BJ's Seeks to Have Suit Dismissed

MADISON, Wis. – BJ’s Wholesale Club and its card processing firm, Fifth Third Bank, have made a motion to the Massachusetts court seeking to have a lawsuit from CUNA Mutual Group and 163 credit unions dismissed, according to a spokesman for CUNA Mutual. The insurer and credit unions are trying to recover the costs of re-issuing thousands of credit and debit cards that the big box retailer allegedly lost to hackers after holding on to them in contravention of Visa and MasterCard’s regulations. Prior to the CardService Solutions case earlier this year, the BJ’s case was the largest card loss case to affect credit unions. CUNA Mutual said that it has until the end of August to reply to a motion to dismiss and then, assuming the court does not dismiss the case, the suit will move forward to oral arguments in third quarter of this year. In its brief filed with the Massachusetts Superior Court, the retailer said it cannot he held responsible for losses incurred by credit unions when they had to replace credit and debit cards which were allegedly compromised during a card data security breach because the retailer had no relationship with the credit unions that should lead them to expect recompense from such losses. “Essentially, the Issuing Banks are unsatisfied with the allocation of economic risks and rewards associated with the complex private financial system for settling credit and debit card transactions,” the retailer argued. “Although, as financial institutions, they have enjoyed the benefits of this private system, the Issuing Banks now want the Court to rewrite the private agreements establishing the system to give them rights and protections for which the Issuing Banks never bargained. The Court should refuse the invitation.” The retailer added that the credit unions did not attach any copies of the agreement between it and Fifth Third, its processor, a document which it said explicitly seeks to prevent any third parties from deriving any rights from the contract. It also suggested that the credit unions couldn’t really prove that the retailer had violated Visa or MasterCard’s regulations. The CUMIS lawsuit differs significantly from that filed by the $2.3 billion Pennsylvania State Employees Credit Union. Like CUMIS and the other credit unions, PSECU is seeking to recover damages from the retailer but, partially because it has filed its own lawsuit, it has not had to use the same grounds as CUMIS and the other credit unions. The somewhat narrower grounds have meant that PSECU is still in the discovery process with its suit and has not, yet at least, had to defend its motion from motions to dismiss, according to Greg Smith, CEO of the credit union.