Consumer Protection

State Farm RICO Litigation

Hale, et al. v. State Farm Mut. Auto. Ins. Co., et al., Case No. 3:12-cv-00660-DRH-SCW.

On December 13, 2018, U.S. District Judge David Herndon of the Southern District of Illinois gave final approval to a $250 million settlement of the State Farm RICO case, wherein plaintiffs alleged that State Farm had secretly worked to help elect an Illinois Supreme Court justice in order to overturn a billion-plus dollar judgment against the company.

Background on the Case

In 1997, Lieff Cabraser and co-counsel filed a class action in Illinois state court, accusing State Farm of approving the use of lower-quality non-original equipment manufacturer (non-OEM) automotive parts for repairs to the vehicles of more than 4 million State Farm policyholders, contrary to the company’s policy language. Plaintiffs won a verdict of more than nearly $1.2 billion that included $600 million in punitive damages. The state appeals court affirmed the judgment, but reduced it slightly to $1.05 billion. State Farm appealed to the Illinois Supreme Court in May 2013.

A two-plus-year delay in that Court’s decision led to a vacancy in the Illinois Supreme Court. Plaintiffs allege that State Farm recruited a little-known trial judge, Judge Lloyd A. Karmeier, to run for the vacant Supreme Court seat, and then managed his campaign behind the scenes, and secretly funded it to the tune of almost $4 million. Then, after Justice Karmeier was elected, State Farm hid its involvement in his campaign to ensure that Justice Karmeier could participate in the pending appeal of the $1.05 billion judgment. State Farm’s scheme was successful: Justice Karmeier joined the otherwise “deadlocked” deliberations and voted to decertify the class and overturn the judgment.

In a 2012 lawsuit filed in federal court, Plaintiffs allege that this secretive scheme to seat a sympathetic justice—and then to lie about it, so as secure that justice’s participation in the pending appeal—violated the Racketeer Influenced and Corrupt Organization Act (“RICO”), and deprived Plaintiffs of their interest in the billion-dollar judgment. Judge David R. Herndon of the U.S. District Court for the Southern District of Illinois certified the class in October 2016, and the Seventh Circuit denied State Farm’s petition to appeal the ruling in December 2016 and again in May 2017. Discovery is ongoing, and a trial is set for September 2018. Just prior to the trial, on August 21, 2018, Judge David R. Herndon issued two new Orders relating to evidence and testimony to be included in the trial (see sidebar).