De Beers’ $295m pact set aside

[] — DE BEERS may have to rethink a $295m settlement it offered in response to a class action suit in 2005 after a federal appeal court this week ‘set aside’ the settlement offer.

The settlement offer, which was granted final approval by a US District Judge in 2008, was in response to a class action antitrust suit alleging a price-fixing conspiracy in the diamond market.

According to The Legal Intelligencer, which first reported on the latest development, the settlement was rejected because not all plaintiffs, specifically plaintiffs indirectly affected by De Beers’ alleged cartel activities, could pursue claims.

The issue is one for legal eagles, but in plain language some indirect plaintiffs don’t have the ability to pursue claims from De Beers owing to specific laws in their respective states.

Judge Kent A Jordan, the Federal Appeals Court judge who has ruled on this matter, wrote: “Two plaintiffs cannot be joined in a single class to adjudicate the same set of facts when those facts give only one of them a legally cognizable claim”.

Said De Beers spokesman, Tom Tweedy: “De Beers is aware of yesterday’s opinion of the US Third Circuit Court of Appeals and is considering its implications”.

The outcome thus far seems hardly satisfactory for any party, according to Des Kilalea, an analyst for RBC Capital Markets (Europe). It was a complication for De Beers’ because its “one size fits all” which could have seen the issue resolved seems not to be valid in respect of all claims.

At the same time, however, it demonstrated that plaintiffs would not be able to band together as one either.

For years, De Beers executives avoided entry to the US on legal advice they may be arrested for overseeing business activities that effectively amounted to a price-fixing cartel.

De Beers has since allowed its infamous ‘Charterhouse Street’ stockpile to dwindle, but in its heyday, the company bought, sorted and stored diamonds worth billions of dollars. It then carefully supplied these diamonds to the market, or stemmed them, depending on diamond prices.

US authorities ruled this was tantamount to antitrust activity, a claim that De Beers rejected adding that it was not subject to the jurisdiction of the US courts.

The Legal Intelligencer takes up the history of the story: “De Beers initially refused to appear in the lawsuits, asserting that courts in the United States lacked personal jurisdiction over it and that any judgment entered by those courts would be a legal nullity.

“By September 2004, defaults or default judgments had been entered against De Beers in six of the seven actions.

“But in May 2005, counsel for De Beers approached the plaintiffs counsel to discuss settlement of the indirect purchasers’ claims.”

It was at this point that De Beers said it would establish a settlement fund to be paid to class members and agreed to restrain from violating the US antitrust law.