The $60 million settlement (
The proposed settlement would cover issuer costs associated with the network breach. Issuers must decide by Jan. 29 whether to accept the settlement, Heartland says.
Asked to respond to the firms’ claims, a Visa spokesperson would only refer to the Jan. 8 press release about the settlement. A Heartland Payment Systems representative was not immediately available.
Three law firms, each with interim co-lead counsels representing card issuers, noted in a joint press release yesterday the proposal may provide little compensation for issuers because they could recover only “pennies on the dollar” for their breach-related costs. Moreover, the settlement does not give issuers enough time–15 days-to decide whether to participate, they contend. The three law firms include The Coffman Law Firm of Beaumont, Texas; Caddell & Chapman of Houston; and Chimicles & Tikellis LLC of Havorford, Pa.
Affected financial institutions officially were notified of the settlement proposal on Jan. 14. The proposed settlement may be an attempt to “circumvent safeguards inherent in the judicial process,” the release states. They attorneys also contend the proposed settlement comes early in the court proceedings.
“It is early in the case, and there has been no formal discovery,” says Joe Sauder, an attorney and co-lead counsel with Chimicles & Tikellis.
The three firms represent various groups of card issuers, says Richard L. Coffman, an attorney at The Coffman Law Firm. Coffman, who is one of the co-lead counsels who represents about 30 financial institutions, says none of the attorneys are saying financial institutions should not accept the settlement agreement, but they should analyze whether the offer is worth it.
“Each financial institution has do its own math and evaluate its unique settlement offer” to decide whether to should accept, Coffman tells PaymentsSource.
“We’re not saying don’t take the deal,” Coffman says. “We’re saying scrutinize it.”
The range of settlement offers range from 0.7 cents per dollar of loss to as much as 32 cents per dollar of loss, Coffman says. Most offers have been between 3 cents and 10 cents on the dollar, he says.
Some banks and credit unions could accept their offers to eliminate the “risk and hassle of litigation,” Coffman says. “There are no guarantees.”
Most egregious in Coffman’s view, however, is the settlement’s liability release for Heartland’s two acquiring banks, Clayton, Mo.-based Heartland Bank and KeyBank, a unit of Cleveland-based KeyCorp. Accepted offers also release Visa and Heartland Payment Systems from litigation.
“Why do the acquiring banks get a free ride on the deal without putting anything into it?” Coffman asks.
On Tuesday, his firm filed suit in the U.S. District Court, Southern District of Texas, against Heartland Bank and KeyBank alleging breach of contract and negligence, among other allegations, for their roles in the data breach and its aftermath. Coffman says the suit was not filed in response to the Jan. 14 settlement. It had originally been scheduled for filing around the time of the settlement announcement, he says.
“Why would Visa feel like it could take upon itself to secretly negotiate a deal on behalf of its network members and release the two richest parties?” Coffman asks.
“The majority of settlement funds are provided by Heartland, which is downplaying its ability to pay any more money,” Coffman says. “Yet KeyBank has $97 billion in assets, and Heartland Bank has over $1 billion of assets, which suggests that there are additional sources of money to compensate the issuers for their damages.”
A KeyBank spokesperson says the bank does not comment on litigation. A representative from Heartland Bank was not immediately available.
Meanwhile, the class-action lawsuit against Heartland Payment Systems continues in court. Additional motion hearings are scheduled to take place in the next few weeks, Coffman says.
