Combined Communications Corp. v. US Postal Serv., 3-87-0214.

• Decision Date: 27 May 1988
• Docket Number: No. 3-87-0214.,3-87-0214.
• Citation: 686 F. Supp. 663
• Parties: COMBINED COMMUNICATIONS CORPORATION and the Nashville Banner Publishing Company v. UNITED STATES POSTAL SERVICE.
• Court: U.S. District Court — Middle District of Tennessee

686 F. Supp. 663

COMBINED COMMUNICATIONS CORPORATION and the Nashville Banner Publishing Company v. UNITED STATES POSTAL SERVICE.

No. 3-87-0214.

United States District Court, M.D. Tennessee, Nashville Division.

May 27, 1988.

William R. Willis, Jr., Willis & Knight, Nashville, Tenn., Timothy J. May, David C. Todd, Patton, Boggs and Blow, Washington, D.C., Alan Marx, King & Ballow, Nashville, Tenn., Lawrence J. Aldrich, Gannett Co., Arlington, Va., for plaintiffs.

James C. Thomason, III, Asst. U.S. Atty., Nashville, Tenn., Grayson M. Poats, Associate

General Counsel, Joseph F. Wackerman, U.S. Postal Service, Washington, D.C., for defendant.

MEMORANDUM

WISEMAN, Chief Judge.

Plaintiffs Combined Communications Corporation and The Nashville Banner Publishing Company brought this action against defendant United States Postal Service (USPS), alleging that the USPS unlawfully exceeded its statutory authority under the Postal Reorganization Act of 1970, 39 U.S.C. §§ 101 et seq. (1980), by promulgating an administrative regulation that effectively amended the Domestic Mail Classification Schedule (DMCS).¹ Plaintiffs seek: (1) a declaration that the USPS' administrative regulation—DMM 425.226—is unlawful to the extent that it modifies the existing DMCS; (2) an injunction requiring the USPS to carry The Sunday Tennessean FOCUS issue and The Nashville Banner NEIGHBORHOOD issue at second-class rates; and (3) a refund of all postage paid by plaintiffs in excess of second-class rates for mailing these issues. Both plaintiffs and the USPS have moved for summary judgment pursuant to Fed.R.Civ.P. 56. For the reasons set forth below, the Court grants plaintiffs' motion in part and denies the USPS' motion.

I. Postal Reorganization Act of 1970

In enacting the Postal Reorganization Act of 1970 (Act), Congress created the USPS as "an independent establishment of the executive branch of the Government of the United States." 39 U.S.C. § 201. The exercise of the USPS' broad statutory powers, see 39 U.S.C. § 401, is directed by an eleven member Board of Governors (Board). 39 U.S.C. § 202. The Board is composed of nine members who are appointed by the President with the advice and consent of the Senate (Governors), the Postmaster General, and the Deputy Postmaster General. Id. Although the Act vests ultimate ratemaking and classification authority in the Governors of the USPS, see 39 U.S.C. § 3621, the primary responsibility for establishing reasonable and equitable mail classifications and rates rests with the Postal Rate Commission (PRC). See S.Rep. No. 91-912, 91st Cong., 2d Sess. 4 (1970).

The PRC, like the USPS, is an independent establishment of the executive branch, 39 U.S.C. § 3601, consisting of five presidentially-appointed members. Although the overall scheme and legislative history of the Act clearly indicate that Congress intended the PRC to be "an integral part of the USPS" and "a true partner of the Board ... in every aspect of postal operations," it is equally clear that Congress desired the PRC to be "fully independent of the Board ... and ... any influence whatsoever of the Postmaster General or of members of his staff." See S.Rep. No. 91-912 at 13. Congress unquestionably felt such complete independence was necessary to insure that mail rates and classifications were established "on the basis of expert consideration of the overall value of the service provided and the allocation of costs on a scientific or quasi-scientific basis," isolated from congressional lobbying efforts and USPS operational and cost concerns. S.Rep. No. 91-912 at 11, 13. See also 116 Cong.Rec. 22,051 (1970) (statement by Sen. McGee).

The Act includes rather specific and comprehensive ratemaking and classification procedures. See 39 U.S.C. §§ 3622-23. Under the Act, the USPS may request that the PRC submit, or the PRC may submit on its own accord, a recommended decision concerning changes in the DMCS to the Governors. 39 U.S.C. § 3622. The PRC has "full authority without limitation and subject only to the general guidelines and policy of the Act to establish classes of mail subject to approval of the Governors." S.Rep. No. 91-912 at 11. Once such a recommendation is made, "the Governors may approve, allow under protest, reject or modify the decision." 39 U.S.C. § 3625. Ultimately, the Governors' decision may be appealed to the appropriate United States Court of Appeals. 39 U.S.C. § 3628. "No other court has jurisdiction to review a decision made by the PRC or Governors under chapter 36 of the Act." Id. See also The Enterprise, Inc. v. Bolger, 774 F.2d 159, 161 (6th Cir.1985).

II. Factual Background and Procedural History

In late 1982 or early 1983, The Tennessean and The Nashville Banner, along with a number of other newspapers across the country, began distributing what have since become known as "Plus" issues.² These issues—The Tennessean FOCUS and The Nashville Banner NEIGHBORHOOD —were delivered by plaintiffs on a weekly basis to subscribers of their respective newspapers along with the regular issues delivered on that day. The Tennessean and The Nashville Banner also distributed these "Plus" issues to nonsubscribers through the USPS at second-class rates.³

On December 27, 1984, Advo-System, Inc., a large-volume mailer of third-class bulk mail, filed a complaint with the PRC, pursuant to 39 U.S.C. § 3662 (Advo I),⁴ requesting it "to investigate the rates charged by the USPS for improper mailings by daily newspapers of weekly `total market coverage' ... products `Plus' issues to nonsubscribers at second-class ... rates." Following an administrative hearing, the PRC concluded that "Plus" issues were not properly characterized as "issues" of daily newspaper publications and, therefore, "must independently qualify" for second-class mail rates. Accordingly, the PRC issued a Recommended Decision adopting the following proposed addition to the DMCS:

DMCS 200.0123 Second-Class Mail

For purposes of determining second-class eligibility ... an "issue" of a newspaper ... shall be deemed to be a separate publication if:

a. it is published at a regular frequency on the same day as another regular issue of the same publication, and

b. it is distributed to more than (i) 10 percent nonsubscribers, or (ii) twice as many nonsubscribers as the other issue on that same day, whichever is greater.

Such separate publications must independently meet the qualifications for second-class rates.

The PRC felt that DMCS 200.0123 was necessary "to clarify or correct language that had led to misinterpretations in the application of the DMCS to `Plus' issues." While the PRC explicitly acknowledged that the amendment applied "solely to `Plus' issues published ... on the same day as another issue of the same publication," it stressed that its Opinion "did not authorize non-daily newspapers to mail such issues at second-class rates." In response to such a suggestion, the PRC noted: "If this practice should develop, we believe with the guidelines provided herein the USPS could handle it administratively, or if necessary, propose additional clarifying DMCS language."

On March 3, 1986, the Governors approved the PRC's recommended amendment. The following day, the Board ordered that DMCS 200.0123 would become effective on June 8, 1986. On June 2, 1986, both The Tennessean and The Nashville Banner adjusted their publication schedules in an effort to qualify their respective "Plus" issues for second-class rates in light of DMCS 200.0123. In essence, both publications reorganized their schedules so that their respective "Plus" issues would not be published "on the same day as another regular issue of the same publication" and, therefore, would not be deemed a "separate publication" under DMCS 200.0123. Although the USPS initially contested the second-class eligibility of these newly reorganized "Plus" issues and charged both publications third-class rates, it ultimately recognized that these issues were eligible for second-class rates under DMCS 200.0123 and refunded the excess postage previously paid by both publications.

On July 15, 1986, apparently unhappy with the ability of various publications to avoid what it believed was the true intent of DMCS 200.0123, the USPS published for comment in the Federal Register an interim rule which amended the Domestic Mail Manual (DMM). The DMM is a detailed set of administrative regulations governing the USPS' domestic mail services. The USPS amended the DMM by adding a section defining when an "issue" of a newspaper would be deemed a "separate publication" for postal purposes. The proposed amendment, interim DMM § 425.226, provided:

An "issue" of a newspaper ... shall also be deemed to be a separate publication ... when ...:

a. The issue is published at a regular frequency, such as once a week, and

b. more than 10 percent of the total number of copies of the issue are distributed to nonsubscribers, and

c. the number of copies of the issues distributed through the mails is more than twice the number ... of any other single issue of the parent publication distributed through the mails during the same week.

51 Fed.Reg. 25,526 (July 15, 1986). This interim rule, which became effective on July 20, 1986, applied to any issue of a publication meeting certain numerosity criteria regardless of whether it was published on the same day as another issue of the same publication. Consequently, interim DMM § 425.226 acted to disqualify plaintiffs' newly reorganized "Plus" issues from second-class eligibility and effectively required plaintiffs to pay third or fourth-class mailing rates.

On August 21, 1986, four newspapers, including The Nashville Banner and The Tennessean, filed a section 3662 complaint with the PRC (Advo II), claiming that the USPS violated 39 U.S.C. § 3623 by adopting interim DMM § 425.226 and thereby changing DMCS in the absence of a Recommended Decision from the PRC. The complaint asked the PRC to issue a...