UPS 2005 Annual Report Download - page 29

Item 3. Legal Proceedings
We were named as a defendant in twenty-six now-dismissed lawsuits that sought to hold us liable for the
collection of premiums for reinsured excess value (“EV”) insurance in connection with package shipments since
1984. These actions were all filed after an August 9, 1999 U.S. Tax Court decision that the U.S. Court of Appeals
for the Eleventh Circuit later reversed. These twenty-six cases were consolidated for pre-trial purposes in a multi-
district litigation proceeding (“MDL Proceeding”) in federal court in New York. In addition to the cases in which
UPS was named as a defendant, there also was an action, Smith v. Mail Boxes Etc., against Mail Boxes Etc. and
its franchisees relating to UPS EV insurance and related services purchased through Mail Boxes Etc. centers.
That case also was consolidated into the MDL Proceeding.
In late 2003, the parties reached a global settlement resolving all claims and all cases in the MDL
Proceeding. In reaching the settlement, we and the other defendants expressly denied any and all liability. On
July 30, 2004, the court issued an order granting final approval to the substantive terms of the settlement. No
appeals were filed and the settlement became effective on September 8, 2004.
Pursuant to the settlement, UPS provided qualifying settlement class members with vouchers toward the
purchase of specified UPS services and agreed to pay the plaintiffs’ attorneys’ fees and costs. Other defendants
contributed to the costs of the litigation and settlement. The vouchers expired in July 2005 and the value of
services for which vouchers were redeemed totaled $5 million. On November 2, 2005, the court issued an order
awarding plaintiffs’ counsel fees and costs in the total amount of $3 million. The settlement did not have a
material effect on our financial condition, results of operations, or liquidity.
We are a defendant in a number of lawsuits filed in state and federal courts containing various class-action
allegations under state wage-and-hour laws. In one of these cases, Marlo v. UPS, which has been certified as a
class action in a California federal court, plaintiffs allege that they improperly were denied overtime, and seek
penalties for missed meal and rest periods, and interest and attorneys’ fees. Plaintiffs purport to represent a class
of 1,200 full-time supervisors.
We have denied any liability with respect to these claims and intend to vigorously defend ourselves in these
cases. At this time, we have not determined the amount of any liability that may result from these matters or
whether such liability, if any, would have a material adverse effect on our financial condition, results of
operations, or liquidity.
In addition, we are a defendant in various other lawsuits that arose in the normal course of business. We
believe that the eventual resolution of these cases will not have a material adverse effect on our financial
condition, results of operations, or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
None
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