24 August – LAWFUEL – The Law News Network – The firm has successfully represented State Farm Mutual Automobile Insurance Company before the Illinois Supreme Court in obtaining the reversal of a nationwide class action judgment of more than $1 billion against the company. The judgment was one of the largest in Illinois history and the largest judgment ever against an insurance company. The Illinois Supreme Court’s decision, which reinforces the current judicial trend to give greater scrutiny to nationwide and multi-state class actions, represents a significant victory both for insurance companies and corporate defendants generally.
The lawsuit, Avery v. State Farm, challenged State Farm’s specification of non-original equipment manufacturer (non-OEM) parts for insurance covered car repairs. On August 18, the Illinois Supreme Court ruled 6-0 that the certification of a nationwide class in Avery was improper. A majority of the Court also ruled that plaintiffs had not established breach of contract or consumer fraud by State Farm. The Illinois Supreme Court’s opinion is a watershed decision in class action and consumer fraud jurisprudence and should have significant impact on courts across the country. Skadden partner Sheila Birnbaum argued the case for State Farm before the Illinois Supreme Court.
The Avery case was filed in the First Judicial Circuit Court of Williamson County, Illinois. The plaintiffs asserted breach of contract claims and claims under the Illinois Consumer Fraud Act (ICFA), based upon State Farm’s specification of non-OEM parts in car repair estimates for its insureds’ vehicles. The Circuit Court certified a class action consisting of some 4.75 million State Farm policyholders from 48 states and the District of Columbia. The seven-week trial resulted in a jury verdict on the contract claims against State Farm of more than $456 million. In addition, the Circuit Court awarded the class $130 million on the ICFA claim and punitive damages of $600 million. The Appellate Court, Fifth District, vacated the $130 million compensatory damages awarded on the ICFA claim but affirmed the remainder of the judgment, more than $1 billion, against State Farm.
State Farm retained Skadden to represent the company in its appeal to the Illinois Supreme Court. In its decision, the Illinois Supreme Court accepted virtually all of the grounds urged by Skadden for reversing the judgment. In the Court’s majority opinion, Chief Justice McMorrow held that certification of the nationwide contract class was improper because of individual issues presented by the plaintiffs’ claims. The decision also held that the plaintiffs had failed to establish a breach of contract and damages, either on a class-wide basis or for the individual named plaintiffs.
The Court also rejected certification of a nationwide consumer fraud class under ICFA, holding that ICFA has no out-of-state effect. In addition, the Court held that the single Illinois named plaintiff had not shown any actionable misrepresentation by State Farm and had not been deceived by State Farm. In a separate opinion, Justices Freeman and Kilbride concurred as to the impropriety of nationwide class certification, but dissented as to some of the majority’s other rulings.