NEW YORK – New York Attorney General Eric T. Schneiderman announced that his office has filed a $70 million lawsuit against FedEx for illegally shipping nearly 80 million contraband cigarettes to consumers across New York in violation of federal and state laws. The lawsuit joins and expands upon a complaint filed in December 2013 in Manhattan federal court by the City of New York and adds extensive claims of FedEx’s unlawful shipments around the state. 

A press release notes that the joint complaint alleges that, between 2006 and 2012, FedEx made nearly 33,000 illegal shipments of cigarettes to consumers in New York, amounting to more than 400,000 cartons of untaxed cigarettes and a direct tax loss to the state of more than $10 million. Each illegal shipment carries a maximum penalty of $5,000. The shipments violated an agreement FedEx entered into with the state’s AG office in 2006, in which it agreed to cease all unlawful cigarette deliveries to consumers both in New York and throughout the country. The lawsuit further alleges that the company engaged in a pattern of racketeering activity with various cigarette retailers to traffic contraband cigarettes in violation of the federal anti-racketeering statute.

“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,” Attorney General Schneiderman said. “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…”

The shipments by FedEx are prohibited by the federal Contraband Cigarette Trafficking Act (CCTA) and Prevent All Cigarette Trafficking (PACT) Act, as well as by New York State tax and public health laws. 

Because the federal PACT Act requires shippers to affix specified labels identifying the contents as cigarettes and to report all sales into a state, which FedEx did not do, New York is entitled to significant penalties for these violations. Last, the Assurance of Compliance agreement reached with FedEx in 2006 provides that that company must pay a stipulated penalty of $1000 per violation, amounting to approximately $34 million.