Settlement of Diamond Resale Price Fixing Claims Upheld

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Approval of a proposed $295 million settlement of class action resale price fixing claims against a group of entities related to the world's principal diamond producer was proper, according to an en banc decision of the U.S. Court of Appeals in Philadelphia.

The federal district court approving the settlement did not err in granting certification of nationwide settlement classes consisting of direct purchasers of gem diamonds and indirect purchasers of rough or cut-and-polished diamonds (2008-2 Trade Cases ¶76,304), the appellate court held.

Class Certification

The proposed classes satisfied each of the four requirements enunciated in Federal Rule of Civil Procedure 23(a) as prerequisites to certification—numerosity, commonality, typicality, and adequacy of representation—as well as the predominance and superiority requirements of Rule 23(b)(3).

Predominance was easily shown based on the diamond producer’s alleged conduct and the injury it caused to each and every class member, the appellate court held. The plaintiffs also sufficiently showed that certification under Rule 23(b)(2), which applied to claims seeking injunctive or declaratory relief, was appropriate.

The appellate court rejected an argument advanced by objectors to the settlement that certification of a nationwide settlement class was improper based on differences in state law with respect to indirect purchaser standing.

Rule 23 made clear that a district court had limited authority to examine the merits of individual claims when conducting the certification inquiry. Such an inquiry was "particularly unwarranted in the settlement context" since a district court did not need to envision the form that a trial would take or consider the available evidence and methods proposed for proving the disputed element at trial, the court stated. Thus, the district court did not “inappropriately subordinate” state sovereignty in certifying the class.

Settlement

The proposed settlement was fair, adequate, and reasonable, the appellate court confirmed. It was in the best interests of the settlement classes, and was the product of arm's-length, serious, and informed negotiations between experienced and knowledgeable counsel.

The lower court did not err in approving class counsel's plan of allocation. Rejected was an argument that the previously-noted differences in state law mandated a differential allocation in the percentage of recovery within the indirect purchaser consumer settlement fund.

Dissent

A dissenting opinion contended that the predominance requirement for class certification was not satisfied because the lower court had not ensured that each class member possessed a viable or colorable legal claim.

By allowing indirect purchasers who had no standing to sue under their state's antitrust laws to be part of the settlement class, the appellate majority has created a “come one, come all” environment that “sets the class action ship in [the Ninth] Circuit badly adrift,” the dissent argued.

The decision is Sullivan v. DB Investments, Inc., 2011-2 Trade Cases ¶77,736.