U.S. Postal Serv. v. Postal Regulatory Comm'n

• Decision Date: 06 April 2018
• Docket Number: No. 16-1284,16-1284
• Citation: 886 F.3d 1253
• Parties: UNITED STATES POSTAL SERVICE, Petitioner v. POSTAL REGULATORY COMMISSION, Respondent National Postal Policy Council, et al., Intervenors
• Court: U.S. Court of Appeals — District of Columbia Circuit

886 F.3d 1253

UNITED STATES POSTAL SERVICE, Petitioner
v.
POSTAL REGULATORY COMMISSION, Respondent

National Postal Policy Council, et al., Intervenors

No. 16-1284

United States Court of Appeals, District of Columbia Circuit.

Argued January 5, 2018
Decided April 6, 2018

David C. Belt, Attorney, U.S. Postal Service, argued the cause and filed the briefs for petitioner. Stephan J. Boardman, Chief Counsel, U.S. Postal Service, entered an appearance.

Dana Kaersvang, Attorney, U.S. Department of Justice, argued the cause for respondent. With her on the brief were Michael S. Raab, Attorney, David A. Trissell, General Counsel, Postal Regulatory Commission, Christopher J. Laver, and Erica A. Barker, Attorneys.

Before: Pillard, Circuit Judge, and Edwards and Williams, Senior Circuit Judges.

Williams, Senior Circuit Judge:

Under the Postal Accountability and Enhancement Act, Pub. L. No. 109–435, 120 Stat. 3198 (2006), the Postal Regulatory Commission is authorized to set rate caps for the "market-dominant products" of the United States Postal Service. (The act contrasts such products, consisting most obviously of products where the Postal Service enjoys a legal monopoly, such as first-class mail, with the Postal Service's "competitive" products.) The Commission is to set "an annual limitation on the percentage changes in rates" equal to the rate of inflation, 39 U.S.C. § 3622(d)(1)(A) ; the statute defines "rates" as "fees for postal services," 39 U.S.C. § 102(7).

In USPS v. Postal Regulatory Comm'n , 785 F.3d 740 (D.C. Cir. 2015) (" USPS I "), we wrestled with the question of whether, and if so under what circumstances, the Commission could treat Postal Service changes in mail preparation requirements as "changes in rates" subject to the cap.

We rejected the Postal Service's theory that the statute encompassed "only changes to the official posted prices of each product," id . at 751, saying that "the Commission may have the authority under the price cap statute and regulations to consider mail preparation requirement changes of the kind at issue in this case as changes in rates," id . at 755. But, mystified by the Commission's efforts to explain

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how it would decide when a mailing requirement actually was a rate change, we found its action arbitrary and capricious and remanded to the Commission for it to "enunciate an intelligible standard and then reconsider its decision in light of that standard." Id . at 756.

In due course the Commission produced the order now before us, Order No. 3047, Order Resolving Issues on Remand (Jan. 22, 2016). The order rules that a mail preparation change constitutes a change in rates if it results "in the deletion of a rate cell" or "in the redefinition of a rate cell if the mail preparation change causes a significant change to a basic characteristic of a mailing." Id . at 15.

Applying this standard, the Commission reaffirmed its earlier decision that the proposed mail preparation change constituted a change in rates. The Postal Service moved for reconsideration, which the Commission denied. Order No. 3441, Order Resolving Motion for Reconsideration of Commission Order No. 3047 (July 7, 2016). The Postal Service again petitions for review.

We now find that the Commission's new analysis adds no discernible clarity to the reasoning it supplied on the last round and that it rests on an unreasonable interpretation of "changes in rates" that "goes beyond the meaning that the statute can bear." MCI Telecomm. Corp. v. AT&T Co. , 512 U.S. 218, 229, 114 S.Ct. 2223, 129 L.Ed.2d 182 (1994). "[U]nder the familiar standard of Chevron , ... a ‘reasonable agency interpretation prevails’ "; "[o]f course, ‘if Congress has directly spoken to an issue then any agency interpretation contradicting what Congress has said would be unreasonable.’ " Loan Syndications & Trading Ass'n v. SEC , 882 F.3d 220, 222 (D.C. Cir. 2018) (quoting Entergy Corp. v. Riverkeeper, Inc. , 556 U.S. 208, 218 n.4, 129 S.Ct. 1498, 173 L.Ed.2d 369 (2009) ). "Even under Chevron , after all, agencies only ‘possess whatever degree of discretion [an] ambiguity allows.’ " Id . at 224 (quoting City of Arlington v. FCC , 569 U.S. 290, 307, 133 S.Ct. 1863, 185 L.Ed.2d 941 (2013) ). We grant the petition and vacate the orders.

* * *

Our 2015 decision recites the relevant background. See USPS I , 785 F.3d at 744–50. We cover the same ground only as necessary.

The Commission does not apply the rate cap by limiting the rate for each product in isolation. Rather, it allows the Postal Service to trade off above-inflation increases in the rate of one product with below-inflation increases in the rate of another product within the same class (or, of course, constant-dollar decreases in rates). As a result, apart from market-driven changes in volume, the Postal Service's aggregate revenue for each class of market-dominant products should increase no faster than inflation. We explained in USPS I :

Thus, for example, the Commission's rules ensure that the Postal Service may not generate extra revenue beyond the price cap by taking advantage of the different volume levels of different products within a class to raise rates unevenly while technically complying with the class-level price cap. To achieve this, the Commission has promulgated regulations specifying that the calculation of a "change in rates" in a class should be weighted by the mail volume of any given rate cell in a class. 39 C.F.R. § 3010.23(b). So, if the Postal Service has two rate cells in a given class but one of them accounts for the lion's share of the mail volume, any increase in the rate for that rate cell will be weighted according to volume when determining

886 F.3d 1256

its contribution toward the classwide rate change cap.

Id. at 745. (The Postal Service does not question this aspect of the Commission's work.) Thanks to this interrelation of rate cells, the Commission might have tried to integrate mail preparation requirements into its authority over "changes in rates" with the following argument: Where an increase in mail preparation requirements for one cell will drive mailers to use a higher-priced cell , the resulting increase in volume in the latter should count against the rate cap. This is emphatically not the road taken by the Commission. We identify this approach not in order to offer any final judgment on it but to indicate how treating a change in mail preparation requirements as a rate change might, as a matter of arithmetic, be integrated with the Commission's system of volumetric assessment.

We now return to the history that has brought us here. As of 2009, the Postal Service had three rates for bulk mail (listed in descending order of price and ascending order of the related mailing requirement's stringency): (1) one for mail sent without a barcode (the "nonautomation" rate), (2) one for mail sent with either a POSTNET or Basic Intelligent Mail barcode (the "standard automation" rate), and (3) one for mail sent with a Full-Service Intelligent Mail barcode (the "discounted automation" rate).

In January 2013 the Postal Service disallowed use of the POSTNET barcode as a basis for obtaining the standard automation rate. POSTNET Barcode Discontinuation , 77 Fed. Reg. 26,185 (May 3, 2012). The Commission did not treat this change as a change in rates.

In April 2013 the Postal Service sought to make a further change: To qualify for the standard automation rate, mailers would have to upgrade their barcodes to the Full-Service Intelligent Mail variety, which would necessarily qualify them for the "discounted automation" rate as well. Implementation of Full-Service Intelligent Mail Requirements for Automation Prices , 78 Fed. Reg. 23,137 (Apr. 18, 2013). The Commission held this redefinition of requirements for the standard automation rate to be a change in rates. Order No. 1890, Order on Price Adjustments for Market Dominant Products and Related Mail Classification Changes (Nov. 21, 2013). Its explanation was that the barcode changes "require mailers to alter a basic characteristic of a mailing in order for the mailing to qualify for the same rate category for which it was eligible before the change in requirements." Id . at 18. It ruled that this change in mailing requirements, coupled with changes in nominal rates that the Postal Service had earlier proposed, would in the aggregate violate the price cap. Id. at 35–37.

That ruling led to our decision in USPS I , to the Commission's new articulation of its theory and application of that theory against the Postal Service, and thus to the petition now before us.

* * *

Our 2015 decision laid down a marker for what might qualify as rates and "changes in rates." Time and again we tied "rates" to payments by mailers to the Postal Service, and "changes in rates" to changes in those payments. We started by pointing to the controlling statute's definition of "rates" as "fees for postal services." 39 U.S.C. § 102(7) ; USPS I , 785 F.3d at 751. We saw the central issue as being identification of the...