Recent Class Action Settlements By Target & Adobe

Adobe’s impending settlement in a class action comes just a month after Target settled claims for $10 million.  Although confirmatory discovery is ongoing according to Law360, Adobe and the named class members are expected to present their settlement proposal to District Judge Lucy Koh by the end of May.  Last year, both Adobe and Target lost motions to dismiss that challenged the plaintiffs’ Article III standing based on the U.S. Supreme Court’s 2012 decision in Clapper v. Amnesty International USA.  This may have been the catalyst for these recent settlements.

Judge Koh, from the Northern District of California, relied on a 2010 decision by the Ninth Circuit in data breach case, Krottner v. Starbucks Corp., in denying Adobe’s motion. Adobe argued that Krottner is at odds with Clapper, which stands for the proposition that Article III standing cannot be based on “allegations of possible future injury.”  But Judge Koh rejected Adobe’s interpretation notwithstanding the trend by a majority of district courts to dismiss data breach cases under Clapper.

Judge Paul Magnuson’s approach was slightly different.  Target’s Clapper argument was rejected by the judge from the District of Minnesota because he found that the plaintiffs’ allegations of late payment charges, blocked accounts, and unlawful charges were sufficient at the motion to dismiss stage.  Finding support from two U.S. Supreme Court cases, Amchem Prods., Inc. v. Windsor and Ortiz v. Fibreboard Corp., Judge Magnuson concluded: “[s]hould discovery fail to bear out Plaintiffs’ allegations, Target may move for summary judgment on the issue.”  According to a recent report by The Wall Street Journal, Target negotiated a $19 million settlement with MasterCard, and is discussing a separate resolution with Visa, for the costs of reissuing and replacing credit and debit cards.

Although most courts facing data breach class actions have followed the Clapper standard, several have departed from the majority.  For now, whether class plaintiffs can establish Article III standing depends, to a large degree, on which federal court decides the issue.


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