A federal court fined UPS almost $250 million for delivering untaxed cigarettes from unlicensed shippers in the City and State of New York.
The court summarily rejected the delivery giant’s contention that its large size and compartmentalized organizational structure made it impossible for UPS to knowingly violate New York laws.
The court cited copious circumstantial evidence demonstrating UPS’s apparent indifference to making even minimal efforts to comply with New York’s regulatory expectations.
The court also noted that UPS later took real efforts to identify and curb the shipment of untaxed cigarettes and tobacco products after the lawsuit was filed.
“The federal court’s ruling reinforces the principle that logistics companies, like other corporate defendants, are charged with being conversant in the regulations that apply to their industry,” says attorney Robert M. Campobasso of the law firm of Wilson Elser Moskowitz Edelman & Dicker.
“Courts will not tolerate willful ignorance and they are prepared to perform a case-specific analysis of all available circumstantial evidence as to the compliance or noncompliance of logistics companies with state and local regulations.”
The ruling also establishes that federal courts won’t excuse a corporate defendant that attempts to rely on its size and organizational structure to demonstrate that a lack of knowledge made it avoid regulatory compliance, he adds.
The court also was willing to consider evidence of every aspect of UPS operations from the executive level down to the activity of its truck drivers, and impute the collective knowledge of each part of the company to the company as a whole.
Above all, Campobasso stresses, the decision shows that logistics companies must approach all of their operations with sensitivity to federal, state and local regulations or risk the assessment of substantial, and perhaps debilitating penalties.
