Heartland Update: Judge's Ruling Awaited

At Issue: Whether Charges Against Acquiring Banks Should be Dismissed
Heartland Update: Judge's Ruling Awaited
The class action suit brought against Heartland Payment Systems by financial institutions impacted by the 2009 data breach is currently in the hands of Judge Lee Rosenthal, U.S. Southern District Court in Houston, TX.

At issue is whether this case will move forward against Heartland Payment Systems and its two acquiring banks.

In January, five financial institutions filed a class action suit alleging that two acquiring banks, Heartland Bank and Key Bank, should be included as defendants and share responsibility for damages caused by the Heartland Payment Systems data breach, which impacted an estimated 130 million credit and debit cards.

Lone Star National Bank, PBC Credit Union, O Bee Credit Union, Seaboard Federal Credit Union and Pennsylvania State Employees Credit Union filed the class action complaint in the U.S. Southern District Court in Houston, TX in January. Heartland Bank is based in St. Louis, MO, and Key Bank is based in Cleveland, OH.

The acquiring banks' class action suit was consolidated into the class action suit brought against Heartland Payment Systems in March. The acquiring banks' lawyers subsequently filed a motion to dismiss the suit, says Richard Coffman, one of the lawyers representing the financial institutions.

The five banks that are suing the acquiring banks then filed their response to the motions for dismissal, citing the acquiring banks' "failure to monitor, audit, oversee and confirm the propriety, adequacy and effectiveness of Heartland's Payment Card processing system safeguards."

The acquiring banks further responded with subsequent motions in early June, petitioning the court to excuse the banks as defendants, claiming that the U.S. District court in Texas had no jurisdiction over them.

Coffman says that since the June filings, the two sides await Judge Rosenthal's ruling on all of the motions. Her decision is expected to come down later this summer.

In April, Judge Rosenthal gave preliminary approval to a proposed settlement of the consumer class action suit brought against Heartland. The proposed settlement would create a $4 million pool to pay consumers and settle the case. The judge has yet to set a date later for the final hearing on the settlement.

Meanwhile, earlier this week, Bob Carr, the CEO of Heartland Payment Systems, spoke in an exclusive interview about the breach and his response to it. "I just couldn't believe it happened to us, of all companies," says Carr. "We were so focused on security at all times."

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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