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The Green Sheet Online Edition

January 11, 2010 • Issue 10:01:01

Heartland settles some, loses one

On Dec. 21, 2009, Heartland Payment Systems Inc. agreed to settle the consumer cardholder class-action lawsuits that emanated from the District Court for the Southern District of Texas. The suits involve claims arising from the data breach of the Princeton, N.J.-based processor's payment system reported by Heartland in January 2009.

In accordance with settlement terms, Heartland will pay between $1 million and $2.4 million to class-action participants who submit valid claims for losses as a result of the breach. According to the court, this settlement resolves all actions and proceedings that were asserted, or could have been asserted, against Heartland in relation to the breach.

No transparency disparity

Heartland will also pay all costs associated with the administration of the class-action settlement, including up to $1.5 million to notify affected cardholders of procedures to be followed for making claims or opting out of the settlement. A Web site dedicated to disseminating this information is included in Heartland's obligations.

The company has also agreed to pay up to $760,000 of the attorneys' fees and costs of attorneys representing cardholders victimized by the breach. Lastly, Heartland will submit the report of an independent expert on the processor's actions and its plans to enhance the security of its payment system.

"We are pleased to have reached a fair and reasonable settlement agreement that helps cardholders recover losses they may have incurred directly related to the criminal intrusion," said Heartland's Chairman and Chief Executive Officer Robert O. Carr. "We are committed to providing our merchants and their customers with a secure processing solution that protects them from the growing threat of cybercrime."

A December to remember

The resolution of this class-action suit follows on the heels of two other cases settled regarding the Heartland compromise. On Dec. 7, 2009, the United States District Court for the District of New Jersey granted Heartland's motion to dismiss a consolidated shareholder class-action lawsuit filed against Heartland.

Additionally, ten days later Heartland agreed to pay American Express Co. $3.6 million, which completed all "intrusion-related issues" between the two companies. Carr commented that the settlement with AmEx marked the first agreement with a card brand related to the breach.

VeriFone prevails

Concluding a tumultuous 2009, VeriFone reported that Heartland's action to block VeriFone from providing direct support to Heartland merchant customers was rejected by a federal court.

After VeriFone filed a lawsuit in September 2009 alleging Heartland had infringed on a VeriFone patent gained through the acquisition of Lipman Electronic Engineering Ltd., VeriFone said it would provide support to Heartland merchants to prevent disruptions and maintain optimal service levels. One week later, Heartland requested an injunction to prevent VeriFone from doing just that.

However, on Dec. 28, in the U.S. District Court for the District of New Jersey, Judge Mary L. Cooper denied Heartland's injunction request on the grounds that the processor's contentions "contradict its own claims in this case" regarding its ability to service clients who use VeriFone systems.

The judge said Heartland's assertions in previous court filings "suggests an ongoing dependence and foreseeable adverse consequences upon withdrawal of such support." Cooper also rejected Heartland's assertion that VeriFone made untrue statements.

"We are pleased that Judge Cooper saw fit not to block our efforts to offer continual support to Heartland's merchants for VeriFone systems and to find our statements correct," said VeriFone's CEO Douglas G. Bergeron.

"Despite Heartland's considerable efforts, we believe the right thing to do is to ensure that those merchants do not experience any disruption or degradation in the support they receive for their VeriFone system."

As of press time, Heartland was unavailable for comment on this ruling.

As a result of Judge Cooper's decision, it appears the only way Heartland merchants who use VeriFone equipment and systems can ensure continued support for same is to register with VeriFone by Dec. 31, 2009.

Perhaps these two companies will be able to put legal disputes behind them in 2010 and devote even more attention to their core competencies: securely processing and settling payment transactions and providing the highest quality customer service.

After all, providing the very best products and services to merchants is what has made Heartland and VeriFone two payments industry Titans. end of article

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