UPS Faces Class Action on Fuel Charges

DENVER (CN) - A federal RICO class action claims that United Parcel Service for years has charged customers a premium to ship packages by air while actually shipping them by truck to save money on fuel and add to its bottom line. The class claims the "Air-In-Ground program" has earned UPS "hundreds of millions of dollars" in ill-gotten gains since 1995.

Lead plaintiff Arapahoe Hyundai of Denver says that the purpose of the Air-In-Ground program is to "collect the higher price charged for air transportation while actually transporting packages more cheaply by ground."

The class claims that UPS charges fuel surcharges for air shipping even if it ships the packages by truck.

UPS denied the allegations and said the lawsuit is "baseless."

"Every package we send is transported in some part by ground," said Susan Rosenberg, a UPS spokeswoman in Atlanta.

Rosenberg said the company's standard service contract states that UPS "reserves the right to use any mode of transportation," and that pricing for package delivery is based not on mode of delivery but on the "service level."

But Arapahoe Hyundai's complaint states that, compared to air shipment, shipping by ground "constitutes a materially different level of service." Shipping by air costs two to three times more than shipping by ground, according to the complaint.

"When a customer selects the level of service (air or ground) for his package, he does not know that UPS has already pre-determined whether his air package will actually be shipped by air or ground," the complaint states. "UPS does not tell the customer his air package will be shipped by ground or that he will be paying a higher price for a level of service he will not receive."

Rosenberg says that the company has been "very openly talking about shifting some packages from air to ground" to minimize its carbon footprint. She said on Thursday that the company had not yet been served with the lawsuit but contests the charges.

Arapahoe Hyundai seeks damages for breach of contract, fraudulent inducement, fraudulent nondisclosure, intentional misrepresentation and other charges.

It seeks treble damages, an injunction and restitution.

It is represented by Kirk Tresemer with Irwin & Boesen in Denver.

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