Judge: Settlement between Target and MasterCard can go forward

A proposed $19 million settlement between MasterCard and Target Corp. over the Minneapolis-based retailer's 2013 data breach can move forward after a federal judge on Thursday denied an attempt to block parts of it.

U.S. District Judge Paul Magnuson in St. Paul denied a motion for a preliminary injunction by smaller banks.

The banks, who are also suing Target for damages related to the breach, objected to MasterCard's proposed out-of-court settlement, which would require banks that sign onto it to drop further claims against Target, including participation in the suit seeking class action.

In his order, Magnuson noted that MasterCard is not a party to the lawsuit and that the settlement arose out of MasterCard's demand that Target pay more than $26 million to MasterCard-issuing banks for damages from the data breach. The two parties settled on $19 million.

The banks objected, saying the amount would not cover banks' total damages and was subverting the court process.

Magnuson said he could not stop it since a class action had not been certified in the case. Still, he appeared to agree with the spirit of the plaintiffs' arguments.

"The court agrees with the plaintiffs' counsel that the terms of the settlement do not appear altogether fair or reasonable," Magnuson wrote. "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."

The proposed settlement, which was announced last month, is contingent on 90 percent of eligible card issuers signing on to the plan by May 20. MasterCard has said the settlement offers banks a more certain and quicker resolution with reimbursement to happen this year. The court case is scheduled to go to trial in March 2016.

Kavita Kumar • 612-673-4113