The city of New York is suing FedEx, saying the company illegally delivered tons of untaxed cigarettes from a distributor based on a Long Island Indian reservation.
The suit was filed Monday at a federal court in Manhattan.
The city is accusing FedEx of knowingly violating the terms of a 2006 agreement with New York's attorney general in which the company promised to stop all deliveries of mail-order cigarettes to state residents.
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FedEx later banned cigarette shipments nationwide.
But the city says that even after that deal was signed, FedEx continued to ship cigarettes from select dealers. Those included the Shinnecock Smoke Shop on eastern Long Island.
FedEx says the city's claims are "overstated and not founded in law."
The phone rang unanswered Monday evening at the Shinnecock Smoke Shop.