Lieff Cabraser Civil Justice Blog
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State Farm Racketeering Case Now Set As Class Action Suit

Lawsuit alleges State Farm campaigned illegally to elect a judge to vote against previous $1.05 billion judgment against the company

As reported by Law360 (subscription) and other news outlets, U.S. District Court Judge David Herndon has granted class action status to a lawsuit brought by Lieff Cabraser and co-counsel on behalf of 4.7 million State Farm policyholders that alleges State Farm Mutual Automobile Insurance Co. carried out a racketeering enterprise aimed at defrauding the policyholders of a $1.05 billion judgment by getting a new judge elected to the Illinois Supreme court who would rule in State Farm’s favor to scuttle the judgment, previously approved by the Illinois appellate court.

The complaint alleges that the Illinois judge, Lloyd A. Karmeier, was elected after a campaign funded by as much as $4 million from State Farm – 80 percent of the election campaign’s entire amount. Then in August 2005, Justice Karmeier participated in the Illinois Supreme Court’s deliberations and cast his vote in State Farm’s favor, leading the Court to issue a decision overturning the previous $1.05 billion judgment in the case.

According to the Chicago Tribune, State Farm “recruited Karmeier, directed his campaign, had developed a vast network of contributors and funneled as much as $4 million to the campaign. Then, after achieving Karmeier’s election, State Farm deliberately concealed all of this from the Illinois Supreme Court while its appeal was pending.”

The RICO plaintiffs’ complaint alleges that State Farm worked to “recruit, finance, direct and elect a candidate to the Illinois Supreme Court who, once elected, would vote to overturn the $1.05 billion judgment.” The 2012 complaint goes on to note, “there was no guarantee for State Farm that the appeal would not be decided before the November 2004 election, but the risk — a $2 to $4 million investment for a possible $1.05 billion return — was sufficiently minimal to make it a worthwhile gamble.”

The underlying lawsuit was a 1997 class action relating to claims on damages to cars in the late 1990s, where the vehicles were repaired with non-original equipment manufacturer parts in violation of the owners’ insurance agreements with State Farm. If the current case is successful it could result in a payout of more than $7.6 billion to the class, in part because of accrued interest on the amounts involved.

The case is Mark Hale et al. v. State Farm Mutual Automobile Insurance Company et al., case number 3:12-cv-0660 in the U.S. District Court for the Southern District of Illinois.