Class Action Lawyers in Target Case Hoard the Settlement Pie

Imagine a family dinner table where Dad is deciding how large a piece of pie each of his three children get. All three children are good and deserving. But Dad first takes a generous slice for himself—more than a third of the pie—and then gives the rest to his favorite child. The rest of the kids get nothing.

This is akin to what happened in a class action lawsuit stemming from Target’s infamous data breach in 2013, in which credit card and other identifying information was exposed to hackers. Class counsel settled the case with Target, but took 40% of the settlement for themselves in attorneys’ fees and then gave the rest to one group of class members, those who could readily file a claim for losses associated with the data breach. There were several other groups of class members—people with future-damages claims or statutory-damages claims—who got zilch.

Not only is that unfair, it’s illegal. The law protects class members from class counsel picking favorites. Rule 23, which governs the procedure and conduct of class action lawsuits brought in federal courts, requires that when there are groups of class members with conflicting interests (like class members with different legal claims, e.g., present- v. future-damages claims), those groups must be separately represented with separate legal counsel. Clearly, that requirement is an effort to make sure all interests are represented and no one is treated unfairly.

In the Target case, a judge will decide whether or not self-serving lawyers will get away with hoarding the settlement pie for themselves and a small portion of class members. In February, the federal Eighth Circuit Court of Appeals agreed with Competitive Enterprise Institute client Leif Olson that the district court had failed to consider whether there was, in fact, an intraclass conflict in this case. On May 10, CEI will argue to the district court that class certification should be denied because separate legal counsel is needed for these subgroups of class members. Separate legal counsel could represent the respective interests of these subgroups and make the most compelling arguments for why these class members should receive something more than the nothing they’re slated to get.

The outcome of the Target case is important, not just to the people harmed by the data breach but to class action fairness more broadly. Unfortunately, the situation in Target is far from unique. This sort of abuse goes on all the time. It’s time to restore justice and fairness in our nation’s legal system, and this case would be a valuable step in the right direction.

Find out more about the case, In re Target Corporation Customer Data Security Breach Litigation, 14-md-2522-PAM (D. Minn.), here.