Sullivan v. DB Invs. Inc.

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))

No. 08-2784

No. 08-2785

No. 08-2798

No. 08-2799

No. 08-2818

No. 08-2819

No. 08-2831

No. 08-2881

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Opinion Filed December 20, 2011

PRECEDENTIAL

Appeals from the United States District Court

for the District of New Jersey

(D.C. Civil No. 2-04-cv-02819)

District Judge: Honorable Stanley R. CheslerNo. 08-2785 Argued on January 28, 2010

Nos. 08-2784/2798/2799/2818/2819/2831/2881 Submitted

Under Third Circuit L.A.R. 34.1(a) on January 28, 2010

Before: RENDELL and JORDAN, Circuit Judges, and

AMBROSE^*, District Judge.

Reargued En Banc

on February 23, 2011

Before: SCIRICA, RENDELL, AMBRO, FUENTES,

SMITH, FISHER, CHAGARES, JORDAN and VANASKIE,

Circuit Judges.

John J. Pentz, III, Esq. [ARGUED]

Class Action Fairness Group

Counsel for Non Party-Appellant

Howard J. Bashman, Esq. [ARGUED]

George M. Plews, Esq.

Christopher J. Braun, Esq.

Plews Shadley Racher & Braun LLP

Counsel for Non Party-Appellant Susan M. Quinn

William Bernstein, Esq.

Eric B. Fastiff, Esq.

Lieff, Cabraser, Heimann & Bernstein

Joseph D. Cooper, Esq.

Tracy R. Kirkham, Esq.

Cooper & Kirkham

Counsel for Plaintiff-Appellee Shawn Sullivan

Craig C. Corbitt, Esq.

Zelle, Hofmann, Voelbel & Mason

Samuel Issacharoff, Esq. [ARGUED]

New York University Law School

Steven A. Katz, Esq.

Korein Tillery

Susan G. Kupfer, Esq.

Glancy, Binkow & Goldberg

John A. Maher, Esq.

Joseph J. Tabacco, Jr., Esq.

Berman, DeValerio, Pease, Tabacco, Burt & Pucillo

Counsel for Plaintiffs-Appellees Arrigotti Fine Jewelry

Shawn Sullivan and James Walnum

Jessica Biggio, Esq.

Skadden, Arps, Slate, Meagher & Flom

Francis Ciani-Dausch, Esq.

Tara S. Emory, Esq.

Steven C. Sunshine, Esq.

Skadden, Arps, Slate, Meagher & Flom

Matthew P. Hendrickson, Esq.

Skadden, Arps, Slate, Meagher & Flom

Counsel for Defendant-Appellee DeBeers SA

Ben Kinzler, Esq.

Diamond Manufacturers & Importers Association of America

Robert J. LaRocca, Esq.

Kohn Swift & Graf

Joanne Zack, Esq.

Bonio & Zack

Counsel for Non-Party Amicus Appellee

Diamond Manufacturers and Importers Association of

America

Edward W. Harris, III, Esq.

Taft, Stettinius & Holister

Robert A. Skirnick, Esq.

Meredity, Cohen, Greenfogel & Skirnick

Jared Stamell, Esq.

Stamell & Schager

Counsel for Non Party-Appellees Anco Ind. Diamond

Corp.; Amer Diamond Tool & Gauge Inc. And British

Diamond Import Co.

Cecilia L. Gardner, Esq.

Jewelers Vigilance Committee

Counsel for Non Party-Amicus Appellee Jewelers

Vigilance Comm.

Scott W. Browne, Esq.

Browne & Browne

Kenneth E. Nelson, Esq.

Edward F. Siegel, Esq.

Counsel for Non Party-Appellants William Benjamin

Coffey, Jr., Marvin L. Union, Tim Henning, Neil Freeman

and Kylie Luke

Christpher A. Bandas, Esq.

Bandas law Firm

Counsel for Non Party-Appellant Aaron Petrus

Robert E. Margulies, Esq.

Margulies Wind

Jeffrey L. Weinstein, Esq.

Counsel for Non Party-Appellant Janet Giddings

Ricky E. Bagolie, Esq.

Bagolie Friedman Injury Lawyers

Andrea Boggio, Esq.

Bryant University

Counsel for Non Party-Appellants Frank Ascione,

Rosaura Bagolie, Matthew Delong, Ed McKenna

Peter Perera, Thomas Vaughan

Robert J. Gaudet, Jr., Esq. [ARGUED]

RJ Gaudet & Associates

Counsel for Non Party-Appellants Sandeep Gopalan,

Manoj Kolel-Veetil, Matthew Metz, Anita Pal, Deb K. Pal,

Jay Pal and Rangesh K. Shah.

Eric L. Cramer, Esq.

Berger & Montague

Counsel for Non Party-Amicus Appellee

American Antitrust Institute

Kristen Dishman

Pro Se

Margaret Marasco

Pro Se

James B. Hicks

Hicks Parks

Pro Se

OPINION OF THE COURT

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 $272.5million. 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 10). We disagree, and accordingly, we will reason through our analysis in a moredeliberate manner in order to explain why the addition of this new requirement into the Rule 23 certification process is unwarranted.

I. Factual & Procedural Background

A. 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 businesspractices 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 lawsuitswere 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 itscompetitors ("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 indirect purchasers of rough or cut-and-polished diamonds; this category of consumers, jewelry retailers and other middlemen acquired diamonds from sightholders or other direct purchasers, rather than directly from De Beers or its competitors ("Indirect Purchaser Class" or "Indirect Purchasers"). While...