FedEx sues ground contractor, cancels its routes

FedEx Corp.

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sued one of the largest distribution contractors in the US and canceled its routes, saying the businessman orchestrated a campaign to promote his own consulting company, discrediting the distribution giant.

Spencer Patton, a FedEx contractor based in Brentwood, Tenn., recently hosted a conference for FedEx contractors and posted a YouTube video inviting contractors to join a trade association he created. He called on FedEx to renegotiate contracts with its contractors and threatened to stop delivering packages on Black Friday, a crucial time for e-commerce orders.

In a 29-page complaint filed Friday in the US District Court for the Middle District of Tennessee, FedEx said Mr. Patton has misrepresented the financial hardships of contractors whose businesses deliver packages for FedEx’s ground division.

The suit, which names Mr. Patton’s consulting firm as a defendant, says Mr. Patton is encouraging contractors to renegotiate their contracts to bolster his own consulting firm and is seeking to disrupt the firm’s operations on Black Friday. FedEx is seeking a permanent injunction and unspecified monetary damages.

Later on Friday, Mr. Patton said he was informed by FedEx that he was “no longer part of the FedEx Ground contractor network.”

“This move to cancel our contracts is a clear case of a $60 billion company silencing anyone who has a voice,” Mr. Patton said, adding that he had to lay off 225 of his employees.

FedEx said it exercised its rights to immediately end the contracts, which it said make up less than 0.5 percent of FedEx Ground’s 60,000 routes. The company said it had drawn up contingency plans and did not expect any supply disruptions.

FedEx Ground does not deliver packages directly to homes and businesses. Instead, it pays thousands of independent contractors to hire their own drivers and buy their own trucks to deliver packages to designated areas.

FedEx says the company is confident in its ability to deliver packages this holiday season.


Photo:

Gabby Jones for the Wall Street Journal

Mr. Patton, a former hedge fund owner, said he ran 225 routes for FedEx Ground in the Midwest. He has also created other businesses that serve contractors, including Route Consultants, which provides courses in route planning, as well as brokerage services to contractors looking to expand or downsize.

This lawsuit is “to stop a logistics and shipping consulting company from spreading misinformation about our business to illegally promote their own business for financial gain,” said Jenny Robertson, a FedEx spokeswoman. He said the company is confident in its ability to deliver packages this holiday season.

Last weekend, more than 2,000 attendees, including contractors, attended an expo and party Mr. Patton hosted in Las Vegas. Mr. Patton made several speeches and reiterated his plan to cease operations on November 25 if FedEx did not make changes by then.

Since January, several contractors have sent letters to company officials, citing problems with FedEx’s shipping forecasts and higher costs for fuel, wages and vehicle maintenance. Contractors said they should receive a larger portion of the fuel surcharge that FedEx charges its customers.

FedEx said average annual contractor revenue has more than doubled over the past four years to $2.3 million. “Contrary to Mr. Patton’s false or misleading claims about the number of service providers allegedly in financial distress, [independent service providers] have sought mid-contract renegotiations for only about 10% of their 2022 agreements,” FedEx said in its lawsuit.

FedEx said in its lawsuit that Mr. Patton had only renewed some of his own contracts with the company in May and June.

Write to Esther Fung at esther.fung@wsj.com

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It appeared in the August 27, 2022 print edition as “FedEx sues major contractor, cancels its routes”.

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