U.S. Postal Service v. Notestine, No. 88-2480

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: Before WISDOM, GEE and RUBIN; ALVIN B. RUBIN
• Citation: 857 F.2d 989
• Parties: UNITED STATES POSTAL SERVICE, Plaintiff-Appellant, v. David NOTESTINE, et al., Defendants-Appellees.
• Docket Number: No. 88-2480
• Decision Date: 30 September 1988

Page 989

857 F.2d 989 UNITED STATES POSTAL SERVICE, Plaintiff-Appellant,
v.
David NOTESTINE, et al., Defendants-Appellees. No. 88-2480. United States Court of Appeals,
Fifth Circuit. Sept. 30, 1988.

Page 990

Michael Jay Singer, Atty. Appellate Staff, Civ. Div., Mark B. Stern, Dept. of Justice, Washington, D.C., Sam Longoria, Asst. U.S. Atty., Houston, Tex., for plaintiff-appellant.

Tom Aubrey, Houston, Tex., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Texas.

Before WISDOM, GEE and RUBIN, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

The United States Postal Service, acting under express statutory authority, resorted to district court to obtain a preliminary injunction permitting it to retain the mail of named persons while it conducted an administrative proceeding to investigate charges that those persons had solicited money through the mail by means of false representation. The district court not only denied the injunction but issued a preliminary injunction forbidding the Service to

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pursue the administrative proceeding. It further ordered that the charges of false representation be decided in the district court rather than administratively. Because the applicable statute grants the Postal Service exclusive authority to investigate mail fraud charges by conducting administrative proceedings, however, the district court erred both in issuing the preliminary injunction and in arrogating to itself the power to decide the substantive issues in the case.

I.

The Postal Service began an administrative proceeding against David Notestine, Gail Martin-Notestine, Telecard Corporation, and PMI Holdings, Inc. under 39 U.S.C. Sec. 3005 ¹ for soliciting money through the mail by means of false representation. The Service charged that the Notestines and their corporations had falsely advertised that they could provide persons with Mastercard and Visa credit cards without regard to credit history if the applicant paid only an initial fee. While the administrative proceeding was pending, the Service sought a preliminary injunction in federal district court pursuant to 39 U.S.C. Sec. 3007. ² The injunction would have permitted the Service to detain the Notestines' mail until the conclusion of the administrative proceeding.

The Notestines counter-attacked by asking the district court to enjoin the Service from conducting the administrative proceeding and to require it to litigate all of its claims against the Notestines in district court. They argued that the Service had improperly filed parallel administrative and judicial proceedings, and was therefore barred from pursuing the administrative action. Relying upon its purported concurrent jurisdiction, the district court issued a preliminary injunction prohibiting the Postal Service from pursuing the administrative proceeding. On the grounds that the administrative proceeding "is not of the kind that requires a uniformity of decision" and "does not require specialized agency knowledge," the court held that the Service, "having sought equity in the United States district court, ... must do equity here ... The Postal Service will be enjoined from pursuing the claims asserted in this action against the Notestines ... in any other forum including administrative agencies." In this way, the district court sought to protect the Notestines from "a multiplicity of litigation."

II.

Sections 3005 and 3007 and their accompanying regulations, repeatedly upheld by the Supreme Court against a variety of constitutional challenges, ³ prescribe a comprehensive administrative framework by which the Postal Service may prosecute individuals suspected of using the mail to further fraudulent schemes. The regulations

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provide: "When the General Counsel of the Postal Service ... believes that a person is using the mails in a manner requiring formal administrative action under 39 U.S.C. 3005, he shall prepare and file with the Recorder a complaint ..." ⁴

The institution of the administrative action, however, does not interrupt the flow of mail to the person charged and the Postal Service has no authority to intercept mail on its own initiative while the proceeding is pending. If, therefore, the Postal Service seeks to "impound" mail addressed to the charged person "[i]n preparation for or during the pendency of a proceeding initiated under 39 U.S.C. 3005," the Postal Service must "obtain[ ] an appropriate order from a U.S. District Court, as provided in 39 U.S.C. 3007." ⁵ In United States Postal Service v. Athena Products, Ltd., ⁶ this court added the requirement that "injunctions granted under section 3007 should not extend longer than necessary for a prompt administrative determination." ⁷ After an administrative hearing, exhaustion of administrative remedies, and issuance of a final administrative order, the final agency action is, of course, subject to judicial review. ⁸

In Public Clearing House v. Coyne, ⁹ the Supreme Court upheld the Postal Service's power to conduct an administrative hearing without obtaining prior judicial sanction. Subsequent cases have held that courts may not interfere with the Postal Service's exercise of the power under 39 U.S.C. Secs. 3005 and 3007 "unless it has exceeded its authority or is palpably wrong." ¹⁰

The Notestines did not claim, and the district court did not hold, that the Postal Service had exceeded its authority or that its decision to investigate had been palpably wrong. Instead, the Notestines sought to enjoin the administrative proceedings on the grounds that the allegations in the judicial and the administrative proceedings were "identical" and that the Notestines had a "right to have the legality of their business practices determined in one hearing."

As a factual matter, the two proceedings against the Notestines were not identical; indeed, they served distinctly different purposes. Administrative proceedings under Sec. 3005 are designed to investigate and adjudicate the merits of claims of improper use of the mail. After a Sec. 3005 proceeding, if the hearing officer does not exonerate the charged party, the Postal Service may issue an order directing the postmaster to return to the individuals who sent them all mail and money orders sent to the charged party. In addition, the Service may order...