Madison - St. Clair Record

Sunday, November 17, 2019

The case that made Karmeier famous - Avery - stands out as end to powerful class actions

Attorneys & Judges

By The Madison County Record | Nov 6, 2019

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SPRINGFIELD – Justice Lloyd Karmeier delivered dozens of decisions for the Illinois Supreme Court but didn’t deliver the one that made him famous. 

Former Justice Mary Ann McMorrow composed the opinion that wiped out a class action judgment in Avery v. State Farm, but Karmeier paid the price. 

For 13 years, plaintiff lawyers and other foes of business claimed his participation tainted the decision. 

“Justice for sale,” they cried, and they set up a trial about it in U.S. district court. 

Instead of placing him on the stand to answer their accusations, they settled with State Farm for about three percent of the damages they claimed. 

Now, as Karmeier prepares to retire at the end of next year, the Avery decision stands out more than ever as the abrupt end of a powerful movement. 

Class actions gained favor in the last century on a premise that businesses shouldn’t cheat on amounts too small for reasonable remedy in court. 

Aggregation of such claims made them worth pursuing, and defendants generally settled on terms that would appease customers. 

Class action lawyers in Illinois specialized in the state’s consumer fraud law, which provided for private recovery of damages through civil litigation. 

In 1997, a national legal team sued State Farm at Williamson County court in Marion. 

Local counsel Patrick Murphy alleged that on crash claims, State Farm specified parts that the vehicle’s manufacturer hadn’t made. 

In Avery, Murphy alleged consumer fraud and breach of contract, claiming State Farm breached an obligation to provide parts of like kind and quality. 

Williamson County associate judge John Speroni certified a nearly national class of policyholders whose repair records reflected such specifications. 

He ruled that jurors would treat State Farm policies as uniform throughout the nation, finding that differences in policies from state to state were immaterial. 

Murphy dropped out of the action because President Clinton appointed him in 1998 as judge of U.S. district court. 

In 1999, jurors in Speroni’s court found State Farm breached its contract. 

They fixed damages at $456 million. 

Speroni then held bench trial on consumer fraud and found State Farm concealed, misrepresented, suppressed or omitted facts concerning crash parts. 

He awarded $600 million in punitive damages, for a whopping $1.056 billion judgment.

State Farm appealed to the Fifth District. 

Justices Gordon Maag and Thomas Welch affirmed Speroni in 2001, along with Eighth Judicial Circuit judge Robert Welch who sat by assignment. 

Maag wrote, “The jury considered the conflicting expert opinions and the evidence and awarded a sum well below plaintiffs’ expert’s minimum figure.” 

He found no evidence that passion or prejudice motivated the award. 

He wrote that plaintiffs claimed all non original equipment manufacturer parts were categorically inferior. 

“State Farm denied this claim,” Maag wrote. “Plaintiffs won.” 

He wrote that plaintiffs supported their claim with expert testimony that parts were inferior in appearance, fit, quality, function, durability, and performance. 

He found evidence that State Farm knew the parts were inferior and didn’t advise policyholders of problems with the parts. 

He found evidence that State Farm assured policyholders that it specified quality replacement parts. 

State Farm appealed to the Supreme Court, where Justice Robert Thomas stated that he would take no part. 

The other six Justices heard arguments, but three wanted to reverse the judgment outright and three favored trials for Illinois consumers.   

In 2003, Maag declared that he would run for the Supreme Court as a Democrat in the 2004 election and simultaneously stand for retention at the appellate court on a non partisan bias. 

Karmeier declared he would run as a Republican. 

Maag raised $117,760 in 2013, mostly from lawyers in Madison and St. Clair counties. 

Karmeier raised $80,375, receiving $5,000 each from the state medical society, Cassens Transport of Edwardsville, and the political action committee of the Illinois Civil Justice League, JUSTPAC. 

In the first half of 2004, Maag raised $31,532.50 and Karmeier raised $180,863. 

As the election approached, their parties poured millions into the race. 

Democrats provided almost $3 million to Maag, and their Justice for All committee provided more than $1.2 million. 

Republicans provided almost $2 million to Karmeier, and JUSTPAC provided $1.15 million. 

The state hospital association gave him $189,000, and the medical society gave him about $104,000.

One of the issues in the race was the high cost of medical malpractice insurance for providers who argued that excessive litigation or threat of litigation was driving doctors out of the Metro-East. 

The political action committee of the state Chamber of Commerce gave him $210,000, and the state Chamber gave him about $56,000. 

Karmeier received $22,500 from a group of life insurers, $15,000 from American Family Insurance, and $10,000 each from Farmers and Liberty Mutual. 

The election produced 309,521 votes for Karmeier and 256,339 for Maag, who also failed to get 60 percent voter approval to be retained to the Fifth District Appellate Court. 

Karmeier reported for duty in Springfield with the Avery appeal still pending. 

Lead plaintiff Michael Avery moved for Karmeier to disqualify himself, but Karmeier denied the request and the other Justices backed him up. 

When the decision came, it severely shrank the boundaries of Illinois class actions. 

McMorrow wrote that the question of whether language in various policies could be given uniform interpretation should have been decided at trial. 

She wrote that if Speroni had answered the question in the negative, he couldn’t have certified the class. 

She found evidence of damages so speculative and uncertain that judgment deprived State Farm of property in violation of its rights. 

She wrote that the General Assembly didn’t intend the Consumer Fraud Act to apply to transactions that took place outside of Illinois. 

Justice Thomas Freeman dissented but conceded that the Act didn’t apply nationwide. 

He argued that the case should return to Speroni so he could determine if his verdict could be upheld with respect to any subclass. 

“If there was a wrong committed here, as the jury found, the trial court agreed, the appellate court confirmed, and I would affirm, State Farm ought to be held accountable therefor to the extent that due process will allow,” Freeman wrote. 

Avery moved to reopen the case in 2011, claiming he found new evidence of State Farm’s secret and improper support for Karmeier in 2004. 

The Justices denied the motion. 

In 2012, in U.S. district court, Avery’s lawyers filed a racketeering suit against State Farm on behalf of Avery class member Mark Hale. 

He sought to recover the judgment with triple damages and interest. 

In 2014, with the action advancing slowly, Karmeier stood for retention. 

Plaintiff lawyers spent hundreds of thousands on “justice for sale” messages, but voters provided more than the necessary 60 percent to retain Karmeier. 

The racketeering suit still advanced slowly, until District Judge David Herndon set trial to start in September 2018. 

By then, interest had built the claim to about $9 billion. 

Herndon presided over jury selection but stopped the proceedings when class counsel and State Farm announced settlement at $250 million.

 

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