In Sullivan v. DB Investments, Inc. ("Sullivan II"), No.
08-2784, 2011 U.S. App. LEXIS 25185 (3d Cir. Dec. 20, 2011) (en banc), the
Third Circuit reinstated the district court's certification of a nationwide
class settlement comprising indirect and direct purchasers of diamonds from De
Beers, and approved the $295 million settlement. The Third Circuit
considered whether a court must inquire into each class member's "possess[ion
of] a viable claim or 'some colorable legal claim'" when certifying a class
under Federal Rule of Civil Procedure 23. Id. at *6. The Third Circuit
held that if plaintiffs can show that common factual and legal issues
predominated over individual issues, the district court "need not concern
itself with whether [p]laintiffs can prove their allegations." Id. at *25-26.
The Third Circuit vacated a prior panel's decision that
rejected the instant certification because indirect purchasers did not have
standing to sue in federal court or in many of the states, precluding a finding
of predominance because "no question of law or fact regarding their legal
rights is uniform throughout the class." See Sullivan v. DB Investments, Inc.
("Sullivan I"), 613 F.3d 134, 148 (3d Cir. 2010) (vacated).
In Sullivan II, the plaintiffs alleged price-fixing and
monopolization by De Beers in the diamond market. The plaintiffs alleged that
"De Beers exploited its market dominance to artificially inflate the prices of
rough diamonds." Sullivan II, 2011 U.S. App. LEXIS 25185, at *9. They
further contended that De Beers's conduct "caused reseller and consumer
purchasers of diamonds and diamond-infused products to pay an unwarranted
premium for such products." Id. The instant lawsuits were filed in the
United States District Courts for the District of New Jersey and the Southern
District of New York, and five other lawsuits were filed in various federal and
state courts across the country. Id.
Previously, in Sullivan I, the Third Circuit panel
examined the issue of standing and noted that the variance among states'
antitrust statutes "is mainly a function of whether a state has chosen to
follow the Sherman Act principles regarding standing laid down by . . .
Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977)." Sullivan I, 613 F.3d at
146. In Illinois Brick, the Supreme Court held that only direct purchasers had
standing under the Sherman Act to sue for monetary damages deriving from an
antitrust injury. And since a number of states did not have Illinois Brick
repealing statutes in place, indirect purchasers were denied a right to
antitrust recovery as a matter of substantive law. Therefore, the panel vacated
the nationwide class certification of state indirect purchasers.
In Sullivan II, however, the Third Circuit-sitting en
banc-rejected "the addition of this new requirement into the Rule 23
certification process." Sullivan II, 2011 U.S. App. LEXIS 25185, at *6. In
addressing Rule 23's requirement of predominance, the Third Circuit noted that
"variations in state law do not necessarily defeat predominance; and . . .
concerns regarding variations in state law largely dissipate when a court is
considering the certification of a settlement class." Id. at *43. The Third
Circuit noted that, while states abiding by Illinois Brick require a plaintiff
to be a direct purchaser as an element of the claim, the likelihood that an
indirect purchaser "might be unable to establish this element at trial is
beside the point." Id. at *73. The court clarified that this type of standing
is not jurisdictional; here, the "lack of antitrust standing affects a
plaintiff's ability to recover, but does not implicate the subject matter
jurisdiction of the court." Id. at *72-73. "Accordingly, statutory standing is
simply another element of proof for an antitrust claim, rather than a predicate
for asserting a claim in the first place." Id. at *73. Therefore, according to
the Third Circuit, as long as the indirect purchasers may file lawsuits in
Illinois Brick states, even though such lawsuits could easily be dismissed on a
defendant's motion, courts may include indirect purchasers in a settlement
But, the majority held, Rule 23 does not require an
"intensive cataloguing" of each class member's claim according to the laws of
the fifty states, nor an intensive Rule 12(b)(6) analysis to ensure there is a
"colorable legal claim." Id. at *76-78.
The majority also found support in Wal-mart Stores, Inc.
v. Dukes, 131 S. Ct. 2541 (2011):
Dukes actually bolsters our position, making clear that the focus is on whether
the defendant's conduct was common as to all of the class members, not on
whether each plaintiff has a "colorable" claim. In Dukes, the Court held that
commonality and predominance are defeated when it cannot be said that there was
a common course of conduct in which the defendant engaged with respect to each
individual. But commonality is satisfied where common questions generate common
answers "apt to drive the resolution of the litigation." That is exactly what
is presented here, for the answers to questions about De Beers's alleged
misconduct and the harm it caused would be common as to all of the class
members, and would thus inform the resolution of the litigation if it were not
Sullivan II, 2011 U.S. App. LEXIS 25185 at *49 (citation
This decision is favorable to defendants seeking "global
peace" to settle nationwide state-law claims. But it is remains unclear whether
this decision will be extended beyond claims alleging violations of antitrust
or consumer fraud laws, and whether it will be extended beyond its settlement
David Brown is a third year student as New York Law
School. He is Executive Editor of the Law Review. He has interned at the US
Attorney's Office for the Eastern District of New York and for the Honorable
Joel H. Slomsky, US District Court, Eastern District of Pennsylvania.
Abbey Spanier Rodd & Abrams, LLP, located in New York
City, is a well-recognized national class action and complex litigation law
If you believe that a company is acting in an
anticompetitive manner please call us at 212-889-3700 or visit our website at www.abbeyspanier.com.
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