Utah court not done with firm

0 Comments | Deseret News (Salt Lake City), Apr 8, 2003 | by Jerry D. Spangler Deseret News staff writer

State Farm Insurance may have been given a reprieve by the U.S. Supreme Court, which on Monday overturned a $145 million judgment -- the largest punitive damage award in Utah history -- against the industry giant.

But come this Wednesday, State Farm will be back before the Utah Supreme Court, the same court responsible for earlier reinstating the just-overturned $145 million judgment, for a different case involving similar allegations of illegal and unethical conduct on the part of the company.

Two former in-house State Farm attorneys, Richard K. Spratley and Brett G. Pearce, have sued the company, alleging they were forced out of the company because they would not engage in "wrongful, illegal and unethical conduct," according to the lawsuit filed in 3rd District Court in June 2001.

State Farm has responded that any and all documents or information Spratley and Pearce might have about the company's legal practices are protected under confidential attorney-client privilege. And any public hearing on that evidence would violate that confidence.

Spratley and Pearce were, after all, attorneys employed by State Farm, they point out.

State Farm has asked the Utah Supreme Court to weigh in on whether the memos, notes and other documents that comprise the bulk of the Spratley-Pearce case should be kept out of any trial and out of the public's view. The public hearing, scheduled for 9:30 a.m. at the University of Utah Law School, will not address the evidence, only whether State Farm can keep it secret.

According to the lawsuit, Spratley and Pearce claim they were required to:

"Misrepresent facts and circumstances to other parties in lawsuits and to the judges assigned to cases in litigation."

"Remain silent and otherwise breach their legal and ethical duties to disclose facts and other information."

"Take actions in violation of their legal and ethical duties."

Those were the same kinds of allegations raised by Curtis and Inez Campbell, who sued State Farm after the company refused to settle claims arising from an accident that left one man dead and another permanently disabled. The trial testimony revealed the company had altered accident reports, misled claimants and exposed their clients to unnecessary trials.

In 1996, a Utah jury ordered the company to pay $145 million for "malicious and fraudulent" treatment of one of its customers in the Campbell case. The trial judge reduced the amount of the award, but the Utah Supreme Court reinstated the damages, calling State Farm's actions "malicious and reprehensible."

The two in-house attorneys, now in private practice, claim in court documents that company policies were designed to benefit the company financially, but at the expense of those who paid for insurance coverage.

The Spratley-Pearce case has yet to go to trial, and the evidence to support their allegations has been sealed by court order.

If Spratley and Pearce win their argument, the matter would then be scheduled for another Utah Supreme Court hearing on the merits of the evidence.

E-MAIL: spang@desnews.com