Sierra Club v. U.S. Postal Service, 74-1830

• Decision Date: 15 December 1976
• Docket Number: No. 74-1830,74-1830
• Parties: SIERRA CLUB, a California Non-Profit Corporation, Appellant, v. UNITED STATES POSTAL SERVICE et al., Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1199

549 F.2d 1199

SIERRA CLUB, a California Non-Profit Corporation, Appellant, v. UNITED STATES POSTAL SERVICE et al., Appellees.

No. 74-1830.

United States Court of Appeals, Ninth Circuit.

Dec. 15, 1976.

Rehearing and Rehearing En Banc Denied March 21, 1977.

Clark W. Maser (argued), of Athearn, Chandler & Hoffman, San Francisco, Cal., for appellant.

George Christopher Stoll, Asst. U. S. Atty. (argued), San Francisco, Cal., for appellees.

Before DUNIWAY and WRIGHT, Circuit Judges, and LUCAS, ^* District Judge.

LUCAS, District Judge:

The Sierra Club, plaintiff in the district court, brings this appeal from an order of the district court granting defendants' motion for summary judgment. ¹ For the reasons stated in this opinion, we affirm the judgment below.

Prior to 1971, the Sierra Club enjoyed preferred second and third class mailing rates pursuant to 39 U.S.C. §§ 4358 and 4452, because it was considered an "educational" organization. In 1971, however, the Postal Service decided to discontinue the Sierra Club's preferential rates. The Postal Service based this action upon an earlier determination of the Internal Revenue Service that the Sierra Club no longer qualified for a tax exemption under the Internal Revenue Code of 1954 (26 U.S.C.) § 501(c)(3), which applies to charitable and educational institutions. ² The action was apparently founded on the assumption that the I.R.S., in revoking the Section 501(c)(3) exemption, found that the Sierra Club was no longer an "educational" organization.

Soon after the decision by the Postal Service not to continue the Sierra Club's preferential treatment, the Sierra Club filed suit in the district court seeking review of the administrative action, injunctive relief, and a refund under the Tucker Act (28 U.S.C. § 1346(a)(2)). This action prompted the Postal Service to reconsider its decision; the Postal Service immediately restored the Sierra Club's preferred status and asked the Sierra Club to present documentary evidence substantiating its claim that it was entitled to preferential treatment as an educational organization. In return, the Sierra Club ceased the prosecution of its action. The Sierra Club thereafter submitted to the Postal Service a substantial volume of documentation and materials in support of its position.

On November 11, 1971, a meeting was held in the office of the Manager of the Mail Classification Division of the Postal Service. In attendance at that meeting were the Manager of the Mail Classification Division, the Executive Director of the Sierra Club, and attorneys for both sides. In the course of the meeting, the Sierra Club was allowed an opportunity to present further data which it wished the Postal Service to consider and to make oral arguments in support of its position.

Subsequent to the meeting, the Sierra Club submitted additional information at the request of the Postal Service. This additional material included the Sierra Club's financial statement, documentation of the Sierra Club's various activities, and a listing of Sierra Club publications.

On the basis of all of the material presented before, during, and after the meeting, the Postal Service reached a decision regarding the Sierra Club's preferred mailing rates, and notified the Sierra Club of that decision by a letter dated March 14, 1972. It decided that the Sierra Club was not an educational organization within the meaning of 39 C.F.R. §§ 132.1 and 134, and was not, therefore, entitled to the preferential mailing rates. After the Sierra Club was notified of this decision, it filed an amended complaint in the district court. The amended complaint set forth the events which had occurred since the original complaint was filed. On August 11, 1972, the Postal Service filed an answer to the amended complaint, and on January 26, 1973, it filed a motion for Summary Judgment.

At the hearing of the motion for Summary Judgment, the Sierra Club was given yet another opportunity to present any material to the Postal Service which the Sierra Club felt was not adequately considered when the Postal Service made its decision. The Sierra Club rejected this opportunity to augment the record and resubmit the matter to the Postal Service, however. The motion of the Postal Service for Summary Judgment was granted in a Memorandum of Decision filed on November 1, 1973, and this appeal ensued.

The Sierra Club first contends that the Postal Service was wrong in concluding that the Sierra Club is not an educational organization and is thus not entitled to preferential postal rates. There is a strong presumption in favor of a Postal Service determination of this sort and the scope of review is extremely limited. See, e. g., American Bible Society v. Blount, 446 F.2d 588 (3d Cir. 1971). Traditionally, the courts have overturned a Postal Service determination of mailing rate status only when the determination is "clearly wrong," amounting to an abuse of discretion. See Bates & Guild Co. v. Payne, 194 U.S. 106, 24 S.Ct. 595, 48 L.Ed. 894 (1904). This is still the proper standard of review; a district court should reverse a Postal Service rate determination only if it is arbitrary and capricious. The district court carefully considered the Postal Service's decision, and found that the Postal Service did not act arbitrarily or capriciously in this case, and did not, therefore, commit an abuse of discretion. 386 F.Supp. at 1105. Upon a review of the record, we agree with the district court that no such abuse has been shown. Sierra Club's contention that the Postal Service rate determination was erroneous must therefore fail.

Sierra Club's next contention on this appeal is that it was denied procedural due process because it did not receive a revocation hearing as it contends is required by Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). Goldberg held that a recipient of public assistance benefits had been denied due process where those benefits were terminated without effective notice of the reasons for the proposed termination, without an opportunity for the recipient to confront adverse witnesses, and without an opportunity for the recipient to present his own arguments and evidence. While that case involved the termination of welfare benefits, Goldberg has been applied in various other contexts. See, e. g., Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972) (execution of prejudgment writ of execution); Raper v. Lucey, 488 F.2d 748 (1st Cir. 1973) (denial of motor vehicle license).

Goldberg does not, however, establish a rigid standard to be applied in determining whether the principles of procedural due process have been satisfied. In its opinion, the Supreme Court carefully considered the flexible nature of the requirements of due process:

"The extent to which procedural due process must be afforded the recipient is influenced by the extent to which he may be 'condemned to suffer grievous loss,' Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 168 (71 S.Ct. 624, 647, 95 L.Ed. 817) (1951) (Frankfurter, J., concurring), and depends upon whether the recipient's interest in avoiding that loss outweighs the governmental interest in summary adjudication. Accordingly, as we said in Cafeteria & Restaurant Workers Union, etc. v. McElroy, 367 U.S. 886, 895 (81 S.Ct. 1743, 1748, 1749, 6 L.Ed.2d 1230) (1961), 'consideration of what procedures due process may require under any given set of circumstances must begin with a determination of the precise nature of the government function involved as well as of the private interest that has been affected by governmental action.' See also Hannah v. Larche, 363 U.S. 420, 440, 442, 80 S.Ct. 1502, 1513, 1514, 4 L.Ed.2d 1307 (1960).

"It is true, of course, that some governmental benefits may be administratively terminated without affording the recipient a pre-termination evidentiary hearing." 397 U.S. at 262-63, 90 S.Ct. at 1017.

This court has consistently adhered to this view of procedural due process; for example, in Bignall v. North Idaho College, 538 F.2d 243, 245 (9th Cir. 1976), we stated: "Due process is a flexible, pragmatic concept."

A court must consider the circumstances surrounding a particular termination of benefits in determining whether the beneficiary has been denied due process. Some situations will require a full evidentiary hearing and others will require less, depending upon the interest of the individual and the function of the government, and upon the opportunity of the individual to have his position heard.

In this case, the interest of the beneficiary, while important, is not as compelling as, for example, the interests of the beneficiaries in Goldberg (welfare benefits) or Bignall (employment rights). The ability of a public interest organization to communicate with its members is undoubtedly important to its existence, and the mail may well be an especially efficient method of communication for most of the organization's purposes. The Postal Service has not, however, terminated the Sierra Club's right to use the mails for its communications. It has merely required that the Sierra Club pay the same rates as others who use the mails. The Sierra Club's interest in its preferred rates is simply not protected to the same extent that life-sustaining welfare or unemployment benefits are protected.

The Postal Service's interests, on the other hand, are more compelling in this case than in most. There are various categories of preferred mailing rates. Rate classification decisions are initially made, in most ca...