Target Corporation (TGT): Here’s Why Banks Claim No Liability For Breach Costs

Target Corporation (NYSE:TGT) is still reeling from the effects of the massive data breach it experienced last year. According to Courtney Reagan on CNBC’s Closing Bell, The company is still facing over 100 civil lawsuits stemming from the breach.

Reagan said that one particular lawsuit filed against Target Corporation (NYSE:TGT) is a class action lawsuit of banks claiming that they should not be liable for the costs of the aftermath of the massive breach.

According to Reagan, the plaintiffs claim to have spent billions collectively because of the breach. In an interview, Charles “Bucky” Zimmerman, Zimmerman Reed partner and lead counsel for the banks in this Target Corporation (NYSE:TGT) lawsuit, said that Target is to blame and should be fronting the costs.

“The debate is when something is breached at a retailer or at a merchant, who bears the risk of loss? Clearly, it should not be the banks. They didn’t do anything wrong and I think the evidence will show that Target did. They had warnings, they didn’t know how to use the system that they had installed properly and the messages that went up to management never were reacted to,” Zimmerman said.

This echoes details that came to light after what has been called the biggest hacking of a retailer in the U.S. In a report, Bloomberg Businessweek said that the tale of this hacking is of “an alert system…that worked beautifully.”

According to the publication, FireEye Inc (NASDAQ:FEYE), the company which made Target Corporation (NYSE:TGT)’s malware detection system, detected the last step of the hackers before the breach which was to put in place a route for the stolen data to flow through. FireEye is said to have alerted Target’s team of specialists in Bangalore who then alerted the firm’s security team in Minneapolis. However, nothing happened after.

“So I think the case can be made that Target dropped the ball and as between Target and the banks, Target bears the risk of loss,” Zimmerman said.

Bill Miller’s Legg Mason Capital Management is a Target Corporation (NYSE:TGT) shareholder with about 1.54 million shares in the company by the end of September.