Sam DeFrank of Downstate Marion owned a 1992 GM pickup truck that was in an accident in 1997. He got the truck fixed, but it upset him that his State Farm insurance policy had authorized repairs that used body parts not made by GM. Several months after he got the truck repaired, he sold it for $11,000, just $400 less that its Blue Book value at the time.
And life goes on . . . except DeFrank became a plaintiff in a massive class-action lawsuit that alleged State Farm had defrauded nearly 5 million customers. A Williamson County judge found that State Farm policyholders in 48 states had been defrauded and they should all be governed by Illinois law, whether or not they had ever been in the state. State Farm was whacked with a $1 billion judgment, a classic example of a civil justice system run amok.
Last week, though, the Illinois Supreme Court restored sanity to this. It overturned the judgment against State Farm. The court ruled that the class never should have been certified, no fraud had been committed and damages had not been established.
Talk about the scene of an accident: Plaintiffs’ lawyers had shopped this suit elsewhere but couldn’t find a friendly venue until they hit the jackpot in the Land of Lincoln.
Tricks such as assembling plaintiffs from several states and searching for the friendliest local legal system spurred this year’s successful push in Congress for class-action reform. Today this lawsuit would be transferred to federal court, where it’s doubtful the suit would have made it past the lowest court level.
Give credit, though, to the Illinois Supreme Court for ruling wisely and dispassionately on this case.
The plaintiffs argued that they had been wronged because State Farm didn’t pay to restore their cars to the “original” condition. When a fender gets rumpled or a headlight is smashed, replacement parts can be purchased from the car’s manufacturer. But many replacement parts also can be purchased from independent companies at lower cost.
Many State Farm policies noted that the insurer could require the purchase of parts not made by the original manufacturer when it paid for repairs. The lawyers claimed the less-expensive parts were “categorically inferior.” Not defective; they never tried to prove that.
Writing for the court, Chief Justice Mary Ann McMorrow sensibly pointed out that some consumer goods are “categorically inferior” to others–she specifically cited Chevrolets to Cadillacs–without being in any way defective. DeFrank testified that the replacement parts used in his truck were not an issue when he sold it. So where was the fraud? Nowhere.
Two justices, Charles Freeman and Thomas Kilbride, dissented in part from the majority. They complained that the court has developed a “new hostility” to class actions, went out of its way to rule in State Farm’s favor and wished to “send a message.”
If the court sent a message, it was the right one. This case never should have gone so far. “We have not acted with bias or favoritism but, instead, have applied the law objectively to the facts of record with no purpose other than to reach a just result,” McMorrow wrote.
Such sensible legal reasoning may soon ruin Illinois’ reputation as a sweet home for plaintiffs’ lawyers. What a welcome repair that would be.
