State Farm policyholders get class-action status in $1 billion RICO lawsuit

Sept. 20--A federal racketeering lawsuit involving State Farm and allegations of funneling money into the election of a state judge has been granted class-action status, potentially benefiting more than 4 million policyholders.

In 2012, plaintiffs that included Mark Hale of New York and Todd Shadle of Texas filed a two-count, class-action lawsuit in a U.S. District Court for the Southern District of Illinois. The class could include 4.7 million policyholders, court documents show.

They alleged that, starting in 2003, State Farm conducted a racketeering enterprise to enable the insurer to evade payment of a $1.05 billion judgment that had been affirmed by the Illinois Appellate Court.

The underlying case had involved a class action suit filed in 1997 regarding claims for damage to cars between 1987 and 1998 that were repaired with nonoriginal equipment manufacturer parts. It led to the $1.05 billion verdict.

In a 29-page order Friday, U.S. District Judge David Herndon recapped the plaintiff's allegations, which sought to disqualify Judge Lloyd Karmeier from participating in the appeal, "having received reliable information that State Farm had exerted financial and political influence" to get Lloyd Karmeier elected to the Illinois Supreme Court.

The request was denied and in August 2005, "with now-Justice Karmeier participating in the court's deliberations and casting his vote in State Farm's favor, the Illinois Supreme Court issued a decision overturning the $1.05 billion judgment," Herndon wrote.

State Farm "recruited Karmeier, directed his campaign, had developed a vast network of contributors and funneled as much as $4 million to the campaign," according to Herndon's summary of the complaint. "Then, after achieving Karmeier's election, State Farm deliberately concealed all of this from the Illinois Supreme Court while its appeal was pending."

State Farm spokeswoman Missy Dundov said the insurer is "disappointed in the court decision on the class certification question and respectfully disagree with it."

Dundov said State Farm plans to ask the appellate court to review the ruling.

On Monday, the Illinois Supreme Court said Karmeier would be its next chief justice. Karmeier is not a defendant in the lawsuit.

The 2012 case, if successful, could result in a more than a $7.6 billion payout from State Farm for the class, due partly to the interest that has accrued, according to Clifford Law Offices, which is representing policyholders.

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