United States Postal Serv. v. Postal Regulatory Comm'n, 10–1343.

• Decision Date: 24 May 2011
• Docket Number: No. 10–1343.,10–1343.
• Parties: UNITED STATES POSTAL SERVICE, Petitionerv.POSTAL REGULATORY COMMISSION, RespondentNational Postal Mail Handlers Union et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

640 F.3d 1263

395 U.S.App.D.C. 122

UNITED STATES POSTAL SERVICE, Petitioner

v.POSTAL REGULATORY COMMISSION, RespondentNational Postal Mail Handlers Union et al., Intervenors.

No. 10–1343.

United States Court of Appeals, District of Columbia Circuit.

Argued March 15, 2011.Decided May 24, 2011.

On Petition for Review of an Order of the Postal Regulatory Commission.Paul D. Clement argued the cause for the petitioner. Jeffrey S. Bucholtz, Zachary D. Tripp, Paul A. Mezzina and Michael J. Elston, Attorneys, United States Postal Service, were on brief.Bruce R. Lerner and Osvaldo Vazquez were on brief for intervenor National Postal Handlers Union in support of the petitioner.Peter D. DeChiara was on brief for amicus curiae National Association of Letter Carriers, AFL–CIO in support of the petitioner.Daniel Tenny, Attorney, United States Department of Justice, argued the cause for the respondent. Michael S. Raab, Attorney, Stephen L. Sharfman, General Counsel, Postal Regulatory Commission, R. Brian Corcoran, Assistant General Counsel, and Richard A. Oliver, Attorney, were on brief.Ian D. Volner, David M. Levy, David R. Straus, Michael W. Hall, Tonda F. Rush, William B. Baker, John M. Burzio, Thomas W. McLaughlin and Timothy L. Keegan were on brief for intervenors Affordable Mail Alliance et al. in support of the respondent.Susan M. Collins, pro se, was on brief for amicus curiae United States Senator Susan M. Collins in support of the respondent.

Before: HENDERSON, TATEL and BROWN, Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.KAREN LeCRAFT HENDERSON, Circuit Judge:

Section 201(d) of the Postal Accountability and Enhancement Act of 2006 (PAEA or Act), Pub.L. No. 109–435, 120 Stat. 3198, generally limits annual increases in the postal rates for market dominant products to an amount equal to the change in the Consumer Price Index for All Urban Consumers (CPI–U). The United States Postal Service (Postal Service) filed a request with the Postal Regulatory Commission (Commission) to exceed the annual cap pursuant to section 201(d)(1)(E), which authorizes the Commission to “establish procedures whereby rates may be adjusted [above the annual CPI–U cap] on an expedited basis due to either extraordinary or exceptional circumstances,” citing as the exigent circumstance the recent recession and declines in mail volume resulting therefrom. 39 U.S.C. § 3622(d)(1)(E). The Postal Commission denied the exigent rate request on the ground that the Postal Service failed to demonstrate, as required under the statutory language, that the proposed rate adjustments are “due to” the cited “extraordinary or exceptional circumstances.” Although the Commission correctly construed “due to” to require a causal relationship between the exigent circumstances' effects on the Postal Service and the amount of the above-cap rate increases, it incorrectly concluded the plain meaning of that phrase requires the proposed rate adjustments to be “tailored to offset the specific effects of the claimed exigency.” Exigent Request Denial at 65. We therefore remand to the Commission so that it can exercise its discretion to construe the ambiguous language of section 201, explaining the extent of causation the Commission requires the Postal Service to demonstrate between the exigent circumstance's impact on Postal Service finances and the proposed rate increase.

I.

PAEA, enacted on December 20, 2006, directed that the Commission establish by regulation within eighteen months (and revise thereafter as necessary) “a modern system for regulating rates and classes for market-dominant products.” ¹ 39 U.S.C. § 3622(a). The Act sets out various “objectives” for the Commission to “appl[y] in conjunction with [each other]” and enumerates fourteen “[f]actors ... [to] take into account.” Id. § 3622(b), (c). The Act also sets forth specific “[r]equirements” for the system, including an annual limit on the percentage changes in rates “equal to the change in the [CPI–U].” Id. § 3622(d)(1)(A). In addition, the Act directs the Commission to set a schedule for rates to change at regular intervals by predictable amounts and procedures for public notice and Commission review before a rate change takes effect. Id. § 3622(d)(1)(B)-(C). Notwithstanding the CPI–U limitation and the statutory procedural requirements, the Congress inserted a “safety valve” into the statute, which directs the Commission to

establish procedures whereby rates may be adjusted on an expedited basis due to either extraordinary or exceptional circumstances, provided that the Commission determines, after notice and opportunity for a public hearing and comment, and within 90 days after any request by the Postal Service, that such adjustment is reasonable and equitable and necessary to enable the Postal Service, under best practices of honest, efficient, and economical management, to maintain and continue the development of postal services of the kind and quality adapted to the needs of the United States.Id. § 3622(d)(1)(E). Per the statute's directive, the Commission promulgated regulations establishing procedures for regulating market dominant rates, 39 C.F.R. pt. 3010, including the exception for above–CPI–U rate adjustments in extraordinary or exceptional circumstances, id. subpt. E (§§ 3010.60–.66).²

The Postal Service submitted its first above-cap “exigent” request under the new regulatory system on July 6, 2010. The request proposed “exigent prices representing an aggregate increase of approximately 5.6 percent ... for implementation of new prices on January 2, 2011.” Exigent Request of the U.S. Postal Service (Exigent Request), Docket No. R2010–4, at 1 (July 6, 2010). As the supporting exigent circumstance justifying the increases, the Postal Service cited “the dramatic, rapid and unprecedented decline in mail volume” in the short time since PAEA had been enacted. Id. According to the Postal Service, “mail volume stalled” in FY 2007, “then plunged” in FY 2008 and FY 2009, “falling a total of nearly 17 percent between FY 2006 and FY 2009.” Id. The Service acknowledged that volume from “the long-term impact of electronic diversion ha[d] been widely acknowledged over the last 10 years” but asserted that “the depth and severity of the current recession—and its impact on mail volume—were unforeseeable,” particularly given that “[h]istorically, mail volume has generally increased from year to year, and even in the comparatively few instances of decreases, they were of a much smaller order of magnitude.” Id. at 6.

In a decision dated September 30, 2010, the Commission denied the exigent request, concluding that “the requested increases are not justified as lawful exigent rate adjustments.” Order denying Request for Exigent Rate Adjustments, Order No. 547, Docket No. R2010–4, at 4 (Sept. 30, 2010) (Exigent Request Denial). The Commission agreed with the Postal Service that “the recent recession, and the decline in mail volume experienced during the recession,” qualified as an “extraordinary or exceptional circumstance” under section 201(d)(1)(E). Id. at 3. The Commission concluded, however, that the rate request, as submitted, did not otherwise qualify for section 201(d)(1)(E)' s narrow exception to the statutory rate cap. The Commission explained that the “determination that ‘extraordinary or exceptional circumstances' have occurred is not by itself sufficient to authorize the collection of rates in excess of otherwise applicable rate caps”—two additional statutory requirements must be satisfied: (1) “the proposed adjustment must be ‘due to’ the extraordinary or exceptional circumstances” and (2) the adjustment “must meet a ‘reasonable and equitable and necessary’ test.” Id. at 53. “Together,” the Commission stated, “the three requirements (the existence of extraordinary or exceptional circumstances; the requirement that the adjustment be ‘due to’ those circumstances; and the requirement that the adjustment be reasonable and equitable and necessary) create a narrow exception to the general statutory rule that rates for market dominant products are limited by CPI–U–based rate caps.” Id. at 54. Addressing the meaning of the statutory language, the Commission explained that the preposition “due to” “expresses a causal relationship,” which mandates that the proposed exigent rate adjustments be causally related to the cited exigent circumstance. Id. In addition, the Commission continued, the “reasonable and equitable and necessary” language “provides context for the statutory [due to] command” and “implicitly” reinforces its causal requirement because “[f]or an adjustment to be ‘due to’ an extraordinary or exceptional circumstance, the Postal Service must show that the adjustment is a ‘reasonable and equitable and necessary’ way to respond to the circumstance.” Id. at 55–56. Accordingly, the Commission denied the request on the ground the proposed rates are “not designed to respond to the recent recession, or its impact on mail volume.” Id. at 3. The Commission found instead that they “represent an attempt to address long-term structural problems not caused by the recent recession,” id., but rather by the inescapable fact that “ ‘[t]he bulk of [the Postal Service's] costs are fixed by laws, contract or regulations and its operating flexibility is severely limited,’ ” id. at 61–62 (quoting Statement of Joseph Corbett, Postal Service Chief Financial Officer, at 2) (alterations in original). ³ In particular the Commission found the Postal Service failed to “quantify the impact of the recession on postal finances, address how the requested rate increases relate to the recession's impact on postal volumes, or identify how the requested rates resolve the crisis at hand.” Id. at 4.

II.

Because the Congress expressly delegated to the Commission responsibility to implement PAEA section 201, we review its interpretation under Chevron U.S.A. Inc. v. Natural Resources Defense...