No. 5-99-0830 IN THE APPELLATE COURT OF ... - Appellate.net

No. 5-99-0830 

IN THE 

APPELLATE COURT OF ILLINOIS 

FIFTH DISTRICT 

MICHAEL E. AVERY, et al., on behalf of ) Appeal from the Circuit Court 

themselves and all others similarly ) for the First Judicial Circuit 

situated, ) Williamson County, Illinois 

) 

Plaintiffs-Appellees. ) No. 97-L-114 

) 

v. ) 

) 

STATE FARM MUTUAL AUTOMOBILE ) 

INSURANCE COMPANY, ) 

) Hon. John Speroni, 

Defendant-Appellant. ) Judge Presiding. 

BRIEF OF APPELLANT STATE FARM 

MUTUAL AUTOMOBILE INSURANCE COMPANY 

Michele Odorizzi 

Robert H. Shultz, Jr. 

Bradley J. Andreozzi 

HEYL, ROYSTER, VOELKER & 

Allan Erbsen ALLEN 

MAYER, BROWN & PLATT 

103 West Vandalia 

190 South LaSalle Street P.O. Box 467 

Chicago, Illinois 60603 Edwardsville, Illinois 62025 

(312) 782-0600 (618) 656-4646 

William R. Quinlan 

Marci A. Eisenstein 

Gino L. DiVito 

Aphrodite Kokolis 

QUINLAN & CRISHAM, LTD. 

SCHIFF, HARDIN & WAITE 

30 North LaSalle Street 6600 Sears Tower 

Chicago, Illinois 60602 Chicago, Illinois 60606 

(312) 263-0900 (312) 258-5500 

Wm. Kent Brandon 

BRANDON, SCHMIDT, 

GOFFINET & SOLVERSON 

916 West Main Street 

Carbondale, Illinois 62902 

(618) 549-0777 

ORAL ARGUMENT REQUESTED

POINTS AND AUTHORITIES 

Page(s) 

I. Class Certification Violated The Illinois Class Action Statute 

And Deprived State Farm Of Its State And Federal Due 

Process Right To A Fair Trial ......................................31 

735 ILCS 5/2-801 .................................................31 

McCabe v. Burgess, 75 Ill.2d 457 (1979) ...........................31, 32 

Wood River Area Dev. Corp. v. Germania Fed. Sav. & Loan, 

198 Ill.App.3d 445 (5th Dist. 1990) ................................31, 32 

Barnes v. American Tobacco Co., 161 F.3d 127 (3d Cir. 1998) .............31 

Hervey v. City of Little Rock, 787 F.2d 1223 (8th Cir. 1986) ...............31 

Fed. R. Civ. P. 23 .................................................31 

Getto v. City of Chicago, 86 Ill.2d 39 (1981) ...........................32 

Schlessinger v. Olsen, 86 Ill.2d 314 (1981) .............................31 

Eshaghi v. Hanley Dawson Cadillac Co., 214 Ill.App.3d 995 

(1st Dist. 1991) ...................................................32 

A. Individual Questions Overwhelmed Any Purported 

Common Questions Raised By Plaintiffs’ Breach Of 

Contract Claims ...........................................32 

Nebel v. City of Chicago, 53 Ill.App.3d 890 (1st Dist. 1977) ...............32 

Slimack v. Country Life Ins. Co., 227 Ill.App.3d 287 

(5th Dist. 1992) ..................................................33 

Hagerty v. General Motors Corp., 59 Ill.2d 52 (1974) ....................33 

Key v. Jewel Cos.,176 Ill.App.3d 91 (1st Dist. 1988) .....................33 

Miner v. Gillette Co., 87 Ill.2d 7 (1981) ...............................33 

Magro v. Continental Toyota, Inc., 67 Ill.2d 157 (1977) ...................33 

-i-

Charles Hester Enters. v. Illinois Founders Ins. Co., 

137 Ill.App.3d 84 (5th Dist. 1985), aff’d, 114 Ill.2d 278 (1986) .............33 

Elder v. Coronet Ins. Co., 201 Ill.App.3d 733 (1st Dist. 1990) ..............33 

1. Plaintiffs’ Contract Claims Raised A Host Of Fact 

Questions That Could Be Fairly Resolved Only 

On An Individual Basis .....................................34 

Eshaghi v. Hanley Dawson Cadillac Co., 214 Ill.App.3d 995 


a. Individualized Proof Was Necessary To Determine 

Which Class Members Had Non-OEM Parts 

Installed On Their Vehicles .................................36 

Sanneman v. Chrysler Corp., 2000 WL 257452 (E.D. Pa. 2000) .........36, 37 

Kelly v. Sears Roebuck & Co., 308 Ill.App.3d 633 (1st Dist. 1999) ..........37 

Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331 

(4th Cir. 1998) ................................................37, 38 

b. Individualized Proof Was Necessary To Determine 

The Quality Of The Non-OEM Parts State Farm 

Specified And The Pre-Loss Condition Of Class 

Members’ Vehicles .........................................38 

Bellefonte Ins. Co. v. Griffin, 358 So.2d 387 (Miss. 1978) .................39 

Johnson v. Ford Motor Co., 988 F.2d 573 (5th Cir. 1993) .................39 

Floyd v. General Motors Corp., 960 P.2d 763 (Kan. App. 1998) ............40 



In re Ford Motor Co. Vehicle Paint Litig., 182 F.R.D. 214 

(E.D. La. 1998) ..................................................40 

Rios v. Allstate Ins. Co., No. 94 CH 11396 (Cook County Cir. Ct. 

Jan. 27, 1998) ....................................................40 

-ii-

Murray v. State Farm Mut. Auto. Ins. Co., No. 96-2585 

(W.D. Tenn. Aug. 19, 1997) ........................................41 

Sanneman v. Chrysler Corp., 2000 WL 257452 (E.D. Pa. 2000) ............41 

Walsh v. Ford Motor Co., 130 F.R.D. 260 (D.D.C. 1990) .................41 

Goetz v. Village of Hoffman Estates, 62 Ill.App.3d 233 

(1st Dist. 1978) ...................................................41 

Barnes v. American Tobacco Co., 161 F.3d 127 (3d Cir. 1998) .............41 

Horizon Unlimited, Inc. v. Silva, 1998 WL 238468 

(E.D. Pa. 1998) ...................................................41 

Zehnder v. Ginsburg & Ginsburg Architects, 678 N.Y.S.2d 376 

(App. Div. 1998) .................................................42 

c. Plaintiffs’ Attempt To Overcome The Inherently 

Individual Nature Of The Inquiry By Seeking To 

Litigate The Case On Behalf Of The Class As A 

Whole Failed As A Matter Of Law ...........................42 

Lindsey v. Normet, 405 U.S. 56 (1972) ................................43 

Western Elec. Co. v. Stern, 544 F.2d 1196 (3d Cir. 1976) ..................43 

Broussard v. Meineke Discount Muffler Shops, Inc., 

155 F.3d 331 (4th Cir. 1998) ..................................45, 46, 47 

Cimino v. Raymark Indus., Inc., 151 F.3d 297 (5th Cir. 1998) ..............45 

Amchem Prods. v. Windsor, 521 U.S. 591 (1997) ........................45 

In re Hotel Tel. Charges, 500 F.2d 86 (9th Cir. 1974) ....................45 

Dry Cleaning & Laundry Inst. v. Flom’s Corp., 

1993 WL 527928 (E.D. Mich. 1993) ..................................45 

Windham v. American Brands, Inc., 565 F.2d 59 (4th Cir. 1977) ............46 

Kelly v. Sears Roebuck & Co., 308 Ill.App.3d 633 (1st Dist. 1999) ..........46 

Andrews v. AT&T Co., 95 F.3d 1014 (11th Cir. 1996) ....................47 

-iii-

In re Fibreboard Corp., 893 F.2d 706 (5th Cir. 1990) ....................47 



d. State Farm’s Affirmative Defenses Could Be 

Litigated Only On An Individual Basis ........................49 

Lindsey v. Normet, 405 U.S. 56 (1972) ................................50 

In re Masonite Corp. Hardboard Siding Prods. Liab. Litig., 

170 F.R.D. 417 (E.D. La. 1997) ......................................50 

e. Individual Issues Predominated With Respect To 

The Existence And Extent Of Damages ........................50 

In re Merrill Lynch, 191 F.R.D. 391 (D.N.J. 1999) .......................51 

Ilinois v. Ampress Brick Co., 67 F.R.D. 457 (N.D. Ill. 1975) ...............51 

In re Ford Motor Co. Bronco II Prod. Liab. Litig., 


2. At The Very Least, The Court Should Not Have 

Allowed The Jury To Find Liability And Render 

A Damages Verdict On A Classwide Basis .....................52 


(5th Dist. 1992) ...............................................53, 54 

McCabe v. Burgess, 75 Ill.2d 457 (1979) ...........................53, 54 

3. Individual Questions Of Law Also Made It Impossible 

To Try Plaintiffs’ Breach Of Contract Claims On A 

Classwide Basis ...........................................54 

Jones v. State Farm Mut. Auto. Ins. Co., 289 Ill.App.3d 903 


Allen v. State Farm Mut. Auto. Ins. Co., 214 Ill.App.3d 729 


Boyd v. Madison Mut. Ins. Co., 146 Ill.App.3d 420 

(5th Dist. 1986), aff’d, 116 Ill.2d 305 (1987) ...........................56 

-iv-

Johnson v. State Farm Mut. Auto. Ins. Co., 754 P.2d 330 

(Ariz. App. 1988) .................................................57 

Great Tex. County Mut. Ins. Co. v. Lewis, 979 S.W.2d 72 

(Tex. App. 1998) ..............................................57, 58 

Ray v. Farmers Ins. Exch., 246 Cal.Rptr. 593 (App. 1988) .................57 

Bickel v. Nationwide Mut. Ins. Co., 143 S.E.2d 903 (Va. 1965) .............57 

General Accident Fire & Life Assurance Corp. v. Judd, 

400 S.W.2d 685 (Ky. 1966) .........................................57 

Roth v. Amica Mut. Ins. Co., Civ. No. 98-3551 

(Mass. Super. Sept. 3, 1999) ........................................57 

Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) ....................58 

In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995) ..............58 

B. The Circuit Court Abused Its Discretion In 

Concluding That Common Questions Predominated 

Over Individual Issues With Respect To Plaintiffs’ 

Consumer Fraud Claims ....................................59 

1. The Circuit Court Erred As A Matter Of Law In 

Concluding That There Were Common Issues Of Law ...........59 

Tylka v. Gerber Prods. Co., 178 F.R.D. 493 (N.D. Ill. 1998) ...............59 

O.K. Lumber Co. v. Providence Wash. Ins. Co., 759 P.2d 523 

(Alaska 1988) ....................................................60 

Ferguson v. United Ins. Co. of Am., 293 S.E.2d 736 

(Ga. App. 1982) ..................................................60 

Irwin Rogers Ins. Agency v. Murphy, 833 P.2d 128 

(Idaho App. 1992) ................................................60 

Alarcon v. Aetna Cas. & Sur. Co., 538 So.2d 696 

(La. App. 1989) ..................................................60 

Britton v. Farmers Ins. Group, 721 P.2d 303 (Mont. 1986) ................60 

-v-

State v. Piedmont Funding Corp., 382 A.2d 819 (R.I. 1978) ...............60 

Colonial Life & Accident Ins. Co. v. American Family Life 

Assurance Co., 846 F. Supp. 454 (D.S.C. 1994) .........................60 

Wilder v. Aetna Life & Cas. Ins. Co., 433 A.2d 309 (Vt. 1981) .............60 

Stephenson v. Capano Dev., Inc., 462 A.2d 1069 (Del. 1983) ..............60 

Holeman v. Neils, 803 F. Supp. 237 (D. Ariz. 1992) ......................60 

Lynas v. Williams, 454 S.E.2d 570 (Ga. App. 1995) ......................60 

Taylor v. McCollom, 849 P.2d 1123 (Or. App. 1993) .....................60 

Carpenter v. BMW of N. Am., Inc., 1999 WL 415390 

(E.D. Pa. 1999) ...................................................61 



Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996) ............62 

Tylka v. Gerber Prods. Co., 178 F.R.D. 493 (N.D. Ill. 1998) ...............62 

Fisher v. Bristol-Myers Squibb Co., 181 F.R.D. 365 

(N.D. Ill. 1998) ...................................................62 

Dhamer v. Bristol-Myers Squibb Co., 183 F.R.D. 520 


In re Jackson Nat’l Life Ins. Co. Premium Litig., 183 F.R.D. 217 

(W.D. Mich. 1998) ................................................62 

Clement v. American Honda Fin. Corp., 176 F.R.D. 15 

(D. Conn. 1997) ..................................................62 

In re Stucco Litig., 175 F.R.D. 210 (E.D.N.C. 1997) .....................62 

Oliveira v. Amoco Oil Co., 311 Ill.App.3d 886, 726 N.E.2d 512 

(4th Dist. 2000) ...............................................62, 63 

Cimino v. Raymark Indus., Inc., 151 F.3d 297 (5th Cir. 1998) ..............63 

-vi-

2. The Circuit Court Abused Its Discretion In 

Concluding That Common Issues Of Fact 

Predominated With Respect To Plaintiffs’ 

Consumer Fraud Claims ....................................64 

815 ILCS 505/2 ..................................................64 

815 ILCS 505/10a ................................................64 

Connick v. Suzuki Motor Co., 174 Ill.2d 482 (1996) ......................64 

Zekman v. Direct Am. Marketers, Inc., 182 Ill.2d 359 (1998) ............64, 65 

Key v. Jewel Cos.,176 Ill.App.3d 91 (1st Dist. 1988) .....................66 

Charles Hester Enters. v. Illinois Founders Ins. Co., 

137 Ill.App.3d 84 (5th Dist. 1985), aff’d, 114 Ill.2d 278 (1986) .............66 


C. The Circuit Court Applied The Wrong Standard In 

Concluding That A Class Action Was A Fair And 

Efficient Way To Adjudicate This Controversy .................67 

735 ILCS 5/2-801(4) ...........................................67, 68 

McCabe v. Burgess, 75 Ill.2d 457 (1979) ..............................67 


Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996) ............68 



D. The Circuit Court Erred In Concluding That The 

Class Representatives Fairly And Adequately 

Represented The Class .....................................69 

735 ILCS 5/2-801(3) ..............................................69 


Magro v. Continental Toyota, Inc., 67 Ill.2d 157 (1977) ...................69 

-vii-

Hansberry v. Lee, 311 U.S. 32 (1940) .................................69 

Broussard v. Meineke Discount Muffler Shops, Inc., 

155 F.3d 331 (4th Cir. 1998) .....................................70, 71 

E & V Slack, Inc. v. Shell Oil Co., 969 S.W.2d 565 

(Tex. App. 1998) .................................................71 

E. The Circuit Court’s Failure To Provide The Class 

With Proper Notice Also Requires Reversal Of 

The Judgment .............................................71 

Frank v. Teachers Ins. & Annuity Ass’n, 71 Ill.2d 583 (1978) ..............71 

Client Follow-Up Co. v. Hynes, 105 Ill.App.3d 619 

(1st Dist. 1982) ................................................71, 72 


Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) ......................71 

Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) ....................71 

II. 

The Breach Of Contract Judgment Must Be Reversed 

Because It Was The Product Of Numerous Prejudicial 

Errors .........................................................72 

McClure v. Owens Corning Fiberglas Corp., 188 Ill.2d 102 (1999) .........72 

A. The Circuit Court’s Admission Of Legally Invalid 

And Wholly Speculative Damages Theories Constitutes 

Reversible Error And Demontrates Why The Class 

Must Be Decertified On Remand .............................72 

Ouwenga v. Nu-Way AG, Inc., 239 Ill.App.3d 518 

(3d Dist. 1992) ...................................................73 

Fieldcrest Builders, Inc. v. Antonucci, 311 Ill.App.3d 597 


Northwest Commerce Bank v. Continental Data Forms, Inc., 

233 Ill.App.3d 124 (2d Dist. 1992) ...................................73 

Schoeneweis v. Herrin, 110 Ill.App.3d 800 (5th Dist. 1982) ................73 

-viii-

1. The Circuit Court Erred In Allowing Plaintiffs To 

Present Their Legally Invalid Theory Of 

“Specification Damages” To The Jury .........................73 

Economy Fire & Cas. Co. v. GAB Bus. Serv. Inc., 

155 Ill.App.3d 197 (3d Dist. 1987) ...................................76 

Prevendar v. Thonn, 166 Ill.App.3d 30 (2d Dist. 1988) ...................76 

Mid-State Fertilizer Co. v. Exchange Nat’l Bank, 877 F.2d 1333 

(7th Cir. 1989) ...................................................76 

Martoccio v. Western Restaurants, Inc., 286 Ill.App.3d 390 


2. The Classwide Installation Damages Are Hopelessly 

Speculative ...............................................77 

Brown v. Chicago & N.W. Transp. Co., 162 Ill.App.3d 926 

(1st Dist. 1987) ...................................................79 

SK Hand Tool Corp. v. Dresser Indus., Inc., 284 Ill.App.3d 417 


Bowman v. Zimny, 256 Ill.App.3d 386 (1st Dist. 1993) ...................80 

B. The Court Committed Reversible Error By Relieving 

Plaintiffs Of Their Burden Of Proving That State Farm 

Had Breached Its Contract With Respect To Each 

Member Of The Class Who Was Awarded Damages .............81 

Swartz v. Sears, Roebuck & Co., 264 Ill.App.3d 254 


Rikard v. Dover Elevator Co., 126 Ill.App.3d 438 

(5th Dist. 1984) ..................................................84 

C. The Circuit Court Erred In Admitting Baseless 

Opinion Testimony Purporting To Show The 

Universal Inferiority Of Non-OEM Parts ......................85 

Grant v. Petroff, 291 Ill.App.3d 795 (5th Dist. 1997) .....................86 

-ix-

1. Plaintiffs’ Body Shop Witnesses Greatly Exceeded 

The Permissible Scope Of Lay Opinion Testimony ..............86 

Baltus v. Weaver Div. of Kidde & Co., 199 Ill.App.3d 821 


Bogosian v. Mercedes Benz of N. Am., 104 F.3d 472 

(1st Cir. 1997) ...................................................87 

Davis v. International Harvester Co., 167 Ill.App.3d 814 

(2d Dist. 1988) ...................................................87 

Freeding-Skokie Roll-Off Serv., Inc. v. Hamilton, 

108 Ill.2d 217 (1985) ..............................................87 

People v. Novak, 163 Ill.2d 93 (1994) .................................88 

2. The Opinions Of Plaintiffs’ Expert Witnesses Were 

Inherently Unreliable And Should Not Have Been 

Admitted .................................................89 

People v. Novak, 163 Ill.2d 93 (1994) .................................90 

MICHAEL H. GRAHAM, CLEARY & GRAHAM’S HANDBOOK OF 

ILLINOIS EVIDENCE (7th ed. 1999) ....................................90 

Donaldson v. Central Illinois Public Service Co., 

2000 WL 268307 (5th Dist. 2000) ....................................90 

Harris v. Cropmate Co., 302 Ill. App. 3d 364 (1999) .....................90 

Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 

(1993) ..........................................................90 

Protestant Mem. Med. Ctr., Inc. v. Department of Pub. Aid, 

295 Ill.App.3d 249 (5th Dist. 1998) ...................................90 

O’Conner v. Commonwealth Edison Co., 807 F. Supp. 1376 

(C.D. Ill. 1992), aff’d, 13 F.3d 1090 (7th Cir. 1994) ......................90 

Comer v. American Elec. Power, 63 F. Supp.2d 927 

(N.D. Ind. 1999) ..................................................90 

-x-

Muzzey v. Kerr-McGee Chem. Corp., 921 F. Supp. 511 


Kuhn v. Ball State Univ., 78 F.3d 330 (7th Cir. 1996) .....................91 

Evans v. Philadelphia Housing Auth., 1995 WL 154872 

(E.D. Pa. 1995), aff’d, 79 F.3d 1139 (3d Cir. 1996) ......................91 

Johnson v. Ford Motor Co., 988 F.2d 573 (1993) ........................93 

Floyd v. General Motors Corp., 960 P.2d 763 (Kan. App. 1998) ............93 

Ducharme v. Hyundai Motor Am., 698 N.E.2d 412 

(Mass. App. 1998) ................................................93 

Brock v. Caterpillar, Inc., 94 F.3d 220 (6th Cir. 1996) ....................93 

Freund v. Fleetwood Enters., 956 F.2d 354 (1st Cir. 1992) ................93 



Rios v. Allstate Ins. Co., No. 94-CH-11396 (Cook County Cir. Ct. 

Jan. 27, 1998) ....................................................93 

Kleiss v. Cassida, 297 Ill.App.3d 165 (4th Dist. 1998) ....................95 

Clark v. Takata Corp., 192 F.3d 750 (7th Cir. 1999) .....................95 

D. The Circuit Court Erred As A Matter Of Law By 

Allowing Plaintiffs To Rely On A Market “Perception” 

Theory To Determine Whether Non-OEM Parts Met 

The Contractual Standard ..................................96 

E. Other Trial Errors Were Clearly Prejudicial, Requiring 

Reversal Of The Classwide Judgment Below ...................98 

Broussard v. Huffman Mfg. Co., 108 Ill.App.3d 356 

(3d Dist. 1982) ...................................................98 

People v. Gilliam, 172 Ill.2d 484 (1996) ...............................99 

Hernandez v. Power Constr. Co., 73 Ill.2d 90 (1978) .....................99 

-xi-

People v. Clayton, 302 Ill.App.3d 220 (2d Dist. 1998) ....................99 

Urbas v. Saintco, Inc., 264 Ill.App.3d 111 (5th Dist. 1994) ................99 

United States v. Benson, 941 F.2d 598 (7th Cir. 1991), 

amended, 957 F.2d 301 (7th Cir. 1992) ................................99 

1 MCCORMICK ON EVIDENCE § 12 (5th ed. 1999) .......................100 

Wakeford v. Rodehouse Restaurants, 223 Ill.App.3d 31 

(5th Dist. 1991), aff’d, 154 Ill.2d 543, (1992) ..........................100 

Haas v. Abrahamson, 705 F. Supp. 1370 (E.D. Wis. 1989), aff’d, 

910 F.2d 384 (7th Cir. 1990) .......................................100 

General Motors Acceptance Corp. v. Baymon, 732 So.2d 262 

(Miss. 1999) ....................................................102 

Wernowsky v. Economy Fire & Cas. Co., 106 Ill.2d 49 (1985) .............103 

Plooy v. Paryani, 275 Ill.App.3d 1074 (1st Dist. 1995) ..................103 

MICHAEL H. GRAHAM, CLEARY & GRAHAM’S HANDBOOK OF 

ILLINOIS EVIDENCE (7th ed. 1999) ...................................103 

People v. Novak, 163 Ill.2d 93 (1994) ................................104 

People v. Houser, 305 Ill.App.3d 384 (4th Dist. 1999) ...................105 

Hubbard v. McDonough Power Equip., Inc., 83 Ill.App.3d 272 

(5th Dist. 1980) .................................................105 

Swajian v. General Motors Corp., 916 F.2d 31 (1st Cir. 1990) ............105 

Rotolo v. Digital Equip. Corp., 150 F.3d 223 (2d Cir. 1998) ..............106 

F. State Farm’s Evidence Disproved Plaintiffs’ Claims 

Of Universal Inferiority, Confirming That The Only 

Way The Case Could Be Fairly Tried Was By 

Looking At The Facts Of Each Individual Repair ..............106 

Hastings v. Gulledge, 272 Ill.App.3d 861 (5th Dist. 1995) ................106 

-xii-

III. The ICFA Judgment Should Be Reversed ...........................110 

A. ICFA Cannot Be Applied To Out-of-State Insurance 

Transactions .............................................110 

Lucas v. Lakin, 175 Ill.2d 166 (1997) ................................110 

Morris B. Chapman & Assocs. v. Kitzman, 307 Ill.App.3d 92 

(5th Dist. 1999), appeal granted, 187 Ill.2d 571 (2000) ..................110 

1. ICFA Does Not Provide A Cause Of Action For Class 

Members With No Transactional Nexus To Illinois .............111 

Scott v. Association for Childbirth at Home, 88 Ill.2d 279 (1981) ..........111 

815 ILCS 505/1(f) ...............................................111 

815 ILCS 505/2 .................................................111 

Graham v. General U.S. Grant Post No. 2665, 43 Ill.2d 1 (1969) ..........112 

Dur-Ite Co. v. Industrial Comm’n, 394 Ill. 338 (1946) ...................112 

Union Bridge & Constr. Co. v. Industrial Comm’n, 287 Ill. 396 

(1919) .........................................................112 

Oppenheimer & Co. v. Staley Commodities Int’l, Inc., 

1989 WL 6556 (N.D. Ill. 1989) .....................................113 

Continental X-Ray Corp. v. XRE Corp., 1995 WL 599064 

(N.D. Ill. 1995) ..................................................113 

Endo v. Albertine, 1995 WL 170030 (N.D. Ill. 1995) ....................113 

Swartz v. Schaub, 818 F. Supp. 1214 (N.D. Ill. 1993) ....................113 

Seaboard Seed Co. v. Bemis Co., 632 F. Supp. 1133 

(N.D. Ill. 1986) ..................................................113 

Tylka v. Gerber Prods. Co., 182 F.R.D. 573 (N.D. Ill. 1998) ..............113 

Nepomoceno v. Knights of Columbus, 1999 WL 66570 


-xiii-

VPHI, Inc. v. National Educ. Training Group, Inc., 

1995 WL 51405 (N.D. Ill. 1995) ....................................113 


(4th Dist. 2000) .............................................113, 114 

Martin v. Heinold Commodities, Inc., 117 Ill.2d 67 (1987) ...............113 

Gordon v. Boden, 224 Ill.App.3d 195 (1st Dist. 1991) ...................113 

Rohlfing v. Manor Care, Inc., 172 F.R.D. 330 (N.D. Ill. 1997) ............114 

Hastings v. Fidelity Mortgage Decisions Corp., 984 F. Supp. 600 


Peters v. Northern Trust Co., 1999 WL 515481 (N.D. Ill. 1999) ...........114 

Warren v. First Nat’l Bank, 149 Ill. 9 (1893) ..........................114 

Hartliep Transit Co. v. Central Mut. Ins. Co., 288 Ill.App. 140 

(2d Dist. 1936) ..................................................115 

Schoeberlein v. Purdue Univ., 129 Ill.2d 372 (1989) ....................115 

2. Illinois’ Choice-Of-Law Rules Preclude Applying 

ICFA Nationwide .........................................115 

Ingersoll v. Klein, 46 Ill.2d 42 (1970) ................................115 

Western States Ins. Co. v. Zschau, 298 Ill.App.3d 214 

(2d Dist. 1998) ..................................................116 

Allen v. State Farm Mut. Auto. Ins. Co., 214 Ill.App.3d 729 

(1st Dist. 1991) ..................................................116 

RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 193 cmt b (1971) ........116 


(4th Dist. 2000) .................................................117 

Jones v. Searle Labs., 93 Ill.2d 366 (1982) ............................117 

Jones v. State Farm Mut. Auto. Ins. Co., 289 Ill.App.3d 903 


-xiv-

3. Applying ICFA To Transactions In 47 Other States 

Is Unconstitutional ........................................117 

a. The Application Of Illinois Law To Insurance 

Transactions Occurring Entirely In Other States 

Violates The Commerce Clause And Impermissibly 

Intrudes On The Sovereignty Of Those Other States ...........117 

Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520 (1959) .................117 

Healy v. Beer Inst., 491 U.S. 324 (1989) ..............................118 

Brown-Forman Distillers Corp. v. New York State Liquor Auth., 

476 U.S. 573 (1986) ..............................................118 

BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) ..................118, 120 

15 U.S.C. § 1011 ................................................119 

15 U.S.C. § 1012 ................................................119 

FTC v. Travelers Health Ass’n, 362 U.S. 293 (1960) ....................119 

Aetna Life Ins. Co. v. Dunken, 266 U.S. 389 (1924) .....................119 

New York Life Ins. Co. v. Head, 234 U.S. 149 (1914) ....................119 

Robertson v. California, 328 U.S. 440 (1946) ..........................119 

Prudential Ins. Co. v. Benjamin, 328 U.S. 408 (1946) ...................120 

Edgar v. MITE Corp., 457 U.S. 624 (1982) ...........................120 

b. The Application Of Illinois Law To Transactions 

That Occurred Entirely In Other States Violates 

The Federal Due Process And Full Faith And 

Credit Clauses ...........................................120 

Allstate Ins. Co. v. Hague, 449 U.S. 302 (1981) ........................120 

Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) ...............121, 123 

Home Ins. Co. v. Dick, 281 U.S. 397 (1930) ...........................121 

-xv-

Okada v. MGIC Indem. Corp., 823 F.2d 276 (9th Cir. 1986) ..............122 

Eagle-Picher Indus. v. Liberty Mut. Ins. Co., 829 F.2d 227 

(1st Cir. 1987) ..................................................122 

Northwestern Mut. Life Ins. Co. v. Wender, 940 F. Supp. 62 

(S.D.N.Y. 1996) .................................................122 

Poe v. Sears, Roebuck & Co., 1998 WL 113561 (N.D. Ga. 1998) ..........122 


177 F.R.D. 360 (E.D. La. 1997) .....................................122 

Endo v. Albertine, 1995 WL 170030 (N.D. Ill. 1995) ....................123 

Russo v. Massachusetts Mut. Life Ins. Co., 680 N.Y.S.2d 916 

(Sup. Ct. 1998) ..................................................123 

In re Masonite Corp. Hardboard Siding Prods. Liab. Litig., 

170 F.R.D. 417 (E.D. La. 1997) .....................................123 

Duvall v. TRW, Inc., 578 N.E.2d 556 (Ohio App. 1991) ..................123 

B. The ICFA Judgment Should Be Reversed On The 

Merits ..................................................124 

Lucas v. Lakin, 175 Ill.2d 166 (1997) ................................124 

Cornstubble v. Ford Motor Co., 178 Ill. App. 3d 20 

(5th Dist. 1988) .................................................124 

1. The Court Applied The Wrong Burden Of Proof ..............124 

General Motors Acceptance Corp. v. Grissom, 150 Ill.App.3d 62 

(5th Dist. 1986) .................................................124 

Lidecker v. Kendall College, 194 Ill.App.3d 309 (1st Dist. 1990) ..........125 

Munjal v. Baird & Warner, Inc., 138 Ill.App.3d 172 

(2d Dist. 1985) ..................................................125 

Malooley v. Alice, 251 Ill.App.3d 51 (3d Dist. 1993) ....................125 

McKennan v. Mickelberry, 242 Ill. 117 (1909) .........................125 

-xvi-

9 STUART M. SPEISER ET AL., THE AMERICAN LAW OF TORTS 

§ 32:103 (1992) .................................................125 

Connick v. Suzuki Motor Co., 174 Ill.2d 482 (1996) .....................125 

Ray v. Winter, 67 Ill.2d 296 (1977) ..................................126 

2. The Circuit Court Improperly Excused Plaintiffs 

From Proving Proximate Cause .............................126 

815 ILCS 505/10a ...............................................126 

Connick v. Suzuki Motor Co., 174 Ill.2d 482 (1996) .....................126 

Zekman v. Direct Am. Marketers, Inc., 182 Ill.2d 359 (1998) ..............126 

3. The Circuit Court’s Finding That State Farm 

Violated ICFA Was Against The Manifest Weight 

Of The Evidence, Requiring The Entry of 

Judgment In Favor Of State Farm ...........................126 

Zankle v. Queen Anne Landscaping, 311 Ill.App.3d 308, 

724 N.E.2d 988 (2d Dist. 2000) .....................................127 

Lake County Grading Co. v. Advance Mechanical Contractors, 

Inc., 275 Ill.App.3d 452 (2d Dist. 1995) ..............................127 

Exchange Nat’l Bank v. Farm Bureau Life Ins. Co., 

108 Ill.App.3d 212 (3d Dist. 1982) ..................................127 

Collins v. Hyster Co., 174 Ill.App.3d 972 (3d Dist. 1988) ................128 

Kelly v. Sears Roebuck & Co., 308 Ill.App.3d 633 


Breckenridge v. Cambridge Homes, Inc., 246 Ill.App.3d 810 


Zimmerman v. Northfield Real Estate, Inc., 156 Ill.App.3d 154 

(1st Dist. 1986) ..................................................129 

Spiegel v. Sharp Elec. Corp., 125 Ill.App.3d 897 (1st Dist. 1984) ..........129 

Evanston Hosp. v. Crane, 254 Ill.App.3d 435 (1st Dist. 1993) .............129 

-xvii-

Zekman v. Direct Am. Marketers, Inc., 182 Ill.2d 359 (1998) ..............130 

BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) ......................131 

Bordenkircher v. Hayes, 434 U.S. 357 (1978) ..........................131 

4. The Circuit Court’s Finding Of Classwide Fraud 

Ignores The Numerous State Laws That Authorize 

Specification Of Non-OEM Parts And Improperly 

Punishes State Farm For Conduct That Is Legal 

In Every State ............................................131 


815 ILCS 505/10b(1) .............................................133 

Aurora Firefighter’s Credit Union v. Harvey, 163 Ill. App. 3d 915 

(2d Dist. 1987) ..................................................133 

Weatherman v. Gary-Wheaton Bank, 186 Ill. 2d 472 (1999) ..............133 

Lanier v. Associates Finance, Inc., 114 Ill. 2d 1 (1986) ..................133 

5. The “Disgorgement” Damages Must Be Vacated 

Because The Circuit Court Erred As A Matter 

Of Law In Imposing A Constructive Trust On 

State Farm’s “Savings” ....................................133 

815 ILCS 505/10a(a) .............................................133 

Hill v. Names & Addresses, Inc., 212 Ill.App.3d 1065 

(1st Dist. 1991) ..............................................133, 135 

Bragado v. City of Zion, 839 F. Supp. 551 (N.D. Ill. 1993) ...............134 

Majcher v. Laurel Motors, Inc., 287 Ill.App.3d 719 


Kipnis v. Meltzer, 253 Ill.App.3d 67 (1st Dist. 1993) ....................134 

Grounds v. VanLaningham, 256 Ill. App. 540 (3d Dist. 1930) .............134 

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IV. The $600 Million Punitive Award Should Be Reversed ................136 

Cornstubble v. Ford Motor Co., 178 Ill. App. 3d 20 

(5th Dist. 1988) .................................................136 

Inter Med. Supplies, Ltd. v. EBI Med. Sys., Inc., 181 F.3d 446 

(3d Cir. 1999), cert. denied, 120 S. Ct. 791 (2000) ......................136 

Johansen v. Combustion Eng’g, Inc., 170 F.3d 1320 (11th Cir.), 

cert. denied, 120 S. Ct. 329 (1999) ..................................136 

Hough v. Mooningham, 139 Ill.App.3d 1018 (5th Dist. 1986) .............137 

A. It Is Unconstitutional To Punish State Farm Under 

Illinois Law For Transactions That Occurred Entirely 

Outside Of Illinois ........................................137 


Continental Trend Resources, Inc. v. OXY USA Inc., 

101 F.3d 634 (10th Cir. 1996) ......................................138 

Ace v. Aetna Life Ins. Co., 40 F. Supp.2d 1125 (D. Alaska 1999) ...........138 

Ford Motor Co. v. Ammerman, 705 N.E.2d 539 (Ind. App. 1999) ..........138 

B. The Punitive Award Violates The Federal Due 

Process Clause And Illinois Law Because State 

Farm Had No Notice That Specifying Non-OEM 

Parts Was Punishable .....................................138 

Kelsay v. Motorola, Inc., 74 Ill.2d 172 (1978) ......................138, 139 


C. There Is No Evidence, Much Less Clear And 

Convincing Evidence, That State Farm Had The 

“Evil Mind” Necessary To Justify The Imposition 

Of Punitive Damages Under Illinois Law .....................139 

Loitz v. Remington Arms Co., 138 Ill.2d 404 (1990) .............139, 140, 141 

Kelsay v. Motorola, Inc., 74 Ill.2d 172 (1978) ..........................139 

-xix-


Parsons v. Winter, 142 Ill.App.3d 354 (1st Dist. 1986) ..................140 

Kopczick v. Hobart Corp., 308 Ill.App.3d 967 (3d Dist. 1999) .............140 

Overbey v. Illinois Farmers Ins. Co., 170 Ill.App.3d 594 

(2d Dist. 1988) ..................................................140 

General Motors Acceptance Corp. v. Grissom, 150 Ill.App.3d 62 

(5th Dist. 1986) .................................................140 

Kohlmeier v. Shelter Ins. Co., 170 Ill.App.3d 643 (5th Dist. 1988) .........141 

Satcher v. Honda Motor Co., 52 F.3d 1311 (5th Cir. 1995) ...............141 

Drabik v. Stanley-Bostitch, Inc., 997 F.2d 496 (8th Cir. 1993) .............141 

Alley v. Gubser Dev. Co., 785 F.2d 849 (10th Cir. 1986) .................141 

D. The Punitive Award Is Grossly Excessive And Must 

Be Vacated Entirely Or Drastically Reduced ..................142 


Black v. Iovino, 219 Ill.App.3d 378 (1st Dist. 1991) .................143, 144 

Hazelwood v. Illinois C.G.R.R., 114 Ill.App.3d 703 

(4th Dist. 1983) .............................................143, 144 

TXO Prod. Corp. v. Alliance Resources Corp., 509 U.S. 443 

(1993) .........................................................143 

BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) ......143, 144, 145, 146, 147 

Memphis Community Sch. Dist. v. Stachura, 477 U.S. 299 

(1986) .........................................................143 

Inter Med. Supplies, Ltd. v. EBI Med. Sys., Inc., 181 F.3d 446 

(3d Cir. 1999), cert. denied, 120 S. Ct. 791 (2000) ......................144 

Beliz v. W.H. McLeod & Sons Packing Co., 765 F.2d 1317 

(5th Cir. 1985) ..................................................144 

Rosado v. Santiago, 562 F.2d 114 (1st Cir. 1977) .......................144 

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Mirkin v. Wasserman, 858 P.2d 568 (Cal. 1993) ........................144 

Maiorino v. Schering-Plough Corp., 695 A.2d 353 

(N.J. Super. App. Div. 1997) .......................................144 

Quick Air Freight, Inc. v. Teamsters Local Union No. 413, 

575 N.E.2d 1204 (Ohio App. 1989) ..................................144 

Hilao v. Estate of Marcos, 103 F.3d 767 (9th Cir. 1996) .................145 

Texaco, Inc. v. Pennzoil Co., 729 S.W.2d 768 (Tex. App. 1987) ...........145 

Transportation Ins. Co. v. Moriel, 879 S.W.2d 10 (Tex. 1994) ............146 

Browning-Ferris Indus., Inc. v. Kelco Disposal, Inc., 

492 U.S. 257 (1989) ..............................................146 

Sunstein, Kahneman, & Schkade, Assessing Punitive Damages 

(with Notes on Cognition and Valuation in Law), 

107 Yale L.J. 2071 (1998) .........................................146 

Polinsky & Shavell, Punitive Damages: An Economic Analysis, 

111 Harv. L. Rev. 869 (1998) ......................................146 

Pickering v. Owens-Corning Fiberglas Corp., 265 Ill.App.3d 806 

(5th Dist. 1994) .................................................147 

Proctor v. Davis, 291 Ill.App.3d 265 (1st Dist. 1997) ....................147 

-xxi-

NATURE OF THE CASE 

This is an appeal from the largest judgment ever entered in Illinois ($1.18 billion), 

which includes the largest award of punitive damages ever made anywhere in the United 

States against an insurance company ($600 million). Plaintiffs were awarded this massive 

judgment for alleged breaches of contract and consumer fraud arising out of State Farm’s 

fully disclosed practice of specifying automobile replacement parts made by a company 

other than the vehicle’s manufacturer (“non-OEM” parts) when estimating the costs of some 

repairs. Trial was bifurcated. The jury considered the breach of contract claim and rendered 

a verdict against State Farm for $456,180,000 in compensatory damages. The circuit court 

then awarded plaintiffs an additional $130,000,000 in “disgorgement” damages and 

$600,000,000 in punitive damages under the Illinois Consumer Fraud Act (“ICFA”). 

On appeal, State Farm seeks reversal of the judgment below and decertification of 

the plaintiff class, which consists of more than 4.7 million State Farm policyholders from 

48 states and the District of Columbia who received repair estimates over a 10½-year period 

specifying approximately 33,000 different types of non-OEM parts. In the alternative, State 

Farm seeks at the very least a new trial in light of a variety of errors committed by the circuit 

court in a misguided attempt to make this case manageable as a class action. State Farm also 

seeks elimination or reduction of the unprecedented punitive damages award on the ground, 

among others, that it was beyond the circuit court’s power to punish State Farm for engaging 

in conduct that is expressly permitted under the laws of a majority of states and not 

prohibited by any state. 

No issues are raised on the pleadings.

ISSUES PRESENTED 

1. Whether the circuit court abused its discretion and deprived State Farm of its 

due process right to a fair trial by certifying, and then refusing to decertify, a nationwide 

class challenging State Farm’s conduct with respect to millions of highly individualized 

repair transactions. 

2. Whether State Farm is entitled, at the very least, to a new trial on plaintiffs’ 

breach of contract claim because of instructional, evidentiary, and other errors committed 

by the circuit court in a misguided effort to make the trial manageable as a class action. 

3. Whether the judgment against State Farm under ICFA must be reversed 

because the circuit court erred as a matter of Illinois and federal constitutional law by 

applying ICFA to the claims of all class members nationwide and misapplied ICFA both in 

finding liability and in imposing $130 million of duplicative “disgorgement” damages. 

4. Whether the $600 million punitive award must be vacated or, at a minimum, 

greatly reduced, because it constitutes unconstitutional extraterritorial punishment and 

because it was imposed in violation of Illinois law and of Illinois and federal principles of 

due process. 

STATEMENT OF JURISDICTION 

Jurisdiction in this Court is proper under Supreme Court Rules 303 and 304(a). The 

circuit court entered judgment on all counts on October 8, 1999, A. 1, 6, State Farm filed 

timely post-trial motions on November 8, 1999, C. 30717, and the court denied them on 

November 19, 1999, A. 50. The court entered a Rule 304(a) finding on December 9, 1999, 

A. 19, and State Farm filed a timely notice of appeal on December 17, 1999, A. 20. 

-2-

STATUTES INVOLVED 

Relevant portions of the Illinois Consumer Fraud Act, 815 ILCS 505/1 et seq., and 

class action statute, 735 ILCS 5/2-801 et seq., are set out at pages A. 145-55 of State Farm’s 

appendix. Statutes and regulations governing the specification of non-OEM parts in 42 

states are set out at pages A. 156-267 of the appendix. 

STATEMENT OF FACTS 

1. State Farm’s Practices with Respect to Non-OEM Replacement Parts. For many 

years, State Farm has sought to contain the cost of automobile insurance by managing repair 

expenses. Because State Farm is a mutual company, which has no shareholders or outside 

investors, the benefits of reduced repair costs belong entirely to its policyholder members 

and are passed on to them in the form of reduced premiums or increased dividends. See, 

e.g., R. 11039, 11041-42, 11474-76. 

A large component of automobile repair expenses is the cost of replacing damaged 

parts. Prior to the verdict in this case, State Farm reduced repair costs and hence premiums 

by choosing or “specifying” non-OEM parts on repair estimates when such parts met its 

selection criteria and were less expensive than competing OEM parts. R. 9287-89. “OEM” 

parts are replacement parts that are made by or for the “original equipment manufacturer” 

— such as Ford or General Motors. Non-OEM replacement parts are manufactured and sold 

by companies that are not affiliated with the car makers. 

The great majority of parts specified on State Farm repair estimates during the class 

period (from 1987-1998) were OEM parts. R. 706. During that period, however, State Farm 

saved more than $366 million by specifying non-OEM parts, rather than more expensive 

-3-

OEM parts. R. 11133; PX 4974. All of these savings were “passed directly and completely 

to policyholders in the form of lower rates and premiums.” R. 11047-48. State Farm 

policyholders saved as much as $1 billion more during that period because the use of non- 

OEM parts by State Farm and other insurers created competitive pressures on car companies 

to reduce OEM prices, thereby further reducing repair costs. R. 11148. 

The non-OEM replacement parts at issue in this case (referred to as “crash” parts 

because they typically are replaced due to damage in a crash rather than mechanical failure) 

are sheet metal and plastic parts that hang on the outer shell of the car. Most of these parts 

are cosmetic — essentially the “skin” of the car. R. 8297, 9775. The circuit court defined 

non-OEM crash parts as: 

(1) fenders, (2) hoods, (3) doors, (4) deck lids, (5) luggage lid panels, (6) quarter 

panels, (7) rear outer panels, (8) front end panels, (9) header panels, (10) filler 

panels, (11) door shells, (12) pickup truck beds, box sides and tailgates, (13) radiator 

grill support panels, (14) grills, (15) head lamp mounting panels, brackets, housing, 

lenses and doors, (16) tail lamp mounting panels, brackets, housing, and lenses, (17) 

outer body moldings, (18) door body side moldings, (19) front wheel open moldings, 

(20) side moldings, (21) front and rear fascias, (22) outer panels, mounting brackets, 

supports and surrounds, (23) bumpers, excluding chrome bumpers, (24) bumper 

covers, face bars, and (25) bumper brackets and supports. 

A. 57-59. These 25 categories include approximately 33,000 distinct types of parts made 

by scores of different manufacturers for different makes and models of vehicles during the 

10½-year class period. R. 11342-46. 

2. Contract Language. This case involves a number of different policy forms 

containing varying language. Some of the policies provided that State Farm would “pay to 

repair or replace the property or part with like kind and quality.” See, e.g., PX 1200-1 at tab 

29 p. 16. Most policies required State Farm to pay for the restoration of the insured vehicle 

-4-

to its “pre-loss condition.” DX 1244 at 16. Most of the policies also expressly provided that 

State Farm could meet that obligation by specifying non-OEM repair parts: 

We will include in the estimate parts sufficient to restore a vehicle to its pre-loss 

condition. You agree with us that such parts may include either parts furnished by 

the vehicle’s manufacturer or parts from other sources including non-original 

equipment manufacturers. 

Id. (emphasis added). 

Melding the “pre-loss condition” and “like kind and quality” language from different 

policies, the circuit court instructed the jury at the start and close of the case that “the State 

Farm policies and insurance contracts allow State Farm to specify [non-OEM parts] . . . so 

long as the crash parts are of like kind and quality which restore the damaged vehicle to its 

pre-loss condition.” R. 4426; A. 59-60. The court defined “pre-loss condition” as the 

“condition of the vehicle immediately before the time it is damaged.” A. 60. The court did 

not mention policies purchased by class members in five states that did not use either the 

“pre-loss condition” or the “like kind and quality” language, PX 1200-1 at tabs 23, 53-56, 

and barred State Farm from introducing any “evidence regarding differences in State Farm’s 

contractual obligations towards members of the class.” C. 28970; see also C. 28980. 

3. Varying State Regulations. Like other insurance practices, the specification of 

non-OEM parts is not regulated on a uniform, national level. Instead, it is regulated by each 

state’s department of insurance under laws and regulations that vary from state to state. No 

state bars specification of non-OEM parts, and most expressly permit it subject to regulation. 

Thirty states regulate insurers’ disclosures regarding non-OEM parts, usually requiring 

-5-

specific language in repair estimates provided to policyholders. 1/ Four other states do not 

require disclosure by insurers, but do require disclosures by bodyshops when they use non- 

OEM parts to repair vehicles. 2/ Kentucky regulates non-OEM parts, but does not require any 

disclosures. See 806 Ky. Admin. Regs. 12:095(7)(9). At least 13 states impose quality 

requirements on non-OEM parts: some apply only to cars of a given age; others use differing 

formulations. 3/ Eight states require affirmative consent by the policyholder to the use of non- 

OEM parts. 4/ Four states regulate replacement parts in general, but do not single out non- 

1/ 

See Ala. Code § 32-17A-3; Ariz. Rev. Stat. § 44-1293; Cal. Bus. & Prof. Code § 

9875.1; Colo. Rev. Stat. § 10-3-1305; Conn. Gen. Stat. § 38a-355(a)(2); Fla. Stat. § 501.33; 

Ga. Code Ann. § 33-6-5(13)(C); Idaho Code § 41-1328D(2); 215 ILCS 5/155.29(d); Kan. 

Stat. Ann. § 50-662; La. Rev. Stat. Ann. § 51:2424; Mass. Regs. Code tit. 211, § 56.07; 

Mich. Comp. Laws Ann. § 257.1363; Minn. Stat. §§ 72B.091(2), 325F.56(8), 325F.60(1)(e); 

Miss. Code Ann. § 63-27-5; Mo. Code Regs. Ann. tit. 20, § 100-1.050(2)(D)(2); Mo. Rev. 

Stat. § 407.295(3)(2); Neb. Admin. R. & Regs. tit. 210, § 45-006; Nev. Admin. Code ch. 

686A, § 240; N.H. Rev. Stat. Ann. § 407-D:4; N.J. Admin. Code tit. 11, § 2-17.10(a)(13); 

N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7(b)(5)(I); N.C. Admin. Code tit. 11, r. 

4.0427(b); Ohio Rev. Code Ann. § 1345.81(B); Okla. Stat. tit. 15, § 955; Or. Rev. Stat. § 

746.292(3)(b); S.D. Codified Laws § 58-33-71; Utah Code Ann. § 31A-22-319; Va. Code 

Ann. § 38.2-510(C)(1); Wis. Stat. Ann. § 632.38(2), (3); Wyo. Ins. R. & Regs. ch. 19, § 7. 

2/ 

Iowa Code § 537B.4(2); Md. Code Ann., Com. Law § 14-2302(b); Wash. Rev. Code 

§ 46.71.015(2); W. Va. Code § 46A-6B-4. 

3/ 

See Cal. Code Regs. tit. 10, § 2695.8(g)(1); Fla. Admin. Code Ann. r. 4-166.027(10); 

Ga. Comp. R. & Regs. r. 120-2-52-.05(4); Ill. Admin. Code tit. 50, § 919.80(d)(5)(C); 806 

Ky. Admin. Regs. 12:095(7)(9); Mo. Code Regs. Ann. tit. 20, § 100-1.050(2)(D)(2)(B); Neb. 

Admin. R. & Regs. tit. 210, § 45-005; N.H. Rev. Stat. Ann. 407-D:3; N.J. Admin. Code tit. 

11, § 2-17.10; N.C. Admin. Code tit. 11, r. 4.0426; Or. Rev. Stat. § 746.287; R.I. Admin. R. 

& Regs. Ins. Reg. LXXIII(7)(B)(2); Wyo. Ins. R. & Regs. ch. 19, § 5. 

4/ 

See Colo. Rev. Stat. § 42-9-107; Haw. Rev. Stat. § 431:10C-313.6(a); Ind. Code § 

27-4-1.5-8; N.Y. Comp. Codes R. & Regs. tit. 11, §216.7 (b)(5)(ii) (consent required if non- 

OEM parts are from more than three sources); Or. Rev. Stat. §§ 746.287(1), 746.292(4)(b); 

R.I. Gen. Laws § 27-10.2-2; W. Va. Code § 46A-6B-3; Wyo. Ins. R. & Regs. ch. 19, § 6. 

-6-

OEM parts. 5/ At least two states — Hawaii and Massachusetts — affirmatively encourage 

the use of non-OEM parts. See Haw. Rev. Stat. § 431:10C-313.6(a) (insureds who insist on 

receiving OEM parts must pay the price difference between the OEM part and a non-OEM 

part); Mass. Regs Code tit. 211, § 133.04 (non-OEM parts “shall be used” absent specified 

conditions). 

For years, car companies (which have a monopoly on OEM parts for their cars), and 

bodyshops (which make more money selling higher priced OEM parts, R. 6738-39, 7096-97; 

PX 1316 at 7-15), have vigorously lobbied state legislatures to preclude insurance companies 

from specifying non-OEM parts and to require them to specify only OEM parts instead. C. 

14243-44, 14298, 14569-70. No state has done so. Many states have held hearings, 

conducted investigations, and determined, as a matter of public policy, that the availability 

of non-OEM parts promotes the public welfare in their states by reducing repair costs and 

insurance premiums, without sacrificing the quality of the repair. R. 9132-33, 9135-39, 

9141-42, 9145, 8945-46, 10684-85. 

4. The Repair Process. Although State Farm pays for the repair of damaged 

vehicles, it does not repair the vehicles itself. Instead, parts are purchased and repairs are 

made by local bodyshops selected by policyholders. R. 8443. State Farm works with the 

bodyshop, seeking to ensure that a quality repair is made at a reasonable price. R. 8647-48; 

DX 209A. Generally, the repair process starts when State Farm inspects the damaged vehicle 

5/ 

Alaska Stat. § 45.45.190 (invoice must identify parts as “new, used, rebuilt, or 

reconditioned”; statute silent on non-OEM/OEM distinction), Del. Code Ann. tit. 6, § 

4905A(b) (same); 37 Pa. Code § 301.5(8)(vi) (same); Me. Rev. Stat. Ann. tit. 29-A, § 1804 

(requires consent for installation of “used, reconditioned or rebuilt” parts; statute silent on 

non-OEM/OEM distinction). 

-7-

and writes an estimate for the repair costs, specifying the parts it will pay for. To be 

specified on a repair estimate, a non-OEM part had to meet State Farm’s criteria, R. 9286- 

89, which required coverage by a warranty, R. 8454-55. In addition, beginning in 1992, 

State Farm’s policy was to designate only non-OEM parts certified by the Certified 

Automotive Parts Association (“CAPA”) whenever the category of part involved was subject 

to CAPA certification. R. 8433-34; DX 209. 6/ 

State Farm also worked with bodyshops to prevent any inferior non-OEM parts from 

being installed on insured vehicles. Plaintiffs’ own bodyshop witnesses and State Farm’s 

witnesses agreed that State Farm routinely authorized and paid for an OEM part if the 

bodyshop could not obtain or had found problems with a non-OEM part State Farm specified 

in the repair estimate. 7/ Bodyshops also sometimes installed OEM parts without passing on 

the cost to either State Farm or the policyholder. 8/ In some cases, policyholders (including 

two of the class representatives who testified at trial) decided they wanted OEM parts and 

6/ 

CAPA was established and funded by the major insurance companies, in cooperation 

with consumer advocates, on the model of Underwriters Laboratories to certify non-OEM 

parts that meet certain quality standards. R. 9771-72. 

7/ 

For example, plaintiffs’ witness Francis Ingaharro testified that State Farm “honored 

its contract” every time he brought a defective non-OEM part to its attention. R. 6655-56. 

Plaintiffs’ witness Dave Beyers testified that he would simply fax State Farm a form, and 

it would approve an OEM part. R. 6090. Plaintiffs’ witness Larry Visser stated that State 

Farm would always authorize an OEM part if the non-OEM part did not fit. R. 5938-39, 

5949. Plaintiffs’ witnesses Shane Kelley, Michael Berounsky, and Loren Lowe agreed, R. 

4513-15, 4525, 7047, 7102, as did State Farm’s bodyshop witnesses, R. 8007, 8063, 8109, 

8291, 8320, 8444, 8471, 8510, 9602-03, 10346-47. 

8/ 

Sometimes bodyshops were able to obtain OEM parts from their suppliers at lower 

than list prices and installed them for the same price State Farm had agreed to pay, C. 15712- 

13; bodyshops also sometimes absorbed any difference in cost, R. 4529-30. 

-8-

paid the difference in cost out of their own pockets. R. 6117, 6191. Thus, the fact that a 

non-OEM part was designated in a State Farm repair estimate does not mean that it was 

installed on an insured’s vehicle. Although State Farm’s computerized records indicate 

whether non-OEM parts were specified on the estimate, they do not show whether those 

parts were actually installed by the bodyshop or, if not, who paid for the installation of an 

OEM part. R. 10211. 

Whenever State Farm specified a non-OEM part on an estimate, it disclosed to the 

insured that the estimate included a part “not made by the original equipment manufacturer.” 

DX 2025 (red stamp placed on estimate); DX 418 (disclosure form); DX 397A (disclosure 

brochure). As the circuit court acknowledged, “[w]hen [non-OEM] parts are used on an 

estimate, the policyholder is given a State Farm brochure discussing the use of non-OEM 

parts . . . . The estimate is then stamped indicating the use of non-OEM parts.” A. 28. 

Since 1990, State Farm has offered its policyholders a written Guarantee of 

satisfaction, promising to replace or repair — at no cost to the insured — any State Farmspecified 

non-OEM part that does not satisfy the policyholder. See, e.g., R. 8464-68; DX 

859A. The Guarantee in most cases runs for as long as the policyholder owns the vehicle 

and can be invoked at any time if the policyholder decides, in his or her sole discretion, that 

the non-OEM part is not satisfactory. See DX 320; see also R. 9289, 10334-35. 

5. Prior Litigation Regarding Non-OEM Parts. Over the past few years, several 

putative class action suits have been filed against various insurance companies challenging 

their specification of non-OEM parts. State Farm settled two cases; in each, only a minute 

fraction of the class claimed any damages from non-OEM parts. See Ashenfelter Affidavit, 

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Exh. Box 9, Tab 1. Both court-approved settlements expressly authorized State Farm to 

continue specifying non-OEM parts. C. 614-15, 649. In the remaining cases, courts refused 

to certify class actions, finding that individual questions about part quality, causation, and 

damages predominated over any alleged common questions. See Rios v. Allstate Ins. Co., 

No. 94 CH 11396 (Cook County Cir. Ct. Jan. 27, 1998), C. 23918; Murray v. State Farm 

Mut. Auto. Ins. Co., No. 96-2585 (W.D. Tenn. Aug. 19, 1997), C. 2943. 

6. Commencement and Certification of this Class Action. This case began on July 

28, 1997, when Jeanne Teter filed a complaint in Williamson County Circuit Court 

challenging State Farm’s policy regarding non-OEM parts. C. 201. In Count I of the final 

version of their complaint, plaintiffs alleged that State Farm’s obligation to restore cars to 

pre-loss condition could “be met only by requiring the exclusive use in repairs of factoryauthorized 

or OEM parts” and that State Farm therefore breached its contractual obligation 

whenever it specified non-OEM parts. C 13402, 13409. Count II alleged that State Farm’s 

“practices” of “installing” non-OEM parts, while promising to use only parts of “like kind 

and quality,” violated ICFA. C. 13410-11. Count III sought declaratory and injunctive relief 

under ICFA. C. 13411-12. 

On the same day that the original complaint was filed — weeks before State Farm 

was served — the circuit court certified a nationwide class action on an ex parte basis, 

stating that it had found, after “rigorous analysis,” that all statutory prerequisites had been 

met and that Teter was an adequate class representative. C. 440. After State Farm was 

served, plaintiffs conceded that, contrary to the allegations of the complaint Teter had 

verified, she was not even a member of the class she purported to represent because her 

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epair estimate specified only OEM parts. R. 601. She was eventually dismissed from the 

case and replaced by other class representatives. C. 4401. 

After State Farm was served with the complaint, it moved to vacate the ex parte class 

certification order on the ground that it had been entered in violation of Illinois law and State 

Farm’s due process right to be heard. C. 495. After the case was re-assigned to Associate 

Judge John Speroni, a hearing was set on the class certification issue. State Farm opposed 

class certification, arguing that there was no predominating common issue of fact because 

the only way to determine whether it had breached its contractual obligation to pay for parts 

that would restore a vehicle to pre-loss condition would be to consider the facts and 

circumstances of each of the millions of individual repair transactions at issue in the case. 

C. 1893-95. State Farm also argued that the case could not proceed on behalf of a 

nationwide class because the contract and consumer fraud claims of policyholders outside 

Illinois would have to be adjudicated under the laws of each state, which differed in critical 

respects that would make a single trial hopelessly unmanageable. C. 1902-03. 

The circuit court reaffirmed the class certification order. A. 22. The court concluded 

that any conflicts in consumer fraud laws could be resolved by applying the Illinois 

Consumer Fraud Act to all class members’ claims and that any differences in contract law 

could be handled through sub-classes. A. 32. 9/ And it rejected State Farm’s argument that 

9/ 

In a subsequent order, the circuit court concluded that there were “no true conflicts 

of law” with respect to the breach of contract claims and stated that it would therefore apply 

Illinois contract law classwide. A. 44-45. The court also stated that it would apply ICFA 

to the entire class because State Farm is headquartered in Illinois, because the conduct at 

issue “emanated from activities in Illinois,” and because there were no “true conflicts” 

among the consumer fraud laws of the various states. A. 46-47. 

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individual issues of fact predominated over any purported common questions, relying on 

plaintiffs’ representations that they would be able to prove “that non-OEM parts are 

categorically inferior.” A. 31. 

The circuit court ultimately adopted the following class definition for the breach of 

contract claim: 

All persons in the United States, except those residing in Arkansas and Tennessee, 

who between July 28, 1987 and February 24, 1998; one, were insured by a vehicle 

casualty insurance policy issued by defendant, State Farm; and, two, made a claim 

for vehicle repairs pursuant to their policy, and had non-factory authorized and/or 

non-OEM original equipment manufacturer crash parts installed on their vehicles, 

or else received monetary compensation determined in relation to the cost of such 

parts. Excluded from the class are employees of defendant, State Farm, its officers, 

its directors, its subsidiaries, or its affiliates. In addition, the following persons are 

excluded from the class: One, persons who resided or garaged their vehicles in 

Illinois, and whose Illinois insurance policies were executed prior to April 16th, 

1994, and [two,] persons who resided in California, and whose policies were 

issued[/]executed prior to September 26th, 1996. 

A. 57. 10/ The class definition for the ICFA claim was identical, except that the class period 

began on July 28, 1994, to reflect ICFA’s three-year statute of limitations. Although the 

precise number of class members is unclear, approximately 4.7 million policyholders 

received estimates specifying at least one non-OEM part during the 10½-year period 

established for the breach of contract class. R. 7170-71. 

The court rejected State Farm’s proposal to send individual notice to the 1.8 million 

10/ 

The exclusion of some Illinois and California residents reflected settlement 

agreements in those states. Arkansas and Tennessee residents were excluded to enable 

plaintiffs’ counsel to pursue state-wide class actions they had already filed. After State Farm 

removed the Tennessee action to federal court, that court denied class certification, Murray 

v. State Farm Mut. Auto. Ins. Co., No. 96-2585 (W.D. Tenn. Aug. 19, 1997), C. 2943; the 

case was later dismissed with prejudice. Plaintiffs in the Arkansas action withdrew their 

request for class certification, and the case was settled on an individual basis. C. 23965. 

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potential class members whose names and addresses were known. C. 7076. Instead, it 

ordered notice by publication in such media as The National Enquirer, The Star, and People 

magazine, among others. C. 9030, 9027, 8014. Only fifteen of the 4.7 million potential 

class members opted out of the class. A. 4-5. 

7. Trial. After their original named plaintiff was forced to drop out of the litigation, 

plaintiffs added eleven new plaintiffs to serve as class representatives. C. 28956. Before trial, 

State Farm moved for summary judgment against all of the named plaintiffs, on the ground 

that each of their claims suffered from some defect that precluded recovery. For example, 

State Farm argued that two of the class representatives (Laurie Loger and Tammy Snider) 

had no claim because OEM parts had been installed on their vehicles, at no additional 

charge, even though non-OEM parts had been specified on their repair estimates. R. 4524, 

4530; C. 15577-80, 15914. The circuit court denied State Farm’s motion on the ground that 

there were genuine issues of material fact as to each class representative that would have to 

be tried. C. 22404. 

State Farm also moved for decertification of the class, arguing that discovery had 

revealed a wide variation in the facts and circumstances of each class representative’s repair, 

demonstrating that the case could not be fairly adjudicated on a classwide basis. C. 17802. 

The circuit court denied that motion as well, without comment. A. 42. On the day before the 

trial, plaintiffs dropped five of the eleven class representatives, including the two who had 

received OEM parts at no additional cost. C. 28956; R. 3612-13. Although these individuals 

no longer represented the class, they remained members of the class. 

Before the trial began, the circuit court granted a number of plaintiffs’ motions in 

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limine. The court barred State Farm from presenting evidence to the jury concerning 

differing state laws or differing insurance policies issued by State Farm over the 10½-year 

class period. C. 28966, 28970. It also barred State Farm from telling the jury that it was a 

mutual company and from presenting evidence of the “savings to State Farm’s insureds” or 

“benefits” to policyholders from State Farm’s specification of non-OEM parts. C. 28974, 

28988. Finally, the court barred any testimony in the jury portion of the trial concerning the 

various state laws regulating the specification of non-OEM parts. C. 28966. This ruling 

prevented State Farm from offering testimony from present and former state insurance 

regulators who would have explained that the majority of states have concluded that many 

non-OEM parts are of “like kind and quality” and therefore have expressly allowed 

insurance companies to specify such parts so long as they meet certain disclosure 

obligations. R. 9139, 10684-85. These witnesses would also have testified that state 

legislators and regulators had concluded that non-OEM parts are beneficial to consumers 

because they help reduce the costs of repairs (and hence premiums) and encourage vigorous 

competition in the repair parts industry. R. 8945-46, 9136. 

a. Plaintiffs’ Case. As noted above, the court instructed the jury at the outset of the 

case that State Farm’s “policies and insurance contracts allow State Farm to specify [non- 

OEM parts] . . . so long as the crash parts are of like kind and quality which restores the 

damaged vehicle to its pre-loss condition.” R. 4430-31. Plaintiffs’ witnesses conceded that, 

in order to determine whether any class member’s vehicle had been restored to pre-loss 

condition, they would need to know the pre-loss condition of that particular vehicle. R. 4927, 

12182. Yet plaintiffs did not present evidence concerning the pre-loss condition of any class 

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member’s vehicle other than those of the five class representatives who testified at trial. 11/ 

Plaintiffs also did not attempt to prove — even with respect to the remaining class 

representatives — that any particular non-OEM part State Farm had specified was incapable 

of restoring a vehicle to its pre-loss condition. 12/ Instead, plaintiffs sought to prove, by 

“global” evidence, that all 33,000 different kinds of non-OEM parts encompassed by the 

class definition were inherently inferior to new OEM parts. R. 12986. 

Over State Farm’s objection, plaintiffs presented lay opinion testimony from several 

bodyshop owners and employees, who characterized all non-OEM parts as “junk” and 

claimed that such parts were always inferior to OEM parts. See, e.g., R. 5892, 6762, 7057, 

5860. Some also testified to their “concerns” that non-OEM parts “maybe” are unsafe. R. 

4507.20, 5922, 6627-28, 7053. None of these witnesses had ever attempted to perform a 

scientific comparison of OEM and non-OEM parts. Two admitted on cross-examination that 

their opinions were based on promotional brochures from OEM manufacturers. R. 5929; PX 

1214 at 32-35. Another based his opinion on a 1999 Consumer Reports article and a 

television news segment about the article. R. 4507LL-MM, 4507PP, 4531-32. Although 

11/ 

The pre-loss condition of the five class representatives’ vehicles varied considerably. 

Sam DeFrank owned a five-year-old pick-up truck with 24,000 miles. R. 4507K-L. Mark 

Covington owned a four-year-old Chevy Cavalier that had been in a previous accident; 

Covington testified that he did not know what type of replacement parts had been used in the 

prior repair. R. 5712, 5724-25. Todd Shadle had a four-year-old Saturn. R. 6102. Michael 

Avery had an eight-year-old Jeep with more than 90,000 miles. R. 6177, 6200. And Carly 

Vickers had a four-year-old Mazda Protégé, which she bought used, and which had been in 

at least one prior accident. R. 6338-40. 

12/ 

For example, two of the class representatives (Shadle and Avery) had rejected the 

non-OEM parts specified for their vehicles and paid extra to have OEM parts installed. R. 

6117, 6191. Plaintiffs did not introduce any evidence with respect to the quality of the non- 

OEM parts specified on the repair estimates given to either Avery or Shadle. 

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this material was not admitted into evidence, R. 4406, the court allowed plaintiffs to play the 

video of the news segment and cite the article repeatedly during trial and closing arguments, 

over State Farm’s objections. See, e.g., R. 7680-84, 12977-79, 12984-85. 

Plaintiffs also offered expert opinion testimony. A metallurgist, Kendall Clarke, 

testified that he had studied the welds and metal composition of seventeen non-OEM hoods 

and three kinds of tailgates. Based on this limited sample, which was provided to him by 

one of plaintiffs’ bodyshop witnesses, he opined that all non-OEM sheet metal parts — 

including types of parts he had never seen — were inferior to their OEM counterparts. R. 

5629-30, 5634-37, 5639-41. Clarke admitted that he had made no effort to investigate 

whether the few parts he tested ever could have appeared on a State Farm estimate. R. 5648- 

49 (“Q: Now, out of the work that you did do, you didn’t make any effort to investigate as 

to whether these parts would have or could have been specified on a State Farm estimate, 

did you, sir? A: No, I did not”). 

Paul Griglio, a consultant who had spent his entire career working for OEM 

manufacturers, R. 5373-75, testified that all non-OEM crash parts are “categorically and 

overwhelmingly inferior” to their OEM counterparts. R. 5173-74. That conclusion was 

based on his belief that it is impossible to successfully reverse-engineer any automobile 

replacement part. R. 5292. Griglio admitted that he had never tested this hypothesis by 

physically comparing any non-OEM parts to OEM parts. R. 5377-78. Instead, his opinion 

was based on a three-day visit to three Taiwanese manufacturers that did not make most of 

the non-OEM parts at issue in this case — including hoods, header panels, tailgates, grills, 

moldings, fascias, bumpers, or any plastic parts. R. 5377-78, 5396-400. 

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William Anderton, who had previously worked in a testing laboratory affiliated with 

Allstate Insurance Company (R. 5742), also testified that no non-OEM parts are as good as 

OEM parts. R. 5752. On cross-examination, counsel for State Farm showed Anderton 

laboratory reports generated during his tenure at the company, which found that non-OEM 

parts often performed as well as or better than OEM parts. See R. 5792-93 (non-OEM part 

fit so well it practically “fell” into place); R. 5799-802; R. 5806-07 (“‘All OE and non-OE 

hoods buckled as they should’”). Anderton admitted that he could not point to any 

statements in those reports that were false. R. 5825. 

Plaintiffs also offered evidence designed to show that non-OEM parts were perceived 

as inferior, whether or not they were in fact inferior. For example, public relations consultant 

Dennis Bender testified about a public opinion survey he had conducted in 1995 on behalf 

of General Motors comparing a single vehicle that GM had repaired with “genuine GM 

parts” to a vehicle repaired with five non-OEM parts selected and installed by GM. Based 

on that very limited survey, Bender concluded that cars that have been repaired using non- 

OEM parts have a lower resale value. R. 4991. Appraisal consultant Larry Batton offered 

his opinion that the presence of non-OEM parts on a used car “always” reduces value. R. 

11825. On cross-examination, Batton admitted that his own internet site on which he values 

used cars did not ask whether the car had non-OEM parts. R. 11845-47. 

Plaintiffs used internal State Farm and CAPA documents that were critical of some 

types of non-OEM parts to try to persuade the jury that State Farm itself believed that non- 

OEM parts were inherently inferior to OEM parts. Two former insurance regulators, Tim 

Ryles and Robert Hunter, testified that these memos established that non-OEM parts were 

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in fact inferior to OEM parts. R. 4653-59, 6380. Both witnesses disclaimed any technical 

expertise that would enable them to reach an opinion of their own with respect to the quality 

of non-OEM parts. As Hunter explained, “I’m not the parts guy. I am the documents guy.” 

R. 6388; see also R. 4852-54; 6383-90. 13/ 

Not all of plaintiffs’ witnesses agreed that non-OEM parts are categorically inferior 

to OEM parts. For example, in response to a question as to whether she was saying that all 

OEM parts are better than all non-OEM parts, plaintiffs’ witness Christine Moorman replied 

that it would be “foolishness” to make such a blanket statement. R. 11916. Similarly, one 

of plaintiffs’ bodyshop witnesses, Dave Beyers, testified that in his experience 

approximately 35% of CAPA-certified parts fit well and that another 30% can be made to 

fit if the bodyshop works with them. R. 6094-95. 

b. State Farm’s Case. State Farm argued throughout the trial that there is no way 

to make categorical judgments about non-OEM parts. State Farm agreed that there were 

inferior non-OEM parts available in the marketplace during the class period. It presented 

evidence, however, that there were also many non-OEM parts that could be used to restore 

vehicles to their pre-loss condition and that State Farm had instituted safeguards to ensure 

that only quality non-OEM parts were installed on its policyholders’ vehicles. State Farm 

argued that plaintiffs had failed to meet their burden of proving that all non-OEM parts were 

13/ 

Plaintiffs also relied on out-of-court statements by State Farm estimators that were 

recounted by bodyshop witnesses, which described non-OEM parts in derogatory terms. R. 

5890, 5922, 6643-47; PX 1314B at 31. In addition, they cited deposition testimony by a few 

State Farm executives that the non-OEM parts State Farm specified were not “equal” to 

OEM parts, although these same witnesses testified that the parts were “functionally 

equivalent” to OEM parts and restored cars to pre-loss condition. R. 13005-06; 7261-65. 

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categorically inferior and, in fact, had not offered evidence that any non-OEM part that was 

actually installed on a class member’s vehicle failed to restore it to pre-loss condition. 14/ 

State Farm presented a variety of witnesses who testified to the availability during 

the class period of non-OEM parts that met the contractual standard. Donald Parker, an 

automotive engineering expert, showed the jury samples of non-OEM and OEM parts 

(header panels, fenders and bumper covers). Parker testified that he had tested and measured 

the parts and had concluded that the non-OEM parts were as good as the OEM parts. R. 

7965-66. With respect to the header panels, another witness testified that both the OEM and 

the non-OEM version were made by the same company (Polywheels of Canada) at the same 

plant and that the only difference was that they were packed in different boxes — and sold 

at different prices. R.10992-94. 

State Farm also presented the testimony of numerous bodyshop witnesses who stated 

that they routinely use the non-OEM parts State Farm specifies to restore cars to their preloss 

condition. See, e.g., R. 7995-96, 8007-09, 8070-72, 9038-39, 9697. Some brought 

pictures of vehicles they had repaired using non-OEM parts. R. 7733, 8018-23. One (Kelly 

14/ 

As described above, only three of the five class representatives who appeared at trial 

had non-OEM parts installed on their vehicles. Carly Vickers testified that she was “not one 

hundred percent” happy with the repair, but could not say that her dissatisfaction was due 

to the quality of the parts used, rather than the quality of the repair. R. 6354-55. Sam 

DeFrank complained that one of the nine non-OEM parts installed on his truck sagged, but 

that complaint was successfully redressed by putting in two screws. R. 6086-87. Mark 

Covington complained about an ill-fitting hood and light. R. 5721. There was a dispute as 

to whether these problems were the result of the quality of the parts themselves, a subsequent 

collision, or the repair shop’s failure to install the parts properly. R. 5730-32, 8163-65. 

Because the circuit court refused State Farm’s request for a verdict with respect to the claims 

of the five class representatives, there is no way to tell how (if at all) the jury resolved the 

factual issues raised by these specific repairs. 

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Roe) testified to a double-blind study, conducted at the Collision Industry Conference, to 

determine how bodyshop owners would react to non-OEM parts if those parts were not 

identified as such. She testified that this study showed that all of the non-OEM parts she 

tested were acceptable and that some scored better than OEM parts. R. 9657; DX 2020C. 

Michelle Vogler, a mechanical engineering expert, testified that she had inspected 

five Taiwanese factories and an American plant where non-OEM parts were manufactured 

and had compared the non-OEM parts they produced to OEM parts. R. 11243. She testified 

that production runs of both OEM and non-OEM parts tolerate some internal variances, but 

that the non-OEM parts she reviewed showed less variation and were as good as the OEM 

parts she reviewed. R. 11349-52, 11358-61. William Reda, an engineer for a company that 

manufactures replacement parts for car makers, contradicted Griglio’s testimony that parts 

cannot be reverse-engineered, explaining that OEM manufacturers often do not have the 

specifications for a particular part and that they frequently (and successfully) reverseengineer 

OEM parts from an OEM sample. R. 8764-66, 8769, 8825-26. 

State Farm acknowledged that some consumers were skeptical about non-OEM parts 

before receiving them. But it presented evidence that virtually no one complained to State 

Farm, to insurance regulators, or to consumer advocates after the parts were actually 

installed on their vehicles. R. 8840, 9097-98, 11865-67, 8727, 12031, 10790-91. For 

example, the Assistant Deputy Director of the Illinois Department of Insurance testified that 

his office has received approximately 25,000 complaints related to auto insurance in the past 

five years, but that none concerned non-OEM parts. R. 8840. Similarly, a survey of State 

Farm claims files showed that only 0.59% of policyholders who had non-OEM parts 

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specified on their repair estimates complained to State Farm. R. 9462; DX 908. State Farm 

also introduced evidence that, during the period from 1994 to 1997, State Farm 

policyholders for whom non-OEM parts had been specified renewed their policies at the 

same rate (95%) as policyholders for whom only OEM parts had been specified. R. 10158- 

59; DX 867. 

State Farm also introduced evidence that professionals who set values for used cars 

consider the presence of non-OEM parts to be irrelevant. For example, an eighteen-year 

veteran director of the world’s largest auto auction house described plaintiffs’ lawsuit as 

“ludicrous,” stating that he had never heard anyone claim that the presence of non-OEM 

parts on a vehicle reduced its market value. R. 8870-71. The publisher of the “Black Book” 

value guide for used cars agreed that the mere presence of non-OEM parts on a vehicle has 

no impact on its market value. R. 10242. 

To respond to plaintiffs’ claim that non-OEM crash parts present a potential safety 

hazard, State Farm introduced expert testimony that most crash parts are entirely cosmetic 

and play no role at all in occupant safety, and that those non-OEM crash parts that could 

affect safety meet government standards and pass crash tests. R. 7501-02, 7542-43, 7566, 

7860-61. State Farm introduced a 1991 report by the National Highway Traffic Safety 

Administration (“NHTSA”) regarding non-OEM crash parts, which concluded that “there 

are no data or analyses available at this time to suggest a safety problem with aftermarket 

or replacement components.” DX 481H. State Farm also introduced evidence that, although 

NHTSA has recalled close to three million OEM hoods, it has never recalled a non-OEM 

hood or any other non-OEM crash part. R. 10798-800. In their case and in rebuttal, 

plaintiffs did not introduce any evidence that anyone had ever been injured by any of the 

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millions of non-OEM parts on the road, or that any non-OEM part had failed a crash test. 

c. Evidence with Respect to Damages. In its class certification order, the circuit 

court acknowledged that damages might require individualized proof, A. 36, making it 

impossible to litigate damages and liability in a single trial. Prior to trial, plaintiffs sought 

a ruling allowing them to ask for classwide damages on an aggregate basis, without proof 

as to which (or how many) members of the class were hurt or by how much. State Farm 

objected to that motion, arguing that the fact and amount of damage could not be established 

on a classwide basis. In support of its position, State Farm pointed to the experiences of the 

various class representatives, many of whom could not claim to have suffered any economic 

loss at all. C. 18857. The circuit court rejected these arguments, granting plaintiffs’ motion 

to present their damages proof on an aggregate basis. A. 48. 

Plaintiffs sought two types of damages on the contract count. First, they sought $243 

million in what they called “specification” (or “direct”) damages. These damages were 

supposed to compensate class members for having non-OEM parts specified on their repair 

estimates, regardless of whether they actually received such parts or made any out-of-pocket 

expenditure to obtain OEM parts. Under plaintiffs’ theory, even a class member who 

received an OEM part at State Farm’s expense would be entitled to “specification” damages. 

On cross-examination, plaintiffs’ damages expert, Dr. Iqbal Mathur, admitted that it made 

no “economic sense” to award damages based solely on the specification — as opposed to 

the installation — of non-OEM parts. R. 7222-23 (Q: “your theory of direct damages doesn’t 

make economic sense; isn’t that true, sir?” “A: That is correct.”). But he calculated those 

damages anyway because he believed them to be recoverable “legal damages.” R. 7229. 

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Second, plaintiffs sought “installation” damages to compensate those class members 

who actually received non-OEM parts for the cost of replacing them with OEM parts. Based 

on a variety of assumptions about average costs, Dr. Mathur estimated total installation 

damages for the class to be between $658,450,000 and $1,211,500,000. R. 7187-89. On 

cross-examination, he admitted that this estimate might be as much as $1 billion too high. 

R. 7238. Dr. Mathur also admitted that there was no way to obtain the data necessary to 

eliminate the uncertainty in his estimate — such as how many non-OEM parts were actually 

installed, how many failed to restore vehicles to their pre-loss condition, how many vehicles 

were still in the policyholders’ possession, how long a repair would take, how much labor 

would cost, what a rental car would cost in each particular area, and the like. R. 7232-36. 

Under ICFA, plaintiffs sought compensatory damages in the form of both 

specification and installation damages; they also asked the court to impose a constructive 

trust on the $130,269,000 in “savings” State Farm had realized by specifying non-OEM parts 

during the three-year ICFA class period. R. 7437-38. Plaintiffs made clear that they were 

not claiming both specification and disgorgement damages — because both were calculated 

based on the amounts State Farm had saved for its policyholders by specifying non-OEM 

parts. Instead, they viewed specification and disgorgement damages as alternative theories 

to support the same recovery. R. 2459-60, 13040; C. 29176. 

d. Directed Verdict Motion and Instructions. At the conclusion of plaintiffs’ case, 

and again at the close of the evidence, State Farm moved for decertification of the class or, 

in the alternative, a directed verdict on all claims. C. 29338, 29879. State Farm argued, 

among other things, that plaintiffs could not prevail on behalf of the entire class because they 

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had failed to meet their burden of proving that all non-OEM parts received by class members 

were inferior to the parts they replaced and were incapable of restoring each class member’s 

car to its pre-loss condition. C. 29340, 29881. In response, plaintiffs contended that they 

were not required to prove that all non-OEM parts were inferior, and that the entire class 

could prevail even if only some class members had received an inferior non-OEM part and 

only some had suffered an economic loss. R. 12569, 7603. The court denied State Farm’s 

motions without comment. R. 7614, 12350. 

At the close of the evidence, plaintiffs sought an order striking all of State Farm’s 

remaining affirmative defenses, including waiver, estoppel and consent, on the ground that 

State Farm had failed to prove these defenses on a classwide basis. C. 29999. The circuit 

court granted plaintiffs’ motion with respect to waiver and estoppel, holding that those 

defenses did not go to the quality of the parts, which was the “issue in this case.” R. 12351. 

The court denied the motion to strike State Farm’s consent defense, stating that State Farm 

was free to argue consent to the jury. R. 10154. However, the court had already barred State 

Farm from introducing any evidence of consent, precluding it from showing that a number 

of states specifically require consent as a condition to the specification of non-OEM parts 

and that in one state (Indiana) State Farm’s records showed that 93% of the insureds who 

were asked consented to the use of non-OEM parts. R. 10154-55. 

The circuit court rejected virtually all of State Farm’s proposed instructions and 

instructed the jury almost entirely with pattern instructions from the I.P.I. form book. R. 

12464-65. During the jury instruction conference, the circuit court acknowledged that 

plaintiffs’ burden was to prove that “it’s more probably true than not that all [non-OEM 

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parts] are inferior.” R. 12539 (“all does mean all”). But the court rejected State Farm’s 

proposed instructions that would have told the jury that plaintiffs had the burden of proving 

that all non-OEM parts specified in class members’ repair estimates were inferior to the parts 

they replaced and failed to restore each class member’s vehicle to pre-loss condition. See 

A. 65-68; R. 12575-77. The court also refused to instruct the jury that plaintiffs had to 

establish the pre-loss condition of class members’ vehicles in order to prove that the non- 

OEM parts specified by State Farm failed to restore those vehicles to their pre-loss 

condition. R. 12490-91; A. 69. Instead, over State Farm’s objection, the jury was instructed 

only that plaintiffs were required to prove that State Farm had breached its “contract with 

the plaintiff class.” A. 63; see also A. 61. 

The circuit court also instructed the jury that, if it found that State Farm had breached 

its “contract” with the class, it was required to award damages on an aggregate basis. A. 61. 

The court refused to instruct the jury that damages could not be based on speculation or 

conjecture. A. 75; R. 12500-01. The court also refused to instruct the jury that it had the 

option of rejecting plaintiffs’ theory of “specification” damages, even though the court had 

previously ruled that the propriety of such damages was a question for the jury. A. 71; R. 

12492-94, 12524-25. 

The circuit court denied State Farm’s request to propound an interrogatory that would 

have asked the jury whether it had found that all non-OEM parts specified on State Farm 

repair estimates during the class period were inferior. R. 12599. The court also denied State 

Farm’s request that the jury render verdicts or answer interrogatories on the claims of each 

class representative who appeared at trial, accepting plaintiffs’ argument that the named 

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plaintiffs, like the absent members of the class, could recover as part of the class without 

proving their own individual claims. R. 12552, 12596, 12544-46. 

In closing arguments to the jury, State Farm argued that plaintiffs could not recover 

unless they could prove that all of the non-OEM parts State Farm had specified were 

inferior. In rebuttal, plaintiffs pointed to the court’s instructions as validation that “it is not 

our burden in this case” to prove the inferiority of all non-OEM parts, and that they needed 

to prove merely “[t]hat it is more probably true than not true that State Farm broke its 

promise to the class.” R. 12987. 

8. The Jury Verdict and ICFA Judgment. The jury found for plaintiffs. It awarded 

all requested specification damages ($243,740,000) and $212,440,000 in installation 

damages. C. 30226. The court then entered judgment for plaintiffs on the ICFA count, 

concluding that State Farm’s failure to disclose “known problems” and “possible safety 

concerns” with respect to non-OEM parts and its use of the term “Quality Replacement 

Parts” to describe those parts constituted a deceptive practice that injured each class 

member. A. 11. The court awarded $130 million in disgorgement damages in addition to the 

specification and installation damages awarded by the jury and, in a single sentence of its 

order, imposed $600 million in punitive damages — the largest punitive exaction in Illinois 

history. A. 13. The court also issued a declaratory judgment finding that State Farm’s 

obligation under all of its insurance policies, regardless of their language and applicable state 

law, was to specify non-OEM parts that were capable of restoring the vehicle to its pre-loss 

condition. A. 14. The court declined to issue the injunction plaintiffs had requested to bar 

State Farm from specifying non-OEM parts in the future, on the ground that policyholders 

-26-

had an adequate remedy at law if State Farm specified non-OEM parts in breach of its 

contractual obligations. A. 14-15. 

The court entered two judgments against State Farm totaling $1,186,636,180, 

reserving jurisdiction to award attorneys’ fees and costs to plaintiffs under ICFA at a later 

time. A. 2-3, 15-16. After it denied State Farm’s post-trial motions, the court entered a Rule 

304(a) finding to ensure that the judgments would be immediately appealable. A. 19. The 

court postponed to a later date the issue of how the judgment, if sustained on appeal, would 

be allocated among class members. Although plaintiffs and the court have suggested that 

there will be an ancillary claims proceeding, no decision has been made as to how (if at all) 

class members will be required to prove their individual claims. 

SUMMARY OF ARGUMENT 

From the ex parte class certification order issued on the day the complaint was filed 

through the entry of the largest judgment ever awarded in the State of Illinois, this case was 

characterized at every turn by improper rulings that violated not only Illinois law, but also 

the fundamental guarantees of due process established under the Illinois and United States 

Constitutions. For the reasons outlined below, the judgment should be reversed and the class 

decertified. 

As demonstrated in Part I below, this is a case that never should have been certified 

as a class action. The circuit court clearly abused its discretion by sweeping into a single, 

massive lawsuit almost five million different repair transactions that occurred in 48 states 

and the District of Columbia and involved tens of thousands of different kinds of non-OEM 

parts as well as millions of vehicles of varying ages, makes and pre-loss condition. These 

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transactions presented a multitude of individual factual issues that could not possibly be 

resolved in a manner consistent with due process without proof of the individual facts and 

circumstances surrounding each repair. In addition, as a matter of Illinois law and 

constitutional principle, the claims of non-Illinois class members could not be decided under 

Illinois law, but rather must be decided under the laws of each individual state. Because it 

was apparent from the outset that there was no proper way to resolve any common issues of 

fact or issues of law on a classwide basis, it was reversible error to certify the class. 

If there was ever any doubt about the propriety of class certification, however, the 

trial proved that the case could not be fairly adjudicated on a classwide basis. As 

demonstrated in Part II below, in order to make a classwide trial manageable, the circuit 

court made a series of erroneous rulings about evidence, burdens of proof, and jury 

instructions that effectively deprived State Farm of a fair trial. For example, plaintiffs 

should have been required to prove which class members suffered an economic loss and to 

provide a reasonable estimate of the amount of that loss. But, recognizing that it was 

impossible to meet that burden on a classwide basis, the court simply excused plaintiffs from 

having to prove the fact of damage as to any class member and allowed them to prove 

“aggregate” damages. Those damages were so clearly improper that plaintiffs’ own expert 

candidly admitted that the “specification” damages made no “economic sense” and that his 

estimate of “installation” damages might be as much as $1 billion too high. 

In order to make the trial manageable, the court also excused plaintiffs from proving 

that any member of the class — including the five class representatives who testified at trial 

— had received non-OEM parts that failed to restore his or her particular vehicle to its pre- 

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loss condition. Instead of requiring proof of any real breaches of contract, the court took yet 

another shortcut, allowing plaintiffs to obtain a $450 million verdict largely on the strength 

of anecdotes and glib generalizations about the general quality of non-OEM parts offered 

by bodyshop owners and plaintiffs’ paid experts. These and other errors detailed in Part II 

below compel reversal of the breach of contract judgment. Because the errors themselves 

demonstrate the impossibility of trying this case on a classwide basis, they also compel 

decertification of the class. 

As demonstrated in Part III below, the $730 million ICFA judgment must also be 

reversed. The circuit court tried to resolve the manageability problems inherent in a 

nationwide consumer fraud class action by applying the Illinois Consumer Fraud Act to the 

claims of all class members. But, as the Fourth District recently concluded in Oliveira v. 

Amoco Oil Co., 311 Ill.App.3d 886, 726 N.E.2d 51 (4th Dist. 2000), the General Assembly 

never intended ICFA to govern transactions in other states. Furthermore, by using ICFA to 

effectively outlaw the practice of specifying non-OEM parts, the circuit court 

unconstitutionally interfered with the laws of Illinois’ sister states, the majority of which 

expressly allow insurance companies to specify non-OEM parts. 

A separate and independent reason for vacating the ICFA judgment — and, indeed, 

for entering judgment on that claim in favor of State Farm — is that the circuit court failed 

to properly apply ICFA to the facts of this case. Among other things, the court applied the 

wrong standard of proof, using a “preponderance of the evidence” standard despite this 

Court’s holding in General Motors Acceptance Corp. v. Grissom, 150 Ill.App.3d 62, 65 (5th 

Dist. 1986), that ICFA requires proof by “clear and convincing” evidence. Furthermore, 

-29-

under any standard of proof, State Farm’s statements with respect to non-OEM parts were 

not deceptive: State Farm fully disclosed in its policies that it could specify non-OEM parts 

and told policyholders when it was doing so. The mere fact that plaintiffs now disagree 

about the quality of non-OEM parts in general hardly makes State Farm’s disclosures — 

many of which were mandated by state law — deceptive. Plaintiffs also failed to offer any 

evidence to show that any class member suffered any harm as a result of the fact that State 

Farm described non-OEM parts as “quality replacement parts” and failed to provide any 

rationale for the award of $130 million in completely duplicative “disgorgement” damages. 

Finally, as demonstrated in Part IV below, even if the ICFA judgment could 

somehow withstand review by this Court, the $600 million punitive damages award would 

have to be reversed. State Farm did not specify non-OEM parts in order to harm anyone. On 

the contrary, it did so to promote sorely-needed competition in the automobile parts industry, 

to reduce repair costs, and to save its policyholders money on their insurance premiums. 

Moreover, State Farm was not alone in promoting the specification of non-OEM parts: 

consumer groups and state legislatures and regulators around the country have endorsed the 

specification of non-OEM parts. Under these circumstances, there is no justification for 

imposing any punitive damages on State Farm. Indeed, punishing State Farm under Illinois 

law for engaging in conduct outside Illinois that is expressly allowed in a majority of states 

would constitute both unconstitutional extraterritorial punishment under BMW of N. Am., 

Inc. v. Gore, 517 U.S. 559, 568-73 (1996), and a deprivation of State Farm’s constitutional 

right to fair notice that its conduct in specifying non-OEM parts could subject it to 

punishment. 

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ARGUMENT 

I. Class Certification Violated The Illinois Class Action Statute And Deprived 

State Farm Of Its State And Federal Due Process Right To A Fair Trial. 

The Illinois class action statute establishes four requirements that a plaintiff must 

meet before a class may be certified. Plaintiffs bear the burden of proving that: 

(1) The class is so numerous that joinder of all members is impracticable; 

(2) There are questions of fact or law common to the class, which 

common questions predominate over any questions affecting only 

individual members; 

(3) The representative parties will fairly and adequately protect the 

interest of the class; and 

(4) The class action is an appropriate method for the fair and efficient 

adjudication of the controversy. 

735 ILCS 5/2-801. See McCabe v. Burgess, 75 Ill.2d 457, 464 (1979); Wood River Area 

Dev. Corp. v. Germania Fed. Sav. & Loan, 198 Ill.App.3d 445, 449 (5th Dist. 1990). 

A circuit court has a continuing duty to assess the propriety of an order certifying a 

class as the case develops. If it becomes apparent at any point in the proceedings that the 

class no longer meets all of the statutory requirements, the class must be decertified. See, 

e.g., Barnes v. American Tobacco Co., 161 F.3d 127, 140 (3d Cir. 1998); Hervey v. City of 

Little Rock, 787 F.2d 1223, 1227 (8th Cir. 1986). 15/ See also Getto v. City of Chicago, 86 

Ill.2d 39, 47 (1981) (class certification order “is always subject to amendment or 

modification before a final judgment is entered”). 

15/ 

Because Illinois’ class action statute is “patterned” after Rule 23 of the Federal Rules 

of Civil Procedure, Getto v. City of Chicago, 86 Ill.2d 39, 47 (1981), Illinois courts routinely 

cite federal cases interpreting Rule 23 in deciding issues under the Illinois statute. See, e.g., 

Schlessinger v. Olsen, 86 Ill.2d 314, 320 (1981); Wood River, 198 Ill.App.3d at 450. 

-31-

A class certification ruling — or a refusal to decertify a class — must be reversed on 

appeal if it is the product of a clear abuse of discretion or the application of impermissible 

legal criteria. See McCabe, 75 Ill.2d at 464; Eshaghi v. Hanley Dawson Cadillac Co., 214 

Ill.App.3d 995, 1001 (1st Dist. 1991). In this case, the circuit court applied the wrong legal 

criteria and abused its discretion when it initially certified the class, and again when it denied 

State Farm’s motions for decertification before, during, and after the trial. Plaintiffs failed 

to meet their burden of demonstrating that common questions of law or fact predominated 

over individual questions. In addition, because the only way to fairly try the case was to 

consider the facts and circumstances of each class member’s individual repair, a class action 

was neither an efficient nor a fair way to resolve the controversy. Finally, because of the 

inherent conflict of interest between class members who remain State Farm policyholders 

(and therefore have an interest in minimizing both the judgment and future repair costs) and 

those who are not current policyholders (whose only interest is in maximizing their 

recovery), plaintiffs failed to meet their burden of showing that the named plaintiffs could 

adequately represent the interests of the entire class. 

A. Individual Questions Overwhelmed Any Purported Common Questions 

Raised By Plaintiffs’ Breach Of Contract Claims. 

“[A]n issue is predominant” only if it is “so important that, in a very practical effect, 

it disposes of the entire controversy, leaving only minor issues to be resolved in individual 

circumstances.” Nebel v. City of Chicago, 53 Ill.App.3d 890, 902 (1st Dist. 1977). As this 

Court has explained, “[s]atisfaction of the requirement pertaining to predominating common 

questions of fact or law necessitates a showing that successful adjudication of the purported 

class representatives’ individual claims will establish a right of recovery in other class 

-32-

members.” Slimack v. Country Life Ins. Co., 227 Ill.App.3d 287, 292-93 (5th Dist. 1992); 

accord Hagerty v. General Motors Corp., 59 Ill.2d 52, 59 (1974); Key v. Jewel Cos.,176 

Ill.App.3d 91, 96 (1st Dist. 1988). 

The paradigm class action is one in which class members engaged in “essentially 

identical transactions” with the defendant. Miner v. Gillette Co., 87 Ill.2d 7, 19 (1981). By 

contrast, class certification has not been allowed under Illinois law where the transactions 

at issue differ and the outcome of each purported class member’s claim depends on the 

individual facts surrounding his or her own transaction. See, e.g., Magro v. Continental 

Toyota, Inc., 67 Ill.2d 157 (1977) (holding that class allegations should have been stricken 

as a matter of law because there was no way to tell whether individual class members had 

been properly taxed for their automobile repairs without considering the individual facts of 

each repair); Charles Hester Enters. v. Illinois Founders Ins. Co., 137 Ill.App.3d 84, 100-01 

(5th Dist. 1985) (affirming denial of class certification because the “differing factual bases 

of each separate purchase [of dramshop coverage] would have to be inquired into in order 

to establish the motives and particulars concerning policy limits desired and actually 

purchased” in order to determine whether class members had been deceived), aff’d, 114 

Ill.2d 278 (1986). 16/ 

16/ 

Accord Hagerty, 59 Ill.2d 52 (1974) (upholding denial of class certification on same 

claims alleged in Magro); Elder v. Coronet Ins. Co., 201 Ill.App.3d 733, 754 (1st Dist. 1990) 

(affirming denial of class certification where, because of unresolved individual issues, 

defendant “would be entitled to a jury trial on the claims of the plaintiff and all the other 

members of the class”); Key, 176 Ill.App.3d at 97 (affirming decertification order where the 

resolution of plaintiffs’ claims “turns on specific facts as to the relationship between 

individual franchisees and White Hen Pantry and the manner in which individual franchisees 

operated their stores” and where “[t]here is no evidence to suggest that the experience of the 

[named] plaintiffs . . . is in any way representative of a class that would include all 

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When these fundamental principles are applied to plaintiffs’ breach of contract 

claims, it becomes apparent that the circuit court abused its discretion first by certifying the 

class and then by denying State Farm’s motions to decertify. 

1. Plaintiffs’ Contract Claims Raised A Host Of Fact Questions 

That Could Be Fairly Resolved Only On An Individual Basis. 

The circuit court reaffirmed the ex parte class certification order on the ground that 

State Farm’s “common pattern” of specifying non-OEM parts created a common issue of 

“contract[] interpretation.” A. 29. Subsequently, however, the court resolved any question 

of contract interpretation by concluding that all of State Farm’s policies — regardless of 

differences in language and governing state laws — imposed the same obligation: to pay for 

parts of like kind and quality which restore the policyholders’ vehicle to its pre-loss 

condition. R. 4426; A. 59-60. 17/ Having defined State Farm’s obligations under its policies, 

the court should have gone on to consider whether State Farm’s compliance with that 

obligation could be determined based on common evidence, rather than inquiring into each 

individual repair. See Eshaghi, 214 Ill.App.3d at 1001 (to determine predominance, “the 

court must inquire into the issues raised and standard of proof required by the substantive 

law upon which plaintiff’s complaint is based”). 

The circuit court, however, refused to conduct the required predominance analysis. 

The court did not consider what facts plaintiffs would have to prove to establish the elements 

of each class member’s individual breach of contract claim. Nor did it consider what kind 

franchisees”). 

17/ 

As demonstrated in Part I(A)(3) below, the circuit court was plainly wrong in 

concluding that a single contractual standard applies to all claims of all class members. 

-34-

of evidence State Farm would be entitled to introduce to defend itself with respect to those 

individual claims. Instead, the court merely assumed that the proof for each class member 

would be the same, accepting at face value plaintiffs’ representations that they would be able 

to prove the “categorical[] inferior[ity]” of all non-OEM parts. A. 31. At the same time, the 

court brushed aside the evidence State Farm had presented at the class certification hearing 

concerning the tens of thousands of non-OEM parts involved and the significant variations 

in quality among those parts, on the ground that such evidence went to “the merits of 

whether non-OEM parts are equal to OEM parts.” A. 30-31. 

If the circuit court had used the correct legal standard for judging predominance, the 

only conclusion it could have reached was that individual issues of fact overwhelmed any 

purported common question. If an insured were to bring an individual breach of contract 

claim, he would have to prove (1) that State Farm specified a non-OEM repair part on his 

repair estimate; (2) that a non-OEM part was actually installed on his vehicle or that he paid 

extra to have an OEM part installed; (3) that the non-OEM part specified was incapable of 

restoring the vehicle to its pre-loss condition; (4) that any failure in fact to restore the vehicle 

to its pre-loss condition was due to the inferior quality of the part, rather than to other causes, 

such as poor workmanship by the bodyshop; and (5) that he suffered some reasonably 

ascertainable economic injury as a result. Even if a plaintiff could prove all of these 

elements, State Farm would still have the right, in any individual case, to assert a variety of 

individual defenses, such as waiver or consent. As demonstrated below, there was simply 

no way to adjudicate every element of plaintiffs’ claims on a classwide basis. Instead, the 

only way plaintiffs could possibly meet their burden of proving each of the elements of a 

-35-

each of contract claim with respect to each class member — and the only way State Farm 

would have a full and fair opportunity to establish its defenses — would be to look at the 

individual facts surrounding each class member’s repair transaction. 

a. Individualized Proof Was Necessary To Determine Which Class 

Members Had Non-OEM Parts Installed On Their Vehicles. 

State Farm’s records identify the policyholders who received repair estimates 

specifying non-OEM parts. But those records do not show whether the non-OEM parts 

specified were actually installed on the policyholders’ vehicles. R. 10211. A study 

introduced at trial indicated that only 50% of the non-OEM parts that were specified were 

actually installed. R. 10164-65. In many cases, an OEM part was installed at no additional 

cost to the policyholder. See page 8, supra. Plaintiffs themselves admitted that this occurred 

in “numerous” cases. C. 13404. Obviously, a class member who received an OEM part at 

no additional cost cannot claim to have suffered any economic loss. Yet the only way to 

separate out the class members who actually had non-OEM parts installed on their vehicles 

from those who did not was to look at the individual facts surrounding each repair. 

The circuit court should have denied class certification or decertified the class when 

it became clear that it was impossible to tell without looking at each individual repair which 

members of the class had non-OEM parts installed on their vehicles. A federal district court 

made precisely this point recently in denying certification of a class of purchasers of 

Chrysler vehicles that had been painted with an allegedly inferior paint process. See 

Sanneman v. Chrysler Corp., 2000 WL 257452 (E.D. Pa. 2000). As the court noted, “the 

practical issue of actually identifying class members” — proving whose vehicles had 

suffered or were suffering paint delamination — “presents serious administrative burdens 

-36-

that are incongruous with the efficiencies expected in a class action.” Id. at *4. Because 

there was no way to tell, without looking at each individual vehicle, whose vehicles were in 

fact delaminating or had delaminated — let alone why the delamination had occurred — the 

court held that class certification was improper. The same result should have been reached 

here, where it is impossible to tell without looking at each individual repair which members 

of the class had standing to seek damages for any alleged breach of contract. See Kelly v. 

Sears Roebuck & Co., 308 Ill.App.3d 633, 644 (1st Dist. 1999). 

Plaintiffs tried to get around the threshold problem created by their inability to 

identify when non-OEM parts were actually installed by claiming that the mere specification 

of a non-OEM part constituted a breach of contract entitling the policyholder to so-called 

“specification” damages. But there was no breach of contract by State Farm so long as the 

insured’s vehicle was restored to pre-loss condition, which, under plaintiffs’ theory, use of 

OEM parts accomplished. Moreover, no principle of law allows a plaintiff who did not 

suffer any real harm to recover damages for a breach of contract. Plaintiffs’ own expert 

conceded that their theory of specification damages made no economic sense precisely 

because policyholders who received OEM parts at no additional cost could not claim to have 

suffered any loss as a result of the specification of non-OEM parts. R. 7222-23. That 

plaintiffs were forced to rely upon such a far-fetched damages theory in order to deal with 

their inability to identify who had received non-OEM parts should have been a clear signal 

to the circuit court that this case was not appropriate for class treatment. See Broussard v. 

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Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 343 (4th Cir. 1998). 18/ 

b. Individualized Proof Was Necessary To Determine The Quality 

Of The Non-OEM Parts State Farm Specified And The Pre-Loss 

Condition Of Class Members’ Vehicles. 

The second element plaintiffs had to prove was that the non-OEM parts State Farm 

specified were so inferior that they could not be used to restore the vehicles in question to 

pre-loss condition. Because pre-loss condition is the benchmark by which the repair is to 

be judged, plaintiffs had to prove the pre-loss condition of each class member’s vehicle. If 

non-OEM parts were actually installed on vehicles, plaintiffs also had to prove the condition 

of the vehicle after it was repaired and had to show that the repair had been competently 

performed, but that the part could not be used to achieve the desired effect. Proving all of 

those facts would necessarily require an individual trial as to each class member’s repair. 

The evidence showed that the pre-loss condition of class members’ vehicles varied 

widely. Some vehicles were old and in poor condition. 19/ 

Others had been in previous 

accidents and had already been repaired with non-OEM parts. R. 8013-14, 8069-70, 8300. 

A brand-new OEM fender is not required to restore an old vehicle with battered and rusted 

18/ 

In Meineke, the Fourth Circuit reversed a $390 million judgment in favor of a class 

of Meineke franchisees on the ground (among others) that the trial court had abused its 

discretion by certifying the class. As in this case, the plaintiffs in Meineke had attempted 

to “substitute [an expert’s] ‘hypothetical or speculative’ evidence, divorced from any actual 

proof of damages” for proof of damages actually suffered by individual franchisees. The 

court observed: “That this shortcut was necessary in order for this suit to proceed as a class 

action should have been a caution signal to the district court that class-wide proof of 

damages was impermissible.” 155 F.3d at 343. 

19/ 

For example, class member Peggy Frey had a ten-year old Ford Mustang with over 

100,000 miles that was in “very poor mechanical condition,” with fog lights held in place 

by clothespins. C. 13886-87. 

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fenders to its pre-loss condition. See Bellefonte Ins. Co. v. Griffin, 358 So.2d 387, 390 

(Miss. 1978) (policy requiring payment for “like kind and quality” parts contemplates an 

adjustment for depreciation of, and pre-accident damage to, the original part). And if a non- 

OEM part was already on the car as a result of a previous repair (see, e.g., R. 8300), it could 

not possibly be a per se breach of contract to specify a replacement that was also a non-OEM 

part. But, as plaintiffs’ own expert witnesses conceded, the only way to tell whether the 

parts State Farm had specified had been used to restore a vehicle to its pre-loss condition was 

to look at the actual pre-loss condition of the vehicle in question (R. 4927-28, 12182) — an 

exercise that would have been physically impossible to accomplish in a single trial of the 

claims of almost 5 million class members. 

In order to prove each class member’s breach of contract claim, plaintiffs faced the 

equally impossible task of establishing that each of the literally tens of thousands of different 

non-OEM repair parts State Farm specified was so inferior that it could not be used to restore 

a vehicle to its pre-loss condition. These parts were made by scores of different 

manufacturers over a more than ten-year period in plants all over the world. As a matter of 

commonsense, even if plaintiffs could have proved that certain class representatives or other 

members of the class had received defective non-OEM parts that failed to restore their 

particular vehicles to their pre-loss conditions, that would not prove that different parts, 

made by different manufacturers for cars of different makes, models, or years failed to 

restore other policyholders’ vehicles to their particular pre-loss conditions. 20/ Thus, contrary 

20/ 

See, e.g., Johnson v. Ford Motor Co., 988 F.2d 573, 579-80 (5th Cir. 1993) (plaintiff 

cannot prove defective joint assembly in 1983 Ford Escorts by offering evidence of defects 

in different Ford parts, different Ford models, or Ford Escorts manufactured in different 

-39-

to the requirement established by this Court in Slimack, this was not a case where 

“successful adjudication of the purported class representatives’ individual claims will 

establish a right of recovery in other class members.” 227 Ill.App.3d at 292-93. 

To properly prove the claims of individual class members, plaintiffs would first have 

had to present separate proof with respect to each of the 33,000 different kinds of non-OEM 

repair parts that were actually installed on State Farm policyholders’ vehicles. Then, they 

would have had to show that any defects identified in the repair jobs were the result of 

inherent defects in the parts, rather than a lack of skill on the part of any of the thousands of 

different bodyshops that performed the repairs in question. 21/ 

The daunting prospect of having to try the merits of each class member’s claim 

individually has caused other courts to deny motions to certify much smaller classes 

challenging the specification of non-OEM repair parts. In Rios v. Allstate Ins. Co., No. 94 

CH 11396 (Cook County Cir. Ct. Jan. 27, 1998), the Circuit Court of Cook County expressly 

rejected the reasoning employed by the circuit court in this case and refused to certify a class 

of Allstate policyholders from only two states (Illinois and Indiana) who sought damages as 

years); Floyd v. General Motors Corp., 960 P.2d 763, 766 (Kan. App. 1998) (evidence that 

GM recalled certain 1992 models to determine whether particular bolt was missing from 

steering mechanism was inadmissible to prove steering defect in 1988 model). See also R. 

4906 (admission of plaintiffs’ witness Ryles that problems with a non-OEM part made by 

one manufacturer would not justify the conclusion that other non-OEM parts made by a 

different manufacturer were defective). 

21/ 

See In re Ford Motor Co. Vehicle Paint Litig., 182 F.R.D. 214, 220 (E.D. La. 1998) 

(holding certification inappropriate because, among other things, a variety of individual 

factors apart from the allegedly defective paint process could have affected how paint 

performed, and the parties would have been required to litigate the issue of causation on a 

case-by-case basis). 

-40-

a result of Allstate’s specification of non-OEM repair parts. The Rios court concluded that 

there were simply too many variables that have to be considered in deciding whether a non- 

OEM part restored a vehicle to its pre-loss condition to make it feasible to resolve the 

individual claims of thousands (let alone millions) of class members on a classwide basis. 

C. 23924-25. Similarly, in Murray v. State Farm Mut. Auto. Ins. Co., No. 96-2585, slip op. 

at 26 (W.D. Tenn. Aug. 19, 1997), the court refused to certify a class of Tennessee 

policyholders, on the ground that “hundreds or thousands of mini-trials [would be required] 

in order to determine if plaintiffs were entitled to recover.” C. 2968. 

These decisions reflect the prevailing view throughout the country that significant 

variations in products alleged to be defective preclude class certification. See, e.g., 

Sanneman, 2000 WL 257452, at *9 (denying certification of claims challenging Chrysler’s 

new painting process, involving eight model years, 13 manufacturing plants and hundreds 

of different colors of paint supplied by two different manufacturers); Walsh v. Ford Motor 

Co., 130 F.R.D. 260, 270 (D.D.C. 1990) (denying class certification where differences in 

design of four different engine systems were not “minor and immaterial”); see also Goetz 

v. Village of Hoffman Estates, 62 Ill.App.3d 233, 237-238 (1st Dist. 1978) (differences in 

electrical wiring of subdivision homes precluded class certification in suit alleging negligent 

wiring). Indeed, other courts have declined to certify classes alleging defects in products 

that are far more uniform in composition and design than the 33,000 non-OEM parts at issue 

here — including cigarettes, airplane kits, and condominiums. 22/ 

22/ 

See, e.g., Barnes, 161 F.3d at 135 (affirming decertification of class because 

“[d]efendants manufactured hundreds of different types of cigarettes over the years and have 

even made changes within each brand”); Horizon Unlimited, Inc. v. Silva, 1998 WL 238468, 

-41-

c. Plaintiffs’ Attempt To Overcome The Inherently Individual 

Nature Of The Inquiry By Seeking To Litigate The Case On 

Behalf Of The Class As A Whole Failed As A Matter Of Law. 

Plaintiffs recognized that it would be impossible to try this case as a class action if 

they were required to prove the pre-loss condition of each class member’s vehicle and the 

inferiority of each of the tens of thousands of different kinds of non-OEM parts that were 

actually installed. They persuaded the circuit court to certify the class by promising to show, 

through generalized proof, that all non-OEM crash parts were so inferior that they were 

inherently incapable of meeting the contractual standard. A. 31. 

The circuit court’s decision to certify the class based on these representations was 

a clear abuse of discretion. It was obvious from the outset that plaintiffs would never be able 

to sustain the burden they had undertaken. There is no way anyone could possibly establish, 

through common proof, that 33,000 different types of parts produced over 10½ years by 

different factories out of different materials failed to restore 4.7 million different vehicles 

to pre-loss condition. Moreover, the fact that the majority of states expressly permit 

insurance companies to use non-OEM parts to meet the same contractual obligations at issue 

here — and that there is not a single state that prohibits insurance companies from doing so 

— is proof, in and of itself, that non-OEM parts cannot be categorically condemned. For if, 

as plaintiffs contend, there were no “like kind and quality” non-OEM parts, state legislatures, 

at *6 (E.D. Pa. 1998) (denying class certification because airplane performance varied 

depending on alterations made to kits and how purchasers finished planes with component 

parts made from different manufacturers); Zehnder v. Ginsburg & Ginsburg Architects, 678 

N.Y.S.2d 376, 377 (App. Div. 1998) (individual questions of law and fact predominated in 

condominium owners’ suit to recover damages based on faulty construction of units, where 

units were not of uniform design). 

-42-

insurance regulators and consumer advocates would hardly support legislation allowing 

insurance companies to specify those parts. 

In any event, even if the court had been free to accept plaintiffs’ representations 

about what they intended to prove, it was error to certify the class in the face of State Farm’s 

repeated protestations that it had a right to defend each class member’s claim based on the 

quality of the parts that were actually installed on the vehicles in question. While plaintiffs 

made a choice to present generalized proof, State Farm had a right under both the Illinois 

and United States Constitutions to present a full-scale defense to each individual class 

member’s claim. See Lindsey v. Normet, 405 U.S. 56, 66 (1972) (“Due process requires that 

there be an opportunity to present every available defense”). To deny a defendant the right 

to “present a full defense on the issues would violate due process.” Western Elec. Co. v. 

Stern, 544 F.2d 1196, 1199 (3d Cir. 1976). The court in Stern concluded that, even if 

plaintiffs could “make out a prima facie case” of a Title VII violation “without introducing 

evidence on individual cases,” “defendants must be allowed to present any relevant rebuttal 

evidence they choose, including evidence that there was no discrimination against one or 

more members of the class.” Id. (emphasis added). So too, in this case, even if plaintiffs 

could have found a way to present their prima facie breach of contract case on a classwide 

basis, State Farm was entitled to defend itself by presenting evidence about individual 

repairs to prove that it did not breach its contracts with particular members of the class. 

Because that kind of detailed, individual proof cannot feasibly be presented in the context 

of a class action, it was an abuse of discretion — and a deprivation of State Farm’s state and 

federal due process rights — to certify the class. 

-43-

The circuit court compounded its error in certifying the class by refusing to decertify 

it after plaintiffs shifted their theory of the case. As State Farm had predicted, once the trial 

got underway, it became clear that plaintiffs were no longer shouldering the burden of 

proving that non-OEM parts were so universally inferior that they could never be used to 

restore any vehicle, no matter how decrepit it might be, to its pre-loss condition. Instead, 

plaintiffs now argued that it was not their burden to prove that all non-OEM parts were 

inferior and that they could prevail if they could persuade the jury that State Farm had 

breached its “promise to the class.” R. 12987. 23/ 

The circuit court allowed plaintiffs to 

present their case on a global, aggregate basis, without having to prove that all non-OEM 

parts were inferior, which members of the class had suffered an economic loss as a result of 

the installation or specification of an inferior non-OEM part, or the extent of any individual’s 

loss. See, e.g., R. 12351; A. 61-62. 

The approach plaintiffs adopted at trial effectively substituted the class as the 

plaintiff in the action, submerging all of the class members’ individual claims into a single, 

aggregate claim. Under this “aggregate” theory, the individual facts of any class member’s 

claim — and even of the class representatives’ claims — were irrelevant, because the issue 

was whether the class as a whole had suffered some injury as a result of the practice in 

question. The circuit court’s decision to accept this approach to avoid what otherwise would 

23/ 

Compare plaintiffs’ statements at the class certification stage that “we will prove at 

trial that all imitation crash parts are inferior” and that “what we will prove is all imitation 

crash parts are bad,” R. 1796, 1803, with their closing argument to the jury that “[i]t is not 

our burden in this case” to prove the inferiority of all non-OEM parts and that they needed 

to prove merely “[t]hat it is more probably true than not true that State Farm broke its 

promise to the class.” R. 12987. 

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have been the overwhelming predominance of individual issues of fact was an error of law 

that requires reversal of the judgment and decertification of the class. 

The certification of a class does not alter the substantive law applicable to the class 

members’ claims. See Meineke, 155 F.3d at 345 (“It is axiomatic that the procedural device 

of Rule 23 cannot be allowed to expand the substance of the claims of class members”); 

Cimino v. Raymark Indus., Inc., 151 F.3d 297, 312 (5th Cir. 1998) (class certification “does 

not alter the required elements which must be found to impose liability and fix damages (or 

the burden of proof thereon) or the identity of the substantive law . . . which determines such 

elements”). See also Amchem Prods. v. Windsor, 521 U.S. 591, 615 (1997) (holding that the 

class action device cannot “sacrific[e] procedural fairness”). 

Because the same substantive rules apply whether there is one plaintiff or millions 

suing as a class, plaintiffs must be able to prove all of the elements of their claim for each 

member of the class on whose behalf a judgment is rendered. This proposition is wellestablished 

in the antitrust context. See, e.g., In re Hotel Tel. Charges, 500 F.2d 86, 90 (9th 

Cir. 1974) (“allowing gross damages by treating unsubstantiated claims of class members 

collectively significantly alters substantive rights under the antitrust statutes”); Dry Cleaning 

& Laundry Inst. v. Flom’s Corp., 1993 WL 527928, at *3 (E.D. Mich. 1993) (“only 

individual members of the proposed class, not the class, can be injured ‘in [their] business 

or property’ by a[n] [antitrust violation]”). The same rationale applies to a breach of 

contract claim: a policyholder cannot recover damages for a breach of contract unless he can 

prove that he personally suffered an economic loss as a result of the insurance company’s 

failure to meet the particular obligations that were owed to him. 

-45-

The corollary of these fundamental principles is that class members who cannot 

prove individual injury cannot recover simply because other members of the class may have 

been injured. A class member is not permitted “to recover damages sustained not by him, 

but by someone else who happens to be a member of such class.” Windham v. American 

Brands, Inc., 565 F.2d 59, 66 (4th Cir. 1977); see also Kelly, 308 Ill.App.3d at 644 (where 

only some of the batteries Sears sold were allegedly defective, plaintiff in a purported class 

action had to plead and prove that the battery he himself purchased was defective). Thus, 

plaintiffs could not properly prevail on behalf of a nearly five million-member class by 

persuading a jury that “global” evidence showed that State Farm somehow breached its 

“contract with the class.” Instead, in order to have a class at all, plaintiffs had to be able to 

demonstrate through common proof which class members’ contracts were breached and what 

losses those particular class members actually suffered. When it became obvious that 

plaintiffs could not possibly meet that burden, the circuit court had an obligation to decertify 

the class. 

Meineke is directly on point. In that case, as in this one, the plaintiffs recovered an 

enormous judgment by “portray[ing] the class at trial as a large, unified group that suffered 

a uniform, collective injury.” 155 F.3d at 345. The plaintiffs in Meineke created a 

“composite” plaintiff by presenting their case on an aggregate basis, “litigat[ing their case] 

not on behalf of themselves but on behalf of a ‘perfect plaintiff’ pieced together for 

litigation.” Id. at 344. The Fourth Circuit reversed the judgment, holding that the trial court 

erred in allowing the plaintiffs to portray the class as if it were a single entity with a single 

contract, when it was entirely possible that the defendant had breached its contract with only 

-46-

some class members and the issue of whose contract was breached depended on the 

individual facts of each transaction. Id. at 345. 24/ 

The same analysis applies here. It is clear that State Farm did not breach its contract 

with each and every member of the class. Indeed, the evidence developed through discovery 

demonstrated that most, if not all, of the eleven hand-picked class representatives whom 

plaintiffs offered at various times did not have any claim against State Farm for breach of 

contract. For example, plaintiffs Laurie Loger and Tammy Snider had no claims because 

OEM parts were installed on their vehicles, at no additional charge. R. 4524, 4530; C. 

15577-80, 15914. Plaintiff DeFrank had no claim because he admitted that when he sold his 

vehicle, which was repaired in part with non-OEM parts specified by State Farm, he did not 

suffer any reduction in price due to the non-OEM parts. R. 4507W, 4507BB. Plaintiff 

Vickers also received full value for her vehicle — from State Farm — when she totaled it 

after it was repaired (in part) with non-OEM parts. R. 6342, 6358. And plaintiffs Hofer, 

Shadle and Avery all chose to pay for OEM parts to be installed on their vehicles — but 

never even attempted to prove that the particular non-OEM parts State Farm had specified 

24/ 

See also Andrews v. AT&T Co., 95 F.3d 1014 (11th Cir. 1996), where the court 

reversed the certification of a nationwide class containing millions of members, who sought 

to challenge the legality of hundreds of 900-number phone programs under state gambling 

and fraud statutes. The court rejected plaintiffs’ attempt to “lump[] together and condemn[] 

or absolve[]” the programs “en masse,” holding that the validity of each 900-number would 

have to evaluated under the law of the state in which the caller was located. Id. at 1024. 

Similarly, in In re Fibreboard Corp., 893 F.2d 706, 711-12 (5th Cir. 1990), the court 

rejected a plan to try 3,000 asbestos claims “as a group” on the ground that such a procedure 

“cannot focus upon such issues as individual causation” and “[c]ommonality among class 

members on issues of causation and damages can be achieved only by lifting the description 

of the claims to a level of generality that tears them away from their substantively required 

moorings to actual causation and discrete injury.” 

-47-

could not have been used to restore their vehicles to pre-loss condition. See C. 15686A; R. 

6117, 6191. 

Before trial, the circuit court denied State Farm’s motion for summary judgment 

against the individual class representatives, on the ground that there were genuine issues of 

material fact to be tried. Then, however, the court refused to ask the jury to resolve those 

issues of fact, denying State Farm’s request that the jury render a verdict with respect to the 

claim of each individual who remained a class representative. The court accepted plaintiffs’ 

argument that “there is no requirement that the named class representatives prove their 

individual cases,” and that the entitlement of the class representatives who appeared at trial, 

as well as those that plaintiffs had dropped, depended entirely on “their membership in the 

class.” R. 12544-45. That argument, however, turns the Illinois rule on its head. Under 

Illinois law, it is not some composite class claim that determines the right of an individual 

to recover. Rather, it is “successful adjudication of the purported class representatives’ 

individual claims” that is supposed to be used to “establish a right of recovery in other class 

members.” Slimack, 227 Ill.App.3d at 292-93. 

In this case, as plaintiffs’ own arguments reflect, adjudication of the class 

representatives’ widely varying claims proved absolutely nothing about the claims of other 

class members. Even if one or more of them could have shown that they had personally 

suffered an economic loss as a result of a breach of contract by State Farm, such a showing 

would have meant nothing for other class members who had different vehicles with different 

pre-loss conditions and who received estimates specifying different non-OEM parts under 

different circumstances. Because it was apparent at least by the time the case was tried, if 

-48-

not sooner, that plaintiffs could not possibly meet the standard adopted by this Court for 

judging predominance, it was a clear abuse of discretion for the circuit court to refuse to 

decertify the class. 

d. State Farm’s Affirmative Defenses Could Be Litigated Only On 

An Individual Basis. 

Class certification was also improper because it effectively deprived State Farm of 

affirmative defenses it would have been entitled to raise if class members’ claims had been 

tried individually. For example, in at least eight states, State Farm was required by state law 

to secure the consent of its policyholders before specifying non-OEM parts on repair 

estimates; if a policyholder insisted on OEM parts, State Farm was required to pay for them, 

at no additional charge to the policyholder. See note 4, supra. In these states, State Farm 

had a potential waiver defense to any breach of contract claim, on the ground that the 

policyholder had explicitly consented to the use of a particular non-OEM part at the time of 

the repair and therefore could not seek damages if he or she later decided that the use of non- 

OEM parts was unacceptable. Whether this defense would succeed in any individual case 

would depend both on the law in the particular state where the repair took place and on the 

facts and circumstances surrounding the transaction. 

By certifying a class, however, the circuit court made it impossible for State Farm 

to raise this and other similar defenses with respect to any class member’s claim, no matter 

how clear the consent or waiver might be. 25/ 

There is no way that State Farm could have 

25/ 

There are a variety of other situations in which State Farm might have defenses 

unique to the individual policyholder. For example, a policyholder who agreed to the use 

of non-OEM parts in order to avoid having his vehicle declared a total loss — because the 

cost of repairs using OEM parts would have exceeded the value of the vehicle — should be 

-49-

conducted discovery, let alone presented unique affirmative defenses, with respect to the 

claims of almost five million class members. The court’s treatment of State Farm’s consent 

defense illustrates the unfairness inherent in its ruling: the court allowed State Farm to argue 

consent, but — in order to avoid introducing any evidence of differences among class 

members — prohibited State Farm from telling the jury about the statutes that require 

consent. As a result, State Farm was allowed to “argue” that some class members had 

consented, but was precluded from presenting any evidence to support that argument. 

State Farm had a constitutional right to “an opportunity to present every available 

defense,” Lindsey, 405 U.S. at 66. The circuit court’s decision to certify a class deprived 

State Farm of any ability to exercise that right. For that reason alone, the judgment below 

should be reversed and the class decertified. See, e.g., In re Masonite Corp. Hardboard 

Siding Prods. Liab. Litig., 170 F.R.D. 417, 425 (E.D. La. 1997) (refusing to certify 

nationwide class of consumers claiming to have received defective siding products because, 

among other things, “it is apparent that Masonite cannot receive a fair trial without a process 

that permits a thorough and discrete presentation of [its individualized] defenses”). 

e. Individual Issues Predominated With Respect To The Existence 

And Extent Of Damages. 

The question of whether and the extent to which class members suffered any 

damages also presented uniquely individual issues that could not be resolved properly except 

by looking at the individual facts and circumstances of each claim. By the eve of trial, it had 

become clear that a large portion of the class had no legitimate claim for damages. As 

estopped from claiming a breach of contract. R. 8414-16. 

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explained above, class members who received OEM parts — rather than the non-OEM parts 

State Farm had specified — at no extra cost had no basis for claiming damages. Similarly, 

class members like DeFrank and Vickers, who disposed of their vehicles without any 

discount attributable to the presence of non-OEM parts, could not claim to have suffered any 

economic harm. The only way to identify who these class members were — or even how 

many fell into this category — was to consider each class member’s individual situation. 

A class may not properly be certified where, as here, not all class members suffered 

damages, and determining which class members incurred damages would require a case-bycase 

examination. A federal district court made precisely this point recently in In re Merrill 

Lynch, 191 F.R.D. 391 (D.N.J. 1999), when it rejected plaintiffs’ suggestion that they be 

allowed to seek an aggregate damages award without having to prove which class members 

were injured by the defendants’ allegedly unlawful practices. The court held that an 

aggregate damages approach was “not acceptable as a means to arrive at some figure which 

can then be allocated among the proposed class members, regardless of whether each class 

member suffered actual loss.” Id. at 397. Rather, “‘[t]he party seeking to represent a class 

must establish that all members of the purported class have suffered damages.’” Id. at 395, 

quoting Illinois v. Ampress Brick Co., 67 F.R.D. 457, 460 (N.D. Ill. 1975) (emphasis added). 

Proof of the amount of damages also required an inquiry into each class member’s 

individual situation. Class members who paid for OEM parts out of their own pockets might 

have a claim for damages equal to the amounts they actually paid — assuming they could 

prove that the parts State Farm specified could not have been used to restore their vehicles 

to pre-loss condition. But without an individual examination of the facts surrounding each 

-51-

epair, there was no way even to make a wild guess as to how much class members — 

individually or collectively — had actually paid out of their own pockets for OEM parts. 

The same analysis applies to plaintiffs’ claim for “installation” damages — that is, 

the cost of removing non-OEM parts on vehicles still owned by class members and replacing 

them with OEM parts. In any individual case, it would not be particularly difficult to figure 

out the cost to cure the alleged breach. But, as plaintiffs’ own damages expert candidly 

admitted, the information necessary to provide a reasonable estimate of “installation” 

damages on a classwide basis is simply not available. There is no information that would 

allow an expert to determine how many non-OEM parts were installed on vehicles that class 

members still own, how many of those failed to restore the vehicles to pre-loss condition, 

what it would cost to replace those particular parts, how long the repairs would take, or what 

other consequential damages (such as a rental car) would likely be incurred. The only way 

to obtain that information is to look at each class member’s situation individually. Because 

“cost to cure” damages involved “a myriad of individualized factual inquiries,” class 

certification should have been denied. In re Ford Motor Co. Bronco II Prod. Liab. Litig., 

177 F.R.D. 360, 375 (E.D. La. 1997). 

2. At The Very Least, The Court Should Not Have Allowed The 

Jury To Find Liability And Render A Damages Verdict On A 

Classwide Basis. 

At trial, the circuit court struck many of State Farm’s defenses and excluded evidence 

on the ground that the only issue being tried was the quality of non-OEM parts. 

Nevertheless, the court allowed plaintiffs to skip over all of State Farm’s individualized 

defenses outlined above and to leap directly to a $450 million contract damages award. 

-52-

Even if the court had been right in concluding that the quality of non-OEM parts could be 

litigated on a classwide basis through common proof (which it was not), its decision to 

ignore or eliminate all individual issues and to proceed directly to a damages verdict was 

based on a fundamental misunderstanding of proper class action procedure. 

In its class certification ruling, the circuit court stated that “the inability of some 

members of the class to obtain relief due to particular factors unique to them, is to be 

resolved at trial and does not impair certification of the class.” A. 27 (emphasis added). 

This statement is exactly backwards: in Slimack, this Court explained that “questions that 

may be peculiar to individual [class] members” must be adjudicated “in an ancillary 

proceeding or proceedings” — not at the “common issues” trial. Slimack, 227 Ill.App.3d at 

293. Furthermore, if there is no way to efficiently manage the adjudication of the remaining 

individual issues through subclasses, the proper remedy is to decertify the class. Id. See 

also McCabe, 75 Ill.2d at 468-69 (a class action is not appropriate when, even after 

adjudication of common issues, the court would still have to make individual factual 

determinations as to each class member). 

In this case, even if the jury could have properly decided that non-OEM parts were 

inherently inferior to OEM parts, that would only be the beginning — not the end — of the 

inquiry. Ancillary proceedings would still be needed to determine, on an individual basis, 

which vehicles had non-OEM parts installed, whether or not a particular part that was 

actually installed failed to restore the vehicle to its particular pre-loss condition, whether 

State Farm had affirmative defenses to particular claims, and whether and how much any 

individual class member had been damaged by any claimed breach of contract. Depriving 

-53-

State Farm of its right to litigate those individual issues on a case-by-case basis deprived it 

of its fundamental right to due process. 

Because these ancillary proceedings would require mini-trials of each individual 

class member’s claim, no time would be saved by holding a “common issues” trial and thus 

decertification was required under Slimack and McCabe. In any event, whether or not the 

breach of contract class is ultimately decertified, the jury verdict cannot stand in light of the 

circuit court’s failure to provide State Farm with a reasonable opportunity to litigate issues 

of fact peculiar to individual class members in ancillary proceedings. 

3. Individual Questions Of Law Also Made It Impossible To Try 

Plaintiffs’ Breach Of Contract Claims On A Classwide Basis. 

Apart from the multiple individual issues of fact described above, plaintiffs’ breach 

of contract claims also raise numerous individual questions of law which should have been 

decided based on the varying language of the applicable contracts and the varying laws of 

48 states and the District of Columbia. As the circuit court recognized, in order to certify 

a class to pursue a breach of contract claim, “the operative contractual language contained 

in each policy [must be] susceptible to uniform interpretation.” A. 30. But that was not true 

here. Most of the contracts contained the “like kind and quality” or “pre-loss” language the 

circuit court relied upon in instructing the jury. But a significant number of policies did not. 

State Farm’s policies in Massachusetts, and its assigned risk policies in Alaska, Illinois, 

Indiana, and Minnesota, did not use either the “like kind and quality” or “pre-loss condition” 

language. 26/ 

Instead, the Massachusetts policy simply promised to pay “the actual cash 

26/ 

“Assigned risk” policies govern the “residual market”of high-risk consumers whom 

states require insurers to cover, as distinct from the market State Farm insures voluntarily. 

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value” of “parts at the time of the collision,” PX 1200-1 at tab 23 p.16, while the assigned 

risk policies promised to pay an “[a]mount necessary to repair or replace the property.” PX 

1200-1 at tabs 53-57. Neither of these formulations expressly imposes any standard of part 

quality. In fact, the assigned risk policies deliberately delete the “like kind and quality” and 

“pre-loss condition” language that appears in other State Farm policies. Compare PX 1200- 

1 at tab 14 p.15 (Illinois Policy) with id. at tab 54 p.13 (Illinois Assigned Risk Policy). 

Plaintiffs conceded these factual variations and admitted that careful management 

was necessary to accommodate them, suggesting either subclasses or special jury 

interrogatories. R. 2471-72. Nevertheless, the circuit court refused to take any action to 

separate class members with different policy language from the rest of the class and insisted 

that the jury not even be told about the existence of these policies. C. 28970 (barring State 

Farm from discussing “differences in State Farm’s contractual obligations towards members 

of the class”); C. 28980 (barring State Farm from mentioning “the states where the insureds’ 

policies are filed”). That error alone is sufficient to require reversal of the breach of contract 

judgment, since it is impossible to determine what portion of the judgment is attributable to 

class members who had significantly different policy language. 

Apart from differing policy language, varying state laws with respect to insurance 

policies in general and the specification of non-OEM parts in particular created a patchwork 

of differing rights and obligations that should have been taken into account in adjudicating 

each class member’s claim. It is well settled that an automobile insurance policy must be 

interpreted under the laws of the state where the vehicle is garaged or the policyholder lives. 

DX 483 at 14. 

-55-

See, e.g., Jones v. State Farm Mut. Auto. Ins. Co., 289 Ill.App.3d 903, 918 (1st Dist. 1997); 

Allen v. State Farm Mut. Auto. Ins. Co., 214 Ill.App.3d 729, 738-39 (1st Dist. 1991). The 

circuit court did not dispute this basic proposition, but nevertheless ignored all variations in 

state laws on the ground that contract law was consistent nationwide and that there was 

therefore no “true conflict” requiring application of other states’ laws. That decision was 

wrong as a matter of law. 

The relevant state laws differ in a number of important respects which made it 

impossible to achieve a single, uniform interpretation of even facially identical State Farm 

policies. For example, at least 13 states have specific statutes or regulations governing the 

key legal question raised by this case: what quality standards must be met before an 

insurance company may properly specify a non-OEM part in a repair estimate. See note 3, 

supra. Those statutory provisions are controlling for repairs ordered in those states, 

providing a statutory gloss, which differs from state to state, on the meaning of both “like 

kind and quality” and “pre-loss condition.” See Boyd v. Madison Mut. Ins. Co., 146 

Ill.App.3d 420, 424-25 (5th Dist. 1986) (“As with any other type of contract, statutory 

provisions applicable to insurance policies which are in effect at the time the policy is issued 

or renewed are treated as part of the agreement”), aff’d, 116 Ill.2d 305 (1987). 

In addition, apart from statutory quality standards, a large number of states expressly 

allow insurance companies to specify non-OEM parts subject to certain disclosure and/or 

consent requirements. See notes 1-4, supra. As noted above, two states, Massachusetts and 

Hawaii, have sought to hold down the cost of insurance by effectively requiring an insurance 

company to specify non-OEM parts when “like kind and quality” parts are available. See 

-56-

page 7, supra. All of these statutes bear directly on State Farm’s contractual obligations in 

particular states. Thus, for example, if a Massachusetts policyholder had sued State Farm 

for breach of contract in Massachusetts, State Farm undoubtedly would have been entitled 

to have the Massachusetts statute considered in adjudicating the claim. That this case was 

brought as a class action should not have altered the standards under which State Farm’s 

conduct with respect to a Massachusetts policyholder was judged. Yet it clearly did, as the 

circuit court went so far as to bar State Farm from even mentioning the existence of state 

statutes governing the specification of non-OEM parts. 

State laws interpreting terms like “pre-loss condition” and “like kind and quality” 

also vary. For example, in several states, courts have expressly rejected the argument that 

an insurance company is required to restore vehicles to their pre-loss value, holding that the 

only obligation is to restore vehicles to their physical condition prior to the accident. 27/ Yet 

in this case, plaintiffs were permitted to argue that State Farm had breached its contracts 

with all class members even if non-OEM parts restored their vehicles to pre-loss condition 

because those parts supposedly diminished the market value of the vehicles. See R. 12861 

(even if non-OEM parts were “good,” “it doesn’t matter because the perception is going to 

diminish the value of a vehicle. And therefore, these parts are not like kind and quality, 

simply because of the perception, for that reason alone”). Plaintiffs never would have been 

27/ 

See Johnson v. State Farm Mut. Auto. Ins. Co., 754 P.2d 330, 331 (Ariz. App. 1988); 

Great Tex. County Mut. Ins. Co. v. Lewis, 979 S.W.2d 72, 75 (Tex. App. 1998); Ray v. 

Farmers Ins. Exch., 246 Cal.Rptr. 593, 596 (Ct. App. 1988); Bickel v. Nationwide Mut. Ins. 

Co., 143 S.E.2d 903, 906 (Va. 1965); General Accident Fire & Life Assurance Corp. v. 

Judd, 400 S.W.2d 685, 687 (Ky. 1966); Roth v. Amica Mut. Ins. Co., Civ. No. 98-3551, slip. 

op. at 2-3 (Mass. Super. Ct. Sept. 3, 1999). 

-57-

allowed to make this argument if the case had been tried in states where the courts have 

rejected a market value theory of pre-loss condition. The certification of a class should not 

have altered that result. 28/ 

Rather than trying to deal with the variations in policy language and the governing 

laws, the circuit court chose to ignore them completely. The court instructed the jury that 

there was only one policy form, even though there are a number of different forms. Then 

the court made up its own interpretation of that policy form, without citing any law to 

support it. Finally, in order to enforce the artificial uniformity it had created, the court 

barred State Farm from telling the jury about any different contract language or differing 

state laws governing the specification of non-OEM parts. 

The circuit court’s decision to force this case into the mold of a class action by 

fabricating a single contract and a single interpretation is an error of law of constitutional 

dimension that requires reversal by this Court. See Phillips Petroleum Co. v. Shutts, 472 

U.S. 797, 818-23 (1985); see also Part III(A)(3), infra. Contrary to the circuit court’s ruling 

on choice of law, the law governing all class members’ claims is not the same; the 

conflicting laws governing State Farm’s obligations to class members create yet another 

layer of individual issues that, together with the slew of individual fact issues described 

above, precluded class certification. See In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293, 1300 

28/ 

There are also differences in how courts interpret “like kind and quality.” For 

example, under Texas law, an insurer’s duty to provide “like kind and quality” parts is 

limited to “repairing the damaged automobile so that it is suitable or fit for its intended 

purpose.” Lewis, 979 S.W.2d at 74. Non-OEM parts might satisfy this relatively lax 

standard even if they failed to meet the standard applied under the law of a different state. 

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(7th Cir. 1995) (decertifying class action in part because the trial court sought to paper over 

variations in state law with an “Esperanto instruction” melding the laws of 50 states). 

B. The Circuit Court Abused Its Discretion In Concluding That Common 

Questions Predominated Over Individual Issues With Respect To 

Plaintiffs’ Consumer Fraud Claims. 

1. The Circuit Court Erred As A Matter Of Law In Concluding 

That There Were Common Issues Of Law. 

State Farm argued that a nationwide consumer fraud class could not be certified 

because, among other things, the claims of non-Illinois class members would be governed 

by the varying consumer fraud laws of 47 states and the District of Columbia. The circuit 

court rejected this argument, holding that common issues of law predominated because there 

were no “true conflicts” between ICFA and the consumer fraud statutes of other states and 

because, in any event, ICFA could properly be applied to the claims of all class members, 

no matter where the alleged deception occurred. A. 45-46. Both of those conclusions were 

wrong as a matter of law. 

First, the circuit court’s conclusory assertion, after several rounds of lengthy briefing, 

that there are no “true conflicts” among consumer fraud statutes is inexplicable. As one court 

observed in refusing to certify a nationwide consumer fraud class, “a brief review of the 

applicable statutes reveals . . . differing standards of proof, procedure, substance, and 

remedies.” Tylka v. Gerber Prods. Co., 178 F.R.D. 493, 498 (N.D. Ill. 1998). That 

description is particularly apt when the defendant is an insurance company. In at least eight 

states, policyholders are not allowed to bring consumer fraud claims at all against insurance 

companies, but rather are required to seek remedies under the state’s insurance laws and 

-59-

egulations. 29/ Other states permit such suits but prohibit plaintiffs from bringing a suit on 

behalf of a class. See Ga. Code Ann. § 10-1-399(a); La. Rev. Stat. Ann. § 51:1409(A); Miss. 

Code Ann. § 75-24-15(4); Mont. Code Ann. § 30-14-133(l); S.C. Code Ann. § 39-5-140(a). 

And in some states, consumers are required to send demand letters to alleged violators as a 

condition precedent to bringing a lawsuit. See, e.g., Tex. Bus. & Com. Code Ann. § 

17.505(a); Ind. Code § 24-5-0.5-5; Miss. Code Ann. § 75-24-15(2) (requiring exhaustion of 

alternative dispute resolution remedy). 

The elements of consumer fraud claims also vary widely from state to state. Some 

states do not require a plaintiff to prove that he relied on the allegedly deceptive statement. 

See, e.g., Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983). Other states, 

however, do require proof of reliance. 30/ 

Some states require proof that the defendant made 

the allegedly deceptive statements with scienter; others do not. Compare Or. Rev. Stat. §§ 

646.638(1), 646.605(10) (requiring willful intent to commit fraud) with Del. Code. tit. 6, § 

2513(a) (scienter not required). 

29/ 

Ala. Code § 8-19-7(3); O.K. Lumber Co. v. Providence Wash. Ins. Co., 759 P.2d 523, 

528 (Alaska 1988); Ferguson v. United Ins. Co. of Am., 293 S.E.2d 736, 737 (Ga. App. 

1982); Fla. Stat. Ann. § 501.212(4); Irwin Rogers Ins. Agency v. Murphy, 833 P.2d 128, 134 

(Idaho App. 1992); Alarcon v. Aetna Cas. & Sur. Co., 538 So.2d 696, 699-700 (La. App. 

1989); Md. Code Ann., Com. Law § 13-104(l); Britton v. Farmers Ins. Group, 721 P.2d 303, 

323-24 (Mont. 1986); State v. Piedmont Funding Corp., 382 A.2d 819 (R.I. 1978); Colonial 

Life & Acc. Ins. Co. v. American Family Life Assur. Co., 846 F. Supp. 454, 463 (D.S.C. 

1994); Wilder v. Aetna Life & Cas. Ins. Co., 433 A.2d 309, 310 (Vt. 1981). 

30/ 

E.g., Holeman v. Neils, 803 F. Supp. 237, 242 (D. Ariz. 1992); Lynas v. Williams, 

454 S.E.2d 570, 574 (Ga. App. 1995); Ind. Code § 24-5-0.5-4(a); Tex. Bus. & Com. Code 

Ann. § 17.50(a); Wyo. Stat. Ann. § 40-12-108(a). The states also differ with respect to the 

degree of reliance plaintiffs must prove. Compare Taylor v. McCollom, 849 P.2d 1123, 1125 

(Or. App. 1993), with Lynas, 454 S.E.2d at 574, and Holeman, 803 F. Supp. at 242. 

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As the circuit court itself recognized (A. 46), the available remedies also differ 

considerably with respect to whether punitive or treble damages are allowed and, if so, under 

what circumstances. 31/ In addition, different states require different factors to be considered 

in assessing the amount of punitive damages to award, and several states limit the amount 

of punitive damages. See Carpenter v. BMW of N. Am., Inc., 1999 WL 415390, at *4 (E.D. 

Pa. 1999) (denying certification of nationwide class due to variations among state consumer 

fraud statutes regarding punitive and treble damages). 

In addition to these variations in state consumer fraud laws, variations in state laws 

concerning the specification of non-OEM parts preclude a finding that common issues of law 

predominated. Plaintiffs’ consumer fraud claims were based on alleged inadequacies in 

State Farm’s disclosures to policyholders. But those disclosures complied with — and in 

many cases were required by — the applicable state laws or insurance regulations. See Part 

III(B)(4), infra. Whether disclosures that comply with state insurance regulations may 

nevertheless be deemed “deceptive” for purposes of a state’s consumer fraud law is an issue 

that should have been decided under the laws of each individual state. See Ford Bronco II 

Litig., 177 F.R.D. at 371 (refusing to certify nationwide consumer fraud class because each 

state has “policy reasons” for its own particular consumer fraud statute). By applying 

Illinois law classwide and completely ignoring the laws of 38 states specifically allowing 

insurance companies to specify non-OEM parts, the circuit court in this case effectively 

31/ 

Compare Ala. Code § 8-19-10(a)(2); Ga. Code Ann. § 10-1-399(c); Idaho Code § 

48-608(l); Mass. Gen. Laws ch. 93A, § 9(3); N.J. Stat. Ann. § 56:8-19; N.M. Stat. Ann. § 

57-12-10(E); Nev. Rev. Stat. § 41.600(3); N.C. Gen. Stat. § 75-16; N.D. Cent. Code § 

51-15-09; S.C. Code Ann. § 39-5-140(a). 

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overruled the considered judgments of numerous state legislatures and regulators as to how 

the interests of consumers in their states are best protected. 

Because invoking state consumer fraud laws requires different procedures, different 

substantive proof and different remedies for class members from each state, courts routinely 

refuse to certify nationwide consumer fraud class actions. See, e.g., Castano v. American 

Tobacco Co., 84 F.3d 734, 741 (5th Cir. 1996) (“In a multi-state class action, variations in 

state law may swamp any common issues and defeat predominance”); Tylka, 178 F.R.D. at 

498; Fisher v. Bristol-Myers Squibb Co., 181 F.R.D. 365, 371-72 (N.D. Ill. 1998). 32/ Indeed, 

the Fourth District recently upheld an order denying certification of a nationwide class 

alleging consumer fraud violations on the ground that variations in state consumer fraud 

laws created so many individual issues of fact and law that a nationwide class could not be 

certified. See Oliveira v. Amoco Oil Co., 311 Ill.App.3d 886, 726 N.E.2d at 61-62. That 

decision was undoubtedly correct: merely figuring out what rules would apply to class 

members in each state would be a complex undertaking. Actually trying a nationwide 

consumer fraud case under a complex web of differing procedures and legal rules would be 

an impossible task. 

Second, the circuit court erred as a matter of law in concluding that predominance 

could be manufactured by the simple expedient of applying ICFA to all claims of all class 

members regardless of where the deception allegedly occurred. In Oliveira, plaintiffs tried 

32/ 

See also Dhamer v. Bristol-Myers Squibb Co., 183 F.R.D. 520, 532-34 (N.D. Ill. 

1998); In re Jackson Nat’l Life Ins. Co. Premium Litig., 183 F.R.D. 217, 222-23 (W.D. 

Mich. 1998); Clement v. American Honda Fin. Corp., 176 F.R.D. 15, 23 & nn.10-12 (D. 

Conn. 1997); In re Stucco Litig., 175 F.R.D. 210, 216 (E.D.N.C. 1997). 

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the same shortcut, arguing — just as plaintiffs did in this case — that ICFA could be applied 

to Amoco’s conduct nationwide because Amoco was headquartered in Illinois and the 

allegedly false advertising campaign at issue in that case was conceived in and disseminated 

from its headquarters. The Fourth District rejected that argument as a matter of law, holding 

that ICFA was not intended to apply — and could not constitutionally be applied — to outof-state 

transactions affecting non-Illinois citizens. As explained in greater detail in Part 

III(A)(1) below, the Fourth District correctly held that ICFA was limited, by its terms, to 

consumer transactions that occurred in the State of Illinois, and that Illinois “has no authority 

to regulate out-of-state transactions affecting non-Illinois citizens, such as the purchase of 

gasoline, and has no interest in doing so.” Oliveira, 311 Ill.App.3d 886, 726 N.E.2d at 61. 

The same analysis applies here. Illinois has no authority to regulate insurance 

transactions that take place in other states and affect only non-Illinois consumers. By 

contrast, other states have a critical interest in making sure that their own insurance and 

consumer fraud laws are applied to insurance transactions that take place in their own 

jurisdictions and involve their own citizens. Thus, if a Massachusetts consumer had brought 

an individual consumer fraud suit against State Farm challenging its specification of a non- 

OEM part in Massachusetts under a Massachusetts policy form, there is no doubt that the 

only proper law to apply would be the Massachusetts consumer protection statute. See Mass. 

Gen. Laws ch. 93A. That result does not change simply because plaintiffs’ counsel chose 

to bring this case as a class action. See Cimino, 151 F.3d at 312 (class certification does not 

alter the “identity of the substantive law” governing the plaintiffs’ claims). Because the 

application of differing state consumer fraud laws destroys any conceivable claim that 

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common issues of fact or law predominate, the circuit court’s decision to certify a 

nationwide consumer fraud class should be reversed. 

2. The Circuit Court Abused Its Discretion In Concluding That 

Common Issues Of Fact Predominated With Respect To 

Plaintiffs’ Consumer Fraud Claims. 

Even if only Illinois law were applied, however, there are too many individual issues 

of fact for the ICFA claim to meet the predominance requirement. In order to prove a claim 

for damages under ICFA, a plaintiff must be able to identify a material misrepresentation of 

fact that proximately caused the plaintiff to suffer an economic loss. 815 ILCS 505/2 & 

505/10a. Connick v. Suzuki Motor Co., 174 Ill.2d 482, 501 (1996). In this case, proof of the 

elements of proximate cause and damages would require an inquiry into the individual facts 

and circumstances surrounding each transaction. Thus, common issues of fact would not 

predominate over individual issues even with respect to an Illinois-only class. 

The Supreme Court’s decision in Zekman v. Direct Am. Marketers, Inc., 182 Ill.2d 

359 (1998), underscores the need to review the individual facts of each case in order to make 

a determination as to whether the alleged deception was the proximate cause of any harm. 

There, the Court upheld summary judgment in favor of the defendants because the plaintiff’s 

deposition testimony revealed that he had not been deceived into making telephone calls to 

a “900” number, but rather had fully understood the true facts at the time he made the calls. 

In this case, whether any individual class member was deceived by whatever statements 

were made by State Farm about the quality of non-OEM parts would depend on the facts and 

circumstances surrounding the individual transaction. 

For example, it was apparent from the trial testimony that none of the five class 

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epresentatives who appeared at trial had been deceived by anything State Farm said (or did 

not say) about non-OEM parts. Two of the class representatives (Avery and Shadle) paid 

extra for OEM parts rather than accept the non-OEM parts specified on their repair 

estimates. R. 6117, 6191. The other three all testified that they had protested the use of non- 

OEM parts because they believed them to be inferior, but nevertheless allowed them to be 

installed because they did not want, or could not afford, to pay the difference. R. 5718, 

5728-30 (Covington); R. 6345-47 (Vickers); R. 4507N-P (DeFrank). Even if these plaintiffs 

had breach of contract claims against State Farm, none of them could claim to have been 

deceived into taking any action based on the belief that non-OEM parts were as good as 

OEM parts. Instead, as in Zekman, the testimony of these plaintiffs affirmatively rebuts any 

claim of deception: none of them believed non-OEM parts were in fact “quality replacement 

parts”; thus, none of them could claim to have been harmed by the alleged deception. 

In order to show that some harm was proximately caused by the alleged deception, 

plaintiffs would have to prove that a policyholder accepted non-OEM repair parts based at 

least in part on deceptive statements by State Farm with respect to their quality. They would 

also have to show that the parts that were actually installed did not in fact live up to State 

Farm’s description and that the class member suffered some actual damages as a result of 

the parts’ shortcomings. As with plaintiffs’ breach of contract claim, the only way to 

properly prove either proximate causation or damages would be to introduce evidence 

concerning the individual facts and circumstances of each repair — what the policyholder 

read, what was said by both State Farm and the bodyshop mechanics, what decisions the 

policyholder made and why those decisions were made, whether the vehicle was restored to 

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its pre-loss condition and, if not, whether the policyholder suffered any economic loss as a 

result of the alleged deception. 

Numerous courts have concluded that the inability to make a classwide determination 

of proximate causation precludes class certification. See, e.g., Key, 176 Ill.App.3d at 98 

(“Where individual determinations of proximate cause would be required which predominate 

over common questions of law and fact, a class action will not be certified.”); Charles 

Hester Enters., 137 Ill.App.3d at 100-01 (affirming denial of class certification of ICFA 

claim regarding purchase of excess liability insurance where “each separate purchase would 

have to be inquired into in order to establish the motives and particulars concerning policy 

limits desired and actually purchased”). The same analysis applies here: because there is no 

way to tell who was in fact deceived or the extent to which the deception caused any injury 

without considering the individual facts and circumstances of each transaction, whatever 

common questions of fact might be raised by the ICFA claim do not predominate over 

individual questions. 

The circuit court attempted to avoid the difficulties inherent in trying the ICFA claim 

on a classwide basis by ignoring the entire question of proximate causation and basing 

damages on State Farm’s supposed savings, rather than on any economic losses suffered by 

individual class members. As demonstrated in Part III(B)(5) below, disgorgement of 

“savings” is not a proper measure of damages under ICFA. Moreover, the circuit court’s 

shortcut eliminated one of the most important elements of an ICFA claim by allowing 

plaintiffs to recover hundreds of millions of dollars without having to prove that any class 

member — let alone each of the class members on whose behalf the judgment was entered 

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— was injured by the alleged deception. See Fibreboard Corp, 893 F.2d at 712 (rejecting 

plan to try 3,000 asbestos claims on a class basis because doing so would change the 

substantive law applicable to class members’ claims by effectively excusing them from 

proving that their individual injuries had been caused by exposure to asbestos). 

C. The Circuit Court Applied The Wrong Standard In Concluding That A 

Class Action Was A Fair And Efficient Way To Adjudicate This 

Controversy. 

A class may not be certified in Illinois unless the court properly determines that a 

class action is “an appropriate method for the fair and efficient adjudication of the 

controversy.” 735 ILCS 5/2-801(4). The circuit court described this as a “flexible” 

requirement that does not require proof that a class action is the most efficient way to 

proceed. A. 34. The court concluded that plaintiffs had met their burden under this 

subsection because a class action might be “the only practical means for State Farm 

policyholders to present their claims and for State Farm to achieve finality as to their 

claims.” Id. The court also concluded — without any explanation — that the proposed class 

adjudication was manageable. A. 37. 

The circuit court’s view of the appropriateness requirement was wrong as a matter 

of law. The Illinois Supreme Court has made clear that the Illinois statute, no less than 

Federal Rule 23, requires the plaintiff to demonstrate that a class action “can best secure the 

economies of time, effort, and expense.” McCabe, 75 Ill.2d at 468-69. It is thus not the kind 

of endlessly “flexible” requirement the circuit court supposed it to be. 

Furthermore, the circuit court erred by focusing exclusively on the statutory 

requirement of “efficiency,” while completely ignoring the equally important requirement 

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that a class action be a “fair” way to adjudicate the controversy. The court’s assertion that 

many small claims would go unredressed if class certification were denied is not enough to 

meet the “fairness” requirement of § 2-801(4). A class action is not fair if, in order to make 

the case manageable on a classwide basis, the court is forced to engage in the kind of 

shortcuts evident in this case — altering the plaintiffs’ burden of proof, ignoring the 

applicable law, and allowing the plaintiffs to use “aggregate” proof as a substitute for 

evidence that any individual member of the class actually suffered an economic loss. See 

Fibreboard, 893 F.2d at 712 (rejecting argument that the practical difficulties of trying 

claims individually justify a group trial in which individual plaintiffs are excused from 

proving the elements of their claim). 

In any event, this is not a case where the only alternative to a class action is a large 

number of individual trials. All of the evidence suggests that the number of State Farm 

policyholders who were dissatisfied with non-OEM parts is very small: the number of 

complaints (to either State Farm or regulators) about non-OEM parts has been minimal; in 

the two class actions that were settled, only a small fraction of the class members who could 

have claimed damages bothered to do so. See Ashenfelter Affidavit, Exh. Box 9, Tab 1. 

Any policyholder who is dissatisfied with a repair can invoke the Guarantee without 

incurring any litigation expenses. And anyone who remains dissatisfied and successfully 

brings suit under a state consumer fraud statute is likely to be able to recover attorneys’ fees 

as well. Thus, there was no overwhelming need for class certification in this case, either to 

protect the courts from being inundated with lawsuits or to protect injured consumers who 

otherwise would have no ability to obtain redress. See Castano, 84 F.3d at 748; Ford Paint 

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Litig., 182 F.R.D. at 225. 

Basic fairness requires that State Farm have a right to defend its conduct based on 

the facts and circumstances of each transaction. A class action is a fair and efficient way of 

adjudicating the controversy if all of the transactions are essentially identical because, in that 

situation, plaintiffs are put to their proof with respect to all members of the class and the 

defendant will have a full and fair opportunity to present all of its defenses. But in a case like 

this, where the relevant facts of the millions of individual transactions at issue vary greatly, 

trying the case as a class action inevitably minimizes the plaintiffs’ burden of proof and 

deprives the defendant of the right to present its best defense. Such a result is not “fair.” On 

the contrary, it is so clearly unfair that it constitutes a deprivation of the defendant’s basic 

right to due process under the Illinois and the United States Constitutions. 

D. The Circuit Court Erred In Concluding That The Class Representatives 

Fairly And Adequately Represented The Class. 

The Illinois class action statute also requires a proper determination that the named 

plaintiffs will “fairly and adequately protect the interest of the class.” 735 ILCS 5/2-801(3). 

This provision requires, among other things, that there be no significant conflicts between 

the named class representatives and the class members, or among the class members 

themselves. See Miner, 87 Ill.2d at 14; see also Magro, 67 Ill.2d at 161 (“The general rule 

is that a class action cannot be maintained unless all members of the class have a common 

interest in the questions involved and the results of the suit.”). Similarly, the federal due 

process clause requires that the class be free from significant conflicts of interest. Hansberry 

v. Lee, 311 U.S. 32, 44-45 (1940). 

In its class certification order, the circuit court held that there were no conflicts of 

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interest because “the representatives herein and Class members share common objectives 

and legal and factual positions.” A. 33. That conclusory ruling, however, ignored the clear 

conflict of interest between class members who are currently insured by State Farm and 

those who are not. 

State Farm is a mutual insurance company, which means that its policyholders are 

its owners. Because of that fact, any payment of damages directly impacts its current 

insureds through either higher premiums, decreased dividends, or decreased reserves for the 

payment of claims. Moreover, current insureds have a strong interest in ensuring that State 

Farm continues to follow practices that are designed to hold costs down — like the 

specification of non-OEM parts. As a consequence of these undeniable economic facts, 

current insureds and former insureds have diametrically opposed interests in this litigation. 

Former insureds have every incentive to seek the maximum amount of damages, including 

punitive damages, no matter what such an award might do to State Farm’s premiums and 

claims practices on an ongoing basis. By contrast, current insureds have an interest in 

making sure that State Farm is required to pay only the amount necessary to cure any defects 

and that it is not discouraged from continuing to specify non-OEM parts in order to control 

costs. 

The only proper remedy for the conflict of interest apparent in this case is to reverse 

the judgment and decertify the class. That is what the Fourth Circuit ordered in Meineke. 

Like the former insureds here, former franchisees in Meineke had a “backward-looking 

interest” in “maximizing any damages Meineke would have to pay,” while current 

franchisees, like the current insureds, had a “forward-looking interest” in ensuring 

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Meineke’s continued financial viability. 155 F.3d at 338. The court concluded that this 

conflict of interest precluded the certification of the class and reversed the judgment. Id. at 

338-39; see also E & V Slack, Inc. v. Shell Oil Co., 969 S.W.2d 565, 568 (Tex. App. 1998) 

(certification improper in class of current and former franchisees). The virtually identical 

conflict of interest exists here between current and former insureds, and, for the same reason, 

this judgment must be reversed and the class decertified. 

E. The Circuit Court’s Failure To Provide The Class With Proper Notice 

Also Requires Reversal Of The Judgment. 

The circuit court’s refusal to give individual notice to the 1.8 million class members 

whose names and addresses could be identified from State Farm’s records also requires 

reversal of the judgment in favor of the class. As a matter of Illinois law and federal due 

process, absent class members were entitled to the best notice practicable. That is 

particularly true in light of the conflict between class members described above. See Frank 

v. Teachers Ins. & Annuity Ass’n, 71 Ill.2d 583, 596 (1978) (individual notice required 

where names and addresses are available and where potential conflict of interest among class 

members exists); Client Follow-Up Co. v. Hynes, 105 Ill.App.3d 619, 626 (1st Dist. 1982) 

(same); see also Miner, 87 Ill.2d at 15 (individual notice required where names and 

addresses are available); Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 173 (1974). 

That the publication-only notice given in this case was insufficient is apparent from 

the fact that only fifteen of the almost 5 million class members opted out. Compare Shutts, 

472 U.S. at 813 (that 3,400 out of 28,000 putative class members opted out demonstrated 

that the individual notice given was effective). Even if all of the other formidable obstacles 

to class certification outlined above could somehow be overcome, the inadequacy of the 

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notice, in and of itself, would require reversal of the judgment, followed by a new notice and 

a new trial. See Client Follow-Up, 105 Ill.App.3d at 627 (rejecting argument that 

deficiencies in the notice can be cured by giving notice after judgment: “[t]o give notice to 

class members after a decision on the merits is to give notice after the reasons for giving it 

have ceased to exist”). 

II. 

The Breach Of Contract Judgment Must Be Reversed Because It Was The 

Product Of Numerous Prejudicial Errors. 

The trial of plaintiffs’ breach of contract claim was riddled with errors in 

instructions, in allocating burdens of proof, and in admitting and excluding evidence. Those 

errors, individually and collectively, were so clearly prejudicial that it was an abuse of 

discretion for the circuit court to deny State Farm’s motion to vacate the judgment and grant 

a new trial. McClure v. Owens Corning Fiberglas Corp., 188 Ill.2d 102, 132-33 (1999) 

(standard of review on appeal from denial of a motion for a new trial is abuse of discretion). 

Furthermore, most of the errors stemmed from the circuit court’s desire to preserve the case 

as a class action, as the court allowed plaintiffs to take shortcut after shortcut to paper over 

their inability to present any real classwide proof. Because these trial errors demonstrated 

beyond any doubt that this case cannot properly be tried as a class action, the only proper 

remedy is to vacate the $450 million judgment and to order the breach of contract class 

decertified on remand. 

A. The Circuit Court’s Admission Of Legally Invalid And Wholly 

Speculative Damages Theories Constitutes Reversible Error And 

Demonstrates Why The Class Must Be Decertified On Remand. 

Perhaps the most egregious example of an improper shortcut was the circuit court’s 

decision to allow plaintiffs to seek damages on an aggregate, classwide basis. As a result of 

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this decision, plaintiffs were excused from proving who was damaged by the alleged breach 

of contract — or even what percentage of the class was damaged. In addition, the court’s 

ruling allowed plaintiffs to seek over $1 billion in breach of contract damages despite their 

inability to provide any reasonable basis for estimating the damages actually suffered by 

class members. “[B]asic contract theory requires that damages be proved with reasonable 

certainty and precludes damages based on conjecture or speculation.” Ouwenga v. Nu-Way 

AG, Inc., 239 Ill.App.3d 518, 523 (3d Dist. 1992). 33/ In this case, however, the ordinary 

requirements for proving damages were thrown out the window, in order to ensure that the 

case could proceed on a classwide basis. 

1. The Circuit Court Erred In Allowing Plaintiffs To Present Their 

Legally Invalid Theory Of “Specification Damages” To The Jury. 

As explained above, by the time the case was tried, it had become clear that a large 

portion of the class had not suffered any legally compensable damages. Plaintiffs had 

conceded from the beginning that policyholders whose repair estimates included non-OEM 

parts, but who received OEM parts at no additional cost, should not even be part of the class. 

See Plaintiffs’ Class Certification Brief, C. 3446 (“[i]t is axiomatic that any person whose 

car was repaired only with OEM parts is not part of the class for which certification is 

sought”); Class Certification Order, A. 29 (“[a]ny person whose car was repaired only with 

33/ 

See also Fieldcrest Builders, Inc. v. Antonucci, 311 Ill.App.3d 597, 607 (1st Dist. 

1999) (“The party seeking the damages bears the burden of establishing the proof of the 

alleged damages with reasonable certainty”); Northwest Commerce Bank v. Continental 

Data Forms, Inc., 233 Ill.App.3d 124, 130 (2d Dist. 1992) (“plaintiff must prove damages 

to a reasonable degree of certainty and evidence cannot be remote, speculative, or 

uncertain”); Schoeneweis v. Herrin, 110 Ill.App.3d 800, 808 (5th Dist. 1982) (plaintiff must 

“establish a reasonable basis for computation” of damages). 

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OEM parts is not part of the class for which certification is sought”). And plaintiffs made 

a conscious choice to waive their argument that class members who had disposed of their 

vehicles had been damaged because their vehicles had diminished in value as a result of the 

installation of non-OEM parts. C. 19195-96. But then plaintiffs realized that they had no 

way to separate class members who could claim damages from those who could not: State 

Farm’s records do not show which class members’ vehicles had actually been repaired with 

non-OEM parts, let alone which class members still owned such vehicles. Thus, the only 

way to figure out who could claim damages would be to look at each individual class 

member’s repair and to inspect each individual vehicle. 

Faced with this dilemma, plaintiffs recognized that they needed a new damages 

theory to preserve the illusion of commonality necessary to continue the case as a class 

action. Thus, less than three months before trial (and almost two years after filing their 

complaint), class counsel paid a visit to their damages expert, who two days later produced 

a report that for the first time mentioned specification damages. R. 7220-21. Under this 

newly concocted theory, plaintiffs simply declared that breach and damage occurred 

simultaneously the moment a class member received a repair estimate specifying non-OEM 

parts. R. 13008 (“when they put these things on the estimate, that’s when the damage 

occurs”). Plaintiffs thus avoided any need to prove the fact of damages: damages were 

presumed from membership in the class. R. 7203, 7216. 

Having made up a theory under which everyone in the class would be damaged, 

plaintiffs proceeded to make up a measure of damages, declaring that specification damages 

were equal to the difference in cost between the non-OEM part on the estimate and the 

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corresponding OEM part. R. 7169. In order to estimate that damage figure, Mathur took 

State Farm’s estimate of the amount it had saved class members from 1987 to 1997 by using 

non-OEM parts, extrapolated to get a figure for the full class period through February 1998, 

and declared the resulting figure — $243,700,000 — to be the classwide “specification” 

damages. R. 7169-70. 34/ 

The circuit court committed reversible error by allowing plaintiffs to present their 

theory of specification damages to the jury. Mathur himself conceded that specification 

damages made no economic sense: 

Q: So, from an economic perspective, which is all that you are qualified to 

testify about, you would have to tell us that your theory of direct damages 

doesn’t make economic sense; isn’t that true, sir? 

A: That is correct. 

Q: Thank you. So, according to you, as an economist, and not as a lawyer, using 

theories that plaintiffs’ lawyers have tried to give you, is a policyholder 

entitled to damages merely because State Farm quoted a non-OEM part on 

their estimate, as long as State Farm did restore the car to its pre-loss 

condition? 

A: No. 

R. 7222-23. Mathur also conceded that policyholders whose cars were restored to pre-loss 

condition or who sold their cars for fair market value (without any deduction for non-OEM 

parts) suffered no economic injury. R. 7227, 7230. Nevertheless, because plaintiffs’ counsel 

instructed him to do so, he offered a theory of damages that compensated everyone who 

received an estimate that specified non-OEM parts whether or not they had suffered any 

34/ 

Mathur’s “savings” figure differs from State Farm’s total estimate of savings for the 

ten-year period of $366 million because Mathur eliminated the amounts State Farm reported 

saving as a result of specifying non-OEM parts on repair estimates for third-party insurance 

claims, which were not at issue in this litigation. 

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economic loss. R. 7220-21 (Q: “That was given to you by plaintiffs’ lawyers; isn’t that 

right?” A: “That is correct.”). Mathur assumed that plaintiffs’ theory was “legal” rather than 

economic. R. 7221, 7229, 7233. 

In fact, however, there is no such thing as presumed “legal” damages for breach of 

contract. Plaintiffs may recover in a breach of contract action only if they can prove actual 

damages, that is, economic losses suffered as a result of the breach. See Economy Fire & 

Cas. Co. v. GAB Bus. Serv. Inc., 155 Ill.App.3d 197, 201 (3d Dist. 1987) (plaintiff must 

show that “loss or damages resulted directly” from the breach); Prevendar v. Thonn, 166 

Ill.App.3d 30, 36 (2d Dist. 1988) (same). Thus, a contracting party who has received the 

benefit of his bargain has no standing to seek damages. Yet under plaintiffs’ specification 

theory, even those class members who received OEM parts at no additional cost — who 

plaintiffs conceded received the benefit of their bargain, C. 17018 — were entitled to 

specification damages. For that reason alone, the circuit court should have rejected 

plaintiffs’ theory of “specification” damages as a matter of law. 

Allowing Mathur to instruct the jury from the witness stand about the recoverability 

of “legal” damages was also an abuse of discretion. Experts may not testify about the law; 

that is for the judge to decide. Nor are they permitted to serve as mouthpieces for theories 

concocted by lawyers; instead, they must contribute a professional opinion that adds to the 

case. See, e.g., Mid-State Fertilizer Co. v. Exchange Nat’l Bank, 877 F.2d 1333, 1340 (7th 

Cir. 1989) (observing that “ukase in the guise of expertise is a plague in contemporary 

litigation” and advising that “[j]udges should not be buffaloed by unreasoned expert 

opinions”). 

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Mathur’s testimony was particularly prejudicial because the circuit court improperly 

refused to instruct the jury about fundamental damages principles. For example, the court 

refused State Farm’s proposed instructions that it “cannot be liable if a class member 

disposed of his or her vehicle after it was repaired with non-OEM crash parts and did not 

lose money due to the fact that the car was repaired with non-OEM crash parts,” A. 74, and 

that “State Farm cannot be liable if a class member had non-OEM crash parts specified in 

his or her repair estimate, but had OEM crash parts installed on his or her vehicle at no 

additional cost to him or her,” A. 73. The court also refused to instruct the jury that “[t]he 

mere fact that a non-OEM crash part was specified in a class member’s repair estimate is not 

sufficient to establish State Farm’s liability.” A. 70. Indeed, despite holding that the viabilty 

of specification damages was a jury issue, the court refused to tell the jury that it was free 

to reject Mathur’s theory of specification damages. A. 71. All of these instructions were 

proper statements of the law, and all were necessary to dispel the erroneous impression 

Mathur had been allowed to create. The court’s refusal to give these instructions was an 

abuse of discretion, which in and of itself entitles State Farm to reversal of the specification 

damages. See Martoccio v. Western Restaurants, Inc., 286 Ill.App.3d 390, 392 (5th Dist. 

1997) (reversing trial court for abuse of discretion in failing to give proper instruction). 

2. The Classwide Installation Damages Are Hopelessly Speculative. 

Plaintiffs also claimed entitlement to “installation” (or “consequential”) damages. 

These were defined as damages to pay the cost of replacing the non-OEM parts on class 

members’ cars with OEM parts and included the cost of new OEM parts, the cost of labor 

to replace the non-OEM parts with OEM parts, and the cost of a rental car for two days 

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while the repair was accomplished. R. 7174-77. Mathur admitted that not every class 

member was entitled to installation damages. R. 7179. A class member could receive 

installation damages only if at least one non-OEM part on his estimate was actually installed 

on his car, and only if he still had the car and the part. Id. 

Mathur testified that installation damages for the entire class — assuming that every 

class member had received at least one non-OEM part, still owned the vehicle, and would 

have it repaired in two days, while renting a car at an average rate of $51 — would total 

$1,316,900,000. R. 7178. Mathur conceded, however, that this estimate was too high, and 

he attempted to reduce it in light of the admitted fact that many non-OEM parts that were 

specified were never installed on class members’ vehicles. Mathur guessed that somewhere 

between 50% and 92% of the non-OEM parts specified on estimates had actually been 

installed. R. 7183. Based on that guess he offered a range of damages estimates between 

a “low” of $658,450,000 and a “high” estimate of $1,211,500,000 — an astonishing $550 

million swing. R. 7187-89. 

On cross-examination Mathur conceded that these estimates should have been 

reduced to take into account other relevant factors. For example, he admitted that his 

estimate did not take into account the undoubtedly substantial number of class members who 

no longer owned vehicles on which non-OEM parts had been installed. R. 7227-38. He also 

simply assumed that every vehicle on which non-OEM parts had been installed was not 

restored to pre-loss condition and that every non-OEM part would have to be replaced. R. 

7226. Mathur testified that the reason he had not made any further reductions to his estimate 

was that he lacked the data necessary to adjust it on a classwide basis. R. 7232-36. At the 

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end of the day, Mathur conceded that he had not estimated damages with any reasonable 

degree of certainty: 

Q: So, when [plaintiffs’ counsel] asked you whether the figures that you gave 

to this jury were, every time, as conservative as you could make them, the 

fact is that the figure that you gave to this jury has to be reduced over and 

over and over again, by your own admission; isn’t that right, sir? 

A: That is correct. 

R. 7256. In fact, he conceded that his figures might be off by as much as a billion dollars. 

R. 7238 (Q: “[is it] possible that they are off by as much as a billion dollars?” A: “That is 

possible”). It is hard to imagine expert testimony that is more contrary to the basic, black 

letter rule that damages cannot be based on speculation or conjecture. See Brown v. Chicago 

& N.W. Transp. Co., 162 Ill.App.3d 926, 937-38 (1st Dist. 1987) (Although “expert 

testimony couched in terms of probabilities or possibilities based on assumed facts is 

admissible, . . . this rule does not lessen the need for a reasonable degree of certainty. It is 

manifestly unfair to hold [defendant] liable for injuries which [plaintiff’s] own experts admit 

are problematical”). 

Because Mathur was unable to make even a wild guess as to how many class 

members were entitled to installation damages, he could only speculate about the cost of 

buying new OEM parts, the labor costs of installing those parts, and the car rental costs 

during the repair; yet he opined that these amounted to up to $ 1.2 billion. Mathur had no 

way of telling, however, how many class members actually had non-OEM parts installed, 

or how many of those class members still owned those cars, so he could not know how 

many class members could conceivably be in a position to have OEM parts installed. And 

because Mathur did not know which non-OEM parts (which could range from a headlamp 

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lens to a hood) would have to be replaced, or the length of time that process might take, he 

could not know what the part or labor costs would be, or how many class members would 

actually need a rental car, or for how many days. Mathur had no basis to calculate any of 

these variables, so his estimate of classwide installation damages is nothing more than a 

number pulled from thin air. The circuit court committed reversible error first by allowing 

Mathur to offer such testimony to the jury and then by denying State Farm’s motion to 

vacate the award of installation damages following the trial. See SK Hand Tool Corp. v. 

Dresser Indus., Inc., 284 Ill.App.3d 417, 426 (1st Dist. 1996) (“reviewing courts will reverse 

damage awards that are based on speculation or conjecture”). The jury, which cut Mathur’s 

“high” damages by almost $1 billion, obviously believed that Mathur’s damages estimate 

was wildly inflated. But, over State Farm’s objection, R. 12500-01, the jury was never told 

that plaintiffs had the “burden of establishing a reasonable basis for computing . . . damages” 

and that “[d]amages cannot be based upon mere speculation, hypothesis, conjecture or 

whim.” A. 75. Without this instruction, it was entirely reasonable for the jury to believe that 

it had to award some amount of installation damages and that it could do so simply by 

picking a number out of the air. 

Like Mathur himself, the jury had no reasonable basis for making its own estimate 

of installation damages. Juries have authority to choose between competing expert estimates 

and to adjust expert estimates in light of conflicting expert testimony, but they have no 

authority to invent their own estimates when plaintiffs completely fail to satisfy their burden 

of proof. Because the figure arrived at by the jury, no less than Mathur’s estimates, is utterly 

speculative, the award of installation damages must be reversed. See, e.g., Bowman v. 

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Zimny, 256 Ill.App.3d 386, 390-91 (1st Dist. 1993) (“an assessment of damages made 

without the necessary level of certainty will be considered to be against the manifest weight 

of the evidence and overturned on appeal”). 

Rather than simply remanding for a new trial on the issue of damages, the Court 

should remand with directions to decertify. That Mathur’s testimony was utterly speculative 

was no accident: no expert could possibly come up with a reasonable estimate of aggregate 

damages for the class because, as Mathur conceded (R. 7236-38), the information necessary 

to make such an estimate is simply not available. The only way to make that data available 

would be to explore the individual facts and circumstances of every class member’s repair 

— an exercise that is fundamentally at odds with the concept of a class action. 

B. The Court Committed Reversible Error By Relieving Plaintiffs Of Their 

Burden Of Proving That State Farm Had Breached Its Contract With 

Respect To Each Member Of The Class Who Was Awarded Damages. 

The verdict forms submitted to the jury took an all-or-nothing approach: the jury 

either had to find in favor of the entire class or in favor of State Farm. The jury was not 

permitted to carve out any portion of the class even if it concluded that some portion had not 

proved either a breach of contract or damages. In fact, the jury was not even asked to return 

a verdict with respect to the class representatives who appeared at trial. Having chosen to 

proceed on this basis, plaintiffs were required to prove that State Farm breached its contracts 

with each and every member of the class. Proof that State Farm had breached its contracts 

with some unidentified members of the class was not enough to meet that burden. 

When they convinced the circuit court to certify the class, plaintiffs willingly 

embraced this heavy burden, claiming that they would be able to prove at trial that non-OEM 

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parts are “categorically inferior” and can never be used to restore any vehicle to its pre-loss 

condition. At trial, however, plaintiffs began to backpedal and ultimately convinced the 

circuit court to salvage the class by relieving them of their burden to prove that State Farm 

had breached its contract with each and every member of the class. That decision was 

wrong, as a matter of law, and provides a sufficient reason, in and of itself, to reverse the 

breach of contract judgment. 

In its opening instruction, the court told the jury that State Farm could properly 

specify non-OEM parts so long as those parts were “of like kind and quality which restore 

the damaged vehicle to its pre-loss condition.” R. 4426. Plaintiffs’ own experts admitted 

that the only way to tell whether any particular vehicle had been restored to its pre-loss 

condition was to ascertain its pre-loss condition. R. 4927, 12182. Nevertheless, apart from 

telling the jury about the five class representatives’ cars, plaintiffs never introduced any 

evidence about the pre-loss condition of any of the almost five million vehicles at issue in 

this case. At the close of the evidence, State Farm moved for a directed verdict on the 

ground that plaintiffs had failed to introduce any evidence on this basic element of their case. 

That motion was denied, without comment. R. 12350. 

The court also refused to submit the issue of pre-loss condition to the jury. State 

Farm proposed the following instruction: “In order to determine whether a non-OEM crash 

part is of like kind and quality which restored a class member’s vehicle to its pre-loss 

condition, you must determine the pre-loss condition of that vehicle. If you cannot 

determine the pre-loss condition of that class member’s vehicle, your verdict must be for 

State Farm.” A. 69. The court refused to give that instruction. R. 12490-91. As a result, 

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the jury was focused on the wrong issue: rather than considering whether State Farm had 

breached its obligation to restore particular vehicles to their pre-loss condition, the jury was 

led to believe that the only issue was whether non-OEM parts were as good as new OEM 

parts. See, e.g., R. 12986 (statement by plaintiffs’ counsel during closing argument: “The 

basic question of the lawsuit is are these imitation parts equal to the OEM’s, or are they 

not?”). 

The court also refused to tell the jury that plaintiffs could not prevail unless they 

were able to prove that State Farm had breached its contracts with each and every member 

of the class. State Farm offered the circuit court a variety of different instructions, all of 

which would have told the jury in one way or another that plaintiffs were required to deliver 

on their initial promise when the case was first certified as a class: that they would be able 

to prove that all non-OEM parts are so categorically inferior that none of them could be used 

to restore any vehicle to its pre-loss condition. A. 65-68. 35/ 

The circuit court did not disagree with State Farm’s formulation of the plaintiffs’ 

burden. R. 12539. Nevertheless, it refused to tell the jury that plaintiffs were required to 

prove that State Farm had breached its contracts with each and every member of the class. 

35/ 

Proposed Instruction No. 26 stated that plaintiffs “have the burden of proving the 

claims of each and every one of the class members. If you find that Plaintiffs have not 

proved their claims against State Farm with respect to any one class member or any one 

named Plaintiff, your verdict must be for State Farm and against all class members.” A. 65. 

Proposed Instruction No. 28A made the same point, stating that “Plaintiffs have the burden 

of proving that each and every one of the non-OEM crash parts specified in the class 

members’ repair estimates were not of like kind and quality to the parts they replaced which 

failed to restore all of the class members’ vehicles to their pre-loss condition.” A. 67. That 

proposed instruction went on to provide that the jury should find for State Farm “[i]f you 

find that Plaintiffs have failed to prove this proposition, or have proved this proposition with 

respect to fewer than all of the non-OEM crash parts at issue here.” Id. 

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R. 12575-77, 12552. The court concluded that, even though there were no IPI instructions 

for class actions, there was no need to go beyond the IPI instructions on breach of contract 

in order to fully and fairly instruct the jury. R. 12464-65. That conclusion was wrong, as 

a matter of law. See Swartz v. Sears, Roebuck & Co., 264 Ill.App.3d 254 (1st Dist. 1993) 

(it is error to refuse to give a non-IPI instruction where there are no pattern instructions on 

the issue in question and the IPI instructions are an incorrect statement of law). How class 

actions work is not intuitively obvious to lay people. Thus, “it [is] impossible to say that 

jurors, without instruction, would know the burden of proof to be applied in a particular 

case.” Rikard v. Dover Elevator Co., 126 Ill.App.3d 438, 441 (5th Dist. 1984). 

The instruction the circuit court ultimately gave to the jury was at best confusing and 

at worst affirmatively misleading. The court instructed the jury that “[p]laintiff class 

members and defendant State Farm entered into a contract” — as if there were only one 

contract between State Farm and the millions of class members. It went on to explain that 

plaintiffs had the burden of proving three things: that “the members of the plaintiff class 

perform[ed] all obligations required of them under the contract”; that “defendant failed to 

perform its obligations under the contract and breached said contract”; and that “as a result 

of the breach of contract, the plaintiff class sustained damages.” A. 61. The court never 

explained what it meant for State Farm to breach its “contract” with the class — whether that 

meant that plaintiffs had to prove that State Farm failed to restore all or almost all or most 

or many or only some of the class members’ vehicles to their pre-loss condition. 

In closing argument, State Farm reiterated the burden of proof that plaintiffs had 

assumed: to prove that “all the parts are always inferior, and always failed to return the car 

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to its pre-loss condition.” R. 12874-75. In rebuttal, however, plaintiffs’ counsel characterized 

State Farm’s position as “nonsense,” stating that it was “not our burden in this case” to prove 

that every one of the millions of non-OEM parts specified by State Farm was inferior. R. 

12987. He argued that plaintiffs were required to prove only that “it is more probably true 

than not true that State Farm broke its promise to the class of like kind and quality parts,” 

id., again without providing any explanation as to what that meant. 

As a result of the inadequacy of the instructions, the jury was left to its own devices 

to decide what level of proof was required in order to render judgment in favor of the entire 

class. Because the court also refused to propound any of State Farm’s suggested jury 

interrogatories — which would have inquired as to whether the jury had found that State 

Farm had breached its contracts with either the class representatives individually or all of 

the members of the class (R. 12596) — there is no way of knowing what standard the jury 

in fact chose to apply. Under those circumstances, State Farm is entitled, at the very least, 

to have the breach of contract judgment vacated. Because it is apparent that plaintiffs cannot 

meet their burden of proof on a classwide basis without inquiring into the individual facts 

of each transaction, however, the circuit court should be ordered to decertify the class. 

C. The Circuit Court Erred In Admitting Baseless Opinion Testimony 

Purporting To Show The Universal Inferiority Of Non-OEM Parts. 

Although plaintiffs convinced the court not to instruct the jury that they were 

required to prove the inferiority of all non-OEM parts in order to obtain a verdict against 

State Farm, at trial plaintiffs did attempt to prove that proposition. Their evidence, however, 

consisted largely of gross generalizations by witnesses who did not have the expertise or the 

data on which to base their sweeping opinions. Such testimony would not have been 

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necessary or admissible in an individual breach of contract case, where the plaintiff would 

concentrate on a specific part or parts that had allegedly failed to restore his particular 

vehicle to its pre-loss condition. But it was the only way plaintiffs could even attempt to 

prove their case on a classwide basis. As demonstrated below, the circuit court abused its 

discretion by admitting this highly prejudicial evidence, requiring reversal of the judgment. 36/ 

Because this is the only kind of evidence plaintiffs could possibly muster to prove their case 

on a classwide basis, the circuit court should be ordered to decertify the class. 

1. Plaintiffs’ Bodyshop Witnesses Greatly Exceeded The 

Permissible Scope Of Lay Opinion Testimony. 

One of the more remarkable features of this case was the parade of lay witnesses 

plaintiffs were allowed to march before the jury to declare their completely uninformed 

opinions about non-OEM parts. One after another, bodyshop owners and workers — whose 

shops earn more installing the pricier OEM parts than they do installing non-OEM parts, R. 

6738-39, 7096-97 — proclaimed non-OEM parts to be “all junk.” R. 6762; accord R. 5892 

(“there is not a single after-market part that is not junk”); R. 5860. Though none had ever 

attempted to perform any scientific tests on non-OEM parts, they opined that such parts are 

all inferior in design, quality, corrosion protection, and structural integrity, R. 4507KK-LL, 

4509, and “maybe” are unsafe, R. 4507.20. None of these lay witnesses had any expertise 

in metallurgy, design, or structural engineering. As a result, it was an abuse of discretion 

for the circuit court to allow them to offer their wholly uninformed opinions regarding the 

36/ 

See Grant v. Petroff, 291 Ill.App.3d 795, 803 (5th Dist. 1997) (reversal required 

where error in admission of evidence is “substantially prejudicial, thereby affecting the 

outcome of the trial”). 

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quality of non-OEM parts. See Baltus v. Weaver Div. of Kidde & Co., 199 Ill.App.3d 821, 

837 (1st Dist. 1990) (a witness whose “only recitation of qualifications was 20 years as an 

auto mechanic” installing particular parts “may [have] expertise in their [installation], but 

it does not mean he has the knowledge, skills, and experience as a manufacturer or designer” 

of those parts). 37/ 

Illinois courts, like federal courts, allow lay witnesses to offer opinion testimony 

“‘limited to those opinions or inferences which [were] rationally based on the[ir] 

perception[s]’” and sufficiently reliable to be “‘helpful’” to the jury. Freeding-Skokie Roll- 

Off Serv., Inc. v. Hamilton, 108 Ill.2d 217, 222 (1985) (quoting Fed. R. Evid. 701). Absent 

expertise or specialized knowledge, a lay witness’s opinion testimony is admissible, 

however, only if it is grounded in his or her “personal observation and recollection of 

concrete facts.” Id. 

Most of the testimony of plaintiffs’ bodyshop witnesses was not grounded in any 

first-hand perceptions or concrete facts. Rather than limiting themselves to opining that non- 

OEM parts they had actually installed seemed to fit poorly — an opinion they could have 

derived from first-hand experience — plaintiffs’ bodyshop witnesses were permitted to wax 

eloquent about the purportedly universal inferiority of all non-OEM parts, including myriad 

types of parts that they had never seen. PX 1214 at 53 (“I don’t have to look at it” to know 

37/ 

See also Bogosian v. Mercedes Benz of N. Am., 104 F.3d 472, 477 (1st Cir. 1997) (a 

witness’ “extensive experience in automotive repair” does not establish the requisite 

“significant expertise — by way of knowledge, skill, experience, training, or education — 

in relevant areas such as the design or manufacture of automobiles or their components”); 

Davis v. International Harvester Co., 167 Ill.App.3d 814, 827 (2d Dist. 1988) (truck driver 

not qualified to opine about safety of truck design). 

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that a non-OEM part is inferior to its OEM counterpart). They were also permitted to 

speculate about safety issues, even though none of the bodyshop witnesses had any personal 

knowledge or expertise in that area. 

Not surprisingly, when pressed to identify the factual basis for their opinions, several 

of the bodyshop witnesses confessed that they were relying on such incompetent foundations 

as promotional brochures produced by Mazda and General Motors to tout the advantages of 

their OEM parts, R. 5929; PX 1214 at 32-35, or a Consumer Reports magazine article. R. 

4507LL-MM. Admitting such testimony was clear error. These are not the kinds of materials 

on which a reputable expert would rely in forming an opinion about the quality of all non- 

OEM parts. Moreover, even if an expert could have properly relied on such materials, a lay 

witness may not. Rather, a lay opinion witness is limited to offering opinions predicated on 

his own personal knowledge — and may not under any circumstances testify based on a 

review of materials of which he has no “personal knowledge.” People v. Novak, 163 Ill.2d 

93, 103 (1994). 

The circuit court also erred by allowing plaintiffs, over State Farm’s objection, R. 

7154, to introduce into evidence a marketing survey purporting to show that 96% of 

bodyshops did not like non-OEM parts. PX 1316. Plaintiffs cited the survey in closing 

argument as “probably the most important piece of evidence here today,” R. 12989, 

suggesting that it alone proved the inherent inferiority of non-OEM parts. The survey should 

have been excluded both as hearsay (the person who conducted it was not available to 

explain his methodology), C. 26658, and because it was not probative of whether non-OEM 

parts were actually inferior. The survey merely confirmed that bodyshops prefer OEM parts, 

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which is not surprising because they make more money selling them. See PX 1316 at 7-15 

(70% of bodyshops agree that OEM parts are more profitable to sell than non-OEM parts). 

While allowing plaintiffs to offer the biased views of bodyshop owners about the 

quality of non-OEM parts, the circuit court inexplicably refused to allow State Farm to tell 

the jury about the views of state legislatures and insurance regulators. If the trial was to be 

a swearing contest based on personal opinions about non-OEM parts, the court at least 

should have allowed State Farm to tell the jury that, although bodyshops and car companies 

had campaigned for years to outlaw the specification of non-OEM parts, no state had agreed 

to do so. See, e.g., R. 9136-37. State Farm should also have been allowed to tell the jury 

that the majority of states expressly allow insurance companies to specify non-OEM parts 

so long as they are of like kind and quality — reflecting a legislative finding that there are 

a substantial number of non-OEM parts that meet that description. The circuit court, 

however, refused to allow regulators to testify about their states’ conclusions regarding non- 

OEM parts, on the ground that the jury could not be told about the differing state laws and 

regulations governing the specification of non-OEM parts. C. 28966; R. 10142. Once again, 

the court’s desire to preserve the case as a class action skewed its evidentiary rulings, 

preventing the jury from hearing a critical counterpoint to the opinions of plaintiffs’ 

bodyshop witnesses. 

2. The Opinions Of Plaintiffs’ Expert Witnesses Were Inherently 

Unreliable And Should Not Have Been Admitted. 

Another shortcut that tainted the trial of this case was the circuit court’s decision to 

allow plaintiffs’ experts to offer a variety of overblown generalizations about non-OEM 

parts. To be admissible in Illinois, expert testimony must reflect “specialized knowledge” 

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and be likely to assist the trier of fact. Novak, 163 Ill.2d at 104; see also MICHAEL H. 

GRAHAM, CLEARY & GRAHAM’S HANDBOOK OF ILLINOIS EVIDENCE § 702.2, at 614-15 (7th 

ed. 1999); id. § 702.4, at 620-21. In its recent decision in Donaldson v. Central Illinois 

Public Service Co., 2000 WL 268307 (5th Dist. 2000), this Court held that the touchstone 

of admissibility in Illinois continues to be the Frye requirement of general acceptance within 

the scientific community. 38/ 

In this case, the ultimate opinions offered by plaintiffs’ experts — that all non-OEM 

parts are inherently inferior to OEM parts — should not have been admitted because they 

were not based on any reliable methodology recognized in the relevant scientific community. 

The global opinions offered by plaintiffs’ experts all suffered from a common flaw: they 

were unreliable generalizations drawn from nonrepresentative and skewed samples. A 

“statistically valid sample” must be both “representative . . . and random.” Protestant Mem. 

Med. Ctr., Inc. v. Department of Pub. Aid, 295 Ill.App.3d 249, 255 (5th Dist. 1998). Courts 

routinely reject expert opinions when they are based on inadequate, nonrepresentative or 

biased samples. 39/ 

38/ 

In Donaldson, the Court disagreed with the Fourth District’s adoption of a “Frye-plus 

reliability standard” in Harris v. Cropmate Co., 302 Ill.App.3d 364 (1999). State Farm 

respectfully disagrees with the Court’s decision and urges it to adopt the standard articulated 

in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). In any event, as 

demonstrated below, plaintiffs’ expert testimony should have been excluded whether the 

standard is Frye, Frye-plus reliability, or Daubert. 

39/ 

See, e.g., O’Conner v. Commonwealth Edison Co., 807 F. Supp. 1376, 1396 (C.D. 

Ill. 1992) (physician’s opinion based on a sample of only five patients was inadmissible 

because such “limited personal experience simply cannot provide a sufficient scientific basis 

upon which any scientific reasoning process can discover a ‘binding universal rule’”), aff’d, 

13 F.3d 1090 (7th Cir. 1994); Comer v. American Elec. Power, 63 F. Supp.2d 927, 934 (N.D. 

Ind. 1999); Muzzey v. Kerr-McGee Chem. Corp., 921 F. Supp. 511, 519 (N.D. Ill. 1996); cf. 

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In this case, plaintiffs’ experts predicated their opinions on samples that were not 

randomly selected and that comprised only a tiny and non-representative fraction of the 

33,000 different kinds of non-OEM parts that State Farm could have specified over a tenyear 

period. For example, Kendall Clarke’s opinion that all non-OEM sheet metal parts are 

inherently inferior to their OEM counterparts, R. 5629-30, was based on an analysis of only 

a few hoods and tailgates. He conceded on cross-examination that he had not studied most 

of the categories of steel parts at issue in this lawsuit and had no basis for opining about 

them. R. 5639-41. He also admitted that he had made “no” “effort to investigate” whether 

the parts he had studied “could have been specified on a State Farm estimate.” R. 5648-49. 

Instead, Clarke simply limited the universe he studied to the parts that had been selected by 

someone else — a bodyshop mechanic who was an avowed critic of non-OEM parts — and 

assumed that they provided a proper basis for offering an opinion. R. 5634-37, 5661-62. 

Similarly, Paul Griglio’s declaration that non-OEM crash parts are “categorically and 

overwhelmingly inferior” to their OEM counterparts, R. 5174, was based solely on a threeday 

visit to three factories in Taiwan that manufactured a few types of non-OEM sheet metal 

parts. R. 5377-78. Griglio never visited any plants outside of Taiwan (R. 5390); any plants 

that manufactured non-OEM plastic parts (R. 5396); or any plants that manufactured the 

numerous other kinds of non-OEM parts at issue in this lawsuit, including header panels, 

tailgates, grills, moldings, fascias, and bumpers (R. 5396-400). Moreover, all he did at the 

Kuhn v. Ball State Univ., 78 F.3d 330, 332 (7th Cir. 1996) (excluding anecdotal evidence 

where plaintiff failed to provide meaningful statistical analysis of a “goodly sample” of 

relevant data); Evans v. Philadelphia Housing Auth., 1995 WL 154872, at *5 (E.D. Pa. 1995) 

(excluding expert opinion based upon a small, biased sample), aff’d, 79 F.3d 1139 (3d Cir. 

1996). 

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plants was to observe the process by which they manufactured non-OEM parts. Griglio 

admitted that he never tested or analyzed a single non-OEM part, let alone performed a sideby-side 

test of a non-OEM part and its OEM counterpart, to determine whether the 

manufacturing processes he had observed in fact produced inferior products. R. 5377-78. 

Thus, he lacked any basis on which to offer a categorical opinion about the quality of all 

non-OEM parts. 

William Anderton also based his opinion on a wholly inadequate sample. He opined 

that non-OEM parts are universally inferior to OEM parts, R. 5752, on the basis of only 

three tests involving a very limited sample of the universe of non-OEM part types, primarily 

sheet metal. R. 5791-92. Furthermore, Anderton admitted that test reports generated by his 

own division at Allstate contradicted his conclusion of universal inferiority: those reports 

show that some of the non-OEM parts he and his company tested were just as good as OEM 

parts, and that several OEM parts were worse than their non-OEM counterparts. R. 5792-93, 

5799-802, 5806-07. 

Perhaps most incredible of all was Dennis Bender, who predicated his opinion that 

non-OEM parts did not restore vehicles to their pre-loss value on a single, biased marketing 

“study” that General Motors had commissioned him to perform as part of its advertising 

campaign to expand its crash parts market. R. 4999-5000, 5004-05, 5018. Bender admitted 

that the purpose of the study was not objective: “General Motors had a story to tell, and the 

consuming public was the audience they wanted to reach.” R. 5014. Moreover, General 

Motors had pre-selected two cars and replacement parts, made the repairs, and performed 

accelerated aging on the car before Bender’s marketing firm was hired. R. 4997-99. Thus, 

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Bender could not swear that the non-OEM parts selected were fairly representative, nor 

could he say whether both cars had been subjected to equivalent treatment. 40/ In any event, 

it is absurd to suggest that a single repair with a handful of non-OEM parts could ever 

provide a basis for concluding that all of the tens of thousands of non-OEM parts available 

in the marketplace are inferior. 

Car parts are not fungible: the design of a headlamp differs from the design of a 

hood, and the fact that one might have a defect is not probative of the quality of the other. 

Numerous courts have made this common sense point. For example, the Fifth Circuit has 

held that the plaintiff could not prove that a joint assembly in 1983 Ford Escorts was 

defective by offering evidence of defects in different Ford parts, different Ford models, or 

Ford Escorts manufactured in different years. Johnson v. Ford Motor Co., 988 F.2d 573, 

579-80 (1993). Similarly, in Floyd v. General Motors Corp., 960 P.2d 763, 766 (Kan. App. 

1998), the court affirmed exclusion of evidence of a steering defect in GM’s 1992 models 

to prove a steering defect in its 1988 model. 41/ And in Rios, the Cook County Circuit Court 

refused to certify a class virtually identical to the one here because it would be “illogical for 

the Court to examine a [mere] handful of the . . . 30,000 non-OEM parts[,] to make a 

comparison to OEM parts[,] and somehow [to] extrapolate from that that therefore the whole 

40/ 

Bender did confess that, when he observed that the hood of the car repaired with GM 

parts was misaligned, he instructed GM to fix it. R. 5016. The very nature of the test — as 

well as Bender’s apparent desire to ensure that its outcome would be favorable to GM — 

demonstrates its inherent unreliability as the basis for forming any general opinions with 

respect to the quality of non-OEM parts. 

41/ 

Accord Ducharme v. Hyundai Motor Am., 698 N.E.2d 412, 416 (Mass. App. 1998); 

Brock v. Caterpillar, Inc., 94 F.3d 220, 224-26 (6th Cir. 1996); Freund v. Fleetwood Enters., 

956 F.2d 354, 360-61 (1st Cir. 1992); see also Ford Paint Litig., 182 F.R.D. at 220. 

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panoply of 30,000 parts are affected.” C. 23923A. 

Even plaintiffs’ own witnesses grudgingly conceded on cross-examination that 

universal conclusions could not be drawn from a nonrepresentative sampling of dissimilar 

parts. For example, Ryles admitted that evidence that a hood made by one manufacturer was 

inferior would not prove that other parts made by that same manufacturer were inferior, let 

alone that any parts made by other manufacturers were inferior. R. 4905-06. Similarly, 

Griglio — who acknowledged that OEM part quality varied over time — admitted that it 

was inappropriate to judge parts from one year based on parts from an earlier year. R. 5413- 

14. 

Only Clarke attempted to defend plaintiffs’ methodology of deriving universal 

conclusions from nonrepresentative samples. But his reasoning actually proves State Farm’s 

point. He testified that, in instances of “mass production” (i.e., by a single manufacturer at 

a single factory), “all of the parts should be of a fairly consistent quality” “[s]o, you can, 

with reasonableness,” derive conclusions about all the parts by examining an “individual 

part.” R. 5595-96. But non-OEM parts as a category are not “mass produced” by a single 

manufacturer at a single factory. Thus, the fact that one company might produce a bad hood 

says nothing about whether different companies produced a good fender or good plastic 

parts. 

The circuit court also erred in allowing plaintiffs’ experts to introduce into the case 

the emotionally-charged issue of safety. Despite the fact that they had never tested a single 

non-OEM part for safety and lacked any qualification to opine on that topic, plaintiffs’ 

witnesses repeatedly asserted that non-OEM parts were likely unsafe. Anderton, for 

example, testified that non-OEM parts presented a “safety concern” (R. 5761) and that non- 

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OEM part construction “had some distinct safety implications” (R. 5775) — even though he 

admitted that he had never performed a single safety test of a non-OEM part and had no 

background in safety design and testing at all (R. 5760, 5784, 5816, 5819). Plaintiffs’ 

bodyshop witnesses also testified to their “concerns” that non-OEM parts “maybe” are 

unsafe. R. 4507.20, 5922, 6627-28, 7053. Like Anderton, the bodyshop witnesses had no 

expertise in safety analysis, nor any factual basis for asserting that any non-OEM parts were 

not as safe as their OEM counterparts. 

Despite the fact that millions of non-OEM parts have been on the road for more than 

a decade, plaintiffs failed to adduce any evidence that anyone has ever been injured due to 

defects in any non-OEM part, let alone a study suggesting a safety problem with non-OEM 

parts that is sufficiently universal to justify condemning them all. Lacking any factual 

foundation or practical experience on which to ground their opinions that any — let alone 

all — non-OEM parts are unsafe, plaintiffs’ experts and lay “opinion” witnesses simply 

proclaimed it to be so. A purported expert’s mere say-so, however, is plainly not enough to 

support any judgment, much less the massive judgment in this case. See Kleiss v. Cassida, 

297 Ill.App.3d 165, 174 (4th Dist. 1998). Even “[a] supremely qualified expert cannot waltz 

into the courtroom and render opinions unless those opinions are based upon some 

recognized scientific method and are reliable and relevant.” Clark v. Takata Corp., 192 F.3d 

750, 759 n.5 (7th Cir. 1999). 

* * * * 

That plaintiffs’ proof of universal inferiority rested on so weak a foundation 

demonstrates not only why the judgment cannot stand, but why the class must be decertified 

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on remand. No expert could properly opine on the quality of all 33,000 kinds of parts at 

issue here. Thus, attempting to prove this case on a classwide basis would inevitably lead 

to a flawed and unsustainable result. 

D. The Circuit Court Erred As A Matter Of Law By Allowing Plaintiffs To 

Rely On A Market “Perception” Theory To Determine Whether Non- 

OEM Parts Met The Contractual Standard. 

In a last-ditch effort to find some basis for universally condemning non-OEM parts, 

plaintiffs offered the jury a “perception” theory, arguing that even if non-OEM parts were 

of good quality, specifying them nevertheless breached State Farm’s contract because 

consumers perceived non-OEM parts poorly due to negative portrayals in the media. 

Plaintiffs claimed that, because of this perception, even non-OEM parts that were as good 

as OEM parts would not restore vehicles to their pre-loss market value and thus would not 

suffice to restore any vehicle to its pre-loss condition. R. 4434-35, 12861. 

Plaintiffs should not have been permitted to offer their “perception” theory to the 

jury. As demonstrated above, under the case law applicable in several states, it is clear that 

an insurance company’s obligation to restore a vehicle to its “pre-loss condition” means its 

physical condition prior to the accident and not its market value. See page 57, supra. Thus, 

even if plaintiffs were right on the facts (which they were not), their perception theory 

should have been excluded as a matter of law with respect to class members in those states. 

Plaintiffs’ theory should also be deemed foreclosed under the laws of the 38 states that 

expressly permit insurance companies to specify non-OEM parts: it simply cannot be true 

that state legislators and regulators expressly allowed insurance companies to meet their 

contractual obligations by specifying non-OEM parts even though, under this “perception” 

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theory, even non-OEM parts that are as good as or better than OEM parts could not, under 

any circumstances, meet the contractual standard. 42/ 

In addition, plaintiffs utterly failed to prove that whatever negative perceptions there 

might have been had such a universal effect on the market value of used vehicles that State 

Farm must be deemed to have breached its contract every time a non-OEM part was installed 

on a class member’s vehicle. Indeed, the key witness plaintiffs introduced in an attempt to 

prove that non-OEM parts diminish resale value actually proved the opposite. Larry Batton 

claimed in his direct testimony that non-OEM parts “always” reduce value. R. 11825. On 

cross-examination, however, Batton admitted that an elaborate questionnaire he uses on his 

web-site to value consumers’ cars does not ask if the cars have any non-OEM parts. R. 

11845-47. Batton also admitted that, in many years of writing valuation letters for State 

Farm, he wrote that non-OEM parts devalued a car only one time, which was after plaintiffs 

had hired him as an expert in this case. R. 11850-51. Finally, Batton conceded that he 

personally sold used cars without disclosing that they had non-OEM parts on them, and 

apparently without discounting the price. R. 11843-44. 

The real-world experiences of the class representatives also contradicted the 

perception theory. Two named plaintiffs (Vickers and DeFrank) who received non-OEM 

parts no longer owned the repaired vehicles by the time of trial. As noted above, these 

plaintiffs admitted that neither of them received less for their vehicles because of the 

42/ 

Tellingly, plaintiffs’ perception theory directly contradicts their consumer fraud 

theory. On the ICFA count, plaintiffs claimed that class members “had no knowledge of 

[non-OEM] inferiority.” C. 29170. But the perception theory assumes the opposite — that 

non-OEM inferiority is a widely known fact in the market. 

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presence of non-OEM parts. R. 6342, 6358; R. 4507V-W, 4507BB. In a class action, class 

representatives’ experiences should prove class claims; here, the only class members who 

testified disproved the diminished value claims of the class. 

E. Other Trial Errors Were Clearly Prejudicial, Requiring Reversal Of 

The Classwide Judgment Below. 

The circuit court also erred in allowing plaintiffs to prove their case through onesided 

interpretations of State Farm’s documents, improper attacks on State Farm’s motives 

and character, and videotapes that never would have been shown to the jury in an individual 

case that was properly focused on the quality of parts actually installed on the insured 

vehicle. Each of these errors was substantially prejudicial, requiring, at the very least, a new 

trial. 

First, the court erred in allowing plaintiffs, over State Farm’s objection, to present 

as “expert” witnesses two former insurance regulators, Messrs. Ryles and Hunter, to 

“interpret” State Farm’s documents. Ryles and Hunter both confessed that they lacked any 

“technical expertise” on vehicle parts, engineering principles, or metallurgy. R. 4852-4, R. 

6383-90. Nevertheless, they repeatedly opined that non-OEM parts are inferior in 

dimension, structure, safety, and reliability to OEM parts — quintessentially scientific and 

technical opinions. 43/ Allowing these “expert” witnesses to testify far outside their area of 

expertise was a clear abuse of discretion. See Broussard v. Huffman Mfg. Co., 108 Ill.App.3d 

356, 362 (3d Dist. 1982) (expert’s testimony “must be on questions coming within the field 

43/ 

See, e.g., R. 4750 (opining in detail about the purported “dimensional[] inferior[ity]” 

of non-OEM parts); R. 4756-58 (discussing galvanization, despite an admitted lack of 

knowledge about it). 

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of his training or expertise”). 

Plaintiffs tried to get around Ryles’ and Hunter’s admitted lack of expertise by 

arguing that they were acting as experts, not on technical issues, but rather on the 

interpretation of State Farm’s internal documents. Ryles and Hunter described themselves 

as the “documents guy[s],” R. 6388, whose job it was to “review documents by State Farm” 

that plaintiffs’ counsel had collected in binders labeled the “State Farm Story,” and to 

“identify what State Farm had said about various issues.” R. 4853, C. 26227-28, 27391- 

92. 44/ The problem with this argument, however, is that there is no such thing as an “expert” 

in determining what the defendant “ha[s] said about various issues,” because that task 

requires no special skill or knowledge. 

“[E]xpert testimony is not admissible on matters of common knowledge unless the 

subject is difficult to understand or explain.” People v. Gilliam, 172 Ill.2d 484, 513 (1996); 

accord Hernandez v. Power Constr. Co., 73 Ill.2d 90, 99 (1978); People v. Clayton, 302 

Ill.App.3d 220, 226 (2d Dist. 1998). “[T]o testify as an expert, it must be shown that such 

person possesses ‘special skills beyond the ken of the average juror and that he employed 

those skills in forming an opinion.’” Urbas v. Saintco, Inc., 264 Ill.App.3d 111, 137 (5th 

Dist. 1994). Expert testimony that “consists of nothing more than” summarizing documents 

and “drawing inferences . . . that [the expert is] no more qualified than the jury to draw” is 

inadmissible. United States v. Benson, 941 F.2d 598, 604 (7th Cir. 1991), amended, 957 

44/ 

Plaintiffs’ counsel presented the witnesses with State Farm documents and asked 

such questions as “Tell the jury about this letter. What does it say?,” R. 4688, and “Tell the 

jury the gist of that document,” R. 4795. The “experts” compliantly responded with such 

answers as “I assume because of [] what I’ve seen in the record that . . .,” R. 6509, and the 

“inferences that I drew from reading the document [are]. . .,” R. 4817. 

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F.2d 301 (7th Cir. 1992). In this case, Ryles and Hunter contributed no expertise; rather, 

they served merely as conduits through whom plaintiffs’ counsel funneled to the jury reams 

of documents about which Ryles and Hunter lacked any personal knowledge. 

Admission of Ryles’ and Hunter’s uninformed testimony prejudiced State Farm by 

giving the jurors the impression that the court had shifted to these “experts” the jurors’ 

responsibility for deciding the case. See 1 MCCORMICK ON EVIDENCE § 12, at 51 (5th ed. 

1999); Wakeford v. Rodehouse Restaurants, 223 Ill.App.3d 31, 48 (5th Dist. 1991), aff’d, 

154 Ill.2d 543 (1992). Exploiting that impression, Ryles actually told the jury that it was his 

job to weigh the evidence and to determine whether the burden of proof had been met. R. 

4864 (“I decided what the preponderance of the evidence was”); R. 4919 (“I don’t believe 

[State Farm has] sufficient evidence to show that these parts are of like kind and quality”). 

The dangers of allowing a witness to assume the mantle of “super-juror,” Haas v. 

Abrahamson, 705 F. Supp. 1370, 1375 (E.D. Wis. 1989), aff’d, 910 F.2d 384 (7th Cir. 1990), 

are convincingly demonstrated by Ryles’ own testimony: he got the burden of proof exactly 

backwards, advising the jury to find State Farm liable because State Farm had allegedly 

failed to prove by “a preponderance of the evidence . . . that these parts are equal to or better 

than OEM parts.” R. 4864. 

While allowing Ryles and Hunter to improperly “interpret” State Farm documents, 

the court inexplicably refused to allow State Farm to explain its own documents. For 

example, throughout the trial plaintiffs harped on a State Farm memo containing the 

following sentence: “A pick-up truck might make better sense for the usage of [non-OEM 

parts] than a Mercedes.” PX 433. In opening argument, plaintiffs claimed that this memo 

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eflected a policy of “discrimination” in favor of luxury cars, and asked “why” State Farm 

would discriminate if non-OEM parts were really as good as OEM parts. R. 4447. Ryles 

interpreted this memo as showing State Farm’s belief that “some policyholders are created 

more equal than others.” R. 4783. Hunter testified that the discrimination supposedly 

documented in the memo confirmed that non-OEM parts are inferior. R. 6394-95. 

State Farm called Bill Hardt, the author of the memo, as a witness to answer 

plaintiffs’ rhetorical question as to “why” the memo was written. Hardt was about to do so 

when plaintiffs objected on the ground that “the document speaks for itself.” R. 9262-65. 

Even though Ryles and Hunter had opined about what the document meant without any 

personal knowledge whatsoever, the court made the astonishing ruling that Hardt — who 

wrote the document — could not explain what he really meant. Id. 45/ 

Second, the circuit court also abused its discretion by allowing plaintiffs to make 

arguments and offer evidence impugning State Farm’s character and motives in specifying 

non-OEM parts, while at the same time prohibiting State Farm from telling the jury why it 

had adopted a policy of specifying non-OEM parts. Prior to trial, the circuit court precluded 

State Farm from offering any evidence to show that its practices with respect to non-OEM 

parts were motivated by a desire to hold down repair costs and thereby allow State Farm to 

hold down premiums and increase dividends. C. 28974. State Farm was not allowed to 

45/ 

In an offer of proof, Hardt explained that he distinguished between a pick-up truck 

and a Mercedes because non-OEM parts are more available for pick-ups (which have a 

relatively high market share) and are therefore “tried and tested” and likely to be of higher 

quality than non-OEM parts for a Mercedes. R. 9478-80. Hardt, who has driven a pick-up 

truck for 35 years, R. 9267, stated that he in no way intended to discriminate based on 

wealth. R. 9478-80. 

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introduce testimony from consumer advocates who would have explained that the 

specification of non-OEM parts is a pro-consumer practice that makes repairs less costly and 

prevents the car companies from charging the kinds of monopoly prices for repair parts they 

used to charge before the non-OEM market developed. See, e.g., R. 10109-11. Nor was 

State Farm allowed to explain to the jury that it is a mutual company, owned by its 

policyholders, and therefore was motivated only by a desire to protect its policyholders — 

and not by the need to generate profits for shareholders. C. 28988. 

Whatever the merits of these rulings may have been before the trial began, it was a 

clear abuse of discretion for the circuit court to continue to adhere to them once plaintiffs 

stood up in opening argument and started throwing mud at State Farm. Plaintiffs accused 

State Farm of foisting non-OEM parts on “vulnerable” “minorities,” such as “blacks, 

Hispanics, and particularly Vietnamese,” and a “little old lady,” while bestowing OEM parts 

on “well-shod” policyholders whose “golfing buddies” might be lawyers. 46/ R. 6007-10, 

4507.18, 4441, 13002. Plaintiffs implied that State Farm was cheating policyholders by 

providing cheaper parts than class members had paid for and asked the jury to force State 

Farm to give up the ill-gotten “money” it had supposedly “made” from this misconduct. R. 

13008. Then, in closing argument, plaintiffs urged the jury to speak up for justice, invoking 

the specter of “Nazis” herding victims to the gas chamber, while good people failed to 

46/ 

This was not the first time that plaintiffs’ lead trial counsel has made the unfortunate 

decision to play the race card in a civil trial. The Mississippi Supreme Court recently 

reversed a verdict that Mr. Barrett had obtained in a breach of contract action in part because 

of his “obvious effort to inflame the emotions of the jury” by “blatantly play[ing] the ‘race 

card’ before the jury.” General Motors Acceptance Corp. v. Baymon, 732 So.2d 262, 271-72 

(Miss. 1999). 

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“speak up for justice.” R. 13013-14. 

State Farm objected to plaintiffs’ attacks on its motives and character and three times 

moved for a mistrial, but the circuit court refused to take any action. R. 4454-59, 4563-64, 

6049-52, 12378. That decision was a clear abuse of discretion in and of itself. The innuendo 

in this case was unfounded, see Wernowsky v. Economy Fire & Cas. Co., 106 Ill.2d 49, 55- 

56 (1985), irrelevant, see Plooy v. Paryani, 275 Ill.App.3d 1074, 1088-89 (1st Dist. 1995), 

and unduly prejudicial, GRAHAM, supra, § 403.1, at 189. 47/ But the court made matters much 

worse by refusing to allow State Farm to defend itself by explaining its true motives. If the 

jury believed that State Farm profited from using non-OEM parts, it could attribute a motive 

to State Farm — greed — that would make sense of plaintiffs’ theory that State Farm 

deliberately chose to breach its contracts with 4.7 million policyholders. But the jury never 

learned the truth and imposed $450 million in damages — including $243 million linked to 

State Farm’s “savings” — based on a false impression created by one-sided evidentiary 

rulings. 

Third, the circuit court also abused its discretion by allowing plaintiffs to parade 

before the jury a videotaped news segment about a Consumer Reports article critical of non- 

OEM parts. Neither the article nor the videotape had been admitted into evidence. 

Nevertheless, plaintiffs were allowed to cite from the article and repeatedly play the 

47/ 

Only two people testified to State Farm’s alleged policy of discrimination: a 

disgruntled former junior State Farm employee in Colorado who quit fifteen years ago — 

long before the class period even started — and a bodyshop owner in West Virginia with 

limited exposure to State Farm. R. 4507.12, 6025-26. Plaintiffs did not produce any 

statistical evidence suggesting discrimination; nor did they point to any class member who 

claimed to have been the victim of discrimination in the specification of crash parts. 

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videotape — which showed non-OEM bumpers shattering in impact tests — for the jury on 

the ground that plaintiffs’ lay opinion witnesses had relied on these materials in forming 

their opinions. R. 4405-06, 12008-09. That decision was wrong as a matter of law. As 

explained above, lay opinion witnesses may only testify based on their own personal 

observations and experience and therefore are not allowed to rely on materials like the 

Consumer Reports article and video in forming their opinions — let alone testify about such 

materials. See Novak, 163 Ill.2d at 103. 

Furthermore, the court permitted plaintiffs to tout the Consumer Reports material far 

beyond the confines of the limited purpose for which it was introduced. The material was 

clearly not admissible as substantive evidence: plaintiffs made no attempt whatsoever to 

prove that any of the parts depicted in the video or discussed in the article had ever been 

installed on a State Farm-insured vehicle. In addition, State Farm never had an opportunity 

to cross-examine either the authors of the article or the source of the videotaped images. 

Nevertheless, plaintiffs were repeatedly allowed to use the Consumer Reports material as 

if it were substantive evidence. For example, plaintiffs’ counsel cited sections of the article 

to a State Farm witness, asking several times “Do you disagree with the scientists at 

Consumer Reports on that statement?” R. 7680-84, 12020. In closing argument, plaintiffs 

mentioned the material at least five times, referring to it as “the Consumer Reports magazine 

article that is not in evidence, but that you heard about,” R. 12990, and responding to State 

Farm’s argument that plaintiffs had not introduced evidence about specific non-OEM parts 

with the assertion that “[i]ts not true, however, to say you didn’t see any parts. You saw 

them in the Consumer Reports video. You saw them.” R. 12979; see also R. 12977-78, 

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12984-85. The perversion of ostensible Rule 703 material into substantive evidence touted 

for its truth was flagrant, and the circuit court’s refusal to stop it was a clear abuse of 

discretion. People v. Houser, 305 Ill.App.3d 384, 395 (4th Dist. 1999) (“Rule 703 cannot be 

used to make an end-run around other evidentiary principles in an effort to sully the 

defendant with otherwise inadmissible evidence”). 

The circuit court also erred in allowing plaintiffs to play for the jury a videotape — 

complete with musical soundtrack — prepared by Ford Motor Company’s “Marketing 

Office” more than fifteen years ago to compare a fender manufactured by Ford with a non- 

OEM fender. Not surprisingly, the non-Ford fender did not fare well in the Ford marketing 

test: in fact, it appeared to corrode before the jury’s eyes. PX 1325. The two Ford employees 

who testified about the video were unable to provide any information about the non-OEM 

fender, except to say that it had been bought “somewheres” between 1984 and 1986, well 

before the class period began. R. 6686-87, 6694. There was no evidence that the same kind 

of fender had ever been installed on a State Farm policyholder’s car at any time, let alone 

during the class period. Nor was there any basis to believe that the corrosion test pictured 

in the videotape had been fairly conducted. C. 27506. Under these circumstances, the Ford 

videotape never should have been admitted. 48/ 

48/ 

The “test” of parts manufactured prior to the class period was especially prejudicial 

in light of abundant evidence that the quality of non-OEM parts has improved over time. 

R. 10953-54, 8049-50, 8085. “[I]t is well settled” that videotapes of “experiments are 

incompetent unless the essential elements of the experiment are shown to be substantially 

similar to those existing at the time” of the charged conduct. Hubbard v. McDonough Power 

Equip., Inc., 83 Ill.App.3d 272, 280 (5th Dist. 1980); accord Swajian v. General Motors 

Corp., 916 F.2d 31, 36 (1st Cir. 1990) (videotape recreating circumstances dissimilar to 

those of charged conduct is not proper as evidence or a demonstrative exhibit). 

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The erroneous misuse of the Ford and Consumer Reports material was highly 

prejudicial. In a long trial about often dry issues, the videos provided a dramatic interlude 

that undoubtedly had a substantial impact on the jury. The citation of an article from a 

trusted source like Consumer Reports, as well as the “attention grabbing” images on the 

videotapes, went “directly to the heart of the litigation” and thus directly affected the 

outcome of the trial. Rotolo v. Digital Equip. Corp., 150 F.3d 223, 225 (2d Cir. 1998) 

(vacating jury verdict due to plaintiffs’ reliance on inadmissable videotape). 

F. State Farm’s Evidence Disproved Plaintiffs’ Claims Of Universal 

Inferiority, Confirming That The Only Way The Case Could Be Fairly 

Tried Was By Looking At The Facts Of Each Individual Repair. 

Because the jury was not instructed that plaintiffs had to prove the universal 

inferiority of non-OEM parts, its verdict cannot be taken as a finding that all such parts are 

inferior. But if it could somehow be read in that way, the verdict would be contrary to the 

manifest weight of the evidence. See Hastings v. Gulledge, 272 Ill.App.3d 861, 863 (5th 

Dist. 1995) (a verdict “is against the manifest weight of the evidence if the opposite 

conclusion is clearly evident or if the jury findings are unreasonable, arbitrary, and not based 

upon any of the evidence”). The overwhelming weight of the evidence at trial showed that 

non-OEM parts could not be universally condemned and that the only way to determine 

whether they restored a policyholder’s vehicle to its pre-loss condition was to look at the 

individual facts and circumstances of each repair. 

State Farm’s evidence showed that there were non-OEM parts that were as good as 

OEM parts and that many such parts had been successfully used to restore vehicles to their 

pre-loss condition. See, e.g., R. 9858-59, 11341-42; 10992-94 (eyewitness testimony that 

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Polywheels company makes both the OEM and non-OEM versions of a Ford header-panel 

and that the only difference is the label on the box); 7995-96, 8007-09, 8070-72, 9038-39, 

9697. Unlike plaintiffs’ anecdotal evidence, this evidence was highly probative on the 

critical factual question at trial — whether all non-OEM parts sold during the class period 

were so inferior that State Farm necessarily breached its contracts whenever it specified such 

parts. As plaintiffs’ own expert admitted, although many examples of bad non-OEM parts 

cannot prove that all such parts are bad, even one example of a good non-OEM part is 

enough to disprove a claim of universal inferiority. R. 7196-97. 

In addition to this evidence, State Farm presented evidence about the marketplace’s 

reaction to non-OEM parts during the class period that conclusively rebutted any claim that 

all non-OEM parts were inherently inferior. If all of the millions of non-OEM parts installed 

on vehicles since 1987 were as bad as plaintiffs claimed — fitting poorly, rusting, denting, 

shattering, and creating safety problems — used car markets would have reacted and 

consumers would have flooded not only State Farm, but also insurance regulators with 

complaints. But the evidence at trial made it clear that there was no such reaction. 

The uncontradicted real-world evidence was that used car buyers do not care whether 

a vehicle has been repaired with OEM or non-OEM parts. The publisher of the “Black 

Book” — the industry bible for used cars — testified that, if non-OEM parts affected value, 

the issue “would be flagged” in the market and reflected in his guide. R. 10278. But in fact 

valuation guides do not even mention non-OEM parts as a factor affecting the market value 

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of used cars. 49/ 

Similarly, although auction houses that sell millions of used cars each year have 

intricate disclosure rules, none requires sellers to disclose the presence of non-OEM parts. 

R. 8881-82, 9217-18, 10247, 8692-93, 5114; DX 655; DX 2013C; DX 2013D; DX 650. As 

one manager of an auction that sells 450-520 cars each week explained, the issue of non- 

OEM parts has “never been brought up.” R. 8676. Likewise, the manager of the largest auto 

auction in the world, which has $4 billion in sales per year, labeled the allegations in this 

lawsuit “ludicrous,” R. 8870-71, noting that “[i]f what this case is about was important, it 

would be written all over our policy and procedure manual; and it’s never been a problem 

since auctions began.” R. 8892. 

Indeed, the OEMs themselves — Ford, GM, and Chrysler — certify used cars that 

have been repaired with non-OEM parts and offer warranties on those vehicles. None of 

these programs differentiates between OEM and non-OEM crash parts. R. 10479-84. In 

addition, car makers have lease buy-back agreements with large customers (such as rental 

agencies) whereby they commit to repurchase cars for a specified price. None of these 

leases bars use of non-OEM parts in repairs, R. 10499-510; DX 835; DX 836; DX 837, even 

though lessees often use non-OEM parts. R. 10504-08. This market behavior demonstrates 

that the opinion expressed by plaintiffs’ paid experts — that there are no good non-OEM 

49/ 

See R. 9214-16 (discussing NADA Guide, Kelley Blue Book, and Black Book); R. 

8895, 10466-67 (discussing consumer-oriented guides, internet guides, and state 

publications); R. 10486-89 (discussing guide for the leasing industry); DX 666; DX 667; DX 

463. The Black Book has 60,000 weekly subscribers in the auto and finance industries, but 

according to its publisher has “never” made an adjustment for non-OEM parts. R. 10240-41, 

10224-25, 10234-36. 

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parts — was simply a made-for-litigation position with no basis in the real world. 

The behavior of policyholders is also highly probative of whether all non-OEM parts 

are inherently inferior. If plaintiffs were right, policyholders who were “forced” to accept 

such parts would have complained in droves to State Farm, to state regulators, and to 

consumer advocates. But virtually none did. For example, a study showed that only 0.59% 

of policyholders who had non-OEM parts specified on their repair estimates complaint to 

State Farm. R. 9462; DX 908. State regulators likewise reported virtually no complaints. 

In the past five years the Illinois Insurance Commissioner has received approximately 

25,000 complaints regarding auto insurance; but none concerned non-OEM parts. R. 8840. 

In prior years, the Commissioner received only five complaints about non-OEM parts, and 

found them all meritless. R. 8861. The same pattern is true in other states. R. 9097-98 

(over five years, only 1 of 10,000 complaints in Nevada concerned non-OEM parts); R. 

11866-67 (none of 4,000 annual complaints in New York concerned non-OEM parts); R. 

8727 (no complaints in Iowa regarding non-OEM parts). Texas seems to have the most 

complaints — eight in 1997. R. 12031. Consumer groups report the same lack of 

complaints. The Center for Auto Safety receives 50,000 complaints a year, yet almost none 

concern non-OEM parts. R. 10790-91. Unrebutted evidence also showed that State Farm 

policyholders who received non-OEM parts renewed their policies at the same high rate as 

those who received OEM parts, indicating that OEM and non-OEM parts were equally 

satisfactory. R. 10158-59; DX 867. 

This market evidence is dispositive. This is not a question of credibility or of one 

expert’s opinion against another’s. The collective experience of millions of Americans 

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cannot be faked and cannot be ignored. Non-OEM parts simply cannot have been as 

universally inferior as plaintiffs claimed they were. Because the evidence overwhelmingly 

demonstrates that plaintiffs did not and cannot prove their breach of contract claim on a 

classwide basis, the judgment must be reversed and the class decertified. 

III. 

The ICFA Judgment Should Be Reversed. 

The $730 million judgment imposed on State Farm by the circuit court should also 

be vacated and the ICFA class decertified. In the alternative, judgment should be entered in 

favor of State Farm on the ICFA claim. The circuit court erred as a matter of law in applying 

ICFA on a nationwide basis to the claims of all class members. Furthermore, even under 

ICFA, the circuit court’s conclusions were contrary to the statutory language and the 

manifest weight of the evidence and do not support either its finding of liability or its 

imposition of $130 million in “disgorgement” damages. 

A. ICFA Cannot Be Applied To Out-of-State Insurance Transactions. 50/ 

The vast majority of class members have never set foot in Illinois. They have never 

met or talked to a State Farm employee who works in Illinois. Their contact with State Farm 

is through its local agent, its local claims representative, and its local adjuster. Their cars 

are garaged outside Illinois. Their accidents occurred outside Illinois. Their estimates were 

written outside Illinois. Disclosures were made outside Illinois. Non-OEM parts were 

installed (if at all) outside Illinois. Damages, if any, accrued outside Illinois. Most plaintiffs 

simply have no contact with Illinois, and Illinois has no contact with them. 

50/ 

Review of the circuit court’s decision to apply Illinois law is de novo. See Lucas v. 

Lakin, 175 Ill.2d 166, 171 (1997); Morris B. Chapman & Assocs. v. Kitzman, 307 Ill.App.3d 

92, 99 (5th Dist. 1999), appeal granted, 187 Ill.2d 571 (2000). 

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In contrast, each of the 47 other states in the class has substantial contacts with 

resident class members, and with State Farm. Each state regulates local insurance 

transactions and disclosures. Each state has consumer protection laws. Each state regulates 

local repair practices, and most states regulate non-OEM parts. Each state has implemented 

these regulatory schemes pursuant to different policies with different emphases. Yet the 

circuit court ruled that Illinois’ consumer fraud law would decide what State Farm could do 

in every other state, no matter what the legislature and insurance commissioner in those 

states had to say. 

ICFA was applied nationwide because it was convenient, not because it was 

appropriate. Having conjured up a sprawling class action that would be untriable if 

governed by the laws of 48 states, plaintiffs resorted to the fiction that ICFA follows State 

Farm wherever it goes because State Farm is headquartered in Illinois. The circuit court’s 

acceptance of this fiction was an error of law that requires reversal of the ICFA judgment 

and decertification of the nationwide class. 

1. ICFA Does Not Provide A Cause Of Action For Class Members 

With No Transactional Nexus To Illinois. 

The Illinois Supreme Court has recognized that the purpose of ICFA “is to protect 

Illinois consumers, borrowers, and businessmen.” Scott v. Association for Childbirth at 

Home, 88 Ill.2d 279, 288 (1981) (emphasis added). To that end, ICFA prohibits fraud only 

“in the conduct of trade or commerce,” which is defined as “trade or commerce directly or 

indirectly affecting the people of this State.” 815 ILCS 505/1(f) & 505/2 (emphasis added). 

Thus, on its face, ICFA does not supply a cause of action to out-of-state residents whose 

insurance claims were adjusted and whose cars were repaired outside of Illinois because 

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those transactions can in no way be said to “affect[]” the people of Illinois. 

Even if ICFA’s geographic limitation were not clear, the settled rule in Illinois is that, 

“when a statute . . . is silent as to extraterritorial effect, there is a presumption that it has 

none.” Graham v. General U.S. Grant Post No. 2665, 43 Ill.2d 1, 6 (1969). Use of “general 

words” such as “any” or “all” is insufficient to overcome the presumption against giving 

statutes extraterritorial effect; the statute must use specific language to justify applying it to 

conduct or injuries in another state. Dur-Ite Co. v. Industrial Comm’n, 394 Ill. 338, 349 

(1946). Moreover, even when a statute should be “liberally construed to carry out its 

beneficent object,” it does not apply to injuries outside the state absent an express legislative 

directive. Union Bridge & Constr. Co. v. Industrial Comm’n, 287 Ill. 396, 400 (1919). 

The prerogative of applying Illinois law extraterritorially (subject to constitutional 

limitations) resides in the legislature, not the courts. See Dur-Ite, 394 Ill. at 349 (“this court 

. . . declines to arrogate to itself legislative power under the guise of tortuous statutory 

construction”). Because the General Assembly did not unambiguously provide that out-ofstate 

transactions with in-state companies are governed by ICFA (and, indeed, limited ICFA 

to conduct affecting Illinois residents), the circuit court erred in applying ICFA to the claims 

of out-of-state class members. 

Construing ICFA’s plain language and faithful to the presumption against 

extraterritoriality, the overwhelming majority of reported decisions addressing the issue have 

held that out-of-state residents may not bring an ICFA claim based on transactions that 

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occurred outside Illinois. 51/ In the only Illinois appellate court decision to squarely address 

the issue, the Fourth District recently held that out-of-state purchasers of gasoline could not 

bring an ICFA claim against a gasoline company whose corporate headquarters are located 

in Chicago, explaining: 

In the case of an out-of-state consumer, the trade or commerce referred to by the Act 

occurred outside Illinois where the putative class members lived, purchased gasoline, 

and were allegedly harmed. They had no contact with Illinois. 

Oliveira v. Amoco Oil Co., 311 Ill.App.3d 886, 726 N.E.2d at 61. Like the gasoline 

purchasers in Oliveira, plaintiffs here purchased insurance, received estimates, and allegedly 

were harmed “outside Illinois” and have “no contact with Illinois.” Id. 

Plaintiffs persuaded the circuit court that ICFA could be applied nationwide because 

State Farm’s policy favoring the use of non-OEM parts “emanated” from Bloomington. See 

A. 46. 52/ But that view ignores ICFA’s limitation to transactions that “affect[]” the people 

51/ 

See Oppenheimer & Co. v. Staley Commodities Int’l, Inc., 1989 WL 6556, *2 (N.D. 

Ill. 1989); Continental X-Ray Corp. v. XRE Corp., 1995 WL 599064, *3 (N.D. Ill. 1995); 

Endo v. Albertine, 1995 WL 170030, *6 (N.D. Ill. 1995); Swartz v. Schaub, 818 F. Supp. 

1214, 1214 (N.D. Ill. 1993); Seaboard Seed Co. v. Bemis Co., 632 F. Supp. 1133, 1140 (N.D. 

Ill. 1986), all of which hold that non-Illinois residents may not sue under ICFA. See also 

Tylka v. Gerber Prods. Co., 182 F.R.D. 573 (N.D. Ill. 1998) (out-of-state residents could 

bring an ICFA claim only if they purchased allegedly misrepresented product in Illinois); 

Nepomoceno v. Knights of Columbus, 1999 WL 66570, *16 (N.D. Ill. 1999) (same); VPHI, 

Inc. v. National Educ. Training Group, Inc., 1995 WL 51405, *2 (N.D. Ill. 1995) (refusing 

to apply ICFA to “conduct occurring wholly outside Illinois” even though contract provided 

that it was to be construed in accordance with Illinois law). 

52/ 

In concluding that it could apply ICFA nationwide, the circuit court relied on Martin 

v. Heinold Commodities, Inc., 117 Ill.2d 67 (1987), and Gordon v. Boden, 224 Ill.App.3d 

195 (1st Dist. 1991). A. 45. As the Fourth District explained in Oliveira, however, Heinold 

is inapposite because, among other things, the contracts at issue in that case specified that 

any litigation would be conducted in Illinois under Illinois law. See 311 Ill.App.3d 886, 726 

N.E.2d at 60. Gordon is also beside the point because the court in that case did not decide 

the choice of law issue, but rather stated only that Illinois law could be applied to the class 

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of Illinois. Not surprisingly, state and federal courts alike have emphatically rejected the 

precise argument accepted here. In Oliveira, for example, the plaintiff argued that ICFA 

applied nationwide because “the idea for the deceptive advertising campaign originated in 

Illinois where defendant had its corporate headquarters.” Oliveira, 311 Ill.App.3d 886, 726 

N.E.2d at 61. The Fourth District soundly rejected that argument, explaining: 

[T]he suggestion [that] defendant’s fraud scheme “emanated” from employees of 

defendant in Illinois does not constitute trade or commerce affecting Illinois 

consumers. The Act does not seek to punish evil thoughts but actual deceptive acts 

and practices. 

Id. Accord Rohlfing v. Manor Care, Inc., 172 F.R.D. 330, 340 & n.10 (N.D. Ill. 1997) 

(“where the only connection with Illinois is the headquarters of one defendant, . . . the ICFA 

does not apply to the claims of the non-Illinois plaintiffs”; ICFA does not apply to claims 

by non-Illinois residents “merely because a scheme ‘emanated’ from the minds of persons 

in Illinois”); Hastings v. Fidelity Mortgage Decisions Corp., 984 F. Supp. 600, 615 (N.D. 

Ill. 1997); Peters v. Northern Trust Co., 1999 WL 515481, at *14 (N.D. Ill. 1999). 

Plaintiffs’ theory also is inconsistent with the long-established proposition that 

corporations “do not carry with them” their home state’s law “when they go to other 

jurisdictions to do business.” Warren v. First Nat’l Bank, 149 Ill. 9, 27 (1893). This 

principle has particular force in the context of insurance transactions because “the various 

States have enacted laws relative to the licensing of foreign insurance companies to transact 

business therein, and as a matter of public policy such companies under such circumstances, 

having authorized agents to solicit business, must be held to transact such business under the 

members’ claims if they had sufficient contacts with Illinois. 

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laws of the State where the policy is sold.” Hartliep Transit Co. v. Central Mut. Ins. Co., 

288 Ill.App. 140, 144 (2d Dist. 1936) (applying Iowa law to claim against Illinois insurer). 

Finally, the circuit court’s expansive reading of ICFA flies in the face of interstate 

comity. See Schoeberlein v. Purdue Univ., 129 Ill.2d 372, 378 (1989) (noting importance 

of “[i]nterstate comity” to “encourage amiable and respectful relations among individual 

States”). To read ICFA to apply to the extraterritorial transactions of Illinois companies is 

to claim for Illinois a sovereign power that Illinois would deny its fellow states: under the 

circuit court’s reading of ICFA, the law of another state will not control what its companies 

do here or what Illinois-headquartered companies do there. The Illinois General Assembly 

could not have intended such a result when it enacted ICFA to protect the “people of this 

State.” 

Accordingly, for all of the foregoing reasons, this Court should read ICFA the way 

its drafters wrote it: to apply to local transactions, but not to out-of-state transactions. 

2. Illinois’ Choice-Of-Law Rules Preclude Applying ICFA 

Nationwide. 

Even if ICFA could be applied to out-of-state transactions, Illinois’ choice-of-law 

rules require that it not be applied when, as here, another state has a greater interest in 

regulating those transactions. The Illinois Supreme Court has held that, when the conflicting 

laws of two or more states could potentially apply to the same transaction, “the local law of 

the State where the injury occurred should determine the rights and liabilities of the parties, 

unless [another state] has a more significant relationship with the occurrence and with the 

parties.” Ingersoll v. Klein, 46 Ill.2d 42, 45 (1970). 

In the context of automobile insurance, the Illinois courts follow the Restatement rule 

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and apply “the law of the state where the car was intended to be principally located” unless, 

for some reason, another state “has a more significant relationship to the transaction” in 

question. Western States Ins. Co. v. Zschau, 298 Ill.App.3d 214, 223 (2d Dist. 1998); Allen 

v. State Farm Mut. Auto. Ins. Co., 214 Ill.App.3d 729, 738 (1st Dist. 1991). See also 

RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 193 and cmt b (1971). 

Here, it cannot plausibly be said that Illinois — whose only “contact” with the vast 

majority of out-of state class members is its location as State Farm’s headquarters — has a 

“more significant relationship” to those class members than the states in which they reside. 

Consider, for example, Michael Avery, whose name supplies the caption for this case. Mr. 

Avery lives in Louisiana. R. 6172. He bought his State Farm policy from an agent in 

Louisiana. R. 6176. His policy form was approved by the Louisiana Insurance 

Commissioner. La. Rev. Stat. Ann. § 22:620(A)(1). He took his damaged car to a bodyshop 

in Louisiana. R. 6187. An adjuster from State Farm’s Louisiana office wrote an estimate 

for non-OEM parts containing a disclosure required by the Louisiana legislature. R. 6181- 

82; PX 1309; La. Rev. Stat. Ann. § 51:2424. Avery complained to his agent and an adjuster 

in Louisiana. R. 6188-90. He ultimately paid for OEM parts in Louisiana. R. 6191. Even 

if Illinois could plausibly claim some contact with the transaction about which Mr. Avery 

complains, it cannot claim a more significant relationship than Louisiana. The same is true 

for the millions of class members whose cars are garaged outside Illinois and whose policies 

were issued and claims were adjusted outside Illinois. 

Given the obviously superior interest of other states in applying their laws to 

transactions within their borders, the circuit court should not have applied ICFA nationwide. 

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This Court should follow the weight of Illinois authority and reverse. See, e.g., Oliveira, 311 

Ill.App.3d 886, 726 N.E.2d at 61 (“Illinois has no authority to regulate out-of-state 

transactions affecting non-Illinois citizens . . . and has no interest in doing so”); Jones v. 

Searle Labs., 93 Ill.2d 366, 374-75, 377 (1982) (British law applies to claims by British 

plaintiffs injured in Britain against defendant with an Illinois headquarters because Britain 

has more significant contacts, even if some tortious conduct occurred in Illinois); Jones v. 

State Farm, 289 Ill.App.3d at 918 (Ohio law applies to action by Ohio plaintiff on State 

Farm automobile insurance policy). 

3. Applying ICFA To Transactions In 47 Other States Is 

Unconstitutional. 

The circuit court’s application of ICFA to millions of out-of-state insurance 

transactions is also patently unconstitutional. As demonstrated below, in a wide range of 

contexts and under various constitutional provisions (including the federal Due Process, Full 

Faith and Credit, and Commerce Clauses), the U.S. Supreme Court has consistently rejected 

state efforts to apply local law to transactions that occurred entirely in other states. The fact 

that State Farm is headquartered in Illinois in no way justifies the circuit court’s deviation 

from this deeply entrenched principle of American constitutional law. 

a. The Application Of Illinois Law To Insurance Transactions 

Occurring Entirely In Other States Violates The Commerce 

Clause And Impermissibly Intrudes On The Sovereignty Of 

Those Other States. 

The U.S. Constitution contemplates that all 50 states are sovereigns of “equal 

dignity,” with distinct spheres of authority. Bibb v. Navajo Freight Lines, Inc., 359 U.S. 

520, 529 (1959). Accordingly, invoking both the Commerce Clause and principles of state 

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sovereignty embodied in the Constitution as a whole, the Supreme Court has repeatedly 

rejected states’ attempts to “control conduct beyond the boundaries of the State” and regulate 

“commercial activity occurring wholly outside” their borders. Healy v. Beer Inst., 491 U.S. 

324, 336-37 (1989); Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 

U.S. 573, 582-83 (1986) (rejecting New York’s attempt to “project its legislation” into other 

states). 

The Supreme Court’s most recent case on the subject — BMW of N. Am., Inc. v. 

Gore, 517 U.S. 559 (1996) — is controlling here. In BMW, the defendant automobile 

distributor had a policy of not disclosing post-manufacturing repairs it had made to vehicles 

if the cost of the repairs was less than 3% of the vehicle’s suggested retail price. Id. at 563- 

64. The 3% threshold comported with the statutes and regulations of every state that had 

affirmatively addressed the subject. Id. at 565. The plaintiff, an Alabama consumer, 

brought suit under Alabama’s general fraud law, and urged the jury to punish BMW $4,000 

for each of the roughly 1,000 vehicles it had sold nationwide without disclosure of repairs. 

The jury agreed, returning a punitive award of $4 million. Id. at 564-65. In reviewing the 

punitive award, the Supreme Court held that an Alabama jury could not punish the defendant 

under Alabama law for transactions that occurred outside of Alabama. The Court explained: 

[B]y attempting to alter BMW’s nationwide policy, Alabama would be infringing on 

the policy choices of other States. . . . Alabama may insist that BMW adhere to a 

particular disclosure policy in that State. Alabama does not have the power, 

however, to punish BMW for conduct that was lawful where it occurred and that had 

no impact on Alabama or its residents. 

Id. at 572-73 (emphasis added). BMW is dispositive here. Just as Alabama was not entitled 

to apply its fraud law nationwide to punish BMW for transactions that occurred entirely in 

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other states, Illinois cannot apply its consumer fraud statute to regulate State Farm’s 

specification of non-OEM parts in 47 other states and the District of Columbia. 

Indeed, the prohibition against extraterritorial regulation applies with even greater 

force in the context of insurance transactions, because in enacting the McCarran-Ferguson 

Act Congress expressly left insurance regulation to the discretion of each of the “several 

States.” 15 U.S.C. §§ 1011, 1012. As the Supreme Court has observed, “[i]t is clear [from 

the legislative history of the Act] that Congress viewed state regulation of insurance solely 

in terms of regulation by the law of the State where occurred the activity sought to be 

regulated. There was no indication of any thought that a State could regulate activities 

carried on beyond its own borders.” FTC v. Travelers Health Ass’n, 362 U.S. 293, 300 

(1960) (emphasis added). In fact, even before enactment of the McCarran-Ferguson Act, the 

Supreme Court had repeatedly held that states may not apply their own insurance statutes 

to insurance policies that were entered into in other states. See, e.g., Aetna Life Ins. Co. v. 

Dunken, 266 U.S. 389, 399 (1924) (Texas statute cannot govern Tennessee insurance 

policy); New York Life Ins. Co. v. Head, 234 U.S. 149, 161 (1914) (Missouri statute cannot 

govern New York insurance policy). Cf. Robertson v. California, 328 U.S. 440, 459-61 

(1946) (holding that California has strong interest in regulating local activities of foreign 

insurer, and rejecting extraterritoriality challenge because California had not tried to regulate 

the insurer’s conduct outside California). 

Notwithstanding this settled law, plaintiffs convinced the circuit court to assure 

“uniformity of treatment” for a “classwide practice” by applying ICFA to all class members’ 

claims. C. 17051. But, as the Supreme Court made clear in BMW, no state has the power 

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to assure nationwide “uniformity.” 517 U.S. at 571. 53/ That prohibition applies to all states, 

including the state in which the defendant is headquartered. Under the Commerce Clause, 

Illinois is forbidden to dictate how business should be conducted in other states and cannot 

impose restraints, even on its own citizens, that would needlessly restrict commerce in those 

other states. See Edgar v. MITE Corp., 457 U.S. 624, 640-46 (1982) (holding that Illinois’ 

anti-takeover statute, which interfered with the offeror’s tender for shares held by non- 

Illinois residents, violated Commerce Clause even though it was being applied to a tender 

offer for an Illinois corporation). 

b. The Application Of Illinois Law To Transactions That Occurred 

Entirely In Other States Violates The Federal Due Process And 

Full Faith And Credit Clauses. 

The Supreme Court has made clear that the federal Due Process and Full Faith and 

Credit Clauses forbid a state from applying its law to a transaction absent “significant 

contact or significant aggregation of contacts, creating state interests, with the parties and 

the occurrence or transaction.” Allstate Ins. Co. v. Hague, 449 U.S. 302, 308 (1981) 

(plurality opinion). If the state has only “one nonsignificant forum contact,” application of 

its law is unconstitutional. Id. at 309. 54/ Moreover, due process prohibits application of a 

53/ 

Plaintiffs’ desire for “uniformity” rings particularly hollow in the insurance context, 

because Congress has expressly stated that insurance regulation should not be uniform. See 

Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 431 & n.39 (1946) (when Congress enacted 

McCarran-Ferguson Act, it eschewed “uniformity of regulation” for insurance by leaving 

regulation to each state). 

54/ 

The Hague case concerned whether the law of Wisconsin (place of injury) or 

Minnesota (plaintiff’s domicile) governed interpretation of an Allstate automobile insurance 

policy. See 449 U.S. at 305-06. Even though Allstate is headquartered in Illinois, no Justice 

of the Supreme Court suggested that Illinois law should apply. 

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state’s law when it is not within the “expectation of the parties” at the time they enter into 

the transaction at issue. Shutts, 472 U.S. at 822. 

The Supreme Court’s decision in Shutts is controlling. Shutts was a class action filed 

in Kansas on behalf of residents of all 50 states against a lessee of oil and gas properties 

located in 11 states. In an effort to facilitate adjudication of the case on a classwide basis, 

the trial court applied Kansas law to all class members’ claims. Noting that “[t]here is no 

indication that when the leases involving land and royalty owners outside of Kansas were 

executed, the parties had any idea that Kansas law would control,” the Court held that the 

application of Kansas law to claims that had nothing to do with Kansas was “sufficiently 

arbitrary and unfair as to exceed constitutional limits.” 472 U.S. at 822. The Court 

emphasized that “Kansas ‘may not abrogate the rights of parties beyond its borders having 

no relation to anything done or to be done within them.’” Id. (quoting Home Ins. Co. v. Dick, 

281 U.S. 397, 410 (1930)). It concluded that these “constitutional limitations . . . must be 

respected even in a nationwide class action.” Id. at 823. 

The circuit court’s decision to apply ICFA to the claims of millions of non-Illinois 

class members directly conflicts with Shutts. Just as Kansas had no stake in the outcome of 

claims centered entirely in other states, Illinois has no legitimate interest in regulating State 

Farm’s specification of non-OEM parts in other states pursuant to policy language that was 

reviewed and approved by insurance regulators in those states. For Illinois to apply its law 

under such circumstances squarely violates the Full Faith and Credit Clause. 

Furthermore, just as neither Phillips nor the non-Kansan class members could have 

anticipated that Kansas law would apply to their disputes, neither State Farm nor out-of-state 

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class members reasonably could have expected that Illinois consumer fraud law would 

govern any disputes between them. After all, the claim of a typical member of this class 

involves a repair in, for example, Hawaii to a Hawaii resident’s car pursuant to an insurance 

policy that was approved by Hawaii’s insurance commissioner. The circuit court’s 

application of Illinois law to such a claim constitutes adjudication by ambush. There can be 

no serious doubt that, if an individual claim of this sort had been brought in Hawaii (or even 

in Illinois), the court would have applied Hawaii law. 55/ Under these circumstances, it can 

only be deemed “arbitrary and unfair” and a gross violation of due process for an Illinois 

court to apply Illinois law to the claims of non-resident class members merely because it 

would facilitate litigation of the case as a class action. 

The fact that State Farm is headquartered in Illinois changes nothing. Numerous 

courts have held that application of the law of the defendant’s domicile to transactions that 

occurred entirely in other states violates the Due Process and Full Faith and Credit Clauses. 

See, e.g., Poe v. Sears, Roebuck & Co., 1998 WL 113561, at *4 (N.D. Ga. 1998) (under 

Shutts, applying the law of the State in which the defendant is headquartered “would not pass 

constitutional muster”); Ford Bronco II Litig., 177 F.R.D. at 371 (under Shutts, Michigan 

law may not be applied in nationwide class action even though the defendant is 

55/ 

See Okada v. MGIC Indem. Corp., 823 F.2d 276, 280 (9th Cir. 1986) (“Hawaii courts 

apply Hawaii state law when the acts covered by the policy occur in Hawaii, the insureds are 

Hawaii citizens, and the insurance company is not a Hawaii citizen.”); see also Eagle-Picher 

Indus. v. Liberty Mut. Ins. Co., 829 F.2d 227, 248 (1st Cir. 1987) (applying Ohio law where 

policy was issued in Ohio by Illinois-based insurer to Ohio-based company to cover risks 

arising in Ohio); Northwestern Mut. Life Ins. Co. v. Wender, 940 F. Supp. 62, 66-67 

(S.D.N.Y. 1996) (New York law applies when policy is issued in New York notwithstanding 

fact that insurer is incorporated in Wisconsin). 

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headquartered in Michigan); Endo, 1995 WL 170030, at *5 (fact that Illinois is defendant’s 

primary place of business is not adequate under Shutts to justify applying Illinois law to 

claims of out-of-state class members); Russo v. Massachusetts Mut. Life Ins. Co., 680 

N.Y.S.2d 916, 919 (Sup. Ct. 1998) (“[p]rinciples of comity and federalism, as well as the 

implications of the Due Process Clause and the Full Faith and Credit Clause, militate against 

the plaintiffs’ proposal to impose Massachusetts law [the law of the defendant’s domicile] 

upon every claim of each class member”); see also Masonite Siding Litig., 170 F.R.D. at 423 

(under applicable choice-of-law principles, the fact that defendant’s primary place of 

business is in Illinois does not justify applying Illinois law to the claims of all members of 

a 50-state class); Duvall v. TRW, Inc., 578 N.E.2d 556, 559 (Ohio App. 1991) (“the fact that 

TRW is incorporated and headquartered in Ohio” is “an insufficient basis for applying Ohio 

law to these potential out-of-state class members”). 

These cases are plainly correct. Under the Full Faith and Credit Clause, Illinois may 

not apply its law to claims or cases in which it has no legitimate interest, and Illinois cannot 

claim such an interest with respect to insurance transactions conducted outside Illinois under 

the regulatory authority of other states simply because the defendant happens to be 

domiciled in Illinois. See Shutts, 472 U.S. at 821-822. Nor could nationwide application of 

Illinois law be said to be within “the expectation of the parties,” which the Supreme Court 

has indicated is “an important element” of the due process analysis. Id. at 822. As explained 

above, any dispute between State Farm and an out-of-state policyholder regarding a claim 

adjusted in that policyholder’s state of residence has invariably been governed by the law 

of that state. That State Farm is headquartered in Illinois would not lead anyone to believe 

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that a disputed claim would be resolved under Illinois law, any more than one would expect 

a court to apply Massachusetts law when a Massachusetts-based insurer adjusts the claim 

of an Illinois policyholder in Illinois. 

B. The ICFA Judgment Should Be Reversed On The Merits. 

If the Court vacates the breach of contract judgment, it should automatically vacate 

the ICFA judgment as well. The circuit court made clear that, in resolving factual issues 

raised by the ICFA claim — including issues concerning the quality of non-OEM parts — 

it would follow the jury’s verdict on the contract claim. R. 2474. Because the contract 

judgment does not provide a basis for drawing universal conclusions about the quality of 

non-OEM parts, the ICFA judgment cannot stand. But there are a number of other reasons 

as well why the ICFA judgment should be reversed and the ICFA class decertified. 

Moreover, because plaintiffs failed to prove that State Farm engaged in any deception in 

violation of the Act, judgment should be entered for State Farm. 56/ 

1. The Court Applied The Wrong Burden Of Proof. 

The circuit court erroneously applied a “preponderance of the evidence” standard to 

plaintiffs’ ICFA claims, despite plaintiffs’ concession in their proposed judgment, C. 30170, 

and this Court’s ruling that the proper standard is “clear and convincing evidence.” General 

Motors Acceptance Corp. v. Grissom, 150 Ill.App.3d 62, 65 (5th Dist. 1986). The court did 

not offer any explanation for its departure from controlling authority. Nor is there any basis 

56/ 

The circuit court’s legal determinations, including its determination of the standard 

of proof, are reviewed de novo, see Lucas, 175 Ill.2d at 171, and its factual findings are 

reviewed to determine whether they are against the manifest weight of the evidence, see 

Cornstubble v. Ford Motor Co., 178 Ill.App.3d 20, 24 (5th Dist. 1988). 

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for this Court to alter that authority now. The First and Second Districts agree that plaintiffs 

must prove ICFA violations by “clear and convincing” evidence. See Lidecker v. Kendall 

College, 194 Ill.App.3d 309, 314 (1st Dist. 1990); Munjal v. Baird & Warner, Inc., 138 

Ill.App.3d 172, 183 (2d Dist. 1985). 57/ 

For decades, the Illinois Supreme Court has required that common law fraud claims 

be proven by “clear and convincing evidence” to ensure that liability is not based on mere 

suspicions of dishonesty. See, e.g., McKennan v. Mickelberry, 242 Ill. 117, 134 (1909). The 

rationale for applying the “clear and convincing” standard in common law fraud cases 

applies fully to statutory fraud. ICFA expands the definition of fraud and streamlines the 

elements, but it remains, as its name confirms, about fraud, and therefore triggers “[t]he 

general rule of American law, long recognized as equally true both at law and in equity” that 

fraud is “not to be presumed,” and must be “clearly proven.” 9 STUART M. SPEISER ET AL., 

THE AMERICAN LAW OF TORTS § 32:103, at 443-45 (1992). Indeed, the Illinois Supreme 

Court has already recognized that the procedural safeguards that protect defendants in 

common law fraud cases apply to ICFA, holding that “a complaint alleging a violation of 

consumer fraud must be pled with the same particularity and specificity as that required 

under common law fraud.” Connick, 174 Ill.2d at 501. There is thus every reason to believe 

that, when presented with the opportunity, the Illinois Supreme Court will agree with this 

Court and hold that ICFA claims must be proven by clear and convincing evidence. 58/ 

The Third District is alone in reading ICFA to permit proof by a “preponderance of 

the evidence.” Malooley v. Alice, 251 Ill.App.3d 51, 56 (3d Dist. 1993). 

57/ 

58/ 

In addition, the Illinois Supreme Court has consistently held that the “clear and 

convincing” standard must be applied to claims for the imposition of a constructive trust, 

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2. The Circuit Court Improperly Excused Plaintiffs From Proving 

Proximate Cause. 

ICFA requires private litigants to prove not only a deceptive act or omission but also 

a causal link between the deception and actual damages suffered by the plaintiff. See 815 

ILCS 505/10a; Connick, 174 Ill.2d at 501; Zekman, 182 Ill.2d at 374-76. Here, there was 

no evidence that the representations and omissions identified by the circuit court proximately 

caused injury to any of the class members. On the contrary, the evidence showed that none 

of the individual class representatives had been deceived about the quality of non-OEM 

parts. See Part I(B)(2), supra. By holding State Farm liable under ICFA without requiring 

plaintiffs to prove any causal relationship whatsoever between the alleged deception and 

actual harm to any member of the class — let alone the entire class — the circuit court once 

again altered the substantive law in order to enable plaintiffs to proceed on a classwide basis. 

That decision, in and of itself, requires reversal of the ICFA judgment and decertification 

of the ICFA class. 

3. The Circuit Court’s Finding That State Farm Violated ICFA 

Was Against The Manifest Weight Of The Evidence, Requiring 

The Entry Of Judgment In Favor Of State Farm. 

Throughout this case plaintiffs equated breach of contract with consumer fraud. 

Their complaint alleged that State Farm’s fraudulent “practice” was installing “inferior” 

parts despite having “promised” to use “like kind and quality” parts. C. 13410. Likewise, 

in opposing summary judgment, plaintiffs identified the alleged fraudulent misrepresentation 

as “State Farm’s promis[e] in the policy to restore Plaintiffs’ vehicles to pre-loss condition 

like the claim for “disgorgement” damages here. See Ray v. Winter, 67 Ill.2d 296, 303 

(1977). 

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y using parts of like kind and quality.” C. 19053. As plaintiffs’ witness Robert Hunter (the 

“documents guy”) put it in summarizing plaintiffs’ consumer fraud theory: “If you are going 

to breach your contract, I think you need to warn people.” R. 6927. 

The circuit court accepted that view, holding that State Farm violated ICFA because 

it “did nothing to advise [policyholders] of the inferiority of the parts.” A. 11. The court 

evidently felt that, to avoid liability under ICFA, State Farm (and other insurers that 

specified non-OEM parts) would have needed to make disclosures like the following one 

that was proposed by plaintiffs: “Warning, we are about to give you bad parts.” R. 6597. 

But this proposed disclosure completely subsumes contract law into ICFA: a party must 

admit breach to avoid committing fraud. 

Illinois courts have repeatedly rejected the circuit court’s apparent belief that ICFA 

transforms breach of contract into a statutory tort. See, e.g., Zankle v. Queen Anne 

Landscaping, 311 Ill.App.3d 308, 724 N.E.2d 988, 992-93 (2d Dist. 2000); Lake County 

Grading Co. v. Advance Mechanical Contractors, Inc., 275 Ill.App.3d 452, 460 (2d Dist. 

1995); Exchange Nat’l Bank v. Farm Bureau Life Ins. Co., 108 Ill.App.3d 212, 216 (3d Dist. 

1982). Recharacterizing the tort as failure to disclose the breach, rather than the breach 

itself, does not avoid these precedents. Few breaches of contract are ever disclosed, so 

virtually every breach would, under the circuit court’s reasoning, also qualify as fraud. 

ICFA does not countenance such a sweeping displacement of common law contract claims 

in favor of statutory remedies. 

The circuit court’s other grounds for finding liability under ICFA are equally 

wanting. The court concluded that State Farm violated ICFA by failing to disclose “possible 

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safety concerns” involving unidentified non-OEM parts. But failure to disclose a possibility 

of concern is not a sufficient basis for ICFA liability. The law requires disclosure of actual 

known safety problems, not speculative “concerns” that “possibly” may be valid. Cf. 

Collins v. Hyster Co., 174 Ill.App.3d 972, 979 (3d Dist. 1988) (defendant has duty to 

disclose safety defect in product only when it “knows or should know that injury may 

occur”). Otherwise, any non-disclosure could be deemed deceptive: all products, from 

airplanes to toasters, raise “concerns” about safety for any prudent manufacturer or user, but 

few concerns are sufficiently concrete to create a duty to disclose, the breach of which is 

punishable as consumer fraud. 

The record in this case would not support a finding by a preponderance of the 

evidence, much less clear and convincing evidence, that State Farm had actual concerns 

about the safety of parts that it was actually specifying. Despite the fact that there were 

literally millions of non-OEM parts on the road, plaintiffs failed to adduce evidence that any 

person suffered any injury caused by any non-OEM part, much less one specified by State 

Farm. 59/ 

Furthermore, although plaintiffs speculated about safety concerns raised by non- 

OEM hoods, doors and bumpers, such concerns could not possibly support a judgment in 

favor of the large portion of the class who received non-OEM parts — such as plastic 

moldings — that have no safety implications at all. See Kelly, 308 Ill.App.3d at 644. Given 

59/ 

This ground for liability also ignores the undisputed fact that the federal government 

has recalled millions of OEM parts — but no non-OEM parts — due to safety problems. R. 

5431-62, 10800; DX 2002. The circuit court never explained why State Farm may specify 

OEM parts without disclosing possible safety concerns (and why OEM manufactures need 

not disclose these concerns when selling new cars), while the failure to disclose when 

specifying non-OEM parts constitutes fraud. 

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plaintiffs’ failure to identify any class member who actually received a non-OEM part that 

allegedly raised such concerns, there is no basis whatsoever for any finding of liability based 

on a failure to disclose safety concerns. 

The circuit court also found that the term “Quality Replacement Part” was a 

“misleading” description of non-OEM parts. A. 11. But that ruling ignores established law 

holding that vague subjective statements of opinion and puffery are not fraudulent under 

either ICFA or the common law. See, e.g., Breckenridge v. Cambridge Homes, Inc., 246 

Ill.App.3d 810, 823 (2d Dist. 1993) (“puffing” does not violate ICFA); Zimmerman v. 

Northfield Real Estate, Inc., 156 Ill.App.3d 154, 163 (1st Dist. 1986) (“subjective 

description” does not “qualify as a fraudulent misrepresentation of fact”); Spiegel v. Sharp 

Elec. Corp., 125 Ill.App.3d 897, 902 (1st Dist. 1984) (“mere commendation or opinion” is 

not fraud). 

The characterization of a product as “quality” is precisely the kind of subjective 

characterization that Illinois courts have repeatedly held is not actionable. See, e.g., 

Evanston Hosp. v. Crane, 254 Ill.App.3d 435, 443-44 (1st Dist. 1993) (representation that 

hospital care would be high-quality is not fraudulent under ICFA); Breckenridge, 246 

Ill.App.3d at 823 (statements that new home would be of “custom quality” with “expert 

workmanship” did not violate ICFA); Zimmerman, 156 Ill.App.3d at 163 (describing house 

as “magnificent” and “comfortable” is not fraudulent); Spiegel, 125 Ill.App.3d at 902 

(statement that copier would make “picture perfect copies” was not fraudulent). 

The circuit court also found that State Farm “[told] its policyholders, in various 

written documents which were admitted into evidence, that [non-OEM] parts were as good, 

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or better than, OEM parts” and that this statement was deceptive. A. 11. The court did not 

— and could not — identify these “various” documents because none exist during the ICFA 

class period, which began on July 28, 1994. Although the record contains two State Farm 

newsletters describing non-OEM parts as being as good as or better than OEM parts, both 

pre-date the ICFA class period. One was sent in 1990, and the other in 1993. PX 390A, PX 

425A. State Farm provided other, more recent materials to policyholders, but none 

contained similar statements. See, e.g., DX 320; DX 397A; DX 859A. 

By definition, the ICFA class members received their repair estimates on or after July 

28, 1994. There is no proof that any, much less all, of these class members received or knew 

about newsletters published in 1990 and 1993. Moreover, the 1990 newsletter was not even 

sent to policyholders; it went to State Farm agents. R. 6891. Causation is thus doubly 

attenuated: policyholders never received the document, which in any event was sent four 

years before the class period started and seven years before it ended. No amount of 

deference to the circuit court can gloss over such disregard for the basic principles of 

causation embedded in ICFA. Zekman, 182 Ill.2d at 374-76. 

Finally, the circuit court concluded that State Farm violated ICFA by offering 

policyholders a satisfaction Guarantee under which State Farm will repair or replace a non- 

OEM part it specified, free of charge, if the customer is dissatisfied with it. See, e.g., R. 

8464-68; DX 859A. The circuit court concluded that offering this Guarantee was deceptive 

because it “improperly and unfairly placed the burden of securing a quality repair on the 

policyholder, not State Farm.” A. 11. This basis for liability is also utterly untenable. 

At least two states whose residents would no doubt account for a significant 

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percentage of the class (New York and California) require State Farm to warrant the non- 

OEM parts that it specifies. See Cal. Code Regs. tit. 10, § 2695.8(g)(3); N.Y. Comp. Codes 

R. & Regs. tit. 11, § 216.7(b)(5)(vii). State Farm cannot commit fraud by doing what is 

mandated by controlling state law; to hold otherwise is a flagrant violation of due process. 

See BMW, 517 U.S. at 573 & n.19; Bordenkircher v. Hayes, 434 U.S. 357, 363 (1978). 

In addition, the court’s apparent conclusion that consumers would be better off 

without the Guarantee turns consumer protection law on its head. Warranties benefit 

consumers by creating incentives for providers of goods and services to prevent problems 

before they occur (so as to avoid the added expense of paying to replace warranted items), 

and by obligating providers to correct problems after they occur. No rational insurer would 

conclude that, because it warranted parts, it had no burden to monitor quality. To the 

contrary, legislatures frequently mandate warranties to protect consumers from companies 

that might not otherwise have an economic incentive to accommodate consumer interests. 

The circuit court’s finding that State Farm’s Guarantee shifted a “burden” to policyholders 

therefore makes no sense. 

Regardless of whether the Guarantee could provide a defense to a fraud claim, there 

is no way that the mere fact of offering a Guarantee could itself be the basis for a finding of 

fraud. The court’s inexplicable contrary conclusion is wrong as a matter of law. 

4. The Circuit Court’s Finding Of Classwide Fraud Ignores The 

Numerous State Laws That Authorize Specification Of Non- 

OEM Parts And Improperly Punishes State Farm For Conduct 

That Is Legal In Every State. 

Most states have held hearings about non-OEM parts and have considered the same 

generalized testimony about their alleged defects that the circuit court heard. No state has 

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anned the parts, deemed specification of such parts to be fraudulent, or required disclosure 

of “possible safety concerns” or part “inferiority.” Instead, the vast majority of states allow 

specification subject to consent or disclosure, and two states — Massachusetts and Hawaii 

— affirmatively favor the use of non-OEM parts. See page 7, supra. 

The circuit court decided that it knew better than all the state legislatures in America. 

It implicitly assumed that all non-OEM parts are inferior; that consent pursuant to state 

statutes is never valid; that state-mandated disclosures are always deceptive; and that the 

express preferences of Massachusetts and Hawaii for non-OEM parts have no practical 

effect. ICFA has never before been used to arrogate power in this way, and this Court 

should not permit it now. 

Plaintiffs undoubtedly will respond, as they have before, that no state would tolerate 

specification of non-OEM parts that are not of “like kind and quality,” making the circuit 

court’s factual finding of inferiority consistent with the various states’ laws. C. 30964. But 

this twisted reasoning ignores the legislative record. Every state that authorizes use of non- 

OEM parts has concluded — often based on extensive hearings — that at least some 

significant number of non-OEM parts are of like kind and quality; otherwise, the numerous 

statutes authorizing (or affirmatively requiring) the use of non-OEM parts would have been 

meaningless acts. See, e.g., R. 10684-85, 11879-80. 

Thirty-seven states have concluded that consent or specified disclosures are sufficient 

to protect consumers. These states could have required the disclosures that the circuit court 

apparently deemed necessary, but none did. Indeed, the circuit court converted state 

disclosure laws into traps for the unwary, because there is no way to comply without 

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committing fraud: if all non-OEM parts are inferior, then the state-mandated disclosures are 

never accurate. The circuit court had no power to hold that compliance with thirty-seven 

states’ laws is always fraudulent. See BMW, 517 U.S. at 573 & n.19. 60/ 

5. The “Disgorgement” Damages Must Be Vacated Because The 

Circuit Court Erred As A Matter Of Law In Imposing A 

Constructive Trust On State Farm’s “Savings.” 

The ICFA judgment should be reversed for all of the reasons outlined above. But 

there are additional reasons why the award of “disgorgement” damages must be vacated. 

ICFA allows the “court, in its discretion, [to] award actual economic damages or any other 

relief which the court deems proper.” 815 ILCS 505/10a(a). The circuit court acknowledged 

that the ICFA class members had already been fully compensated for their actual economic 

damages through the specification and installation damages awarded by the jury and that 

they could not use ICFA to recover twice. A. 12. Nevertheless, the court inexplicably went 

on to award “disgorgement” damages to the plaintiff class by imposing a “constructive trust” 

on the $130 million it found State Farm had “saved” during the class period by specifying 

non-OEM parts. Id. That decision was wrong as a matter of law. 

Because it is an equitable remedy, the imposition of a constructive trust is 

permissible only in situations where the plaintiff has no adequate remedy at law. See Hill 

v. Names & Addresses, Inc., 212 Ill.App.3d 1065, 1082 (1st Dist. 1991) (“when a plaintiff’s 

60/ 

Punishing conduct authorized by state law also contradicts the policy behind ICFA’s 

safe harbor provision. See 815 ILCS 505/10b(1); Aurora Firefighter’s Credit Union v. 

Harvey, 163 Ill.App.3d 915, 926 (2d Dist. 1987) (§10b reflects “policy against imposing 

greater requirements under the generalized consumer protection legislation than are imposed 

by other statutes which address specific kinds of activities and are administered by a State 

regulatory body”); Weatherman v. Gary-Wheaton Bank, 186 Ill.2d 472, 488-89 (1999); 

Lanier v. Associates Finance, Inc., 114 Ill.2d 1, 17-18 (1986). 

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legal remedy is adequate, the imposition of a constructive trust is erroneous”). In this case, 

the circuit court did not making any findings suggesting that the actual damages already 

awarded to the class were an inadequate remedy for the harm allegedly inflicted on the ICFA 

class. Under those circumstances, the court had no power to invoke an equitable remedy in 

order to provide plaintiffs with additional damages above and beyond their actual damages. 

Indeed, the language of the statute itself makes that clear by giving the court the power to 

award actual damages “or” any other relief it deems proper. 

The disgorgement damages the court awarded must also be vacated because they 

were duplicative of the specification damages awarded by the jury. It is well settled that “a 

plaintiff seeking compensation for an injury under multiple theories of recovery may only 

recover once.” Bragado v. City of Zion, 839 F. Supp. 551, 555 (N.D. Ill. 1993) (citations 

omitted); see also Majcher v. Laurel Motors, Inc., 287 Ill.App.3d 719, 729 (2d Dist. 1997); 

Kipnis v. Meltzer, 253 Ill.App.3d 67, 68 (1st Dist. 1993). That is particularly true when the 

remedy is an equitable one: duplicative damages constitute punishment rather than 

compensation; it is “elementary” that equity abhors a penalty. Grounds v. VanLaningham, 

256 Ill. App. 540, 546-47 (3d Dist. 1930). Yet the court’s award of “disgorgement” damages 

allowed plaintiffs to recover the same “savings” State Farm realized from the specification 

of non-OEM parts twice — once as “specification” damages and once as “disgorgement” 

damages. 61/ 

Indeed, until the judgment was entered, plaintiffs themselves repeatedly 

conceded that they could not recover disgorgement damages if they fully recovered the 

61/ 

The two figures Dr. Mathur offered for State Farm’s “savings” differ because the 

specification damages were based on the 10½-year breach of contract class period, while 

disgorgement damages were based on the 3½-year ICFA class period. R. 7437-38. 

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specification damages they had sought from the jury. R. 2459-60 (stating that “an 

appropriate specification breach of contract damage . . . awarded by a jury would be the 

same as the amount ordered by the Court to be disgorged. But you wouldn’t add the two 

numbers together”) (emphasis added); see also C. 29176; R. 13040. 

Even if the jury had chosen not to award any specification damages, however, it 

would have been an abuse of discretion for the court to impose a constructive trust on State 

Farm’s “savings.” A constructive trust is a remedy used primarily against disloyal 

fiduciaries who have profited from their wrongdoing. The remedy is designed to deter such 

wrongdoing by “removing all temptation” and “extinguish[ing] all possibility of profit 

flowing” from it. Hill, 212 Ill.App.3d at 1082. State Farm, however, never profited from 

the alleged ICFA violation, nor did it have any motive to deceive its policyholders. As a 

mutual company, State Farm serves no constituency other than its policyholders. Any 

“savings” it realizes by specifying non-OEM parts (or taking any other measures to reduce 

repair costs) are necessarily passed on to its policyholders, in the form of reduced premiums, 

increased dividends, or increased reserves to pay claims. R. 9135-36, 10708-09, 11041-44, 

11473-76. Thus, a constructive trust would never be an appropriate remedy in a suit against 

State Farm brought by a group of policyholders. 

Forcing State Farm to “disgorge” $130 million in “savings” it long since passed on 

to its policyholders would serve no equitable purpose. Indeed, it would be affirmatively 

inequitable: it would take money out of current policyholders’ pockets (in the form of higher 

premiums, lower dividends, or reduced reserves) and give it to a smaller group of present 

and former policyholders who happen to be members of the ICFA class. That redistribution 

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of wealth, by its very nature, would not be designed to compensate the ICFA class for any 

actual damages suffered. Instead, it would simply be a windfall to the ICFA class at the 

expense of current policyholders. 

IV. 

The $600 Million Punitive Award Should Be Reversed. 

Without making any specific findings or articulating any reasons for doing so, the 

circuit court imposed an unprecedented $600 million punitive damages award on State Farm. 

That award must be vacated for several reasons. First, it is unconstitutional to punish State 

Farm under Illinois law for transactions that occurred entirely in other states. Second, both 

Illinois law and the federal Due Process Clause preclude imposing punitive damages on 

defendants who lacked fair notice that their conduct was punishable. That principle applies 

here because not a single state has prohibited insurers from specifying non-OEM parts, and 

a majority have either authorized the practice or affirmatively encouraged it. Third, the 

record contains no evidence, much less clear and convincing evidence, that State Farm had 

the kind of “evil motive” necessary to justify the imposition of punitive damages under 

Illinois law. Finally, even if it were somehow permissible to impose some amount of 

punitive damages, the record-smashing $600 million exaction imposed by the circuit court 

is grossly excessive. 62/ 

62/ 

The circuit court’s determination that it could punish State Farm’s nationwide 

conduct under Illinois law is a legal one that is reviewed de novo. See note 50, supra. The 

question whether State Farm had fair notice that its specification of non-OEM parts could 

subject it to punishment is also a legal one that is reviewed de novo. The circuit court’s 

implicit determination that Illinois’ standard for imposing punitive damages had been met 

is reviewed to determine whether it is against the manifest weight of the evidence. 

Cornstubble, 178 Ill.App.3d at 24. The question whether the punitive award is 

unconstitutionally excessive is one of law that is subject to de novo review. Inter Med. 

Supplies, Ltd. v. EBI Med. Sys., Inc., 181 F.3d 446, 464 (3d Cir. 1999); Johansen v. 

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A. It Is Unconstitutional To Punish State Farm Under Illinois Law For 

Transactions That Occurred Entirely Outside Of Illinois. 

The Supreme Court has held in no uncertain terms that the Constitution prohibits one 

state from attempting to punish under its own law transactions that occurred entirely in other 

states. BMW, 517 U.S. at 571-73. The Court explained that principles of state sovereignty 

and comity embodied in the Constitution establish that “no single State [may] impose its 

own policy choice on neighboring States” and that “one State’s power to impose burdens on 

the interstate market . . . is not only subordinate to the federal power over interstate 

commerce, but is also constrained by the need to respect the interests of the other States.” 

Id. at 571. The Court concluded: 

We think it follows from these principles of state sovereignty and comity that a State 

may not impose economic sanctions on violators of its laws with the intent of 

changing the tortfeasors’ lawful conduct in other States. . . . [T]he economic 

penalties that a State such as Alabama inflicts on those who transgress its laws . . . 

must be supported by the State’s interest in protecting its own consumers and its own 

economy. . . . Alabama does not have the power . . . to punish BMW for conduct that 

was lawful where it occurred and that had no impact on Alabama or its residents. 

Id. at 572-73 (emphasis added). 

The present case is a carbon copy of BMW. In BMW, the evidence was that the 

defendant’s nationwide policy comported with the laws of every state that had legislated on 

the subject. So too here: no state prohibits specification of non-OEM parts, and well over 

half the states either authorize or affirmatively encourage the practice. 63/ 

Combustion Eng’g, Inc., 170 F.3d 1320, 1334 (11th Cir. 1999). The question whether the 

punitive damages are excessive under state law is subject to review for abuse of discretion. 

Hough v. Mooningham, 139 Ill.App.3d 1018, 1024 (5th Dist. 1986). 

63/ 

Even assuming that State Farm’s specification of non-OEM parts were wrongful in 

every state in the country (which it was not), that still would not justify allowing an Illinois 

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Notwithstanding this evidence that the use of non-OEM parts is statutorily authorized 

in numerous other states, the circuit court ignored BMW and imposed a massive $600 million 

classwide punishment under Illinois law, and Illinois law alone. Because BMW makes it 

crystal clear that this kind of extraterritorial punishment violates the federal constitution, the 

punitive award must be vacated. 

B. The Punitive Award Violates The Federal Due Process Clause And 

Illinois Law Because State Farm Had No Notice That Specifying Non- 

OEM Parts Was Punishable. 

The Illinois Supreme Court has expressly held that courts may not impose punitive 

damages when the defendant did not have reason to know that its conduct was punishable 

(even if the conduct is later declared to be). Kelsay v. Motorola, Inc., 74 Ill.2d 172, 189 

(1978). As the Court explained, “[t]he assessment of punitive damages has some of the 

same functions as the sanctions of criminal law. The sanctions of criminal law cannot 

constitutionally be imposed when the criminality of the conduct is not capable of being 

known beforehand.” Id. at 188 (internal quotation marks and citation omitted). Similarly, 

the U.S. Supreme Court has made clear that “[e]lementary notions of fairness enshrined in 

our constitutional jurisprudence dictate that a person receive fair notice . . . of the conduct 

circuit court to preempt the prerogatives of all other states by imposing nationwide 

punishment under Illinois law. Continental Trend Resources, Inc. v. OXY USA Inc., 101 

F.3d 634, 637 (10th Cir. 1996) (BMW “prohibit[s] reliance upon inhibiting unlawful conduct 

in other states”); Ace v. Aetna Life Ins. Co., 40 F. Supp.2d 1125, 1133 (D. Alaska 1999) 

(“While the court does not imply that what Aetna did to Ace would be lawful in other states, 

the court reads the BMW case broadly enough to suggest that Alaska must leave some room 

within which the other states can exercise their own interests in defining the precise extent 

of and in deterring wrongful conduct”); Ford Motor Co. v. Ammerman, 705 N.E.2d 539, 561 

(Ind. App. 1999) (rejecting argument that extraterritorial punishment is permissible when 

conduct “is unlawful in every state of the union”). 

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that will subject him to punishment.” BMW, 517 U.S. at 574. 

In Kelsay, the Illinois Supreme Court concluded that the defendant was entitled to 

believe that its conduct was legal because of (1) the absence of any decision holding that its 

conduct was actionable and (2) the presence of decisions in other states suggesting that such 

conduct was lawful. 74 Ill.2d at 189. Those same considerations clearly exist here. Prior 

to the decision here, not one court anywhere, much less in Illinois, had ever held that 

specification of non-OEM parts is a deceptive practice or otherwise constitutes fraud. On the 

other hand, numerous state statutes and regulations either authorize or affirmatively 

encourage the use of non-OEM parts. Accordingly, here, as in Kelsay, “it would be 

extremely unfair to sustain an award against the defendant for punitive damages.” Id. at 189. 

C. There Is No Evidence, Much Less Clear And Convincing Evidence, That 

State Farm Had The “Evil Mind” Necessary To Justify The Imposition 

Of Punitive Damages Under Illinois Law. 

The Illinois Supreme Court has repeatedly expressed its misgivings regarding 

punitive damages, noting that “punitive damages are not favored in the law.” Loitz v. 

Remington Arms Co., 138 Ill.2d 404, 414 (1990); Kelsay, 74 Ill.2d at 188. The Court has 

decried the increased frequency with which punitive damages have been imposed, see Loitz, 

138 Ill.2d at 416, and has expressly advised lower courts to “take caution to see that punitive 

damages are not improperly or unwisely awarded.” Kelsay, 74 Ill.2d at 188. 

Punitive damages “can be awarded only for conduct for which this remedy is 

appropriate — which is to say, conduct involving some element of outrage similar to that 

usually found in crime.” Loitz, 138 Ill.2d at 415. This stringent standard requires evidence 

that the defendant acted “with an evil motive or . . . with reckless indifference to the rights 

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of others.” Id. at 415-16. Violation of ICFA alone does not warrant punitive damages. See 

Malooley, 251 Ill.App.3d at 57-58 (punitive damages inappropriate even though defendant 

violated ICFA). Rather, punitive damages are proper “only if the defendant’s misconduct 

is above and beyond the conduct needed for the basis of the action.” Parsons v. Winter, 142 

Ill.App.3d 354, 361 (1st Dist. 1986). Courts routinely set aside punitive awards when the 

defendant’s conduct, though tortious, was not sufficiently egregious to warrant punishment. 

See, e.g., Loitz, 138 Ill.2d at 427; Kopczick v. Hobart Corp., 308 Ill.App.3d 967, 974-78 (3d 

Dist. 1999); Malooley, 251 Ill.App.3d at 57-58; Overbey v. Illinois Farmers Ins. Co., 170 

Ill.App.3d 594, 605 (2d Dist. 1988). As with liability for the underlying tort, plaintiffs must 

prove liability for punitive damages with clear and convincing evidence, see Grissom, 150 

Ill.App.3d at 65, a standard the circuit court ignored. 

The circuit court made no findings about motive, nor is there any evidence in the 

record — much less clear and convincing evidence — that State Farm acted with an “evil 

motive” or “reckless indifference” to the rights of its policyholders. Loitz, 138 Ill.2d at 415- 

16. The most common motive that punitive damages are designed to punish and deter — 

greed — is obviously absent here, because State Farm passes on “profits” to policyholders 

in the form of lower premiums and dividends. State Farm’s use of non-OEM parts resulted 

in direct cost savings to policyholders of over $360 million during 1987-1997; policyholders 

saved hundreds of millions more during that period because of the enhanced competition 

between non-OEM and OEM parts that State Farm helped foster. Id. Thus, the people that 

plaintiffs accuse State Farm of defrauding were the same people State Farm intended to 

benefit. The circuit court obviously disagreed with State Farm’s view that policyholders in 

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fact benefitted from access to non-OEM parts. But, given the striking absence of evidence 

of any improper motive, the worst that can be said of State Farm’s conduct is that it 

constitutes a well-intentioned mistake, which does not warrant imposition of punitive 

damages. See Kohlmeier v. Shelter Ins. Co., 170 Ill.App.3d 643, 658 (5th Dist. 1988) (an 

insurer’s “error in judgment” cannot justify punitive damages). 

Second, it cannot be “outrageous” to do what state statutes expressly permit. As we 

explained above, most states allow specification of non-OEM parts subject to disclosure 

and/or consent, and two states (Massachusetts and Hawaii) affirmatively encourage use of 

non-OEM parts. Even if State Farm somehow violated ICFA every time it specified a non- 

OEM part in those states, it can hardly have been “evil” for State Farm to take state law at 

face value and specify non-OEM parts subject to the state-mandated disclosures. 

Third, State Farm’s practice of specifying non-OEM parts and providing a subjective 

satisfaction Guarantee was fully consistent with industry practice. Numerous insurers have 

adopted policies encouraging specification of non-OEM parts. When, as here, the 

defendant’s practice comports with industry standards, its conduct cannot be deemed 

sufficiently wrongful to warrant punitive damages. See, e.g., Loitz, 138 Ill.2d at 424-25. 64/ 

Finally, State Farm justifiably relied on the fact that few customers complained about 

non-OEM parts after receiving them. The contracts told policyholders that State Farm might 

64/ 

See also Satcher v. Honda Motor Co., 52 F.3d 1311, 1316-17 (5th Cir. 1995) 

(vacating punitive award in part because defendant’s conduct was consistent with industry 

and government safety standards); Drabik v. Stanley-Bostitch, Inc., 997 F.2d 496, 510 (8th 

Cir. 1993) (“[c]ompliance with industry standard and custom serves to negate conscious 

disregard and to show that the defendant acted with a nonculpable state of mind”); Alley v. 

Gubser Dev. Co., 785 F.2d 849, 856 (10th Cir. 1986) (reversing denial of directed verdict 

on punitive damages where defendant’s conduct was consistent with industry practice). 

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specify non-OEM parts, see DX 1244 at 16; the estimate indicated that State Farm had done 

so; and the Guarantee provided a remedy for people who were dissatisfied with the non- 

OEM parts they received. Although some policyholders expressed skepticism before non- 

OEM parts were put on their cars, virtually none complained afterward to State Farm, to 

insurance regulators, or to consumer advocates. R. 8339, 9442-63. If all non-OEM parts 

were “inferior,” and if using them was outrageous and evil, more consumers undoubtedly 

would have complained. State Farm acted reasonably when it interpreted the lack of 

complaints as confirmation that its policy of saving money for policyholders by specifying 

non-OEM parts was satisfying consumers. R. 10158-59 (specifying non-OEM parts did not 

lower renewal rates). Under no stretch of the imagination did it act with “evil motive.” 

D. The Punitive Award Is Grossly Excessive And Must Be Vacated Entirely 

Or Drastically Reduced. 

The circuit court’s entire explanation for its decision to impose a $600 million 

punitive damages award on State Farm is as follows: 

A court, in determining the amount of a punitive damage award, should consider the 

nature and enormity of the wrong, the defendant’s financial status and the 

defendant’s potential liability in other cases. The court has considered these factors 

and determines that $600,000,000.00 in punitive damages is appropriate. 

A. 13 (citation omitted). The court went on to mention that State Farm could afford to pay 

the award, id., but did not explain why a lesser award would have been too low. Thus, a 

single sentence was all the court deemed necessary to justify the largest punitive damages 

award (by several orders of magnitude) ever levied in Illinois. Even if this Court were to 

conclude that punitive damages may lawfully be imposed in this case, the unprecedented 

$600 million award is grossly excessive in relation to Illinois’ interests in retribution and 

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deterrence and therefore must be vacated entirely or, at minimum, drastically reduced. 

Punitive damages “are not intended to act as a windfall for the party to whom the 

punitive damages are awarded,” Malooley, 251 Ill.App.3d at 57-58; rather, they “are 

intended to punish and deter,” Black v. Iovino, 219 Ill.App.3d 378, 393 (1st Dist. 1991). 

While deterrence and retribution are legitimate interests, courts will not uncritically uphold 

large punitive awards on the mere assertion that the amount awarded furthered those 

interests. Rather, Illinois courts will deem a punitive award excessive “when it is so large 

that it no longer serves those purposes.” Hazelwood v. Illinois C.G.R.R., 114 Ill.App.3d 703, 

711 (4th Dist. 1983); see also TXO Prod. Corp. v. Alliance Resources Corp., 509 U.S. 443, 

456 (1993) (plurality opinion) (rejecting notion that “any award that would serve the 

legitimate state interest in deterring or punishing wrongful conduct, no matter how large, 

would be acceptable”). 

Similarly, an award greater than necessary to deter future misconduct violates the 

federal Due Process Clause. BMW, 517 U.S. at 584. Thus, courts must consider “whether 

less drastic remedies could be expected to achieve” the state’s legitimate goals. Id. The 

$600 million exaction here is far greater than necessary to serve Illinois’ interest in 

punishment and deterrence. 

First, the $585 million in total compensatory and disgorgement damages (which are 

themselves duplicative and therefore punitive) more than fully achieve whatever interest in 

punishment and deterrence Illinois could have, rendering a substantial punitive award 

unnecessary. As a number of courts around the country have recognized, compensatory 

damages have a significant deterrent effect. See Memphis Community Sch. Dist. v. Stachura, 

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477 U.S. 299, 307 (1986) (“[d]eterrence . . . operates through the mechanism of damages 

that are compensatory”) (emphasis omitted). 65/ This case confirms the deterrent power of 

compensatory damages: State Farm announced shortly after the jury verdict — but before 

the court imposed punitive damages — that it would no longer specify non-OEM parts. 

Second, both Illinois law and the federal Due Process Clause require punitive 

damages to be proportionate to the degree of reprehensibility of the defendant’s conduct. 

See Hazelwood, 114 Ill.App.3d at 712-713; Black, 219 Ill.App.3d at 394; BMW, 517 U.S. 

at 575-76. While all acts justifying punitive damages must by definition merit punishment, 

“some of those acts are clearly more reprehensible than others” and “[t]he egregiousness of 

the act should be reflected in the amount of the award.” Hazelwood, 114 Ill.App.3d at 712. 

The Supreme Court has characterized the degree of reprehensibility of the defendant’s 

actions as “[p]erhaps the most important indicium of the reasonableness of a punitive 

damages award.” BMW, 517 U.S. at 575. 

By any measure, this case falls on the bottom end of the reprehensibility spectrum. 

As in BMW, the conduct here was non-violent and entailed solely economic harm. BMW, 

65/ 

See also Inter Med. Supplies, 181 F.3d at 467-69 (observing that “high, easily 

calculable compensatory damages may more appropriately be accompanied by a lower 

punitive damages ratio,” and reducing $100 million punitive award to $1 million where 

compensatory damages were $48 million); Beliz v. W.H. McLeod & Sons Packing Co., 765 

F.2d 1317, 1332 (5th Cir. 1985) (“[d]eterrent effect may be achieved without awarding 

exemplary damages” if compensatory damages award is sufficiently large); Rosado v. 

Santiago, 562 F.2d 114, 121 (1st Cir. 1977) (in evaluating punitive damages, court should 

consider whether the “actual damages would not suffice to deter a defendant’s 

wrongdoing”); Mirkin v. Wasserman, 858 P.2d 568, 583 (Cal. 1993) (actual damages can 

fulfill deterrent functions); Maiorino v. Schering-Plough Corp., 695 A.2d 353, 370 (N.J. 

Super. App. Div. 1997) (large compensatory award “provided significant deterrence”); 

Quick Air Freight, Inc. v. Teamsters Local Union No. 413, 575 N.E.2d 1204, 1217 (Ohio 

App. 1989) (punitive damages unnecessary in light of substantial compensatory award). 

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517 U.S. at 576. This case is not in the same universe as ones in which the defendant 

intended to kill or injure or recklessly disregarded a serious risk of death in order to line its 

own pockets. The $600 million award is far greater than virtually every other punitive 

exaction ever upheld on appeal, including punitive awards in cases involving devastating 

injuries caused by release of toxic chemicals, deliberate contamination of drinking water, 

and deliberate indifference to safety resulting in death. In fact, nationwide, only two punitive 

awards greater than $600 million have ever been upheld on appeal, neither of which 

involved circumstances even remotely similar to the facts of this case. 66/ 

Nor is this case in 

the nature of a boiler room scheme or some other scam to defraud vulnerable people out of 

their life savings. To the contrary, as the support of the consumer advocate and state 

regulator witnesses and amici reflects, the purpose of State Farm’s policy of specifying non- 

OEM parts was to break the OEM monopoly and save money for policyholders. 

Moreover, “it is also significant that there is no evidence that [State Farm] persisted 

in a course of conduct after it had been adjudged unlawful on even one occasion, let alone 

repeated occasions.” BMW, 517 U.S. at 579. This is the first instance in which State Farm’s 

practices relating to non-OEM parts have been ruled unlawful, and, as in BMW, State Farm 

was entitled to rely upon other states’ laws in believing that its conduct was legal. Id. at 577- 

66/ 

In Hilao v. Estate of Marcos, 103 F.3d 767 (9th Cir. 1996), the Ninth Circuit upheld 

a $1.2 billion exaction punishing thousands of human rights abuses (including kidnappings, 

torture, and summary executions) conducted by a foreign tyrant. In Texaco, Inc. v. Pennzoil 

Co., 729 S.W.2d 768, 865-66 (Tex. App. 1987), a Texas court approved a $1 billion 

punishment against Texaco for preventing Pennzoil from completing its attempted take-over 

of Getty Oil Company. The decision, which pre-dates the Supreme Court’s holding in BMW, 

relied heavily on the fact that Texaco had caused Pennzoil $7.5 billion in actual harm. Id. 

In the 13 years since Pennzoil was decided, no appellate court, other than in the Marcos 

case, has upheld a punitive award even remotely approaching that sum. 

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78. In fact, as a result of the jury’s verdict, State Farm stopped specifying non-OEM parts 

pending resolution of this appeal. As the Supreme Court held in BMW, such responsiveness 

militates against any conclusion that the defendant is a recalcitrant wrongdoer that will 

respond only to a large punitive award. 517 U.S. at 579 n.31; see also id. at 584-85. Gauged 

by any relevant yardstick, State Farm’s conduct lies at the bottom of the reprehensibility 

spectrum and is patently undeserving of a substantial punitive award, let alone the 

unprecedented $600 million exaction imposed by the circuit court. 

Third, the punitive award is not merely unnecessary and excessive, it is against 

public policy. Excessive punishments, such as this one, threaten to raise consumer prices, 

chill innovation, and deter businesses from engaging in socially advantageous conduct that 

risks litigation. See Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 18 (Tex. 1994) 

(observing that “civil punishment can result in overdeterrence and overcompensation”). 67/ 

This case is a textbook example: after the punitive damages award was entered, other major 

insurers stopped specifying non-OEM parts. Car makers are back on the road to a new 

monopoly in replacement parts. The resulting increase in repair costs and premiums will 

hurt not just State Farm policyholders, but all consumers. To make matters worse, the 

impact is likely to be felt most severely by lower income consumers, who can ill afford 

67/ 

See also Browning-Ferris Indus., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 282 

(1989) (O’Connor, J., concurring in part and dissenting in part) (exemplary exactions that 

are greater than reasonably necessary for punishment or deterrence hurt society by 

discouraging socially desirable activity); Sunstein, Kahneman, & Schkade, Assessing 

Punitive Damages (with Notes on Cognition and Valuation in Law), 107 Yale L.J. 2071, 

2077 & nn.22, 23 (1998) (observing that “a risk of extremely high awards is likely to 

produce excessive caution in risk-averse managers and companies”); Polinsky & Shavell, 

Punitive Damages: An Economic Analysis, 111 Harv. L. Rev. 869, 882-83 & n.29 (1998). 

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either higher premiums or the increase in the cost of parts they purchase at retail. 

Fourth, the gargantuan award in this case would necessarily be paid out of increased 

premiums or a reduction in State Farm’s reserves, which means that State Farm would have 

$600 million less to cover policyholder claims in the event of a large disaster (such as a 

hurricane). Given that State Farm is a mutual company owned by its policyholders, the 

award is little more than a $600 million wealth transfer from all State Farm policyholders 

to those policyholders — and former policyholders — who are members of the class. 

Finally, comparison to other punitive awards in Illinois reveals the manifest 

excessiveness of this award. The $600 million award is 80 times the size of the next largest 

award ever upheld on appeal in Illinois in any type of case. See Pickering v. Owens-Corning 

Fiberglas Corp., 265 Ill.App.3d 806 (5th Dist. 1994) (upholding $7.5 million punitive award 

in personal injury case). Nothing about that decision (or any other) fairly apprised State 

Farm that its non-OEM parts policy could subject it to a multi-million dollar award, much 

less one in the high nine figures. Cf. BMW, 517 U.S. at 572 (due process requires fair notice 

of the severity of the punishment); Proctor v. Davis, 291 Ill.App.3d 265, 287 (1st Dist. 1997) 

(remitting excessive $35 million punitive award to $6.1 million). 

* * * * 

The $600 million award imposed here is truly unprecedented: It serves no deterrent 

purpose, is not tethered to any rational assessment of the reprehensibility of State Farm’s 

conduct, and would be paid by the very people — all State Farm policyholders nationwide 

— whom it is supposed to benefit. Both Illinois and federal law prohibit such irrational and 

excessive punitive exactions; the award must be vacated entirely or drastically reduced. 

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CONCLUSION 

For all of the reasons outlined above, State Farm urges the Court to vacate the 

judgments and order decertification of the class. Alternatively, State Farm requests that the 

Court reverse and grant a new trial on the breach of contract claim and enter judgment in 

State Farm’s favor on the ICFA claim. And even if the Court were to uphold the liability 

determinations, State Farm seeks reversal or a drastic reduction of the punitive, equitable, 

and compensatory damages. 

Respectfully submitted, 

Dated: May 12, 2000 

_______________________________ 

One of the attorneys for State Farm 

Mutual Automobile Insurance Company 

Michele Odorizzi 

Robert H. Shultz, Jr. 

Bradley J. Andreozzi 

HEYL, ROYSTER, VOELKER & 

Allan Erbsen ALLEN 

MAYER, BROWN & PLATT 

103 West Vandalia 

190 South LaSalle Street P.O. Box 467 

Chicago, Illinois 60603 Edwardsville, Illinois 62025 

(312) 782-0600 (618) 656-4646 

William R. Quinlan 

Marci A. Eisenstein 

Gino L. DiVito 

Aphrodite Kokolis 

QUINLAN & CRISHAM, LTD. 

SCHIFF, HARDIN & WAITE 

30 North LaSalle Street 6600 Sears Tower 

Chicago, Illinois 60602 Chicago, Illinois 60606 

(312) 263-0900 (312) 258-5500 

Wm. Kent Brandon 

BRANDON, SCHMIDT, 

GOFFINET & SOLVERSON 

916 West Main Street 

Carbondale, Illinois 62902 

(618) 549-0777 

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