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Court Rejects Settlement in De Beers Diamonds Class Action

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By Tanya Roth, Esq. on July 14, 2010 1:23 PM

Is a settlement a diamond company's best friend? The answer to that question will have to wait for De Beers, the world's biggest diamond producer. On July 13, a federal appeals court refused to approve the settlement in a class action suit against De Beers by diamond purchasers who have claimed the company broke anti-trust laws. The settlement has been sent back to a lower court for reconsideration.

According to a report by Reuters, De Beers plead guilty in 2004 to a price fixing charge. The company came to an agreement in 2005 to set up a fund worth $272.5 million to compensate indirect purchasers of De Beers diamonds.

A U.S. District Court in New Jersey approved the settlement for the class. A class action suit is one in which a group of people with the same or similar injuries caused by the same product or action sue the defendant as a group. This is a more efficient way for the court, the defendants and the plaintiffs to litigate many similar claims than allowing tens, hundreds or even thousands of individual suits to proceed. However, not all the plaintiffs' claims in a class action are always identical. In this case, 34 of the indirect diamond purchasers objected to the settlement. The indirect purchasers include retailers, some middlemen and diamond consumers. The case was sent to the 3rd Circuit Court of Appeals.

Reuters reports that the 3rd Circuit found the class members' claims to be widely varying and based upon a number of differing state laws. Judge Kent Jordan said that the settlement did not recognize the disparities of the claims and sent the case back to the District Court to further consider and clarify which claims are subject to the treatment as a class.

The settlement, wrote Judge Jordan, "is akin to suggesting that a really good cook, by means of superior kitchen management, can make a cake out of nothing." 

De Beers did not immediately return a call for comment from Reuters.

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