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Target data breach sets stage for legal action

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Published:   |   Updated: January 21, 2014 at 05:28 AM

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As predictably as the seasons change, news of Target’s massive data breach of customer information has scores of ambitious lawyers across the country starting to file lawsuits against Target. But anyone looking for a big payout better have an equally massive reserve of patience.

Target says hackers may have swiped the credit card information and PIN numbers of up to 40 million people, and the addresses, phone numbers and emails of 70 million people. It’s ripe material for lawsuits. Yet experts in the field of class-action suits say they’re elaborately complicated and courts nationwide have started to sour on the idea of suits that take years and ultimately end up with a coupon for a dollar or two for customers.

“They may start off as genuine actions,” said Tim Kaye, a professor of law at Stetson University who specializes in class-action work. “But too often, the only people who really benefit are the attorneys involved. ... Courts are saying things are getting a bit out of hand.”

For now, millions of Americans are (or should be) scouring their credit card accounts for suspect activity, and are changing (or should change) their credit, debit and PIN numbers. Target executives have apologized profusely for the hacking.

From a legal point of view, the clock started on Dec. 18, the day Target disclosed the breach. By Dec. 20, at least one plaintiff in Florida filed a suit against Target in Florida area seeking a class action.

Next, Kaye said, expect a kind of land-grab process, as ambitious lawyers try to sign up as many potential victims as they can, because that’s one of the surest ways for them to boost their own potential fees down the line. Some suits may land in state courts, others in federal courts, depending on where the victims live and how each state handles hacking, privacy rules and regulations.

Next, people should expect a blizzard of advertising by lawyers, similar to the late-night infomercials that have appeared for years over issues like smoking, Mesothelioma and other ailments that ultimately landed in courtrooms. The more clients lawyers can sign up, the higher their potential cut of the payouts.

Next, courts will begin to sort out the cases, and Kaye expects plaintiff’s lawyers to begin a sparring process among themselves to represent the “lead plaintiff.” Negotiations will be private among the lawyers, and many may actually want to take a back seat while others who are well-experienced in winning such cases will push to move to the front. The lead plaintiff will likely get higher fees, and a higher portion of any potential payout.

“While everyone wants a piece of the action,” Kaye said, “no one inexperienced wants to take charge and risk losing.” Meanwhile Target’s own lawyers will be preparing, and negotiating with the company’s insurance providers, Kaye said, as Target most likely has an insurance policy that covers at least part of such contingencies.

When cases do reach a judge, or several judges, a key point will be whether afflicted customers have any “common issues.” Are they living in the same states? Are they all hurt in the same way? Which federal and state rules apply?

Next comes the least predictable part, Kaye said. The purpose of large class-action cases is to try and hold one large trial for similar victims so hundreds of identical cases don’t clog up courtrooms around the country. A court in the Target case may hold a trial and decide — from beginning to end — how Target handled the breach and what every potential victim should be paid in compensation. Or the court may take a more subtle approach and decide only a few facts, such as that there was a breach and that Target was at fault. That would let other courts skip that step and then require potential victims to prove how they were harmed.

At any point in the process, Target and the lead plaintiff may decide on a settlement that short-circuits much of a potential trial — speeding up potential settlements for victims.

Despite the spectacularly large nature of the Target breach, even if hundreds of lawsuits were filed against the company, plaintiffs may still face difficult hurdles getting compensated for their losses and out of pocket expenses, said Dan Clark, an attorney in Tampa who often files consumer advocacy lawsuits.

Target has taken action, providing free credit reports for all customers. But Target may end up having to do more in the months to come, such as providing tax refund and credit card fraud protection, as well as providing more-detailed credit monitoring for its customers, Clark said.

“Inconvenience is not enough,” for a promising lawsuit, Clark said. “If Target customers incur actual monetary losses from such things as fraudulent tax return filings, theft of funds from bank accounts, or identity theft, customers will still need to prove a link between their losses and the Target breach.”

That could be a hard chain to prove, compared to class-action lawsuits like those over Chinese drywall, where there were multistate cases that dealt with people who suffered direct economic impact from having to rip tainted drywall from their homes. “You can have 100 million people involved,” Clark said. “But 99.9 percent of them may have nothing actually happen to them. Hopefully, Target will not sit back and wait. Hopefully Target will step up and start providing all of its customers the protection they need.”

rmullins@tampatrib.com

(813) 259-7919

Twitter: @DailyDeadline

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