FedEx Corp. agreed to pay $21.5 million to settle a 2011 class action that alleged the world’s largest cargo airline overcharged non-residential customers – including businesses and governments – higher residential shipping rates.
The Memphis-based global shipping giant charges U.S. customers for express shipping service based upon the delivery destination. Non-residential destinations are charged a lower base price with surcharges added on if the destination is a delivery to a home or private residence.
The settlement was filed July 26 in the U.S. District Court for the Western District of Tennessee and covers a class of at least 200,000 customers, according to the court filing. The settlement agreement covers deliveries made from Aug. 28, 2008, to July 13, 2011.
FedEx Corp. has agreed to pay $21.5 million for a class action that alleged overcharging customers. (Daily News File)
A hearing on preliminary court approval is set for Thursday, Aug. 1.
The February 2011 complaint filed by a Georgia law firm accused FedEx of using a “flawed system for classifying delivery locations as residential or business addresses” that ultimately resulted in the shipping company overcharging commercial and government customers as much as $3 each for tens of thousands of delivery locations.
Court documents show law firm Manjunath A. Gokare PC, a practice that focuses on immigration law, complained FedEx Express overcharged the law firm when it signed a contract to ship time-sensitive immigration documents to a U.S. Citizen Immigration Services processing center in Vermont.
When a Gokare employee noticed the firm had been charged a higher residential rate, the employee contacted FedEx Express to correct the billing error, according to a legal filing. A FedEx call-center representative refused to adjust the rate from residential to commercial, as did a call-center supervisor. The law firm then filed a class action on behalf of the firm and all customers impacted by FedEx Express’ alleged billing mistakes, court documents show.
An amended compliant filed in December accused FedEx of also overcharging Bank of America Corp., a U.S. Citizenship and Immigration office in Chicago and a body armor company in Jacksonville, Fla.
The cargo airline agreed to the settlement despite denying the allegations and pointed to provisions of its customer service guide that bar class actions and require that invoice adjustments due to an overcharge be received within 60 days, according to the court filing.
Lawyers on behalf of FedEx argued in the filing that the case should not be classified as a class action because a case-by-case inquiry would have to be conducted to determine whether each of the millions of addresses in question was residential or non-residential.
“While plaintiffs (FedEx Corp.) strongly disagree and contend that the courier_designated_resi (the shipping designation) field in FedEx’s shipping data provides evidence as to whether each address was residential or non-residential, this issue would have to litigated in the absence of a settlement,” FedEx attorneys said in the proposed settlement agreement.
Under the terms of the settlement, FedEx agreed to no longer rely on a third-party database or customer designations to make business and residential classifications. When a customer indicates that a delivery address is residential on www.fedex.com, FedEx also has agreed to inform the customer that the delivery will result in a higher rate.
The Memphis-based company will pay about 100 percent of the un-refunded residential delivery charges for shipments in which a class member requested but did not receive a refund. Class members who did not request a refund will receive about 20 percent of the un-refunded residential delivery charges.