United Parcel Service, Inc. v. U.S. Postal Service
| Decision Date | 07 August 1979 |
| Docket Number | No. 78-2390,78-2390 |
| Citation | 604 F.2d 1370 |
| Parties | UNITED PARCEL SERVICE, INC., a New York Corporation, and United Parcel Service, Inc., and Ohio Corporation v. UNITED STATES POSTAL SERVICE, Appellant. |
| Court | U.S. Court of Appeals — Third Circuit |
Barbara Allen Babcock, Asst. Atty. Gen., Peter F. Vaira, U. S. Atty., Ronald R. Glancz, Thomas G. Wilson (argued), App. Staff, Civ. Div., Dept. of Justice, Washington, D. C., for appellant.
Irving R. Segal (argued), Robert L. Kendall, Jr., John E. McKeever, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for appellees.
Before GARTH, HIGGINBOTHAM, Circuit Judges, and SCHWARTZ, * District Judge.
This is an appeal from a final order of the district court which permanently enjoined the defendant United States Postal Service (hereafter Postal Service) from engaging in a parcel post experiment until it obtained approval from the Postal Rate Commission, in compliance with 39 U.S.C. §§ 3622-25. We affirm.
In 1970 Congress enacted the Postal Reorganization Act of 1970, 39 U.S.C. §§ 101 Et seq. The Act created the Postal Service as an independent unit of the executive branch, 39 U.S.C. § 201. It also created the Postal Rate Commission as a separate independent establishment, 39 U.S.C. § 3601.
The Postal Service is governed by a Board of Governors, 39 U.S.C. § 202, which pursuant to 39 U.S.C. § 402 established an Executive Committee. The Executive Committee is comprised of the Postmaster General, the Deputy Postmaster General, various Assistant Postmasters General, the Chief Postal Inspector, and the General Counsel. 39 C.F.R. § 221.5(d)(1) (1978).
On September 26, 1977 the Executive Committee in accordance with the duty imposed upon the Postal Service to "plan, develop, promote, and provide adequate and efficient postal services at fair and reasonable rates and fees," 39 U.S.C. § 403(a), approved implementation of a parcel post experiment called the Local Parcel Service Test Plan. A detailed description of the Plan may be found in the district court's opinion, United Parcel Service v. United States Postal Service, 455 F.Supp. 857, 861-62 (E.D.Pa.1978). Suffice it to say that the Postal Service in mid-October 1977 instituted a twelve-month bulk mailing experiment to test the cost and service feasibility of charging a fixed fee per item for each item mailed by twenty selected shippers, rather than calculating the amount of postage by weighing each individual parcel. Twenty selected shippers in five metropolitan communities 1 entered into contracts with the Postal Service whereby each guaranteed a minimum mailing volume of 50 pieces per day and 250 pieces per week. Delivery of the items was limited to the geographic area covered by the Postal Service Bulk Mail Facility serving the shipper (intra-BMC delivery). Under the test plan eligible articles were (1) items mailable as parcel post and (2) third class single piece mail. "Nonmachineable outsides" (i. e., parcels of unusual dimensions which require hand processing) were not eligible articles. The articles had to be containerized, addressed for delivery in the BMC service area and all special service parcels had to be isolated.
Sample weighings of randomly selected items in the bulk shipment were used to determine the average weight of all items. The cost of mailing each item was based on the average weight thus determined. The cost to the shipper of mailing 50 or more items averaging five pounds or less was 87 cents per item. The cost per item when average item weight was over five, but under twenty, pounds was $1.15 per item. This fixed-fee postage payment system eliminated the need to calculate postage individually on each parcel. In any event, the cost of mailing an item under the test plan differed substantially from the cost of mailing the same item by regular parcel post under the rates and mail classification schedule then in effect. 455 F.Supp. at 861 n.7, Exhibit 2, Appendix at 47.
United Parcel Service (hereafter UPS), the plaintiff in this action, is a private parcel delivery service. UPS, complaining that the Postal Service had no authority under statute or regulation for conducting such an experiment, commenced an action in the Eastern District of Pennsylvania seeking to enjoin the Postal Service test.
The Postal Service, however, asserting that its test involved neither a change in rates nor a change in classification of mail within the meaning of 39 U.S.C. §§ 3622-23, claimed that such a Plan did not require submission to approval by, or authorization of the Rate Commission. 2
The Postal Service and UPS submitted the issues to the district court on a stipulation of facts together with certain exhibits and affidavits. Although expressing its belief that "as a matter of pure policy the result advocated by the Postal Service is more desirable . . ." 455 F.Supp. at 863, the district court held that the test plan effected a change in a postal rate and a mail classification. Agreeing with UPS, it thereupon entered an order on July 19, 1978 which " . . . permanently enjoined (the United States Postal Service), from continuing in operation the parcel post experiment known as the Service Test Plan until such time as it has complied with the provisions of 39 U.S.C. §§ 3622-25 ()." The statutes which the district court held to be applicable and with which the Postal Service was obliged to comply would require a recommended decision by the Rate Commission approving the test plan. This appeal followed.
Congressional dissatisfaction with postal inefficiency reached a peak in 1970. It was then that the Postal Service was established pursuant to the Reorganization Act. Congressional declarations of postal policy resulted in a direction that the Postal Service be "operated as a basic and fundamental service provided to the people . . ." 39 U.S.C. § 101(a). At the same time, Congress commanded that "(p)ostal rates shall be established to apportion the costs of all postal operations to all users of the mail on a fair and equitable basis." 39 U.S.C. § 101(d). In order to eliminate any effect of politics and special interest lobbying on rate-setting and mail classification, Congress completely delegated its rate-setting authority. The power to set rates of postage and to establish classes of mail was vested in the nine Presidentially appointed Governors 3 of the Postal Service. That power, however, was limited to the extent that the Governors' authority over rates and classifications could only be exercised After comprehensive review and recommendation by the Postal Rate Commission, the regulatory agency which Congress created to oversee the ratemaking and mail classification process.
The Postal Rate Commission is completely independent of the Postal Service. It is comprised of five Commissioners appointed by the President with the advice and consent of the Senate. 39 U.S.C. § 3601. The concept of the Postal Rate Commission in the statutory schema was described in the Senate Report in these terms:
The bill (Postal Reorganization Act) provides that the Postal Rate Commission shall be a body fully independent of the Board of Governors and fully independent of any influence whatsoever of the Postmaster General or of members of his staff. The Commission's independence is contemplated as being complete from the other arms of the postal service, subject to no subordination within the postal service either expressed or implied. The limited circumstances under which a recommended rate decision made by the Commission may be modified by the Governors are carefully spelled out in the language of the bill.
It is expected that the Commission will work in harmony with the Board of Governors, acting in a timely and responsive manner to the Board's requests for recommended decisions for changes in rates, fees and classifications.
In discharging the highly important responsibilities vested in the Commission, it must exercise its best judgment to insure that all postal rates, fees, and classifications are reasonable and equitable, and to insure that the rights of all mail users are protected, throughout the ratemaking and classification process, by careful consideration of all the specific public-interest factors that the statute requires be taken into account, and by faithful adherence to all of the ratemaking and classification standards set forth in the statute.
S.Rep. 91-912, 91st Cong., 2d Sess. at 13-14. In establishing the "partnership" between the Board of Governors and the Rate Commission, the Senate Committee expressed a fear that:
if the Board of Governors were authorized to control revenues, it would place them in a position of some businesses in the private sector of the economy pricing with one eye . . . over their shoulder to the effect of the cost of an upcoming labor-management agreement.
As an example of the need for independence of the Rate Commission, the Senate Committee referred to a proposal to raise first-class mail rates:
The recent proposal for a 10-cent first-class stamp in order to raise sufficient revenue to balance the books of the Post Office in one single step is fair proof of that quest for catching up with costs. Most of the money in the postal system comes from first-class mail. A 100-percent increase in the rates for all second-class mail would not produce as much revenue as a 5-percent increase in the first-class rate. The temptation to resolve the financial problems of the Post Office by charging the lion's share of all operational costs to first class is strong; that's where the big money is. The necessity for preventing that imposition upon the only class of mail which the general public uses is one of the reasons why the Postal Rate Commission should be independent of operating management.
Id. at 13. It was the Senate's view of the Rate Commission...
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