FedEx Ground is suing one of its largest contractors, alleging he lodged “false and misleading statements” against it to prop up his own business.
The parcel delivery giant on Friday filed a lawsuit against Spencer Patton’s Tennessee-based Route Consultant, which previously operated 225 routes for FedEx Ground. Patton’s contracts on those routes were also severed Friday.
FedEx had remained largely silent to Patton’s public criticisms of the company, but the lawsuit and route cuts represent a significant strike back against the contractor as it protects a business that generated $33.2 billion in revenue for the fiscal year ended May 31.
FedEx accused Patton in its complaint, filed in U.S. District Court for the Middle District of Tennessee, of “creating a fictionalized crisis” between FedEx and its contractors “as an advertisement for the purported need for Route Consultant’s consultancy and other services.” FedEx went on to accuse Patton of having “exaggerated and misrepresented the purported financial hardships” of contractors.
Patton called the lawsuit an attempt to silence anyone from speaking with the media.
“In my keynote at Contractor Expo last weekend, I noted that fear grows in the darkness and now this story is getting a ton of light in the public’s eye,” Patton said in a statement Friday in response to the lawsuit. “I am not afraid of a lawsuit from FedEx. I knew when I started speaking on behalf of small business owners in the community that a lawsuit was a likely weapon FedEx would deploy.”
Patton also confirmed the severing of his routes in a separate announcement sent out Friday evening, saying 225 jobs have been lost as a result.
“My public statements were clearly an option of last resort after months of attempting to work through these issues privately with FedEx Ground partners,” Patton said. “In my letters and videos I called on FedEx Ground to listen to its own network—to understand the degree of financial distress widely experienced among the small business owners—and the broad affirmation from the contractor community invigorated me to continue the push.”
Through his LinkedIn account, Patton said last week that few stories manage to “unite both sides of the aisle… but one of small business, inflation, and supply chain is bringing everyone’s full focus to this story.”
Patton had been vocal in the weeks leading up to the lawsuit, announcing the formation of the Trade Association for Logistics Professionals (TALP) as a nonprofit aimed at connecting FedEx Ground contractors and other logistics workers. Route Consultant also hosted a Contractor Expo Aug. 20-21 in Las Vegas during which Patton delivered a keynote address criticizing Fedex Ground’s business model for not working with contractors, such as himself, to renegotiate contracts and engaging in money-losing strategies, such as Sunday delivery.
FedEx accused Patton of pushing other contractors to renegotiate their contracts “and then to position himself on behalf of Route Consultant in the middle and as a beneficiary of those renegotiations.”
Route Consultant offers consulting, brokerage and educational courses on running a FedEx business to FedEx service providers.
While FedEx contractors may have contracts with the company for delivery routes, they can also strike their own contracts with businesses that provide the actual deliveries and transportation. There’s also an after-market where routes can be bought and sold, which is where a brokerage such as Route Consultant could come into play as an intermediary.
FedEx said it agreed to about 40 percent of the renegotiation requests that have come in since July 1, with more than 90 percent of those meetings leading to a new contract that included higher payments, according to the lawsuit. Some of Patton’s contractors are included in that group, the FedEx complaint said.
Contractors providing the actual parcel pickup and delivery, known as independent service providers, and those shuttling packages between hubs and stations, known as transportation service providers, earn an average of $2.3 million in revenue annually, according to the FedEx lawsuit. That figure, the delivery company said, reflects about a doubling of sales over a four-year period.
Patton, in his Vegas keynote at the Contractor Expo, raised the possibility of being unable to continue on with his routes after Nov. 25 of this year if he was unable to renegotiate the financial terms of his contract. The company said in its complaint it took those remarks as an attempt to “influence a group walkout or boycott” on Black Friday, its highest-volume day.
The statements have created concerns among customers and the logistics giant said it is aware of competitors looking to “exploit” the situation to “poach existing [FedEx] customers,” the lawsuit said.
A company spokesperson aimed to address any customer concerns about FedEx’s peak-season service, confirming the delivery network’s strength to Sourcing Journal after Patton’s Vegas remarks.
“As we continue to work with service providers, we are confident that the structure of the FedEx Ground operating model is solid, and that the vast majority of service providers are committed to delivering an outstanding peak for our customers,” a FedEx spokesperson told Sourcing Journal. “As always, we are also prepared to ensure service continuity through the implementation of contingencies that include short-term agreements with existing service providers as well as purchased transportation where appropriate.”