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Eighth District: Bamboozled Diamond Ring Shipper Cannot Sue FedEx for Collecting Bogus Payment Check

A shipper of an expensive ring could expect FedEx to deliver her package without damaging the merchandise and not releasing it to the buyer until payment was provided, but could not hold FedEx liable for picking up a phony check, the Eighth District Court of Appeals ruled.

Sandra Eastman sold a ring to Ashton Roberts for $6,850. In May 2010, Eastman shipped the ring from the FedEx location in Beachwood to a FedEx location in Houston, Texas. Using the priority overnight service, Eastman listed Roberts as the recipient. According to the court, Eastman requested FedEx hold the ring at the Houston location and she contracted to use FedEx’s “Collect on Delivery” (COD) service. In that contract she listed Roberts as the recipient, requiring a secure payment in the form of a cashier’s check to release the ring.

Roberts hired a courier to deliver the cashier’s check and sign for the ring. FedEx gave the courier the ring and sent Eastman the check. Eastman’s bank notified her that the check was fraudulent and in November 2012, she sued FedEx for negligence, breach of contract, and violations of Ohio’s Consumer Sales Practices Act.

FedEx argued that federal Airline Deregulation Act of 1978 barred Eastman from suing FedEx for negligence and violations for the Ohio sales practice law. And it said it was not in breach of the contract because the back page of the “COD airbill” Eastman signed provided that she was “solely responsible for any loss associated with a fraudulent check.” The trial court granted summary judgment to FedEx and Eastman appealed to the Eighth District.

Writing for the court, Judge Mary J. Boyle presented that Congress passed the Airline Deregulation Act to preempt states from undoing federal regulations with laws of their own. The preemption has to relate to issues of “price, route or service of an air carrier” meaning that not all lawsuits related to negligence or sales practices were necessarily forbidden. However, in this situation, Eastman was disputing the delivery service of FedEx and the federal law does not permit citizens to use state courts to sue airlines, including delivery services, for matters related to service, Judge Boyle concluded.

Both sides agreed a breach of contract claim could go before the Ohio courts, and FedEx provided the COD airbill Eastman signed when sending the ring. Eastman argued that FedEx breached its contract by releasing the ring to the courier rather than Roberts. FedEx pointed to the back of the bill, which said it does not offer “restricted-delivery service and may deliver to someone other than the person or entity named as the recipient.”

The court also noted the airbill said payments collected COD are at the shipper’s risk, including all risk of “nonpayment, fraud and forgery.” Boyle wrote that the contract does not make FedEx liable because it gave the ring to the courier, and that Eastman needs to pursue her claims against the buyer, not FedEx.

“FedEx also could have been liable had it not collected a check for the ring, or if it had collected the wrong type of payment or the wrong amount of payment. But none of those things occurred here, FedEx performed as it stated it would in the contract,” Judge Boyle wrote.

Judges Frank D. Celebrezze Jr. and Melody J. Stewart concurred in the decision.

Eastman v. FedEx Corp., 2014-Ohio-4213
Opinion: http://sc.ohio.gov/rod/docs/pdf/8/2014/2014-ohio-4213.pdf
Civil Appeal From: Cuyahoga County
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: September 25, 2014

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