NEW YORK (Reuters) - A U.S. judge on Wednesday dismissed a federal racketeering lawsuit claiming FedEx Corp overcharged customers by inflating package weights, and wrongly collecting customs duties on products sent to Canada from shippers instead of recipients.
U.S. District Judge Katherine Forrest in Manhattan said the FedEx Ground unit that imposed the charges was not “sufficiently distinct” from its parent and another unit to justify holding all three liable for violating the federal anti-racketeering law known as RICO.
NYBikerGear, a Putnam Valley, New York-based online seller of motorcycle apparel and accessories, claimed it was overcharged more than 150 times through inflated package weights, and a similar number through improper customs charges, according to court papers.
In a 21-page decision, Forrest said the fact that FedEx Ground was incorporated separately and based in a Pittsburgh suburb, while FedEx and its FedEx Corporate Services unit were based in Memphis, Tennessee, did not matter in the racketeering context, or affect NYBikerGear’s dealings with the company.
“If plaintiff’s theory of RICO distinctness were accepted, it would transform every routine allegation of fraud involving a company that uses the routine holding company/subsidiary structure at issue here into a RICO claim,” Forrest wrote. “That is not and should not be the law.”
The plaintiff, which is also known as U1it4less Inc, had sought triple damages for customers since 2007 over the alleged inflated weights, and since 2008 over the customs charges. It sued in March 2011. Another judge had dismissed other claims.
Michael Paleudis, a lawyer for the plaintiff, declined to comment.
FedEx, in a statement, said it is pleased with the decision, and that the plaintiff’s allegations were unfounded.
It is common for FedEx and rival United Parcel Service Inc, which together command much of the U.S. express package delivery market, to be accused of overcharges by customers.
RICO is short for the U.S. Racketeer Influenced and Corrupt Organizations Act. It is most commonly associated with organized crime prosecutions.
The case is U1it4less Inc v. FedEx Corp et al, U.S. District Court, Southern District of New York, No. 11-01713.
Editing by Jeffrey Benkoe and Lisa Shumaker