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FedEx Strategy Backfires in Punitive Phase

FedEx Strategy Backfires in Punitive Phase

FedEx Discrimination Case Verdict

The Recorder
By Matthew Hirsch
June 6, 2006

Chart: Top Verdicts in Alameda County

The $61 million judgment against FedEx Corp. awarded June 2 in Alameda County capped off a catastrophe at trial for the worldwide shipping company.

In trial to fend off claims of discrimination and harassment against two drivers of Lebanese descent who claimed a manager subjected them to racist epithets, FedEx bet on joint legal representation.

The company went into the trial with one firm, Seyfarth Shaw, representing it and company manager Stacy Shoun. This, observers say, tied the company’s fate to whether the jury believed the defendants’ claim.

That backfired when the jury awarded $10 million in compensatory damages, twice as much as the plaintiffs had asked for.

At this point, the company sidelined its lawyer and brought in new counsel to, in essence, plead for mercy. That didn’t work either. The jury tacked on $50 million in punitive damages.

“Typically, when you go to a trial with joint representation, the defendant thinks it’s a strong case and they are going to win,” said Nancy Abell, a partner at Paul, Hastings, Janofsky & Walker.

If the trial reaches the punitive phase, Abell said, the damage may have already been done.

“If you can see the result coming or that it could come, you would want each of the parties feeling that it had its counsel figure out the best strategy at the trial phase, not just the damages phase,” she said.

FedEx maintained that the problem wasn’t its legal strategy, but the jury.

“FedEx firmly disagrees with the jury’s verdict,” FedEx spokesman Perry Colosimo said in a statement. “We believe it is excessive, and we will vigorously appeal to a higher court.”

FedEx attorneys declined to discuss the case, and Colosimo wouldn’t talk about the attorneys’ strategy.

Defense attorneys have argued that FedEx has a strong policy against racial and ethnic discrimination and denied that Shoun mistreated the two drivers.

But after the jury found FedEx and Shoun had acted with malice, Seyfarth’s James Nelson withdrew from representing Shoun, and FedEx called in a new trial team to argue the rest of the way.

“Now that the [compensatory] award came down, they started distancing themselves from Stacy Shoun like he was a leper,” said San Francisco attorney Christopher Dolan, who represented the plaintiffs.

That didn’t work, attorney Chris Dolan said. Nor did bringing in a bunch of new lawyers. “The jury walks in and sees a bunch of suits out there,” he said. “I don’t think it helped them.”

The last-minute flood of new lawyers looked like the company hadn’t accepted the jury’s decision and was trying to cut its losses.

The result was the largest single civil rights judgment under California’s Fair Employment and Housing Act and the fourth-largest verdict in Alameda County history.

Still, one lawyer on the defense side came out feeling pretty good.

Howard, Rice, Nemerovski, Canady, Falk & Rabkin’s Kenneth Hausman, who joined the defense last Tuesday as Shoun’s attorney when the defense split, kept his client’s punitive loss to a mere $56, less than it would cost to overnight a box of chocolates and a written apology to both plaintiffs.

Hausman said he was “surprised but relieved” by the verdict, especially since he was given less than two days to prepare for trial, and the compensatory award — including $1 million against Shoun — meant the new lawyer faced a difficult situation.

“It was pretty clear since they had already found malice that they were going to award punitive damages,” he said. “I think we did a great job at keeping the punitive damages at $56 when the jury came back with a $50 million racial discrimination verdict against FedEx.”

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