TJX Settles With Banks Over Data Breach

WSJ(12/19)

TJX Cos. settled a lawsuit brought by a group of New England banks over a data breach that resulted in the theft of millions of credit-card numbers.

Terms of the settlement weren't disclosed, but TJX said the amount paid is covered by a $107 million reserve taken in the second quarter. The Framingham, Mass., retailer will pay part of the costs and expenses the banks incurred, not including attorney fees.

Banks said numbers and personal data stored in TJX's computers on as many as 100 million cards were stolen by hackers, who remotely tapped into the computers beginning in July 2005. The case is the largest of its kind. TJX has denied wrongdoing.

The settlement, which comes about six months after the suit was filed in federal court, is expected to give a big boost to a separate agreement proposed last month between TJX and Visa Inc. That proposed settlement, under which TJX has agreed to pay as much as $40.9 million for losses incurred by banks, is contingent on acceptance by banks representing at least 80% of the Visa-card accounts involved.

It isn't known how many banks have decided to accept the Visa proposal, the deadline for which is today. Under terms of the federal lawsuit settlement, the banking associations of Massachusetts, Maine and Connecticut will recommend that their members accept the Visa proposal. The associations represent approximately 300 member banks, many of which are Visa issuers. Banks accepting the deal forfeit the right to sue TJX.

At least one bank, Alabama-based Amerifirst Bank Inc., has declined to participate in the federal-court settlement. It has the option under a federal court ruling last week to pursue its case against TJX in Massachusetts state court.

Officials of Amerifirst Bank couldn't be reached to comment last night. In an interview last week, Joseph Whatley Jr., an attorney representing Amerifirst, said it was his client's intention to continue its suit in Massachusetts. He said Amerifirst and a Tennessee bank he represents in the case would receive less than three cents for every dollar under terms of the agreement between Visa and TJX.

TJX still faces state and federal investigations into the breach.