Judge approves $250 million State Farm settlement; Says plaintiffs likely would not have prevailed at trial

By Record News | Dec 14, 2018

EAST ST. LOUIS – U.S. District Judge David Herndon, who designated Illinois Supreme Court Chief Justice Lloyd Karmeier as a hostile witness for a trial accusing him of corruption, now admits jurors might have trusted him. 

“A Southern Illinois jury would have a difficult time not believing a Supreme Court Justice,” Herndon said on Dec. 13, at a hearing where he approved a $250 million settlement between State Farm and a class of policyholders from a previous class action. 

"I find it quite likely plaintiffs would not have prevailed at trial," Herndon said. 

If they had won, he said he wouldn’t have awarded post judgment interest. 

Herndon and Karmeier  

In a case 20 years old, interest amounted to more than damages. 

Herndon called a claim for treble damages speculative and said a statute of limitations was a significant impediment. 

He approved a fee of a third for class counsel and about $7 million in expenses, leaving about $160 million for the class. 

He overruled an objection from Lisa Marlow of Kentucky, who claimed counsel settled for so little that they didn’t deserve a third for their fee. 

In the original case, Avery v. State Farm, plaintiffs claimed State Farm specified and provided inferior parts for crash repairs. 

Jurors in Williamson County awarded the class more than $1 billion in 1998, and associate judge John Speroni entered judgment. 

Fifth District appellate judges affirmed him in 2001, in an opinion that Justice Gordon Maag signed. 

State Farm appealed to the Supreme Court, which heard argument but hadn’t reached a decision by 2004. 

In that year’s race for Supreme Court, Karmeier defeated Maag. 

Karmeier and five other Justices reversed Avery in 2005, with one Justice not participating. 

Avery petitioned to reopen the case in 2011, claiming to possess evidence that State Farm secretly supported Karmeier in 2004. 

The Supreme Court denied the petition. 

Avery’s lawyers, representing Mark Hale of New York State, filed a racketeering suit against State Farm in federal court in 2012. 

They argued that they didn’t have to prove that the Supreme Court would have affirmed the judgment if voters hadn’t elected Karmeier. 

They built a theory that he tainted the tribunal. 

Their expert calculated damages exceeding $7 billion. 

Herndon started trial the day after Labor Day, but the parties promptly settled. 

No one objected but Marlow, who claimed class counsel walked away from a trial worth far more than $250 million. 

She argued that Seventh Circuit appellate judges favored plaintiffs all along. 

At the approval hearing, class counsel Robert Nelson of San Francisco said there was no question that $250 million was adequate in light of the risks. 

“The Seventh Circuit didn’t rule substantively on any matter,” Nelson said. 

He said whether they would have ruled for plaintiffs after trial was a completely different question. 

“We made a realistic judgment on the information we were able to obtain,” he said. 

He said plaintiffs paid for focus groups and jury consultants, and Marlow didn’t. 

He said a million class members would receive automatic payments. 

“I think we shined a spotlight on something important,” Nelson said. 

After explaining the settlement he explained the fees along the same line. 

“The risk of walking away empty handed here was very great,” he said. 

He said racketeering cases are extremely difficult, and they had a completely novel theory – the tainted tribunal. 

“There were not a lot of firms looking to be part of this litigation,” he said. 

“We uncovered the fraud entirely on our own.” 

He adjusted moments later and called it “alleged” fraud. 

He said they could justify a much higher fee than they asked for. 

He said they worked more than 55,000 hours. 

State Farm counsel Joseph Cancila of Chicago said he had nothing to add beyond his brief on the settlement. 

He said State Farm took no position on fees. 

Herndon said, “I agree on all points with Mr. Nelson.” 

He said four and a half million class members received direct or general notice. 

Herndon, who will retire next month, said referring discovery to Magistrate Judge Stephen Williams was one of the better decisions of his career. 

Herndon approved fees and expenses, and he overruled the objection. 

Marlow’s lawyer, Mark Downton of Nashville, Tenn., didn’t attend. 

A message he sent about missing the hearing rubbed Herndon wrong.  

Herndon said Downton engaged in hyperbole and “suggested knowledge he couldn’t possibly have.” 

Class counsel Robert Clifford of Chicago asked him to strike Marlow’s objection on procedural grounds. 

Herndon said, “Most of which is a vicious attack on me.” 

He struck it as an alternative to dismissing it.

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Clifford Law Officers, PC State Farm Insurance

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