Cigarette Suit Against UPS Still Burning in NY

MANHATTAN (CN) - The United Parcel Service cannot dodge a lawsuit from New York City and state authorities accusing it of shipping thousands of cartons of untaxed cigarettes, a federal judge ruled on Wednesday.

Filed in February, the lawsuit estimated that UPS delivered more than 136 million illegal cigarettes.

Between 2010 and 2014, the company made more than 78,500 illegal shipments that cost the state $34 million in tax revenue, the complaint said.

New York Attorney General Eric Schnederman said that this violated the terms of a settlement agreement that UPS entered into with his office for past violations in 2005.

An undercover city investigator discovered the alleged breach by placing an order to a company located on the Seneca Indian Nation Reservation in Bason, New York, according to the complaint.

U.S. District Judge Katherine Forrest refused to dismiss multiple claims against UPS on Wednesday.

She noted that authorities alleged that UPS employees observed and picked up packages from smoke shops on Indian reservations, and the company delivered cigarettes for businesses that had been criminally prosecuted in federal courts for trafficking in contraband cigarettes.

"These allegations are sufficient to give rise to an inference of knowledge," she said.

A spokesman for the New York City Law Department said that the city was "pleased" that the court advanced its "most significant claims."

Scheiderman's spokesman Matt Mittenthal echoed that sentiment.

"We are pleased that the court has upheld the core of the state's claims and we will continue this suit, and others, to crack down on the illegal shipment of untaxed cigarettes which exacerbate the public health catastrophe caused by cigarette smoking," he said.

Forrest dismissed counts under the Prevent All Cigarette Trafficking Act and New York Public Health Law, from which she found UPS exempt.

Emphasizing the "number of claims" that the court dismissed, UPS said it would continue to "vigorously defend" against the allegations.

"Since 2005, UPS has continued to work with regulators on the issue," the company said in a statement that. "In fact, UPS agreed to stop delivering cigarettes to consumers nationwide at that time - a policy that went beyond the requirements of federal and state law."

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