RICO class action certified against State Farm over campaign cash to elect judge who ruled in insurer’s favor

September 27, 2016 by

An Illinois federal judge has certified a class of policyholders who filed a RICO suit against State Farm and others that allegedly funneled money into a state judge’s election campaign to evade payment of a $1 billion judgment.

On behalf of a class of almost 5 million policyholders, the plaintiffs allege that State Farm Mutual Automobile Insurance Co. and others carried out a RICO enterprise to defraud the policyholders of a $1.05 billion judgment by using campaign contributions to elect a judicial candidate to Illinois’ top court to sway a vote on an appeal.

The judge in question, Lloyd A. Karmeier, won his race for a seat on the Illinois Supreme Court in 2004 and less than a year later cast a vote in State Farm’s favor, overturning the $1.05 billion judgment.

U.S. District Judge David R. Herndon ruled that common questions of law or fact predominate and that the class action is a superior method to adjudicate the controversy, since “trying these claims individually would result in a substantial amount of repetition and wasted resources.”

The $1.05 billion judgment at issue had sprung from a separate class action, Avery v. State Farm, that had been filed in Illinois state court.  It sought claims of breach of contract and violation of the Illinois Consumer Fraud Act on behalf of policyholders who had suffered losses after making a claim for vehicle repairs and having parts not made by the original manufacturers installed on their vehicles.

The Illinois Appellate Court upheld the judgment in 2001, and the Illinois Supreme Court accepted State Farm’s appeal the following year.  At about the same time, Judge Karmeier, then a trial judge, ran for a seat on the state high court against Appellate Judge Gordon Maag.

The plaintiffs allege that State Farm sought to “recruit, finance, direct and elect a candidate to the Illinois Supreme Court who, once elected, would vote to overturn the $1.05 billion judgment.”  The plaintiffs claim State Farm, acting in conjunction with two individuals and the Illinois Civil Justice League, tapped into a network of contributors to pour as much as $4 million into Karmeier’s campaign — a sum allegedly representing about 80 percent of the campaign’s contributions.

The case is Mark Hale et al. v. State Farm Mutual Automobile Insurance Company et al., case number 3:12-cv-0660 in the U.S. District Court for the Southern District of Illinois.

Keith Dubanevich
Keith is an accomplished trial, appellate, and healthcare lawyer with over 30 years of experience in more than a dozen different jurisdictions around the country. With a focus on complex dispute resolution, with particular emphasis in the healthcare industry, Keith is adept at handling multi-state and internal antitrust cases, consumer litigation, and securities disputes. In healthcare, he has handled peer review disputes, partnership and incorporation matters, and billing investigations. Keith has led internal investigations for public entities as well as for not-for-profit organizations. Keith's clients value his keen instincts in court and his ability to delve into complex legal issues while never losing sight of the overall strategy of a case. During his time at the Oregon Department of Justice as Associate Attorney General and Chief of Staff, Keith led the creation of a civil rights unit, managed securities litigation including multiple cases against financial services companies, and supervised antitrust investigations and prosecutions. He was also involved with the adoption of legislation that expanded the Unlawful Trade Practices Act and legislation that imposed a mediation requirement prior to non-judicial foreclosures.

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