State Farm Must Face Claims It Helped Elect Favorable Judge

EAST ST. LOUIS, Ill. (CN) – A federal judge refused to throw out a racketeering lawsuit claiming State Farm spent up to $4 million on the campaign of an Illinois judge who later voted to overturn a $1 billion award to the insurance giant’s policyholders.

State Farm Mutual Automobile Insurance Co. had asked a judge in the Southern District of Illinois to dismiss without trial a class action filed in May 2012 alleging the insurer had funneled millions of dollars into the campaign of Illinois Supreme Court Justice Lloyd Karmeier.

Karmeier ran for a vacant seat on the state’s high court, and the insurer allegedly hoped that his presence on the bench would help it overturn a $1.05 billion compensatory and punitive damages award to 4.7 million State Farm customers who said the insurer failed to supply proper replacement parts for vehicles.

The plaintiffs asked the court to recuse Karmeier from the case after he beat Judge Gordon Maag in the 2004 general election to win the open seat.

But according to the policyholders’ racketeering lawsuit, State Farm “grossly” underrepresented the full breadth of its support for the judge and the court denied the policyholders’ motion to disqualify the judge.

Karmeier was a part of a panel that voted to overturn the judgment against State Farm in August 2005.

After lead plaintiff Mark Hale of New York filed the racketeering class action in the Southern District of Illinois six years ago, State Farm asked the court to reject the claims instead of allowing the case to proceed to trial. The policyholders had won class-action status in September 2016.

On Tuesday, U.S. District Judge David Herndon denied the insurer’s motion for summary judgment. Herndon rejected State Farm’s argument that the class had already litigated their claims.

The $1.05 billion award was about a failure to make sure customers’ vehicles had the proper replacement parts, while the 2012 class action was about State Farm’s alleged covert efforts to support Judge Karmeier and conceal the full extent of its support, according to Herndon’s 17-page ruling.

“Clearly, these are two separate causes of action that do not arise from the same transactions or involve the same factual allegations. Simply, defendants’ actions in the two cases are entirely different and do not seek redress from the same wrong,” Herndon wrote, adding that the plaintiffs in the prior cases did not possess the evidence to fully comprehend the depth of State Farm’s alleged misconduct.

In court papers, the class claims State Farm bet that a $2 million to $4 million investment in campaign financing for Karmeier would pay off if the $1.05 billion judgment were reversed.

In an investigation headed by retired FBI Special Agent Daniel Reece, the policyholders claim they discovered that State Farm, through several of its operatives and the Illinois Civil Justice League, had overseen Karmeier’s campaign, created a network of campaign contributors, and spent up to $4 million to help him win.

State Farm had concealed the extent of its efforts while its appeal of the judgment was pending at the Illinois Supreme Court, according to the policyholders’ complaint.

Karmeier is now the chief justice of the Illinois Supreme Court. He is not as a named defendant in the class action.

In 2016, attorneys with the plaintiffs’ law firm Clifford Law Offices said that if they prevail in the case, an award could top $7.6 billion to account in part for accrued interest on the earlier judgment, according to a Chicago Tribune report.

State Farm spokeswoman Missy Dundov said the insurer “respectfully disagrees” with Herndon’s ruling and “will continue to vigorously defend our self in court.”

The plaintiffs’ lead attorney, Charles Barrett, did not immediately respond to a request for comment on the ruling.

Karmeier’s attorney Courtney Cox declined to comment.

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