In the latest, and possibly final, chapter of a class settlement saga previously discussed in our Fall 2010 Antitrust Quarterly (“Recent Decisions Could Steer Structure and Venue of Antitrust Class Actions”), the Third Circuit, sitting en banc in Sullivan v. DB Investments, Inc,[1] vacated a 2010 divided three-judge panel decision and reinstated the certification of a $295 million nationwide settlement of price-fixing, monopolization and consumer protection claims variously asserted by direct and indirect purchasers of gem-quality diamonds from De Beers, the world’s largest diamond supplier. In so doing, the Third Circuit rejected the argument that variations among state laws that might result in a large proportion of the indirect purchaser class lacking viable state law claims (or such class members’ lack of antitrust standing) would necessarily defeat Rule 23(b)(3)’s “predominance” requirement for class certification. Rather, the Third Circuit majority found that the predominance inquiry was “easily” resolved based upon De Beers’ conduct and the consequential injury suffered by the class as a whole.

For those who may have worried that the earlier panel opinion in the case,[2] rejecting any special deference for settlement classes, had somehow raised the bar for pursuing class settlements, footnote 56 of the en banc opinion was undoubtedly a welcome reaffirmation of the significant difference in the inquiries posed in the settlement versus litigation context. Citing its own precedent and the Supreme Court’s decision in Amchem Products Inc. v. Windsor,[3] the Third Circuit majority wrote that even though the Rule 23 standards for settlement and litigation classes are the same, certification in the settlement context need not consider “whether the case, if tried, would present intractable management problems” precisely -- because the proposed settlement class contemplates no trial. The court noted that this added risk is of “utmost significance” in determining whether settlement is in the best interests of the class.

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As discussed in our Fall 2010 article, the indirect purchasers in DB Investments sought recovery for the same antitrust injury as did direct purchasers, but brought claims under various state antitrust, consumer protection, and unjust enrichment laws because they lacked standing to bring a federal antitrust claim for damages under Section 4 of the Clayton Act (and could only seek injunctive relief pursuant to Section 16 of the Clayton Act under the federal antitrust laws).  Because, among other things, not all states permit indirect purchasers to recover damages under their antitrust statutes, 34 objections were filed to the proposed class settlement, including arguments that certification was inappropriate because common questions of law or fact did not predominate.  Noting that De Beers had demanded a release of potential damage claims in all 50 states as a condition of the settlement, the district court overruled the objections, certified the nationwide class, and approved the settlement.  The original Third Circuit panel rejected the district court’s class certification order, finding that the court had abused its discretion by placing case management issues above basic questions of substantive law embodied in the varying state statutes. 

The Third Circuit majority en banc decision vacated the panel decision, concluding that class certification and settlement approval was appropriate based upon three “guideposts.”  First, it found the defendant’s conduct and resulting injuries common to class members determine commonality.  In so doing, the majority rejected a dissenting argument that the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes[4] required that each settlement class member must have a colorable claim.  Second, the majority held that variations in state law do not necessarily defeat predominance, as there may be limited variations in patterns such that similar state laws could be grouped together; precisely identical causes of action were not required.  Third, the variances in state law largely dissipated in the context of a settlement class in terms of how such variations would play out at trial.  Because the settlement avoided a trial, manageability concerns were removed.  The Third Circuit also rejected the argument that the class could not be certified if some class members could not assert a valid claim for recovery, noting that antitrust standing is an element of proof for antitrust injury, not a jurisdictional prerequisite for asserting a claim.

For now, this decade-long lawsuit may finally be heading to resolution.  However, the author recently appeared on a panel with the lead attorney for the objectors in the De Beers case, who expressed optimism for Supreme Court review.   Stay tuned.