Evan Schuman's StorefrontBacktalk

Massachusetts Attorney General Martha Coakley—who is heading the multi-state attorney general probe of TJX—wrote to the federal judge overseeing the TJX cases on Thursday strongly objecting to a part of the proposed settlement of the consumer class-action case, according to documents filed in federal court on Friday.

The consumer class-action lawsuit—which already has a proposed settlement before the judge—is separate from the bank class-action lawsuit.

Coakley joined the chorus of parties objecting to the settlement including a one-day public sale that TJX proposed holding to help the consumers who were victimized in the data breach.

Coakley’s objection was not so much with the sale itself, but with having it included as a part of the official settlement. The difference? If it’s in the official settlement, it increases how much money the consumer lawyers involved in the case get for their fee.

"We are unaware of precedent in which a Special Event, or any type of sale open to the general public, has been deemed a benefit of a class action settlement and this court should avoid that precedent. We believe this aspect of the proposed settlement demeans the class action process, which can be used as a meaningful tool to protect consumers," Coakley wrote to U.S. District Court Judge William G. Young, on behalf of some of the participating state attorneys general. "Please note, however, that in commenting on this particular aspect of the proposed settlement agreement, we do not suggest our approval of the settlement’s other terms."

The attorneys general who signed the letter represented Arkansas, Connecticut, Illinois, New Jersey, Ohio, Oregon, Tennessee, Vermont and California. Back in March, there were 34 states involved in the probe. There was no word what happened to the other 24 states and whether they endorse the letter’s comments.

The state probe itself has been silent since being announced and the status of its investigation is unclear.

In her letter, Coakley stressed that she was not objecting to the sale directly, but merely to have it was legally classified. "We are not suggesting that TJX cannot, or should not, hold a sale as a goodwill gesture to its customers, including customers who may have been impacted by the TJX security breach. But the Special Event should not qualify as a class benefit relevant to the determination of whether the settlement agreement is procedurally and substantively fair, adequate, and reasonable," she wrote.

Coakley’s core point was that the sale is not in any meaningful way a penalty to TJX and, indeed, is more likely the opposite.

"The Special Event is nothing more than a retail sale, which would primarily benefit the defendant, TJX Companies. If deemed a benefit to the class, the retail sale also presumably would benefit class action counsel, whose fees would be impacted by a nominally higher valued settlement," Coakley wrote. "It is unclear what benefit, if any, the class gains
from a retail sale that is open to the general public. TJX should not inure the good will of this court or the public for a sale that enhances its bottom line, nor should the class’s attorneys reap large fees for an unquantifiable and dubious benefit. Here, class action counsel anticipates receiving fees of $6.5 million, based, at least in part, on an unquantifiable benefit to the class from the Special Event. This represents a tremendous amount of money to the extent it is linked to the Special Event, or vouchers. We, therefore, urge this Court to reject the Special Event as a benefit of the settlement or, at the very least, subject the Special Event to heightened scrutiny before approval."

In other TJX news from those federal filings on Friday, Judge Young has ordered the parties to go into mediation, a move that will temporarily pause the federal class-action lawsuit while a mediator is appointed and meets with the parties.

By placing the case—where groups of banks are suing TJX for its role in the world’s worst credit card data breach—in an official Alternative Dispute Resolution (ADR) program, Young has likely concluded that this is little if any factual disagreement and that a mediator might be able to coax the two sides into a settlement, said Mark Rasch, the former head of the U.S. Justice Department’s white collar crimes unit and an attorney specializing in retail fraud issues.

Mediation is quite different from binding arbitration, where an arbitrator hears evidence and makes a ruling. Arbitrators—who are often retired judges—just try to propose various resolutions and tries to broker some kind of a deal.

Arbitration meetings are not public, in the same way that any settlement talks are not public. If a settlement is not reached, the federal civil trial would resume.