264 F.3d 1071 (Fed. Cir. 2001), 01-5075, Emery World Wide Airlines v. United States

Docket Nº:01-5075
Citation:264 F.3d 1071
Party Name:EMERY WORLDWIDE AIRLINES, INC., Plaintiff-Appellant, v. UNITED STATES Defendant-Appellee, and FEDERAL EXPRESS CORPORATION, Defendant-Appellee.
Case Date:August 31, 2001
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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264 F.3d 1071 (Fed. Cir. 2001)

EMERY WORLDWIDE AIRLINES, INC., Plaintiff-Appellant,

v.

UNITED STATES Defendant-Appellee,

and

FEDERAL EXPRESS CORPORATION, Defendant-Appellee.

No. 01-5075

United States Court of Appeals, Federal Circuit

August 31, 2001

Appealed from: United States Court of Federal Claims Judge Christine O. C. Miller

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[Copyrighted Material Omitted]

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Frederick W. Claybrook, Jr., Crowell & Moring LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief was W. Stanfield Johnson. Of counsel on the brief were David P. Hendel, and Claude P. Goddard, Jr., Wickwire Gavin, P.C., of Vienna, Virginia.

Kyle Chadwick, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellee United States. With him the brief were Stuart E. Schiffer, Acting Assistant Attorney General; and David M. Cohen, Director. Of counsel on the brief was Eric Scharf, Managing Counsel, U.S. Postal Service, of Washington, DC. Of counsel was Mark A. Melnick, Attorney.

David S. Cohen, Cohen Mohr LLP, of Washington, DC, for defendant-appellee Federal Express Corporation. Of counsel on the brief was Connie Lewis Lensing, Federal Express Corporation, of Memphis, Tennessee.

Before NEWMAN, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and GAJARSA, Circuit Judge.

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GAJARSA, Circuit Judge.

DECISION

On January 10, 2001, the United States Postal Service ("USPS") awarded Federal Express Corp. ("FedEx") a seven-year contract valued at approximately $6.36 billion. Under the provisions of this contract, FedEx agrees to provide air transportation network services to deliver the USPS's Express, Priority, and First Class mail. The USPS negotiated this contract with FedEx on a "sole-source" basis; that is, the USPS did not solicit competitive bids. Emery Worldwide Airlines, Inc. ("Emery"), an air transportation provider that currently transports postal mail under certain air service contracts with the USPS, filed an action in the United States Court of Federal Claims ("Court of Federal Claims" or "trial court") contesting the USPS-FedEx contract award. After determining that it had subject matter jurisdiction, the trial court granted the government's motion for summary judgment upholding the contract and denied Emery's cross-motion for summary judgment, Emery Worldwide Airlines, Inc. v. United States, 49 Fed. Cl. 211 (2001). We affirm.

BACKGROUND

The USPS currently uses a piecemeal system of "dedicated" air transportation networks to deliver Express, Priority, and First Class mail.1 A "dedicated" network uses aircraft that are operated exclusively for the transportation of a single customer's parcels, the USPS's mail in this case. Emery currently operates a fleet of dedicated aircraft under contracts with the USPS. At least six other dedicated system air transportation providers also currently carry Express, Priority, or First Class mail. Some First Class mail is also carried on non-dedicated commercial aircraft.

The USPS recognized that dedicated networks are inefficient and expensive. It also realized that commercial aircraft failed to deliver over 40% of postal mail on time. Therefore, the USPS sought to contract with a single air transportation provider that could provide a "shared" (or "shared-lift") system in which the provider would reliably, effectively, and affordably carry postal mail. A "shared" system aircraft provides transportation services for more than one customer. Such a system allows the USPS to take advantage of economies of scale, paying for only a portion of operating and overhead costs. A shared system also relieves the USPS from paying for an entire plane flight to a particular destination when it only requires transportation of a small amount of mail; in other words, a shared-lift system allows the USPS to "piggy-back" on a plane that already flies on a particular route.

In August 2000, the USPS hired PricewaterhouseCoopers, LLP ("PwC") to conduct a market assessment of the air transportation industry. With assistance from MergeGlobal, Inc., PwC developed an analysis (the "PwC Analysis"), which is dated January 7, 2001. In the Analysis, PwC used publicly available data to assess several carriers potentially available for the single-provider contract.2

By autumn, 2000, it was clear that the USPS was seriously considering awarding

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a contract to FedEx to provide the mail transportation services at issue. Indeed, on September 7, 2000, Postmaster General William Henderson held a press conference on the topic of "FedEx Strategic Alliance Discussions." At the end of the year 2000, the USPS had developed a transportation agreement with FedEx on a sole-source basis. The USPS never sought competitive bids from other carriers; rather it negotiated solely with FedEx.

On January 5, 2001, Emery filed an action in the Court of Federal Claims and moved for a temporary restraining order to enjoin the USPS from awarding a contract to FedEx for transportation of Express, Priority, and First Class mail. FedEx entered the case as an intervenor. The USPS moved to dismiss the case on three grounds: (1) Emery lacked standing because it was not an "interested party;" (2) the Court of Federal Claims lacked subject matter jurisdiction because the USPS is not a "federal agency" for purposes of the Tucker Act; and (3) the Court of Federal Claims lacked jurisdiction because the action could not be brought against the USPS in its own name. The trial court allowed Emery to amend its complaint to name the United States as a defendant and determined that Emery is an "interested party." The court deferred ruling on whether it possessed Tucker Act jurisdiction.

During a hearing on January 8, 2001, the United States presented a document entitled: "Justification for Noncompetitive Purchase with Federal Express Corporation" ("Justification"), which was signed on January 7, 2001 on behalf of the USPS. The Justification outlines nine USPS requirements for transporting Express, Priority, and First Class mail. These requirements include, inter alia: ability to decrease the USPS's reliance on dedicated aircraft and move toward a shared-lift network; nationwide coverage capacity; strong financial stability that is not overly dependant on the USPS for its total livelihood; and an infrastructure capable of tracking parcels. The Justification emphasizes the USPS's preference for a contractor that can provide a shared-lift network that will decrease its current operating costs and overhead outlays.

The Justification also describes options the USPS had under its internal guidelines, the "Purchasing Manual," for procedures it could use to purchase transportation services. One option available was an open, competitive bidding procedure. Based on its extensive experience in awarding competitively bid contracts, the USPS in its Justification explained that such a procedure was not feasible for the contract at issue. The USPS indicated that competitive bidding would take between one and two years and would require substantial expenditures to design an appropriate network for each viable competitor before it could establish a definitive basis for pricing. The Justification also provided that under the Purchasing Manual, instead of conducting a competitive bidding procedure, the USPS could select a single supplier and negotiate a contract with it.3 This negotiation procedure was followed by the USPS in developing the contract with FedEx.

The Justification then indicates that six carriers, including Emery and FedEx, had existing national air networks potentially large enough in geographical scope to perform the contract for Express, Priority, and First Class mail. As evidenced by the Justification, the USPS considered

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each of these potential providers. In describing Emery, the USPS noted that Emery possesses a fleet of only eighty-seven planes, which are on average thirty-one years old and are likely to depreciate rapidly and require significant maintenance costs. The USPS also indicated that it was unlikely Emery could meet the USPS requirements at a cost-effective price without relying on USPS payments for a significant portion of its revenue. The USPS further recognized that Emery has only one-third of the daytime flight capacity required by the USPS and only flies to sixty cities (only sixty percent of which overlap with the existing USPS network) although the USPS required transport to at least sixty-five cities.

After analyzing all six carriers, including Emery and FedEx, the USPS in the Justification remarked that FedEx is "uniquely situated" to meet the USPS's needs. Further, the Justification concludes that a "non-competitive award to FedEx is so compelling that competition . . . would not be in the best interests of the [USPS]."

The USPS attached the PwC Analysis to the Justification as an appendix. In its Analysis, PwC screened out potential suppliers that did not meet particular USPS requirements. These requirements were categorized into seven "filters," which closely mirror the Justification requirements. Emery was "filtered" from consideration after the second filter-national geographic scope, which considers number of airports served, airport overlap with the existing USPS network, and ability of a carrier to cost effectively serve additional airports. After the sixth filter in the PwC Analysis, only FedEx remained. Accordingly, both the USPS in the Justification and PwC in its Analysis determined that FedEx is best suited to meet the USPS's needs for the contract at issue. Notably, the PwC Analysis also demonstrates that Emery possesses a very small market share of non-postal goods transport services...

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