USPS v. PRC

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 15, 2011 Decided May 24, 2011

No. 10-1343

UNITED STATES POSTAL SERVICE,

PETITIONER

v.

POSTAL REGULATORY COMMISSION,

RESPONDENT

NATIONAL POSTAL MAIL HANDLERS UNION ET AL.,

INTERVENORS

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,

2

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

3

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

1

The Postal Service’s market dominant products are enumerated

at 39 U.S.C. § 3621(a). See 39 U.S.C. § 102(8). The products at issue

here are: First-Class Mail, Standard Mail, Periodicals, Package

Services and Special Services.

4

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

2

Regulation 3010.60 provides generally: “The Postal Service may

request to increase rates for market dominant products in excess of the

annual limitation on the percentage changes in rates described in

§ 3010.11(d) due to extraordinary or exceptional circumstances. Such

requests will be known as exigent requests.” The Postal Service’s

exigent request must include, inter alia, “[a] full discussion of the

extraordinary or exceptional circumstance(s) giving rise to the request,

and a complete explanation of how both the requested overall increase,

and the specific rate increases requested, relate to those

circumstances.” 39 C.F.R. § 3010.61(a)(3).

5

(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

6

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

3

According to the Commission, the “principal cause of the Postal

Service’s impending liquidity crisis” is PAEA’s mandate that the

Postal Service make a $5 billion payment each September through

2016 to prefund its Retiree Health Benefits Fund. Exigent Request

Denial at 68; see PAEA § 803(a)(1)(B), 120 Stat. at 3251 (codified at

5 U.S.C. § 8909a(d)(3)(A)).

7

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 Council, Inc., 467 U.S. 837, 842-43 (1984).

See NetCoalition v. SEC, 615 F.3d 525, 533 (D.C. Cir. 2010); cf.

U.S. Postal Serv. v. Postal Regulatory Comm’n, 599 F.3d 705,

710 (D.C. Cir. 2010) (court must defer to and uphold as

reasonable Commission’s interpretation of PAEA § 404(e)(3)

because “that provision was clearly delegated to the

Commission to implement and thereby to interpret”). Under

Chevron step 1, if the “Congress has directly spoken to the

precise question at issue . . . , that is the end of the matter; for

the court, as well as the agency, must give effect to the

unambiguously expressed intent of Congress.” Chevron, 467

U.S. at 842-43. Under Chevron step 2, “if the statute is silent or

ambiguous with respect to the specific issue, the question for the

court is whether the agency’s answer is based on a permissible

construction of the statute.” Id. at 843. In reviewing the

Commission’s Exigent Request Denial, we end our inquiry at

step 1 because the Commission based its interpretation on the

“plain meaning” of the statutory language. Exigent Request

Denial at 27; see Peter Pan Bus Lines, Inc. v. Fed. Motor

Carrier Safety Admin., 471 F.3d 1350, 1354 (D.C. Cir. 2006)

(“Chevron step 2 deference is reserved for those instances when

an agency recognizes that the Congress’s intent is not plain from

the statute’s face.” (citing PDK Labs., Inc. v. DEA, 362 F.3d 786

(D.C. Cir. 2004))).

8

First, we agree with the Commission that the plain meaning

of “due to” mandates a causal relationship between the amount

of a requested adjustment and the exigent circumstances’ impact

on the Postal Service. The plain meaning of “due to” is “because

of.” See Webster's Third New Int’l Dictionary 699 (1993); see

also Exigent Request Denial at 54 (“According to Webster’s

Third New International Dictionary (G. & C. Merriam Co.

1966) the expression ‘due to’ means ‘because of.’ Roget’s 21st

Century Thesaurus (3rd ed. 2010) provides the following

synonyms for the expression ‘due to’: ‘by reason of’; ‘by cause

of’; ‘by virtue of’; and ‘as a result of.’ Each meaning and

synonym expresses a causal relationship and leads the

Commission to conclude that the Postal Service’s proposed

adjustment must be causally related to the alleged extraordinary

or exceptional circumstance.”). Thus, under the plain meaning

of the statutory language, a rate may be “adjusted on an

expedited basis” only because of “extraordinary or exceptional

circumstances.”

The Postal Service acknowledges that the exigent

adjustment must be triggered by the threshold presence of

“extraordinary or exceptional circumstances.” See Exigent

Request at 6 (“The unprecedented drop in mail volume

constitutes the ‘extraordinary or exceptional circumstances’ that

trigger the need for an exigent increase.”). It nonetheless

disagrees with the Commission’s interpretation that the amount

of the adjustment is determined by the amount of the revenue

lost due to the exigent circumstance—at least to the extent the

Commission imposed a “strict ‘nexus’ or offset test.” The

Commission’s interpretation, the Postal Service maintains, is

undercut by the placement of the phrase “due to” “in an

inapposite statutory clause” rather than in the following clause

which sets out the “statutory standard governing the merits of an

exigent rate request,” Pet’r’s Br. 22-24, namely, that the

adjustment be “ ‘reasonable and equitable and necessary to

enable the Postal Service, under the best practices of honest,

9

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,” 39 U.S.C.

§ 3622(d)(1)(E). See Pet’r’s Br. 26-27. The prepositional

phrase, however, appears exactly where it belongs—up-front,

alongside the directive that the Commission “establish

procedures” for making an adjustment—which adjustment must

therefore be “due to” the exigent circumstance.

Having concluded that the plain meaning of section 201

requires a causal relationship between the exigent circumstances

and the proposed rate adjustments, we next consider how close

the relationship must be, that is, how much of the proposed

adjustment must be due to the exigent circumstance. The Postal

Service asserts the Commission incorrectly imposed a “strict

‘nexus’ or offset test,” requiring that the proposed adjustments

mirror the amount of revenue the Postal Service can demonstrate

was lost solely “due to” the recession and its effect on mail

volume, dollar-for-dollar. Pet’r’s Br. 3-5. Indeed, the

Commission seems to have required a very close match,

expecting the Postal Service to “show that its proposed rate

adjustments are tailored to offset the specific effects of the

claimed exigency.” Exigent Request Denial at 65; see also id.

at 60-61 (“[I]t is incumbent on the Postal Service to demonstrate

how the specific rate increases it proposes flow from the

particular circumstances that it cites as exceptional.” (emphases

added)). The statute itself, however, is mute on how close the

match must be. In particular, the “due to” phrase itself is not

determinative on this issue because, although it has a plain

meaning regarding causal connection vel non, as we concluded

supra, it has no similar plain meaning regarding the closeness of

the causal connection. In the latter sense,

[t]he phrase “due to” is ambiguous. “The words do not

speak clearly and unambiguously for themselves. The

causal nexus of ‘due to’ has been given a broad variety

10

of meanings in the law ranging from sole and

proximate cause at one end of the spectrum to

contributing cause at the other.”

Kimber v. Thiokol Corp., 196 F.3d 1092, 1100 (10th Cir. 1999)

(quoting Adams v. Director, OWCP, 886 F.2d 818, 821 (6th Cir.

1989)).4 In other words, the phrase can mean “due in part to” as

well as “due only to.” A financial crisis can often result from

multiple contributing factors, of which only one may be

“extraordinary or exceptional.” It would not be incorrect to say

that the requested rate increase is “due to” the extraordinary

factor simply because it is also “due to” other factors as well.5

The statute on its face does not make clear which meaning of

“due to” the Congress intended. The Commission therefore

could not properly reject the proposed adjustments at Chevron

step 1. Instead, as the agency charged with implementing

section 201(d)(1)(E), the Commission was bound to proceed to

Chevron step 2 to fill the statutory gap by determining how

closely the amount of the adjustments must match the amount of

the revenue lost as a result of the exigent circumstances.

Because the Commission did not proceed to step 2, we remand

for it to do so now. See Peter Pan Bus Lines, Inc, 471 F.3d at

1354.

4

See Adams, 886 F.2d at 821 (interpreting term “due to

pneumoconiosis” in Black Lung Benefits Act to require claimant to

“establish only that his totally disabling respiratory impairment . . .

was due ‘at least in part’ to his pneumoconiosis” and rejecting

proposed causation standard that would have required proof that

pneumoconiosis ‘in and of itself’ caused totally disabling condition).

5

That said, given the posture of this case, we have no need to

decide here whether an increase might be so disproportionate to the

exigency’s impact on the Postal Service that it could not be considered

“due to” that exigency.

11

For the foregoing reasons, we deny the Postal Service’s

petition in part, upholding the Commission’s Chevron step 1

interpretation of the plain meaning of “due to” in PAEA section

201(d) as requiring a causal connection between the exigent

circumstances and the proposed rate adjustments. We also

grant the petition in part, rejecting the Commission’s

Chevron step 1 interpretation of “due to” as requiring that the

Postal Service match the amount of the proposed adjustments

precisely to the amount of revenue lost as a result of the exigent

circumstances. Accordingly, we remand to the Commission to

address the second issue at Chevron step 2.

So ordered.