The $10 Million Target Settlement

King & Spalding
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In the past two years, there have been a number of lawsuits filed against major corporations as a result of data breaches, including the class action filed against Target following the data breach it suffered in late 2013.  Many have been keeping a close eye on this litigation.

On Thursday, March 19, 2015, U.S. District Judge Paul A. Magnuson (D. of Minnesota) held a hearing on the motion for preliminary approval of Target’s settlement with consumers whose credit cards, debit cards, or other personal information were alleged to have been compromised as a result of the 2013 data breach.  If the settlement is approved, Target will pay $10 million to a settlement fund that will be distributed to class members who suffered damages as a result of the breach.  The maximum compensation is $10,000 per eligible class member, and the total class size is approximately 110 million people.  The first group of class members to receive compensation will be those who can prove damages with documentation such as a credit card statements, invoices, and receipts.  Then, any remaining amount will be equally distributed to those class members who do not have documentation but who submit a “Self-Certification Claim.”  In addition to compensating class members, Target will be required to: (i) maintain a written information security program to include internal controls; (ii) designate a chief information security officer to oversee the security program; (iii) maintain a process to monitor for information security events and respond to threats; and (iv) provide information security training to Target employees.

When weighed against the overall cost of litigation, Target’s agreement to this settlement amount seemed to be an easy one.  But why did the consumer plaintiffs agree to it?  Generally, in lawsuits against companies that have suffered data security breaches, plaintiffs have a difficult time proving they suffered cognizable harm as a result of the particular breach at issue.  In a memorandum in support of the motion for preliminary approval of the settlement, the consumer plaintiffs pointed to these difficulties, among others, such as the complexity and expense of further litigation and of calculating damages.  Therefore, their agreement to this settlement seems understandable in light of the litigation challenges facing the plaintiffs.

The court issued an order on March 19th that preliminarily approved the class action settlement.  Class members have until July 31st to submit objections or to request to be excluded from the class.  The final approval hearing is set for November 10, 2015.

Reporter, Jennifer Raghavan, San Francisco, +1 415 318 1234, jraghavan@kslaw.com

 

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