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
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
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
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.
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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