A federal judge on Monday said FedEx Corp must face claims that it violated federal law by delivering contraband cigarettes in New York, cheating the state and New York City out of millions of dollars of excise taxes.
U.S. District Judge Edgardo Ramos in Manhattan denied FedEx's bid to dismiss claims it violated an anti-racketeering law and the Contraband Cigarette Trafficking Act by knowingly shipping nearly 400,000 cartons of untaxed cigarettes to individual residences from 2005 to 2012.
But the judge also dismissed a claim seeking civil fines for alleged violations of a state public health law, saying a 2013 amendment did not apply retroactively. Ramos separately dismissed a claim that FedEx created a public nuisance by distributing cigarettes at less than the legal price.
The lawsuit had sought roughly $239 million in fines and alleged unpaid taxes. A similar lawsuit seeking more than $180 million was filed last month against FedEx rival United Parcel Service Inc.
"We are pleased that the court agreed with several of our arguments in granting, in part, our motion to dismiss, and we look forward to continuing to defend this matter vigorously," FedEx spokesman Perry Colosimo said in a statement.
Eric Proshansky, a lawyer for the city, said: "We are pleased that the court upheld our most significant claims."
A spokeswoman for New York Attorney General Eric Schneiderman had no comment.
The lawsuit against FedEx claimed that the Memphis, Tennessee-based company cost the state between $15 and $43.50 per carton, and the city $15 per carton, in excise taxes by illegally delivering cigarettes on behalf of various sellers.
These sellers included a shop on the Shinnecock Indian Nation reservation in Southampton, New York, among others.
A carton of cigarettes usually contains 10 packs.
In letting some claims go forward, Ramos said the state and city alleged in sufficient detail that FedEx "had some part in directing the affairs of the cigarette seller enterprises."
The case is City of New York et al v. FedEx Ground Package System Inc et al, U.S. District Court, Southern District of New York, No. 13-09173.
