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IN RE INDUSTRIAL DIAMONDS ANTITRUST LITIGATION

November 1, 2000

IN RE INDUSTRIAL DIAMONDS ANTITRUST LITIGATION. THIS DOCUMENT RELATES TO: AMERICAN DIAMOND TOOL & GAUGE, INC.
V.
DE BEERS CONSOLIDATED MINES, LTD., ET AL., AND ZOLLNER CORP. V. DE BEERS CONSOLIDATED MINES, LTD., ET AL.



The opinion of the court was delivered by: William C. Conner, Senior District Judge.

OPINION AND ORDER

BACKGROUND

Procedural History

This litigation was started as three separate antitrust class actions against GE and De Beers, two of the actions being brought in this Court respectively by American Diamond Tool & Gauge, Inc. (92 Civ. 5130) and Zollner Corp. (94 Civ. 3809) and one in the Southern District of Ohio by Cold Spring Granite Co. (92 CV 511). The latter action was transferred to this Court by the Judicial Panel on Multidistrict Litigation for consolidated discovery with the two actions pending here. De Beers did not answer or otherwise appear in either of the New York actions and default judgment was entered against it on April 4, 1994 in Case No. 92 Civ. 5130 and on January 20, 1995 in Case No. 94 Civ. 3809. De Beers was not named as a defendant in the Ohio action.

Plaintiffs in all three actions moved under FED.R.CIV.P. 23(a) and 23(b)(3) for class certification and, in a decision filed July 10, 1996 and reported at 167 F.R.D. 374, this Court certified a plaintiff class consisting of:

all persons and entities located in the United States that purchased industrial diamond products for which the defendants set list prices directly from one of the defendants, or a corporation or other person owned or controlled by one of the defendants, at any time during the period of November 1, 1987, through May 23, 1994 (excluding (i) any federal, state or local government purchaser, and (ii) any defendant or other manufacturer of industrial diamonds, and any parent, subsidiary or affiliate of any defendant or other manufacturer of industrial diamonds).

Following extensive discovery and negotiation, GE settled all claims asserted against it by the plaintiff class by agreeing to pay plaintiffs' attorneys fees and expenses ($1,850,000 and $500,000 respectively) and to give each class member an in-kind rebate of free diamonds of like grade and quality to their purchases of industrial diamonds from GE during a "claim period" of 20 months after the settlement became final, in an amount equal to 3% of the diamonds purchased by the member from GE during the claim period. If a class member purchased no diamonds from GE during the claim period, it was given the option of either transferring a share of its right to such in-kind rebate to another entity or of receiving from GE a cash payment of $1,000. After notification of the class members and a fairness hearing, the settlement was approved by the Court on July 23, 1999.

The Inquest

The Court conducted an inquest to fix damages against the defaulting defendant De Beers on July 26, 2000. The only witness was Dr. Michael C. Keeley, plaintiffs' economics expert. De Beers was not represented at the hearing. An attorney for its Irish subsidiary, De Beers Industrial Diamonds (Ireland), attended the hearing, but declined the Court's invitation to cross-examine the witness or otherwise actively participate.

Because all of the court reporters in the courthouse were occupied on other cases at the time, counsel agreed to have the proceedings recorded by machine. Unfortunately, it was later discovered that the recording machine had malfunctioned and that a readable record had been made of only a short portion at the end of the hearing. However, there was no prejudice because, along with their post-hearing memorandum, plaintiffs submitted an affidavit of Dr. Keeley repeating the substance of his testimony.

DISCUSSION

The Applicable Law

While a default constitutes an admission of all the facts "well pleaded" in the complaint, it does not admit any conclusions of law alleged therein, nor establish ...


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