July 15, 2010

Appeals Court Discards De Beers Settlement Deal

In an opinion filed on July 14, 2010, a federal appeals court rejected the $295 million settlement of an anti-trust lawsuit against De Beers. The class action alleged that the De Beers family of companies engaged in price-fixing in the wholesale market for gem-quality diamonds. The parties settled the matter, in 2005, at the district court level, agreeing upon a claims process that would distribute the funds to two classes: indirect purchasers, a class consisting of resellers and consumers, and direct purchasers, a class consisting of those that bought directly from De Beers or its competitors. $272.5 million of the settlement fund was set aside for re-sellers and consumers, and $22.5 for direct purchasers.

The Third Circuit Court of Appeals rejected the settlement, on the grounds that the indirect purchaser class had been improperly certified, and sent the case back to the District Court in New Jersey. The certification error, raised by a single objector from Texas, was that common issues did not "predominate" within the class, meaning that issues common to the class did not "truly overshadow" those pertinent to individuals.

The law allows the plaintiffs to petition the appeals court for a re-hearing en banc, before all the judges of the Third Circuit, as opposed to a panel of only three which heard the appeal. Otherwise, on remand to the district court, the parties will likely re-assess the indirect-class designation and its impact, if any, on new settlement terms and claims already filed against the settlement fund. This process, which may involve further appeals, can be expected to be lengthy.

The full text of the 75-page appellate decision can be found at:

Also, click here for more information at Law.com.