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The Green Sheet Online Edition

April 09, 2012 • Issue 12:04:01

Heartland breach suit settled

On March 20, 2012, a judge in the Southern District of Texas approved a settlement agreement in the consumer complaint brought against Heartland Payment Systems Inc. The settlement gives almost nothing to consumers and leaves three nonprofit organizations and plaintiffs' attorneys to divide settlement funds.

The complaint and settlement are the fallout from hackers that broke into Heartland's computers and stole at least 130 million debit and credit card numbers. The breach, which was reported in January 2009, was one of the largest data breaches in history. An American, Albert Gonzalez, was convicted of participating in the breach and is serving a 20-year prison term as a result. Two East European hackers who are alleged to have participated in the breach have not been prosecuted.

Small payout to class members

Despite the enormous amount of data stolen and repeated attempts to notify potential members of the class that they had the opportunity to participate in the claim, fewer than 300 people claimed damages in this lawsuit. Of those 300 claims, only 11 were deemed valid. As a result Heartland, which had a settlement reserve of $1 million, paid only $1,925 of the reserve to class members.

The settlement agreement called for any unpaid balance left in the settlement reserve to go to three nonprofit organizations working to protect consumer privacy: the Smart Card Alliance, the Secure POS Vendor Alliance and the Financial Services Information Sharing Analysis Center.

Discounted award to nonprofits

Federal District Judge Lee H. Rosenthal, who presided over the settlement, discounted the award to the nonprofits by 50 percent, that is, to $499,037.55. "Although the ... award will assist the three organizations in working on improved payment-card security, whether, when, and how much improvement will result are all speculative," the judge wrote in his memorandum and order. "Although the ... award is appropriate, the indirect, speculative, and deferred nature of the benefit strongly support valuing that benefit at one-half of the payment amount."

Attorneys were awarded $606,192.50; costs awarded were $35,000. The court valued the total settlement (including administrative costs and attorneys' fees) at just over $3 million.

Regarding the settlement, Heartland said it is "glad to put this behind us and that a major portion of the settlement will go to various third-party organizations committed to enhancing card security for consumers and merchants." end of article

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