Defendants accused of RICO activity in Avery v. State Farm push for dismissal

Bethany Krajelis Oct. 11, 2012, 9:52am


The plaintiffs in a class action suit alleging fraudulent activity in Avery v. State Farm have simply recast the same claims they've been making for years to avoid yet another dismissal, the defendants assert.

The defendants -- State Farm, William Shepherd, an attorney at the insurance company, and Ed Murnane, president of the Illinois Civil Justice League (ICJL) -- this month all filed motions to dismiss the suit that Mark Hale, Todd Shadle and Carly Vickers Morse brought in May in federal court.

In their motions, the three defendants contend that the suit must be dismissed because federal courts don't have jurisdiction to review civil judgments of state courts.

They also assert that the plaintiffs have failed to prove their claims under the Racketeer Influenced and Corrupt Organizations Act (RICO) and even if they did, their claims were time barred at least two years ago.

Hale, Shadle and Morse were class members to the 1997 class action suit against State Farm that accused the company of providing inferior parts for vehicle repairs. The suit resulted in a $1 billion judgment against State Farm, which the state high court eventually overturned.

In 2005, the Avery plaintiffs asked the court to vacate their decision, claiming that Justice Lloyd Karmeier should have recused himself from the case based on $350,000 in campaign donations he received from State Farm employees.

A group of attorneys in 2011 made a similar argument, but noted that Karmeier actually got more than $3 million in contributions that they claim the insurance company funneled through the U.S. Chamber of Commerce and ICJL, as well as its political action committee JUSTPAC.

The state Supreme Court rejected both requests and the U.S. Supreme Court in 2006 denied the plaintiffs' petition for certiorari.

In May, the three Avery plaintiffs accused State Farm, Shepherd, Murnane and Karmeier's campaign committee of creating a RICO enterprise to defraud millions of policyholders out of the billion dollar judgment.

They claim that the defendants basically worked together to recruit, finance and elect Karmeier to the Supreme Court so he would vote to overturn the judgment against State Farm once elected.

Karmeier's campaign committee was dismissed from the suit late last month because it dissolved as a political association several years ago.

In their recently-filed motions to dismiss, Shepherd, Murnane and State Farm claim that the complaint should be dismissed for lack of subject matter jurisdiction under the Rooker Feldman doctrine.

They contend that federal district courts don't have jurisdiction to review civil judgments of state courts and that despite how the plaintiffs worded their May complaint, they are seeking review of the Avery judgment.

"Plaintiffs seek to avoid dismissal by attempting to recast their claims as not stemming from the Illinois Supreme Court's judgment in Avery," Shepherd asserts in his motion to dismiss.

His motion goes on to say that "While their response attempts to prevaricate regarding the source of their alleged injury, the face of plaintiffs' complaint makes it clear that the lynch pin of the alleged fraudulent scheme was Justice Karmeier's participation in the Avery decision."

State Farm made the same argument in its motion, asserting that "Plaintiffs' present attempt to recast the same allegations as RICO claims is an impermissible attack on the judgment and decisions of the Illinois Supreme Court."

Murnane stresses in the motion he filed this week that from 2005 to 2011, "plaintiffs presented substantially similar allegations and arguments regarding Justice Karmeier's participation in Avery" in several motions and memos to the Illinois and U.S. Supreme courts to no avail.

In addition, Murnane and Shepherd both brought up the First Amendment in their support of the suit's dismissal.

They contend that the plaintiffs failed to prove they engaged in fraudulent activity and were simply exercising their First Amendment right to participate in political speech by supporting Karmeier's campaign.

"Essentially, the plaintiffs are asking this court to use RICO to penalize Mr. Shepherd for exercising one of the most fundamental rights in our society," the attorney's motion states. "To do so would allow a RICO action to be used to chill the kind of speech that is essential to political process in this society."

Murnane agreed in his memo, saying that the First Amendment protected his right to support Karmeier in the 2004 election.

Citing the U.S. Supreme Court's 2010 decision in Citizens United v. Federal Election Commission, Murnane's memo states that "The right of citizens to inquire, to hear, to speak, and to use information to reach consensus is a precondition to enlightened self-government and a necessary means to protect it."

All three of the defendants also argue that the plaintiffs failed to meet the RICO requirement of showing a direct relationship between the plaintiffs' injuries and the defendants' conduct.

Murnane contends that the plaintiffs accuse him of being involved in an alleged RICO enterprise, but never explain how his "relationship with the alleged enterprise provided the means for State Farm to allegedly conceal its support of Justice Karmeier from the Illinois Supreme Court."

State Farm also notes in its motion that despite their employees' contributions to Karmeier, there was no guarantee he would be elected, let alone that he would vote to overturn the billion dollar judgment.

"Even more importantly, Plaintiffs cannot show that Justice Karmeier's participation had any effect on the outcome in Avery," the insurance company contends.

Saying that the court unanimously rejected different aspects of the Avery plaintiffs' suit and that only justices would have remanded on their contract claim, State Farm asserts that "Karmeier's vote in Avery was not decisive."

The plaintiffs have until mid-November to respond to the defendants' motions.

Court documents show that Chief Judge David Herndon is presiding over the matter.

The plaintiffs are represented by Tennessee attorneys W. Gordon Ball and Charles Barrett, as well as Louisiana attorney Patrick Pendley.
Chicago attorneys Joseph Cancila Jr., J. Timothy Eaton and James Gaughan, as well as Edwardsville attorney Patrick Cloud, represent State Farm.

Belleville attorneys Russell Scott and Laura Oberkfell represent Shepherd and Chicago attorneys Richard O'Brien and David Greenfield represent Murnane.

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