OPINION OF THE COURT
JORDAN, Circuit Judge.
For more than one hundred years, De Beers S.A. and other entities within the De Beers family of companies (hereinafter collectively "De Beers") have fixed prices in the wholesale market for gem-quality diamonds through a web of pricing and output-purchase agreements with competitors. In the late 1990s, however, De Beers's market power began to wane as new suppliers entered the market and competitors refused to cooperate with De Beers's pricing efforts. Amidst these structural changes to the market, plaintiffs brought the present claims under §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2, and under the antitrust, consumer protection, and unjust enrichment laws of all fifty states and the District of Columbia. Plaintiffs then entered into settlement negotiations with De Beers, which ultimately resulted in a proposed settlement that divided the plaintiffs into two putative classes and created a settlement fund of $295 million. Although several plaintiffs objected to the settlement, the United States District Court for the District of New Jersey overruled the objections, certified the two classes, and approved the settlement agreement. The objectors then filed these appeals. For the reasons that follow, we will vacate the judgment of the District Court and remand for further proceedings.
I. Factual Background
Throughout the twentieth century, De Beers fixed prices in the market for rough gem-quality diamonds by, among other things, executing output-purchase agreements with competitors, establishing a market-wide cartel to set production limits, and restricting wholesalers from reselling diamonds outside of certain geographic territories. Wholesalers, known as "sightholders," were, and continue to be, screened by De Beers based on various criteria and are required to purchase diamonds at ten annual distribution events called "sights." Sightholders constitute De Beers's exclusive channel for distribution of its diamonds, and they resell those diamonds to jewelry manufacturers and retailers as rough diamonds, or as cut-and-polished stones, or as components of finished jewelry products.
A. Deterioration Of De Beers's Market Power
De Beers carried out its cartel activities—including distribution to sightholders—through the Central Selling Organization ("CSO"),
That hold on the diamond industry began to slip, however, during the latter part of the twentieth century, and, by the mid-1990s, it was weakening fast. In 1993, Russia's state-controlled diamond company, ALROSA, flooded the market with low-quality gems to earn cash in the face of financial pressures on the government. In response, De Beers dropped the price of low-grade stones. That action prompted cartel-member Rio Tinto, which operates Argyle Diamond Mines of Australia ("Argyle"), to cease dealing with the CSO in 1996. Rio Tinto's Argyle mine, like ALROSA, began selling larger numbers of low-quality diamonds than De Beers had previously sold through the CSO.
With the low-end of the market moving beyond its control, De Beers turned its attention to higher-quality gems. It initially attempted to retain control over the production and sale of high-grade diamonds by purchasing its competitors' output, as it had done for many decades before. For example, in 1999, it entered into an output purchase agreement with competitor BHP Billiton ("BHP") under which it acquired 35% of BHP's total diamond production. That agreement ended in 2002, and again De Beers's efforts to maintain dominance began to fade, as the market for high-quality stones saw the entrance of new competitors and as old competitors brought new mines into production. By 2006, in the overall market for rough gem diamonds, state-owned companies in Angola and the Democratic Republic of Congo collectively controlled 19% of global production; ALROSA controlled 17%, and De Beers controlled approximately 45%. Other competitors, including Rio Tinto, controlled the remaining share of the market.
B. Present Litigation
The present case dates from 2001, when 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. Between 2002 and 2005, five additional lawsuits were filed in state and federal courts across the country, bringing the total number of suits against De Beers to seven. Three of the cases were initiated in state court in Arizona, California, and Illinois. The Illinois case was removed to federal court and was later consolidated with the remaining four lawsuits—all of which had been filed in various federal district courts—in the United States District Court for the District of New Jersey.
1. Identity of the Plaintiffs
The plaintiffs in the seven cases can be divided into two categories, based on the claims that they assert. The first category
The second category of plaintiffs consists of indirect purchasers, which are entities or individuals that acquired either rough or cut-and-polished gem diamonds but did not do so directly from De Beers or its competitors. Consumers and jewelry retailers fall into this category, as do middlemen who acquired diamonds from sightholders or from another indirect purchaser. The indirect purchasers sought recovery for the same antitrust injury as did the direct purchasers but brought their claims under state antitrust, consumer protection, and unjust enrichment law. These plaintiffs could only rely on state law as a route to monetary relief because they lack standing to bring a federal antitrust claim for damages under § 4 of the Clayton Act. Illinois Brick Co. v. Illinois, 431 U.S. 720, 735-36, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). They did, however, seek injunctive relief for those antitrust violations under § 16 of the Clayton Act. See Mid-W. Paper Prods. Co. v. Cont'l Group, 596 F.2d 573, 594 (3d Cir.1979) ("Illinois Brick does not preclude indirect purchasers from suing for injunctive relief[,] and ... they have standing to sue under § 16....").
Thus, these two categories of plaintiffs assert claims that overlap but are also distinct. The direct purchasers' claims for damages arise only under §§ 1 and 2 of the Sherman Act and § 4 of the Clayton Act. The indirect purchasers' damages claims implicate only state antitrust, consumer protection, and unjust enrichment law. Both categories of plaintiffs also assert claims under § 16 of the Clayton Act for injunctive relief against continued price-fixing and monopolization by De Beers.
2. De Beers's Participation in These Actions
De Beers initially refused to appear in the lawsuits because it asserted 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. In May 2005, counsel for De Beers approached plaintiffs' counsel to discuss settlement of the indirect purchasers' claims. Those discussions produced a settlement of the indirect purchasers' claims in four of the cases (the "indirect purchaser settlement"). Under the indirect purchaser settlement, De Beers agreed not to contest certification of a settlement class of indirect purchasers, and further agreed to establish a settlement fund of $250 million to be paid to class members. De Beers also agreed to a stipulated injunction that restrained it from violating U.S. antitrust law, and it consented to the District Court's jurisdiction for the purpose of enforcing the injunction.
On November 30, 2005, the District Court entered an order (the "November 30
De Beers then entered into settlement negotiations with the direct purchasers and ultimately reached a settlement agreement with them in March 2006. That agreement mirrored the indirect purchaser settlement: De Beers agreed not to contest certification of a direct purchaser settlement class and to create a fund of $22.5 million to satisfy class members' Sherman Act claims. De Beers also agreed to increase the indirect purchaser class settlement fund by $22.5 million because the lawsuits filed by the direct purchasers included as plaintiffs some indirect purchasers who had not participated in the earlier settlement. Finally, De Beers agreed to injunctive relief that was substantively identical to that imposed under the indirect purchaser settlement.
On March 31, 2006, the District Court amended its November 30 order to conditionally certify both the direct and indirect purchaser settlement classes under Rules 23(b)(2) and 23(b)(3), and to preliminarily approve a combined settlement for both classes. The proposed combined settlement agreement provided for a fund of $295 million to be paid to both the direct and indirect purchaser classes. The direct purchasers were to receive $22.5 million of the fund, while $272.5 million was allotted to the indirect purchaser claims. The combined settlement also provided for entry of a stipulated injunction that, among other things, required De Beers to comply with all federal and state antitrust laws, limited De Beers's ability to purchase diamonds from third-party producers, and prohibited De Beers from restricting the geographic territory within which sightholders could resell De Beers diamonds. De Beers also agreed to subject itself to personal jurisdiction in the United States for enforcement of the combined settlement agreement. The parties stipulated that the injunction would take effect in April 2006 even though, at that time, the Court had not yet entered a final order certifying the class and approving the settlement agreement.
C. Class Certification And Settlement Proceedings
After preliminarily approving the new settlement agreement, the District Court allowed class members to lodge objections to the class certification and the settlement.
The objectors raised two challenges to the propriety of certifying the two settlement classes. First, they argued that a nationwide class of indirect purchasers should not have been certified for the purpose of administering a monetary settlement of state law claims because antitrust, consumer protection, and unjust enrichment laws vary widely from state to state.
The District Court overruled both objections. Regarding Rule 23(b)(3) certification, the Court concluded that, while antitrust and consumer protection statutes vary from state to state, those differences are not so significant that they override class commonalities. Specifically, the Court held that class members share common issues of fact regarding whether De Beers actually fixed the price of rough gem diamonds and whether such price-fixing caused the plaintiffs to suffer an antitrust injury. The Court further noted that "De Beers ... demanded a release of potential damage claims in all 50 states" as a condition of the settlement and that certification of a nationwide class was therefore appropriate, even though the law of many jurisdictions limits or denies the right of indirect purchasers to recover for antitrust injuries. (App. at 279.) The Court also observed that the alleged harm was national in scope and that resolving all federal and state antitrust claims simultaneously "benefit[ed] all class members by spreading litigation costs among Plaintiffs." (App. at 284.)
With respect to the Rule 23(b)(2) injunctive relief, the Court held, without addressing objectors' description of competitive advances in the market, that "all class members will continue to suffer ... harm." (App. at 285.) The Court rejected the objectors' argument that the class lacked antitrust standing, concluding that De Beers had stipulated as a factual matter that its conduct caused antitrust injury to all members of the direct and indirect purchaser classes. Thus, according to the Court, De Beers's concession provided a factual basis upon which to predicate class members' antitrust standing because "De Beers has waived the right to demand proof of the substantive elements of the [antitrust] claims." (Id.)
II. Jurisdiction And Standard Of Review
The District Court possessed federal question jurisdiction over the direct purchasers' Sherman Act antitrust claim for damages pursuant to § 4(a) of the Clayton Act, 15 U.S.C. § 15(a), and over both the direct and indirect purchasers' claims for injunctive relief under § 16 of that Act, 15 U.S.C. § 26. Original jurisdiction over the federal claims also arose under 28 U.S.C. §§ 1331 and 1337(a). The District Court had supplemental jurisdiction over the indirect purchasers' state-law antitrust, consumer protection, and unjust enrichment claims under 28 U.S.C. § 1367. We have jurisdiction to review final orders of the District Court pursuant to 28 U.S.C. § 1291.
We review an order granting class certification for abuse of discretion. In re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 595 (3d Cir.2009). A district court abuses its discretion when its class certification decision "rests upon a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact." Id. (quoting In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 312 (3d Cir.2008)).
The appellants are objectors who challenged the District Court's order certifying the indirect purchaser class under Rule 23(b)(3) and both classes under Rule 23(b)(2). The appellees are the named representatives of the indirect purchaser class, who of course support the District Court's order.
A district court may certify a lawsuit as a class action if the suit meets the requirements of Rules 23(a) and 23(b). Rule 23(a) mandates first, that the class be so numerous that joinder of all members is impracticable,
In this case, the objectors challenge the propriety of certification under either Rule 23(b)(2) or 23(b)(3). Because the Court's Rule 23(b)(3) certification order presents a broader range of issues than its Rule 23(b)(2) counterpart, we address the certification of the damages class before turning to the class claims for injunctive relief.
A. Certification Under Rule 23(b)(3)
Because Rule 23(b)(3) allows a district court to certify a class only if, first, all class members share common questions of law or fact that predominate over other issues in the case, and, second, a class action is superior to other methods of adjudicating the members' claims, courts have come to refer to these twin prerequisites for certification as the "predominance" requirement and the "superiority" requirement. The predominance requirement is similar to the commonality requirement in Rule 23(a)(2), which says that the class must share common questions of law or fact. However, the question of predominance imposes a more stringent obligation on the reviewing court to ensure that issues common to the class truly overshadow those pertinent to individuals or to subgroups of class members. In re Ins. Brokerage Antitrust Litig., 579 F.3d 241, 266 (3d Cir.2009). It is therefore "appropriate to analyze the [commonality and predominance] factors together, with particular focus on the predominance requirement." Id. (internal quotation omitted).
A district court must evaluate predominance and superiority by considering the following four factors enumerated in Rule 23(b)(3):
FED.R.CIV.P. 23(b)(3). The court may also consider additional factors pertinent to class certification issues. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 615-16, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (describing factors listed in Rule 23(b)(3) as "nonexhaustive"). When presented with a motion to certify a class for settlement purposes only, as in this case, the court need not consider the likely difficulties
The only issue under Rule 23(b)(3) that the objectors challenge on appeal is the District Court's finding of predominance with regard to the state law claims against De Beers. The predominance of an issue depends upon the value that addressing it will yield for all class members. Amchem, 521 U.S. at 623, 117 S.Ct. 2231 (indicating that the "predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation"). The issue need not be dispositive of the case, In re Lorazepam & Clorazepate Antitrust Litig., 202 F.R.D. 12, 29 (D.D.C.2001), but it must be significant to every class member's claim. See 2 ALBA CONTE & HERBERT NEWBERG, NEWBERG ON CLASS ACTIONS, § 4:25, at 173 (4th ed.2002) (recounting that courts have described as predominant those issues which present a "common nucleus of fact," an "overriding question," or an "essential common link among class members"). Issues are not predominant if they are common to all class members but their resolution does little to bring the case to conclusion. Cf. Fed.R.Civ.P. 23(b)(3) advisory committee's note to the 1966 amendment (indicating that common issues will not predominate if an individualized assessment of liability is necessary notwithstanding resolution of them). Thus, the predominance inquiry requires the court to identify class members' claims and to ask whether the class can support any of the elements of those claims through common proof. Simer v. Rios, 661 F.2d 655, 672 (7th Cir.1981); cf. Ins. Brokerage, 579 F.3d at 269 (affirming class certification because plaintiffs possessed class-wide proof of antitrust injury, even though the amount of each members' damages required individualized proof).
The District Court found that the shared antitrust harm sustained by all indirect purchasers predominated over other issues in the case, making those claims appropriate for class treatment. Thus, the District Court's certification order grouped antitrust claims under the laws of all fifty states and the District of Columbia into a single class. The objectors challenge the District Court's finding of predominance, arguing that differences in state law prevent the allegedly common harm associated with De Beers's price fixing from gaining predominance over legal issues shared by only limited segments of the class. More specifically, the objectors say that different states have very different laws governing whether indirect purchasers even have an antitrust claim and that those substantive differences in state law prevent common issues of law and fact from predominating in this case. They likewise argue that differences among state consumer protection and unjust enrichment laws prevent a finding of predominance. Finally, they argue that the District Court's certification order is procedurally improper because the order fails to identify the state law claims that will receive class treatment. We take up each of those contentions in turn.
1. Predominance of Common Legal and Factual Questions
The objectors' primary attack on the class certification and settlement order asserts
a. State Antitrust Statutes
Under the Sherman Act, to establish antitrust liability for horizontal price-fixing, a plaintiff must show that (1) a defendant entered a contract, combination, or conspiracy with at least one other entity; (2) the agreement constitutes an unreasonable restraint of trade; (3) the agreement produced anticompetitive effects in the relevant market; and (4) the plaintiff was injured as a result. Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 442 (3d Cir.1997) (reiterating elements of proof under § 1 of the Sherman Act). A claim for monopolization requires the plaintiff to prove that (1) the defendant possesses "monopoly power in the relevant market" and (2) the defendant acquired, maintained, or attempted to acquire or maintain that power through means other than "growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966) (setting forth the elements of proof under § 2 of the Sherman Act). Many states have enacted antitrust statutes that proscribe the same conduct as the Sherman Act. 14 HERBERT HOVENKAMP, ANTITRUST LAW ¶ 2401a, at 314 (2d ed.2006).
While state antitrust statutes frequently track the Sherman Act in terms of their substantive elements of proof, they vary significantly with regard to the standing that they extend to indirect purchasers. The variance is mainly a function of whether a state has chosen to follow the Sherman Act principles regarding standing laid down by the Supreme Court in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). In that case, the Court decided that only direct purchasers of a product or service may sue for an antitrust injury. Id. at 734-36, 97 S.Ct. 2061. The Supreme Court's theory for denying standing to indirect purchasers was that "the antitrust laws will be more effectively enforced by concentrating the full recovery for the overcharge in the direct purchasers rather than by allowing every plaintiff potentially affected by the overcharge to sue only for the amount it could show was absorbed by it." Id. at 735, 97 S.Ct. 2061. Hence, the Court viewed direct purchaser standing as the most efficient way to ensure that companies or individuals engaging in anticompetitive conduct were called to account for their actions. Id. at 741, 97 S.Ct. 2061.
Some states have elected to follow the Supreme Court's lead in Illinois Brick.
Thus, in some states with Illinois Brick repealers, indirect purchasers may personally advance a claim for antitrust recovery against a defendant, such as De Beers, that has fixed prices. In other states, however, they may do so only with the assent of the state attorney general. And in states without a repealer statute, recovery is usually foreclosed entirely.
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
For example, an indirect purchaser located in a state that has an Illinois Brick repealer, such as New York, may sue and recover for a price-fixing or monopolization harm, see N.Y. GEN. BUS. LAW § 340(6), but an identical indirect purchaser in a neighboring state without a repealer, such as New Jersey, may not, see Sickles v. Cabot Corp., 379 N.J.Super. 100, 877 A.2d 267, 276 (2005) (refusing to extend antitrust liability under the New Jersey Antitrust Act to indirect purchasers). It is hard to imagine a greater disparity between two class members. Whereas the New York purchaser may recover for an antitrust violation if he can prove the existence of a price-fixing agreement or monopoly market power resulting in higher prices, the New Jersey purchaser has no legal right to recover—or even to bring a lawsuit— regardless of whether he can conclusively prove the existence of a restraint and antitrust impact. Thus, while both purchasers may have felt the effects of the same antitrust conduct, the purchasers do not share common legal or factual issues because the antitrust activity gives rise to a right of action for only one purchaser. See Ins. Brokerage, 579 F.3d at 266 (noting that Rule 23 requires that a class possess at least one issue of law or fact that affects all class members' claims). 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. It is improper to certify a nationwide class when the legal right shared by class members purportedly arises under the laws of multiple jurisdictions, but only some of those jurisdictions extend standing to class members to enforce that right.
Plaintiffs seek to minimize these legal disparities by characterizing them as little
The predominance requirement of Rule 23 is not the only statutory provision to stand as an obstacle to certification. As just discussed, the District Court's certification order extends antitrust remedies that, in many instances, have no root in state substantive law. As such, the order contravenes the Rules Enabling Act, which prohibits a court from interpreting procedural rules in a manner that creates new substantive rights. See 28 U.S.C. § 2072(b) (stating that federal courts may not interpret procedural rules in a manner that "enlarge[s] ... any substantive right"); see also Windham v. Am. Brands, Inc., 565 F.2d 59, 65-66 (4th Cir.1977) (cautioning that each plaintiff in a federal antitrust action must offer individual proof of damages and that the failure to require such proof contravenes the Rules Enabling Act by allowing a plaintiff to recover in the absence of individual harm). By certifying a class, the District Court ran afoul of the Act because its order effectively granted relief to individuals to whom De Beers had no antitrust liability.
Nor can these foundational problems be overcome, as plaintiffs suggest, by relying upon De Beers's willingness to stipulate to liability in all fifty states. Plaintiffs argue that "[w]hen a settlement is reached, the defendant elects not to contest the allegations of the complaint, and district courts are entitled to rely on those allegations to demonstrate commonality." (Plaintiff-Appellees' Ans. Br. at 46.) That is simply incorrect. Independent of any stipulations, district courts are obligated "to consider carefully all relevant evidence and make a definitive determination that the requirements of Rule 23 have been met before certifying a class." Hydrogen Peroxide, 552 F.3d at 320. Were it otherwise, the door would swing wide to collusive settlements. Amchem, 521 U.S. at 620, 117 S.Ct. 2231 (requiring courts to exercise "undiluted, even heightened, attention" to issues of commonality and predominance in the settlement context because those inquires are designed "to protect absentees by blocking unwarranted or overbroad class definitions"). Thus, plaintiffs and De Beers cannot salvage an improper certification order by
The objections in this case pertain to the predominance of class claims and to the standing of individual class members to bring claims under state law. The District Court had to consider both of those issues, apart from the pleadings and stipulations, when evaluating the motion to certify a class. Hydrogen Peroxide, 552 F.3d at 316. A defendant's decision not to contest the requirements of Rule 23 does not relieve a district court of its independent obligation to ensure that those requirements are satisfied. The District Court did not adequately satisfy that obligation and abused its discretion in finding that common issues of law or fact predominate so as to warrant certification of a nationwide class of state antitrust claims.
b. State Consumer Protection and Unjust Enrichment Law
A similar problem exists with regard to the District Court's certification of consumer protection and unjust enrichment claims for class-wide treatment. Consumer protection and unjust enrichment laws are no more uniform among the fifty states than are antitrust statutes. In fact, they are less so. Some states without Illinois Brick repealers allow indirect purchasers to invoke consumer protection statutes to gain antitrust relief. See, e.g., Mack v. Bristol-Myers Squibb Co., 673 So.2d 100, 107 (Fla.Dist.Ct.App.1996); Ciardi v. F. Hoffmann-La Roche, Ltd., 436 Mass. 53, 762 N.E.2d 303, 312 (2002); Arthur v. Microsoft Corp., 267 Neb. 586, 676 N.W.2d 29, 37-38 (2004). Other states preclude indirect purchasers from doing so because they have adopted Illinois Brick standing requirements and view any utilization of consumer protection statutes to recover for antitrust harm as circumventing that policy decision. See, e.g., Sickles, 877 A.2d at 277; Major, 60 P.3d at 517; Vacco v. Microsoft, 260 Conn. 59, 793 A.2d 1048, 1064-66 (2002); Blewett v. Abbott Labs., 86 Wn.App. 782, 938 P.2d 842, 844 (1997). A third group requires indirect purchaser consumer protection actions to proceed as parens patriae suits. Blewett, 938 P.2d at 847, while other statutes lack such requirements, see, e.g., D.C.CODE § 28-4509(a); MICH. COMP. LAWS § 445.778(2); N.D. CENT.CODE § 51-08.1-08(3).
The common law of unjust enrichment likewise varies among the states, with some jurisdictions mandating proof of elements not required by others. Evidence of antitrust activity may provide a basis for an unjust enrichment claim in some states. See Freeman Indus. LLC v. Eastman Chem. Co., 172 S.W.3d 512, 524-26 (Tenn.2005) (allowing an indirect purchaser price-fixing claim to proceed under an unjust enrichment theory); see also D.R. Ward Constr. Co. v. Rohm & Haas Co., 470 F.Supp.2d 485, 507-08 (E.D.Pa.2006) (same with respect to Arizona law). Other states preclude recovery for antitrust injuries on an unjust enrichment theory. Sperry v. Crompton Corp., 8 N.Y.3d 204, 831 N.Y.S.2d 760, 863 N.E.2d 1012, 1018 (2007); cf. Coastal Envt'l. Specialists, Inc. v. Chem-Lig Int'l, Inc., 818 So.2d 12, 19 (La.Ct.App.2001) (holding that a plaintiff may not invoke unjust enrichment principles to obtain a remedy for a harm that is adequately redressed by other areas of law). With respect to the substantive elements of unjust enrichment, some states require plaintiffs to prove that the defendant's conduct rises to the level of fraud. See Mantiply v. Mantiply, 951 So.2d 638, 655 (Ala.2006); Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex.1992). Others do not. See Rhue v. Rhue, 189 N.C. App. 299, 658 S.E.2d 52,
Amidst the welter of differing statutes and decisions across the country on these issues, at least one thing emerges clearly: evidence of price-fixing and monopolization does not give rise in every state to an unjust enrichment or consumer protection claim for indirect purchasers. Thus, while De Beers's price-control activity, as a practical matter, may have harmed all indirect purchasers, that injury cannot provide a basis for the certification granted here because it does not give rise to a legal right to recovery in all of the jurisdictions implicated by a nationwide class. See Chiang v. Veneman, 385 F.3d 256, 273 (3d Cir.2004) ("In order to predominate, the common issues must constitute a `significant part' of the individual cases." (quoting Jenkins v. Raymark Indus., Inc., 782 F.2d 468, 472 (3d Cir.1986))). The District Court therefore abused its discretion when it found that consumer protection and unjust enrichment laws were sufficiently similar to warrant certification as a class.
c. Federalism Concerns
It is no mere afterthought to note that, even ignoring the obstacles posed by Rule 23, principles of federalism counsel against certifying a class in this matter. The mandate of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), prevents a district court from invoking federal procedural rules to extend recovery to a state law plaintiff when state courts would not recognize the plaintiff's harm as grounds for relief. Montgomery Ward & Co., Inc. v. Pac. Indem. Co., 557 F.2d 51, 56 n. 8 (3d Cir. 1977) ("In giving federal courts `cognizance' of equity suits in cases of diversity jurisdiction, Congress never gave, nor did the federal courts ever claim[,] the power to deny substantive rights created by State law or to create substantive rights denied by State law."). Thus, a district court abuses its discretion when, as happened here, it approves a settlement based on a supposed state law antitrust violation that the plaintiff could not have asserted in state court.
Our holding today is not a repudiation of all nationwide class actions based upon state law. In fact, we have previously approved the use of class litigation as a means of resolving state law claims, recognizing that in certain cases such certification may be entirely proper. See Warfarin Sodium II, 391 F.3d at 529-30 (certifying a nationwide class under state consumer protection statutes on the basis that class members had uniformly been overcharged for the defendant's product and had a right to recover under the law of all fifty states).
On remand, the District Court should entertain renewed motions to certify classes that, at least as to state law claims, are not nationwide in scope, if such motions are made. For example, to obtain certification of an indirect purchaser class, plaintiffs would have to show that all class members share a right to recover for antitrust harms, such that one or more common issues affect all members' claims. We express no opinion regarding whether such a class can be formed or, if it can, which states' laws are sufficiently similar that plaintiffs in those states could be joined as class members. It would, however, be improper for the District Court to include in an indirect purchaser class plaintiffs whose claims arise in states that foreclose indirect purchasers from recovering for price-fixing or monopolization. Of course, the plaintiffs are not required to file new class certification motions, and nothing prevents them from prosecuting their claims in an individual capacity.
2. Failure to Identify Class Claims
If the District Court ultimately determines that certification of a more limited class of indirect purchasers is appropriate under Rule 23, any certification order that the Court issues must contain greater detail than the one currently on appeal. Under Rule 23(c), each class certification order must contain "(1) a readily discernible, clear, and precise statement of the parameters defining the class or classes to be certified, and (2) a readily discernible, clear, and complete list of the claims, issues or defenses to be treated on a class basis." In re Constar Int'l Inc. Sec. Litig., 585 F.3d 774, 782 (3d Cir.2009)
As the objectors correctly note, the District Court's class certification order does not comport with the second requirement. The final order of certification adequately delineates the parameters of the indirect purchaser class, defining class membership to include purchasers in the United States who acquired any gem diamond from an entity other than De Beers or another rough diamond mining or production company, such as ALROSA, Rio Tinto, or BHP. It also identifies five legal issues supposedly common to the class.
The District Court recognized that the indirect purchasers were advancing state antitrust, consumer protection, and unjust enrichment claims, and that "variations exist between the antitrust and consumer protection laws of different states." (App. at 279.) However, the Court never identified pertinent state antitrust or consumer protection statutes, explained the relevant state common law of unjust enrichment, or described how those statutes and the common law affect class-wide rights. Nor did the Court indicate whether the class antitrust issues that it actually identified would affect the consumer protection and unjust enrichment claims. The failure to do so constitutes an abuse of discretion. Cf. Wachtel ex rel. Jesse v. Guardian Life Ins. Co. of Am., 453 F.3d 179, 185 (3d Cir.2006) (concluding that a district court abuses its discretion when it articulates general issues of fact common to the class but fails to identify the particular claims that would be subject to class treatment).
Thus, the District Court's class certification order is deficient because the precise claims subject to class treatment are not "readily discernible from the text" of the order and the accompanying opinion. Id. On remand, any certification order
B. Certification Under Rule 23(b)(2)
Rule 23(b)(2) applies only when a class seeks injunctive relief. It has no application "to cases in which the appropriate final relief relates exclusively or predominantly to money damages." Beck v. Maximus, Inc., 457 F.3d 291, 301 (3d Cir. 2006). The relief sought in a Rule 23(b)(2) action must benefit the entire class, and the class representatives bear the burden of demonstrating that "the interests of the class members are so like those of the individual representatives that injustice will not result from their being bound by such judgment in the subsequent application of principles of res judicata." Baby Neal for and by Kanter v. Casey, 43 F.3d 48, 59 (3d Cir.1994).
As with any claim for injunctive relief, the plaintiffs may not base a demand for an injunction solely upon past harm that they have suffered. The plaintiffs must demonstrate that, regardless of their past harm, they are likely to suffer harm in the future. See In re New Motor Vehicles Canadian Export Antitrust Litig., 522 F.3d 6, 14 (1st Cir.2008) ("Past exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief ... if unaccompanied by any continuing, present adverse effects." (alteration in original) (quoting O'Shea v. Littleton, 414 U.S. 488, 495-96, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974))). If the harm against which injunctive relief is sought dissipates during the course of the litigation, the basis for class certification likewise dissolves, and the class must be decertified. Id. at 14-16 (vacating certification of a Rule 23(b)(2) class to enjoin cross-border arbitrage in the market for new automobiles, because, following commencement of the action, the exchange rate between the U.S. dollar and the Canadian dollar fell, undercutting the economic viability of future anticompetitive arbitrage opportunities).
The District Court certified the direct and indirect purchaser classes under Rule 23(b)(2) for the purpose of awarding injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26. Unlike in a claim for damages, indirect purchasers seeking injunctive relief for an antitrust harm under § 16 do have standing. In re Warfarin Sodium Antitrust Litig. (Warfarin Sodium I), 214 F.3d 395, 399-400 (3d Cir.2000). Section 16, however, creates no substantive rights. Mid-W. Paper Prods. Co. v. Cont'l Group, Inc., 596 F.2d 573, 589-90 (3d Cir.1979). But to have standing under § 16, a plaintiff must establish a prospective threat of loss or damage as a result of conduct prohibited elsewhere in antitrust law. Warfarin Sodium I, 214 F.3d at 400. Here, the proponents of class certification relied upon De Beers's alleged price-fixing and monopolization in violation of §§ 1 and 2 of the Sherman Act to substantiate their right to injunctive relief.
The objectors argue that all class members lack standing to seek injunctive relief under § 16 of the Clayton Act because they have not shown an imminent threat of prospective antitrust injury. They aver that De Beers's price-fixing conduct ended in mid-2006, causing competition within the diamond industry to increase and rendering the injunction unnecessary.
Plaintiffs offer a two-fold response. They first rely on the District Court, which held that "the injunction ... is part of a compromise that De Beers entered into willfully" and that, "as such, De Beers has waived the right to demand proof of substantive elements of the claims." (App. at 285.) They say, in other words,
Plaintiffs and De Beers alternatively argue that the injunction, which took effect in mid-2006, was itself responsible for producing the pro-competitive trends in the diamond industry, and that the injunction is necessary to maintain those competitive advances. However, such a conclusion is not supported by the record. Experts retained by both the plaintiffs and De Beers identified numerous causes of increased competition in the diamond industry, including:
According to the plaintiffs' and De Beers's experts, these factors appear to have caused De Beers's market share to fall from approximately 65% in 2000 to 45% by 2006. Plaintiffs' own experts indicated that, following mid-2006, market forces controlled diamond pricing so pervasively that the price from that point to the present provides a competitive benchmark against which to determine the amount of plaintiffs' damages as a result of price-fixing during the class period. At no point did any of the plaintiffs' or De Beers's experts mention the injunction in their damage calculations or conclude that it had any effect whatsoever on diamond prices. Moreover, neither the plaintiffs nor De Beers cite any place in the record reflecting such an effect.
Thus, while mid-2006 increases in competition may have roughly coincided with the District Court's issuance of the injunction, the record cannot support the conclusion that the injunction played a meaningful role in producing those competitive gains. Plaintiffs face no significant threat of future antitrust harm in the
Though the District Court brought skill, experience, and much labor to its handling of this matter,
I agree with the disposition chosen by the majority, namely remand, because the District Court failed to analyze the issues of commonality and predominance. However, I believe that the majority's opinion suffers from two overarching flaws. First, the majority dismisses out of hand our previous precedential opinion, In re Warfarin Sodium Antitrust Litigation, 391 F.3d 516 (3d Cir.2004) ("Warfarin II"), a case that concerned remarkably similar claims and issues. Second, the majority undertakes its own analyses of predominance and plaintiffs' entitlement to injunctive relief, rather than allowing the District Court on remand to evaluate these issues in the first instance. The majority's approach is thus inconsistent with both our precedent and our role as a reviewing court.
The majority opinion conflates two distinct inquiries: "Do common questions predominate?" and "Who should be included in the class?" Our court addressed each of these issues in Warfarin II. Curiously, the majority attempts to distinguish Warfarin II in a footnote. To my mind, Warfarin II binds us and should control our mode of analysis, if not the ultimate ruling on the issue of predominance as well. If we were to follow Warfarin II, I suggest that the District Court on remand could revisit the two inquiries noted above and "tweak" the class and its definition rather than "gut" it as the majority suggests.
In Warfarin II we were called upon to determine whether the certification of a settlement class was proper in a case arising out of DuPont Pharmaceuticals' alleged dissemination of misleading information about a competitor's product. 391 F.3d at 522. The Warfarin plaintiffs alleged that DuPont had engaged in conduct that allowed it to maintain a 67% market share and charge "supracompetitive" prices. Id. at 523. The specific claims asserted were remarkably similar to the claims asserted here. The plaintiffs alleged
Moreover, the threshold issue in Warfarin II was the same as it is here: did common issues predominate? In addressing the predominance issue, we engaged in an extensive discussion as to commonality and predominance:
Id. at 527-29 (citations and footnote omitted).
We then considered the objection that "variations in and inconsistencies between the state consumer fraud and antitrust laws of the fifty states defeat the commonality and predominance requirements of Rule 23." Id. at 529. We described concerns as to manageability that may arise in class certifications for purposes of litigation, but commented that these concerns did not apply to the Warfarin class, which was certified "solely for purposes of settlement." Id. We noted that this was "key." Id. We then stated that, leaving case management issues aside, "there may be situations where variations in state laws are so significant so as to defeat commonality and predominance even in a settlement class certification," but concluded that "this is not such a case." Id. at 529-30.
Id. at 530 (citations omitted).
Accordingly, we affirmed the District Court's ruling that common questions predominated. Id. at 528.
I agree with the majority that more should have been done by the District Court than merely citing Warfarin II. The concern with "weighing" claims does not do away with the need to address "predominance" in the process of class certification, and the District Court has an obligation to satisfy itself that it is not presented with a case where the "variations in state laws are so significant so as to defeat commonality and predominance even in a settlement class certification." Warfarin II, 391 F.3d at 529-30. Although the Court is free to conclude that the predominance requirement is "readily met" here, see Amchem, 521 U.S. at 625, 117 S.Ct. 2231, because any differences in state law are "relatively minor" or can be addressed "by grouping similar state laws together and applying them as a unit," see Prudential, 148 F.3d at 315, its analysis must demonstrate that it has actually considered the scope and effect of any such differences, as well as the effect of any choice-of-law considerations, see In re LifeUSA Holding Inc., 242 F.3d 136, 147 (3d Cir.2001). The District Court's opinion does not assure us that the Court considered these issues, and it does not provide us with any reasoning that would allow us to review the Court's conclusion that none of the differences in state law "are sufficient to defeat commonality and predominance." App. 280.
In conducting that analysis, the District Court need not survey state law on a claim-by-claim basis. While purporting to "review" the District Court's analysis, the majority engages in such a survey. This is not only a departure from our role as an appellate court, it is inconsistent with our analyses in both Warfarin II and Prudential. In Warfarin II, we never attempted to address the specific nuances of "the substantive laws of the fifty states" ourselves. See 391 F.3d at 529-30. Nor did we require the district court to explore the "variations among state antitrust statutes" without regard to whether such variations were mitigated by the other causes of action asserted by plaintiffs, as the majority does here, see Maj. Op. at 145-46. Rather, we reached the straightforward conclusion that "the fact that there may be variations in the rights and remedies available to injured class members under the various laws of the fifty states in this matter does not defeat commonality and predominance." Warfarin II, 391 F.3d at 530. Similarly, in Prudential, the plaintiffs alleged violations of federal securities law, "common law fraud, breach of contract, bad faith, negligent misrepresentation, negligence, unjust enrichment, and breach of state consumer fraud statutes." 148 F.3d at 292. Although we acknowledged that "the class claims are subject to the laws of the fifty states," we approved the district court's approach of finding predominance "by grouping similar state laws together and applying them as a unit" in order to overcome "relatively minor differences in state law." Id. at 315. We did not require the district court to determine whether consumer protection or unjust enrichment laws, for instance, were "uniform among the fifty states," as the majority attempts to do here. Maj. Op. at 150.
Moreover, the majority sets forth discrete surveys of state antitrust law, unjust enrichment law, and consumer protection law, without ever addressing the salient issue of whether every class member might have some valid claim under state or federal law.
The majority also concludes that predominance is not satisfied if the class includes certain members who may have no claim at all under the applicable state or federal law. But that fact should not affect predominance; rather, these people simply should not be included in the class that is certified. If, for instance (as the majority suggests), neither state nor federal law provides a New Jersey resident with a right to relief, then the class should be redefined so that it does not include persons whose right to relief is governed by New Jersey law. Issues regarding what the applicable law would be, including choice of law, can be decided on briefs.
Warfarin II is instructive on this point as well, for, after concluding that the District Court did not abuse its discretion in determining that variations in state law did not affect predominance, we addressed arguments that certain persons—fixed co-pay consumers and third-party payors— should be "excluded" from the class because they, respectively, lacked "viable" claims or "standing." Id. at 530-31. However, we concluded that each group suffered direct, cognizable injury and was properly included. Id. Here, if the District Court determines that there are persons without any "viable" claims, the class simply should not include them. The issue is not one of predominance. Rather, it is one of an entitlement, or a right, to be in the class in the first place, and the resulting definition of the class can be tailored accordingly. The District Court has the duty to ensure that the class includes only those with real "claims." Id.
Thus, Warfarin II provides a road map, if not controlling reasoning, that should be our guide. The majority fails to afford it the respect it is due, and embarks on its own analysis. I suggest that it errs on both counts.
The majority also vacates the certification of a class for injunctive relief based on a belief that the diamond market has become competitive. I suggest that this issue should be addressed on remand as well.
In Warfarin I, we laid out three straightforward requirements for plaintiffs to show that they are entitled to injunctive relief under section 16 of the Clayton Act. They must show "a threat of loss"; "that the injury in question is injury of the type the antitrust laws were intended to prevent"; and that "there is a significant threat of injury from a violation of the antitrust laws." In re Warfarin Sodium Antitrust Litig. ("Warfarin I"), 214 F.3d 395, 399 (3d Cir.2000) (internal quotation marks, alterations, and citations omitted).
The majority opines that De Beers's market share of 45% (as of 2008) is so small as to preclude any significant threat of future injury from its conduct. Yet the District Court never addressed this argument, see App. 284-86, and the majority relies for its independent analysis on expert reports written in 2008 for a very different purpose: the parties' attempt to identify a valid methodology for calculating damages. Although the opinions do indicate that the experts believed that "De Beers has lost its dominant share" of the market, App. 4321, and that "the market for rough diamonds has become much more competitive since mid-2006," App. 4323, the experts did not opine, as the majority suggests, that "[p]laintiffs face no significant threat of future antitrust harm." Maj. Op. at 157. The District Court should have the opportunity to consider on remand whether De Beers continues to possess enough market power to pose a significant threat of harm to plaintiffs, rather than having that inquiry foreclosed by the majority's reliance on expert reports that addressed a different issue.
The following states allow indirect purchaser recovery, but only in parens patriae suits brought by the state attorney general:
Warfarin Sodium II is not controlling because the plaintiffs in that case shared a common claim under the Delaware Consumer Fraud Act. Id. at 528. Evidence pertaining to DuPont's distribution of deceptive marketing materials was common to all class members, and all class members suffered a similar harm by purchasing Coumadin under false pretenses. Id. Thus, unlike the plaintiffs in this case, the plaintiffs in Warfarin Sodium II shared a single, common claim that gave rise to an identical right to recovery under a single state statute for every member of the class. The same evidence used to support this class-wide claim was also relevant to the consumer protection claims under the laws of other states, making class issues predominant over individual ones.
The nationwide consumer protection claims certified in Warfarin Sodium II are critically different than the antitrust claims in this case because they were founded upon deceptive marketing practices, which were properly cognizable under the laws of all fifty states. See id. at 529-30 (implying that certification was proper for settlement purposes because the law in all fifty states provided some form of relief for DuPont's deceptive marketing practices). In contrast, many states do not permit plaintiffs to invoke consumer protection remedies for the antitrust harms that the indirect purchasers have suffered.
Warfarin Sodium II's certification of a class for the purpose of settling indirect purchasers' antitrust claims is also distinguishable from this case. Unlike in Warfarin Sodium II, the District Court here included indirect purchasers from all states in a single class, even though indirect purchasers in many states lack standing to bring antitrust claims. Those members share no common question with the rest of the class because no amount of factual similarity with other class members will confer a right to recover upon them. They are categorically precluded from obtaining antitrust recovery regardless of whether De Beers's price-fixing and monopolization activity disadvantaged them. Thus, the certification of this class, unlike in Warfarin Sodium II, has created a remedy for class members who have no substantive right to receive it.
Warfarin Sodium II's certification under state antitrust statutes is unpersuasive in this context because the class at issue in that case did not include claims under the laws of states without Illinois Brick repealers. Thus, we never considered whether an indirect purchaser in a state without a repealer could use a class settlement as a means of obtaining recovery that the purchaser could not receive had he brought the suit in his individual capacity. We do not construe Warfarin Sodium II as approving such a result. In fact, we noted in Warfarin Sodium II that "there may be situations where variations in state laws are so significant as to defeat commonality and predominance, even in a settlement class." Id. at 529.
There can be no greater variation in state law than exists in the present case, where a plaintiff in one state has access to a remedy that is foreclosed to an identical plaintiff situated across state lines. Thus, we have not, as the concurrence suggests, departed from our holding in Warfarin Sodium II that a class may include plaintiffs whose claims differ significantly if all members share at least one common issue. We have instead recognized that a plaintiff who has no right to relief cannot join in the same class as a plaintiff who does, and that, if those two plaintiffs are included in a single proposed class, then the court may not certify that class because no common issue predominates with respect to both plaintiffs.
As a result, some class members purchased diamonds in a market that was heavily influenced by De Beers while others did not. Gary French, an expert retained by plaintiffs to calculate damages and show class-wide antitrust impact, explained that
(App. at 435.) French later testified that, in 2001, "De Beers temporarily allowed the market to set prices which led to a subsequent drop in polished diamond prices." (App. at 5020.)
Plaintiffs who purchased diamonds before 2001 may have different rights to recovery depending on whether their supplier was actively cooperating with De Beers price-setting efforts. See Gordon v. Lewistown Hosp., 423 F.3d 184, 207 (3d Cir.2005) (indicating that a § 1 plaintiff must prove that the defendant joined a conspiracy to restrain trade). Similarly, those who acquired diamonds in 2001, when De Beers allowed market forces to dictate pricing, likely have no antitrust claim because they made their purchases in a competitive market. See Angelico v. Lehigh Valley Hosp., Inc., 184 F.3d 268, 273-74 (3d Cir. 1999) (requiring plaintiffs to show that they have suffered an antitrust injury—i.e., an injury to competition—to obtain standing to bring an antitrust claim).
Thus, the class, as currently defined, includes members that acquired diamonds in a market controlled by the CSO, members that purchased diamonds from competitors that were not participating in the CSO's price-fixing activities, and members that have no antitrust injury whatsoever. Hence, class members have not sustained a uniform injury as the result of De Beers's antitrust conduct. Instead, their injuries depend upon when they purchased their diamonds and from whom they purchased them, and those injuries can be established only through individual proof. The class is therefore unworkable as these factual differences would defeat class certification notwithstanding the legal defects in the District Court's certification order that we have discussed above. See Hydrogen Peroxide, 552 F.3d at 311-12 ("[T]he task for plaintiffs at class certification is to demonstrate that the element of antitrust impact is capable of proof at trial through evidence that is common to the class rather than individual to its members.").
(App. at 1:276 (alterations in original).)
Although the fact that the District Court conducted such intricate proceedings is not controlling, it is clear that the settlement was welcomed by nearly all affected, and that the alleged flaws form the basis for only a few complaints. As noted in an amicus brief filed by a trade association of jewelry manufacturers and retailers urging affirmance, "a small number of consumers with modest claims and little financial interest in the outcome of the appeal" are being allowed to prevent "[a]n industry in financial straits" from recovering some of what it lost as a result of De Beers's conduct. Amicus Br. at 4. I submit that the wholesale rejection of what the District Court accomplished, based on the concerns raised by just one objector among tens of millions of class members, uses a sword rather than a scalpel and is uncalled for.
The majority also distinguishes Warfarin II on the basis that its "nationwide consumer protection claims ... were founded upon deceptive marketing practices, which were properly cognizable under the laws of all fifty states." Maj. Op. at 152 n. 15. Yet our analysis in Warfarin was much broader than the majority suggests. Rather than engaging in an independent analysis of whether every state's consumer protection law permits claims based on deceptive marketing practices, we considered the "consumer fraud and antitrust laws of the fifty states" as a whole, and concluded that "the fact that there may be variations in the rights and remedies available to injured class members under the various laws of the fifty states in this matter does not defeat commonality and predominance." 391 F.3d at 529-30 (emphases added).
Finally, the majority appears to distinguish Warfarin II as not having "included indirect purchasers from all states in a single class." Maj. Op. at 152 n. 15. However, Warfarin II made no such distinction; to the contrary, we specifically noted that indirect purchasers were included in the class, and the class was defined as "[a]ll consumers or Third Party Payors in the United States who purchased and/or paid all or part of the purchase price of Coumadin dispensed during the period March 1, 1997 through and including August 1, 2001." 391 F.3d at 525. Although it may be true, as the majority contends, that there are potential class members who do not have a right to recover against De Beers, the District Court should be allowed to make that determination on remand, and then adjust the class definition if necessary.