Federal judge undoes potential class action deal to end litigation over 2014 Neiman Marcus data breach

By Scott Holland | Sep 20, 2018

By John Stephen Dwyer [Public domain], via Wikimedia Commons

A federal judge has sided with objectors who want to undo a class action settlement involving a five-year-old Neiman Marcus data breach, saying the leading plaintiffs do not adequately represent the entire group.

Judge Sharon Johnson Coleman issued an opinion Sept. 17 in Chicago decertifying a proposed settlement class established in a June 2017 ruling. The issue started in December 2013, when Neiman Marcus started taking reports from customers reporting fraudulent credit card charges. An investigation revealed malware on the retailers’ network, which it disclosed Jan. 10, 2014, giving rise to multiple class-action complaints that year that ultimately were consolidated. The named plaintiffs included Hilary Remijas, who said she shopped at the Neiman Marcus in Oak Brook in August and December 2013.

Coleman is the third judge on the case. It began with Judge James Zagel, who granted Neiman Marcus’ motion to dismiss in September 2014, saying the plaintiffs didn’t make sufficient allegations and lacked standing. The U.S. Seventh Circuit Appeals Court overturned that ruling in July 2015, sending it back to federal district court in Chicago. There, Neiman Marcus filed 12 consecutive motions to extend the responsive pleading deadline to Feb. 10, 2017. During that time, the case was transferred to U.S. District Judge Samuel Der-Yeghiayan, who also dismissed the action on Feb. 9, 2017, based on failure to proceed.

After the dismissal, plaintiffs moved to reinstate, then for class certification and later sought settlement approval. Three potential class members objected. Der-Yeghiayan heard those arguments, but retired from the bench, with the motions pending. The case was then transferred to Coleman.

According to Coleman, the objectors say the settlement class — which includes more than 2 million Neiman Marcus customers — “contains impermissible intra-class conflicts,” in part because not all customers who made purchases while the malware was active were affected, and the settlement was structured such that individuals couldn’t learn if their accounts are compromised until after they’d opted into the settlement.

Coleman found the “mechanism to be highly suspect,” she wrote.

“Delaying the notification of individual victims no doubt caused potential class members continued uncertainty and caused them to continue to make unnecessary efforts to mitigate the perceived release of their credit card information,” Judge Coleman wrote. “The refusal to inform class members of how they were situated until after they opted into the settlement also creates an appearance of manipulation or dishonesty, undermining the integrity of the class action mechanism.”

Other class members made their purchases outside the 15-week period the malware was active, and Coleman said the plaintiffs had no incentive to represent those customers. Likewise, those customers had more interest in pressing on with legal action to get some sort of recovery, while the leading plaintiffs had incentive to pursue the monetary recover offered in the settlement.

Neiman Marcus offered a year of free credit monitoring and identity theft insurance to anyone who shopped at its stores from July 2013 to January 2014. The named plaintiffs asserted this relief is valuable to all class members, but Coleman noted the company made the offer prior to the settlement.

Coleman said she had no choice but to decertify the class and offered no instruction for how to resolve the flaws. She said that also means there is no need to review the objectors’ challenges to the fairness of the proposed settlement, and denied without prejudice motions for final approval of the settlement, as well as those for legal fees and class representative service awards.

Plaintiffs have been represented in the case by attorneys with the firms of Siprut P.C., of Chicago; Morgan & Morgan Complex Litigation Group, of Tampa, Fla.; and Ahdoot & Wolfson P.C., of Los Angeles.

Neiman Marcus has ben represented by attorneys with the firm of Sidley Austin LLP, of New York and Chicago.

The objector in the case is represented by the firm of Edelson P.C., of Chicago.

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Organizations in this Story

Ahdoot & Wolfson, PC Edelson PC Morgan & Morgan Neiman Marcus Group LLC Sidley Austin LLP Siprut PC U.S. District Court for the Northern District of Illinois

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