ST. LOUIS (Legal Newsline) - A $10 million class action settlement stemming from a 2013 Target data breach -- described as “unfair” by some -- is again being looked at by a federal appeals court.
On Tuesday, the Competitive Enterprise Institute’s Center for Class Action Fairness filed additional briefing in the case, as requested by the U.S. Court of Appeals for the Eighth Circuit.
The Eighth Circuit, earlier this year, sent the case back to a Minnesota federal district court to reconsider the objections of class member Leif Olson, who is represented by CEI, which appealed the original approval of the class action settlement.
In May, Judge Paul A. Magnuson with the U.S. District Court for the District of Minnesota approved certification of the class action for a second time.
“The Target class action settlement unfairly freezes out millions of people from getting any settlement relief,” CEI attorney Melissa Holyoak said Tuesday. “This is a matter of fundamental fairness under the law.
“Under the current settlement terms, people who had their financial data stolen are forced to release statutory claims or claims for damages incurred after July 2015 in exchange for nothing.”
CEI argues the district court, in twice approving the settlement, got it wrong yet again.
The district court, CEI contends, “fundamentally misunderstood” the structure of the settlement as well as U.S. Supreme Court precedent on the matter.
“The district court’s approach proves too much: the future-claims subgroup needed separate representation and separate counsel at the negotiating table to advance their best arguments so they weren’t left behind with zero recovery. And if indeed the future-damages claims had minimal settlement value, they should have been carved out of the Settlement rather than released for no consideration,” CEI wrote in its 19-page supplemental brief.
CEI, in its filing, urges the Eighth Circuit to reverse class certification and hold that a single class settlement cannot be certified; instead, class members who were frozen out should be in separate subclasses with separate legal counsel.
It notes that though the appeals court initially declined CEI’s request for additional briefing in the case, the Eighth Circuit later, on its own initiative, requested additional briefing on the district court’s renewed certification order.
Previously, the Eighth Circuit ruled the district court had not “rigorously scrutinized” whether the settlement satisfied class action requirements.
“Although Olson is highly critical of the settlement and the representation of named Plaintiffs and class counsel, he has utterly failed to demonstrate any conflict of interest,” Magnuson wrote in his May order granting the consumer plaintiffs’ renewed motion to certify the class.
The Eighth Circuit explained in its Feb. 1 opinion that while the U.S. Supreme Court has not said what, specifically, a “rigorous analysis” of class certification prerequisites entails, at a minimum the rule -- Rule 23(a) -- requires a district court to state its reasons “in terms specific enough for meaningful appellate review.”
Judge Bobby E. Shepherd, writing for the Eighth Circuit, said the District of Minnesota’s certification of the settlement class did not meet this standard.
“In its preliminary order, the court replaces analysis of the certification prerequisites with a recitation of Rule 23 and a conclusion that certification is proper,” Shepherd wrote.
He continued, “These remarks are conclusions, not reasons, and on their own they do not constitute a ‘rigorous analysis’ of whether certification is proper in this case.”
Olson challenged the class certification for lack of adequate representation due to an alleged intraclass conflict.
Olson alleged that, unlike the class representatives, he incurred no expenses or costs making him eligible for compensation from the settlement fund. Despite receiving no such relief, he is bound under the deal to release Target from liability from any claims he may someday have.
He argued class members such as himself make up what he calls a “zero-recovery subclass.” Since no named plaintiff belongs to this purported subclass, Olson contended the court should certify a separate subclass with independent representation.
“Though not exhaustive, Olson’s objection raises important concerns for the district court to evaluate upon remand,” Shepherd wrote in the Eighth Circuit’s February opinion.
Class member Jim Sciaroni did not object to the certification but appealed the district court’s approval of the settlement agreement.
Both Olson and Sciaroni also challenged the district court’s order requiring them to post a bond of $49,156 to cover the costs of the appeal.
The Eighth Circuit reversed that order, noting the parties agreed that only $2,284 of the bond reflects the direct costs of the appeal.
The remaining $46,872 -- according to the district court -- covers the “financial harm the class will suffer as a result of the delay caused by the appeal,” such as disruptions in the claims process, hindered distribution of settlement funds to class members, and the administrative costs of maintaining the settlement website and toll-free telephone number.
The Eighth Circuit remanded to the district court to reduce the bond to reflect only those costs that the appellees will recover “should they succeed in any issues remaining on appeal following the district court’s reconsideration of class certification.”
Magnuson, in his May order, said it is “insufficient” to merely argue that a settlement is not good enough.
“To establish that the representation of class representatives and the settlement they negotiated is not fair or adequate, Olson must offer actual evidence of the conflict he claims,” the Minnesota federal judge wrote. “His failure to do so, or to offer any alternative potential -- and reasonably achievable -- recoveries shows that the representation was fair and adequate, and the settlement was as good a settlement as any class member could hope.”
The judge continued, “Those who suffered monetary losses will, in the main, be compensated for all of the losses they suffered. Those who did not suffer any monetary loss will benefit from the heightened protections Target agreed to put in place to safeguard its customers’ personal information. And any class member whose fear of identity theft compelled them to purchase protection for such theft can seek reimbursement for those costs from the settlement fund.”
Magnuson said it’s “difficult to imagine” a settlement that more comprehensively addresses all of the harm suffered by the class.
According to Magnuson’s Nov. 17, 2015 order granting final approval, the settlement provides that Target will pay $10 million to settle the claims of class members and to pay service awards to class representatives. Any residual settlement funds will not revert to Target but will be distributed as directed by the court.
Payments to class members will vary depending on each individual’s ability to document their losses.
Individuals with documentary proof of losses will be reimbursed both for out-of-pocket loss and time loss (up to two hours at $10 per hour), up to a maximum of $10,000.
The plaintiffs have estimated the average payout for such “high value” documented claims -- where the claimed damages are more than $5,000 and there is documentation to support the claim -- will be almost $2,200 per claimant, and the average payout for lower-value documented claims will be just under $300 per claimant.
Individuals who have no documented proof of loss will receive an equal share of the settlement fund after service awards and documented-loss payments are made.
The plaintiffs have estimated the payment for undocumented-loss claimants will be $40 per claimant.
Magnuson said the settlement also requires Target to improve its data security practices in “significant ways.”
The court preliminarily approved the settlement in March 2015, certifying the class to include “all persons in the United States whose credit or debit card information and/or whose personal information was compromised as a result of the data breach that was first disclosed by Target on Dec. 19, 2013.”
The case arises out of one of the largest breaches of payment-card security in the United States’ retail history.
Between Nov. 27 and Dec. 15, 2013 -- the peak of the year’s holiday shopping season -- computer hackers stole credit- and debit-card information and other personal information for about 110 million Target customers.
Many of the plaintiffs, in their lawsuits, alleged the retail store failed to implement and maintain reasonable security procedures and practices appropriate to the nature and scope of the information compromised in the data breach.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.