Law Firm Files Counterclaims Against UPS and The UPS Store, Inc. on Behalf of 11-Store Franchise Owner; Allegations Include "Massive Fraud Perpetrated Upon the Public"

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On April 16, 2014, the law firm of Stephen J. Savva, P.C. filed papers in the U.S. District Court for the Southern District of New York alleging that UPS and its affiliates presided over a fraud perpetrated upon the public that generated millions of dollars in additional revenues for UPS, royalties for The UPS Store, Inc. and incentives for those franchisees who willfully participated. UPS, Inc. et al. v. Hagan, et al. (U.S. District Court, SDNY)(14-cv-1210-WHP).

Consumers are encouraged to confirm pricing and delivery guarantees online, keep detailed records of all shipping transactions and promptly report all cases of potential consumer fraud to the appropriate agencies.

According to recently filed court documents, the two owners of a 20% market share of "The UPS Store" franchise locations in Manhattan have responded to a lawsuit filed by The UPS Store, Inc. ("TUPSS"), United Parcel Service, Inc. and United Parcel Service of America, Inc. (collectively "UPS") with counterclaims and a third-party complaint seeking more than $50 Million in damages, plus punitive damages, costs, attorneys' fees and other relief. The papers were filed on April 16, 2014 in New York Federal Court in lower Manhattan in the action entitled, The UPS Store, Inc., et al. v. Robert Hagan, et al. (S.D.N.Y., 12-cv-1200-WHP).

The federal civil action was initially commenced by UPS on February 25, 2014. According to the complaint on file, UPS seeks money damages and other relief against Robert Hagan, Thomas Hagan and each of their jointly-owned corporate entities. The Hagans' responded last week by filing court documents denying all claims and asserting counterclaims against UPS and TUPSS for breach of contract, fraud, retaliation, tortious interference, unfair trade practices and multiple violations of consumer protection laws in New York and California. The court documents also include detailed allegations of alleged unethical business practices observed at other "The UPS Store" locations in Manhattan and California between October 2013 and January 2014.

According to the court-filed counterclaims, at the heart of the Hagans' counterclaims is an alleged November 12, 2013 meeting at TUPSS's corporate boardroom in San Diego. Court records state that the Hagans allege they notified senior TUPSS executives about questionable business practices they discovered while trying to improve their own business operations. According to the pleadings, the business practices allegedly reported by the Hagans involved franchisees "lying about the UPS Ground delivery guarantee"; "misleading customers about guaranteed delivery dates"; "upselling higher-price shipping options that offer no additional benefits to customers"; "concealing the existence of cheaper cost shipping services when requested by customers"; "adding inches to the dimensions of boxes"; "adding weight to boxes"; "overcharging customers more than the maximum allowable UPS retail rate"; and "charging customers for accessorial charges they did not request." According to the Hagans' lawsuit, they claim that in the weeks and months following the San Diego meeting, no action was taken by TUPSS or UPS to investigate and stop the questionable practices and instead, the Hagans became the target of retaliation and selective enforcement, which they believe ultimately destroyed their business. According to the Court documents, on February 5, 2014, UPS terminated the Hagans' franchise agreements and directed them to cease operations at each of their eleven locations.

According to the Hagans' attorneys Mark L. McKew and Stephen J. Savva, "good faith attempts to avoid litigation were exhausted with UPS's counsel prior to filing the counterclaims and third-party action." The attorneys further state that "because this is a matter of public concern with the potential to impact a large number of consumers, a press conference will be scheduled shorty to share additional details about the evidence collected by investigators." Consumers are encouraged to confirm pricing and delivery guarantees online, keep detailed records of all shipping transactions and promptly report cases of potential consumer fraud to the appropriate agencies.

For further information please contact Mark L. McKew, Esq. or Stephen J. Savva, Esq.

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Mark L. McKew, Esq.
Law Offices of Mark L. McKew
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since: 04/2009
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