New York AG hits FedEx with $235 million suit over untaxed cigarettes

Eric Schneiderman said the company ignored a 2006 agreement signed with the state

Relax, it’s FedEx. But that slogan doesn’t work as well for the company’s legal team, who is now fighting a $235 million lawsuit from New York Attorney General Eric Schneider­man over untaxed cigarette shipments.

In a lawsuit filed on March 30, Schneiderman’s office claims that FedEx violated state and federal law by delivering over 400,000 cartons of cheap and untaxed cigarettes across the state to consumers. According to the lawsuit, this practice directly contradicts a 2006 agreement FedEx signed with the state to attempt to stop the practice.

“FedEx's blatant disregard for its long-standing agreement with New York, as well as federal and state law, enabled tens of millions of cheap, untaxed cigarettes to be shipped to New Yorkers,” said Schneiderman.

The majority cigarettes in question came from the Shinnecock Smoke Shop on the Shinnecock reservation on Long Island. The store has been sued numerous times for untaxed cigarette sales, and New York City similarly sued FedEx over these shipments in 2013. In addition, FedEx is charged with making thousands of untaxed deliveries for a Kentucky company named “Cigarettes Direct to You.”

The shipments in question amount to a “direct tax loss” of more than $10 million, according to Schneiderman. He said that his office is also investigating other shipping companies to see whether they also violated state and federal law.

The suit seeks $70 million in damages, $163,435,000 in penalties, and a court-appointed monitor to oversee the company’s compliance, since, as the lawsuit said, FedEx has been “unable or unwilling to cease conduct that injures the health and safety of a considerable number of persons.”

FedEx has not directly responded to Schneiderman’s suit. Following the similar New York City suit in 2013, a company spokesman said that FedEx “prohibits the shipment of direct to consumers and believes the claims made by the city are overstated and not founded in law.”

 

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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