Sullivan v. DB Invs., Inc.

Decision Date28 January 2010
Docket Number08–2798,08–2818,08–2799,08–2881.,08–2831,Nos. 08–2784,08–2819,08–2785,s. 08–2784
Citation667 F.3d 273,2011 Trade Cases P 77736
PartiesShawn 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)).
CourtU.S. Court of Appeals — Third Circuit


Submitted Under Third Circuit

L.A.R. 34.1(a) on Jan. 28, 2010.

Reargued En Banc on Feb. 23, 2011.Opinion Filed Dec. 20, 2011.

John J. Pentz, III, Esq. [Argued], Class Action Fairness Group, Maynard, MA, for Non PartyAppellant.

Howard J. Bashman, Esq. [Argued], Willow Grove, PA, George M. Plews, Esq., Christopher J. Braun, Esq., Plews Shadley Racher & Braun LLP, Indianapolis, IN, for Non PartyAppellant Susan M. Quinn.

William Bernstein, Esq., Eric B. Fastiff, Esq., Lieff, Cabraser, Heimann & Bernstein, Joseph D. Cooper, Esq., Tracy R. Kirkham, Esq., Cooper & Kirkham, San Francisco, CA, for PlaintiffAppellee Shawn Sullivan.Craig C. Corbitt, Esq., Zelle, Hofmann, Voelbel & Mason, San Francisco, CA, Samuel Issacharoff, Esq. [Argued], New York University Law School, New York, NY, Steven A. Katz, Esq., Korein Tillery, St. Louis, MO, Susan G. Kupfer, Esq., Glancy, Binkow & Goldberg, San Francisco, CA, John A. Maher, Esq., Summit, NJ, Joseph J. Tabacco, Jr., Esq., Berman, DeValerio, Pease, Tabacco, Burt & Pucillo, San Francisco, CA, for PlaintiffsAppellees Arrigotti Fine Jewelry Shawn Sullivan and James Walnum.Jessica Biggio, Esq., Skadden, Arps, Slate, Meagher & Flom, New York, NY, Francis Ciani–Dausch, Esq., Tara S. Emory, Esq., Steven C. Sunshine, Esq., Skadden, Arps, Slate, Meagher & Flom, Washington, DC, Matthew P. Hendrickson, Esq., Skadden, Arps, Slate, Meagher & Flom, New York, NY, for DefendantAppellee DeBeers SA.Ben Kinzler, Esq., Diamond Manufacturers & Importers Association of America, New York, NY, Robert J. LaRocca, Esq., Kohn Swift & Graf, Philadelphia, PA, Joanne Zack, Esq., Bonio & Zack, Bala Cynwyd, PA, for Non–Party Amicus Appellee, Diamond Manufacturers and Importers Association of America.Edward W. Harris, III, Esq., Taft, Stettinius & Holister, Indianapolis, IN, Robert A. Skirnick, Esq., Meredity, Cohen, Greenfogel & Skirnick, Jared Stamell, Esq., Stamell & Schager, New York, NY, for Non PartyAppellees Anco Ind. Diamond Corp.; Amer Diamond Tool & Gauge Inc. And British Diamond Import Co.Cecilia L. Gardner, Esq., Jewelers Vigilance Committee, New York, NY, for Non Party–Amicus Appellee Jewelers Vigilance Comm.Scott W. Browne, Esq., Browne & Browne, Beaumont, TX, Kenneth E. Nelson, Esq., Kansas City, MO, Edward F. Siegel, Esq. Cleveland, OH, for Non PartyAppellants William Benjamin Coffey, Jr., Marvin L. Union, Tim Henning, Neil Freeman and Kylie Luke.Christpher A. Bandas, Esq., Bandas law Firm, Corpus Christie, TX, for Non PartyAppellant Aaron Petrus.Robert E. Margulies, Esq., Margulies Wind, Jersey City, NJ, Jeffrey L. Weinstein, Athens, TX, for Non PartyAppellant Janet Giddings.Ricky E. Bagolie, Esq., Bagolie Friedman Injury Lawyers, Jersey City, NJ, Andrea Boggio, Esq., Bryant University, Smithfield, RI, for Non PartyAppellants Frank Ascione, Rosaura Bagolie, Matthew Delong, Ed McKenna Peter Perera, Thomas Vaughan.Robert J. Gaudet, Jr., Esq. [ARGUED], RJ Gaudet & Associates, Seattle, WA, for Non PartyAppellants Sandeep Gopalan, Manoj Kolel–Veetil, Matthew Metz, Anita Pal, Deb K. Pal, Jay Pal and Rangesh K. Shah.Eric L. Cramer, Esq., Berger & Montague, Philadelphia, PA, for Non Party–Amicus Appellee American Antitrust Institute.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.Before: SCIRICA, RENDELL, AMBRO, FUENTES, SMITH, FISHER, CHAGARES, JORDAN and VANASKIE, Circuit Judges.


RENDELL, Circuit Judge, with whom Circuit Judges SCIRICA, AMBRO, FUENTES, FISHER, CHAGARES and VANASKIE, join.

At issue on appeal in this class action litigation is the propriety of the District Court's certification of two nationwide settlement classes comprising purchasers of diamonds from De Beers S.A. and related entities (De Beers).1 The settlement provided for a fund of $295 million to be distributed to both the direct and indirect purchasers: the direct purchasers were to receive $22.5 million of the fund, while the indirect purchasers would receive $272.5 million. A panel of our Court held that the District Court's ruling was inconsistent with the predominance inquiry mandated by Federal Rule of Civil Procedure 23(b)(3), and remanded the matter for further proceedings. See Sullivan v. DB Investments, Inc., 613 F.3d 134 (3d Cir.2010), reh'g en banc granted and vacated by Sullivan v. DB Investments, Inc., 619 F.3d 287 (3d Cir.2010). We then granted the plaintiffs' petition for rehearing en banc and vacated the prior order. Accordingly, we address anew the propriety of the District Court's certification of the direct and indirect purchaser classes pursuant to Federal Rule of Civil Procedure 23(b)(2) and 23(b)(3), and also consider for the first time the objections raised to the fairness of the class settlement.2

We believe that the predominance inquiry should be easily resolved here based on De Beers's conduct and the injury it caused to each and every class member, and that the straightforward application of Rule 23 and our precedent should result in affirming the District Court's order certifying the class. But the objectors to the class certification and our dissenting colleagues insist that, when deciding whether to certify a class, a district court must ensure that each class member possesses a viable claim or “some colorable legal claim,” (Dissenting Op. at 344). We disagree, and accordingly, we will reason through our analysis in a more deliberate manner in order to explain why the addition of this new requirement into the Rule 23 certification process is unwarranted.

I. Factual & Procedural BackgroundA. Present Litigation & Settlement Proceedings

The allegations in the present case arose from De Beers's undisputed position as the dominant participant in the wholesale market for gem-quality diamonds throughout much of the twentieth century.3 It is alleged that, beginning in 1890 and continuing through the filing of the Complaints at issue in this appeal, De Beers coordinated the worldwide sales of diamonds by, inter alia, executing output-purchase agreements with competitors, synchronizing and setting production limits, restricting the resale of diamonds within certain geographic regions, and directing marketing and advertising. Through its coordinated network of diamond producers, De Beers was able to value diamonds according to certain physical characteristics and to then control the quantity and prices of diamonds in the marketplace by strictly regimenting sales to preferred wholesalers, known as “sightholders.” 4 Sightholders resold these diamonds to jewelry manufacturers and retailers—either as rough diamonds or as cut, polished, and finished stones—and constituted De Beers's primary channel for distribution of its diamonds.5

Between 2001 and 2002, plaintiffs brought suit complaining that De Beers's aforementioned business practices contravened state and federal antitrust, consumer protection, and unjust enrichment laws, and constituted unfair business practices and false advertising under common law and relevant state statutes. Specifically, the plaintiffs alleged that De Beers exploited its market dominance to artificially inflate the prices of rough diamonds; this, in turn, caused reseller and consumer purchasers of diamonds and diamond-infused products to pay an unwarranted premium for such products. The initial 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 in 2001, and five subsequent lawsuits were initiated in federal and state courts in other parts of the country.6 Three of the lawsuits were filed in state court in Arizona, California, and Illinois, respectively; the last was then removed to the United States District Court for the Southern District of Illinois. The five suits in federal court were subsequently all transferred to and consolidated in the United States District Court for the District of New Jersey, and are presently before us.

The plaintiffs in the seven cases are best characterized as falling within one of two types of purchaser classes. The first category includes direct purchasers of gem diamonds, who purchased directly from De Beers or one of its competitors (“Direct Purchaser Class” or “Direct Purchasers”). These plaintiffs advanced claims of price-fixing and monopolization pursuant to §§ 1 and 2 of the Sherman Act, and sought monetary and injunctive relief under §§ 4 and 16 of the Clayton Act. The second category of plaintiffs consists of...

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