NEW ORLEANS – Four credit unions and three banks have asked a federal appeals court here to overturn a lower court ruling rejecting their claims for compensation in the massive 2008 data breach at Heartland Payment Systems that exposed millions of credit union and bank cardholders to fraudulent transactions.

The credit unions, Pennsylvania State Employees CU, Elevations CU, O Bee CU, Seaboard FCU, argue to the U.S. Court of Appeals for the Fifth Circuit that the lower court erred when it dismissed their claims last year on the grounds that Heartland owed contractual duty to Visa and MasterCard and not to them when it allowed the huge data breach to occur.

The banks joining the appeal are Lone Star National Bank, Amalgamated Bank and First Bankers Trust.

Though considered a long shot, the appeal is important to credit unions and banks, which were compensated by Visa and MasterCard for only pennies on the dollar of losses they incurred for fraud transactions on their cards, notifying members of the breach and reissuing millions of cards.

The credit unions and banks have lost numerous claims in the dozens of major breaches over the last few years, including separate suits in this case filed against Heartland Payment’s merchant acquiring banks, Heartland Bank and KeyBank.

In its defense, Heartland Payment argued that it owes no common law duty to the credit unions and banks because its contract was not with them, but with Visa and MasterCard.

But the credit unions and banks argue their claims fit “squarely within the class of foreseeable  and identifiable victims  to whom Heartland  owed a duty of care.”  They argue that Heartland Payment owed them what amounts to contractual duty because they are in a joint venture with Heartland through their common business relationship in the Visa and MasterCard networks.

“In sum, Heartland’s unsupported view of the law would result in the economic loss rule being expanded to bar any tort claim any time an alleged tortfeaser can point to the existence of virtually any contract, no matter how remote, that could conceivably link the parties,” argued the credit unions and banks in their brief to the court.

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