Robert A. Clifford
A class-action conspiracy lawsuit against State Farm Insurance Co. preliminarily reached a $250 million settlement on Tuesday in East St. Louis federal court.
The plaintiffs filed the suit seeking nearly $10 billion from State Farm in a trial that was scheduled to begin today and run for six weeks.
The class alleged in the suit that the Bloomington-based insurance giant secretly funneled money to the campaign committee for Lloyd A. Karmeier, now the chief justice of the Illinois Supreme Court, while he was a candidate for the high court in 2004.
Soon after joining the court, Karmeier cast a vote to overturn a $1.06 billion judgment against State Farm for its use of aftermarket car parts in repairs.
In that case, Avery v. State Farm, the Illinois Supreme Court ruled the nationwide plaintiff class was improperly certified by a Williamson County trial judge and also that the use of aftermarket parts was not a breach of State Farm policyholders’ contracts.
The current class filed the current suit under the Racketeer Influenced and Corrupt Organizations Act in 2012, alleging State Farm covertly supported Karmeier’s campaign in order to secure his win and the Avery suit’s defeat.
The class representative, Mark Hale, is a New York resident. The case also named as individual defendants Illinois Civil Justice League Director Ed Murnane and State Farm employee William Shepherd.
U.S. District Judge David Herndon of the Southern District of Illinois certified Hale’s class last year. In the months since, the two parties readied for trial.
In a submission to the court supporting the settlement, State Farm wrote that it believes it could win at trial, finding the claims “factually and legally without merit.”
“But this case has already gone on for over six years, and the predecessor case, Avery v. State Farm, lasted even longer. As part of the proposed class settlement, [p]laintiff’s [s]econd [a]mended [c]omplaint adds an unjust enrichment claim, which provides a vehicle for State Farm to end the entire litigation with the class. These considerations have led State Farm to determine that the proposed class settlement in this case is in the best interests of its policyholders.”
In its own memorandum of support, the plaintiffs also cited the age of this case and the massive amount of evidence gathered and hearings held.
The memo said that of approximately 4.7 million class members, only 479 have opted out.
“This [s]ettlement represents a substantial achievement for [c]lass [m]embers, all of whom are eligible for monetary payments, and many of whom will receive those payments automatically, meaning without having to submit a claim form,” the memo said.
Despite confidence the class could win, counsel argued, “this proposed [s]ettlement provides significant relief to [c]lass [m]embers now” and avoids an adverse ruling or lengthy appeal.
“If the [c]ourt grants preliminary approval of the [s]ettlement, [p]laintiffs anticipate that a final fairness hearing could take place this calendar year, and propose a hearing date of December 10, 2018.”
Though the counsel list for all the parties involved is much longer, the proposed settlement form was signed on behalf of the class by Robert A. Clifford of Clifford Law Office. Robert “Barney” H. Shultz Jr., vice president and counsel at State Farm, represented the insurance company in the settlement, along with Sheila L. Birnbaum of Dechert LLP in New York and Ronald S. Safer and Joseph A. Cancila Jr. of Riley Safer Holmes & Cancila LLP.
Both a Clifford Law spokeswoman and State Farm released an identical written statement: “As a part of the settlement, [p]laintiffs have agreed to dismiss, upon final approval, their RICO claims and unjust enrichment claims. The [s]ettlement [a]greement will include recitals that State Farm denies liability, that it considers the claims to be without merit, that it considers that it is settling under the unjust enrichment claim and that the [s]ettlement is made simply to bring an end to the entire litigation.”
A State Farm spokesman said the parties met in closed chambers early on Tuesday and that the settlement proposal was shared in open court around 2:45 p.m.
Clifford, who became involved with the underlying lawsuit in 2002 before it went on appeal to the 5th District Appellate Court, said the parties picked a jury last week and were prepared to make opening statements on Tuesday.
Herndon appointed Baton Rouge, La., attorney Randi S. Ellis as mediator.
“Throughout the weekend and into the night — many nights — an agreement was reached,” Clifford said.
The court-defined class comprises any U.S. resident outside Arkansas or Tennessee who was insured by a State Farm auto insurance policy between July 28, 1987, and Feb. 24, 1998, and whose claim was repaired with non-OEM parts or paid out based on non-OEM part costs.
The class excludes State Farm workers and has a shorter time window for claims from Illinois or California.
Under the proposed terms of the settlement, the claims administrator will automatically pay class members with a valid address on file, and others who are eligible can submit claims.
The fund will be distributed in “equal, per-capita shares,” the document says.
If approved by the court, the three named class plaintiffs will each receive a $25,000 “service award.”
The case in the Southern District of Illinois is Mark Hale, et al., v. State Farm Mutual Automobile Insurance Co., et al., No. 12 C 660.
Staff reporter Andrew Maloney contributed to this report.