By Joseph Ax and Nathan Layne
NEW YORK/CHICAGO (Reuters) - A federal judge has rejected a bid from a group of banks and credit unions suing Target Corp (N:TGT) over its 2013 data breach to block the company's proposed $19 million settlement with MasterCard Inc (N:MA).
U.S. District Judge Paul Magnuson in St. Paul, Minnesota,
wrote in a ruling Thursday that the deal does not appear "altogether fair or reasonable" but he could not legally intervene without evidence that Target or MasterCard had made misleading or coercive statements.
"Although the settlement may not pass the 'smell test,' as the saying goes, it is not serious misconduct," Magnuson said.
The settlement is contingent on banks that issued at least 90 percent of the MasterCard accounts signing on to the agreement.
Lawyers for the plaintiffs had argued that the settlement with MasterCard, which is not a party to the lawsuit, was a "sweetheart deal" aimed at undercutting their claims for losses.
Under the proposed agreement, announced in March, MasterCard-issuing banks have until May 20 to accept a percentage of the money from MasterCard.
If they accept the deal, they must drop further claims against Target as part of the settlement. Banks that reject the deal would continue to pursue their own allegations against Target.
Lawyers for the banks have estimated the total losses at more than $160 million, with approximately half for fraud and half for the cost of reissuing nearly nine million credit cards.
In a statement, the lead plaintiffs' lawyers highlighted the judge's concerns and said they would urge banks to reject the deal.
A Target spokeswoman, Molly Snyder, said, "We are pleased with the court's decision which we believe will allow us to resolve claims with participating MasterCard issuers and avoid protracted litigation with those issuers."
The judge's ruling said that MasterCard initially demanded $26 million before the two sides settled on $19 million.
In 2013, Target said the breach during the holiday shopping season compromised at least 40 million credit cards and may have resulted in the theft of personal information from as many as 110 million people. Target is still negotiating with Visa Inc (NYSE:V) over losses from the breach.