Defense Attorneys Successfully Defeat Class Action Alleging State Law Breach of Contract Claim Because Contract Set Forth Exclusive Remedies in Event of Breach and Class Action Complaint Sought a Different Remedy
Plaintiff filed a one-count nationwide class action in state court against FedEx alleging that it breached the terms of its shipping contract with customers because it charged higher rates for express delivery service but failed to deliver the packages on time. Moody v. Federal Express Corp., ___ N.E.2d ___, 2006 WL 3012854 (Ill.App. October 19, 2006) [Slip Opn., at 2]. Plaintiff paid $41.31 to send a package on January 22, 2002 by “FedEx Priority Overnight, Next Business Morning” expecting the package to be delivered by 8:00 a.m. the following morning; instead, the package was delivered two days later at 9:00 a.m. Id. Defense attorneys moved for summary judgment on the grounds that the relief sought in the class action violated the federal Airline Deregulation Act, 49 U.S.C. § 41713(b)(1), “because it sought a remedy outside the four corners of the contract.” Id. The trial court agreed that the claims were preempted and dismissed the class action; the Illinois Appellate Court affirmed on straight contract grounds without reaching the federal preemption issue.
The appellate court explained that plaintiff’s contract with FedEx provides for two remedies in the event of a late delivery: “(1) actual damages to the shipment as a result of the delay . . . or (2) a full refund of her shipping charges under the FedEx money-back guarantee.” Slip Opn., at 2. Plaintiff did not allege damages to the shipment, and did not seek a refund. Rather, she sought a partial refund of the shipping charge outside the contractual time limit for submitting a claim. Plaintiff argued that the Airline Deregulation Act did not preempt such relief because common law permitted her to recover the “price-difference remedy” that she sought. Id. The trial court concluded that the Airline Deregulation Act preempted plaintiff’s claim because the relief she sought “was not based on the actual terms of [her] contract,” but rather than grant summary judgment the court dismissed the action. The Appellate Court “affirm[ed] the lower court on the basis that the contract between [plaintiff] and FedEx lists exclusive remedies different from the remedy sought by [plaintiff].” Id.
The Appellate Court held as a matter of contract interpretation that the shipping contract between FedEx and plaintiff “establishes that the listed remedies were intended to be exclusive,” Slip Opn., at 3. Under Illinois law, the contract represents “the entire agreement between the parties,” and “exclusive remedy provisions” will be enforced “even when the contract omits the word ‘exclusive,’” id. “An exclusive remedy clause will be enforced unless it violates public policy or something in the social relationship of the parties works against upholding the clause.” Id.
The Appellate Court held that the exclusive remedy provision was fully enforceable, explaining at page 5: “To allow a partial refund so long after notice-of-claim deadlines have lapsed would be to render the limitation of liability and notice requirements meaningless.” Accordingly, the judgment was affirmed.