US Postal Service v. University Pub. Corp.

• Decision Date: 15 October 1993
• Docket Number: No. IP 92-414-C.,IP 92-414-C.
• Citation: 835 F. Supp. 489
• Parties: UNITED STATES POSTAL SERVICE, Plaintiff, v. UNIVERSITY PUBLISHING CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Indiana

835 F. Supp. 489

UNITED STATES POSTAL SERVICE, Plaintiff, v. UNIVERSITY PUBLISHING CORPORATION, Defendant.

No. IP 92-414-C.

United States District Court, S.D. Indiana, Indianapolis Division.

October 15, 1993.

Winfield Ong, Office of U.S. Atty., Indianapolis, IN, for plaintiff.

Geoffrey M. Grodner, Mallor Clendening Grodner & Bohrer, Bloomington, IN, for defendant.

MEMORANDUM ENTRY

BARKER, District Judge.

The University Publishing Corporation ("UPC") collects and sells alumni directories. It creates demand for its product by contracting with universities to solicit orders via mail from alumni who then respond not only with requests for the directories but also with contributions. UPC takes a fixed fee from all contributions resulting from its mailings. The United States Postal Service ("USPS") believes that UPC wrongly availed itself of the third-class, bulk mailing rate, which requires a special permit that UPC lacks but which many of its clients have. According to the USPS, postal regulations do not allow an entity such as UPC to use the special rate when it shares in the costs, risks, and benefits of the mailing. The USPS moves the Court to enter summary judgment in its favor and find that UPC is liable to it in the amount of $211.225.25 for mailings it made using the third-class, bulk mailing rate between January, 1988, and July, 1989. UPC disputes the amount of the deficiency and asserts the affirmative defenses of estoppel, laches, consent, and accord and satisfaction. USPS's motion is granted in part and denied in part.

Because the Chicago Rates and Classification Center ("Classification Center") already has rejected UPC's appeal requesting that the deficiency assessment be set aside, procedurally this matter is before the Court as an appeal from an agency adjudication. Pursuant to the Administrative Procedure Act, courts must "hold unlawful and set aside agency action, findings, and conclusions found to be ... arbitrary or capricious...." 5 U.S.C.A. § 706(2)(A). This standard applies to "informal" agency adjudications, such as the one at issue here. See United States v. An Article of Device ... Diapulse, 768 F.2d 826, 829 (7th Cir.1985). In its findings, the Classification Center explained:

Section 625.52, Domestic Mail Manual, states that cooperative mailings may be made at the special bulk rates only when each of the cooperating organizations is individually authorized to mail at the special rates at the post office where the mailing is deposited. A cooperative mailing is a mailing in which one or more parties cooperate with an authorized nonprofit mailer to share the cost, risk, and benefits of the mailing.

....

Postal regulations do not allow matter associated with joint business ventures between an authorized nonprofit organization and a commercial firm to be mailed at the special rates. Typically, with a joint business venture, both parties contribute something (a list of names and use of the special rate authorization by the nonprofit party, and overall coordination of the fund-raising effort by the commercial party) and both parties take something out (a share of the proceeds/profits).

In our opinion, the mailings in question were cooperative ventures. Both your for-profit corporation and the nonprofit organizations shared in the cost, risk, and benefits of these mailings. UPC gained considerably through the sale of their business product, the alumni directories. Because UPC is not an authorized nonprofit organization, postage on the mailings was due at the applicable regular bulk rate.

See Exhibit 5, Administrative Record, Letter to H. David Hilliard from Robert J. Reeves, Rates and Classification Center, October 11, 1990, at 1-2 ("USPS Final Decision"). Section 625.521 of the Domestic Mail Manual ("DMM") states:

Cooperative mailings may be made at the special bulk rates only when each of the cooperating organizations is individually authorized to mail at the special bulk rates at the post office where the mailing is deposited. Cooperative mailings involving the mailing of any matter on behalf of or produced for an organization not itself authorized to mail at the special bulk rates at the post office where the mailing is deposited must be paid at the applicable regular rates....

DMM § 625.521 (1992). Although DMM § 625.52, which is captioned "Cooperative Mailings", does not define "cooperative mailing", the USPS construes that term to mean "a mailing in which one or more parties cooperate with an authorized nonprofit mailer to share the cost, risk, and benefits of the mailing." USPS Final Decision, at 1. This Court is required to give great deference to an agency's interpretation of its own regulations. "`An agency's construction of its own regulation binds a court in all but extraordinary cases.'" Hoffman Homes, Inc. v. Administrator, U.S.E.P.A., 999 F.2d 256, 260 (7th Cir.1993), citing, Homemakers N. Shore, Inc. v. Bowen, 832 F.2d 408, 411 (7th Cir. 1987); see also Peabody Coal Co. v. Director, OWCP, 972 F.2d 178, 183 (7th Cir.1992). The USPS definition of "cooperative mailing" is reasonable and the Court will not disturb it. Nor can the Court say that the USPS's application of that definition and of DMM § 625.52 to the facts of this case is arbitrary and capricious. DMM § 625.521 describes when cooperative mailings may be made using the special bulk rates. According to UPC, it "receives the first $15.00 of every alumni contribution to defray the costs incurred in producing and mailing the letters and directories." Brief of UPC, at 2. This billing practice places the UPC mailings squarely within the definition of a "cooperative mailing" because UPC's revenues are linked to the success of the mailings in generating alumni contributions. DMM § 625.521 requires that each cooperating organization be individually authorized to mail at the special bulk rate. UPC lacks such authorization.

UPC contends that even if liability can be established, its affirmative defenses of estoppel, consent, laches, and accord and satisfaction should prevent the USPS from collecting the deficiency against it. UPC believes that the USPS's acceptance of its mailings over eighteen months estops it from denying that it agreed to process the mailings at the lower rate. This argument is indistinguishable from the UPC's defense of consent, and the Court will dispose of these arguments together. UPC is quick to point to the Seventh Circuit's decision in Portmann v. United States, 674 F.2d 1155 (7th Cir.1982), where the court allowed the plaintiff to invoke estoppel against the USPS based on misrepresentations made by a postal employee regarding the USPS's Express Mail service. But the facts of this matter are readily distinguishable because the record contains no evidence that anyone at the USPS engaged in conduct that was "done with the intention, or at least with the expectation, that it will be acted upon by the other party, and, thus relying, he must be led to act upon it." Portmann, 674 F.2d at 1164 n. 29, citing, J. Pomery, Equity Jurisprudence § 805 at 191-92. Proof of such conduct is a necessary element of estoppel. See id. While the Seventh Circuit has held that affirmative misconduct ...