Banks seek to block Target's deal with MasterCard over data breach

Scott Mlyn | CNBC

A group of small banks and credit unions suing Target over its massive data breach in 2013 are moving to block the retailer's proposed $19 million settlement with MasterCard, calling it a "sweetheart deal" aimed at undercutting their own claims for losses.

Lawyers for plaintiffs in the lawsuit, which seeks class-action status, filed an emergency motion late Tuesday asking a federal judge in St. Paul, Minnesota, for a preliminary injunction that would prevent the settlement announced on March 19 from going through.

The lawyers want the court to throw out terms of the deal, which they contend were "surreptitiously" aimed at barring financial institutions from being part of the lawsuit.

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"The agreement between Target and MasterCard is nothing more than an attempt by Target to avoid fully reimbursing financial institutions for losses they suffered due to one of the largest data breaches in U.S. history," said a statement on Wednesday from Charles Zimmerman of Zimmerman Reed PLLP and Karl Cambronne of Chestnut Cambronne PA, co-lead plaintiffs' attorneys in the lawsuit.

"It provides paltry restitution for the substantial losses suffered," the statement added. "This sweetheart deal for Target was negotiated without involvement of the court or the legal representatives of the impacted financial institutions."

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Lawyers for Target did not return calls seeking comment on the motion, which could prevent it from getting a release from claims in the class-action.

The motion is due to be heard in federal court Monday.

Target has said the amount under its settlement with MasterCard covers costs that banks incurred to reissue credit cards and debit cards to customers as a result of the data breach.

In 2013, Target said at least 40 million credit cards were compromised by the breach during the winter holiday shopping season, and the attack might have resulted in the theft of personal information, such as email addresses and telephone numbers, from as many as 110 million people.

Target is still in negotiations with Visa over fallout from the breach.

Payments under the settlement were to be made by the end of the second quarter and it was conditioned on issuers of at least 90 percent of eligible account holders accepting the offer by May 20, Target said.