Situated v. Db Inv.s Inc.
| Decision Date | 28 January 2010 |
| Docket Number | Nos. 08-2784, 08-2785, 08-2798, 08-2799, 08-2818, 08-2819, 08-2831, 08-2881.,s. 08-2784, 08-2785, 08-2798, 08-2799, 08-2818, 08-2819, 08-2831, 08-2881. |
| Citation | 613 F.3d 134 |
| Parties | Shawn SULLIVAN; Arrigotti Fine Jewelry; James Walnum, on behalf of themselves and all others similarly situated, v. DB INVESTMENTS, INC; De Beers S.A.; De Beers Consolidated Mines, Ltd; De Beers A.G.; Diamond Trading Company; CSO Valuations A.G.; Central Selling Organization; De Beers Centenary A.G. David T. Murray, Appellant in 08-2784 (Pursuant to Fed. R.App. P. 12(a)). Susan M. Quinn, Appellant in 08-2785 (Pursuant to Fed. R.App. P. 12(a)). Marvin L. Union; Tim Henning; Neil Freedman; Kylie Luke; William Benjamin Coffey, Jr., Appellants in 08-2798 (Pursuant to Fed. R.App. P. 12(a)). Aaron Petrus, Appellant in 08-2799 (Pursuant to Fed. R.App. P. 12(a)). Janet Giddings, Appellant in 08-2818 (Pursuant to Fed.R.App.P. 12(a)). Frank Ascione; Rosaura Bagolie; Matthew Delong; Sandeep Gopalan; Manoj Kolel-Veetil; Matthew Metz; Anita Pal; Deb K. Pal; Jay Pal; Peter Perera; Rangesh K. Shah; Ed McKenna; Thomas Vaughan, Appellants in 08-2819 (Pursuant to Fed.R.App.P. 12(a)). Kristen Dishman; Margaret Marasco, Appellants in 08-2831 (Pursuant to Fed.R.App.P. 12(a)). James B. Hicks, Appellant in 08-2881 (Pursuant to Fed. R.App. P. 12(a)). |
| Court | U.S. Court of Appeals — Third Circuit |
OPINION TEXT STARTS HERE
COPYRIGHT MATERIAL OMITTED.
COPYRIGHT MATERIAL OMITTED.
John J. Pentz, III, Class Action Fairness Group, Maynard, MA, Counsel for Not Party-Appellant.
Howard J. Bashman [Argued in No. 08-2785], Willow Grove, PA, George M. Plews, Christopher J. Braun, Plews Shadley Racher & Braun LLP, Indianapolis, IN, Counsel for Objector-Appellant Susan M. Quinn.
Howard B. Becker, Steven A. Katz, Korein Tillery, St. Louis, MO, Craig C. Corbitt, Zelle, Hofmann, Voelbel & Mason, Joseph J. Tabacco, Jr. [Argued in No. 08-2785], Berman, DeValerio, Pease, Tabacco, Burt & Pucillo, William Bernstein, Eric B. Fastiff, Lieff, Cabraser, Heimann & Bernstein, Joseph D. Cooper, Tracy R. Kirkham, Cooper & Kirkham, San Francisco, CA, Susan G. Kupfer, Glancy, Binkow & Goldberg, San Francisco, CA, John A. Maher, Summit, NJ, Counsel for Plaintiffs-Appellees Arrigotti Fine Jewelry Shawn Sullivan and James Walnum.
Jessica Biggio, Francis Ciani-Dausch, Tara S. Emory, Matthew P. Hendrickson, Skadden, Arps, Slate, Meagher & Flom, New York, NY, Mark J. Sagat, Steven C. Sunshine, Skadden, Arps, Slate, Meagher & Flom, Washington, DC, Counsel for Defendant-Appellee DeBeers SA.
Edward W. Harris, III, Taft, Stettinius & Holister, Indianapolis, IN, Robert A. Skirnick, Meredity, Cohen, Greenfogel & Skirnick, Jared Stamell, Stamell & Schager, New York, NY, Counsel for Not Party-Appellees Anco Ind. Diamond Corp., Amer Diamond Tool & Gauge Inc. and British Diamond Import Co.
Cecilia L. Gardner, Jewelers Vigilance Committee, New York, NY, Counsel for Not Party-Amicus Appellee Jewelers Vigilance Comm.
Scott W. Browne, Browne & Browne, Stuart C. Yoes, Beaumont, TX, Kenneth E. Nelson, Kansas, City, MO, Edward F. Siegel, Cleveland, OH, Counsel for Not Party-Appellants William Benjamin Coffey, Jr., Marvin L. Union, Tim Henning, Neil Freeman and Kylie Luke.
Christopher A. Bandas, Bandas law Firm, Corpus Christie, TX, Counsel for Not Party-Appellant Aaron Petrus.
Robert E. Margulies, Margulies Wind, Jersey City, NJ, Jeffrey L. Weinstein, Athens, TX, Counsel for Not Party-Appellant Janet Giddings.
Ricky E. Bagolie, Bagolie Friedman Injury Lawyers, Jersey City, NJ, Andrea Boggio, Bryant University, Smithfield, RI, Counsel for Not Party-Appellants Frank Ascione, Rosaura Bagolie,Matthew Delong, Sandeep Gopalan, Manoj Kolel-Veetil, Matthew Metz, Anita Pal, Deb K. Pal, Jay Pal, Ed McKenna, Peter Perera, Rangesh K. Shah, and Thomas Vaughan.
Kristen Dishman, Wareham, MA, Pro Se.
Margaret Marasco, Lynn, MA, Pro Se.
James B. Hicks, Hicks Parks, Los Angeles, CA, Pro Se.
Before RENDELL and JORDAN, Circuit Judges, and AMBROSE * , District Judge.
For more than one hundred years, De Beers S.A. and other entities within the De Beers family of companies (hereinafter collectively “De Beers”) have fixed prices in the wholesale market for gem-quality diamonds through a web of pricing and output-purchase agreements with competitors. In the late 1990s, however, De Beers's market power began to wane as new suppliers entered the market and competitors refused to cooperate with De Beers's pricing efforts. Amidst these structural changes to the market, plaintiffs brought the present claims under §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2, and under the antitrust, consumer protection, and unjust enrichment laws of all fifty states and the District of Columbia. Plaintiffs then entered into settlement negotiations with De Beers, which ultimately resulted in a proposed settlement that divided the plaintiffs into two putative classes and created a settlement fund of $295 million. Although several plaintiffs objected to the settlement, the United States District Court for the District of New Jersey overruled the objections, certified the two classes, and approved the settlement agreement. The objectors then filed these appeals. For the reasons that follow, we will vacate the judgment of the District Court and remand for further proceedings.
Throughout the twentieth century, De Beers fixed prices in the market for rough gem-quality diamonds by, among other things, executing output-purchase agreements with competitors, establishing a market-wide cartel to set production limits, and restricting wholesalers from reselling diamonds outside of certain geographic territories. Wholesalers, known as “sightholders,” were, and continue to be, screened by De Beers based on various criteria and are required to purchase diamonds at ten annual distribution events called “sights.” Sightholders constitute De Beers's exclusive channel for distribution of its diamonds, and they resell those diamonds to jewelry manufacturers and retailers as rough diamonds, or as cut-and-polished stones, or as components of finished jewelry products.
De Beers carried out its cartel activities-including distribution to sightholders-through the Central Selling Organization (“CSO”), 1 an entity established by De Beers for the purpose of coordinating its actions with those of its competitors. Historically, the CSO was responsible for purchasing diamonds from De Beers's competitors, establishing pricing formulas, and setting output restrictions. TheCSO's network of agreements and De Beers's status as founder of the CSO had for many years given De Beers nearly complete control over the market for rough gem diamonds.
That hold on the diamond industry began to slip, however, during the latter part of the twentieth century, and, by the mid-1990s, it was weakening fast. In 1993, Russia's state-controlled diamond company, ALROSA, flooded the market with low-quality gems to earn cash in the face of financial pressures on the government. In response, De Beers dropped the price of low-grade stones. That action prompted cartel-member Rio Tinto, which operates Argyle Diamond Mines of Australia (“Argyle”), to cease dealing with the CSO in 1996. Rio Tinto's Argyle mine, like ALROSA, began selling larger numbers of low-quality diamonds than De Beers had previously sold through the CSO.
With the low-end of the market moving beyond its control, De Beers turned its attention to higher-quality gems. It initially attempted to retain control over the production and sale of high-grade diamonds by purchasing its competitors' output, as it had done for many decades before. For example, in 1999, it entered into an output purchase agreement with competitor BHP Billiton (“BHP”) under which it acquired 35% of BHP's total diamond production. That agreement ended in 2002, and again De Beers's efforts to maintain dominance began to fade, as the market for high-quality stones saw the entrance of new competitors and as old competitors brought new mines into production. By 2006, in the overall market for rough gem diamonds, state-owned companies in Angola and the Democratic Republic of Congo collectively controlled 19% of global production; ALROSA controlled 17%, and De Beers controlled approximately 45%. Other competitors, including Rio Tinto, controlled the remaining share of the market. 2
The present case dates from 2001, when two price-fixing lawsuits were filed in the United States District Courts for the District of New Jersey and the Southern District of New York. Between 2002 and 2005, five additional lawsuits were filed in state and federal courts across the country, bringing the total number of suits against De Beers to seven. Three of the cases were initiated in state court in Arizona, California, and Illinois. The Illinois case was removed to federal court and was later consolidated with the remaining four lawsuits-all of which had been filed in various federal district courts-in the United States District Court for the District of New Jersey. 3 While only the five federal cases are presently before us, all seven cases are pertinent to this set of appeals because the settlement agreement that the parties ultimately reached applied to all actions, including the ones in state court.
The plaintiffs in the seven cases can be divided into two categories, based on the claims that they assert. The first categoryconsists of direct purchasers that acquired rough gem diamonds directly from De Beers or one of its competitors. The direct purchasers advanced claims of price-fixing and monopolization, citing §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2, for which they sought damages and injunctive relief under §§ 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26. 4
The second category of plaintiffs consists of indirect purchasers, which are entities or individuals...
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