Opinion ID: 1357701
Heading Depth: 2
Heading Rank: 2

Heading: Challenges to the Approval of the Zurich Settlement

Text: The District Court granted final approval of the Zurich Settlement after concluding that the Rule 23 requirements were satisfied. Specifically, the District Court determined that the proposed Zurich Settlement Class met the standards established by Rule 23(a) because the large, nationwide class of plaintiffs easily satisfies the numerosity requirement of subsection (a)(1); the many common questions of law and fact satisfy the commonality requirement of subsection (a)(2); the claims of the named plaintiffs are indistinguishable from those made on behalf of the settlement class and encompass[ ] identical allegations arising from the same course of action taken by the Zurich Defendants, which satisfies the typicality requirement of subsection (a)(3); and the dual components of the adequacy of representation requirement of subsection (a)(4) are satisfied because the attorneys representing the named plaintiffs are clearly `well qualified and experienced class action attorneys,' and the interests of the named plaintiffs are not antagonistic to those of the absent class members. Zurich Settlement Final Approval Opinion at -15. The District Court also concluded that the standards of Rule 23(b)(3) were met, finding that the predominance requirement was satisfied due to the identical claims of both the named Plaintiffs and the absent class members aris[ing] from the same set of facts regarding the alleged collusive and anticompetitive behavior of the Zurich Defendants, and the superiority requirement was satisfied because litigating all of these claims in one action is ... far more desirable than numerous separate actions litigating the same issues. Id. at . Thus, the District Court concluded that the class established by the Zurich Settlement Agreement met all of the requirements of Rule 23(a) and (b)(3). The District Court noted that Van Enterprises had asserted in its written objection that the Settlement Class lacks commonality, typicality, adequacy of representation and a predominance of common issues, but the District Court rejected these contentions because Van Enterprises provide[d] no cogent argument or legal basis to support these assertions, failing to reference a single case, from this or any other Court, that might explain its allegations. Id. at . The District Court also considered the fairness of the Zurich Settlement Agreement and found that none of the Girsh factors suggest[s] that the proposed settlement should not be approved. Id. at . The District Court found that the first five Girsh factors overwhelmingly weigh in favor of approval of [the] settlement. Id. As to the first factorcomplexity, expense, and likely duration of the litigationthe District Court determined that this case involves highly complex legal and factual issues ... [that] would undoubtedly [lead to] a costly and lengthy [litigation] process for all parties and that [t]his proposed settlement provides an immediate benefit to the Plaintiffs. Id. Applying the second factor, the District Court conclude[d] that the small number of objections by Class Members to the settlement award, more specifically, to the calculation of the settlement award and damages resulting from the conduct of the Zurich Defendants, strongly weighs in favor of approval. Id. at . The District Court determined that, under the third factor, the stage of proceedings and the amount of discovery completed weighed in favor of settlement because, [b]ased upon the amount of time Counsel expended in negotiations and the extent of the discovery process, ... Counsel had a thorough appreciation for the merits of the case prior to settlement. Id. at . With respect to the fourth and fifth factors, the District Court concluded that the risks of establishing both liability and damages weighed in favor of settlement because [t]his case involves difficult factual and legal issues which would have translated into protracted litigation and accumulating expenses, in both time and money. Id. The District Court concluded its Girsh analysis by determining that the final four factors weighed slightly or moderately in favor of approval. Id. at . [17] Prior to certifying the class and approving the Zurich Settlement, the District Court addressed objections regarding the failure to utilize subclasses. Certain objectors claimed that three subclasses were necessary due to the allocation of funds under the Zurich Settlement Agreement, and that each of these subclasses was entitled to separate representation. [18] The District Court acknowledged that the use of subclasses is appropriate where members of a class have interests divergent from the rest of the class, but determined that the objectors here failed to raise, let alone describe, any divergent or antagonistic interests between the three groups. Id. at . The District Court also noted that [a] class need not be divided into subclasses merely because different groups have alternative legal theories for recovery, or because those groups have different factual bases for relief. Id. at . Therefore, the District Court rejected the objection.
On appeal, there are two principal groups of objectors: Van Enterprises, who submitted a brief on its own behalf, and the Iaad/Zorkess objectors, who submitted a joint brief on behalf of several objectors. [19] Van Enterprises presents numerous arguments in its opening brief before this Court. Briefly stated, Van Enterprises currently challenges the District Court's certification of the class, arguing that it failed to rigorously analyze the Rule 23 requirements and, in particular, that the Settlement Class is overbroad, resulting in a predominance of individual issues as opposed to common ones. Van Enterprises also argues that the named plaintiffs lack standing because they have not demonstrated an injury in fact. Both Van Enterprises and the Iaad/Zorkess objectors challenge the District Court's failure to utilize subclasses despite the allocation of the settlement fund to various types of policyholders. The Iaad/Zorkess objectors also challenge the District Court's award of $29,950,000 in attorneys' fees and expenses. [20]
At the outset, the plaintiffs assert that Van Enterprises failed to properly preserve its arguments with respect to the Zurich Settlement. They contend that the arguments Van Enterprises now raises on appeal were not preserved by Van Enterprises' written objection in the District Court, in which Van Enterprises attempted to merely incorporate by reference into its objection every argument raised in every brief, declaration and exhibit that was submitted in connection with Plaintiffs' motion for class certification, as well as the Defendants' motion to dismiss. In other words, the plaintiffs argue that this conclusory written objection simply cannot serve to preserve for appeal the sprawling arguments it now raises concerning certification of the Settlement Class. The plaintiffs also point out that Van failed to attend the Fairness Hearing, during which it could have elaborated on its cryptic arguments made entirely by reference. Thus, the plaintiffs contend that the only arguments Van Enterprises preserved for appeal pertain to the Plan of Allocation and the purported need for subclasses. Although Van Enterprises frequently cites submissions to the District Court in the Commercial Case litigationinstead of its own written objectionas support for the various arguments it advances on appeal, Van Enterprises asserts that its written objection preserved all of these arguments because the objection incorporated the motions, responses, briefs, declarations and exhibits filed by the Plaintiffs and Defendants concerning class certification of a litigation class. Van Enterprises argues that the District Court erred by not considering these adversarial motions and briefing for a Litigation Class despite emphatic requests from the non-settling Defendants and Van Enterprises. [21] As an initial matter, although Van Enterprises did not appear at the fairness hearing to argue its objections, its absence from the hearing did not cause it to forfeit the objections it had timely submitted to the District Court in written form. Van Enterprises acted in accordance with the notice provided to the potential Settlement Class Members, which stated that attendance at the hearing was not necessary so long as an objection was properly filed with the District Court by the deadline: If you are a Settlement Class Member... and do not exclude yourself from the Settlement Class, you may object to the Zurich Settlement, any term of the Zurich Settlement Agreement, the Plan of Allocation or Plaintiffs' application for attorneys' fees and expenses. Such objection must be in writing and must provide evidence of your membership in the Settlement Class. The written objection also should state the specific reason(s), if any, for the objection, including any legal support you wish to bring to the Court's attention and any evidence you wish to introduce in support of the objection. A written objection (and any support for it) must be received by the Court and the following counsel by no later than January 11, 2007.    If (and only if) you make a written objection to the Zurich Settlement as set out above, you may choose to speak either in person or through an attorney hired at your own expenseat the hearing... the Court has set to consider whether to approve the Zurich Settlement. You are not required to attend the hearing. Lack of attendance at the hearing will not prevent the Court from considering your objection. (Zurich App. 3077-79.) Thus, while it was necessary for Van Enterprises to provide the grounds for its objections in writing in order to preserve its arguments for appeal, it was unnecessary for it to appear at the hearing. However, we are not obligated to entertain all of the arguments that Van Enterprises presently advances. Absent exceptional circumstances, this Court will not consider issues raised for the first time on appeal. Del. Nation v. Pennsylvania, 446 F.3d 410, 416 (3d Cir.2006) (citing Harris v. City of Phila., 35 F.3d 840, 845 (3d Cir.1994)); see also Salvation Army v. Dep't of Cmty. Affairs of N.J., 919 F.2d 183, 196 (3d Cir.1990) (The matter of what questions may be taken up and resolved for the first time on appeal is one left primarily to the discretion of the courts of appeals, to be exercised on the facts of individual cases. (internal quotation marks omitted)). For an issue to be preserved for appeal, a party must unequivocally put its position before the trial court at a point and in a manner that permits the court to consider its merits. Shell Petroleum, Inc. v. United States, 182 F.3d 212, 218 (3d Cir.1999). A fleeting reference or vague allusion to an issue will not suffice to preserve it for appeal, so the crucial question regarding waiver is whether defendants presented the argument with sufficient specificity to alert the district court. Keenan v. City of Phila., 983 F.2d 459, 471 (3d Cir.1992); see also Frank v. Colt Indus., Inc., 910 F.2d 90, 100 (3d Cir.1990) (Particularly where important and complex issues of law are presented, a far more detailed exposition of argument is required to preserve an issue.). Thus, the arguments that were properly preserved for appeal are limited to those which Van Enterprises presented with at least a minimum level of thoroughness to the District Court through its written objection and, without the existence of compelling circumstances, we need not entertain challenges to the approval of the Zurich Settlement which were not before the District Court. [22] Turning to the substance of Van Enterprises' written objection, we are able to discern that Van Enterprises' principal challenges to the approval of the Zurich Settlement are that the Settlement Class is overbroadwhich impacts the Rule 23 requirements of commonality, typicality, and predominance of common issuesand that antagonistic interests among the class members exist such that, in the absence of separate subclasses, the adequacy of representation requirement is not satisfied and the Plan of Allocation is not fair. (Zurich App. 2439.) Van Enterprises did not offer much support in its written objection to substantiate its argument that the Rule 23 requirements are not satisfied, but rather posited that the Settlement Class should not be certified unless the litigation class can properly be certified, and thus Van Enterprises asserted that the District Court needed to consider all of the filings in the class action litigation that have a bearing on whether certification of the litigation class is appropriate. Van Enterprises also did not substantiate its argument that subclasses were needed to ensure a fair allocation of the settlement fund other than to say that the Plan of Allocation treats various types of policyholders differently. Although Van Enterprises detracts from the credibility and persuasiveness of its objections by presenting them in such a conclusory fashion, we nonetheless will credit its explicit mention of the commonality, typicality, and predominance requirements of Rule 23(a) and (b), as well as its brief discussion of the need for subclasseswhich touched on both the adequacy of representation requirement of Rule 23(a) and the fairness of the Plan of Allocation under Rule 23(e)and will consider these specific challenges on appeal. But beyond these objections, Van Enterprises has forfeited the opportunity to challenge other aspects of the District Court's decision to approve the Zurich Settlement by failing to make any mention of those arguments in its written objection. [23] The attorneys general argue that among the issues that Van Enterprises has failed to preserve for appeal is its challenge to the named plaintiffs' standing. The attorneys general assert that the standing issue was not addressed in Van's original objection.... If Van had seriously believed there was an issue of standing, it could have raised it at the District Court level. They also note that [i]n the related `Gallagher' settlement, Van raised the [standing] argument and was denied by the same District Judge as here. We agree that Van Enterprises' objection is devoid of any reference, express or implied, to the named plaintiffs' standing and there is no basis for construing the objection as containing such a challenge. In a somewhat telling statement, Van Enterprises now argues that no standing issues were addressed by the Settling Parties and District Court in connection with [the Zurich] Settlement Class. The likely explanation for the absence of a standing analysis is that no challenge was made to the plaintiffs' standing and the District Court did not otherwise discern a reason to include a discussion of the plaintiffs' standing in its opinion. That said, because [s]tanding is a threshold jurisdictional requirement, and we have an obligation to examine our own jurisdiction and that of the district courts, we will briefly address whether the named plaintiffs have standing. Interfaith Cmty. Org. v. Honeywell Int'l, Inc., 399 F.3d 248, 254 (3d Cir.2005) (internal quotation marks and citation omitted). Turning to the irreducible constitutional minimum of standing, the Supreme Court has articulated three requirements: First, the plaintiff must have suffered an `injury in fact'an invasion of a legally protected interest which is (a) concrete and particularized and (b) `actual or imminent, not conjectural or hypothetical.' Second, there must be a causal connection between the injury and the conduct complained ofthe injury has to be `fairly ... trace[able] to the challenged action of the defendant, and not... th[e] result [of] the independent action of some third party not before the court.' Third, it must be `likely,' as opposed to merely `speculative,' that the injury will be `redressed by a favorable decision.' Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (internal citations and select quotation marks omitted). Van Enterprises argues that the named Plaintiffs do not allege and have not shown that any of their policies were subject to the improper use of contingent commission agreements, and thus they have not established an injury in fact. Van Enterprises contends that, at best, Plaintiffs allege that the entire class paid `higher prices that arguably ensued in [the] entire industry' as a result of Defendants' allegedly anticompetitive conduct directed at some subset of Class Members. In response, the attorneys general assert that at least seven of the named plaintiffs purchased Zurich insurance policies, and that this is sufficient to establish standing for class certification purposes because [o]nce a named Plaintiff has been shown to have standing and therefore [is] properly before the Court, the focus shifts to compliance with the provisions of Rule 23. Alternatively, the plaintiffs argue that because the Settlement Class is limited to those policyholders with a `direct and immediate relationship' to a Defendant coconspirator in this Action, and because all Settlement Class Members purchased insurance at prices elevated by Defendants' unlawful scheme, all members of the Settlement Class have been injured by the anticompetitive conduct described in the Complaint and therefore have standing. They add that the payment of contingent commissions drove up the costs of all insurance policies because [t]hrough a process called `premium build-up' the contingent commissions paid by insurers were built into formulas used to derive all rates. Van Enterprises' arguments must be rejected because it is clear that the named plaintiffs alleged a concrete and particularized injury in fact. The plaintiffs alleged that they paid supra-competitive prices for their insurance policies as a result of the contingent commission arrangements and other anticompetitive conduct of the Zurich Defendants. This increase in price constitutes a concrete injury in fact. Moreover, because the named plaintiffs purchased insurance policies from the Zurich Defendants during the relevant class period, their injuries are neither generalized nor speculative. This is not to say that the named plaintiffs have proven that they were injured by the Zurich Defendants, but they are not required to prove their injuries in order to establish that they are a proper party to bring their claims before the court. Additionally, the plaintiffs alleged that the economic harm they suffered can be traced to the Zurich Defendants' conduct and these injuries can be redressed by imposing liability on the Zurich Defendants. Therefore, we are satisfied that the case and controversy requirement of Article III is met and that the named plaintiffs had standing to bring this case.
Turning to the merits of Van Enterprises' preserved objections to class certification, Van argues that [t]he District Court failed to rigorously analyze the Rule 23 criteria before certifying this Settlement Class. Although Van Enterprises speaks in general terms about all of the Rule 23 requirements, Van's arguments are primarily directed at the predominance component of Rule 23(b)(3). [24] Nonetheless, to the extent that Van Enterprises continues to argue that the commonality and typicality requirements of Rule 23(a) were not satisfied (as it did in its written objection), we reject any such argument. The District Court correctly noted that `commonality does not require an identity of claims or facts among class members'; rather, `[t]he commonality requirement will be satisfied if the named plaintiffs share at least one question of fact or law with the grievances of the prospective class.' Zurich Settlement Final Approval Opinion at  (quoting Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 183 (3d Cir.2001)). Indeed, the District Court listed several common questions of law and fact before concluding that the commonality requirement was satisfied. We find no error in this determination. And with respect to the typicality requirement, the District Court stated that `if the claims of the named plaintiffs and class members involve the same conduct by the defendant, typicality is established.' Id. at  (quoting Newton, 259 F.3d at 183-84). Based on this standard, the District Court explained: Here, the claims made by named Plaintiffs and those made on behalf of the Settlement Class Members are indistinguishable, encompassing identical allegations that the Zurich Defendants violated RICO, federal and state antitrust laws, and the common law obligation of fiduciary duty. These claims arise in each case from the same course of action taken by the Zurich Defendants. Consequently, the named Plaintiffs' claims are typical of those brought by the Settlement Class Members at large. Id. We discern no error in this finding either. Although we are satisfied with the District Court's analysis of the commonality and typicality requirements of Rule 23(a), we think that Van Enterprises' challenge to the predominance requirement of Rule 23(b)(3) calls for a closer look. As part of its challenge to the District Court's finding of predominance, Van Enterprises argues that the Settling Parties and the District Court did not address how antitrust injury could be shown with common proof for this overbroad Settlement Class that includes class members who did not purchase insurance from any Insurer Defendant or who utilized a broker who is not even alleged to be part of the conspiracy and that [d]ue to the overbroad class definition, even the question of whether there is an antitrust conspiracy under federal or state law is not common to the class. Van Enterprises makes similar arguments in the context of the plaintiffs' RICO claim as well. Briefly stated, Van Enterprises argues: The Settling Parties and the District Court did not address whether the named Plaintiffs or Settlement Class members had standing to bring a RICO claim, whether there was a uniform misrepresentation or omission to the class, whether proximate causation and financial loss were common to the class, or the applicability of the filed rate doctrine. Through these arguments, Van Enterprises attempts to demonstrate that common issues do not predominate with respect to the antitrust claims and that [i]ndividual questions remain that would have to be separately adjudicated. [25] The plaintiffs respond that Van's arguments regarding common impact and common injury ignore that Plaintiffs' claims and the Settlement Class Members' claims are identically predicated on the Zurich Defendants' actions and that, as a result, the district court's finding of predominance was not an abuse of discretion. The plaintiffs also argue that Van Enterprises' challenges to the merits of the claims have no relevance to the determination of whether to certify a settlement class. To this argument, the attorneys general add that Van Enterprises simply accuses the District Court of not read[ing] enough briefs, enough declarations, enough reports, enough memoranda, enough cases or enough evidence to support approval of class certification and settlement. The Supreme Court has explained that [t]he Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation, which imposes a standard far more demanding than the Rule 23(a) commonality requirement. Amchem, 521 U.S. at 623-24, 117 S.Ct. 2231. Whereas Rule 23(a)(2)'s commonality element requires that the proposed class members share at least one question of fact or law in common with each other, the Rule 23(b)(3) predominance element requires that common issues predominate over issues affecting only individual class members. In re Warfarin Sodium Antitrust Litig., 391 F.3d at 527-28. Hence, we consider the Rule 23(a) commonality requirement to be incorporated into the more stringent Rule 23(b)(3) predominance requirement, and therefore deem it appropriate to analyze the two factors together, with particular focus on the predominance requirement. Id. at 528; accord Danvers Motor Co. v. Ford Motor Co., 543 F.3d 141, 148 (3d Cir.2008) ([W]here an action is to proceed under Rule 23(b)(3), the commonality requirement is subsumed by the predominance requirement. (internal quotation marks omitted)). Because class certification is unsuitable where proof of the essential elements of the cause of action requires individual treatment, Newton, 259 F.3d at 172, we will examine the elements of plaintiffs' claim through the prism of Rule 23 to determine whether the District Court properly certified the class, In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 311 (internal quotation marks omitted). Here, the District Court relied on its Rule 23(a) commonality analysis in assessing the predominance requirement of Rule 23(b)(3). After setting forth general principles about the predominance requirement, the District Court, interpreting precedent from our Court, noted that because the `clear[ ] focus' of an antitrust class action is `on the allegedly deceptive conduct of defendant' and not on `the conduct of individual class members,' common issues necessarily predominate. [26] Zurich Settlement Final Approval Opinion at  (quoting In re Warfarin Sodium Antitrust Litig., 391 F.3d at 528). The District Court then provided the following explanation in support of finding the predominance requirement satisfied: Here, as discussed in the sections on commonality and typicality, the identical claims of both the named Plaintiffs and the absent class members arise from the same set of facts regarding the alleged collusive and anticompetitive behavior of the Zurich Defendants. Consequently, the predominance requirement is satisfied. Id. at . In its earlier discussion of the commonality requirement, the District Court listed the following as examples of the common questions of law and fact: (1) whether the Zurich Defendants entered into a conspiracy to allocate the market for the sale of insurance; (2) whether the Zurich Defendants' alleged conspiracy had the purpose and effect of unlawfully restraining competition in the insurance industry; (3) whether the Zurich Defendants' conduct violated Section 1 of the Sherman Act; (4) whether the Zurich Defendants' conduct breached their fiduciary duty to their clients; and (5) whether the actions of the Zurich Defendants violated the RICO statute. Id. at . Reading the District Court's commonality and predominance analyses together, as is appropriate in this context, see In re Warfarin Sodium Antitrust Litig., 391 F.3d at 528, it is clear that the District Court identified several significantalbeit broadcommon issues, even if it did not further refine its analysis by assessing the individual elements of the plaintiffs' claims. However, as we indicated earlier, the District Court was not presented with a vigorous challenge to the predominance requirement, which may have influenced its decision not to provide a more thorough analysis of this issue. In order to ensure that the District Court applied the correct legal standard and acted within its discretion in certifying this class, we will conduct a Rule 23(b)(3) predominance analysis for ourselves, building on the foundation provided by the District Court. Because our task calls for us to examine the elements of plaintiffs' claim through the prism of Rule 23, In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 311 (internal quotation marks omitted), we begin with the elements of the plaintiffs' federal antitrust claim. Section 1 of the Sherman Act prohibits [e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations. 15 U.S.C. § 1. To establish a violation of Section 1, a plaintiff must prove: (1) concerted action by the defendants; (2) that produced anti-competitive effects within the relevant product and geographic markets; (3) that the concerted actions were illegal; and (4) that it was injured as a proximate result of the concerted action. Gordon v. Lewistown Hosp., 423 F.3d 184, 207 (3d Cir. 2005) (citing Petruzzi's IGA Supermarkets, Inc. v. Darling-Del. Co., 998 F.2d 1224, 1229 (3d Cir.1993)). The Supreme Court has explained that Section 1 of the Sherman Act `does not prohibit [all] unreasonable restraints of trade ... but only restraints effected by a contract, combination, or conspiracy,' and therefore `[t]he crucial question' is whether the challenged anticompetitive conduct `stem[s] from independent decision or from an agreement, tacit or express.' Bell Atl. Corp. v. Twombly, 550 U.S. 544, 553, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations omitted); see Gordon, 423 F.3d at 207 (The essence of a Section 1 claim is the existence of an agreement.). Turning to the plaintiffs' allegations, we consider whether common questions of law and fact exist with respect to each of these elements. Because the first and third elements of a Sherman Act violation focus on the conduct of the defendants, we find that common questions abound with respect to whether the defendants engaged in illegal, concerted action. For example, common questions relevant to these two elements include whether the Zurich Defendants agreed with any of the Broker Defendants to pay contingent commissions in exchange for an allocation of a certain amount of business in the insurance market, whether the Zurich Defendants conspired with any Insurer Defendants to reduce competition and allocate the market among a select group of insurers, whether the Zurich Defendants agreed not to compete for other Insurer Defendants' customers in return for incumbent protection of their own customers, whether the Zurich Defendants shared a common objective of reducing competition among the other Insurer Defendants as opposed to merely engaging in parallel conduct, whether there was a discernible division of the insurance market which amounted to an illegal restraint of trade, and whether these agreements constituted horizontal restraints of trade that are per se illegal. The second element of a Sherman Act violation, which focuses on the effects of the defendants' challenged conduct, also involves common questions in the present case, including whether the Zurich Defendants' actions reduced competition for insurance, whether the Zurich Defendants' actions resulted in a consolidation of the insurance industry, and whether the Zurich Defendants' actions produced an increase in the cost of premiums for commercial insurance. The fourth element of a Sherman Act violation, which addresses whether the plaintiffs suffered an antitrust injury, is at the center of Van Enterprises' challenge to the District Court's Rule 23(b)(3) predominance finding. In the context of class certifications, we have stated that impact often is critically important for the purpose of evaluating Rule 23(b)(3)'s predominance requirement because it is an element of the claim that may call for individual, as opposed to common, proof. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 311. Accordingly, for purposes of class certification pursuant to Rule 23(b)(3), the task for plaintiffs ... 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. Id. at 311-12. For this reason, although the fourth element focuses on whether the plaintiffs were injured by the defendants' conduct, it may still involve common questions of law and fact if proof of injury can be established on a classwide basis. Van Enterprises argues that antitrust injury cannot be proven on a class-wide basis because the Settlement Class includes class members who did not purchase insurance from an Insurer Defendant or utilize a Broker Defendant. The plaintiffs counter that antitrust injury is a question that is common to the class because Contingent Commissions ... are included in each insurer's ratemaking formulas and are consequently `built' into every commercial premium for commercial insurance products, and the conspiratorial conduct of all Defendants (including Zurich) reduced or eliminated competition for insurance products, thereby raising the insurance premiums paid by Plaintiffs and all members of the class. Thus, they argue that all class members were injured by the Zurich Defendants' anticompetitive conduct, even if the extent of their injuries varied. The attorneys general likewise argue that [c]ontingent commissions paid by insurers were built into the premiums charged to members of the class which resulted in supra competitive premium prices to insurance consumers, and that [a]s a result of the Defendant's conduct, Plaintiffs and unnamed class members have paid insurance premiums in excess of what they would have paid had the Broker Defendants acted in accordance with their fiduciary duties and their representations to their clients. As the arguments of the plaintiffs and attorneys general illustrate, whether the named plaintiffs and absent class members were proximately injured by the conduct of the Zurich Defendants is a question that is capable of proof on a class-wide basis. Contrary to Van Enterprises' assertion, the Settlement Class only includes policyholders who purchased insurance directly from the Zurich Defendants and policyholders who utilized one of the Broker Defendants, and therefore the plaintiffs' theory for proving antitrust injury would apply to all of the class members. Consequently, we are satisfied that the element of antitrust injurythat is, the fact of damagesis susceptible to common proof, even if the amount of damage that each plaintiff suffered could not be established by common proof. Unlike in In re Hydrogen Peroxide Antitrust Litigation, where the certification inquiry was set against the backdrop of an impending trial, here we are not as concerned with formulat[ing] some prediction as to how this element of a Sherman Act violation would play out at trial, 552 F.3d at 311 (internal quotation marks omitted), for the proposal is that there be no trial, Amchem, 521 U.S. at 620, 117 S.Ct. 2231, and instead our inquiry into the element of antitrust injury is solely for the purpose of ensuring that issues common to the class predominate over individual ones. As the foregoing analysis demonstrates, common questions exist even with respect to the element of antitrust injury and therefore any individual issues do not overwhelm the common ones. Because each of the elements of a Sherman Act violation involves common questions of law and fact, we conclude that common questions predominate over individual ones with respect to the federal antitrust claim. Next, we consider the essential elements of the plaintiffs' RICO claim. The RICO statute provides, in relevant part: It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity.... 18 U.S.C. § 1962(c). Establishing liability under this section of the RICO statute requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity, plus an injury to business or property. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (footnote omitted); see Lum v. Bank of Am., 361 F.3d 217, 223 (3d Cir.2004). Under Section 1962(d), [i]t is also unlawful for anyone to conspire to violate § 1962(c). Lum, 361 F.3d at 223. Section 1961(1) of RICO provides a list of the federal and state crimes which constitute racketeering activity and includes mail and wire fraud, and Section 1961(4) of RICO defines the term enterprise to include[ ] any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity. Proving the first element of a RICO violation in this case would involve common questions about the activities of the Zurich Defendants and, in particular, whether the Zurich Defendants participated or engaged in conduct with other Insurer Defendants and Broker Defendants. The second element also involves common questions of law and fact, namely whether an enterprise of Broker Defendants and Insurer Defendants existed (of which the Zurich Defendants were a part) either as an association in fact or as a more formal organization or entity. Proving the third and fourth elements would encompass common questions of law and fact as well, including whether activities that constitute racketeering were taking place through the enterprise (such as mail or wire fraud) and whether these racketeering activities were recurring such that a pattern could be established. While establishing an injury is not as conducive to common proof because it requires that a plaintiff demonstrate harm to his property or business, for the reasons already set forth in our discussion of the element of antitrust impact, we are satisfied that the plaintiffs have presented a plausible theory for proving a class-wide injury as a result of the racketeering activities of the alleged enterprises at issue here. Thus, each element of the alleged RICO violation involves common questions of law and fact. Based on our analysis of the essential elements of the plaintiffs' federal claims, we agree with the District Court's conclusion that common questions of law and fact predominate over any individual ones, and therefore the predominance requirement of Rule 23(b)(3) is satisfied.
Both Van Enterprises and the Iaad/Zorkess objectors present challenges related to the Plan of Allocation, arguing that subclasses were needed to ensure adequate representation for the various types of policyholders and to ensure a fair allocation of the settlement fund. Specifically, the Iaad/Zorkess objectors argue that the District Court abused its discretion by failing to require the establishment of subclasses and separate representation for the Excess and Non-Excess Claimants. [27] They also contend that no informal procedures designed to mimic sub-classing were employed and the increased recovery of one sub-class was achieved at the expense of another sub-class' diminished recovery. Van Enterprises argues that, because not all of the class members purchased insurance directly from the Zurich Defendants, the class members have antagonistic interests and should not be represented by one set of lawyers. Instead, according to Van Enterprises, subclasses should have been certified and, as a result of the District Court's decision not to require subclasses and separate representation, the Plan of Allocation was not fair. [28] The plaintiffs respond that there are no divergent interests among the class members because [t]he groups for intra-class allocation were created solely for economic reasons to provide a fair distribution of the Settlement proceeds among the Settlement Class Members, and explain that [t]he relief was tailored to the individual policyholders' circumstances, and the structure of the distribution does not create intra-class conflicts. They contend that [t]he Settlement Class Members are all in the same position vis-a-vis the Zurich Defendants; they are policyholders that were hampered by the same alleged activities engaged in by the Zurich Defendants. Moreover, they defend the Plan of Allocation by arguing that it was prepared by Class Counsel, with the substantial assistance of economic experts and the Intervenor Attorneys General, in such a way as to fairly allocate the recovery among Settlement Class Members in accordance with Plaintiffs' theories of potential damages in the Action. They maintain that the objectors fail to recognize that the Plan of Allocation is designed to reflect certain differences in the impact of the Defendants' conduct in certain lines of insurance during different years. The attorneys general also argue that subclasses were not necessary in this settlement and that the Plan of Allocation was fair. They contend that the objectors are essentially complain[ing] that the comparatively weak claims receive comparatively less economic redress and that [t]his type of disparity is common in class cases without establishing subclasses. Additionally, the attorneys general state: Payment among class members will vary depending on the type of insurance policy they purchased, but that type of variation has never been held to warrant subclasses, especially where the variation in payment is based on the variations in the strength of cases involving particular insurance products. The attorneys general also assert that because the purchasers of excess and non-excess insurance are all known, have been noticed and are the same persons, this case is distinguishable from other cases in which subclasses were required. In sum, the attorneys general assert that there can be no need for subclasses where the difference involved different claims by many of the same persons. Federal Rule of Civil Procedure 23(c)(5) states that [w]hen appropriate, a class action may be divided into subclasses that are each treated as a class under this rule. An advisory committee note for Rule 23(c) indicates that subclasses are appropriate [w]here a class is found to include subclasses divergent in interest. Accordingly, [a] district court hearing a class action has the discretion to divide the class into subclasses and certify each subclass separately. In re Cendant Corp. Sec. Litig., 404 F.3d 173, 202 (3d Cir.2005). We have explained that the option to utilize subclasses is designed to prevent conflicts of interest in class representation. Id. Nonetheless, [w]hile subclasses can be useful in preventing conflicts of interest, they have their drawbacks. Id. (citing a secondary source for the proposition that subclassing can create a Balkanization of the class action and present a huge obstacle to settlement if each subclass has an incentive to hold out for more money). Because the decision whether to certify a subclass requires a balancing of costs and benefits that can best be performed by a district judge, we accord substantial deference to district courts with respect to their resolution of this issue. Id.; see Alexander v. Gino's, Inc., 621 F.2d 71, 75 (3d Cir.1980) (noting that the district court has considerable discretion in utilizing subclasses under Rule 23(c)). Thus, [w]here the district court has declined to certify a subclass, we will ordinarily defer to its decision unless it constituted an abuse of discretion. In re Cendant Corp. Sec. Litig., 404 F.3d at 202; cf. In re Prudential Ins. Co., 148 F.3d at 316 (explaining that the objector had not demonstrated that [one type of] claimants differ from other class members so as to require the creation of a subclass, and concluding that [b]ecause the [one type of] claimants did not require specialized or distinct treatment, the court's failure to create a separate subclass for those claimants ... was not an abuse of discretion). Under the circumstances of this case, we cannot say that the District Court abused its discretion in refusing to create subclasses or require separate representation. We acknowledge that the objectors' argument that subclasses should have been utilized has some appeal to it, given that the Plan of Allocation divides the total settlement award on the basis of the type of insurance, thereby creating different groups for the purpose of reimbursement, and the groups do not have access to an equal percentage of the fund. But subclasses are only necessary when members of the class have divergent interests and the District Court found that no such divergent interests existed between the allocation groups. The District Court explained that the objectors failed to raise, let alone describe, any divergent or antagonistic interests between the three groups, as is required in order for subclasses to be mandated. Instead, [the objectors] state[] without explanation that these groups have `claims of varying merit'a statement that appears to have been derived entirely from the fact that the Settlement's plan of allocation has chosen to distribute different percentages of the settlement monies to these groups. Zurich Settlement Final Approval Opinion at  (citation omitted). The District Court reasoned that simply because the relief varied among the different groups of class members did not demonstrate that there were conflicting or antagonistic interests within the class. The District Court's analysis of the adequacy of representation requirement of Rule 23(a) provides additional support for its conclusion that there are no divergent interests among the class members. In this context, the District Court found that it is clear that the named Plaintiffs' interests are not antagonistic to those of the absent class members. The central questions in this case regarding the Zurich Defendants' alleged conduct, and the impact of that conduct on both the named Plaintiffs and the absent class members, animates in an identical fashion the claims of both groups.... Plaintiffs have advocated as vigorously for the absent class members as they have for themselves. Id. at . Moreover, on appeal, the objectors still fail to articulate how the interests of the various members are divergent, and instead they continue to point to the fact that the fund was allocated in such a way that a greater percentage of the settlement value is designated for class members who purchased excess insurance during certain years. However, this is simply a reflection of the extent of the injury that certain class members incurred and does not clearly suggest that the class members had antagonistic interests. Additionally, as the attorneys general emphasized at oral argument, many of the Settlement Class Members are both Excess and Non-Excess policyholders and will be entitled to recover damages for overpayment of premiums for both types of insurance. This illustrates that the Plan of Allocation did not create de facto subclasses among the class members but merely created a structure for ensuring that reimbursement is tied to the extent of damages incurred on certain policies of insurance. This method for distributing the fund, in which individuals and entities may have claims that span several of the allocation groups, did not produce a divergence of interests among the class members. Rather, regardless of the type of insurance at issue and the time period during which it was purchased, all of the class members shared a unified interest in establishing the Zurich Defendants' liability for engaging in anticompetitive conduct which increased the cost of premiums for all policyholders. Additionally, the District Court found that the Zurich Settlement Agreement and the Plan of Allocation were fair, reasonable, and adequate, and in support of this finding credited the representation of the attorneys general that the Plan of Allocation accurately reflects differences in the impact of the Defendants' conduct in certain lines of insurance during different years. Id. at . As the plaintiffs explained in their memorandum in support of their motion for final approval of the settlement, [f]or each group of claimants, the distributable amount from the Combined Settlement Amount will be calculated by dividing the premium paid by each claimant for the applicable policies by the total premiums paid by all claimants.... With respect to any Settlement Class Policy Purchase, no Conspiracy Claimant can recover a higher percentage of the premium paid than that recovered by an Excess Claimant or a Non-Excess Claimant. In addition, to the extent that any of the Combined Settlement Amount allocable to the Conspiracy Claimants is not distributed, that remaining amount shall be reallocated to the Excess Claimants and the Non-Excess Claimants, with 62.7% allocated to the Excess Claimants, and 37.3% allocated to the Non-Excess Claimants. (Zurich App. 2906.) This information further demonstrates that the Plan of Allocation was carefully devised to ensure a fair distribution of the settlement fund to the various types of claimants and was allocated in such a way that policyholders who likely incurred the most damage are entitled to a larger proportion of the recovery than those whose injuries were less severe. Even if some potential benefits may have been realized from utilizing subclasses, it is not at all clear that the advantages would have outweighed the disadvantages, and therefore it is difficult to say that the District Court abused its discretion by not taking this step. Consequently, we conclude that the District Court's decision not to certify separate subclasses or require separate representation did not constitute an abuse of discretion and likewise its approval of the Zurich Settlement Agreement and Plan of Allocation was also within its discretion.