FedEx agreed Monday to a settlement of $35.4 million to end three lawsuits brought by the city and state of New York over untaxed cigarettes.
The lawsuits allege that FedEx shipped millions of untaxed cigarettes to residents of New York over the last decade on behalf of cigarette suppliers. Both the city and state of New York have levied taxes on cigarettes since 2008 at varying rates. These taxes are collected by requiring cigarette companies to purchase “cigarette stamps” in order to ship cigarettes to local stores and distributors in New York. State law mandates that this be the only method of entry for cigarettes into New York.
The current suits were brought after it was found that several shops were evading the cigarette tax by shipping directly to consumers via FedEx Ground. The suits describe several instances of FedEx employees becoming aware of the the shipping of unstamped cigarettes via FedEx Ground and notifying the state only months later. Ultimately, the state brought three separate actions alleging that FedEx undercut public health policy of the city and state by trafficking in cigarettes and avoided millions in revenue owed to the state on unstamped cigarettes.
The settlement came today as a result of two rulings from last year. In October US District Judge Edgardo Ramos ruled that FedEx was aware of the shipping of untaxed cigarettes and found the company liable. In May 2017 UPS was ordered by a district judge to pay $247 million in a similar case, which is set for appeal in March. FedEx has not issued any statement regarding the settlement.