Northern Air Cargo v. United States Postal Serv.

• Decision Date: 03 April 2012
• Docket Number: Nos. 10–5385,11–5149.,10–5402,s. 10–5385
• Citation: 400 U.S.App.D.C. 69,674 F.3d 852
• Parties: NORTHERN AIR CARGO, et al., Appellants v. UNITED STATES POSTAL SERVICE and Peninsula Airways, Inc., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

400 U.S.App.D.C. 69

674 F.3d 852

NORTHERN AIR CARGO, et al., Appellants

v.UNITED STATES POSTAL SERVICE and Peninsula Airways, Inc., Appellees.

Nos. 10–5385

10–5402

11–5149.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 3, 2012.Decided April 3, 2012.

Appeals from the United States District Court for the District of Columbia (No. 1:09–cv–02065).Amy L. Brown argued the cause for appellants/cross-appellees. With her on the briefs were Pierre H. Bergeron and Jeremy W. Dutra.

Mitchell P. Zeff, Assistant U.S. Attorney, argued the cause for appellee United States Postal Service. With him on the brief were Ronald C. Machen, Jr., U.S. Attorney, R. Craig Lawrence, Assistant U.S. Attorney, and Michael J. Elston, Chief Counsel, United States Postal Service.

Christopher T. Handman argued the cause for appellee/cross appellant Peninsula Airways, Inc. With him on the briefs were Robert E. Cohn, Patrick R. Rizzi, and Mary Helen Wimberly.

Before: SENTELLE, Chief Judge, SILBERMAN and WILLIAMS, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge SILBERMAN.

Concurring opinion filed by Chief Judge SENTELLE.

SILBERMAN, Senior Circuit Judge.

This case is a partial primer as to how not to defend or adjudicate a challenge to agency action in federal district court. The Postal Service determined, in two informal adjudications, that Peninsula Airways (“PenAir”) was qualified to carry (could be “tendered”) “nonpriority bypass mail” on five Alaska routes. This awkward term refers to types of freight—not ordinary mail—which are carried by planes to small communities in that vast state that are largely unreachable by surface transportation.¹ Presumably, by shipping such goods under the auspices of the Post Office, the federal government defrays part of the cost. The word “bypass” is used because the freight is never handled by the Post Office's processing facilities. The word “nonpriority” apparently refers to a slower delivery time than “priority” mail, but since the parties do not suggest a difference relevant for this case between priority and nonpriority bypass mail, we will, henceforth, use only “bypass mail” to refer to the types of freight at issue.

The Postal Service acted pursuant to the Rural Service Improvement Act of 2002 (“the Act”), which permitted PenAir to enter the five routes as what is termed a “mainline bypass mail carrier” (essentially those that fly large planes) only if it met certain statutory conditions.

Three competing carriers, who presently divide the market, sued twice to challenge the Postal Service's determinations as contrary to the Act. Although it initially issued an extraordinary injunction preventing the tender to PenAir, the district court ultimately concluded that the Postal Service's position was authorized. The three competing carriers appealed, and PenAir cross-appealed part of the district court's initial determination.

Contrary to the district court, we think that the three relevant statutory sections are quite ambiguous—indeed one is hopelessly so—and because we have no authoritative Postal Service interpretations of the statute before us, we vacate the district court's judgment with instructions to remand to the Postal Service.

I

The small towns involved in this case, Dillingham, King Salmon, Aniak, McGrath and Unalakleet, can be accessed only by plane or boat, and they depend on bypass mail for food, hospital supplies, generators and other necessities. Although small towns, these locations are called “hub points” from which even smaller settlements are reached. All bypass mail sent to them originates in either Anchorage or Fairbanks. The private air carriers who deliver bypass mail are compensated by the Postal Service (with Department of Transportation involvement), depending on the type of aircraft the carrier operates and the number of similar carriers serving the same route. Carriers operating smaller planes whose payload capacity is less than 7,500 pounds are termed “bush carriers.” Carriers operating larger planes are called “mainline carriers” and they receive slightly lower rates. Under the Postal Service's “equitable tender” practice, planes of each type get an equal share of the relevant category of bypass mail (mainline or bush) on each route. Thus, each market entrant dilutes the existing carriers' shares proportionately.

To enter the bypass mail market, carriers must apply to the Postal Service for equitable tender of bypass mail on a particular route. The Postal Service then determines whether the carrier satisfies certain eligibility requirements. The Act places particular limitations on a carrier's eligibility for equitable tender on routes that go from Anchorage or Fairbanks to hub points. Ordinarily, the Postal Service can only tender bypass mail on those routes to “existing mainline carriers” (essentially, carriers who were certified and providing mainline bypass mail service as of January 1, 2001). But under an exception at issue here, the Postal Service can also tender to a “new 121 mainline passenger carrier” if the new carrier provides substantial passenger service and meets other requirements.²

Appellants Northern Air Cargo, Tatonduk Outfitters Limited (Events Air Cargo), and Lynden Air Cargo are all existing mainline carriers who have received equitable tender of mainline bypass mail on some or all of the five routes from Anchorage to the hubs of Dillingham, King Salmon, Aniak, McGrath, and Unalakleet. Though appellants provide bypass mail and other freight services on these routes several days a week, none provide regular passenger service.

Until 2009, appellee PenAir served these five routes as a bush carrier, primarily carrying passengers. Before 2001—this becomes controversial—PenAir also carried some bush bypass mail on these routes. In July and August of 2009, after upgrading its fleet to include larger planes, PenAir requested equitable tender of mainline bypass mail on these routes as a new 121 mainline passenger carrier. PenAir emphasized its plans to provide daily passenger as well as cargo service, which would make it the only regular provider of mainline passenger service on the five routes. The Postal Service granted PenAir equitable tender on all five routes in two letters written by the Program Manager of Intra–Alaska Air Transportation Policy in August and September 2009. The only explanation offered was that “[h]aving reviewed the matter, we have concluded that your letters describe service which would make you eligible for the equitable tender you have requested in those markets.” In August, PenAir began operating as a mainline carrier, and on November 9, 2009, the Postal Service began tendering mainline bypass mail to PenAir on the five routes.

Appellants sued the Postal Service, arguing before the district court that the Postal Service had exceeded its statutory authority. Under appellants' reading of the Act, PenAir was ineligible for equitable tender as a new mainline passenger carrier because it was not a “new” carrier. Even if it were, appellants argued, a “Prior Service and Capacity Requirement” applied to PenAir and it had not been satisfied. That requirement makes mainline carriers eligible for equitable tender on a route only after they have provided the requisite “scheduled service,” i.e., two noncontract flights within Alaska per week for at least a year.³ PenAir intervened, and the parties cross-filed motions for summary judgment. The district court ruled in part for the Postal Service and PenAir, holding that the definition of a “new” carrier was unambiguous and that PenAir qualified. But the court also decided in part for appellants, holding that the Prior Service and Capacity Requirement was also supposedly unambiguous, applied to PenAir, and had not yet been satisfied.

To be sure, the district court criticized the Postal Service's explanation of its decision as a “vague assertion [which] fails to reflect any deliberative process.” But, because the court thought the statute susceptible of only one interpretation, it enjoined the Postal Service from tendering mainline bypass mail to PenAir until PenAir satisfied the Prior Service and Capacity Requirement, in what it called a “final appealable Order.” Accordingly, the Postal Service ceased tendering mainline bypass mail to PenAir. Appellants appealed the “new” carrier ruling, and PenAir, but not the Postal Service, conditionally cross-appealed the Prior Service and Capacity Requirement ruling.

PenAir resubmitted its request for equitable tender, arguing that it had already satisfied the Prior Service and Capacity Requirement by flying the requisite number of scheduled flights for the thirteen months between August 2009 (when PenAir started operating as a mainline carrier) and September 2010 (when the district judge entered its injunction). Appellants objected that PenAir could not have possibly satisfied the requirement. According to appellants, no service—passenger or cargo—provided while PenAir received tender of bypass mail could be counted toward the requirement, and ten of the thirteen months should therefore have been excluded from calculations. ⁴ And less than thirty days had elapsed since the district court's order, so the requirement could not have been satisfied in the meantime. Appellants requested an opportunity to participate in the process. The Postal Service apparently never responded, although it did seek clarification from the district court as to whether the injunction precluded the Postal Service from crediting PenAir's prior service.⁵ Instead it granted PenAir's request. Its only explanation was that “[t]he Postal Service has validated that the Prior Service and Capacity Requirement ... has been met by PenAir. Additionally, PenAir satisfies the definition of ‘new’ 121 mainline passenger carrier ... based on the Postal Service's interpretation as well as the [district court's] decision.” The letters...