Third Circuit En Banc Review of Sullivan v. DB Investments, Inc


by William A.S. Magrath

William Magrath performs an in-depth analysis of the Third Circuit's en banc review of Sullivan v. DB Investments. Mr. Magrath notes that while a prediction of a decision based on the judges' questions during oral argument requires "reading the tea leaves," the en banc panel's decision in Sullivan may provide important guidance on at least some key questions related to the interpretation of Rule 23.



The Sullivan case arose out of alleged price fixing activity by the De Beers family of companies in the wholesale market for gem-quality diamonds. Plaintiffs brought claims against De Beers under the Sherman and Clayton Acts as well as the antitrust, consumer protection, and unjust enrichment laws of all fifty states and the District of Columbia. Plaintiffs were divided into two classes. The first class of plaintiffs, the direct purchaser class, consisted of those plaintiffs who had bought rough gem diamonds directly from De Beers during the relevant time period. The second class of plaintiffs, the indirect purchaser class, consisted of those plaintiffs who purchased gem diamonds during the relevant time period from sources other than De Beers or one of its competitors. Consumers and jewelry retailers who bought their diamonds from middlemen fell into this category.

Plaintiffs entered into settlement negotiations with De Beers that ultimately resulted in a proposed settlement dividing the plaintiffs into the two putative classes and creating a settlement fund of $295 million to be shared by the two classes. The United States District Court for the District of New Jersey overruled the objections of several plaintiffs to the settlement, certified the two classes, and approved the settlement agreement.

Third Circuit Panel Opinion

One of the objectors appealed the case to the Third Circuit where it was heard before a panel composed of Judge Rendell, Judge Jordan, and Judge Ambrose, a United States District Court judge for the Western District of Pennsylvania sitting by designation.

In an opinion authored by Judge Jordan and joined by Judge Ambrose, the panel held that a nationwide settlement-only class could not be certified when there was not a legal right to recovery in all of the jurisdictions implicated by the class.

The panel majority found that the trial court's certification of the indirect purchaser class for settlement purposes under Federal Rules of Civil Procedure Rule 23(b)(3) was improper. The panel analyzed the antitrust, consumer protection, and unjust enrichment law of the fifty states and District of Columbia and concluded "it was improper for the District Court to certify a nationwide class of plaintiffs based on state law when many states withhold antitrust standing from indirect purchasers and where the variability in consumer protection and unjust enrichment law in a context like this is extreme." With respect to the state antitrust claims, the court found that "[t]he variations in state law identified by the objectors preclude the requisite finding of predominance under Rule 23(b)(3) because indirect purchasers do not have a right to recover in all states, and, therefore, no question of law or fact regarding their legal rights is uniform throughout the class." subscribers can access the complete commentary, Third Circuit En Banc Review of Sullivan v. DB Investments, Inc.  Additional fees may be incurred.

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William A.S. Magrath is an associate in the San Francisco office of Gibson, Dunn & Crutcher. He currently practices in the firm's Litigation Department. Mr. Magrath received his law degree cum laude in 2010 from New York University School of Law, where he was an editor of the New York University Law Review and a Florence Allen Scholar. Prior to attending law school, Mr. Magrath worked for three and a half years for the U.S. Department of Defense. Mr. Magrath received his M.S. and B.S. in Computer Science from Stanford University in 2003.


  • Anonymous
    Based on the findings/ruling of the United States District Court. If I understand their ruling then the indirect purchaser ie; the consumer will receive none of the $295 million settlement and once again are left out in the cold bareing the burden of the wealthy.......