Nat'l Postal Policy Council v. Postal Regulatory Comm'n
| Decision Date | 12 November 2021 |
| Docket Number | C/w 20-1505, 20-1510, 20-1521,No. 17-1276,17-1276 |
| Citation | 17 F.4th 1184 |
| Parties | NATIONAL POSTAL POLICY COUNCIL, Petitioner v. POSTAL REGULATORY COMMISSION, Respondent National Newspaper Association, et al., Intervenors |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Ayesha N. Khan argued the cause for Mailer petitioners. With her on the briefs were William B. Baker, Eric S. Berman, Matthew D. Field, Ian D. Volner, and Elizabeth C. Rinehart.
David C. Belt, Attorney, U.S. Postal Service, argued the cause for petitioner United States Postal Service. With him on the briefs was Morgan E. Rehrig, Attorney. Stephen J. Boardman, Chief Counsel, entered an appearance.
Dana Kaersvang, Attorney, U.S. Department of Justice, argued the cause for respondent. With her on the brief were Brian M. Boynton, Acting Assistant Attorney General, and Michael S. Raab and Michael Shih, Attorneys, David A. Trissell, General Counsel, United States Postal Regulatory Commission, Christopher Laver, Deputy General Counsel, and Anne J. Siarnacki and Reese T. Boone, Attorneys.
Morgan E. Rehrig and David C. Belt, Attorneys, United States Postal Service, were on the brief for intervenor United States Postal Service in support of respondent.
William B. Baker, Ayesha N. Khan, Eric S. Berman, Matthew D. Field, Ian D. Volner, and Elizabeth C. Rinehart were on the brief for intervenors Alliance of Nonprofit Mailers, et al. in support of respondent. David M. Levy entered an appearance.
Before: Rogers and Tatel, Circuit Judges, and Randolph, Senior Circuit Judge.
In 2006, Congress passed the Postal Accountability and Enhancement Act, which directed the Postal Regulatory Commission to establish a ratemaking system to govern the prices set by the U.S. Postal Service for its market-dominant products. Although Congress left many details to the Commission, it forbade rates from increasing faster than the rate of inflation. The Commission was also required to assess after ten years whether the system had achieved nine objectives. If not, then the Commission could modify the ratemaking system or adopt an alternative one. This case arises from that mandatory ten-year review. In 2017, the Commission found that the existing ratemaking system was deficient and had not maintained the Postal Service's financial stability. After extensive review, it adopted a new system in 2020, which retains the price cap generally but allows above-inflation rate increases to target specific costs. Order 5763: Order Adopting Final Rules for the System of Regulating Rates and Classes for Market Dominant Products , Docket No. RM2017-3 (P.R.C. Nov. 30, 2020), 85 Fed. Reg. 81,124 (Dec. 15, 2020) ("Order 5763 ").
Groups whose members purchase postal products ("Mailers") and the Postal Service seek review of the Commission's new ratemaking system. The Mailers oppose any new rate authority. They contend that the system is inconsistent with the statute that gives the Commission its regulatory authority and is arbitrary and capricious. In contrast, the Postal Service contends that the Commission's new ratemaking system is irrational because it does not confer enough rate authority. The Commission responds that its actions are authorized by statute and reasonably explained.
For the following reasons, the court concludes that the Commission acted within its authority under the Accountability Act, and that its predictive judgments and economic conclusions satisfy the Administrative Procedure Act's requirement of reasoned decision-making. Accordingly, the court denies the petitions for review.
By way of introduction, a summary of the Accountability Act is followed by a summary of the proceedings before the Commission.
For much of the Nation's history, postal services were administered by the Post Office Department at rates fixed by Congress. See Nat'l Ass'n of Greeting Card Publishers v. U.S. Postal Serv. , 462 U.S. 810, 813, 103 S.Ct. 2717, 77 L.Ed.2d 195 (1983) (" Greeting Card Publishers "). In 1970, Congress relinquished control of ratesetting and replaced the Post Office Department with two independent executive agencies: the United States Postal Service and the Postal Rate Commission. See Postal Reorganization Act of 1970, Pub. L. No. 91-375, §§ 201–02, 3601, 84 Stat. 719, 720, 759. Superintended by a Board of Governors, consisting of experts in economics, accounting, law, and public administration, 39 U.S.C. § 502(a), the Postal Service was required to set rates equal to costs with the goal of breaking even. See Greeting Card Publishers , 462 U.S. at 813, 103 S.Ct. 2717. To guide the Postal Service, Congress charged the Postal Rate Commission (later renamed the Postal Regulatory Commission) with reviewing the Board's rate proposals. See id. at 813–14, 103 S.Ct. 2717.
In 2006, Congress modernized the Postal Service in the Postal Accountability and Enhancement Act ("Accountability Act" or "Act"), Pub. L. No. 109-435, 120 Stat. 3198 (2006). Section 201 of the Act, 39 U.S.C. § 3622, "completely reformed the ratemaking system for market-dominant products," i.e. , those "products for which the Postal Service enjoys a statutory monopoly, or for which the Postal Service exercises sufficient market power so that it can effectively dictate the price of such products without risk of losing much business to competing firms." U.S. Postal Serv. v. Postal Regul. Comm'n , 785 F.3d 740, 744 (D.C. Cir. 2015) (citing 39 U.S.C. § 3642(b)(1)–(2) ). The Act required the Commission to "establish" within eighteen months "a modern system for regulating rates and classes for market-dominant products." 39 U.S.C. § 3622(a). The system had to "be designed to achieve [nine] objectives, each of which shall be applied in conjunction with the others," id. § 3622(b), taking fourteen "[f]actors" into account, id. § 3622(c). The Act further enumerates five "[r]equirements" that the ratemaking system "shall" contain. Id. § 3622(d).
Pertinent here, the Act mandates that the ratemaking system "include an annual limitation on the percentage changes in rates ... equal to the change in the Consumer Price Index." Id. § 3622(d)(1)(A). This prevents rates for market-dominant products from rising faster than the inflation rate. See U.S. Postal Serv. , 785 F.3d at 744. The hope was that moving from a cost-of-service model to a price cap would incentivize the Postal Service to cut costs and improve efficiency. See S. Comm. on Gov't Affairs, Postal Accountability and Enhancement Act, S. REP . 108-318, at 9 (2004). The Postal Service may exceed the price cap if the Commission finds, after notice and comment, that a rate change is warranted due to "extraordinary or exceptional circumstances" if "reasonable and equitable and necessary" to maintain postal services. 39 U.S.C. § 3622(d)(1)(E).
The Accountability Act provides the Commission two ways to change the ratemaking system. First, the Commission may "revise" the system "from time to time." Id. § 3622(a). Second, the Commission must assess ten years after the Act's passage "if the system is achieving the objectives in subsection (b), taking into account the factors in subsection (c)." Id. § 3622(d)(3). "If the Commission determines, after notice and opportunity for public comment, that the system is not achieving the objectives," then it "may, by regulation, make such modification or adopt such alternative system for regulating rates ... as necessary to achieve the objectives." Id.
In December 2017, the Commission released the findings of its ten-year review. Order 4257 , Docket No. RM2017-3 (P.R.C. Dec. 1, 2017). It found that "while some aspects of the system" had "worked as planned, overall[ ] the system has not achieved the objectives." Id. at 5. The Commission explained that the "operating environment" of the Postal Service "changed quickly and dramatically" after the Act's passage. Id. at 45. The "Great Recession" of 2008 resulted in the most severe decline in mail volumes since the Great Depression of the 1930s, causing the Postal Service's revenue to plummet. Id. at 38. The period of deflation after the Great Recession meant the Postal Service could not increase rates due to the statutory price cap. Id. Throughout, the Postal Service's costs soared due to an obligation imposed on it by the Accountability Act requiring the prefunding of retirement benefits. Id. at 37. As a result, the Postal Service accumulated a $59.1 billion deficit in just ten years. Id. at 171.
Given those findings, the Commission determined that the existing ratemaking system failed to achieve three statutory objectives. First, the system had not maintained the financial stability of the Postal Service. Id. at 178. Although the Postal Service could cover its immediate operating expenses, id. at 159–65, it had not achieved "medium-term stability" as it had suffered a net loss for ten straight years, id. at 165–69. Nor had the Postal Service achieved "long-term stability" because it lacked the funds to invest in capital improvements or pay down debts. Id. at 169–71. Second, the system had not maximized incentives to cut costs and improve efficiency. Id. at 226. Despite the Postal Service having reduced costs, id. at 191, and improved its efficiency, id. at 203–21, the ratemaking system did not maximally incentivize such efforts because they "were insufficient to address the Postal Service's financial instability," id. at 222. Third, the system had not achieved reasonable rates "because certain products and [mail] classes threatened the financial integrity of the Postal Service." Id. at 236.
Concurrent with its findings, the Commission proposed "a two-pronged solution designed to place the Postal Service on the path to financial stability by providing [it] rate adjustment authority in addition to the CPI-U rate authority." Order 4258 , Docket No. RM2017-3, at 37 (P.R.C. Dec. 1, 2017). To address medium-term financial stability, the Commission...
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