Target-MasterCard settlement can proceed despite not passing “the smell test”

A $19 million settlement between Target and MasterCard over costs stemming from the retailer’s 2013 data breach can proceed, according to a ruling from United States District Court Judge Paul Magnuson, who told interveners that he had little authority to dispute a settlement that does not seem either “fair or reasonable.”

Financial institutions that had sued Target to recoup the losses due to reissuing debit and credit cards, as well as reimbursing customers for fraudulent transactions objected to the settlement between Target and MasterCard and the judge noted that their concerns were “understandable.” A condition of the settlement requires banks to give up their claims against Target.

Magnuson wrote, “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. But the Court cannot enjoin a proposed settlement in this situation because it suspects that neither the settlement nor the putative class’s options are completely fair. The Court may act only if there is ‘misconduct of a serious nature.’ Although the settlement may not ‘pass the smell test,’ as the saying goes, it is not serious misconduct.”

Magnuson noted that the bank plaintiffs in the case were not a party to the settlement discussions and were not made aware of the $19 million agreement – which stemmed from a demand from MasterCard for $26 million – before the public announcement.