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FedEx overcharged customers for years, internal email says

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FedEx Corp. has been “systematically overcharging” customers by billing businesses and government offices at higher residential rates, a company sales executive said in an internal email unsealed in a lawsuit.

“I have brought this to attention of many people over the past five or six years, including more than one managing director, and no action has been taken to address it,” Alan Elam wrote in an email on Aug. 2, 2011. “My belief is that we are choosing not to fix this issue because it is worth so much money to FedEx,” Elam said in a separate email that day.

The emails were unsealed Monday in a class-action, or group, lawsuit claiming FedEx Corp. (NYSE: FDX) and FedEx Corporate Services Inc. overcharged commercial and government customers as much as $3 each for millions of packages delivered. The plaintiffs, who claim violations of federal civil racketeering laws, seek three times the amount of the alleged overcharges in their lawsuit.

“We allege that FedEx has and continues to engage in a pattern of intentionally charging its customers residential delivery fees for deliveries to obviously non-residential addresses such as courthouses, government offices and banks,” Steven J. Rosenwasser, a lawyer for the plaintiffs, said in an interview.

Residential rates

FedEx, based in Memphis, Tenn., has charged residential rates for deliveries to the U.S. Citizenship and Immigration Office, Bank of America Corp. (NYSE: BAC), Toyota Motor Credit Corp. and the National Passport Processing Center, according to the amended complaint filed Monday in the lawsuit.

“Perhaps most telling, on at least 70 separate occasions, FedEx improperly charged a residential delivery surcharge to its customers for deliveries to FedEx’s own headquarters,” according to the complaint.

The lawsuit, filed in federal court in Memphis in 2011 on behalf of a national class of consumers, also seeks an injunction barring FedEx from charging commercial customers at residential rates.

FedEx spokeswoman Carla Boyd wasn’t immediately available to comment on the allegations Tuesday and other public relations officials didn’t immediately return voice and email messages seeking comment.

The Elam emails point to the company’s internal knowledge of overcharging, lawyers suing the company said. The emails were initially classified by FedEx as confidential and unsealed by court order Monday.

‘Unlawful surcharges’

“Defendants’ own internal documents prove that defendants have known for years that they are unlawfully charging residential surcharges when they do not apply, but have permitted the unlawful surcharges to continue because they generate substantial illicit profits,” Rosenwasser and other plaintiffs’ attorneys said in an amended complaint filed Monday after the order.

“We believe that FedEx’s own emails show that the overcharges were not an accident or error, but rather an intentional decision to employ a system that overcharged customers,” Rosenwasser said Monday in an email.

Elam said he became aware of a problem in 2008, according to the emails. “It became clear to me at this time that we had a systemic problem that was likely causing overcharges for thousands of our customers, and that the dollar value was huge,” Elam wrote in an Aug. 12, 2011, email to Daniel Mullally, FedEx senior vice president for sales.

Three superiors

Elam said he brought the issue to the attention of three of his superiors, including his managing director. “In conversations with each, I used the language, ‘This is a huge class-action lawsuit waiting to happen.’ None of them have ever reported back taking any action to elevate this issue,” Elam wrote.

“FedEx has been systematically overcharging our customers for services that we know we did not provide, and we have been doing so for many years,” Elam said.

In a prior email attached to this string, Mullally told Elam that he didn’t know about any possible overcharging.

“Quite frankly was not aware of this but certainly I understand the gravity of the situation so let me involve Solutions, Customer Service and Billing to see what we are doing to resolve,” Mullally wrote. “Thanks for bringing to my attention.”

Chris Suhoza, vice president of solutions at FedEx, responded to Mullally and Elam: “Alan rest assured your concerns and those of others in this area have not gone unheard. We are working this customer experience issue through ...” The rest of this sentence remained redacted, or blacked out.

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

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