“In this case, significant penalties are appropriate given the public harm specifically sought to be addressed by the statutes at issue and given the egregious and prolonged nature of UPS’s conduct,” U.S. District Katherine Forrest wrote. “The court is also troubled by UPS’s consistent unwillingness to acknowledge its errors; UPS has persisted in claiming it did nothing wrong.”
Setting the stage for a new chapter of the years-long battle at the Second Circuit, UPS vowed to fight Forrest’s findings.
“UPS is extremely disappointed in the court’s ruling and imposed penalties and we will vigorously appeal the decision,” spokeswoman Susan Rosenberg said in an email. “The court’s monetary award is excessive and far out of the bounds of constitutional limits, particularly given that the shipments at issue generated around $1 million in revenue.”
UPS disputes the argument by New York City and the state, which brought the joint enforcement action against it in 2015, that it should have know it was responsible for enforcing tobacco regulations.
Given that UPS corrected the behavior, it says the damages award is overly punitive.
“New York’s action sought to force UPS to serve in a quasi-law enforcement role which involved monitoring, inspecting and reporting package contents, which is not appropriate for a common carrier,” Rosenberg said. “UPS cannot be held to contractual obligations to which it never agreed. This case is not about a failure of compliance. The court found UPS in full compliance since 2015 and rejected the request for an injunction or appointment of a monitor. New York abandoned a collaborative system to identify and remove illegal cigarette shipments that worked well for years in favor of a lawsuit to seek a monetary windfall.”
Judge Forrest initially ruled against UPS in March after a bench trial but had withheld her determination of damages before now.
At a hearing shortly after the trial last year, an assistant New York attorney general pushed for the court to make UPS pay $825 million.
Forrest opted to award roughly $165 million to the state and $81 million to the city.
“Not only can it handle a hefty fine,” Forrest said of UPS, “only a hefty fine will impact such a large entity sufficiently to capture the attention of the highest executives in the company – executives who then, in a rational economic move, will cause changes in practice and procedures to be strictly maintained.”
The city and state sought penalties for 78,000 believed tobacco deliveries that UPS made to unauthorized sellers between 2010 and 2014.
Forrest notes that UPS was found to have made deliveries for 18 entities, but that UPS excluded most of these companies from the post-trial filing that was due in April.
“In sharp contrast to plaintiffs’ submission, defendant’s submission demonstrates a lack of cooperation and, frankly, odd abrasiveness,” Forrest wrote. “In an apparent reaction to this court’s liability decision against it, defendant refused to include a majority of the information requested by the court. Specifically, defendant provided its packages count with regards to only three entities: Smokes & Spirits; Seneca Cigars; and Jacobs Tobacco. Thus, this court deems defendant to have waived arguments relating to the calculations submitted by plaintiffs.”