Top Choice Distributors, Inc. v. U.S. Postal Service

• Decision Date: 26 February 1998
• Docket Number: No. 97-6186,97-6186
• Citation: 138 F.3d 463
• Parties: TOP CHOICE DISTRIBUTORS, INC. and Salvatore Sciandra, Plaintiffs-Appellants, v. UNITED STATES POSTAL SERVICE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 463

138 F.3d 463

TOP CHOICE DISTRIBUTORS, INC. and Salvatore Sciandra, Plaintiffs-Appellants, v. UNITED STATES POSTAL SERVICE, Defendant-Appellee.

No. 97-6186.

United States Court of Appeals,

Second Circuit.

Argued Feb. 12, 1998.

Decided Feb. 26, 1998.

Charles B. Chernofsky, New York City (Chernofsky & deNoyelles, New York City, Salvatore R. Martoche, Hiscock & Barclays, LLP, Buffalo, NY, on the brief), for Plaintiffs-Appellants.

Janet E. Smith, United States Postal Service, Washington, D.C. (Patrick NeMoyer, United States Attorney for the Western District of New York, Mary Fleming, Assistant United States Attorney, Buffalo, NY, R. Andrew German, Rodney Gould, United States Postal Service, Washington, DC, on the brief), for Defendant-Appellee.

Before: VAN GRAAFEILAND, JACOBS, and LAY, ^* Circuit Judges.

JACOBS, Circuit Judge.

Plaintiff-appellant Top Choice Distributors, Inc. is a self-described direct-mail solicitation company which has been the target of a number of administrative proceedings in which the United States Postal Service has charged it with conducting schemes through the mail to obtain money by means of fraudulent misrepresentations. In response to the Postal Service's latest administrative action, Top Choice and its chairman, Salvatore Sciandra, have sued the United States Postal Service, citing the prior administrative actions and invoking the doctrines of res judicata and collateral estoppel. Plaintiffs now appeal from a judgment of the United States District Court for the Western District of New York (Elfvin, J.), granting defendant's motion for summary judgment and dismissing the complaint for failure to exhaust administrative remedies. We affirm on slightly different grounds.

BACKGROUND

In June 1994, the Postal Service initiated an administrative complaint against Top Choice, alleging that its mailings contained false representations in violation of 39 U.S.C. § 3005, which prohibits the use of the mails to conduct a scheme to obtain money by means of fraudulent misrepresentations. That complaint was settled by a consent agreement, which provided for a cease and desist order that placed certain conditions on any future mailings by Top Choice.

In April 1995, the Postal Service filed an administrative breach petition against Top Choice, alleging violations of the 1994 consent agreement and the cease and desist order. In July 1995, the Postal Service's Judicial Officer ruled that eight of the twelve The Postal Service initiated yet another complaint against Top Choice in October 1996, pleading that further mailings contained fraudulent misrepresentations in violation of 39 U.S.C. § 3005. In response, plaintiffs filed this action seeking an injunction barring the Postal Service from prosecuting the pending administrative complaint. Plaintiffs allege that the latest administrative initiative of the Postal Service is barred by res judicata and collateral estoppel because it charges violations of a kind that could have been asserted in the first administrative complaint and that were held in the earlier proceedings not to violate the statute.

Top Choice mailings at issue violated the 1994 agreement and order.

The district court denied plaintiffs' motion for a preliminary injunction; plaintiffs moved for summary judgment; and the Postal Service cross-moved for a summary judgment on the ground that plaintiffs failed to exhaust administrative remedies. The district court granted the cross-motion.

DISCUSSION

On appeal, plaintiffs contend that the district court erred in dismissing the action for failure to exhaust administrative remedies. We conclude that dismissal of the complaint is justified on a closely-related ground: lack of finality.

The Postal Service is authorized, "upon evidence satisfactory to" it, to deny the use of the mails to those engaged in schemes to obtain money by means of false representations. 39 U.S.C. § 3005 (West Supp.1997). Procedures for enforcing this authority are set out in regulations: the General Counsel of the Postal Service files a complaint, and a hearing is held before an administrative law judge, who then issues a decision. 39 C.F.R. §§ 952.5, 952.14, 952.24 (1997). The ALJ's decision "shall become the final Agency decision unless an appeal is taken in accordance with § 952.25." 39 C.F.R. § 952.24(a). An appeal may be taken to the Judicial Officer of the Postal Service, who is authorized to render the "final Agency decision." Id. §§ 952.25, 952.26. The Postal Service may then issue a cease and desist order and may also order that mail addressed to the respondents be returned to its senders. 39 U.S.C. § 3005(a).

Plaintiffs challenge the Postal Service's exercise of its § 3005 power. Although the Postal Service concedes that the final agency decision of the Postal Service is subject to judicial review under chapter 7 of the Administrative Procedure Act, 5 U.S.C. § 701 et seq. ("APA"), it claims that its decision is not yet final and that plaintiffs' request for judicial review is premature. ¹ We agree.

The district court exercised its discretion and required Top Choice to exhaust its administrative remedies before bringing suit against the Postal Service. However, as noted, this action must be brought under the APA and the APA permits judicial review of only "final agency action[s]." 5 U.S.C. § 704. The Supreme Court has recently emphasized the distinction between the exhaustion of remedies requirement, upon which the district court relied, and the finality requirement, and that is a distinction that we are obliged to respect:

[T]he finality requirement is concerned with whether the initial decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury; the exhaustion requirement generally refers to administrative and judicial procedures by which an injured party may seek review of an adverse decision and obtain a remedy if the decision is found to be unlawful or otherwise inappropriate.

Darby v. Cisneros, 509 U.S. 137, 144, 113 S.Ct. 2539, 2543, 125 L.Ed.2d 113 (1993) (alteration in original) (citation and internal quotation marks omitted). The two requirements advance the same goals and would operate here with the same result; but applying the distinction between exhaustion of remedies and finality that the Supreme Court has drawn, this case is well (and better) characterized as turning on the principle of finality because as yet there has been no adverse decision by the agency. Finality is an explicit requirement of the APA, while exhaustion is a judge-made creation, and the Supreme Court in Darby limited the applicability of the exhaustion of remedies doctrine in cases brought pursuant to the APA. See id. at 146, 113 S.Ct. at 2544-45.

"As a general matter, two conditions must be satisfied for agency action to be final: First, the action must mark the consummation of the agency's decisionmaking process--it must not be of a merely tentative or interlocutory nature. And second, the action must be one by which rights or obligations have been determined or from which legal consequences will flow." Bennett v. Spear, 520 U.S. 154, ----, 117 S.Ct. 1154, 1168, 137 L.Ed.2d 281 (1997) (citations and internal quotation marks omitted); see also Franklin v. Massachusetts, 505 U.S. 788, 797, 112 S.Ct. 2767, 2773, 120 L.Ed.2d 636 (1992) ("The core question is whether the agency has completed its decisionmaking process, and whether the result of that process is one that will directly affect the parties.").

In Federal Trade Commission v. Standard Oil Co., 449 U.S. 232, 101 S.Ct. 488, 66 L.Ed.2d 416 (1980), the Federal Trade Commission ("FTC") issued a complaint against an oil company, and the company argued that the FTC lacked reason to believe that the company had violated the law. The Supreme Court found that because the regulations provided for an evidentiary hearing, an ALJ determination, and a possible appeal from that determination to the Commission, the complaint was merely "a prerequisite to a definitive agency action on the question whether [the oil company] violated the Act," which determined nothing more than "that adjudicatory proceedings will commence," id. at 241-42, 101 S.Ct. at 494, and which had no effect on the oil company other than "to impose upon [it] the burden of responding to the charges made against it," id. at 242, 101 S.Ct. at 494. The Court emphasized that denial of review at that early procedural stage would advance important policy goals: avoiding interference with the proper functioning of the agency; affording the agency an opportunity to correct its own mistakes and apply its expertise; and preventing piecemeal review. The agency's decision to charge the company in a complaint therefore was held unreviewable.

The Seventh Circuit has expressly imposed the finality...