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File photo courtesy of www.WJBC.com.

Earlier this month, a federal judge found federal-judge-found that almost 5M State Farm Mutual Automobile Insurance Co. policyholders have the right to proceed in a class action. State Farm faces suit for allegedly buying a judge. The judge in question is Lloyd Karmeier and the insurance company supposedly heavily backed him for a seat on Illinois’ Supreme Court. Justice Karmeier now serves as that Court’s chief justice.

File photo of Justice Karmeier, courtesy of www.bnd.com.
File photo of Justice Karmeier, courtesy of www.bnd.com.

The suit against State Farm does not name Justice Karmeier as a defendant, though the plaintiffs allege that the insurer backed him expressly for the purpose of his assistance in voting to overturn a $1B verdict against the business. U.S. District Judge David R. Herndon held that the alleged improper conduct “affected all the proposed class members uniformly, and that that named plaintiffs and their attorneys otherwise satisfied court rules around class actions.”

As Judge Herndon wrote, “[T]he injury in this case is based on the interest the plaintiffs and the proposed class members had in a neutral forum and the damages correspond with the undivided interest in the judgment each lost as a result of the tainted tribunal. “This issue is identical for all plaintiffs and class members.” He further held that the insurer and other parties teamed up to “secretly subvert the judicial process and deprive plaintiffs of an impartial forum” for review of the original award.

The plaintiffs argue that the insurer defrauded them when it allegedly paid for (at least in part) Justice Karmeier’s 2004 campaign. They further argue that Justice Karmeier’s vote against the $1B award was key in overturning it. One of their points is that State Farm execs were dishonest in their denial of said backing.

The original suit involved allegations that generic car parts used to repair the plaintiffs’ vehicles were not the same quality as the original factory parts. They claimed that this was a violation of their policy coverage. A jury originally gave the plaintiffs $456M in 1999 for breach of contract. The trial judge in that case bumped the verdict up by $730M over a fraud claim in the suit.

On appeal, the court cut the amount from almost $1.2B to $1.01B.

In 2005, that award was tossed out partly with Justice Karmeier’s support. The SCOTUS declined to grant certiorari (they didn’t accept the case for review). Sometime after this happened, plaintiffs’ attorneys discovered State Farm’s alleged funding of Justice Karmeier’s campaign. Justice Karmeier was re-elected to his seat in 2014, though no mention of State Farm involvement in that election was made.

As an aside, another justice on the seven-member Illinois Supreme Court wrote the opinion in the award’s reversal. Four of the seven supported the decision, with two dissenters and one abstainer. Even the dissenters agreed on certain parts of the majority’s ruling. One of the reasons the award was reversed is that the Court stated that “certification of a nationwide class of policyholders was improper.”

The original jury award ranked as “one of the largest class-action awards in U.S. legal history.”

Judge Herndon’s recent decision makes things “interesting” for State Farm. The company has been fighting off claims of racketeering over Justice Karmeier’s election. The current class action “alleges violations of the Racketeering Influenced and Corrupt Organizations Act [RICO] and could put State Farm on the hook for more than $7.6 billion because of interest that has accrued on the original jury award, according to plaintiffs’ lawyers…”

State Farm spokesperson Missy Dundov commented that State Farm plans to request “the appellate court to review this ruling in the very near future.” She said that “plaintiffs ‘have unsuccessfully asserted and reasserted these allegations for many years and should not be permitted to do so any longer.’”

Sources:

State Farm Faces Suit Over Claims It Bankrolled Judge

State Farm Must Face $7B RICO Class Action, Judge Rules

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