Lieff Cabraser Civil Justice Blog
State Farm Policyholder RICO Lawsuit: Justice for Sale in Illinois

State Farm Policyholder RICO Lawsuit: Justice for Sale in Illinois

The American Lawyer (subscription) reports the latest developments in a 20-year “litigation nightmare” that still continues between State Farm Mutual Automobile Insurance Co. and over four million of its policyholders.

What originally began as a lawsuit by customers claiming State Farm violated its insurance agreements by repairing their vehicles with lower-quality parts than promised grew into a nationwide class action in which 4.7 million plaintiffs sued the company over its deficient insurance performance and received a $1.05 billion judgment in their favor.

State Farm’s subsequent Herculean efforts to avoid payment of that judgment eventually found the company facing RICO charges in the wake of what plaintiffs and legal experts say was the illegal suborning of the judicial elective process in Illinois as State Farm paid more than $4 million to elect a judge who would in turn overturn the billion-plus dollar verdict in plaintiffs’ favor.

If the State Farm customers ultimately win this two-decade old battle, they could collect damages that have risen to over $7 billion in a case likely to have a powerful impact on the ongoing conversation of money in politics, including “whether corporations can continue to use so-called dark money to influence elections.”

As The American Lawyer observes, “Dark money is at the heart of the [State Farm RICO suit] campaign allegations. It’s the money, given by wealthy donors and corporations, that is funneled through nonprofit political action committees, or PACs, to support political campaigns.” At present, an appeal is pending in the case, which is currently stayed.

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.

The American Lawyer‘s new analysis of the case concludes with a reference to recent studies pointing to a marked increase in special interest group spending in efforts to influence Supreme Court races across the U.S. and quotes Alicia Bannon, Senior Counsel of the Brennan Center for Justice at New York University School of Law, “Special interests know that state Supreme Courts have tremendous power to shape the legal and policy landscape on everything from civil rights to tort reform, even beyond a state’s borders, and they have been pouring money into these races in recent years. With the rise of outside spenders that do not disclose their donors, we can’t even identify potential conflicts of interest. This poses a major threat to the integrity of our justice system.”

Read the full article at AmericanLawyer.com (subscription).