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Federal judge backs jury award in FedEx-ATA dispute

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FedEx Corp. will have to take its appeal of a $66 million verdict in favor of the defunct Indianapolis airline ATA to a higher court.

Richard Young, chief judge in the U.S. District Court of southern Indiana, said in a Wednesday ruling that he will not overturn the jury's October decision. He denied FedEx's motion for a new trial, writing that "the jury's damages award was rationally based upon the evidence and was not monstrously excessive."

As IBJ reported in its Jan. 17 edition, the jury's verdict seemed to come as a shock to FedEx attorneys, who said it went against the "clear weight of the evidence." The company said in a recent securities filing that it had set aside a $66 million reserve to cover the damages award, but that it would appeal the decision.

Now that FedEx has exhausted its options at the lower court, the next stop is the Seventh Circuit Court of Appeals in Chicago.  

ATA charged in the breach-of-contract suit that FedEx’s unexpected decision in January 2008 to drop it as a military-charter partner forced it into bankruptcy liquidation that spring. ATA had been flying military charters for more than two decades, and it said FedEx was legally obligated to keep it on board through at least September 2009.

The case hinged on a September 2006 letter that described how business was to be divvied up through September 2009 between ATA and another airline that was part of the FedEx military-charter team.

FedEx argued that was not a legal contract because it didn’t address financial terms and other key issues. It noted the legal standard for an enforceable contract is “a meeting of the minds of the parties, in mutual assent to all essential terms.”

In a court filing, FedEx attorneys wrote, “Given the uncontroverted evidence and the relevant law … there is simply no reasonable basis in the record on which the jury could find that an agreement on just one term of FedEx Team membership was an enforceable contract for FedEx Team membership.”

FedEx balked at the size of the jury's award, noting that in fiscal 2007, ATA earned just $2.1 million from its military charter business.

If the $66 million judgment stands, it will go to ATA's creditors, who are still owed millions in the company's Chapter 7 bankruptcy.

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