A landmark $1.6 million jury judgment has been made against Federal Express Corporation for denying a cargo claim in bad faith. The jury awarded Power Standards Lab, a tiny manufacturer of electronic equipment in Emeryville, California, compensatory and punitive damages against FedEx.
In December 2000, Alex McEachern, founder of Power Standards Laboratory, used FedEx to overnight his one-of-a-kind power sensor equipment to a customer in San Diego. He bought $20,000 worth of declared value coverage to protect the product he had worked over two years to produce. The equipment arrived in San Diego severely damaged. McEachern documented the damage and filed a claim with FedEx for $17,450, which FedEx immediately denied.
McEachern attempted for months to get FedEx to pay the claim, and says that a FedEx claims representative told him that he would have to sue. McEachern did just that.
"I suppose FedEx thought nobody would risk the money that's required to sue for just $17,500," said McEachern, who had never filed a lawsuit before. As it turned out, the jury awarded McEachern almost $80,000 in legal fees as part of its verdict, and added $1.5 million in punitive damages.
At trial, a FedEx Claims Manager testified that it was FedEx's Claims Department policy never to respond in writing to written inquiries from customers. And the FedEx Claims Representative assigned to the claim testified that in 20 years in the Claims Department, she had never seen FedEx overturn a denial of a claim in a customer's favour.
Michael Mazzocone, the San Francisco attorney who represented Power Standards Lab, confirmed that in addition to the jury awarding his client approximately $80,000 in attorney's fees, it also awarded $1.5 million in punitive damages, finding that FedEx acted in bad faith and with fraud or oppression in denying the claim.
The landmark verdict is believed to be the first of its kind in California against a cargo company for acting in bad faith in the handling of a cargo claim of a customer, and may open the door to similar consumer lawsuits. "The jury verdict should send a clear message to FedEx and other cargo carriers that bad faith denial of claims is not tolerated in California," Mazzocone said.
"I hope that FedEx gets the message," said McEachern, an internationally recognized expert on power quality and U.S. representative to the International Electrotechnical Commission on power quality measurement. "FedEx does a great job delivering packages, but their Claims Department has room for improvement. Once they get their act together, we hope to start shipping with FedEx again."
This legal blow is likely to be felt particularly hard by FedEx, as the company is still smarting from a $2.3 million verdict against them awarded February 24, 2003, in a civil rights suit filed by a former FedEx employee.
