had some harsh words for them.

“The Court agrees with plaintiffs' counsel that the terms of the settlement do not appear altogether fair or reasonable. 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,” he wrote.

“Although the settlement may not 'pass the smell test,' as the saying goes, it is not serious misconduct,” he added.

“The court's opinion is a harsh indictment of the 'settlement' proposed by Target and MasterCard, and should give financial institutions great pause before accepting this flawed and inadequate agreement,” Zimmerman and Cambronne said in a statement to CU Times.

“We agree with Judge Magnuson that 'the terms of the settlement do not appear altogether fair or reasonable' and that it may not 'pass the smell test'. The Court's findings further underscore that the agreement between Target and MasterCard is nothing more than an attempt by Target to avoid fully reimbursing financial institutions for losses they suffered due to one of the largest data breaches in U.S. history. We will continue communicating with financial institutions about the importance of rejecting this Target-MasterCard 'settlement' in order to seek proper compensation for losses resulting from this data breach.” :

Instant Insights /

Target Settlement: Judge Denies Injunction

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