A Solution in Search of a ProblemThere’s No Need to Federalize Class Actions, page 2

A SOLUTION IN SEARCH OF A PROBLEM (continued)

Page 2

By refusing to provide genuine Jeep parts State Farm saved about $155. Mr. Avery paid out-of-pocket to get real Jeep parts because he was concerned about his family’s safety if his Cherokee was repaired with parts that did not meet the manufacturer’s specifications, and he did not want to install shoddy-looking repair parts that could reduce its value.

The evidence at trial showed that the imitation parts, specified on over 4.2 million repair jobs by State Farm, were not of "like kind and quality" because they failed to fit and lacked the durability, quality, and finish of genuine parts. Many of these crash parts were bumper parts that demonstrations showed crumbled easily on impact.

The inferior quality of these knock-off parts was the natural result of manufacturing and design processes designed to make cheaper, not better, parts. As one State Farm vice president candidly admitted in a confidential 1997 memorandum: "we may well say it is like kind, and quality, but the bottom line is that it is not the same." The proponents of class action "reform," not surprisingly, avoid all this, instead arguing Avery was "unfair" and interferes with state regulation.

State Farm is headquartered and chartered in Illinois, and several plaintiffs were Illinois residents. Avery was thus filed in Illinois state court, where our jurisdictional system required it be filed. The evidence at trial also showed that State Farm’s policy and practice of using substandard parts when settling claims had been conceived of, systematized, and applied from Illinois. Established U.S. Supreme Court doctrine allows a state court to exercise jurisdiction over a nationwide class, and to apply its own law, under the facts found in Avery. (See 1985's Phillips Petroleum Co. v. Shutts).

Corporations (and mutual insurance companies like State Farm) may have grown in power far beyond what could have been contemplated in the mid-1800s, when the modern corporate form arose, but they remain creatures of state, not federal law, and each state has a sovereign interest in controlling corporate misconduct that emanates from that state.

Nor was State Farm disadvantaged by the forum. The judge who certified and held the three-month trial in Avery had been an attorney for State Farm before his elevation to the bench and was a State Farm policyholder, and both parties consented to his assignment. Procedurally, State Farm was also afforded every opportunity to make its arguments and protect its rights. Class certification involved a four-day evidentiary hearing, and the court’s comprehensive certification opinion was challenged, not once, but twice, in the Illinois Supreme Court, and then by writ of certiorari to the U.S. Supreme Court.

After a full year and a half of discovery, the trial court again considered State Farm's arguments when deciding State Farm's decertification and summary judgment motions. At trial, State Farm presented over 14 full days of testimony and dispensed with surrebuttal. The jury deliberated for three days, followed by the court's judgment on the consumer fraud claim. After trial, State Farm petitioned for direct review in the Illinois Supreme Court, which was denied. The case is now on appeal in the Illinois Court of Appeals.

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