United States Postal Serv. v. Postal Regulatory Comm'n, 11–1117.

• Decision Date: 17 April 2012
• Docket Number: No. 11–1117.,11–1117.
• Citation: 676 F.3d 1105
• Parties: UNITED STATES POSTAL SERVICE, Petitioner v. POSTAL REGULATORY COMMISSION, RespondentAmerican Catalog Mailers Association, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

676 F.3d 1105

UNITED STATES POSTAL SERVICE, Petitioner

v.POSTAL REGULATORY COMMISSION, RespondentAmerican Catalog Mailers Association, et al., Intervenors.

No. 11–1117.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 7, 2010.Decided April 17, 2012.

On Petition for Review of an Order of the Postal Regulatory Commission.Michael J. Elston, Chief Counsel, U.S. Postal Service, argued the cause and filed the briefs for petitioner.

William D. Blakely, Lauren P. DeSantis–Then, and William E. Quirk were on the briefs for intervenor American Catalog Mailers Association in support of petitioner.

Abby C. Wright, Attorney, U.S. Department of Justice, argued the cause for respondent. With her on the brief were Tony West, Assistant Attorney General, Michael S. Raab, Attorney, Stephen L. Sharfman, General Counsel, Postal Regulatory Commission, R. Brian Corcoran, Deputy General Counsel, and Katrina R. Martinez, Attorney.William J. Olson, John S. Miles, Herbert W. Titus, and Thomas W. McLaughlin were on the brief for intervenors L.L. Bean, Inc., et al. in support of respondent.

Before: GARLAND and GRIFFITH, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge WILLIAMS.

WILLIAMS, Senior Circuit Judge:

As amended by the 2006 Postal Accountability and Enhancement Act (“PAEA”), title 39 of the U.S.Code requires the United States Postal Service to submit to the Postal Regulatory Commission, within 90 days of the end of each fiscal year, a financial report that “analyze[s] costs, revenues, rates, and quality of service ... in sufficient detail to demonstrate that all products during [that] year complied with all applicable requirements of this title.” 39 U.S.C. § 3652(a). After a period for public comment, the Commission must issue an order determining “whether any rates ... in effect during [that] year (for products individually or collectively) were not in compliance with applicable provisions of this chapter,” and may direct the Postal Service to remedy any violations. See id. § 3653(b)(1).

Fulfilling these duties, the Commission issued its 2010 Annual Compliance Determination (“ACD”), finding in part that the rates for a particular product—Standard Mail Flats, a subset of Standard Mail—were in violation of 39 U.S.C. § 101(d)'s mandate that “[p]ostal rates shall be established to apportion the costs of all postal operations to all users of the mail on a fair and equitable basis.” See Annual Compliance Determination Report for Fiscal Year 2010, available at http:// www. prc. gov/ Docs/ 72/ 72382/ PRC_ ACD_ 2010. pdf, at 106. Because the revenues from Standard Flats fell significantly short of the product's costs, a deficit that had only increased in recent years, the Commission determined that current rates “reflect[ed] an unfair and inequitable apportionment of the costs of postal operations of all Standard Mail users,” contrary to the demands of § 101(d). Id. In the Commission's view, the persistent losses incurred by Standard Flats amounted to a subsidy of Flats at the expense of other Standard Mail products (and their customers), whose rates it saw as being artificially inflated in order to make up the difference. In order to remedy the violation, the Commission ordered the Postal Service to “increase the cost coverage” for Standard Flats “until such time that the revenues for this product exceed attributable costs.” Id.

The Postal Service seeks review of this determination, arguing that the PAEA does not permit reliance on 39 U.S.C. § 101(d) for purposes of the ACD, and that the determination regarding Standard Flats was otherwise arbitrary and capricious. We think that the Commission acted within its statutory authority but remand for an explanation of the relation between its remedy, on one hand, and its treatment of other products and indeed the bounds of its authority, on the other.

* * *

Some statutory mandates apply generally to all of the Postal Service's products, see, e.g., 39 U.S.C. § 101, whereas many differ depending on whether the product is market-dominant (as is true of Standard Mail products) or belongs to a second category—“competitive products,” which consists of products also offered by other carriers, such as UPS. Compare id. §§ 3621–29 (governing market-dominant products), with id. §§ 3631–34 (governing competitive ones). In particular, the PAEA provides the Commission with fourteen factors to consider when reviewing Postal Service rates for market-dominant products, see id. § 3622(c), and a separate list for competitive products, see id. § 3633(a).

Two of § 3622(c)'s fourteen factors governing market-dominant products are of particular relevance here: (1) subsection (c)(2)'s requirement “that each class of mail ... bear the direct and indirect postal costs attributable to each class” (emphasis added) and (2) subsection (c)(14)'s general stipulation that the Commission consider “the policies of [title 39] as well as such other factors as the Commission determines appropriate.”

The Postal Service's primary argument is that the Commission's decision on Standard Flats looked beyond the specific criteria Congress laid out for market-dominant products in § 3622(c). In particular, the Service focuses our attention on subsection (c)(2)'s use of the word “class,” rather than “product.” The Service contrasts subsection (c)(2) with the rules governing competitive products, which tell the Commission to “ensure that each competitive product covers its costs.” 39 U.S.C. § 3633(a)(2) (emphasis added). It draws from this contrast the inference that within the market-dominant domain the Commission's power to require full cost coverage applies only to classes, not to the individual products within a class. Petitioner's Br. 21. (The logic of the distinction might be that non-cost-based pricing for a competitive product inflicts special damage—on competition and its expected consumer benefits. Of course that hypothesis doesn't explain how the Service, in marketing a class of products all of which are competitive, could generate returns sufficiently above cost to cross-subsidize other products within the class.) Clearly the linguistic distinction tends to shore up the negative inference the Postal Service draws from § 3622(c)(2)'s omission of the word “product.”

The Commission does not altogether dispute that negative inference, but argues in its brief that in an “extreme case” subsection (c)(14)'s catch-all phrase—invoking “the policies of this title as well as such other factors as the Commission determines appropriate”—allows it to incorporate the more generally applicable standards found in 39 U.S.C. § 101. Respondent's Br. 29. The “title” referred to is title 39, which of course includes 39 U.S.C. § 101(d). It thus interprets subsection (c)(14) to permit it to override the more particular requirements found in subsection (c)'s thirteen specific factors, where necessary to “apportion the costs of all postal operations to all users of the mail on a fair and equitable basis,” see id. § 101(d), and more generally to make sure that market-dominant rates are “consistent with the overarching financial and policy goals set forth” in the PAEA. Respondent's Br. 31 (quoting S.Rep. No. 108–318, at 8 (2004)). The Commission also invokes another broad clause: Congress specifically ordered the Service to provide data, in its annual reports, “in sufficient detail to demonstrate that all products during such year complied with ...