[BreachExchange] Eighth Circuit Remands Proposed Settlement in Target Data Breach Class Action

[Audrey McNeil]

http://www.jdsupra.com/legalnews/eighth-circuit-remands-proposed-46434/

The Eighth Circuit Court of Appeals has remanded a $10 million settlement
in the Target data breach class action on the grounds that the district
court had not rigorously analyzed the propriety of the class certification.

The class initially certified by the district court was defined to include
"[a]ll persons in the United States whose credit or debit card information
and/or whose personal information was compromised as a result of the [2013
Target] data breach." Under the settlement agreement approved by the
district court, Target would have created a $10 million settlement fund for
the class. Class members with documented losses would be compensated first,
with the remaining balance being distributed equally to class members with
undocumented losses. Class members who suffered no loss from the security
breach would receive nothing from the settlement fund.

No class members objected when the district court preliminarily certified
the settlement class. However, between the district court's preliminary and
final orders certifying the class and approving the settlement, class
member Leif Olson objected to the settlement class on the grounds that it
did not meet the basic class prerequisites under Federal Rule of Civil
Procedure 23(a). Specifically, Mr. Olson argued that class members who are,
like himself, ineligible for monetary compensation make up what he termed a
"zero-recovery subclass." He argued that no named plaintiff belonged to
this purported subclass, and therefore the court should certify a separate
subclass with independent representation.

The Eighth Circuit agreed in part, holding that "the district court abused
its discretion by failing to rigorously analyze the propriety of
certification, especially once new arguments challenging the adequacy of
representation were raised after preliminary certification." The court
explained that it was not taking a position on the propriety of the class,
but noted that Mr. Olson's objections raised "important concerns" about
whether an intraclass conflict exists when class members who cannot claim
money from a settlement fund are represented by class members who can.

The Eighth Circuit appears to be the first Court of Appeals to remand a
data breach class action settlement for reasons related to the sufficiency
of the class. As such, the holding may provide guidance for structuring
future data breach class action settlements.
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