Lawyers in federal lawsuit object to Target's settlement with MasterCard

The lead counsel in a federal lawsuit against Target Corp. is raising objections to the proposed $19 million settlement the Minneapolis-based retailer reached with MasterCard.

On Friday, Minneapolis attorney Charles Zimmerman called the agreement a "secret deal" that is offering "pennies on the dollar" to financial institutions that suffered millions of dollars in losses following a massive breach of Target's data systems in late 2013. And he said it's unfair Target and MasterCard circumvented the court process already in motion.

He is the lead counsel on the lawsuit, which is seeking class-action status, brought by financial institutions against Target that is making its way through U.S. District Court in St. Paul.

"What you have is a behind-the-curtain cheap settlement that isn't anywhere near capturing what financial institutions have suffered," he said.

He plans to bring his concerns to Judge Paul Magnuson at a hearing on April 27.

While he didn't have a total number of losses banks suffered from the breach, he said the damages have been estimated between several hundred million to up to a billion dollars. After the breach, banks reissued cards and reimbursed consumers for fraudulent charges, among other costs.

Earlier this week, Target and MasterCard announced the proposed $19 million settlement, but it is contingent on 90 percent of eligible MasterCard accounts that were affected by the breach to sign on to it and to release them of any claims, including the pending federal lawsuit. Financial institutions have until May 20 to endorse the proposal. If it passes, banks would be paid by the end of the second quarter this year.

A Target spokesman said the retailer does not comment on pending litigations.

The proposed settlement does not include Visa, which is still in negotiations with Target and is believed to have had more accounts affected than MasterCard.

Zimmerman, as well as the Minneapolis law firm of Chestnut Cambronne, which are the court-appointed lead counsel on the federal lawsuit, are urging financial institutions not to sign the proposed settlement without better understanding their rights through the court process.

"The banks I've talked to so far — I haven't talked to many, but I've talked to some — they think this is kind of laughable," Zimmerman said.

He also bristled at the fact that he, and the court, were excluded from the private negotiations that led to the settlement.

The proposed $19 million settlement with MasterCard is already included in the $252 million in costs Target has said it expects to pay for breach-related expenses.

About 40 million customers had their payment card information stolen after hackers infiltrated Target's point-of-sale systems. Another 70 million people had personal information compromised.