In case you missed the en banc argument on Wednesday to the Third Circuit in Sullivan v. DB Investments Inc., No. 08-2784 (audio file here; post on panel decision here), Blawgletter offers our fragmentary notes below.

[By way of background, a panel of the Third Circuit ruled that, because some states don't allow indirect purchaser suits under their antitrust laws, the claims of the settlement class members didn't "predominate" within the meaning of Rule 23(b)(3).  The panel also concluded that certification for injunctive relief under Rule 23(b)(2) couldn't stand due to the fact that, in the opinion of two panel members, DeBeers no longer posed a big threat of anticompetitive conduct.  Sullivan v. DB Investments, Inc., No. 08-2784 (3d Cir. July 13, 2010).

Circuit Judge Rendell concurred in the outcome but not in the rationale.  She disagreed with the majority on the grounds that her colleagues paid inadequate heed of the court's decision in In re Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004), and went too far in reaching issues that the district court, and not the court of appeals, should decide in the first instance.]

 We felt that Sam Issacharoff did a splendid job on behalf of the settlement class and performed better than the other three who argued against the certification order.  Issacharoff convinced us that Rule 23(b)(3) doesn't bar certification where some class members, perhaps many, have far weaker claims than other class members do.  We also came to the view that the court will likely uphold certification but remand the case for a closer look at the plan of allocation to assure fairness as between those with stronger claims and those with weaker claims.

Howard Bashman for Class Member Susan Quinn

Illinois Brick bars federal claims for indirect purchasers. Residents of states that bar indirect claims can't get recovery. Plaintiffs at first limited class to 31 for indirect consumer purchasers and 23 states for indirect reseller purchasers until the case settled. Plaintiffs now ask court to ignore Rules Enabling Act and Rule 23.  Court in Warfarin and Prudential said nothing that supports certification here.

Judge Scirica: what if all class members got 100 percent? Even indirect buyers have injury. Asking to vindicate Sullivan or something more like fairness of allocation.

Bashman: dilution cuts my client's recovery.

Scirica: so no problem if class members get 100 percent. Why not remand for reallocation? Rule 23 issue

Bashman: people who have no claims affect people who do.

Judge Rendell: where does it end? Would district court have to do conflicts analysis for each class member? Also limitations?

Bashman: can't escape that case presents whether state law allows claim.

Judge Fuentes: why not focus on misconduct of defendant? Amchem. Why get into vagaries of state law

Bashman: agree that but for Illinois Brick could settle. Common issues re "claims". Rule 23 itself speaks to claims, not questions.

Judge Fisher: DeBeers wants releases. States could pass repealers tomorrow. Why can't DeBeers get peace?

Bashman: Ohio supremes say no claim. Very clear.

Scirica: would judge also have to assure claim valid for purposes of joinder?

Bashman: Don't know.

Scirica: Reed Elsevier said don't need valid copyright claim to settle.

Bashman: That case involved a jurisdiction issue, not predominance.

Scirica: Matsushita says can settle claims.

Judge Ambro: Second Circuit case says can settle class claims even after court rejects on merits.  Why shouldn't we follow that case?

Bashman: different if don't have claims at all.Fuentes: nightmarish for district court to do what you say?

Bashman:  not nightmarish at all.  Plaintiffs originally limited to non-repealer states.

John Pence for David Murray

Second Circuit case on stock option and Verizon case allow cert if no valid claims because entire class lacks valid claims.  In re New Motor Vehicle involves weak claims, and allocation raises issue worthy of settlement. Court must reach merits on cert under Gersh.

Scirica: fairness analysis happens after certification.

Pence:  cert and fairness happen together.

Scirica:  not so.

Pence:  in this case, the court blended the analysis, brought in irrelevant question about enforceability of judgment.

Scirica: Gersh says district court needs to assess risks of litigation.

 Pence:  reply brief points out that judgment would last up to 20 years and has more value than money.

Robert Gaudet for members of consumer subclass

Gaudet:  Clear conflict of interest between class members.  Will make three points.

Should have considered chance for treble damages under Gersh.

Class members must have chance to object to fees and expenses applications. Filings happened after deadline for objections.

Third, consumer subclass reps shouldn't get $5,000 when average award to class members = $1.

Fuentes: did court address fairness?

Gaudet: no estimate of class damages that indirects suffered.

Scirica: proper for court to weigh lack of personal jurisdiction?

Gaudet: easy to establish personal jurisdiction over DeBeers. Need to fix class action system, which has become a joke even to Europeans.

Sam Issacharoff for class

Bashman argues that case divides Illinois Brick repealer states and non-repealer states. Case actually involves several class actions with variety of claims. Bashman's own client alleged unjust enrichment under non-repealer Texas law and now announces, for first time, that bought diamonds in New Mexico, a repealer state. The Lighter class action, one of seven, alleged DeBeers set up system to avoid liability in U.S. Alleged series of claims, including violation of Wilson Tariff Act. Have arguments on claims, however weak.

Judge Jordan: you lead with Lighter because Ohio law and other non-repelaer states so clearly don't allow indirect claims.

Issacharoff: Lighter came first. Null also there.

Jordan: clear Ohio bars indirects. Johnson.

Issacharoff: Johnson doesn't go that far. Seven complaints allege variety of claims.

Jordan: what if state Supreme Court barred all possible claims. Wouldn't certifying class that included claims under that state's laws violate predominance?

Issacharoff: yes, but only if court barred every conceivable claim as long as relates to price fixing. Not this case.

Jordan: Keyspan said can't get disgorgement.

Issacharoff: Lighter.

Jordan: passage of diamonds through NY gives right of action to Ohio?

Issacharoff: weak but there. Shady Grove.

Fuentes: if have only antitrust claims, would have problems?

Issacharoff: Illinois Brick states always in flux. Predominance issue would arise.

Fuentes: what should we focus on?

Issacharoff: whether as in Amchem have genuine controversy.

Jordan: question really relates to whether facts raise actual legal liability under relevant law.

Issacharoff: you keep pushing me back to hypo where some members have no claim. That is not this case. Lighter, Donnelly Act, false advertising, and various others. At least half dozen. What is the standard? "Valid claim" a new concept. Go back to Amchem. "Genuine controversy".

Ambro: Fifth Circuit said state law differences could swamp common issues.

Issacharoff: concerns manageability.

Rendell: answer surprised me. Couldn't DeBeers buy peace even if only claims involved non-repealer states? Illinois Brick a prudential decision. Settlement makes huge difference.

Issacharoff: agree.  Illinois Brick did indeed concern prudential concerns.

Jordan: you just retreated.  You said before that not having valid claim would defeat predominance.

Issacharoff: disagree with your view that state Supremes' ruling ends inquiry. You don't have a case that says you can't have claim for consumer fraud in a non-repealer state.

Jordan: Judge Chesler didn't certify federal claims.

Issacharoff: yes, he did. Lighter certified injunctive class, and pended on appeal.

Jordan: have to deal with actual cert.

Issacharoff: Chesler did certify more than you say.  He certified multiple cases involving multiple claims.

Rendell: Do you agree that Judge Chesler didn't do a predominance analysis?

Issacharoff: I don't.

Ambro: doesn't court have to look at differences in state law claims?

Issacharoff: Null and Lighter cases raised many claims. Can't be right that would have to look at every claim.  Would exhaust value of settlement to look at each claim.

Jordan: not so.  Johnson says no claims under Ohio law.

Issacharoff: we don't know if Johnson applies to anyone. Would have to inquire into facts for each class member.

Jordan: easy to figure out

Issacharoff: no, not easy. Conflicts analysis, for example, would become necessary.

Jordan: you still haven't answered me. If Ohioans don't have a claim, why do we have to do anything further?

Issacharoff: I concede your point but disagree with your assumptions. Would make settlement classes impossible. Go back to Prudential. Objections go to a different case from this one.

Bashman on Rebuttal

Bashman: Becker said have to do conflicts of law analysis. Amchem.

Ambro: how does case implicate Rules Enabling Act where defendant wants to settle lousy claim?

Bashman: because court approves class.

Scirica: shouldn't we focus on fairness to class members?

Bashman: Wachtel and Constar.

Jordan: respond to Issacharoff's point that claims uncertain.

Bashman: court didn't certify that class. Can't analyze on basis of possible changes in law.

Bashman: agree with Rendell's view that predominance analysis leaves a lot for us to desire.