Sears, Roebuck & Co. v. U.S. Postal Serv., Civil Action No. 14–1031 (RMC)

• Decision Date: 30 September 2015
• Docket Number: Civil Action No. 14–1031 (RMC)
• Citation: 134 F.Supp.3d 365
• Parties: Sears, Roebuck and Co., et al., Plaintiffs, v. U.S. Postal Service, Defendant.
• Court: U.S. District Court — District of Columbia

134 F.Supp.3d 365

Sears, Roebuck and Co., et al., Plaintiffs,

v.U.S. Postal Service, Defendant.

Civil Action No. 14–1031 (RMC)

United States District Court, District of Columbia.

Signed September 30, 2015

David Matthew Levy, John F. Cooney, Moxila A. Upadhyaya, Venable LLP, Washington, DC, for Plaintiffs.

Peter C. Pfaffenroth, U.S. Attorney's Office, Washington, DC, for Defendant.

OPINION

ROSEMARY M. COLLYER

, United States District Judge

This is a case about an extra dab of glue—just an extra bit of stickum worth over $1.25 million. Sears, Roebuck and Co.; Segerdahl Graphics, Inc.; and Aspen Marketing Services, LLC (collectively, Plaintiffs) mailed rectangular folded self-mailers in three separate mailings in 2009. To qualify for the most discounted automation rate, U.S. Postal Service rules required self-mailers to be sealed on the top and bottom with glue or adhesive tabs. Because Plaintiffs' mailpieces were not sealed on the top and bottom, the U.S. Postal Service's Pricing Classification Service Center disqualified the mailings from the lower rate and assessed deficiencies totaling over $1.25 million.

Plaintiffs challenge the Pricing Center's decisions as unreasonable, ultra vires, and in violation of due process, and have moved for summary judgment. The Postal Service filed a Counterclaim for judgment on the asserted deficiencies; it filed a cross motion to dismiss in part and for summary judgment on the remainder.¹ Plaintiffs failed to follow the rules applicable at the time to their mailings and now they want to avoid paying the postage due. Because their mailpieces did not comply with the regulations specifying the type of mail entitled to the most-discounted rate and the deficiency assessments were proper, judgment will be entered in favor of the Postal Service.

I. FACTS

A. Postal Service Regulations for Automated Mail

The U.S. Postal Service is an independent establishment of the Executive Branch, see 39 U.S.C. § 201

, that provides mail services at uniform rates throughout the country. 39 U.S.C. §§ 101, 403. The Postal Service is empowered to adopt rules and regulations in furtherance of its functions. Id . § 401(2).

In the early 1980s, the Postal Service began to purchase and deploy equipment for the automated processing of mail. Compilation of Directory of Firms, 48 Fed.Reg. 28377–01, 28377 (June 21, 1983)

(citing Omnibus Budget Reconciliation Act of 1981, Pub.L. No. 97–35). The Postal Service started automated mail processing in 1983, and the processing machines became more sophisticated over time. Eligibility Requirements for Automated Rate Categories, 55 Fed.Reg. 40560, 40560 (Oct. 3, 1990). The Postal Service realized by 1990 that it had presumed erroneously that all mail would be sent inside an envelope when it created standards for mail eligible to receive an automation discount; it had failed to consider the problems presented by automated processing of "non-enveloped mail," that is "folded self-mailers" prepared from a single piece of folded cardstock. Id. at 40561. As a result, the Postal Service established standards for the construction of folded self-mailers to ensure successful automated processing. Id.

Typically, a folded self-mailer is formed from a single sheet of cardstock that is folded once on the right side (the leading edge), addressed on the front, and sealed to make a letter-sized mailpiece. Such a self-mailer is designed to be mailed without needing to be enclosed in an envelope. DMM §§ 201.3.1, 201.3.14.1, at DS11–15; see also Folded Self–Mailers & Unenveloped Mailpieces, 76 Fed.Reg. 74704, 74706 (Dec. 1, 2011)

, at PS1724–1728.

The Domestic Mail Manual (DMM or Manual) is a Postal Service regulation that sets forth mailing standards. See 39 C.F.R. §§ 111.1

, 211.2(a)(2). The Manual establishes rules and requirements governing the products and services described in the Mail Classification Schedule. The Schedule, in turn, lists and describes the Postal Service's products and services and its rates. See 39 C.F.R. §§ 3020.10, 3020.13 (describing the Mail Classification Schedule). The Postal Service charges a lower rate for mail that can be processed on high-speed sorting machines and more for mail processed by hand or in other ways. DMM Notice 123 Price List at 11 (May 2009), at DS19.

To qualify for the low automation rate, mailpieces must comply with the physical requirements set forth in the Manual. DMM § 201.3.0, at DS11; cf. DMM § 201.2.1 (non-machinable letters are those that do not meet the requirements of DMM § 201.3.0), at DS10. The sealing requirements for folded self-mailers designed with a final fold on the right—the requirements in effect at the time Plaintiffs sent the self-mailers at issue here—are as follows:

In specifically identified formats, a self-mailer may have the final fold on the right side (leading edge) of the piece. The left edge (trailing edge) and other open edges must be secured with at least one tab or a glue line. The number of tabs required is determined by the final trim size and paper basis weight of the piece. If the piece is 7 inches long or more, the piece must be sealed on the top and the bottom. In all cases, additional tabs, seals, or glue spots or glue lines may be used. Newsprint paper is acceptable if the basis weight of the paper meets the minimum standards in 3.14.1a and the piece is certified by the USPS mailpiece design analyst to be acceptable for automated processing.

DMM § 201.3.14.1c (May 11, 2009), at DS15.² Thus, as critically relevant to the Plaintiffs' mailings—oblong folded pieces 7 inches long or more with a final fold on the right had to be "sealed on the top and the bottom."

The Postal Service also published a Quick Service Guide 201b, which included illustrations of the allowed designs and sealing requirements for folded self-mailers. See Guide 201b (May 11, 2009), at PS233–34. The illustration of the design permitted for mailers governed by DMM § 201.3.14.1c, that is, with the final fold on the right side of the rectangular mailpiece, shows tabs in the center of the trailing (left) edge, the center of the top, and the center of the bottom. Id . (placement of tabs and wafer seals), at PS234 (see attached Appendix, p. 1). Guide 201b noted that "as an alternative to tabs or wafer seals, the open edge of the length of the mailpiece may be continuously glued or spot glued." Id ., at PS233.

The reason for sealing self-mailers with tabs or glue is to "prevent the open edges from fanning out and jamming high-speed processing equipment." Folded Self–Mailers—Additional Options, Postal Bulletin (June 5, 1997), at DS21; see also Eligibility Requirements for Automated Rate Categories, 55 Fed.Reg. 40560, 40561 (Oct. 3, 1990)

("Self-mailers ... that are open on three sides cannot be successfully processed on the current automation equipment."). The problem of unenveloped mail getting caught in the machines remained a Postal Service concern in December 2008 and May 2009—contemporaneously with the mailings at issue in this case that were sent in April, August, and December of 2009. See New Standards for Letter–Size Booklets and Folded Self–Mailers, 73 Fed.Reg. 79430 (Dec. 29, 2008), at PS1705 (self-mailers "tend to double feed and jam resulting in damage to the equipment and the mail"; if they jam they must be processed manually or on flat sorting equipment, which is more labor intensive); Guide 201b (May 11, 2009), at PS233 ("Unenveloped letter-sized mailpieces prepared for automation mailings must be secured (tabbed) to prevent an open edge from jamming high-speed processing equipment.").

Postal customers are required to comply with postal standards. DMM § 607.1.1, at PS124. When mailings are submitted with a postage statement, the mailer's signature certifies compliance with all applicable standards. Id.

The Postal Service may demand proper payment even after acceptance of the mail. DMM § 607.1.2, at PS124. Postal customers who fail to meet postal standards for the rates they claim have underpaid postage. See DMM § 604.10.1 (a "revenue deficiency" is "a shortage or underpayment of postage or fees"), at PS122. The Postal Service may assess a revenue deficiency against an underpaying customer.

B. Revenue Deficiency Assessed for Plaintiffs' Three Mailings

The first self-mailer at issue was mailed for Sears, Roebuck and Co. in April 2009 to promote "Sears Days," a nationwide retail sale. The piece was a bi-fold design, printed by Specialty Print Communications who subcontracted with another printer, Team Services, for sorting and mailing. Team Services mailed over 5.8 million Sears Days self-mailers at the discounted automation rate on an account charged to Sears. The second contested mailpiece was also an advertisement for Sears, a bi-fold piece promoting a "Baby Event," that was designed and printed by Segerdahl Graphics, Inc., (Segerdahl) a graphic design, printing, and mail preparation company. In August 2009, Segerdahl mailed over 500,000 Baby Event mailers at the discounted automation rate. The third self-mailer was a tri-fold design promoting a "Buick Holiday Event" for a group of General Motors dealers in the Chicago area. The Holiday Event advertisement was designed by Aspen Marketing Services, LLC, (Aspen) a marketing company; Segerdahl printed and mailed over 1.9 million of these advertisements in December 2009. See Appendix, p. 2 (line drawings of Plaintiffs' mailers, as depicted in Pl. Mot. for Summ. J. [Dkt. 47] at 10–12).

In each instance the self-mailers were governed by § 201.3.14.1c of the Manual, as the final fold was on the right edge and they were more than 7 inches long. Plaintiffs' self-mailers were sealed with two glue lines or elongated glue spots along the trailing edge, within one inch from the top and bottom edges. See Compl. [Dkt. 1] ¶¶ 32–34. To be eligible for the low automation rate under § 201.3.14.1c, the self-mailers had to be "sealed on the top and the bottom." The Postal Service determined that they were not so sealed...