In 2015, Target settled a class action stemming from a massive data breach of its customers' sensitive information. According to the settlement terms, Target agreed to pay $10 million to those affected. The Minnesota district court originally granted approval over the class and the settlement. However a lone objector filed an appeal, and the Eighth Circuit granted a limited remand because it was not satisfied the district court had conducted a "rigorous analysis" of the requirements for class certification under Federal Rule of Civil Procedure 23.
Specifically, the Eighth Circuit mandated that the lower court's analysis include an evaluation of the objector's intra-class conflict arguments. The objector argued a conflict existed because the class representatives included class members who suffered a monetary loss due to the breach and others who did not. Under the settlement terms, those who suffered a loss would be eligible for reimbursement while those who did not suffer a loss would receive a pro-rata share of the remaining settlement funds. The objector argued this structure created a conflict.
After conducting a "rigorous analysis" the district court rejected the objector's arguments. In reviewing the potential conflict, the court clarified the two components of a class-conflict analysis: first, whether there are class representatives who have suffered the same or similar injury as the class members; and second, whether some class representatives and class counsel have interests that are so at odds with other class representatives and class members that a singular class is inappropriate. The court quickly established that the first element was met, and focused its decision on the second prong of the test.
The court stated that in order to defeat Rule 23's adequacy requirement, a conflict must be "actual" and "fundamental." The objector argued the conflict in this case is similar to that found in asbestos class action litigation where the class included those individuals with current injuries as well as those with potential future injuries from asbestos exposure, including those who might not, or could not, be aware of their membership in the class. The court rejected this argument because the data breach occurred nearly four years ago and all those involved know about the breach and have suffered any injury they are reasonably likely to suffer. Therefore, there are "no unascertainable members of the class, and no attendant due process concerns."
The court determined no conflict existed because all plaintiffs are fully compensated under the terms of the settlement. Those who suffered losses will be reimbursed and those who did not suffer losses will benefit from the heightened protections Target agreed to put in place, as well as receive a pro-rata share of any remaining settlement funds. The court explained that "the mere fact that one group of claimants recovers less than another group does not mean that a single class is inadequate to represent both groups." Thus, the settlement did not disadvantage one group of plaintiffs to the benefit of another.
The court concluded it is insufficient to merely argue a settlement is not good enough. An objector must present evidence of an "actual, fundamental conflict." The objector's failure to do so in this case showed the representation by class members and class counsel was fair and adequate and the class could be certified with no need for subclasses.
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