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

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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 -140-
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). -141-
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No. 5-99-0830 IN THE APPELLATE COUR
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Charles Hester Enters. v. Illinois
Page 5 and 6:
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
Page 19 and 20:
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
Page 45 and 46:
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
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to its pre-loss condition.” R. 12
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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
Page 143 and 144: state’s law when it is not within
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 and 158: specification damages they had soug
Page 159 and 160: A. It Is Unconstitutional To Punish
Page 161: that will subject him to punishment
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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