Litigation

Oregon Court of Appeals remands punitive damages against FedEx

By Lori Bauman

Last week the Oregon Court of Appeals affirmed a jury's verdict that FedEx defrauded one of its independent contractors, but remanded on the ground that $7 million in punitive damages was excessive.  In Wieber v. FedEx Ground Package System, Inc., plaintiffs had an independent contractor agreement with FedEx to pick up and deliver packages in a designated area.  After FedEx terminated the agreement, plaintiffs sued on several theories, including fraud.  The jury found in favor of plaintiffs, awarding compensatory damages of $350,000 and puntive damages of $7 million.

The Court of Appeals first held that a claim for intentional intererence with economic relations was defective as a matter of law and should not have gone to the jury.  Plaintiffs claimed that, by terminating the contract, FedEx interfered with their relationships with customers in the designated territory.  But because only "strangers" to a contract can be liable for interference, and because FedEx was not a stranger but was "inextricably linked" with plaintiffs' relationship with their customers, FedEx could not be liable for tortious interference.

The Court of Appeals then affirmed the fraud claim, based on a false representation by a FedEx representative that plaintiffs would receive advance notice before the contract was terminated.  The amount of punitive damages awarded on that claim was 20 times the actual damages, which is excessive under the Due Process Clause.  The court ordered a new trial on the amount of punitive damages unless plaintiffs agreed to an award of three times compensatory damages.

See our earlier coverage of Oregon case law on punitive damages and the Due Process Clause here.

Full post as published by Northwest Business Litigation Blog on November 05, 2009 (boomark / email).