FedEx Sues Ground Contractor, Cancels His Routes

In a 29-page complaint filed Friday in U.S. 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 the defendant, says Mr. Patton is encouraging contractors to renegotiate their contracts to boost his own consulting firm and seeking to disrupt the company’s operations on Black Friday. FedEx is seeking a permanent injunction and unspecified monetary damages.

Later 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 corporation silencing anyone with a voice,” said Mr. Patton, adding that he had to lay off 225 of his employees.

FedEx said it had exercised its rights to immediately stop the contracts, which it said constituted less than 0.5% of its 60,000 FedEx Ground routes. The company said it had contingency plans in place and didn’t expect any delivery disruptions.

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

Mr. Patton, a former hedge-fund owner, said he operated 225 routes for FedEx Ground in the Midwest. He has also built other businesses that cater to contractors, including Route Consultants, which provides lessons on how to schedule routes, as well as brokerage services for contractors seeking to expand or downsize.

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

Last weekend, more than 2,000 attendees including contractors attended an expo and party that Mr. Patton had organized in Las Vegas. Mr. Patton made a few speeches and repeated his plan to stop work on Nov. 25 if FedEx didn’t make changes by then.

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

FedEx said the average annual revenue of contractors 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 that purportedly are in financial distress, [independent service providers] have sought mid-contract renegotiations for only about 10% of their agreements in 2022,” FedEx said in its suit.

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

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