Civil Procedure & Federal Courts Blog

Pilot project in Southern District of New York to simplify complex cases

The project, to begin January 2011, is spearheaded by Judge Shira Scheindlin, and is reported in The Third Branch here. 

PM

December 2011 edition of "The Third Branch" available

The December 2011 newsletter of the United States Courts, "The Third Branch," is available here.

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Third Circuit Upholds $295 Million Settlement Class in De Beers Diamond Antitrust Suits

The Third Circuit has released an important case involving settlement classes, Sullivan v. DB Investments, Inc., No. 08-2784 et al. (3d Cir. Dec. 21, 2011) (en banc).  Professor Samuel Issacharoff, of New York University Law School, was one of the attorneys who argued for plaintiffs.

The plaintiffs alleged antitrust and other violations in “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.”

“On March 31, 2006, the District Court . . . conditionally certif[ied] both the Direct and Indirect Purchaser settlement classes under Rules 23(b)(2) and 23(b)(3), and . . . preliminarily approve[d] a combined settlement fund for both classes totaling $295 million, of which $22.5 million was allotted to Direct Purchasers and $272.5 million was allocated to the Indirect Purchaser claims. The combined settlement also provided for entry of a stipulated injunction, which required De Beers to, inter alia, comply with and abide by federal and state antitrust laws, to limit its purchases of diamonds from third-party producers, to abstain from setting or fixing the prices of diamonds sold by third-party producers, to desist from restricting the geographic regions within which sightholders could resell De Beers diamonds, and barred De Beers from purchasing diamonds in the United States for the principal purpose of restraining supply. Notably, De Beers agreed to subject itself to personal jurisdiction in the United States for purposes of enforcing the combined settlement agreement.”

On appeal, a divided panel of the court initially determined that the District Court abused its discretion in certifying the nationwide class of litigants. The court then vacated this opinion and granted rehearing en banc.

The court’s en banc opinion affirmed the district court’s order, holding that the predominance requirement for certification of the settlement class was met:

“Specifically, here, plaintiffs allege that De Beers engaged in anticompetitive activity by exploiting its 65% share of the diamond market and control of the world‘s supply of rough diamonds to impose rigid constraints on the sale and resale of those diamonds. This conduct resulted in a common injury as to all class members – inflated diamond  prices – in violation of federal antitrust law, and the antitrust, consumer protection, or unjust enrichment laws of every state and the District of Columbia.  In this respect, . . . , De Beers’s asserted price-fixing and monopolization conduct lies at the core of plaintiffs’ claims, as do the common injuries which all class members suffered as a result. Based upon our case law, we can distill that “each class member shares a similar legal question arising from whether De Beers engaged in a broad conspiracy that was aimed to and did affect diamond prices in the United States.” (App‘x 278-79 (emphasis added).) Evidence for this legal question would entail generalized common proof as to “the implementation of De Beers‘[s] conspiracy, the form of the conspiracy, and the duration and extent of the conspiracy.” (Id. 278.)  

 “The plaintiffs likewise share common factual questions as to whether De Beers “acted in concert to artificially fix, maintain, and stabilize prices and to monopolize trade and commerce in the market for polished diamonds,” and whether said activity resulted “in an inflation in the prices of diamonds sold to consumers.” (Id. 278-79.) These allegations are unaffected by the particularized conduct of individual class members, as proof of liability and liability itself would depend entirely upon De Beers‘s allegedly anticompetitive activities. Indeed, the presence of these questions stemming solely from De Beers‘s asserted behavior and the fact that all class members purchased diamonds is an apt illustration of why the predominance test is “readily met in certain cases alleging consumer [ ] fraud or violations of the antitrust laws.‘”  Ins. Broker., 579 F.3d at 266 (quoting Amchem, 521 U.S. at 624); see generally Fed. R. Civ. P. 23(b)(3) advisory committee‘s notes to 1966 amendment (providing that ―a fraud perpetrated on numerous persons by the use of similar misrepresentations may be an appealing situation for a class action‖). Considering this presentation of common issues, a finding that common inquiries predominated over individual questions particular to any putative class member appears reasonably within the discretion of the District Court.”

The court distinguished Wal-Mart Stores Inc. v. Dukes:

“In this regard, we note the dissent‘s misreading of the Supreme Court‘s recent opinion in Wal-mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011) as supporting its thesis that an inquiry into the existence or validity of each class member‘s claim is required at the class certification stage. To the contrary, 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.” 131 S. Ct. at 2551. 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 being settled.”

The en banc court also affirmed the award of attorneys’ fees to plaintiffs’ counsel of approximately $73 million, or about 25% of the $293 million principal settlement fund.

Judge Scirica concurred, writing “separately to address this case in the wider context of the evolving law on settlement classes.”

Judge Jordan, joined by Judge Smith, dissented, characterizing the majority’s ruling as “in certifying a class action, it makes no difference whether the class is defined to include members who lack any claim at all.”

PM

 

Restyled Federal Rules of Evidence effective December 1, 2011

This is a bit tardy (sorry, I was grading), but the restyled Federal Rules of Evidence 101 to 1103 took effect on December 1.  As with the earlier restyling of the FRCP, the amendments are intended to clarify and not to make substantive changes.  They may be downloaded here. 

PM

Freer on Brennan's Personal Jurisdiction Jurisprudence

Richard Freer (Emory University) has posted Personal Jurisdiction in the Twenty-First Century: The Ironic Legacy of Justice Brennan to SSRN.

Abstract:      
In 2011, the Supreme Court decided two personal jurisdiction cases. They are the Court's first personal jurisdiction decisions in 21 years. More remarkably, they are the first cases since the Eisenhower Administration in which the Court has applied the iconic International Shoe decision without the participation of Justice William J. Brennan. From McGee in 1957 through Burnham in 1990, Brennan was there. No justice wrote more opinions about personal jurisdiction than he. Yet, for all his efforts to explain his position and persuade his colleagues, he commanded a majority only once, in Burger King in 1985.

This article traces Justice Brennan’s personal jurisdiction jurisprudence. Through 1984, he adopted a 'mélange' approach, in which all relevant factors are considered ad hoc under an overarching rubric of fairness. Justice Black pioneered the approach, and Brennan championed it for decades. When it became apparent that the Court was going in another direction – one which gave primacy to considerations of defendant-initiated contact with the forum rather than to fairness – Brennan capitulated. This enabled him to write the majority opinion in Burger King, in which he attempted to convert the regnant contact-focused theory into one engaging broader considerations of fairness. The century (and Brennan’s career) ended with the Court’s lamentable efforts in Asahi and Burnham, in which no view could muster more than four votes on the Court.

Now we have a new century and two new cases. Though Brennan is cited in each opinion in the two cases, this article concludes that the Court has rejected virtually all of Brennan’s positions in personal jurisdiction. But Brennan’s jurisprudence may have an unexpected and ironic legacy, tracing to a little-noticed portion of his Burger King opinion. Brennan created a regime in which it is virtually impossible to defeat the exercise of jurisdiction by appealing to reasonableness or fairness. The only realistic way for a court to reject jurisdiction is to find that the defendant created no contact with the forum. This explains the obsession with contact in the recent cases and the strained efforts of six justices in one of the new cases to resist finding that a manufacturer can be sued in the state in which its machine caused physical injury.

 RJE

"He Signed You, Bill! Now You're A Law!"

With apologies to Schoolhouse Rock for the title of this post, President Obama has signed the Federal Courts Jurisdiction and Venue Clarification Act of 2011, covered earlier here. The law contains many significant provisions regarding federal diversity jurisdiction, removal and remand, and venue. If you’re keeping score, it amends 28 U.S.C. §§ 1332, 1391, 1404, 1441, 1446, and 1453; repeals 28 U.S.C. § 1392; and enacts new code sections 28 U.S.C. §§ 1390 and 1455.

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Federal Courts Jurisdiction and Venue Clarification of Act of 2011

This week Congress passed the Federal Courts Jurisdiction and Venue Clarification Act of 2011 (H.R. 394), although it is still awaiting the President's signature. It’s a very important piece of legislation that will be significant for academics and practitioners alike.

Prawfsblawg’s Howard Wasserman (Florida International) has posted a summary of the final bill that was circulated by Arthur Hellman (Pittsburgh). If you want to keep tabs on the bill, check out the Bill Summary & Status here.

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