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Federal Judge Certifies Class Action Against State Farm in $7.6 Billion+ "Dark Money" Action

An Illinois federal judge late Friday (Sept. 16, 2016) granted class certification to plaintiffs representing 4.7 million State Farm policyholders involved in a complex Racketeering Influenced and Corrupt Organizations Act ("RICO") regarding an alleged scheme involving campaign contributions being poured into an Illinois Supreme Court justice's race to influence the reversal of a $1.05 billion decision. If successful, that could result in a more than $7.6 billion payout from State Farm for the class given the interest that has accrued.

This case alleges violations of the "RICO" against State Farm and related defendants who allegedly "perpetrat[ed] a scheme through an enterprise specifically designed to defraud Plaintiffs and Class out of a $1.05 billion judgment," according to the complaint. That "scheme" allegedly involved the defendants orchestrating a "dark money" network of campaign contributions to the campaign committee of Justice Lloyd A. Karmeier for the Illinois Supreme Court who would be sympathetic to State Farm's position in the $1.05 billion class action, and then misleading and lying to the Court about its clandestine and sizeable involvement in contributions to Karmeier's contested election.

"Dark money" is campaign contributions that are run through political action committees (PACs) so that the actual source of its distribution is muddied.  Here, it is alleged that State Farm contributed millions to the U.S. Chamber of Commerce that then sent the money back to PACs and the Illinois Republican Party for use in Karmeier's campaign.

Karmeier's contested election for an open downstate seat on the Illinois Supreme Court for the November, 2004 election was one of the highest in history for a judicial election and his recruitment for the position involved someone "who would support State Farm once its appeal came before the [Illinois Supreme] Court for disposition," according to pleadings. The underlying case involves a class action filed in 1997 that led to a $1.05 billion verdict that was upheld by the appellate court. But when it ultimately was decided by the Illinois Supreme Court more than two years following oral arguments before the Court that Karmeier never heard, by then Karmeier had been elected and had taken the bench and decided to participate in the Court's decision, with Karmeier admitting he cast the deciding vote.

The defendants in the RICO certified class action are State Farm; Edward Murnane, President of the Illinois Civil Justice League (ICJL); and William G. Shepherd, employee/lobbyist of State Farm and ICJL Executive Committee Member. Karmeier's election committee, now long disbanded, remains associated in the enterprise, according to the pleadings.

Friday's decision certifying the class brings this case one step closer to a jury trial to determine the damages suffered by the class that consists of 4.7 million State Farm policyholders who made a claim for vehicle repairs pursuant to their policies from 1987-1998. These claims were litigated in the Avery v. State Farm case and involved damages to cars that were repaired with non-factory authorized and/or non-Original Equipment Manufacturer (OEM) parts when they were led to believe that they were factory authorized, as their policies provided.

The claimed misleading comments and lies by State Farm representatives to the Illinois Supreme Court and the damages they caused are now the subject of the RICO class action after plaintiffs hired a former FBI agent who uncovered the alleged "dark money" ties of State Farm to Karmeier's campaign in his bid for election to Illinois' highest court. Plaintiffs allege Karmeier's participation in that case and his apparent lack of objectivity tainted the tribunal that resulted in the reversal by the Illinois Supreme Court.

Friday's decision comes on the heels of an earlier decision by U.S. District Court Judge David R. Herndon who held in June that plaintiffs' experts, including a judicial election expert as well as a forensic accounting expert who valued the case to now be worth $7.6 billion, could testify as expert witnesses during the expected trial of this matter.

"The Illinois Constitution clearly provides that four votes are required to reverse the decision of an appellate court. In the absence of four votes, the Illinois Constitution provides that the decision of the appellate court stands, which in this matter would have resulted in affirming the $1.05 billion verdict," said Robert A. Clifford, founder and senior partner of Clifford Law Offices in Chicago and co-lead counsel of the class action matter. "The next step is that we will continue our preparations for trial of this matter on behalf of the millions of State Farm policy holders."

In its 29-page written opinion issued Friday (Sept. 16, 2016), Judge Herndon said that in certifying the class, "the Court agrees with plaintiff that all questions of law and fact are common as to the putative class: did defendants act in concert over a period of time to select and elect Justice Karmeier and to fraudulently conceal the nature and the scope of their involvement to enable and defend his participation in Avery."

The parties are expected to be before Judge Herndon Oct. 15 in St. Louis for a status on the case.

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Case: Hale, Shadle and Loger on behalf of themselves and all others similarly situated v. State Farm Mutual Automobile Insurance Company, Edward Murnane and William G. Shepherd, No. 12-0660-DRH (U.S. District Court for the Southern District of Illinois).

For further information, contact Clifford Law Offices' Communications Partner Pamela Sakowicz Menaker at 847-721-0909 orpammenaker@cliffordlaw.com.

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