Apex Compounding Pharmacy LLC v. Best Transportation Services, Inc. et al
Filing
115
OPINION AND ORDER: The Court finds that the Plaintiff is entitled to a verdict in its favor as to Count VI only and to an award of damages in the amount of $800.00. The Court DIRECTS the Clerk of Court to ENTER JUDGMENT in favor of the Plaintiff Apex Compounding Pharmacy LLC and against the Defendant Best Transportation Services, Inc. in the amount of $800.00. Signed by Judge Theresa L Springmann on 3/18/2021. (lhc)
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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
APEX COMPOUNDING
PHARMACY LLC,
Plaintiff,
v.
CAUSE NO.: 2:16-CV-73-TLS
BEST TRANSPORTATION
SERVICES, INC.,
Defendant.
OPINION AND ORDER
Sometime prior to July 17, 2015, the Plaintiff, Apex Compounding Pharmacy LLC,
sought delivery services from the Defendant, Best Transportation Services, Inc. The parties
entered into a contract, under which the Defendant would deliver medications manufactured by
the Plaintiff to its customers in the Chicago metropolitan area. The Plaintiff alleges that on July
17, 2015, it was notified that the Defendant’s delivery person, Katherine Rodriguez, failed to
complete eight deliveries. After this discovery, the Plaintiff sued the Defendant in Indiana state
court. See State Court Compl., ECF No. 3. The Plaintiff’s Complaint asserts breach of contract,
negligence, and respondeat superior claims against the Defendant. The Defendant contends that
Indiana law prohibits all but the Plaintiff’s breach of contract claim and that the Plaintiff’s
recovery for such a claim is limited to, as per the terms and conditions of service agreed upon by
both parties, $800.00. This lawsuit was removed to federal court based on diversity jurisdiction,
see Notice of Removal, ECF No. 1, and the parties then proceeded to trial without a jury, see
Bench Trial, ECF Nos. 108, 109. Pursuant to Federal Rule of Civil Procedure 52(a), after
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observation of the witnesses at trial and review of the trial exhibits, the Court enters the
following written findings of facts and conclusions of law.
FINDINGS OF FACT
Prior to the Bench Trial, the following undisputed material facts were established:
Best operates a for-hire delivery service that is registered with the United States
Department of Transportation. Apex manufactures and sells specialized
prescription medication. Apex had an agreement with eight customers to deliver
prescriptions for medication to them. Apex engaged Best to pick up the
prescriptions at Apex’s location in Dyer, Indiana, and deliver them to the customers
in Chicago and various Illinois suburbs of Chicago, namely: Lansing, Oak Lawn,
Park Forest, and Crete. Katherine Rodriguez, an agent for Best, picked up the
prescriptions.
Aug. 20, 2018 Op. & Order 1, ECF No. 75. At trial, the Court heard testimony from the following
witnesses:
Cassi Hammar, assistant office manager at Apex Compounding Pharmacy, LLC;
Denita Wuske, account executive/business development manager at Best
Transportation Services, Inc.;
Brett Dines, founder of Apex Compounding Pharmacy, LLC;
Benjamin Kuehl, senior systems analyst at Best Transportation Services, Inc.;
Daniel Meehan, president and chief executive officer of Best Transportation
Services, Inc.
The following facts are based on admitted exhibits and from testimony elicited at trial.
The Plaintiff submitted orders through the Defendant’s online portal seeking delivery
services for the eight medications that are at issue in the instant case. Tr. Ex. 6. The Plaintiff
submitted a valuation of $100.00 for six of the medications and no valuation, which appears as a
valuation of $0.00, for two of the medications. Tr. v.2, p. 285, ECF No.112; Tr. Ex. 6. The
Defendant engaged Katherine Rodriguez to deliver the medications at issue. Aug. 20, 2018 Op.
& Order 1. On July 17, 2015, Katherine Rodriguez failed to deliver the medications. See, e.g.,
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Tr. v.1, p. 38–39, 50–53, 76–77, ECF No. 111. The medications were not returned to and could
not be recovered by either the Plaintiff or the Defendant. The week following July 17, 2015, the
Plaintiff remanufactured the medications, and the Defendant delivered them to the Plaintiff’s
clients. Tr. Ex. 10.
The Plaintiff contends that Katherine Rodriguez was the Defendant’s employee;
however, the Defendant argues that she was an independent contractor. The following was
established about the Defendant’s and industry practices:
The Defendant’s delivery persons were staffed by a third-party company, Contract
Resource Services (Tr. v.1, p. 107–08; Tr. v.2, p. 313);
Contract Resource Services compensated the Defendant’s delivery persons, provided the
delivery persons’ health insurance and tax documentation, and conducted background
checks and drug tests on the delivery persons (Tr. v.2, p. 313–314, 346);
The Defendant’s delivery persons were required to use their own vehicles and provide
their own vehicle insurance (Tr. v.1, p. 108; Tr. v.2, p. 315);
The Defendant leased a handheld device to some delivery persons (Tr. v.2, p. 341);
The Defendant’s delivery persons could use their own smartphone instead of leasing a
handheld device (Id.);
The Defendant leased software to its delivery persons, which could be used on their
handheld device or smartphone to manage delivery jobs (Id. at 340–42);
Although not required for every job, the Defendant’s delivery persons could provide their
own uniform or lease a uniform from a third-party provider (Id. at 317, 361);
The Defendant’s delivery persons were required to pay their own expenses, such as
vehicle maintenance expenses and toll payments (Tr. v.1, p. 109);
The Defendant’s delivery persons accepted jobs by calling the Defendant or through the
leased software, and were permitted to accept as many or as few delivery jobs as they
desired (Tr. v.2, p. 315, 340–42);
The Defendant’s delivery persons were not required to accept a certain number of
delivery jobs per week and they were free to stop accepting delivery jobs at any time (Id.
at 312–13);
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The Defendant’s delivery persons were free to maintain other employment, including
with the Defendant’s direct competitors (Id.);
The Defendant’s delivery persons were not on its payroll; rather the Defendant paid
Contract Resource Services on an invoice for services rendered (Id. at 313);
The Defendant provided an identification badge to its delivery persons (Id. at p. 316);
The Defendant provided some level of training and instruction to its delivery persons, and
the training and instructions were based on client demands (Id. at 315–16, 324, 338, 349–
50);
The Defendant maintained a dispatch department that was used to communicate with its
clients and delivery persons and confirm when shipments were picked up from the client
and delivered to the client’s customer (Tr. v.1, p 34, 37, 47, 78–79, 84, 110; Tr. v.2, p.
338–39, 351–52);
The Defendant’s dispatch department could be contacted by a delivery person if the
delivery person experienced issues while completing their deliveries (Tr. v.1, p 34, 37,
78–79, 84, 110; Tr. v.2, p. 338–39, 351–52);
The software used by the Defendant provided its delivery persons with a delivery route
generated by the client’s orders that could be accepted or declined by the delivery person
(Tr. v.2, p. 359–60);
The Defendant’s delivery persons used standard forms for each job, including a driver
manifest sheet and ticket book, which contained the Defendant’s terms and conditions of
service (Id. at 265, 269–70, 276, Tr. Exs. A, B.);
The Defendant’s clients submitted orders by telephone or by using an online portal (Tr.
v.2, p. 276, 309);
To use the Defendant’s online portal, clients were required to set up an account and agree
to the Defendant’s terms and conditions of service (Tr. v.2, p. 276–77, 380);
The Defendant’s terms and conditions of services provided that “unless otherwise
specifically indicated the value of no total shipment or no single piece, package, parcel or
article in this delivery, including the contents thereof, exceeds, $100.00 upon which
declaration the charge for delivery is based. Any claim in excess of the said $100.00 is
hereby released and discharged.” (Tr. Exs. A, B);
It is standard practice in the shipping and delivery industry for customers to declare the
value of the item(s) they are shipping so the price of shipping services and the necessary
amount of insurance can be determined (Tr. v.1, p. 64; Tr. v.2, p. 287, 299–300, 306–11,
334).
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Despite the above detailed practices being established by witness testimony and trial
exhibits, some details are absent from the record. Regarding the Defendant’s practices, it is
unclear whether its delivery persons were required to maintain constant communication with the
dispatch department (as opposed to simply confirming receipt and delivery of a package) and
whether the Plaintiff required the Defendant’s delivery persons to receive specialized training
before they were staffed on the Plaintiff’s delivery jobs. Furthermore, the record is lacking in
facts and details particularized toward Katherine Rodriguez’s tenure as a Best delivery person.
Specifically, no evidence was introduced indicating how long she worked for or how many
deliveries she made for the Defendant, whether she leased a uniform or a handheld device,
whether she received any training, or whether she used the route generated by her leased
software. Evidence was introduced indicating that Katherine Rodriguez contacted the dispatch
department on July 17, 2015; however, this communication occurred only after she experienced
difficulties during her delivery job. See Tr. v.1, p. 79.
ANALYSIS
The Pre-Trial Order [ECF No. 105] presented the following issues for trial:
1. The actions of non-party Katherine Rodriguez;
2. The relationship between the Defendant and non-party Katherine Rodriguez;
3. Whether fraud had been perpetrated by the Defendant upon Plaintiff which caused
damages to the Plaintiff;
4. The responsibility of the Defendant for actions alleged in this matter;
5. The contractual requirements and limitation related to the Plaintiff’s request for
services from the Defendant; and
6. The recoverable damages of the Plaintiff, if any.
Pre-Trial Order 1–2, ECF No. 105. The Plaintiff’s Amended Complaint [ECF No. 19] alleges the
following claims against the Defendant: Breach of Contract (Count VI), Gross Negligence
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(Count I), and Respondeat Superior (Counts III, V, VIII). Am. Compl., ECF No. 19. The Court
will address each count alleged against the Defendant contained within the Plaintiff’s Amended
Complaint [ECF No. 19] and, in the process, will resolve each issue presented in the Pre-Trial
Order [ECF No. 105].
A.
Breach of Contract Claim
Count VI of the Amended Complaint alleges a breach of contract claim. Whether there
was a contract between the parties was not a significant focus of the trial. In fact, the parties
seem to agree that some form of contract existed between them. Regardless, the Court must
spend some time properly framing the issue, as the evidence introduced at trial suggests that the
parties entered into several contracts during the course of their business relationship.
“The required elements to form a valid contract in Indiana are an offer, an acceptance,
consideration, and a manifestation of mutual assent.” Hampton v. ITT Commc’ns Sys. Div., 1:10CV-291, 2012 WL 2064510, at *3 (N.D. Ind. June 7, 2012) (citing In re Paternity of M.F., 938
N.E.2d 1256, 1259 (Ind. Ct. App. 2010)).1 Both parties presented evidence demonstrating that
there was a meeting between the Plaintiff’s and the Defendant’s representatives at which the
parties, through their representatives, explored the possibility of entering into a business
relationship. See, e.g., Tr. v.1, p 19–21; Tr. v.2, p. 301–06, 323. Both parties also presented
evidence showing that sometime after that initial meeting, the parties agreed that the Defendant
would begin delivering prescriptions to the Plaintiff’s customers in the Chicagoland area. See,
1
It is well established that “[a] Federal District Court exercising diversity jurisdiction must apply the
substantive law of the State in which it sits.” Bateman v. Cent. Foundry Div., Gen. Motors Corp., 822 F.
Supp. 556, 561 (S.D. Ind. 1992) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938); 10A Charles Alan
Wright, Arthur R. Miller & Mary Kay Kane, Fed. Prac. & Proc. Civ. § 2712 (1983)). Neither party has
argued that any law other than Indiana law should apply; thus the Court will apply Indiana law. See Camp
v. TNT Logistics Corp., 553 F.3d 502, 505 (7th Cir. 2009) (citing Wood v. Mid–Valley Inc., 942 F.2d 425,
426 (7th Cir. 1991)).
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e.g., Tr. v.1, p 24; Tr. v.2, p. 304–06. Although the parties may consider this the beginning of
their business relationship, this conduct did not result in the formation of a contract.
“The existence of a valid Indiana contract depends on mutuality of obligation.” See Penn
v. Ryan’s Family Steak Houses, Inc., 269 F.3d 753, 759 (7th Cir. 2001). When the parties
initially agreed to do business together, the parties agreed that the Plaintiff would submit online
order forms to utilize the Defendant’s services. The Plaintiff was under no obligation to submit
order forms and the Plaintiff routinely used other companies’ delivery services. See Tr. v.1, p 24.
As such, no contract was formed at that time. Penn, 269 F.3d at 759. (“[A] contract is
unenforceable if it fails to obligate [one party] to do anything.” (quoting Ind.-Am. Water Co. v.
Town of Seelyville, 698 N.E.2d 1255, 1260 (Ind. Ct. App. 1998))).
Rather than a single contract that encompasses the entire business relationship, eight
contracts are at issue. Under Indiana law, “[t]he elements of a breach of contract action are the
existence of a contract, the breach thereof, and damages.” Hawa v. Moore, 947 N.E.2d 421, 426
(Ind. Ct. App. 2011) (citing McKeighen v. Daviess Cnty. Fair Bd., 918 N.E.2d 717, 721 (Ind. Ct.
App. 2009)). The Defendant does not argue that there were no contracts and to do so would be
futile. The Plaintiff, by submitting the eight order forms, extended each time an offer to the
Defendant to utilize its delivery services in exchange for payment. The Defendant accepted each
of the eight offers, which is made evident by the Defendant sending Katherine Rodriguez to pick
up and deliver the Plaintiff’s products. Both parties provided consideration, as the Defendant
performed a service and the Plaintiff awarded compensation. Finally, mutual assent existed
between the parties as it was well established that the Defendant would deliver the Plaintiff’s
products to its Chicagoland customers in in exchange for payment.
During trial, the Plaintiff’s witnesses each testified at length about how the Defendant’s
delivery person failed to deliver the eight prescriptions. See, e.g., Tr. v.1, p 38–40, 76–79, 143–
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45. Although the Defendant’s CEO did not affirmatively testify that the Defendant breached the
contracts, his testimony does not suggest that the Defendant actually delivered the medications
on July 17, 2015, as agreed to in the contracts. Furthermore, it seems unlikely that Denita
Wuske’s notes investigating the lost prescriptions and the July 20, 2015 orders would exist if the
prescriptions had been delivered pursuant to the contracts. See Tr. Exs. 9, 10. While testimony
from Katherine Rodriguez or the dispatch operator working on July 20, 2015, would have
streamlined the Court’s analysis, the evidence presented at trial is sufficient for the Court to find
in the Plaintiff’s favor on its breach of contract claim.
B. Negligence Claim
Count I of the Complaint alleges a gross negligence claim against the Defendant on the
basis that “Best Transportation and Katherine Rodriguez failed to make the deliveries on behalf
of Apex,” that “Best Transportation did not supervise or monitor Katherine Rodriguez’s conduct
as an employee of Best Transportation,” that ,“[b]y failing to adequately supervise Katherine
Rodriguez, Best Transportation acted in reckless disregard of the consequences to Apex,” and
that, “[a]s a direct result of Best Transportation’s gross negligence, Apex suffered damages in
excess of $46,000.00.” Am Compl. ¶¶ 12, 14–16. In closing arguments, the Defendant argued
that there is no basis for a negligence claim because the only relationship that existed between
the parties was a contractual relationship.
The Defendant’s argument has merit under Indiana law. To succeed on a gross
negligence claim, a plaintiff must show that the defendant owed the plaintiff a duty, that the
defendant breached that duty, and that the plaintiff suffered an injury proximately caused by that
breach of duty. Lake Ridge New Tech Schs. v. Bank of N.Y. Mellon, Tr. Co., N.A., 353 F. Supp.
3d 745, 757 (N.D. Ind. 2018) (citing Jaffri v. JPMorgan Chase Bank, N.A., 26 N.E.3d 635, 638
(Ind. Ct. App. 2015). “Indiana law does not recognize a tort claim for breach of contract, nor
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does it allow parties to circumvent that rule by repackaging a breach of contract as a tort.” Forest
River Mfg., LLC v. Lexmark Enter. Software, LLC, No. 3:16-CV-449, 2017 WL 1906164, at *2
(N.D. Ind. May 9, 2017) (citing Greg Allen Constr. Co., Inc. v. Estelle, 798 N.E.2d 171, 173
(Ind. 2003); Bayview Loan Servicing, LLC v. Golden Foods, Inc., 59 N.E.3d 1056, 1068 (Ind. Ct.
App. 2016)). Accordingly, a plaintiff who claims that the defendant negligently breached a
contract has not set forth an actionable negligence claim and cannot succeed. Jaffri, 26 N.E.3d at
638. “The Supreme Court of Indiana has held that a breach of contract does not give rise to a
[negligence] claim unless a legal duty independent of the contract has been violated.” Lake Ridge
New Tech Schs., 353 F. Supp. 3d at 757 (citing Greg Allen Constr. Co., 798 N.E.2d at 175). That
is, “a party to a contract or its agent may be liable in tort to the other party for damages from
negligence that would be actionable if there were no contract, but not otherwise.” Greg Allen
Constr. Co., 798 N.E.2d at 175.
In this case, the Plaintiff’s gross negligence claim argues that the Defendant acted
negligently by failing to properly supervise Katherine Rodriguez, that, due to this negligence, the
Plaintiff’s products were not delivered, and that the Plaintiff suffered damages. In other words,
the Plaintiff alleges that because the Defendant acted negligently the contract was breached. The
Plaintiff cannot succeed on such a claim as it is merely a repackaged breach of contract claim.
Moreover, the Plaintiff cannot rely on the delivery contract to establish that the Defendant owed
it a duty, and the Plaintiff has not established the existence of some other duty. As such, the
Plaintiff’s gross negligence claim fails.
C.
Respondeat Superior Claims
The Plaintiff, in Counts III, V, and VIII, also brings claims based on the theory of
respondeat superior liability. “The doctrine of respondeat superior imposes liability on an
employer for the wrongful acts of [its] employee committed within the scope of employment.”
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Hurlow v. Managing Partners, Inc., 755 N.E.2d 1158, 1161 (Ind. Ct. App. 2001) (citing Stropes
v. Heritage House Childrens Ctr. of Shelbyville, Inc., 547 N.E.2d 244, 247 (Ind. 1989)). Count
III alleges that “Best Transportation is liable for the negligent acts of Katherine Rodriguez, as
Katherine Rodriguez was acting within the course and scope of her employment at all relevant
times herein,” Count V alleges that “Best Transportation is liable for the fraudulent act of
Katherine Rodriguez, as Katherine Rodriguez was acting within the course and scope of her
employment during her fraudulent act,” and Count VIII alleges that “Best Transportation is liable
for the conversion of Katherine Rodriguez, as Katherine Rodriguez was acting within the scope
of her employment during the conversion.” Am Compl. ¶¶ 29, 46, 66.
Under the doctrine of respondeat superior, “a principal is not liable for the torts of [its]
independent contractors.” Hixon v. Sherwin-Williams Co., 671 F.2d 1005, 1009 (7th Cir. 1982)
(citing Ryan v. Curran, 64 Ind. 345, 354 (1878)); see also Moberly v. Day, 757 N.E.2d 1007,
1009 (Ind. 2001) (recognizing that Indiana has a “long-standing general rule . . . that a principal
is not liable for the negligence of an independent contractor” (quoting Bagley v. Insight
Commc’ns Co., 658 N.E.2d 584, 586 (Ind. 1995))); Ali v. All. Home Health Care, LLC, 53
N.E.3d 420, 434 (Ind. Ct. App. 2016) (“We have long held that, subject to specific exceptions, a
principal is not liable for the torts of independent contractors.” (citing Carie v. PSI Energy, Inc.,
715 N.E.2d 853, 855 (Ind. 1999)). Indeed, “[a]n entity cannot be held liable under a theory of
respondeat superior unless an employer-employee relationship exists between the entity and the
person who caused the plaintiff's injuries.” 12 Ind. Law Encyc. Employment § 125 (citing Kahrs
v. Conley, 729 N.E.2d 191 (Ind. Ct. App. 2000)). Based on the evidence introduced at trial, the
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Court finds that Katherine Rodriguez was an independent contractor; therefore, the Plaintiff’s
respondeat superior claims fail.2
“Generally, the question of whether one acts as an employee or an independent contractor
is a question for the finder of fact.” Guillaume v. Hall Farms, Inc., 914 N.E.2d 784, 788 (Ind. Ct.
App. 2009) (citing Snell v. C.J. Jenkins Enters., Inc., 881 N.E.2d 1088, 1090 (Ind. Ct. App.
2008)). Under Indiana law, the following factors may be considered when determining whether
an individual is an employee or an independent contractor:
(a) the extent of control which, by the agreement, the master may exercise over
the details of the work;
(b) whether or not the one employed is engaged in a distinct occupation or
business;
(c) the kind of occupation, with reference to whether, in the locality, the work is
usually done under the direction of the employer or by a specialist without
supervision;
(d) the skill required in the particular occupation;
(e) whether the employer or the workman supplies the instrumentalities, tools, and
the place of work for the person doing the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h) whether or not the work is a part of the regular business of the employer;
(i) whether or not the parties believe they are creating the relation of master and
servant; and
2
The Court recognizes that there exist exceptions to the general rule that employers cannot be held liable
for the conduct of their independent contractors, including when one party is contractually charged with
performing the specific duty. Shawnee Constr. & Eng’g Inc. v. Stanley, 962 N.E.2d 76, 81 (Ind. Ct. App.
2011) (citing Merrill v. Knauf Fiber Glass GmbH, 771 N.E.2d 1258, 1264 (Ind. Ct. App. 2002)). During
trial the Plaintiff failed to show that the contracts at issue created a contractual duty of care. See Marks v.
N. Ind. Pub. Serv. Co., 954 N.E.2d 948, 952–54 (Ind. Ct. App. 2011). In fact, the evidence does not even
demonstrate that the contracts expressly prohibited the Defendant from delegating its contractual
obligations to an independent contractor. Therefore, the Court concludes that this exception does not
apply.
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(j) whether the principal is or is not in business.
Moberly, 757 N.E.2d at 1009–10 (quoting Restatement (Second) of Agency § 220 (1958); citing
Mortg. Consultants, Inc. v. Mahaney, 655 N.E.2d 493, 495 (Ind. 1995)).
In this case, the Plaintiff provided insufficient evidence to establish that Katherine
Rodriguez was an employee rather than an independent contractor. Of the above-listed factors,
only (h) and (j) weigh in favor of the Plaintiff, as the evidence shows that the Defendant was in
business and that the delivery services provided by Katherine Rodriguez were part of the
Defendant’s regular business.
Factors (a), (b), (e), (g), and (i) weigh in favor of the Defendant. Factor (a) requires the
Court to consider the extent of control which, by the agreement, the Defendant could exercise
over the details of Katherine Rodriguez’s work. Moberly, 757 N.E.2d at 1010. The evidence
demonstrates that the Defendant generally exerted little control over the details of the delivery
persons’ work. The Defendant allowed the delivery persons to accept whatever job they wanted
as long as they met the necessary qualifications, and the Defendant provided training and
instruction only based on the demands of its clients. Tr. v.2, p. 315–16, 324, 338, 340–42, 349–
50. Nothing before the Court suggests that the Defendant’s representatives accompanied its
delivery persons to provide instruction or supervision. Although the Defendant could
communicate with the drivers using its dispatch department, no evidence was introduced
suggesting that the dispatch department was used to constantly monitor or supervise the delivery
persons’ work. Tr. v.1, p 34, 37, 47, 78–79, 84, 110; Tr. v.2, p. 338–39, 351–52. Rather, it
appears that the Defendant primarily used its dispatch department to confirm that the delivery
persons picked up and completed their deliveries. Tr. v.2, p. 338–39. It was also established that,
despite the Defendant’s software generating a route based on the client’s orders, the delivery
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persons were permitted to accept or deny the generated route. Tr. v.2, p. 359–60. Although the
Defendant could freely communicate with the drivers and some instruction was provided, the
evidence does not demonstrate the level of control necessary for the Court to conclude that the
delivery persons were employees of the Defendant. Furthermore, the Plaintiff introduced no
evidence indicating that Katherine Rodriguez received any training, instruction, or supervision
from the Defendant that would make it more likely that she was an employee. As such, factor (a)
weighs in favor of the Defendant.
Factor (b) also weighs in favor of Katherine Rodriguez being classified as an independent
contractor. Although no evidence was introduced to establish whether Katherine Rodriguez
exclusively worked for the Defendant, it is clear that the Defendant provided gig-based
employment for its delivery persons and that Katherine Rodriguez, like all other drivers, was
under no requirement to take any particular job and was free to work for other companies,
including the Defendant’s competitors. Tr. v.2, p. 312–15, 340–42. Therefore, this factor weighs
in the Defendant’s favor. See Walker v. Martin, 887 N.E.2d 125, 132 (Ind. Ct. App. 2008) (“The
evidence demonstrated that Martin was engaged in his own hauling business and did not work
exclusively for LaFountaine. Therefore, this factor also weighs in favor of Martin as an
independent contractor.”).
Factor (e) relates to the equipment provided by the principal. In this case, the only
“equipment” the Defendant freely provided to its delivery persons was an identification badge.
Tr. v.2, p. 316. In contrast, the delivery persons were responsible for providing their own vehicle,
providing or leasing from the Defendant their own smartphone or handheld device, leasing from
the Defendant the necessary software, and providing or leasing (from a third party) their uniform.
(Tr. v.1, p. 108; Tr. v.2, p. 315, 317, 340–42, 361). Further, the Plaintiff did not show that
Katherine Rodriguez obtained any equipment from the Defendant. See Carroll v. Kamps, 795 F.
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Supp. 2d 794, 808 (N.D. Ind. 2011) (“When a principal provides the instrumentalities of
employment, particularly instrumentalities of substantial value, this factor tilts towards employee
status.” (citing Moberly, 757 N.E.2d at 1012)). Accordingly, this factor also weighs in the
Defendant’s favor.
Finally, factors (g) and (i), which, respectively, require the Court to consider how the
worker was paid and whether the parties believe an employer-employee relationship was being
created, also support the conclusion that Katherine Rodriguez was an independent contractor.
The evidence clearly demonstrates that the delivery persons, including Katherine Rodriguez,
were not paid directly by the Defendant; rather, the Defendant paid a staffing agency for the
services performed by the delivery persons. Tr. v.2, p. 313–14, 346.3 Additionally, the evidence
shows that the Defendant’s employees did not believe that the delivery persons, including
Katherine Rodriguez, were company employees. Indeed, two of the Defendant’s employees
testified at trial that the delivery persons were independent contractors. Tr. v.1, p. 201; Tr. v.2, p.
306.4
The Court has been provided insufficient evidence to determine whether factors (c), (d),
and (f) weigh in favor of Katherine Rodriguez being considered an employee or an independent
contractor. Factor (c) requires the Court to consider the industry standard practice. While the
Defendant’s CEO testified that the use of independent contractors was standard in the delivery
industry, Tr. v.2, p. 324, he did not testify as to whether the work performed in the industry is
3
The Court notes that the Plaintiff’s witness Denita Wuske testified that the Defendant paid Katherine
Rodriguez. Tr v.1, p. 111. However, this testimony is discredited by Denita Wuske’s later testimony that
Katherine Rodriguez was not on the Defendant’s payroll and Daniel Meehan’s testimony that Katherine
Rodriguez was not paid by the Defendant and that Denita Wuske, due to her position at the company,
would not have any knowledge regarding the delivery persons’ compensation. Tr v.1, p. 115 Tr. v.2, p.
312–14.
4
There is no evidence before the Court indicating whether Katherine Rodriguez believed she was an
employee or an independent contractor; therefore, this factor does not weigh heavily in the Court’s
analysis.
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typically carried out under the direction of the employer or by a specialist without supervision.
There was also limited evidence relating to factor (d), which requires the Court to consider the
level of skill required to perform the work. While some evidence was presented indicating that
the Defendant occasionally provided training to its delivery persons, id. at 315–16, 324, 338,
349–50, no evidence clearly addressed the level of skill needed to be a delivery person, see
Walker, 877 N.E.2d at 132 (explaining that being an interstate truck driver with a commercial
driver’s license requires particularized skill, which favors the driver being considered an
independent contractor); but see Bauermeister v. Churchman, 59 N.E.3d 969, 976 (Ind. Ct. App.
2016) (“Churchman’s job was to deliver newspapers, ‘which does not require special skill and
weighs slightly in favor of [her] status as an employee.’” (quoting Snell, 881 N.E.2d at 1092)).
Finally, no evidence addressing factor (f)—the length of time the worker was employed—was
introduced, as no exhibit or witness testimony indicated how long Katherine Rodriguez worked
as a delivery person for the Defendant.
The Court, having considered each of the above described factors in relation to the
evidence presented by both parties, concludes that Katherine Rodriguez was an independent
contractor. As such, the Plaintiff’s respondeat superior claims fail.
D.
Damages
The Plaintiff has established that the Defendant breached the contracts between them;
therefore, the Court must determine the amount of damages that should be awarded. The Plaintiff
represents that its damages from the breach of contract claim are $143,601.20 for the initial lost
prescriptions, the remanufactured prescriptions, the delivery fee paid to the Defendant, the
HIPAA notification costs, and the loss of future profits.
Under Indiana law, “a party injured by a breach of contract may recover the benefit of its
bargain but is limited in its recovery to the loss actually suffered” and a “party injured by a
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breach of contract may not be placed in a better position than it would have enjoyed if the breach
had not occurred.” Otter Creek Trading Co. v. PCM Enviro PTY, LTD, 60 N.E.3d 217, 229 (Ind.
Ct. App. 2016) (citing Fowler v. Campbell, 612 N.E.2d 596, 603 (Ind. Ct. App. 1993)). “A
damage award must be based upon some fairly defined standard, such as cost of repair, market
value, established experience, rental value, loss of use, loss of profits, or direct inference from
known circumstances.” Id. Furthermore, “[t]he measure of damages for breach of contract is
limited by what is reasonably foreseeable at the time the parties entered into the contract,” with
foreseeable damages being only those damages for “which it is objectively reasonable to expect,
not merely what might conceivably occur.” Belle City Amusements, Inc. v. Doorway Promotions,
Inc., 936 N.E.2d 243, 249 (Ind. Ct. App. 2010) (citing Rogier v. Am. Testing & Eng’g Corp., 734
N.E.2d 606, 614 (Ind. Ct. App. 2000); Greives v. Greenwood, 550 N.E.2d 334, 338 (Ind. Ct.
App. 1990)). “It is the plaintiff’s burden to prove damages, and a damage award must be
supported by probative evidence.” Id. (citing Ind. Bureau of Motor Vehicles v. Ash, Inc., 895
N.E.2d 359, 368 (Ind. Ct. App. 2008)).
The breakdown of the Plaintiff’s claim for damages is as follows: $27,780.94 for the
destruction of the initial prescriptions given to Katherine Rodriguez for delivery on July 17,
2015; $27,780.94 for the remanufacture of the destroyed prescriptions; $126.56 for delivery fees
paid to the Defendant; $53.92 for notices required under HIPAA; and $87,858.84 for the loss of
future profits because certain prescriptions were not refilled following the July 17, 2015 incident.
The Court considers each source of damages in turn.
1.
Damages for the Initial Prescriptions
If the Defendant had delivered the Plaintiff’s prescriptions, the Plaintiff would have been
compensated by various medical insurance providers. As such, the Plaintiff would typically be
entitled to damages in the amount it would have received for the products. Restatement (Second)
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of Contracts § 347 cmt. a (1981) (“Contract damages are ordinarily based on the injured party's
expectation interest and are intended to give him the benefit of his bargain by awarding him a
sum of money that will, to the extent possible, put him in as good a position as he would have
been in had the contract been performed.”). However, in this case, the Plaintiff’s damages are
limited because of the Defendant’s terms and conditions of service and because such an amount
was not foreseeable to the Defendant.
Throughout trial, a key issue was whether the Defendant required its customers to submit
the value of the items for which they sought delivery services. The evidence before the Court
clearly establishes that it was an industry standard to require the disclosure of a product’s value
before shipment. Tr. v.1, p. 64; Tr. v.2, p. 287, 299–300, 306–11, 334. The evidence also shows
that it was the Defendant’s practice to require its customers to disclose whether the item being
shipped had a value higher than $100.00. This requirement was included in the Defendant’s
terms and conditions of services, which were printed on the Defendant’s standard forms. Tr. v.2,
p. 265, 269–70, 276; Tr. Exs. A, B. The terms and conditions of services also released and
discharged “[a]ny claim in excess of the said $100.00.” Tr. Exs. A, B. Such releases are
generally enforceable, see Dick Corp. v. Geiger, 783 N.E.2d 368, 373 (Ind. Ct. App. 2003)
(“There is a very strong presumption of enforceability of contracts representing the freely
bargained agreement of the parties.” (citing Zollman v. Geneva Leasing Assoc's, Inc., 780 N.E.2d
387, 391 (Ind. Ct. App. 2002))); Restatement (Second) of Contracts § 346 cmt. a (1981) (“A duty
to pay damages may be suspended or discharged by agreement or otherwise, and if it is
discharged the claim for damages is extinguished.”), and nothing before the Court suggests that
the release contained in the Defendant’s terms and conditions of service should not be enforced.
The terms and conditions of service would have been seen by the Plaintiff during the course of
the parties’ business relationship, and accepting the terms and conditions of service was a
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prerequisite for submitting orders on the Defendant’s online portal. Tr. v.2, p. 265, 269–70, 276;
Tr. Exs. A, B.
Pursuant to the conditions agreed to by both parties, the Plaintiff’s recovery for each lost
package is limited to $100.00 per package. See Sgouros v. TransUnion Corp., 817 F.3d 1029,
1033–34 (7th Cir. 2016); Jallali v. Nat’l Bd. of Osteopathic Med. Exam’rs, Inc., 908 N.E.2d
1168, 1173–74 (Ind. Ct. App. 2009). The Plaintiff argues that there is no evidence demonstrating
that it was bound by the Defendant’s terms and conditions of service, which includes the release
and discharge of any claim in excess of $100.00. During trial it was established that customers
who wished to use the Defendant’s online portal were required to accept the Defendant’s terms
and conditions when registering an account. It was also established that the Plaintiff placed each
of the orders at issue by using the online portal. Based on this process, it would seem that the
Plaintiff was aware of and accepted the terms and conditions. The Plaintiff, however, argues the
Plaintiff’s account “was set up by a sales representative from Best Transportation; and therefore,
Apex did not see those terms and conditions. Apex did not check a box affirming to have read,
understood, or agreed to those terms and conditions;” therefore, it cannot be limited to a recovery
of $100.00 per agreement. Tr. v.2, p. 386–87, 416.
Benjamin Kuehl testified that, when registering an online account, the registration page
contained a link to the terms and conditions under which the Defendant provided services and
that the registration page required the user to click a box indicating that the user agreed to be
bound to the terms and conditions of service before being permitted to create an account to place
online orders. Id. at 277, 295. He also testified that sales representatives could set up customer
accounts, thus creating the possibility that a customer could have an account without previously
checking the box indicating that the customer agreed to be bound to the Defendant’s terms and
conditions. Id. at 277–79, 295.
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The evidence before the Court clearly demonstrates that the Plaintiff had an account;
however, the Plaintiff failed to present sufficient evidence to support its contention that the
Defendant’s sales representative set up the Plaintiff’s account in such a way that the Plaintiff was
not aware of the Defendant’s terms and conditions of service. To the contrary, Daniel Meehan
testified that the sales representative would not register customers in the manner described by the
Plaintiff; rather, the sales representative would “have to sit there and explain [the terms] to them”
while the sales representative walked the customer through the registration process. Id. at 380–
81. Although Benjamin Kuehl testified that a sales representative could set up a customer’s
account for them, he clarified that did not know what process the Plaintiff went through to create
its account. Id. at 296.
During trial limited evidence was presented regarding the account registration process.
Cassi Hammar testified that “Denita Wuske came in. She helped set up all the online accounts
for their web portal for inputting the addresses for the patients and setting up—well, mostly
explaining how it would work,” but she did not describe the extent to which Denita Wuske
“helped set up the online accounts” and did not testify that Denita Wuske, and not an Apex
employee, completed the registration process.5 Tr v.1, p. 25–26, 31. Additionally, the Plaintiff
did not elicit testimony from Denita Wuske about the account registration process, despite its
contention that she set up the account without having the Plaintiff review and accept the terms
and conditions. Moreover, at no time did she testify that she acted in the manner described by the
Plaintiff. Accordingly, the Court concludes that the Plaintiff’s submission of orders from the
5
While the Court recognizes that Cassi Hammar testified that there were no “clickwrap agreements” that
required her to check a box to indicate that she read and accepted the Defendant’s terms and conditions of
service; it is clear that she was describing the submission of order forms and not the initial registration
process. Tr v.1, p. 31.
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online portal demonstrates that the Plaintiff agreed to be bound by the Defendant’s terms and
conditions of service, including the release and discharge of any claim in excess of $100.00.
Even if the condition releasing and discharging claims in excess of $100 is inapplicable,
the Plaintiff’s recovery would still be limited to the damages reasonably foreseeable to the
Defendant. The Plaintiff affirmatively represented that six packages were valued at $100.00 and
provided no valuation for the remaining two packages. No evidence suggests that any value
above $100.00 was ever declared by the Plaintiff; rather, the Plaintiff’s position that such a
declaration was not required suggests that the Plaintiff never declared a value greater than
$100.00. Based on the affirmative representations made by the Plaintiff, the Defendant could
reasonably foresee that losing the packages would result in a loss of $800.00; therefore, the
Plaintiff’s damages are limited to that amount.
2.
Damages for the Remanufactured Prescriptions
The Plaintiff also seeks $27,780.94 for the remanufacture of the eight prescriptions
because, according to Brett Dines’s testimony, the Plaintiff was not compensated for the
remanufactured prescriptions. Tr. v.1, p. 224–26. Brett Dines testified that the Plaintiff did not
submit a compensation form to its customer’s medical insurance providers for the
remanufactured prescriptions because to do so would be “contrary to industry norms.” Id.
Specifically, he testified:
We failed to make the delivery in a timely manner. The medication was for pain
medication. The patient suffered throughout the entire weekend and going into
Tuesday; and as a result of that, I believe not only the insurance carriers would
have rejected the claim, but the referral base would have been up in arms too
about us charging for their medications when we didn’t even deliver it on time.
Id. at 226. It is clear that awarding damages for the remanufacture of the prescriptions would be
improper for three reasons.
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First, as previously explained, by agreeing to the Defendant’s terms and conditions of
service, the Plaintiff released and discharged any claims in excess of $100.00 for each contract.
The Court has already determined that the Plaintiff should be awarded $800.00 in damages;
therefore, the Plaintiff cannot recover additional damages.
Second, Brett Dines’s testimony does not demonstrate that these damages flowed
directly and naturally from the Defendant’s breach of contract. See Sammons Commc’ns of Ind.,
Inc. v. Larco Cable Constr., 691 N.E.2d 496, 498 (Ind. Ct. App. 1998) (“To recover the plaintiff
must show that its damages flowed directly and naturally from the breach.” (citing Colonial
Discount Corp. v. Berkhardt, 435 N.E.2d 65, 66 (Ind. Ct. App. 1982))). Rather, his testimony
suggests that the Plaintiff may not have been compensated for the remanufacture of the lost
prescriptions solely because the Plaintiff voluntarily declined to seek payment from its
customer’s medical insurance providers. As there is insufficient evidence for the Court to
conclude whether the damages were the result of the Defendant’s breach of contracts or the
Plaintiff’s failure to seek compensation, an award cannot be granted.
Third, the Plaintiff’s damages, as previously explained, are limited to the damages that
were reasonably foreseeable at the time the parties entered into the contract. There is no evidence
before the Court demonstrating that the Plaintiff informed the Defendant, or that it should have
been otherwise foreseeable, that if the prescriptions were lost, the Plaintiff would still be required
to deliver the medication and would decline to seek or be ineligible to receive compensation for
the remanufactured prescriptions. As such, the damages requested by the Plaintiff in the form of
$27,780.94 for the remanufacture of the eight prescriptions were not reasonably foreseeable to
the Defendant and cannot be recovered.
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3.
Refund of Delivery Fees
The Plaintiff also requests $126.56 in damages as a refund for the fees it paid to the
Defendant for its delivery services on July 17, 2015. Generally,
damages are designed to [protect] one or more interests of the non-breaching
party:
(a) His “expectation interests” which is his interest in having the benefit of his
bargain by being put in as good a position as he would have been in had the
contract been performed;
(b) His “reliance interests” which is his interest in being reimbursed for loss
caused by reliance on the contract by being put in as good a position as he would
have been had the contract not been made; or
(c) His “restitution interest” which is his interest in having restored to him any
benefit that he has conferred on the other party.
Lincoln Nat. Life Ins. Co. v. NCR Corp., 603 F. Supp 1393, 1405 (N.D. Ind. 1984) (quoting
Restatement (Second) of Contracts § 344 (1981)). The refund requested by the Plaintiff is a form
of damages based on the Plaintiff’s “restitution interest.” See id.
“Ordinarily, when a court concludes that there has been a breach of contract, it enforces
the broken promise by protecting the expectation that the injured party had when he made the
contract.” Restatement (Second) of Contracts § 344; see also Otter Creek Trading Co., 60
N.E.3d at 229 (“It is axiomatic that a party injured by a breach of contract may recover the
benefit of its bargain . . . .”); Restatement (Second) of Contracts § 373 cmt. a (“An injured party
usually seeks, through protection of either his expectation or his reliance interest, to enforce the
other party’s broken promise.”). “But expectation damages are not the sole remedy for breach of
contract. Occasionally, the aggrieved party’s interest is protected by an award of restitution
damages, ‘measured by determining the reasonable value of the benefits conferred upon and
received by the defendant, rather than by the detriment undergone by the plaintiff in reliance on
the contract or the losses sustained by the plaintiff.’” Agrigenetics, Inc. v. Pioneer Hi-Bred Int’l.,
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Inc., No. 1:08–cv–802, 2010 WL 4683936, at *2 (S.D. Ind. 2010) (quoting 24 Richard A. Lord,
Willison on Contracts § 64:1 (4th ed. 2001)); see also Restatement (Second) of Contracts § 373
cmt. a. (“However, [the nonbreaching party] may, as an alternative, seek, through protection of
[their] restitution interest, to prevent the unjust enrichment of the other party.”)
In this instance, an award of restitution damages would be inappropriate. Such damages
are typically sought and awarded when the underlying agreement is not enforceable, when it will
result in a larger recovery, and/or when proving expectation damages is difficult or impossible.
See Restatement (Third) of Restitution and Unjust Enrichment § 38 cmt. a (2011); Restatement
(Second) of Contracts § 344 cmt. a. No such issue is present in this matter. The Court has already
determined that there was a breach of eight contracts. The Court, by considering the value of the
shipped goods, the amount of payment the Plaintiff expected, and the terms of the agreements,
determined that the benefit of the Plaintiff’s bargain is $800.00. Finally, an award of $800.00 is
greater than the $126.56 requested as a refund. Accordingly, the Plaintiff’s request for $126.56
of damages as a refund is not supported by law. Furthermore, such an award would be contrary
to the terms of the contracts, which do not provide for a refund and limit the Plaintiff’s recovery
to $100.00 per agreement. See Restatement (Third) of Restitution and Unjust Enrichment § 38
cmt. c (“Performance-based damages, like expectation damages, respect the price terms and the
risk allocations established by the parties’ agreement.”). Therefore, the $126.56 in damages as a
refund for the delivery fees cannot be recovered.
4.
Damages for the HIPAA Notices
As a result of the Defendant breaching the contract, the prescription medications the
Plaintiff was shipping were lost. To comply with the Plaintiff’s HIPAA obligations, the Plaintiff
was required to send notifications regarding the lost prescriptions to its customers. See 45 CFR §
164.404. Sending the notifications cost $53.92, which the Plaintiff seeks in damages from the
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Defendant. While the Court agrees that these damages would have been foreseeable to the
Defendant because it was aware that the products being shipped were prescription medications,
the damages the Plaintiff can recover are limited by the release contained in the Defendant’s
terms and conditions of service. Therefore, this amount cannot be recovered.
5.
Damages for the Loss of Future Profits
Finally, the Court cannot award the requested $87,858.84 for the loss of future profits.
The Court cannot make such an award because, as explained above, the damages the Plaintiff
can recover are limited by the release contained in the Defendant’s terms and conditions of
service. However, an award of damages for the loss of future profits would also be improper
because no evidence was introduced establishing the future profits to be reasonably certain or
that the loss of future profits flowed directly and naturally from the breach of contracts.
Although a Plaintiff may recover lost profits, “an award of damages for lost profits
cannot be based upon mere conjecture or speculation,” and “[i]t is wholly improper . . . for a trier
of fact to project past profits indefinitely into the future without evidence that the projection was
at least reasonably certain.” L.H. Controls, Inc. v. Custom Conveyor, Inc., 974 N.E.2d 1031,
1043 (Ind. Ct. App. 2012) (citing Belle City Amusements, Inc., 936 N.E.2d at 250; T & W Bldg.
Co. v. Merrillville Sport & Fitness, Inc., 529 N.E.2d 865, 868 (Ind. Ct. App. 1988)). The only
evidence the Plaintiff presented to show that the future profits were reasonably certain was Brett
Dines’s testimony that the company had an 85% refill rate on its prescriptions. Tr. v.1, p. 166.
This testimony alone is insufficient for the Court to conclude that the future profits were
reasonably certain.
Further, a plaintiff can only recover future profits if the loss of such profits flowed
directly and naturally from the breach of contracts. See Sammons Commc’ns of Ind., Inc., 691
N.E.2d at 498. Brett Dines testified that the Plaintiff followed up with each physician or office
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manager who did not order refills and was informed that the refills were not ordered
“predominantly” because the Plaintiff “didn’t have the customer service level that was necessary
to meet the needs of their patients.” Tr. v.1, p. 191–92. This testimony is vague, as it does not
specify that the refills were not ordered because of the July 17, 2015 incident. It is possible that
there were issues with the Plaintiff’s customer service outside of the Defendant’s failure to
timely deliver the medication. See id. at 18–19. Furthermore, no witnesses, such as patients or
providers, were called to corroborate Brett Dines’s testimony or to explain that typically refills
would be ordered but were not ordered due to the July 17, 2015 incident. Refills may not have
been ordered for a multitude of reasons. For example, a patient could have passed away or a
provider may have determined that a different medication was more suitable for their patient’s
needs. As the Plaintiff has not demonstrated that the future profits were relatively certain or that
the loss of future profits was the natural consequence of the breach of contract, an award of
$87,858.84 for the loss of future profits would be improper.
6.
Other Requested Damages
In addition to the $143,601.20 described above, the Plaintiff also seeks $460,530.44 in
damages for the loss of company value. However, this amount was sought only in relation to the
Plaintiff’s negligence claims. Tr. v.1, p. 196–99. The Plaintiff did not succeed on its negligence
claims and, therefore, cannot recover this amount. Finally, the Plaintiff sought an award of
punitive damages; however, “[i]t is well settled that a breach of contract claim may not lead to an
award of punitive damages.” Sheaff Brock Inv. Advisors, LLC v. Morton, 7 N.E.3d 278, 288 (Ind.
Ct. App. 2014) (citing Tobin, 819 N.E.2d at 86). As the Plaintiff only succeeded on its breach of
contract claim, punitive damages cannot be awarded.
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CONCLUSION
For the reasons stated above, the Court finds that the Plaintiff is entitled to a verdict in its
favor as to Count VI only and to an award of damages in the amount of $800.00. The Court
DIRECTS the Clerk of Court to ENTER JUDGMENT in favor of the Plaintiff Apex
Compounding Pharmacy LLC and against the Defendant Best Transportation Services, Inc. in
the amount of $800.00.
SO ORDERED on March 18, 2021.
s/ Theresa L. Springmann
JUDGE THERESA L. SPRINGMANN
UNITED STATES DISTRICT COURT
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