State Farm agreed to pay $250 million on the brink of a trial to customers who claimed the company tried to rig the Illinois justice system to wipe out a $1 billion jury verdict from 19 years ago.
The customers were seeking as much as $8.5 billion in damages in a civil racketeering trial that was set to start Tuesday in federal court in East St. Louis, Illinois. A judge granted preliminary approval to the accord and set a final fairness hearing for December.
The largest US auto insurer was charged with trying to convince Judge LLoyd Karmeier’s 2004 election campaign to hire a judge against the cause of the Illinois Supreme Court to secretly finance the defenders’ unspoken advocacy groups. In accordance with the Federal Racketeer Influenced and Corrupt Organizations Act, any loss will be raised to three times.
The company has done anything wrong with rejecting the claim. The company spokesman Jim Camoriano understood that “to put an end to the whole case” and “to avoid long-standing cases and appeals that could last for many years”.
In an interview Tuesday, the State Farm said it was “refusing to participate in a RICO program and rejecting any role in choosing Judge Karmeier so far”, claiming plaintiff lawyer Bob Clifford. “Now they accept paying a billion dollars and I think that’s talking on their own.”
The reconciliation came just before the jury was elected last week and the opening statements began. Probably shows that State Farm is facing a negative decision-making risk, says law professor David Logan from Roger Williams University in Bristol, Rhode Island.
“Companies generally do not participate in such a currency right before the opening speech of a stance, unless the defendant really gets a negative idea,” Logan said. It is not unusual for a settlement much less than the plaintiffs have been waiting for. “It might be worth throwing a shot at a hundred and fifty million dollars in his hand, which would only come after many objections.”
The defenders were seeking $ 1 billion in damages based on the original decision and $ 1.8 billion in interest, and they were in triplicate under the RICO law. The jury would determine the losses and the judge would decide on interest.
The settlement ends more than 20 years of litigation over by State Farm customers who alleged they were given generic car parts of lower quality than original equipment for more than a decade, violating the terms of their insurance policies.
In 1999, an Illinois state court jury awarded the customers $456 million for breach of contract, and the trial judge added $730 million in damages on a fraud claim. An appellate court reduced the verdict to $1.056 billion, but it was one of the largest class-action awards in U.S. legal history.
In 2004, Karmeier, a Republican who had been a circuit judge in rural Washington County for almost two decades, was elected to the Illinois Supreme Court. A year later, that court threw out the award, and the U.S. Supreme Court refused to review the case, seemingly ending the litigation.
The plaintiffs sought to revive the suit following a 2009 U.S. Supreme Court ruling in a lawsuit involving the coal-mining company Massey Energy Co., which found that judges have to recuse themselves in some cases involving their top campaign contributors.
The plaintiffs said State Farm spent more than $3.5 million on Karmeier’s election and continued to conceal its role even during the attempt to reinstate the original claim. The appeal was rejected, and months later, the policyholders filed the new racketeering lawsuit in federal court. The plaintiffs are the same people who sued more than 20 years ago.
The class of customers covered by the deal will include policyholders in the U.S. in all but two states who were insured by a vehicle casualty policy with State Farm from July 28, 1987 to Feb. 24, 1998, and were given generic parts for repairs or reimbursed for such lesser-valued equipment, according to the settlement agreement. Customers in Tennessee and Arkansas weren’t part of the original suit because there was prior litigation in those states, so they aren’t part of the current settlement.
Karmeier, 78, has been Illinois court’s chief justice since 2016. He wasn’t sued in the civil racketeering case, but he was scheduled to be a witness in the trial.
Clifford said was looking forward to questioning Karmeier on the stand this week, but wouldn’t speculate on whether the judge’s expected appearance influenced State Farm’s decision to settle.
Karmeier didn’t immediately respond to an email seeking comment.
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