United Parcel Service, Inc. v. US Postal Service

• Citation: 524 F. Supp. 1235
• Decision Date: 29 October 1981
• Docket Number: Civ. A. No. 81-453.
• Parties: UNITED PARCEL SERVICE, INC., et al., Plaintiffs, v. UNITED STATES POSTAL SERVICE, et al., Defendants.
• Court: U.S. District Court — District of Delaware

524 F. Supp. 1235

UNITED PARCEL SERVICE, INC., et al., Plaintiffs, v. UNITED STATES POSTAL SERVICE, et al., Defendants.

Civ. A. No. 81-453.

United States District Court, D. Delaware.

October 29, 1981.

COPYRIGHT MATERIAL OMITTED

Arthur G. Connolly, Connolly, Bove & Lodge, Wilmington, Del., for United Parcel Service, Inc., and United Parcel Service of America, Inc.; George P. Williams III, Robert L. Kendall, Jr., and John E. McKeever, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., of counsel.

Stephen E. Herrmann, Richards, Layton & Finger, Wilmington, Del., for Nat. Ass'n of Greeting Card Publishers; Matthew S. Perlman and Richard J. Webber, Arent, Fox, Kintner, Plotkin & Kahn, Washington, D. C., of counsel.

Joseph J. Farnan, Jr., U. S. Atty., and John X. Denney, Jr., Asst. U. S. Atty., Dept. of Justice, Wilmington, Del., Frances G. Beck, Daniel J. Foucheaux, Jr., and Gerald J. Robinson, Washington, D. C., for U. S. Postal Service.

Sue L. Robinson, Potter, Anderson & Corroon, Wilmington, Del., for Advertisers Distribution Services and Advertisers Postal Service Corp.; James N. Horwood, David R. Straus and John Michael Adragna, Spiegel & McDiarmid, Washington, D. C., of counsel.

OPINION

MURRAY M. SCHWARTZ, District Judge.

Plaintiffs, United Parcel Service, Inc., a New York corporation, United Parcel Service, Inc., an Ohio corporation, and United Parcel Service of America, Inc., a Delaware corporation (hereinafter collectively "UPS"), brought this action seeking a preliminary and ultimately a permanent injunction preventing the Postal Service from implementing rate changes ordered by decision of the Governors of the Postal Service ("Governors") dated September 29, 1981, and issued September 30, 1981. Presently before the Court are plaintiffs' motion for preliminary injunction and defendants' motion to dismiss.¹ These motions raise several important issues of first impression concerning the proper interpretation of both the ratemaking provisions of the Postal Reorganization Act of 1970 ("Act"), 39 U.S.C. § 101 et seq., and the limits of federal district court jurisdiction under that Act.

The Postal Reorganization Act

In general terms the Act created the Postal Service as an independent establishment of the Executive Branch of the Government. The Postal Service is directed by an eleven member Board of Governors ("Board") composed of nine Governors appointed by the President, and the Postmaster General and the Deputy Postmaster General, both of whom are appointed by the Governors. 39 U.S.C. § 202. As will be developed more fully, the Governors have some powers not given to the Board and the Board has some powers not given to the Governors. The Act also created a five member Postal Rate Commission ("Commission"). The Commission is a separate independent establishment of the Executive Branch of the Government and carries the initial obligation in ratemaking. See 39 U.S.C. §§ 3601, 3622; National Ass'n of Greeting Card Publishers v. United States Postal Service, 569 F.2d 570, 603 (D.C.Cir. 1976), consol'd case vacated and remanded on other grounds, 434 U.S. 884, 98 S.Ct. 253, 54 L.Ed.2d 169 (1977).

The Postal Service initiates the ratemaking process by requesting the Commission to submit a recommended decision on changes in a rate or rates of postage if it determines that such changes would be in the public interest and in accordance with the policies of the Act. 39 U.S.C. § 3622(a). The Commission must respond to such a request by submitting a recommended decision on the Postal Service's requested changes to the Governors within ten months after receiving the request.² 39 U.S.C. §§ 3622, 3624. If the Commission's recommended decision is not received within ten months, the Governors may adopt temporary rates which may not exceed the requested permanent rates. Such temporary rates remain in effect until terminated by the Governors, but in any event not longer than 150 days after the Commission issues its recommended decision. 39 U.S.C. § 3641.

Upon receiving the Commission's recommended decision the Governors have several options. They may:

1. Approve the recommended decision and order it placed in effect.

2. Allow the recommended decision under protest, and either

a. seek judicial review, or

b. return the recommended decision to the Commission for reconsideration and a further recommended decision which would then be retransmitted to the Governors for further action and subject to judicial review in accordance with 39 U.S.C. § 3628.³

3. Reject the recommended decision and allow the Postal Service to resubmit its request for reconsideration. That resubmission would result in a further recommended decision which would be retransmitted to the Governors for further action and subject to judicial review in accordance with 39 U.S.C. § 3628.

39 U.S.C. § 3625.

If the Governors adopt the third alternative they may, on consideration of the Commission's further recommended decision, exercise an additional option. If all of the Governors then holding office concur, in writing, and make the required findings of fact, they may modify the Commission's further recommended decision. 39 U.S.C. § 3625(d). If changes are adopted by the Governors under any of these options, the Board then determines the date on which they become effective.⁴ 39 U.S.C. § 3625(f).

In enacting this rather complicated system, Congress hoped to achieve two related but somewhat conflicting goals. First and foremost, Congress intended to give the Postal Service, through the Governors, ultimate authority over its revenue, subject only to judicial review. See, e. g., Senate Committee on Post Office and Civil Service, S.Rep.No. 91-912, 91st Cong., 2d Sess. 1-4 (1970) ("Senate Report"). At the same time Congress recognized that some check was necessary to prevent the Governors from setting rates based solely on their anticipated costs without regard for the broader public interest. Seeking to serve both ends simultaneously, Congress created the Commission, a partner in the ratemaking process, as a check on the Governors' power to set rates. See Senate Report at 13.

The Facts

The instant dispute arises out of such a ratemaking procedure and raises difficult questions as to the degree of control Congress intended each of the partners to exercise. On April 21, 1980, the Postal Service requested the Commission to recommend rate changes for virtually all classes of mail and types of mail service.⁵ Most importantly for this case, the Postal Service requested that the rate for the first ounce of first-class mail (i. e., letter mail) be increased from fifteen to twenty cents and that the rates for parcel post mail be increased by an average of 8%.

On February 19, 1981, the Commission issued and transmitted its recommended decision to the Governors. That recommendation suggested, inter alia, that the rate for letter mail be increased from fifteen to eighteen cents and the rates for parcel post be increased by an average of 12%.⁶ On March 10, 1981, the Governors issued a decision allowing the recommended rates to take effect under protest and returned the recommended decision to the Commission for reconsideration. At the same time, the Board determined that the rates allowed under protest would go into effect on March 22, 1981, and, in fact, the rates did go into effect on that date.

On June 4, 1981, the Commission issued its further recommended decision on reconsideration which affirmed, with one exception not relevant here, its initial recommended decision of February 19, 1981. On June 30, 1981, the Governors issued a decision which rejected the Commission's June 4 recommended decision on reconsideration and retained the changes, including the eighteen-cent letter rate and 12% parcel post increase ordered on March 10, 1981. The Postal Service resubmitted its request for further reconsideration.

On September 17, 1981, the Commission issued its recommended decision upon further reconsideration which reaffirmed its recommendations of June 4. On September 30, 1981, the Governors issued a unanimous decision dated September 29, 1981, which ordered the Postal Service to place several changes into effect including a twenty-cent letter rate. No change was ordered for the fourth-class parcel post rate. The Board has determined that those changes will take effect November 1, 1981.

Plaintiffs allege that this chain of events violates the provisions of the Act. More particularly they allege that the Governors were without authority to issue their September 29 order directing that rates for first-class mail different from those recommended by the Commission be placed into effect.

Further, plaintiffs allege that they will be irreparably harmed if the illegally modified rates are allowed to take effect. UPS, a substantial user of first-class mail, estimates that the increased rates would cost it approximately $620,000 a year. Affidavit of R. E. Smith, ¶ 16. That cost could not subsequently be recovered if the rate changes are finally held to be unauthorized by the Act. 39 U.S.C. § 3681. Intervening plaintiff, NAGCP, an association of approximately forty greeting card publishers, alleges that its members' sales are inversely affected by the cost of first-class postage. Affidavit of N.S. Halliday, ¶ 3. In addition, UPS alleges that the Postal Service intends to use the increased revenues from its statutory monopoly of first-class mail to subsidize its fourth-class mail operation in which it competes with UPS. UPS Complaint, ¶ 12.

The September 29 decision purported to modify the Commission's September 17 further recommended decision. Stipulated Exhibit 7 at 2. As explained above, the Governors can only modify a further recommended decision by the Commission if they have previously rejected a recommended decision and the Postal Service resubmitted its request. Plaintiffs do not challenge the procedures followed in reaching the September 29 modification...