Judge finds UPS liable to New York over
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[March 25, 2017]
By Jonathan Stempel
NEW YORK (Reuters) - A federal judge on
Friday held United Parcel Service Inc <UPS.N> liable for having
illegally shipped hundreds of thousands of cartons of untaxed cigarettes
in New York, depriving the state and New York City of millions of
dollars of taxes.
U.S. District Judge Katherine Forrest in Manhattan said the state and
city are entitled to compensatory damages and fines, and that UPS' "high
degree of culpability" meant "significant penalties" were appropriate.
"UPS largely relied on its size and weak internal procedures to excuse
blatantly culpable conduct," she wrote. "But there were many, many
people within UPS who consciously avoided the truth, for years."
The state and city had sought more than $872 million, and Forrest could
determine the award as soon as next month.
UPS was accused of having since 2010 shipped more than 683,000 cartons
of untaxed "contraband" cigarettes to unlicensed wholesalers, unlicensed
retailers and residences, often from smoke shops on Indian reservations.
The plaintiffs said this violated the Atlanta-based company's October
2005 agreement with the state not to ship cigarettes to unlicensed
dealers and individual consumers.
UPS was also accused of violating federal laws against racketeering and
cigarette trafficking, as well as New York's public health law.
In her 218-page decision, which followed a non-jury trial in September,
Forrest also declined the state's and city's request for injunctive
relief and to appoint a monitor, saying UPS had taken many steps to
avoid a recurrence.
UPS said in a statement that it was evaluating the decision, but pleased
that Forrest found its current tobacco compliance program "adequate."
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United Parcel Service (UPS) aircraft are loaded and unloaded with
air containers full of packages at the UPS Worldport All Points
International Hub in Louisville, Kentucky, U.S. on December 9, 2016.
REUTERS/John Sommers II/File Photo
Eric Schneiderman, the state's attorney general, in a statement
called the decision "a win for New York and a win for public
Zachary Carter, the New York City Corporation Counsel, said he was
also pleased with the decision.
Forrest also rejected UPS' argument to cap any payout, after the
company claimed it was blindsided at trial when the plaintiffs
sought an award nearly five times the roughly $180 million it had
The state and city are pursuing a similar lawsuit against UPS rival
FedEx Corp <FDX.N>, which is being overseen by U.S. District Judge
Edgardo Ramos in Manhattan. Any trial in that case is unlikely to
begin this year, court records show.
The case is State of New York et al v United Parcel Service Inc,
U.S. District Court, Southern District of New York, No. 15-01136.
(Reporting by Jonathan Stempel in New York; Editing by James
Dalgleish and Diane Craft)
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