CLEVELAND–After nearly three years of court battles, the fast-food restaurant chain Sonic has agreed to pay $5.73 million to settle a class action lawsuit over a huge 2017 data breach that affected at least 4,000 credit unions and banks and more than five million consumers.
As CUToday.info reported, in early 2019 American Airlines FCU in Texas, Arkansas FCU and Redstone FCU filed suit alleging Sonic’s deficiencies in data security allowed hackers to breach and install card-stealing malware into point-of-sale systems at more than 700 Sonic franchises. As a result, hackers were able to steal payment card data and posted five million payment cards for sale on the dark web, according to court documents.
That resulted in a race by credit unions to replace cards and take other steps to fight the potential for losses to members and the CUs themselves.
Now, after three days of negotiations that took place earlier this year, U.S. District Court Judge James S. Gwin in Cleveland has granted preliminary approval of the proposed settlement agreement.
The Terms
According to terms of the settlement, Sonic has agreed to pay $3 million to fund claims filed by credit unions and banks, which breaks down to $1 for each payment card reissued by affected financial institutions and $1.50 for each payment card that experiences fraud within four weeks after the infraction, according to the proposed liquidation document reported by 6park News.
Sonic has also agreed to pay $500,000 for settlement administration costs and a $10,000 service award to each credit union. In addition, Sonic will pay $2.2 million in attorneys’ fees and expenses.
“At this stage, the settlement agreement appears possibly fair, reasonable, and adequate,” Judge Gwin wrote in his ruling, 6park news reported. “The granting of preliminary approval does not create a commitment to grant final approval. The court will consider all evidence, including objections, before making a financial approval decision after the hearing.”
New Hearing Scheduled
Another hearing has been scheduled for Oct. 6 in Cleveland. If final approval is granted to the settlement, credit unions and banks will be notified and may then file a claim, according to the report.
In a statement announcing the settlement, the credit unions said Sonic mounted an aggressive defense at every stage of this case.
“Compared to the risks of ongoing litigation in which credit unions and banks may receive nothing, the settlement allows recovery of some losses through a claims process,” the credit unions said in the statement.
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