Aid Ass'n for Lutherans v. U.S. Postal Service

• Decision Date: 14 March 2003
• Docket Number: No. 01-5449.,No. 03-5066.,No. 03-5065.,No. 01-5450.,01-5449.,01-5450.,03-5065.,03-5066.
• Citation: 321 F.3d 1166
• Parties: AID ASSOCIATION FOR LUTHERANS, Appellee, v. UNITED STATES POSTAL SERVICE, Appellant. American Bar Endowment, Appellee, v. UNITED STATES Postal Service, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

321 F.3d 1166

AID ASSOCIATION FOR LUTHERANS, Appellee, v. UNITED STATES POSTAL SERVICE, Appellant.

American Bar Endowment, Appellee, v. UNITED STATES Postal Service, Appellant.

No. 01-5449.

No. 01-5450.

No. 03-5065.

No. 03-5066.

United States Court of Appeals, District of Columbia Circuit.

Argued February 13, 2003.

Decided March 14, 2003.

Appeals from the United States District Court for the District of Columbia (No. 96cv02694)(No. 97cv00660).

Edward Himmelfarb, Attorney, United States Department of Justice, argued the cause for appellant. With him on the briefs were Roscoe C. Howard, Jr., United States Attorney, and Anthony J. Steinmeyer, Assistant Director, United States Department of Justice. R. Craig Lawrence and Vincent H. Cohen, Jr., Assistant United States Attorneys, entered appearance.

Geoffrey W. Peters argued the cause and filed the brief for appellee Aid Association for Lutherans.

William J. Olson, John S. Miles, and Herbert W. Titus were on the brief for amicus curiae Free Speech Defense and Education Fund, Inc. in support of appellee.

Sheila J. Carpenter argued the cause for appellee American Bar Endowment. With her on the brief was Richard Littell.

Before: EDWARDS, HENDERSON and ROGERS, Circuit Judges.

Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.

HARRY T. EDWARDS, Circuit Judge:

The 1990 amendment to the Postal Reorganization Act of 1970 ("PRA") bars the use of the reduced nonprofit third-class postage rate for mailings promoting any insurance policy if "the coverage provided by the policy" is "generally otherwise commercially available." 39 U.S.C. § 3626(j)(1)(B). In 1992, appellant United States Postal Service ("Postal Service" or "USPS") issued regulations construing this statutory language to bar the use of the reduced rate for mailings promoting insurance of a general type (e.g., life, automobile, health) that is commercially available. See 57 Fed.Reg. 28,464, 28,466 (June 25, 1992). Under the regulations, the Postal Service decided that appellees Aid Association for Lutherans ("AAL") and American Bar Endowment ("ABE"), both nonprofit, tax-exempt organizations that offer insurance policies to their members and are eligible for the nonprofit postage rate, were no longer entitled to mail their insurance-related material at the nonprofit rate to the extent that the insurance offered was of a general type that is otherwise commercially available.

Appellees filed separate law suits in the District Court, alleging that the Postal Service exceeded its statutory authority in promulgating the cited regulations. The District Court granted judgment for appellees, finding that the regulations "constitute an impermissible reading of the statute." Aid Ass'n for Lutherans v. USPS, No. 96-2694, Mem. Op. at 13 (D.D.C. Sept. 13, 2001) ("AAL Mem. Op."), reprinted in Joint Appendix ("JA") 157, 169; Am. Bar. Endowment v. USPS, No. 97-660, Mem. Op. at 6 (D.D.C. Sept. 17, 2001) ("ABE Mem. Op.") (finding the "identical analysis" to apply), reprinted in JA 384, 389. The District Court ordered the postage refund amounts due to AAL and ABE and entered final judgment in these cases on January 13, 2003 and February 12, 2003. See AAL v. USPS, Order (D.D.C. Jan. 13, 2003); ABE v. USPS, Order (D.D.C. Feb. 12, 2003).

Appellant first contends that its regulations are not subject to judicial review, because 39 U.S.C. § 410(a) exempts the Postal Service from the judicial review provisions of the Administrative Procedure Act ("APA"). The Postal Service claims further that, if judicial review is proper, the court should defer to the agency's statutory interpretation under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), because the regulations reflect a permissible construction of 39 U.S.C. § 3626(j)(1)(B). Appellees, in turn, argue that, because the Postal Service acted in excess of its delegated authority under the statute, judicial review is available outside of the APA and the disputed regulations cannot possibly survive scrutiny under any standard of review.

We affirm the judgments of the District Court. Judicial review is available in this case, because, as appellant concedes, appellees may challenge actions by the Postal Service that are outside of the scope of its statutory authority. Appellees' principal claim here is that the challenged regulations emanated from an ultra vires action by the Postal Service. We agree. Therefore, it does not matter whether 39 U.S.C. § 410(a) precludes traditional APA review. On the merits, we hold that the Postal Service's regulations exceed the agency's delegated authority under the statute. The statute permits the agency to regulate solely with respect to "coverage provided by [an insurance] policy." The agency ignored this limitation and focused instead on "types of insurance." "Coverage" under a policy does not mean the "type of insurance" offered. Therefore, the regulations totally pervert the meaning of the statute. And, in so doing, the regulations effectively exclude nonprofit organizations from using the reduced nonprofit postage rate for insurance-related mailings in markets in which they previously had access to the reduced rate. There is nothing in this record to indicate that this was the intention of Congress in enacting 39 U.S.C. § 3626(j)(1)(B). Quite the contrary. Both the clear terms of the statute and the legislative history suggest otherwise.

I. BACKGROUND

In 1970, Congress enacted PRA, 39 U.S.C. § 101 et seq., which created the United States Postal Service. PRA authorized the Postal Service to charge reduced third-class postage rates to "qualified nonprofit organizations," defined as "religious, educational, scientific, philanthropic, agricultural, labor, veterans, or fraternal organizations or associations not organized for profit and none of the net income of which inures to the benefit of any private stockholder or individual," former 39 U.S.C. § 4452(d). Id. § 4452(b), (c).

In 1990, Congress amended PRA to place some restrictions on the use of reduced-rate mail. See 39 U.S.C. § 3626(j). One such restriction was on mailings promoting insurance policies. Section 3626(j)(1)(B) bars the use of the reduced rate for

mail which advertises, promotes, offers, or, for a fee or consideration, recommends, describes, or announces the availability of—

...

(B) any insurance policy, unless the organization which promotes the purchase of such policy is authorized to mail at the rates for mail under former section 4452(b) or 4452(c) of this title, the policy is designed for and primarily promoted to the members, donors, supporters, or beneficiaries of the organization, and the coverage provided by the policy is not generally otherwise commercially available[.]

Id. § 3626(j)(1)(B). The third condition imposed by this section on the use of the reduced rates for insurance-related mailings — i.e., that "the coverage provided by the policy" be "not generally otherwise commercially available" — is the one at issue here.

In 1992, pursuant to its authority to "adopt, amend, and repeal such rules and regulations as it deems necessary to accomplish the objectives of this title," id. § 401(2), the Postal Service issued a final rule after notice and comment, amending its Domestic Mail Manual and construing the language of § 3626(j)(1)(B). See 57 Fed.Reg. 28,464, 28,466 (June 25, 1992). The rule, which is codified at Domestic Mail Manual § E670.5.5, states:

The term "not generally otherwise commercially available" applies to the actual coverage stated in the insurance policy, without regard to the amount of the premiums, the underwriting practices, and the financial condition of the insurer. When comparisons are made with other policies, consideration will be given to policy coverage benefits, limitations, and exclusions, and to the availability of coverage to the targeted category of recipients. When insurance policy coverages are compared for the purpose of determining whether coverage in a policy offered by an organization is not generally otherwise commercially available, the comparison will be based on the specific characteristics of the recipients of the piece in question (e.g., geographic location or demographic characteristics).

Note: The types of insurance considered to be generally commercially available include but are not limited to: Homeowner's, property, casualty, marine, professional liability (including malpractice), travel, health, life, airplane, automobile, truck, motorhome, motorbike, motorcycle, boat, accidental death and dismemberment, medicare supplement (medigap), catastrophic care, nursing home, and hospital indemnity insurance.

Id. In the preamble to the notice of proposed rulemaking, the Postal Service stated that the statute

looks to the "coverage provided by the policy," 39 U.S.C. 3626(j)(1)(B), without any indication that price or the financial conditions or practices of the insurer should modify this rule. The Postal Service also does not believe that the presence of unique elements in a type of policy which is otherwise commercially available is sufficient for a determination that the policy is not commercially available. In the example cited above, the primary focus of the policy was life insurance, rather than coverage to provide strike benefits. Accordingly, in determining whether the policy is commercially available, the policy would be considered life insurance.

56 Fed.Reg. 63,895, 63,896 (Dec. 6, 1991).

Thus, to determine whether "the coverage provided by the policy is not generally otherwise commercially available," 39 U.S.C. § 3626(j)(1)(B), the Postal Service looks to whether the insurance policy fits into one of the broad "types of insurance" (e.g., life, health, automobile) that are commercially available. It does not look to whether the specific terms, extent, elements, or details of the coverage provided in the insurance policy are...