NYC Sues Fedex Over Shipping Cigarettes

In what some see as Mayor Bloomberg's final stab at the tobacco industry, New York City today filed a massive lawsuit against Fedex for shipping cigarettes to private homes.

Monday's lawsuit was filed in the U.S. District Court in Manhattan and seeks $52 million of civil fines and unpaid taxes from FedEx, which is based in Memphis, Tennessee. According to the city, FedEx created a "public nuisance" through its partnership with Shinnecock Smoke Shop, located on the Shinnecock Indian Nation reservation in Southampton, N.Y., to ship untaxed cigarettes to residential homes. FedEx allegedly did so despite, and even while negotiating, a February 2006 agreement with then-New York Attorney General Eliot Spitzer to stop such deliveries in New York, an agreement later expanded to cover deliveries throughout the country. The city said FedEx delivered about 19.5 tons, or 55,000 cartons, of cigarettes to city residents in 9,900 shipments from 2005 to 2012 and deprived it of a $15 excise tax on each carton. A typical carton has 200 cigarettes. FedEx's activity violated various federal and state laws, including an anti-racketeering statute, the complaint said. The city wants FedEx to pay a $49.5 million fine, equal to $5,000 per shipment, plus $2.48 million representing triple the lost tax revenue.

RELATED:  With an average price-per-pack of $13-$14, New York has by far the highest cigarette prices in the nation, a fact that has spawned sprawling smuggling operations by organized crime syndicates.