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

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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. 1<strong>99</strong>9); Johansen v. -136-
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. 1<strong>99</strong>9). 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 -137-
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No. 5-99-0830 IN THE APPELLATE COUR
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Charles Hester Enters. v. Illinois
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In re Fibreboard Corp., 893 F.2d 70
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State v. Piedmont Funding Corp., 38
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Hansberry v. Lee, 311 U.S. 32 (1940
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1. Plaintiffs’ Body Shop Witnesse
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People v. Clayton, 302 Ill.App.3d 2
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VPHI, Inc. v. National Educ. Traini
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Okada v. MGIC Indem. Corp., 823 F.2
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Zekman v. Direct Am. Marketers, Inc
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Malooley v. Alice, 251 Ill.App.3d 5
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NATURE OF THE CASE This is an appea
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STATUTES INVOLVED Relevant portions
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to its “pre-loss condition.” DX
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OEM parts. 5/ At least two states
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paid the difference in cost out of
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epair estimate specified only OEM p
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potential class members whose names
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member’s vehicle other than those
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William Anderton, who had previousl
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categorically inferior and, in fact
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specified on their repair estimates
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Second, plaintiffs sought “instal
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parts] are inferior.” R. 12539 (
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had an adequate remedy at law if St
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loss condition. Instead of requirin
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ARGUMENT I. Class Certification Vio
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members.” Slimack v. Country Life
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of evidence State Farm would be ent
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that are incongruous with the effic
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fenders to its pre-loss condition.
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a result of Allstate’s specificat
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insurance regulators and consumer a
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have been the overwhelming predomin
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some class members and the issue of
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not sooner, that plaintiffs could n
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explained above, class members who
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Even if the court had been right in
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value” of “parts at the time of
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page 7, supra. All of these statute
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(7th Cir. 1995) (decertifying class
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As the circuit court itself recogni
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the same shortcut, arguing — just
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epresentatives who appeared at tria
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— was injured by the alleged dece
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Litig., 182 F.R.D. at 225. Basic fa
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Meineke’s continued financial via
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this decision, plaintiffs were excu
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corresponding OEM part. R. 7169. In
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Mathur’s testimony was particular
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end of the day, Mathur conceded tha
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Zimny, 256 Ill.App.3d 386, 390-91 (
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the jury was focused on the wrong i
Page 107 and 108: to its pre-loss condition.” R. 12
Page 109 and 110: quality of non-OEM parts. See Baltu
Page 111 and 112: which is not surprising because the
Page 113 and 114: In this case, plaintiffs’ experts
Page 115 and 116: Bender could not swear that the non
Page 117 and 118: OEM part construction “had some d
Page 119 and 120: theory, even non-OEM parts that are
Page 121 and 122: of his training or expertise”). P
Page 123 and 124: eflected a policy of “discriminat
Page 125 and 126: “speak up for justice.” R. 1301
Page 127 and 128: 12984-85. The perversion of ostensi
Page 129 and 130: Polywheels company makes both the O
Page 131 and 132: parts — was simply a made-for-lit
Page 133 and 134: In contrast, each of the 47 other s
Page 135 and 136: occurred outside Illinois. 51/ In t
Page 137 and 138: laws of the State where the policy
Page 139 and 140: This Court should follow the weight
Page 141 and 142: other states, Illinois cannot apply
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Page 145 and 146: headquartered in Michigan); Endo, 1
Page 147 and 148: for this Court to alter that author
Page 149 and 150: y using parts of like kind and qual
Page 151 and 152: plaintiffs’ failure to identify a
Page 153 and 154: percentage of the class (New York a
Page 155 and 156: committing fraud: if all non-OEM pa
Page 157: specification damages they had soug
Page 161 and 162: that will subject him to punishment
Page 163 and 164: fact benefitted from access to non-
Page 165 and 166: deterrence and therefore must be va
Page 167 and 168: 517 U.S. at 576. This case is not i
Page 169 and 170: either higher premiums or the incre
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