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Washington, DC,
August 18, 2005—The Supreme Court of Illinois struck an
important blow against “regulation through litigation” today
when it ruled 6-to-0 that a state trial judge should not have
granted nationwide class action treatment in a case about the
use of non-original equipment manufacturer parts in
insurance-covered car repairs, the
American Tort Reform Association (ATRA) said.
The Court’s ruling in
Avery v. State Farm Mut. Auto. Ins. Co.,
No. 5-99-0830, overturned a $1.2 billion judgment against State
Farm, one of the largest verdicts in Illinois and the largest
against an insurance company. The award included $600 million
in punitive damages added by the trial judge. The Court ruled
that nationwide class certification was inappropriate because of
the different facts in individual plaintiffs’ contract claims
and because the only plaintiff qualified to represent a
nationwide consumer protection class failed to prove his
consumer protection claims.
A majority of the
Court also ruled that plaintiffs failed to establish that State
Farm breached its contracts with its policyholders or that they
were damaged. Justices Freeman and Kilbride partially
concurred and partially dissented from the ruling. Justice
Thomas did not participate.
“The Court deserves
praise for refusing to allow trial lawyers and a single judge in
one case to dictate how forty-eight states and the District of
Columbia treat the use of replacement parts in car repairs—the
very essence of regulation through litigation,”
Tiger Joyce,
ATRA President, said. “The Court was respectful of Illinois
legislators and regulators, lawmakers in other states, and
especially the public at large. The Court took a commonsense
approach to the Illinois consumer protection statute and showed
its respect for the rule of law.”
The case was brought
in state court in Williamson County, Illinois, as
a nationwide class action covering
4.75 million State Farm policyholders in forty-eight states and
the District of Columbia. The plaintiffs filed contract and
consumer protection claims against the insurance company because
of the company’s practice of specifying the use of non-OEM parts
in vehicle repairs. Non-OEM parts are repair parts made by
companies not affiliated with the “original equipment
manufacturers,” automobile companies. Specifying non-OEM parts
reduces repair costs and allows insurers to hold down the cost
of automobile insurance premiums. Illinois and most other
states expressly allow insurance companies to specify non-OEM
parts and no state prohibits the specification of non-OEM
parts.
“What is amazing about this case is
that State Farm is a mutual insurance company owned by its
policyholders,” said ATRA General Counsel
Victor Schwartz.
“The policyholders benefited through dividends and lower
premiums because using non-OEM parts saves money. Here, the
trial bar tried to forward its regulation through litigation
agenda to the detriment of plaintiffs, lawmakers in the Illinois
legislature and other states, and the public at large. Even
though the Illinois Supreme Court rejected this – frankly –
frivolous attempt, the costs of defending this case still must
be carried by the policyholders.”
Over the past decade,
a new phenomenon has arisen in our civil justice system called
“regulation through litigation” where the focus of traditional
tort law shifts away from its main purpose—compensating someone
who has been injured by the wrongful conduct of another—to
having a judge create brand new rules that can affect entire
industries.
A
copy of the opinion is available at
http://www.state.il.us/court/Opinions/SupremeCourt/2005/August/Opinions/Html/91494.htm |
