Insurance giant State Farm on Tuesday reached a $250 million preliminary settlement in a federal class-action lawsuit claiming the company funneled money to the campaign of an Illinois Supreme Court candidate.
The lawsuit filed in U.S. District Court in East St. Louis alleged Bloomington-based State Farm secretly funneled money to the campaign of Supreme Court Chief Justice Lloyd A. Karmeier while he was a candidate for the high court in 2004.
In the 2005 case of Avery v. State Farm, Karmeier cast the deciding vote to reverse a $1.06 billion judgment in 1999 against State Farm for its use of aftermarket car parts in repairs. The court ruled the nationwide plaintiff class was improperly certified by a Williamson County trial judge. It also contended using aftermarket parts was not a breach of State Farm policyholders’ contracts.
The class-action lawsuit sought nearly $10 billion from State Farm in a trial that was scheduled to begin Tuesday. The plaintiffs alleged State Farm covertly supported Karmeier’s campaign in order to secure his win and reversal of the Avery lawsuit decision.
In a statement released late Tuesday by State Farm and Clifford Law Offices, the Chicago-based law firm representing policyholders in the litigation, the two sides said they reached the agreement “because they believe it is in the best interest of all the parties and to avoid protracted litigation and appeals that could continue for several more years.” […]
State Farm denies liability and maintains its position that the company “considers the claims to be without merit,” according to the settlement. […]
The millions in so-called “dark money” were channeled through donations to the U.S. Chamber of Commerce, which then sent the money onto a political action committee and the Illinois Republican Party for use in Karmeier’s 2004 campaign, according to the lawsuit.
Karmeier, who is now chief justice of the Supreme Court, cast the deciding vote in favor of overturning the appellate court ruling that upheld the billion-dollar Avery verdict, policyholders noted in their lawsuit.
He was not a defendant in the case.
State Farm “has consistently denied participating in a RICO scheme and to this day denies any role in electing Judge Karmeier,” Bob Clifford, attorney for the plaintiffs, said in an interview Tuesday. “Now they agree to pay a quarter of a billion dollars, and I think that speaks for itself.”
The settlement came after the jury was selected last week and just before opening statements were set to begin. That probably shows State Farm was spooked by the risk of an adverse verdict, said law professor David Logan, of Roger Williams University in Bristol, Rhode Island.
“Corporations generally don’t part with that kind of money just before the opening statement of a trial unless they got a really negative vibe from the jury that was impaneled,” Logan said. The settlement for far less than what plaintiffs were seeking isn’t unusual, he added. “Two hundred and fifty million dollars in hand may be worth declining a shot at a billion, that only would come after many appeals.”
The plaintiffs were seeking $1 billion in damages based on the original verdict and $1.8 billion in interest, plus tripling under the RICO law.. The jury would have determined damages and the judge would have decided on the interest.
The settlement ends more than 20 years of litigation over by State Farm customers who alleged they were given generic car parts of lower quality than original equipment for more than a decade, violating the terms of their insurance policies.
In 1999, an Illinois state court jury awarded the customers $456 million for breach of contract, and the trial judge added $730 million in damages on a fraud claim. An appellate court reduced the verdict to $1.056 billion, but it was one of the largest class-action awards in U.S. legal history.
In 2004, Karmeier, a Republican who had been a circuit judge in rural Washington County for almost two decades, was elected to the Illinois Supreme Court. A year later, that court threw out the award, and the U.S. Supreme Court refused to review the case, seemingly ending the litigation.
* And check out the headline on this Clifford Law Offices press release…
State Farm Pays $250 Million to Keep Illinois Chief Justice Off the Witness Stand