Cigarette Trafficking

City of New York and The People of the State of New York v. Federal Ground Package System Inc. and Federal Express Corp. Civil Action No. 13-cv-9173-ER (ongoing)

New York City and the State of New York filed an amended complaint on March 31, 2014 against FedEx, alleging that FedEx unlawfully shipped contraband cigarettes in violation of state and federal laws. In their complaint plaintiffs allege that FedEx “knowingly delivered” over 140 tons of cigarettes to residential consumers ordered over the intent or by mail from cigarette traffickers, including the Shinnecock Smoke Shop located on the Shinnecock Indian reservation in South Hampton, New York (among others). These contraband cigarettes were delivered throughout the state. Plaintiffs seek penalties and damages under multiple federal and state laws including the Contraband Cigarette Trafficking Act (CCTA), the Prevent All Cigarette Trafficking Act (PACT Act), the Racketeer Influenced and Corrupt Organizations Act (RICO), New York Public Health Law, and Assurance of Compliance with the New York State Attorney General.

Prior to this lawsuit, FedEx entered into an “assurance of Compliance” (AOC) with the state’s Attorney General in 2006. The AOC required FedEx to comply with New York State law that prohibits the delivery of cigarettes to residences, ensure that controls were in place so these deliveries no longer took place, and established a $1,000 penalty per violation. Despite the AOC, the complaint alleges that FedEx continued these shipments in violation of the AOC, New York State law, and federal law since the cigarettes that were delivered did not have the required tax stamps reflecting New York cigarette taxes. The complaint also alleges that since there were multiple shipments of unstamped cigarettes FedEx engaged in a pattern of racketeering activity in violation of RICO, the federal anti-racketeering law. Further, shipments that took place after June 29, 2010 violated the PACT Act, which became effective on that date, because cigarettes shipped were not accompanied with a statement explaining that that federal law requires payment of all excise taxes and compliance with licensing and tax stamping obligations.

The relief sought by plaintiffs includes an injunction to stop any further deliveries into New York State and New York City, require FedEx tobacco deliveries be monitored to ensure compliance with federal and state law, and to recover damages and penalties under various federal laws, state law, and the AOC. This amended complaint follows an initial complaint filed by New York City, which New York State recently joined and expanded upon with this amended complaint. The case is ongoing.