Dec 20 (Reuters) - In a victory for nationwide class actions, a federal appeals court reinstated a $295 million settlement in a lawsuit against the world's largest diamond supplier.

De Beers S.A. had been accused of manipulating the market to inflate the price of rough diamonds and agreed to pay $295 million to U.S. retailers, jewelry makers and consumer who had purchased diamonds since 1994.

In July 2010, a three-judge panel of the 3rd Circuit invalidated the settlement because some members of the class of purchasers came from states that prohibit certain consumers from recovering damages for antitrust violations. But on Tuesday, a full panel of the U.S. Court of Appeals for the 3rd Circuit disagreed and reinstated the settlement.

Instead of variations in state law, the court should focus on "whether the defendant's conduct was common to all of the class members, and whether all of the class members were harmed by the defendant's conduct," Judge Marjorie Rendell wrote for the majority in a 116-page opinion. Differences in state laws were even less relevant when certifying a class for settlement, compared to litigation, the court found.

Between 2001 and 2002, purchasers filed numerous lawsuits against De Beers, accusing the company of monopolizing the diamond business by setting production limits, restricting the resale of diamonds and entering into agreements with competitors. De Beers, which denied the allegations, initially refused to appear in court for the lawsuits, arguing that it had never done business directly with the United States, court records show. Numerous default judgments were entered against De Beers before the company agreed to settle with the purchasers in 2005.

The settlement included $22.5 million for direct purchasers of De Beers diamonds and $272.5 million for indirect purchasers. In addition, De Beers would pay $73 million in attorney's fees and costs.

Objectors to the settlement argued that some members of the class of indirect purchasers lacked any legal claim under their states' antitrust laws.

Two dissenting judges agreed with the objectors, finding a "troubling problem" with the class of indirect purchasers. "It includes people who have no legal claim whatsoever," Judge Kent Jordan wrote in a 38-page dissent. If class certification turned solely on De Beers' allegedly monopolistic activities, the class could include "everyone in the world," he added.

The dissenters accused the majority of violating the Supreme Court's 2011 decision in Wal-Mart v. Dukes, a class action on behalf of 1.5 million female workers who claimed the retailer gave them lower pay and fewer promotions than men. A divided Supreme Court denied the case class-action status, finding that the female employees in different jobs at 3,400 different stores nationwide and with different supervisors did not have enough in common to be lumped together in a single class-action lawsuit.

Based on that decision, all class members must have at least some legal claim in common for class-action status, the dissenting judges concluded in the De Beers case.

The majority rejected the dissent's argument as a "misreading" of the Supreme Court opinion, finding that under the Dukes decision the relevant inquiry is whether the defendant's conduct was common to all of the class members, not whether each plaintiff had a legal claim.

Howard Bashman, who argued on behalf of class members objecting to the class certification, said the majority opinion set a low threshold for certifying a class that conflicts with decisions by the Supreme Court and other appellate courts. "We are optimistic, based on the passionate dissenting opinion, that strong grounds exist for U.S. Supreme Court review," he said.

Samuel Issacharoff, a professor at New York University Law School who argued for the class of purchasers, said the 3rd Circuit decision does not conflict with the Dukes case.

"Dukes v. Wal-Mart was an attempt to try a case in the circumstance where there was no centralized harm. This case is about a decades-long cartel operating in complete control of the diamond industry in a manner that affected each and every purchaser of diamonds," Issacharoff said.

Lawyers for De Beers did not immediately respond to requests for comment.

The case is Sullivan et al v. DB Investments Inc et al, U.S. Court of Appeals for the 3rd Circuit, Nos. 08-2784/2785/2798/2799/2818/2819/2831/2881.

For the purchasers: Samuel Issacharoff of New York University Law School.

For the objectors: Howard Bashman of the Law Offices of Howard J. Bashman.

For De Beers: Jessica Biggio, Matthew Hendrickson and Steven Sunshine of Skadden.

(Reporting by Terry Baynes)

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