In Sullivan v. DB Investments, Inc., ___ F.3d ___, 2010 WL 2736947 (3d Cir. Jul. 13, 2010), the Third Circuit (with one judge concurring only in the disposition) reversed an order granting final approval of a nationwide settlement in an antitrust class action. The majority's quarrel was with certification of the settlement class under the standards set forth in In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 316 (3d Cir. 2008), and in particular with certification of a nationwide class of indirect purchaser plaintiffs for settlement purposes:
In short, this is not a case in which a class of plaintiffs possesses numerous disparate claims but shares an overriding common cause of action under a common body of law. Instead, all parties agree that the claims within the indirect purchaser class implicate the law in every jurisdiction in the nation and that no jurisdiction provides a claim shared by all, or even by a majority, of the class members. These variations in state antitrust law are not trivial. They represent fundamental policy differences among the several states, and they are in consequence as different as it is possible to be, with some states giving substantive antitrust rights to indirect purchasers, other states giving more limited rights, and others denying such rights altogether.
.... The natural result of those differences is that there can be no certification of a nationwide class of state indirect purchaser plaintiffs because there is no common question of law or material fact.
Slip op. at 31-33 (footnote omitted).
Notwithstanding that language, the majority offers a caveat: "Our holding today is not a repudiation of all nationwide class actions based upon state law." Id. at 41. Later in the opinion, the majority suggests that the antitrust and consumer protection statutes in a more limited number of states [may be] sufficiently similar that common issues of law or fact would predominate with respect to plaintiffs in those jurisdictions." Id. at 47. The opinion also reverses certification of a nationwide settlement class for injunctive relief under Rule 23(b)(2), holding that the indirect purchasers lacked standing to seek an injunction because they faced no threat of future harm. See id. at 50-55.
The decision has garnered a fair amount of press coverage. The National Law Journal reported on July 14, 2010 that "3rd Circuit Tosses $275 Million Antitrust Deal in De Beers Case."
I wonder, though, what the objector has really accomplished here. The majority opinion contains a lengthy footnote suggesting that it could be difficult to attain class certification of any indirect purchaser claims, either for litigation or settlement purposes, in this particular case. Slip. op. at 45-47 n.17. If the settlement is scuttled, or if class certification is ultimately denied, then thanks to the objector, no indirect purchasers—even those in states whose laws permit them to recover—will gain anything (unless they file thousands of individual actions). So the objector has done those purchasers more harm than good. What's more, no settlement fund or fees award will be created from which to compensate the objector's counsel if this happens.
Objectors can and should challenge inadequate settlements and attempt to enhance the class members' recovery in appropriate cases. But attacking the certification component of the final approval order is not a productive way to do that because of the risks of such a line of attack, which this case exemplifies. It would make sense only if the objector thinks that no possible settlement or judgment could appropriately compensate the class. In other words, objectors (and perhaps more importantly, their counsel) should be careful what they wish for.
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