En Banc Third Circuit Will Rehear DeBeers Antitrust Case

The Third Circuit has ordered rehearing by the full court in a sprawling antitrust case against price-fixer and market-allocator DeBeers. 

The order vacated a panel decision that mainly upheld denial of class certification.  Blawgletter did a short review of the decision in Third Circuit Cuts Global Diamond Class.  There we said:

DeBeers, the diamond behemoth, limited supply of and fixed prices on sparklies for years and years and in all 50 states plus the District of Columbia.  But it sold to only a small group of outfits, none of which dared sue the font of their mercantile wealth.

That didn't stop indirect purchasers from bringing cases against DeBeers.  And, after almost a decade of wrangling, DeBeers declared a truce with them.  It also agreed to fund a $295 million settlement.

The hard-working district court okayed the pact and certified two classes, one under Rule 23(b)(2) -- for injunctive relief -- and the other under Rule 23(b)(3) -- for damages.  Yesterday, the Third Circuit set the orders aside.

The problem?  In two words, Illinois Brick.  That old U.S. Supreme Court case held that people who don't buy straight from a price-fixer cannot recover damages under the Sherman Act.  Illinois Brick meant that the indirect purchasers who went after DeBeers for damages had to do so under state law.

A panel of the Third Circuit ruled that, because some states don't allow indirect purchaser suits under their antitrust laws, the claims of the settlement class members didn't "predominate" within the meaning of Rule 23(b)(3).  The panel also concluded that certification for injunctive relief under Rule 23(b)(2) couldn't stand due to the fact that, in the opinion of two panel members, DeBeers no longer posed a big threat of anticompetitive conduct.  Sullivan v. DB Investments, Inc., No. 08-2784 (3d Cir. July 13, 2010).

Circuit Judge Rendell concurred in the outcome but not in the rationale.  She disagreed with the majority on the grounds that her colleagues paid inadequate heed of the court's decision in In re Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004), and went too far in reaching issues that the district court, and not the court of appeals, should decide in the first instance.

Blawgletter notes that neither of the opinions cites the American Law Institute's new Principles of the Law of Aggregate Litigation, section 3.06(b) of which states that, before approving a class settlement, "[t]he court need not conclude that common issues predominate over individual issues."

Both the author of the majority opinion, Circuit Judge Jordan, and the concurrer, Circuit Judge Rendell, belong to ALI.

DeBeers, the diamond behemoth, limited supply of and fixed prices on sparklies for years and years and in all 50 states plus the District of Columbia.  But it sold to only a small group of outfits, none of which dared sue the font of their mercantile wealth.

That didn't stop indirect purchasers from bringing cases against DeBeers.  And, after almost a decade of wrangling, DeBeers declared a truce with them.  It also agreed to fund a $295 million settlement.

The hard-working district court okayed the pact and certified two classes, one under Rule 23(b)(2) -- for injunctive relief -- and the other under Rule 23(b)(3) -- for damages.  Yesterday, the Third Circuit set the orders aside.

The problem?  In two words, Illinois Brick.  That old U.S. Supreme Court case held that people who don't buy straight from a price-fixer cannot recover damages under the Sherman Act.  Illinois Brick meant that the indirect purchasers who went after DeBeers for damages had to do so under state law.

A panel of the Third Circuit ruled that, because some states don't allow indirect purchaser suits under their antitrust laws, the claims of the settlement class members didn't "predominate" within the meaning of Rule 23(b)(3).  The panel also concluded that certification for injunctive relief under Rule 23(b)(2) couldn't stand due to the fact that, in the opinion of two panel members, DeBeers no longer posed a big threat of anticompetitive conduct.  Sullivan v. DB Investments, Inc., No. 08-2784 (3d Cir. July 13, 2010).

Circuit Judge Rendell concurred in the outcome but not in the rationale.  She disagreed with the majority on the grounds that her colleagues paid inadequate heed of the court's decision in In re Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004), and went too far in reaching issues that the district court, and not the court of appeals, should decide in the first instance.

Blawgletter notes that neither of the opinions cites the American Law Institute's new Principles of the Law of Aggregate Litigation, section 3.06(b) of which states that, before approving a class settlement, "[t]he court need not conclude that common issues predominate over individual issues."

Both the author of the majority opinion, Circuit Judge Jordan, and the concurrer, Circuit Judge Rendell, belong to ALI.