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Heartland settles class action lawsuits in Texas
PRINCETON, N.J., and SAN JOSE, Calif. (12/29/09)--Heartland Payment Systems Inc. has agreed to settle the data breach-related consumer cardholder class action lawsuits that were consolidated in the U.S. District Court for the Southern District of Texas--to the tune of $1 million to $2.4 million. The suits related to a breach by cybercriminals of its payment system, which the company announced Jan. 20. The breaches occurred between Dec. 6, 2007 and Dec. 21, 2008. The credit card processor agreed to pay the amount to class members in the lawsuit who submit valid claims for losses as a result of the intrusion, it said in a press release. It also agreed to pay all costs tied to the administration of the settlement--including up to $1.5 million for the cost of notice to the settling class--and up to $760,000 of the class action members' attorneys' costs. Heartland also agreed to submit the report of an independent expert on the company's actions and plans to enhance the security of its computer system. The settlement is subject to court approval. Heartland said it could terminate the deal if costs of notice exceed $1.5 million, or if it received more than 2,500 requests for exclusion from the settlement class. The settlement includes all intrusion-related proceedings by consumers who used the payment cards during the breach period, including those who may allege to have suffered losses, the company said. In another related court case stemming indirectly from the breach, VeriFone Holdings of San Jose, Calif., said Monday that a U.S. District Judge in New Jersey had denied Heartland's request for a preliminary injunction against VeriFone to prevent it from communicating it would provide support to merchants using processing terminals from Heartland. The two companies have worked together for years, but they filed lawsuits against each other. VeriFone claims a design for processing terminals at Heartland's new end-to-end encryption system infringes on one of its patents. Heartland says VeriFone is using unfair trade practices to keep its business. Data breaches at Heartland and other companies have prompted a drive toward tougher encryption of payments processing systems. As a result Heartland decided to use its own end-to-end encryption platform (News Now Nov. 10). In Monday's VeriFone opinion, U.S. District Judge Mary L. Cooper said Heartland made contradictory claims over its ability to service clients using VeriFone systems. VeriFone had announced in November it would provide support to prevent disruption to merchants.
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