United States Postal Service v. Postal Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 8, 2010 Decided March 30, 2010

No. 09-1032

UNITED STATES POSTAL SERVICE,

PETITIONER

v.

POSTAL REGULATORY COMMISSION AND UNITED STATES OF

AMERICA,

RESPONDENTS

ALLIANCE OF NONPROFIT MAILERS, ET AL.,

INTERVENORS

On Petition for Review of an Order

of the Postal Regulatory Commission

Miriam R. Nemetz argued the cause for petitioner. With her

on the briefs were Kenneth S. Geller and Melanie W. Rughani.

Eric Fleisig-Greene, Attorney, U.S. Department of Justice,

argued the cause for respondents. With him on the brief were

Michael S. Raab, Attorney, Stephen L. Sharfman, General

Counsel, Postal Regulatory Commission, R. Brian Corcoran,

Assistant General Counsel, and Kenneth E. Richardson,

Attorney.

2

Before: TATEL, Circuit Judge, and SILBERMAN and

WILLIAMS, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge

SILBERMAN.

SILBERMAN, Senior Circuit Judge: The United States

Postal Service seeks review of a Postal Regulatory Commission

order concluding that certain activities carried on by the Service

– the provision of philatelic services (relating to stamp

collecting) and the leasing and licensing of Postal Service

property – are, under the Postal Accountability and

Enhancement Act, subject to the Commission’s review for

possible termination. We deny the Service’s petition.

I

In 1970, what was formerly the cabinet-level Post Office

Department was transformed by statute into the modern

government-owned corporation known as the United States

Postal Service. As part of this transformation, the Service was

given a number of new powers: inter alia, the authority to

acquire, sell, build, and lease property; to provide philatelic

services; and to provide “special nonpostal or similar services.”1

Accordingly, the Service began to engage in a number of

ventures unrelated or only tangentially related to the delivery of

mail. The Service gradually expanded its lines of business, and

by the late 1990s, its nonpostal activities were substantial. They

included computer-based mail, international fax services,

photocopying, philatelic services, antenna leases, and selling

phonecards, T-shirts, mugs, and other souvenirs.

1

Pub. L. No. 91-375, § 404, 84 Stat. 719, 723-24 (1970).

3

Congress considered legislation that would eliminate or

limit the Service’s authority to provide such nonpostal services

as early as 1996,2 but these efforts were redoubled following the

2003 publication of a report by a presidential blue-ribbon

commission tasked with making recommendations to improve

the Postal Service. The commission found that the Service had

entered “dubious new business ventures that most Americans

would consider far afield of its basic function – delivering the

mail to everyone.” These efforts largely had not been profitable.

But by forcing private companies to compete against the

Service, these ventures had resulted in market distortion, and the

Service had been distracted from improving traditional postal

services. So the commission recommended that Congress

restrict the Service’s authority to include only services directly

related to the delivery of mail.3

Congress responded in 2006 with the Postal Accountability

and Enhancement Act. It repealed the Service’s authority to

offer “special nonpostal or similar services,” but it did not

explicitly mention certain nonpostal activities separately

authorized under various statutory provisions, such as the ones

particularly at issue in this case – philatelic and property leasing

activities. It did, however, provide that the Postal Regulatory

Commission was to conduct a review of “each nonpostal service

offered by the Postal Service”4 (emphasis added) to determine

2

See, e.g., Postal Service Core Business Act of 1996, H.R. 3690,

104th Cong., at 1 (1996).

3

Embracing the Future: Making the Tough Choices to Preserve

Universal Mail Service (2003).

4

The statutory subsection granting this authority – 39 U.S.C. §

404(e) – states in full:

(1) In this subsection, the term “nonpostal service” means any

4

whether it should be terminated or continued subject to

Commission regulation as either a market dominant, competitive

or experimental product.5

service that is not a postal service defined under section 102(5).

(2) Nothing in this section shall be considered to permit or

require that the Postal Service provide any nonpostal service

except that the Postal Service may provide nonpostal services

which were offered as of January 1, 2006, as provided under this

subsection.

(3) Not later than 2 years after the date of enactment of the Postal

Accountability and Enhancement Act, the Postal Regulatory

Commission shall review each nonpostal service offered by the

Postal Service on the date of enactment of that act and determine

whether that nonpostal service shall continue, taking into

account–

(A) the public need for the service; and

(B) the ability of the private sector to meet the public need

for the service.

(4) Any nonpostal service not determined to be continued by the

Postal Regulatory Commission under paragraph (3) shall

terminate.

(5) If the Postal Regulatory Commission authorizes the Postal

Service to continue a nonpostal service under this subsection, the

Postal Regulatory Commission shall designate whether the

service shall be regulated under this title as a market dominant

product, a competitive product, or an experimental product.

5

The Commission is empowered to ensure that the Service is not

subsidizing its competitive products with revenues from market

dominant products or engaging in below-cost pricing of competitive

products. The Commission regulates rates for market dominant

5

Several other statutory provisions should be mentioned. A

grandfather clause, § 404(e)(2), ensured that certain existing

nonpostal services could continue pending Commission review,

and § 404(e)(1) defines a nonpostal service as “any service that

is not a postal service” (emphasis added). Elsewhere in the

postal statutes, postal services are defined to cover “the delivery

of letters, printed matter or mailable packages, including

acceptance, collection, sorting, transportation, or other functions

ancillary thereto.”6

In December of 2007, the Commission started its review of

nonpostal services. The Commission asked the Service to

provide details of all of its activities that did not meet the

statutory definition of a postal service. The Service refused to

do so because, in its view, the Act only gave the Commission

authority to review those nonpostal services previously

conducted under the repealed section of § 404 (which authorized

“special nonpostal or similar services”) and did not give

authority to review activities authorized by specific grants of

authority. Thus, according to the Service, the Commission

could not review the Service’s provision of philatelic services or

its leasing and licensing of property because the Act left in place

specific statutory authorization for those activities in § 404(a)(5)

and § 401(5) respectively. Alternatively, the Service argued that

its leasing and licensing of property were not subject to the

Commission’s review because those were not “services” at all.

The Commission rejected both arguments and ordered the

Service to provide a list of all nonpostal services; the Service

complied but continued to assert that the Commission was

acting ultra vires.

products.

6

39 U.S.C. § 102(5).

6

After nearly a year of adjudicatory proceedings, the

Commission issued the results of the review required by

§ 404(e)(3). Its order, once again, rejected the argument that it

was not authorized to review nonpostal services for which an

independent grant of statutory authority existed. The

Commission explained that under the statute, the Service can

only provide two (mutually exclusive) types of services – postal

services and nonpostal services – and that § 404(e)(3) plainly

requires the Commission to review all nonpostal services. The

Commission added that the Service’s argument that the statute

creates a third category of services – not postal and yet still not

subject to the Commission’s power – ignores the purpose

underlying the Act, which was to rein in all of the Service’s

nonpostal commercial ventures.

Also rejected was the argument that the leasing and

licensing of property did not constitute a “service” under the act.

Since the word “service” was not defined by the statute, the

Commission sought suggestions by parties to the proceeding,

before defining the term as “any ongoing commercial activity

offered to the public for the purpose of financial gain.” The

Commission said that definition encompassed the types of

activities that, in its view, were the cause for congressional

concerns about the Service straying from its core

responsibilities. The Commission concluded that leasing of

property and licensing of intellectual property constituted

services under this definition. However, the Commission did

agree that several revenue-generating activities – including the

sale of property as well as services provided to government

agencies – did not qualify as “services” and thus were not

subject to the Commission’s review.

After its review, the Commission determined that both of

the services relevant to this appeal – philatelic services and the

licensing and leasing of property – should be allowed to

7

continue, subject to the Commission’s regulation over philatelic

services as a market dominant product, and licensing and leasing

of property as a competitive product.

II

The Service reiterates before us the same arguments it

presented to the Commission – 1) that the Commission’s

authority under § 404(e)(3) does not extend to nonpostal

services authorized under “independent” explicit grants of

authority and, alternatively, 2) that leasing and licensing of

property does not even constitute a “service.” Although the

Commission authorized the continuation of the activities in

question – philatelic services and leasing – the Service objects

to the regulatory burden it must endure.7

Taking up the first argument, we note that the Service has

a difficult linguistic task. The key statutory provision on which

the Commission relies, § 404(e)(3), does say that the

Commission shall review each nonpostal service offered by the

Postal Service without any stated limitation. Assuming that

property leasing and philatelic services are nonpostal services,

the plain language of that subsection would appear to cover both

activities (the Service does not challenge the Commission’s

determination that philatelic services are nonpostal services).

In a heroic effort to create at least an ambiguity (the Service

actually goes further to claim the statute plainly supports its

reading), the Service points first to subsection (e)(2), the

grandfather clause, which states that “[n]othing in this section

shall be considered to permit or require that the Postal Service

7

We have the impression that the Service’s real concern may

well be the initiation of possible future activities. That issue is, of

course, not before us.

8

provide any nonpostal service, except that the Postal Service

may provide nonpostal services which were offered as of

January 1, 2006, as provided under this subsection” (emphasis

added). The Service’s argument, as we understand it, is that by

using the phrase “in this section” in § 404 (e)(2), the Congress

meant to cabin § 404(e)(3), another subsection, in the same

fashion, i.e., that § 404(e)(3)’s review authority, despite the

phrase, “each nonpostal service,” was limited only to nonpostal

services that were grandfathered by § 404(e)(2). Of course, the

obvious response is that § 404(e)(3) does not contain the

limitation in § 404(e)(2), and its absence creates a negative

implication – that no limitation was intended. Indeed, the

“nothing in this section” clause’s purpose, apparently was only

to rebut the possible implication that this section could, in any

respect, constitute a new grant of authority to offer nonpostal

services. Thus, we find it difficult to conclude that the limiting

phrase “in this section” in § 404(e)(2) casts any meaning on

§ 404(e)(3).8

The other statutory interpretation arguments the Service

presents are equally labored. It is claimed that the

Commission’s position, in effect, is that § 404(e)(3) repeals, by

8

Some language in the order suggests the Commission

interpreted § 404(e)(2) to prohibit the Service from offering any

nonpostal service – even those specifically authorized – unless it was

grandfathered and received Commission approval. The Commission

now concedes that the phrase “[n]othing in this section” only restricts

(e)(2)’s scope (though presumably the Commission would maintain it

still applies to philatelic services as they are authorized in § 404(a)(5)

– the same statutory section). The Service says this constitutes a post

hoc justification for the Commission’s decision and we must reverse

under S.E.C. v. Chenery Corp., 318 U.S. 80, 87 (1943). We do not

agree. The Commission’s order’s reference to § (e)(2) appears only

a makeweight; the order’s primary reliance is on its interpretation of

§ (e)(3), which independently supports the Commission’s position.

9

implication, the separate grants of authority to engage in

philatelic and leasing activities and repeals by implication are

not favored. But that is not the Commission’s position; it is,

rather, that § 404(e)(3) conditions the authority the Service

maintains to engage in those activities. Further, the Service

asserts – based in part on legislative history which revealed no

particular concern about philatelic or leasing services – that it

would not serve the purpose of the statute to include these

activities. But that Congress did not specifically address these

two activities in the legislative history is of no matter; legislative

language often sweeps broader than the exact circumstances that

prompted a statute.

Still we are told the criteria under § 404(e)(3) – determining

whether there is a public need for the services and whether the

private sector can supply the services – are “ill-suited” to apply

to these activities, particularly leasing. But petitioner does not

explain clearly why the criteria are “ill-suited.” The public’s

need can easily refer to the demand for leasing space generally

or the revenue the Service gains from the leasing – the latter of

which the Commission emphasized. One might have thought

that the ability of the private sector to meet the demand would

depend on available competitive leasing space, but the

Commission thought that since real property was unique, it was

not necessary to consider private leasing availability. The

Service could have claimed that the Commission was obliged to

compare alternative leasing opportunities – but that would have

been an arbitrary and capricious challenge to the Commission’s

application of the statute, which petitioner did not make. That

was surely because a remand on that issue would not have

served its interest.

Assuming, arguendo, however, that the Service has

succeeded in at least establishing that the statute is ambiguous,

we turn to the question of Chevron deference vel non. The

10

Service contends that since both the Service and the

Commission have authority to interpret the statute, neither is

entitled to deference. It relies on our opinion in Salleh v.

Christopher, 85 F.3d 689, 691 (D.C. Cir. 1996), where both the

Secretary of State and the Foreign Service Grievance Board

relied on separate, and apparently conflicting, provisions of a

statute conferring authority to finally determine whether a

foreign service officer could be discharged. Under those

circumstances, we could afford deference to neither agency.

That is not our case; there is no dispute that the issue before us

is the proper interpretation of § 404(e)(3), and that provision

was clearly delegated to the Commission to implement and

thereby to interpret. See Dep’t of Health and Human Services

v. FLRA, 920 F.2d 45, 48 (D.C. Cir.1990). Therefore, assuming

the statute has some ambiguity, we must defer to the

Commission’s interpretation regarding the coverage of

§ 404(e)(3) and affirm it, if reasonable. Since the Commission’s

interpretation is, at least, the more likely one, it is certainly

reasonable.

That brings us to the petitioner’s alternative argument that

leasing of property is not a service at all. Here we grant readily

petitioner’s contention that the term “service,” which is not

defined in the statute, is unquestionably ambiguous. But as we

have just observed, the Commission is entitled to Chevron

deference as to its construction. It will be recalled that the

Commission’s interpretation of services is “any ongoing

commercial activity offered to the public for the purpose of

financial gain.” Although the Service observed that the

definition neatly avoided implicating services provided to other

government agencies (and therefore it was presumably suspect),

it does not object to the definition on that ground, but rather only

to the Commission’s failure to exclude leasing or licensing of

property.

11

In support of its claim that leasing is not a “service,” the

petitioner points to other provisions of the statute, particularly

§ 401(5), which authorized the Service “to hold, maintain, sell,

lease or otherwise dispose of such property or any interest

therein; and to provide services in connection therewith and

charges therefor” (emphasis added). That language indicates,

according to the Service, that Congress recognized that

“services” were in a different category than leasing of property.

We do not think that follows. For one thing, maintenance is

unquestionably a service. Moreover, the sentence can just as

easily be read as meaning leasing and maintenance of property

and other services in connection with such leasing and

maintenance. We can easily conceive of statutory language that

would list undeniable services such as, for example, “security

and maintenance” along with “ancillary services.” Again, we

conclude that the Commission’s construction of § 404(e)(3) this

time to include property leasing and licensing as nonpostal

services is quite reasonable and therefore permissible.

Accordingly, the petition is denied.

So ordered.