Wednesday, 28 August 2013 17:04

Avery v State Farm is Back in the News, as a RICO Case making the Judge the Issue

A sitting Illinois Supreme Court justice,  Lloyd A. Karmeier, may have been compelled to testify under oath about allegations that he voted in 2005 to overturn a $1 billion verdict against State Farm because the company secretly funded a multi-million dollar campaign to help him get elected to the state supreme court. The 2004 Illinois Supreme Court race was the most expensive campaign for a single judicial office in U.S. history.

Lawyers whose plan to depose Illinois Supreme Court Justice Lloyd Karmeier became public now say they will do it later or maybe not at all. On Aug. 14, they told U.S. District Judge David Herndon that they would not rush into it if he lifts a temporary stay on discovery in their fraud and racketeering suit against State Farm.

In 1998 in the Avery v. State Farm case, the original plaintiffs won the largest verdict ever against State Farm for requiring the use of “imitation” crash parts in its auto repairs.  After years of appeals, the verdict was reversed.

On May 29, 2012, three plaintiffs from Avery v. State Farm filed a new class action lawsuit, claiming that the insurance company acted as the hub of an enterprise designed to defraud millions of policyholders out of a $1 billion judgment.

Mark Hale, Todd Shadle and Carly Vickers Morse, all of whom live out-of-state and were class members to the unsuccessful 1997 class action suit against State Farm, brought their complaint in May in the U.S. District Court for the Southern District of Illinois.

The trio’s lawsuit named State Farm; William Shepherd, an attorney at the insurance company; Ed Murnane, president of the Illinois Civil Justice League; and Justice Lloyd Karmeier’s campaign committee, Citizens for Karmeier, as defendants, however the judge, David Herndon since dismissed Citizens as a defendant.

Tennessee attorney W. Gordon Ball, who serves on the plaintiffs’ legal team, said his clients’ RICO suit is very simple: “Shepherd, State Farm and Murnane used the Illinois Civil Justice League as an enterprise to basically buy an Illinois Supreme Court justice.”

On August 5, 2013, the plaintiffs in Hale v. State Farm told the judge hearing the case that their “stated intention” was to ask Justice Karmeier to address the allegations in a deposition. The plaintiffs contend that State Farm violated the Racketeer Influenced and Corrupt Organizations Act (RICO) by using the U.S. Chamber of Commerce, the Illinois Republican Party, and other entities as conduits to conceal its role in funding and operating the justice’s campaign. RICO allows plaintiffs to sue persons or entities involved in a conspiracy to engage in improper activities such as bribery, fraud, or violent crimes. In May of this year, a federal judge denied State Farm’s motion to dismiss the lawsuit and ruled that the plaintiffs can continue with discovery. The trial could unearth more details about the extent of State Farm’s involvement in Justice Karmeier’s 2004 campaign.

The events that form the basis of Hale v. State Farm arose in 1997, when more than 4 million aggrieved policyholders filed a class-action lawsuit in an Illinois state court against State Farm. The 1997 lawsuit—Avery v. State Farm—concerned a clause in State Farm’s automobile insurance contract that stipulated that the company would pay for replacement parts of “like kind and quality” to restore a vehicle to its pre-loss condition after an accident. State Farm was accused of breaching this promise by installing inferior replacement parts. A jury in Williamson County, Illinois, agreed with the plaintiffs in Avery v. State Farm and awarded them $1.18 billion. The verdict amounted to around $300 for each of the 4 million plaintiffs.

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