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FedEx settles customer overcharging lawsuit, says Bloomberg report

By Jeff Berman, Group News Editor
July 30, 2013

Following reports from earlier this month indicating that FedEx had agreed to settle a lawsuit regarding charges that the Memphis-based company was “systemically” overcharging customers by billing business and government offices at higher residential rates, Bloomberg reported yesterday that FedEx will pay $21.5 million to settle the lawsuit.

Bloomberg said the settlement was reached on July 26 in Memphis federal court, with a hearing on preliminary court approval schedule for August 1, adding that the settlement covers a class of 200,000 customers.

In December 2012, Bloomberg reported that this development came to light in the form of an internal e-mail by a FedEx sales executive in an internal e-mail which was unsealed in a class action lawsuit filed in a federal court in Memphis in 2011, which claims FedEx Corp. and FedEx Corporate Services overcharged commercial and government customers up to $3 each for millions of delivered packages.

The sales executive, Alan Elam, said in an August 2011 e-mail that he has brought this issue to the attention of many people over the past five or six years, with no action being taken to address it.

What’s more, Bloomberg reported that the plaintiffs, who claimed violations of federal civil racketeering laws, were seeking three times the amount of the alleged overcharges in their lawsuit.

And the lawsuit, according to the report, stated that among the parties FedEx has charged residential delivery fees to include Bank of America Corp. and Toyota Motor Credit Corp., among others.

An industry source whom declined to be identified told LM in December that this is not the first time he has heard of this practice, adding that anecdotally he has heard of FedEx deploying this practice more so than other carriers.

In describing a typical example of how the overcharging occurs, he said a FedEx driver arrives at a business customer’s location, where it does not have a signature on file. When delivering to a business, a driver cannot leave a package without a signature or a signature being on file.

“If a driver arrives to drop off a package and the business is closed or the person whom is supposed to sign for it is not there, he or she may put a release on it not realizing a residential surcharge fee is applied to the customer,” the source said. “This is typically done so a driver does not have to return later to redeliver the package and don’t realize that the sender is now paying a residential surcharge for that delivery.”

“One of the significant benefits of the settlement is that FedEx has agreed to end many of the practices we believe resulted in improper delivery charges,” Steven Rosenwasser, an attorney for the plaintiffs, in the Bloomberg report.

A FedEx spokesperson acknowledged in an e-mail to Bloomberg that the parties had reached a settlement in the case.

The report added, though, that FedEx contended the plaintiffs would have been barred from pursuing their claims in a class action by provisions in the FedEx Service Guide and would also have been barred from pursuing settlements beyond 60 days after an alleged overcharge, according to FedEx’ lawyers.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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