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In re: Target Corporation Customer Data Security Breach Litigation

United States Court of Appeals, Eighth Circuit

February 1, 2017

In re: Target Corporation Customer Data Security Breach Litigation
v.
Consumer Plaintiffs Plaintiff- Appellee Jim Sciaroni Objector - Appellant Target Corporation Defendant-Appellee In re: Target Corporation Customer Data Security Breach Litigation Leif A. Olson Objector - Appellant
v.
Consumer Plaintiffs Plaintiff- Appellee Target Corporation Defendant-Appellee In re: Target Corporation Customer Data Security Breach Litigation Leif A. Olson Objector - Appellant
v.
Consumer Plaintiffs Plaintiff- Appellee Target Corporation Defendant-Appellee In re: Target Corporation Customer Data Security Breach Litigation Jim Sciaroni Objector - Appellant
v.
Consumer Plaintiffs Plaintiff- Appellee Target Corporation Defendant-Appellee In re: Target Corporation Customer Data Security Breach Litigation Leif A. Olson Objector - Appellant
v.
Consumer Plaintiffs Plaintiff- Appellee Target Corporation Defendant-Appellee

          Submitted: November 16, 2016

         Appeals from United States District Court for the District of Minnesota - St. Paul

          Before BENTON and SHEPHERD, Circuit Judges, and STRAND, District Judge. [1]

          SHEPHERD, Circuit Judge.

         This is a consolidated appeal from various district court orders in a lengthy and multifarious class action lawsuit against Target Corporation. Class member Leif Olson challenges the class certification for lack of adequate representation due to an alleged intraclass conflict. Class member Jim Sciaroni does not object to the certification but appeals the district court's approval of the settlement agreement. Together, Olson and Sciaroni also challenge the district court's order requiring them to post a bond of $49, 156 to cover the costs of this appeal. For the reasons discussed below, we remand for further consideration of the class certification consistent with this opinion. We also reverse the order of the district court setting the amount of the appeal bond and remand with instructions to the district court to reduce the bond in accordance with the rule set forth below. We retain jurisdiction over this case and, to the extent necessary, will consider any remaining issues following the district court's disposition on remand.

         I. Background

         In 2013, Target announced a security breach by third-party intruders that compromised the payment card data and personal information of up to 110 million Target customers. Some months later, 112 consumer representatives initiated a class action lawsuit against Target in the U.S. District Court for the District of Minnesota. The parties eventually agreed to settle. Upon request from the consumer-plaintiffs, the district court preliminarily certified a settlement class defined as "[a]ll persons in the United States whose credit or debit card information and/or whose personal information was compromised as a result of the [Target] data breach." The court also preliminarily approved the parties' proposed settlement agreement, which calls for Target to create a $10 million settlement fund for the class. Under the agreement, class members with documented losses are compensated from the fund first, and the remaining balance is distributed equally among class members with undocumented losses. Class members who suffered no loss from the security breach receive nothing from the settlement fund. The agreement also allows class counsel to request fees of up to $6.75 million, which Target must pay in addition to the $10 million fund. Finally, the settlement requires Target to commit to specific improvements in its data security practices, such as appointing a chief information security officer, developing safeguards to control identifiable security risks, and providing security training to employees.

         Between the district court's preliminary and final orders certifying the class and approving the settlement, class members Leif Olson and Jim Sciaroni each objected to the settlement, alleging inadequate compensation and excessive attorneys' fees. Additionally, Olson argued that the class could not be certified because it failed to meet the basic prerequisites of Federal Rule of Civil Procedure 23(a). Olson alleged that, unlike the class representatives, he incurred no expenses or costs making him eligible for compensation from the settlement fund. App. 309-10. Despite receiving no pecuniary relief, as a class member Olson is bound under the settlement to release Target from liability for any claims he may someday have should the breach injure him in the future. According to Olson, class members who are, like himself, ineligible for monetary compensation make up what he terms a "zero-recovery subclass." Olson argued that no named plaintiff belongs to this purported subclass, App. 309, and therefore the court should certify a separate subclass with independent representation.

         The district court overruled Olson's objection and issued final certification and approval of the settlement.[2] When this appeal was filed, the district court imposed a $49, 156 appeal bond, which Olson's counsel posted in full.

         II. Discussion

         A. Class Certification

         We review a district court's decision to certify a class for abuse of discretion. Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1145 (8th Cir. 1999). Olson argues that, in its preliminary certification order, the district court did not properly analyze Rule 23(a) before concluding that the consumer-plaintiffs adequately represent the class. According to Olson, the court's summary application of Rule 23(a) during preliminary certification, as well as its refusal to revisit the issue upon final certification, are independent grounds for remand. We agree.

         A district court may not certify a class until it "is satisfied, after a rigorous analysis, " that Rule 23(a)'s certification prerequisites are met. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982)) (internal quotation marks omitted). Consistent with the Supreme Court's premise that "actual, not presumed, conformance with Rule 23(a) remains . . . indispensable, " Falcon, 457 U.S. at 160, after initial certification, the duty remains with the district court to assure that the class continues to be certifiable throughout the litigation, Petrovic, 200 F.3d at 1145. See also Barney v. Holzer Clinic, Ltd., 110 F.3d 1207, 1214 (6th Cir. 1997) ("The district court's duty to assay whether the named plaintiffs are adequately representing the broader class does not end with the initial certification . . . ."). Where, as here, adequacy of class representation is at issue, "close scrutiny" in the district court is even more important given the need to protect the due process rights of absent class members. See Rattray v. Woodbury Cnty., 614 F.3d 831, 835 (8th Cir. 2010).

         Though the Supreme Court has not articulated what, specifically, a "rigorous analysis" of class certification prerequisites entails, at a minimum the rule requires a district court to state its reasons for certification in terms specific enough for meaningful appellate review. "[S]omething more than mere repetition of [Rule 23(a)'s] language [is required]; there must be an adequate statement of the basic facts to indicate that each requirement of the rule is fulfilled." Pipefitters Local 636 Ins. Fund v. Blue Cross Blue Shield of Mich., 654 F.3d 618, 629 (6th Cir. 2011) (internal quotation marks omitted) (alteration omitted); accord Vizena v. Union Pac. R.R. Co., 360 F.3d 496, 503 (5th Cir. ...


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