National Association of Greeting Card Publishers v. United States Postal Service United Parcel Service of America, Inc v. United States Postal Service, s. 81-1304

Decision Date22 June 1983
Docket Number81-1381,Nos. 81-1304,s. 81-1304
Citation462 U.S. 810,103 S.Ct. 2717,77 L.Ed.2d 195
PartiesNATIONAL ASSOCIATION OF GREETING CARD PUBLISHERS, Petitioner, v. UNITED STATES POSTAL SERVICE, et al. UNITED PARCEL SERVICE OF AMERICA, INC., Petitioner, v. UNITED STATES POSTAL SERVICE, et al
CourtU.S. Supreme Court
Syllabus

Section 3622(b) of the Postal Reorganization Act (Act) provides that the Postal Rate Commission shall recommend rates for the classes of mail in accordance with nine factors, the third of which (§ 3622(b)(3)) is "the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type." In reviewing the ratemaking proceedings involved here, the Court of Appeals for the Second Circuit—contrary to earlier decisions of the Court of Appeals for the District of Columbia Circuit in reviewing prior ratemaking proceedings—held that the Act does not require the maximum possible use of cost-of-service principles, including allocation of costs on unverified inferences of causation, but permits use of other approaches, including the Rate Commission's original two-tier approach under which the rate floor for each class of mail was established by first determining the portion of the Postal Service's total costs verifiably caused by ("attributable to") that class of mail, and then "reasonably assigning" remaining costs to the various classes of mail on the basis of the other noncost, discretionary factors set forth in § 3622(b).

Held:

1. Although the Act divides ratemaking responsibility between the Rate Commission and the Postal Service, the legislative history and the Act's structure demonstrate that ratemaking authority was vested primarily in the Rate Commission. Thus, its interpretation of § 3622(b) is due deference. Pp. 820-821.

2. In enacting the Act to divest itself of its previous control over setting postal rates, Congress was concerned about the influence of lobbyists and resulting discrimination in rates among classes of postal service, but it did not intend to require maximum use of cost-of-service principles or to eliminate the ratesetter's discretion as to the methods for assigning costs; it simply removed the ratesetting function from the political arena. The legislative history does not suggest that Congress viewed the exercise of discretion as an evil in itself. Pp.821-823.

3. The Rate Commission's two-tier approach is a reasonable construction of § 3622(b)(3). The two-tier approach—one tier based on causation and the second tier based on other factors—is consistent with the statutory language and is supported by the legislative history. Pp. 823-825.

4. The statute requires attribution of any costs for which the source can be identified, but leaves it to the Rate Commission, in the first instance, to decide which methods provide reasonable assurance that costs are the result of providing one class of service. Pp. 825-833.

(a) The Act does not dictate a specific method for identifying causal relationships between costs and classes of mail, but envisions consideration of all appropriate costing approaches. Pp. 825-826.

(b) The Rate Commission acted consistently with the statutory mandate and Congress' policy objectives in refusing to use accounting principles lacking an established causal basis. On its face, § 3622(b)(3) does not deny to the expert ratesetting agency the authority to decide which methods sufficiently identify the requisite causal connection between particular services and particular costs. The legislative history supports the Rate Commission's view that when causal analysis is limited by insufficient data, the statute envisions that the Rate Commission will press for better data, rather than construct an "attribution" based on unsupported inferences of causation. Pp. 826-829 .

(c) Because the Rate Commission has decided that methods involving attribution of long-term and short-term variable costs reliably indicate causal connections between classes and postal rates, the Act requires that they be employed. But the Act's language and legislative history support the Rate Commission's position that Congress did not intend to bar the use of any reliable method of attributing costs. Pp. 829-832.

(d) A statement in the legislative history indicating that the rate floor for each class of mail should consist of short-term variable costs does not demonstrate that the Rate Commission's inclusion of long-term variable costs, and consideration of other methods of identifying causation, are inconsistent with the statutory mandate or frustrate Congress' policy. The statute's plain language and prior legislative history indicate that Congress' broad policy was to mandate a rate floor consisting of all costs that could be identified, in the Rate Commission's view, as causally linked to a class of postal service. Pp. 832-833.

663 F.2d 1186 (2nd Cir.1981), affirmed and remanded.

Bernard G. Segal, Philadelphia, Pa., for petitioner in No. 81-1381.

Matthew S. Perlman, Washington, D.C., for petitioner in No. 81-1304.

John H. Garvey, Lexington, Ky., for respondents in both cases.

Justice BLACKMUN delivered the opinion of the Court.

This case arises out of the ost recent general postal ratemaking proceeding, the fifth under the Postal Reorganization Act. At issue is the extent to which the Act requires the responsible federal agencies to base postal rates on cost-of-service principles.

I
A.

When, in 1970, Congress enacted the Postal Reorganization Act (Act), 84 Stat. 719, 39 U.S.C. § 101 et seq., it divested itself of the control it theretofore had exercised over the setting of postal rates and fees. The Act abolished the Post Office Department, which since 1789 had administered the Nation's mails. See Act of Sept. 22, 1789, ch. 16, 1 Stat. 70. In its place, the Act established the United States Postal Service as an independent agency under the direction of an eleven-member Board of Governors. 39 U.S.C. §§ 201, 202.1 The Act also established a five-member Postal Rate Commission (Rate Commission) as an agency independent of the Postal Service. § 3601.

Basic to the Act is the principle that, to the extent "practicable," the Postal Service's total revenue must equal its costs. § 3621. Guided by this principle, the Board of Governors, when it deems it in the public interest, may request the Rate Commission to recommend a new rate schedule. § 3622. After receiving the request, the Rate Commission holds hearings, § 3624(a), and formulates a schedule, § 3624(d). Section 3622(b) provides that the Rate Commission shall recommend rates for the classes of mail 2 in accordance with nine factors, the third of which is "the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service rea- sonably assignable to such class or type." 3 The Governors may approve the recommended rate schedule, may allow it under protest, may reject it, or, in limited circumstances, may modify it. § 3625. The Governors' decision to order new rates into effect may be appealed to any United States court of appeals. § 3628.

Questions confronting us in this case are whether the Rate Commission must follow a two-tier or a three-trier process in setting rates, and the extent to which the Rate Commission must base rates on estimates of the costs caused by providing each class of mail service.

B

In its first two ratemaking proceedings under the Act, the Rate Commission determined that § 3622(b) establishes a two-trier approach to allocating the Postal Service's total revenue requirement. See Postal Rate Commission, Opinion and Recommended Decision, Docket No. R74-1, pp. 4, 91-93 (1975); 4 PRC Op. R71-1, pp. 39-41 (1972). Under this approach, the Rate Commission first must determine the costs caused by ("attributable to") each class of mail, § 3622(b)(3), and on that basis establish a rate floor for each class. PRC Op. R74-1, pp. 92, 93, 110. The Rate Commission then must "reasonably assign," see § 3622(b)(3), the remaining costs to the various classes of mail on the basis of the other factors set forth in § 3622(b). See PRC Op. R74-1, pp. 91-94.

In the first proceeding, the Rate Commission concluded that the Act does not dictate the use of any particular method of identifying the costs caused by each class. PRC Op. 71-1, pp. 42-47. Without committing itself to any theory for the future, it chose to attribute those costs shown to vary with the volume of mail in each class over the "short term"—the period of a single year.5 Although it considered other methods, it found the short-term approach to be the only feasible one, given the limited data developed by the Postal Service. Id., at 47-62.

In the second proceeding, the Rate Commission again viewed the choice of a costing system as within its discretion. PRC Op. R74-1, pp. 92-93, 127. Although the Postal Service contended that short-term costs should again control attribution, the Rate Commission determined that it could reliabily attribute more costs through a long-term variable costing analysis. That method attributes costs by identifying cost variations associated with shifts in mail volume and with shifts in the Postal Service's capacity to handle mail over periods of time longer than one year. Id., at 111-112, 126-127. The Rate Commission did not go beyond attributing long-run variable costs, because the statute forbids attribution based on guesswork, see id., at 110-111, and because the Rate Commission was unable to find "any other reliable principle of casuality on [the] record," id., at 94. The Rate Commission urged the development of improved data for future proceedings, so that it could identify more causal relationships, and thereby attribute more costs. Id., at...

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