Court rejects De Beers class-action settlement

* $272.5 million class action settlement rejected

* Lower court must reconsider class make-up

By Tom Hals

WILMINGTON, Del., July 13 (Reuters) - A U.S. appeals court rejected on Tuesday a $272.5 million class-action settlement between De Beers and purchasers of the company's diamonds who said they were harmed by the company's antitrust behavior.

The appeals court sent the settlement back to a lower court for further consideration and to clarify which claims are subject to the treatment as a class, or group of plaintiffs who are allowed to sue the company collectively.

De Beers, the world's top diamond producer which is 45 percent owned by Anglo American (AAL.L), reached an agreement in 2005 to establish a $272.5 million fund for indirect purchasers of its diamonds. The settlement came after the company pleaded guilty in 2004 to a decade-old price-fixing charge, allowing it to compete directly in the United States.

The class-action settlement was certified by a U.S. District Court in New Jersey but 34 of the indirect purchasers objected to the deal. The indirect purchasers include retailers, consumers and some middlemen.

The U.S. Court of Appeals for the Third Circuit found the purchasers had claims under widely varying state laws. Therefore, the court said, they could not easily qualify as a class.

Judge Kent Jordan wrote that it was hard to imagine a greater disparity between class members, and that the settlement tried to minimize these legal disparities by suggesting they represented little more than differences of procedure.

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

De Beers did not immediately return a call for comment.

The case is Shawn Sullivan; Arrigotti Fine Jewelry; James Walnum v DB Investments Inc; De Beers SA; De Beers Consolidated Mines Ltd; De Beers AG; Diamond Trading Co; CSO Valuations AG; Central Selling Organization; De Beers Centenary AG; U.S. Court of Appeals for the Third Circuit, Nos 08-2784/2785/2798/2799/2818/2819/2831/2881 (Reporting by Tom Hals; Editing by Richard Chang)