Between 2008 and 2011, FedEx Corp. allegedly overcharged nearly half-a-million business customers for shipping, adding higher residential surcharges to their fees. But now, with the settlement of a three-year-old class action lawsuit, it’s FedEx who will need to pay in the end.
On Nov. 22, a federal judge approved a FedEx payment of $16.5 million to settle the class action lawsuit, refunding roughly 475,000 government and business customers. Over the course of three years, FedEx allegedly charged as much as $3 a shipment more than normal shipping costs despite telling customers that they were receiving a reduced business rate.
FedEx and the lawyers from the class action suit, which was brought by law firms Manjunath A. Gokare PC and Goldstein, Borgen, Dardarian & Ho, originally agreed to a settlement in July, pending court approval. Through the terms of the settlement, FedEx admits no guilt. The company does, however, likely face an additional $5 million in fees related to the case, the estimated cost for correcting inaccurate internal databases and changing internal policy procedures to ensure a repeat does not occur.
“We highly value our relationships with our customers and these relationships are at the core of all we do,” said Ben Hunt, a FedEx spokesman, in a statement to the Wall Street Journal. “We agreed to settle this matter to avoid the cost and uncertainty of continued litigation.”
According to leaked internal emails, FedEx become aware of the problem as the result of one sales executive. Alan Elam noticed the discrepancies and reported them to his superiors. In the emails, Elam wrote that he believed the company was “systemically overcharging” businesses with the residential surcharges.
However, Elam did not receive an indication from his superiors that the problem would be fixed. As a result, he became frustrated, writing in an email, “I have brought this to the attention of many people over the past five or six years, including more than one managing director, and no action has been taken to address it.” The class action lawsuit later used Elam’s emails to attempt to demonstrate that FedEx willfully ignored any attempts to stop charging businesses the residential surcharge.
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