A U.S. judge in Minneapolis denied a request from small banks
and credit unions to block part of Target Corp.'s recent $19
million settlement with MasterCard Inc. over its 2013 data breach,
but acknowledged that terms of the pact "do not appear altogether
fair or reasonable."
In a four-page ruling handed down late Thursday, U.S. Judge Paul
Magnuson said that there wasn't any indication that MasterCard is
misleading or coercing banks and credit unions into accepting terms
of the settlement.
"Although the settlement may not "pass the smell test," as the
saying goes, it is not serious misconduct," the judge wrote in his
decision.
Representatives of Minneapolis-based Target and Purchase,
N.Y.-based MasterCard said they were pleased with the judge's
decision.
"Each impacted bank and credit union will review the terms and
make an independent decision on whether to accept the settlement,"
a MasterCard spokesman said.
Target's data breach in late 2013 compromised 40 million credit-
and debit-card accounts. A group of small banks and credit unions
had asked the court to allow them to pursue additional compensation
for losses that they incurred as a result of the breach. The $19
million settlement, announced last month, includes a traditional
provision that prohibits banks that participate in the pact to seek
other reimbursement claims. Small banks were hoping to block part
of the deal in an effort to remove that provision.
The banks say that they are only reimbursed pennies on the
dollar in such cases and should be allowed to pursue compensation
in other ways.
Lawyers representing the small institutions said the judge's
ruling "should give financial institutions great pause before
accepting this flawed and inadequate agreement."
The lenders' request came as part of their lawsuit against
Target. MasterCard isn't officially a party to the case. MasterCard
initially sought more than $26 million from Target, according to
the judge's ruling.
The judge also noted that the court's authority over the
settlement is limited because the case hasn't been certified as a
class-action lawsuit. The plaintiffs are seeking class-action
status.
Paul Ziobro contributed to this article.
Write to Robin Sidel at robin.sidel@wsj.com
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