FedEx Corp. has reached an out-of-court settlement with a class of plaintiffs over allegations that FedEx overcharged commercial customers by misclassifying their shipments as residential deliveries to extract higher surcharges from the shippers.
Both FedEx and Steven J. Rosenwasser, an Atlanta attorney representing two FedEx customers—law firms in Oakland, Calif., and Alpharetta, Ga., an Atlanta suburb—confirmed the out-of-court settlement. Rosenwasser said today that the parties are finalizing the appropriate documentation and that details of the settlement will be disclosed probably within the next one to two weeks.
A federal district court in Memphis, Tenn., must first approve the settlement on a preliminary basis. Notice is then given to members of the class, and then the court issues a final approval.
Last December, attorneys filed a 170-page complaint charging that Memphis-based FedEx and its corporate support division, FedEx Services, illegally mis-rated tens of millions of commercial transactions as residential deliveries so it could collect millions of dollars in illicit overcharges. The behavior went on for years despite repeated warnings from inside the company that it had become a systemic issue that was actually being encouraged by executives, according to the allegations.
The 2012 complaint was filed under the federal Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO. If a civil action under RICO is successful, a plaintiff or plaintiffs can collect "treble damages," which are damages tripling the amount of actual and compensatory damages.
The legal dispute began in February 2011, when the Alpharetta firm, which specializes in immigration law, filed a breach of contract suit against FedEx and FedEx Services. The law firm said the carrier and the unit misclassified commercial shipments as residential deliveries to collect higher surcharges.
Residential surcharges are generally higher than commercial surcharges because residential deliveries are deemed more costly for the carrier to make because the locations are often harder to reach and there is a lack of delivery density.
Delivery surcharges are one of many "accessorial fees" levied by parcel carriers to offset the cost of services beyond basic pickups and deliveries.