FedEx Reaches $21.5 Million Accord in Overcharging Suit

FedEx Corp. (FDX), the world’s largest cargo airline, will pay $21.5 million to settle a lawsuit over claims that it overcharged customers by billing for deliveries to businesses and governments at higher residential rates.

The settlement was filed July 26 in federal court in Memphis, Tennessee. A hearing on preliminary court approval is set for Aug. 1. The settlement covers a class of 200,000 customers, according to the filing.

FedEx was accused in the 2011 complaint of overcharging commercial and government customers as much as $3 each for tens of thousands of packages delivered. FedEx denied the overcharging allegations and said customers could avail themselves of a procedure for challenging the charges.

Under the settlement, FedEx “has agreed to no longer rely solely on a third-party database or customer designations to make business/residential classifications,” in addition to paying refunds, according to the filing.

“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, said today in a phone interview.

“The parties have reached a settlement in this case, which is subject to court approval,” Shea Leordeanu, a FedEx spokeswoman, said in an e-mailed statement.

Government, Businesses

FedEx charged residential rates to destinations including the U.S. Citizenship and Immigration Office in Chicago, a Bank of America Corp. (BAC) facility in Tampa, Florida, and the Safariland Group body armor company in Jacksonville, Florida, according to an amended complaint filed in December.

FedEx contended the plaintiffs would have been barred from pursuing their claims in a class action by provisions in the FedEx Service Guide. They would also have been barred from pursuing settlements beyond 60 days after an alleged overcharge, Memphis-based FedEx’s lawyers said.

FedEx agreed to settle “despite these provisions,” citing challenges to them by plaintiffs’ lawyers, according to the filing. “Absent settlement, this case is likely to take additional years to reach a final resolution,” FedEx and plaintiffs’ lawyers said in the filing, seeking court preliminary approval of the agreement.

The case is Gokare PC v. Federal Express Corp., 11-cv-02131, U.S. District Court, Western District of Tennessee (Memphis).

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Andrew Harris in Chicago at aharris16@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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