Jim Dey | Years-old election yields big payday for dogged lawyers

Jim Dey | Years-old election yields big payday for dogged lawyers

History was made Tuesday at the East St. Louis federal court when State Farm Insurance agreed to pay $250 million to avoid going to trial on civil charges it improperly influenced the outcome of a state Supreme Court race.

The lawyers will collect the biggest chunk of the $250 million — the rest will be divided among roughly 4.7 million members of the original class-action lawsuit.

Individually, that computes to about $50 each before legal fees and expenses.

Still, it's a ground-breaking case. But to understand why, one has to know the history of it, dating back to 1999 with a slew of twists and turns up to the present.

Nearly 20 years ago, a state court jury in Southern Illinois returned a $1 billion verdict against State Farm based on allegations that it fraudulently arranged for repairs to policyholders' vehicles with "after market" or generic parts instead of equivalent parts.

The plaintiff-friendly 5th District Appellate Court in Mount Vernon affirmed the verdict.

But before the Illinois Supreme Court heard State Farm's appeal, there was a record-setting 2004 race for the Supreme Court seat from that district.

Business groups slugged it out with trial lawyer groups over who would fill the seat — Republican Washington County Circuit Judge Lloyd Karmeier or Democratic appellate Justice Gordon Maag.

The warring parties, each working to elect the justice whose judicial philosophy was more sympathetic to their cause, spent $10 million on the race, the most ever for a judicial election.

Karmeier, now the chief justice, won the contest by a relatively comfortable margin. Maag not only lost the Supreme Court race but was not retained for his appellate court seat, a double defeat that caused him to tuck his tail between his legs and leave Illinois.

When most people look at that contest, they see a particularly acute case of politics, Illinois-style. Lawyers disappointed with the result called it "racketeering" and eventually filed the federal racketeering lawsuit that settled this week.

But there's more history to be digested.

Subsequent to his election to the high court, Justice Karmeier voted in 2005 with the majority in two big decisions that enraged the trial lawyer bar.

In one ruling, the high court overturned a $10.1 billion judgment returned in 2003 against Philip Morris by now-retired Madison County Circuit Judge Nicholas Byron. That case involved false advertising allegations in connection with the company's "light" cigarettes.

In the other, it set aside the $1 billion judgment against State Farm. In a majority opinion written by former Justice Mary Ann McMorrow, the high court found the trial court improperly certified the dispute as a class-action lawsuit and that State Farm did not breach its duty to policyholders by using "after market" parts.

Lawyers pursuing Philip Morris — as well as nearly $2 billion in legal fees — tried mightily to get the judgment reinstated.

They unsuccessfully sought intervention by the U.S. Supreme Court. At one point — incredibly — they persuaded the 5th District Appellate Court to issue a 2014 ruling overturning the Illinois Supreme Court and reinstating $10.1 billion verdict.

Again, the Illinois Supreme Court reversed the lower court and set aside the judgment.

Key to the argument of the anti-Philip Morris lawyers was that the cigarette company's campaign donations were crucial to electing Karmeier and that, as a consequence, his participation in the case was improper.

Responding to a legal motion asking that he recuse himself from the Philip Morris case, Karmeier wrote "the notion" that Philip Morris bankrolled his campaign is "just that — a notion."

Karmeier's defenders have asserted that his campaign team made it a point to withhold information about donors to his campaign to defend against allegations challenging his impartiality.

Something else happened in 2014. Trial lawyers tried to defeat Karmeier's bid for retention. They spent $3 million in advertisements urging Karmeier's defeat.

"Justice Isn't for Sale — Vote No on Republican Judge Karmeier," one advertisement stated.

Karmeier almost lost — attracting just the minimum 60 percent support he needed to remain on the bench.

While one set of lawyers, led by Steve Tillery of St. Louis, pursued the Philip Morris verdict in state court, another set of lawyers, led by Robert Clifford of Chicago, pursued the State Farm verdict in federal court.

But the federal suit was different than the litigation in state court.

Clifford & Co. alleged State Farm violated federal civil racketeering laws by making $3.5 million in donations to the U.S. Chamber of Commerce, which then farmed out the money to Karmeier supporters, including the state Republican Party.

Donations by interested parties to political parties or political action committees are routine in American politics. They're considered distasteful by some and routine by others, but their use is embraced as a tactic by almost everyone involved in the political arena.

Indeed, politicos on both sides of the Karmeier/Maag case used the same tactics. That might have been a potent defense for State Farm had the case gone to trial. But U.S. Judge David Herndon said the Maag team's tactics were "irrelevant," and he barred them from evidence.

In making the $250 million settlement, State Farm denied any wrongdoing. But Clifford said, State Farm's settlement "speaks for itself."

But what does it say?

Perhaps that politics is a tawdry business, and corporations, already disliked by jurors, are reluctant to bet on how they will fare when the facts are ugly.

RICO lawsuits provide for treble damages, meaning State Farm could have faced a judgment of up to $10 billion if it had lost in front of a jury. At the same time, the trial lawyers didn't want to take a chance on coming up empty-handed.

So, in the end, after all the allegations and finger-pointing, they made a deal each could live with.

Jim Dey, a member of The News-Gazette staff, can be reached at jdey@news-gazette.com or 217-351-5369.

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