Heartland Update: Judge to Hear Motions to Dismiss Class Action Suits

Attorney: Discovery is "the Biggest Battlefield" Preliminary legal hearings have begun in the class action suit against Heartland Payment Systems, the U.S.-based payments processor that was breached in 2008

More than 30 financial institutions from 22 states have joined the lawsuit against Heartland, which is the largest data breach on record, with a reported 130 million credit and debit cards stolen.

One of the lawyers representing the financial institutions, Richard Coffman of Beaumont, TX, describes the case management conference in late August as a "very good one" for the banks.

A preliminary case management hearing was held on August 24 in Houston's Southern District Court of Texas, before Judge Lee H. Rosenthal, who set the dates for future hearings in the case,

There are two class action suits -- one on the consumer side and the second on behalf of the financial institutions affected by the massive breach. Earlier in June, a Multidistrict Litigation (MDL) panel decided the suits would be held in Houston.

A separate set of securities cases, all filed in New Jersey, will be consolidated and brought to one court later this fall. The MDL panel will decide on those cases in October, Coffman notes. "Heartland is trying to get them consolidated and heard in Houston as well," he says.

Rosenthal's decisions on August 24 dealt with leadership of the class action suits. On the financial institutions' suits, three lawyers were named co-lead counsel: Mike Cadell, of Houston, TX Joe Sauder of Haverford, PA, and Richard Coffman.

Coffman said that the biggest battle during the August 24 hearing was discovery; specifically, what Heartland will be required to produce now and what will be deferred until next spring after Heartland's anticipated motion to dismiss is argued. Heartland already has filed a motion with the Court asking that all discovery be stayed until after the Court rules on the motion to dismiss. Coffman anticipated that the Court will rule on Heartland's motion to stay discovery shortly.

Currently the financial institutions are required to file their amended consolidated complaint by September 23. Thereafter, Heartland must file its motion to dismiss by October 23. Briefing on the motion will be completed by mid-December. Coffman anticipates that it will be argued in early January with a ruling to follow shortly thereafter. Until the Court issues the ruling, Coffman expects no real action to take place in the litigation.

The Heartland data breach is believed to be the largest data breach on record, compromising as many as 130 million credit cards and debit cards. Coffman estimates that the number of financial institutions impacted by the data breach is much higher than the 670 reported on BankInfoSecurity's list (https://www.bankinfosecurity.com/articles.php?art_id=1200). Coffman believes the list probably reflects only about 20 percent of the institutions that have replaced compromised credit cards and debit cards and absorbed their customers' unauthorized charges.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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