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New York state joins New York City in suing FedEx over untaxed cigarettes

A FedEx delivery truck is seen in San Diego, California December 5, 2013. REUTERS/Mike Blake
A FedEx delivery truck is seen in San Diego, California December 5, 2013. REUTERS/Mike Blake

(Reuters) - New York state joined New York City in suing FedEx Corp for allegedly violating state and federal laws by delivering untaxed cigarettes, but the company said customer privacy prevented it from checking packages without reason.

New York City accused FedEx of creating a "public nuisance" through its partnership with Shinnecock Smoke Shop to ship untaxed cigarettes to homes.

An amended complaint filed on Sunday included New York Attorney General Eric Schneiderman among the plaintiffs seeking more than $239 million in damages and penalties.

"Not only has FedEx cheated the state out of millions in tax dollars - but many of these cigarettes may have ended up in the hands of teenagers, who are particularly vulnerable to low-priced cigarettes," Schneiderman said in a statement. (http://r.reuters.com/hex97v)

New York state alleged that FedEx knowingly shipped nearly 400,000 cartons of unstamped cigarettes to homes in the state, depriving it of $15, $27.50 or $43.50 on each carton in tax revenue.

FedEx said the case lacked legal foundation. The company said it had to protect the privacy of customers and would not open packages to determine their contents without reason.

"While the lawsuit identifies several shippers of untaxed cigarettes with which we stopped doing business, those shippers are not being sued in the case, nor are any recipients who evaded paying applicable taxes," FedEx spokesman Perry Colosimo said in a statement emailed to Reuters.

New York City had alleged in December that the company deprived it of excise tax of $15 per carton.

"The claims advanced in the amended complaint by the NYAG are substantively identical to the City's claims in the original complaint," Assistant Corporation Counsel Eric Proshansky, who represents New York City in the case, said in a letter on Sunday.

"Accordingly, the proposed objections to the pleadings raised by FXG (FedEx Ground Package) should still form the basis for discussion at the April 9th pre-motion conference."

FedEx requested the court last week to dismiss or substantially narrow New York City's complaint.

The case is City of New York v. FedEx Ground Package System Inc et al, U.S. District Court, Southern District of New York, No. 13-09173.

(Reporting by Supriya Kurane and Sagarika Jaisinghani in Bangalore; Editing by Joyjeet Das and Kirti Pandey)

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