ET AL., APPELLANTS
UNITED STATES POSTAL SERVICE,
COURT OF APPEALS,
DISTRICT OF COLUMBIA CIRCUIT
193 U.S. App. D.C. 206;
593 F.2d 1360;
1979 U.S. App. LEXIS 16883
January 16, 1979,
February 16, 1979, Decided
SUBSEQUENT HISTORY: [**1]
As Amended February 26, 1979.
Appeal from the United States District Court for the
District of Columbia.
193 U.S. App. D.C. 206; 593 F.2d 1360,
1979 U.S. App. LEXIS 16883, **1
(D.C. Civil Action No. 76-0157).
COUNSEL: Jack Lahr, Washington, D. C.,
with whom Ruth P. Roland and Jerry R. Selinger, Washington,
D. C., were on brief, for appellants.
Kenneth M. Raisler, Asst. U. S. Atty.,
Washington, D. C., with whom Earl J. Silbert, U. S. Atty.,
John A. Terry, Peter E. George and Stephen S. Cowen, Asst.
U. S. Attys., Washington, D. C., were on brief, Robert N.
Ford and David G. Hetzel, Asst. U. S. Attys., Washington, D.
C., for appellees.
JUDGES: Before McGOWAN, LEVENTHAL and
MacKINNON, Circuit Judges.
Opinion for the Court filed by LEVENTHAL,
OPINION BY: LEVENTHAL
At issue in this case is the validity of Postal Service
Manual @ 134.57, a regulation issued by the United States
Postal Service (USPS) on August 26, 1975. n1 That regulation
defines the conditions under which nonprofit organizations
qualified for special third-class mailing privileges under @
300.221 of the Domestic Mail Classification Schedule (DMCS)
n2 may receive the lower third-class bulk nonprofit rate for
matter mailed by them. Specifically, @ [**2] 134.57
limits the availability of the nonprofit rate to matter
owned by a qualified nonprofit organization; prohibits a
qualified [*1362] nonprofit organization from
delegating or lending the use of its special privilege; and
denies the nonprofit rate to "(cooperative) mailings
involving the mailing of matter in behalf of or produced for
an organization not authorized to mail at the special bulk
third-class rate." n3
n1. 40 Fed.Reg. 37209 (1975).
n2. DMCS @ 300.221 provides:
The nonprofit bulk rate is available for bulk rate
third-class mail mailed by qualified nonprofit
organizations. A qualified nonprofit organization is a
religious, educational, scientific, philanthropic,
agricultural, labor, veteran's or fraternal organization or
association that is not organized for profit and none of the
net income of which inures to the benefit of any private
stockholder or individual. Before being entitled to mail at
the nonprofit bulk rate, the organization shall furnish
proof of its qualifications to the Postal Service. DMCS @
300.221 continues a statutory mail classification first
adopted by Congress in 1951. See 65 Stat. 672 (1951); 39
U.S.C. @ 4452 (1964) (superseded). The Postal Reorganization
Act of 1970, Pub.L. No. 91-375, 84 Stat. 719, effectively
repealed all statutory mail classifications, and created a
new procedure for administrative determination of mail
classifications. 39 U.S.C. @ 3623(a) (1976) required USPS to
request from the Postal Rate Commission (PRC) a recommended
decision on establishing a mail classification schedule
within two years of the applicable effective date. In
response to that request, the PRC recommended the adoption
of the DMCS including @ 300.221. See Postal Rate Commission,
Docket No. MC73-1, Opinion and Recommended Decision 128
(April 15, 1976). Pursuant to 39 U.S.C. @ 3625 (1976), the
Governors of the Postal Service approved the recommended
decision. Decision of the Governors of the United States
Postal Service on Establishing a Mail Classification
Schedule (June 2, 1976). During the interim between passage
of the Act and promulgation of the new classification
schedule, the old classifications remained in effect as
regulations of the Postal Service. See Postal Reorganization
Act of 1970, Pub.L. No. 91-375, @ 5(f), 84 Stat. 775.
n3. Section 134.57 provides in full: An organization
authorized to mail at the special bulk third-class rates for
qualified nonprofit organizations may mail Only its own
matter at these rates. An organization may not delegate or
lend the use of its permit to mail at special third-class
rates to any other person, organization or association.
Cooperative mailings may not be made at the special bulk
third-class rates for qualified nonprofit organizations if
one or more of the cooperating persons or organizations is
not entitled itself to the special rates. Cooperative
mailings involving the mailing of matter in behalf of or
produced for an organization not authorized to mail at the
special bulk third-class rates for qualified nonprofit
organization must be paid at the applicable regular rate. If
customers disagree with a postmaster's decision that the
regular rate of postage applies to a particular mailing, the
procedures in 146.14 may be followed.
Appellants, affiliated nonprofit
organizations with a combined membership of 12 million, are
qualified nonprofit organizations [**4] under DMCS @
300.221. In the summer of 1975, they sought to mail to their
newly enrolled members, at the third-class nonprofit rate, a
catalog of pharmaceutical products available for purchase by
mail. Mail orders were to be serviced by Retired Persons
Services, Inc. (RPS), a separate nonprofit corporation
controlled by appellants. RPS was not qualified for special
third-class mailing privileges.
USPS refused to accept the catalog for
mailing at the third-class nonprofit rate. Upon application
by the appellant associations, the Director of the Office of
Mail Classification ruled that the proposed mailing was a
cooperative mailing under @ 134.57 and was therefore
ineligible for the nonprofit rate. n4
n4. J.A. at 113-14.
Appellants sought judicial review, hardly
surprising in view of the substantial financial impact of
the ruling. n5 The district court granted USPS' motion for
summary judgment. n6 On appeal, the associations press three
1) USPS lacked authority to issue @ 134.57 because the
regulation [**5] constituted a change in a mail
classification, a matter reserved exclusively to the Postal
Rate Commission (PRC) under the Postal Reorganization Act of
1970 (Act); n7 2) assuming USPS authority, @ 134.57 is
nevertheless invalid because it was not issued in accordance
with the notice and comment procedures required by the
Administrative [*1363] Procedure Act (APA); n8 3)
the district court erred in granting summary judgment
because genuine issues of material fact remained unresolved.
n5. On sales generated by the RPS catalog, which we were
told at oral argument totaled $ 70 million a year, appellant
associations receive one per cent under a licensing
agreement. J.A. at 93.
n6. National Retired Teachers Ass'n. v. USPS, 430 F. Supp.
n7. Pub.L. No. 91-375, 84 Stat. 719.
n8. 5 U.S.C. @ 553 (1976).
A. Rule As Valid Interpretation Of
As to appellants' first claim, we conclude that @ 134.57
was a valid exercise by USPS of authority to interpret
[**6] the mail classification schedule established
by the PRC.
Under the Act, ultimate authority to fix
mail classifications resides with the Governors of USPS. n9
This authority is exercised by means of a three step
classification process. First, USPS must request a
recommended decision from the Postal Rate Commission, a
regulatory body independent from USPS. n10 The PRC must then
make a recommended decision, taking into account the
policies of the Act and certain enumerated factors. n11
Finally, the Governors may approve, allow under protest,
reject, or modify a recommended decision of the PRC.
n9. 39 U.S.C. @ 3621 (1976).
n10. Id. @ 3623(a), (b). Section 3623(a) provides for a
request for a recommended decision on the initial
establishment of a mail classification schedule, and @
3623(b) provides for requests for recommended decisions on
changes in the mail classifications schedule. Section
3623(b) also permits the PRC to submit recommended decisions
to the Governors on its own initiative. As to the
independent status of the PRC, See 39 U.S.C. @@ 3601-04
n11. 39 U.S.C. @@ 3623(c), 3624 (1976). [**7]
n12. Id., @ 3625.
Although appellants state flatly that
"all congressionally delegated authority over mail
classifications was assigned to the (PRC);" n13 we think it
clear that the PRC does not have exclusive jurisdiction of
all matters touching on mail classifications. Instead, PRC
jurisdiction need be invoked only where a USPS proposal
amounts to a change in a mail classification. USPS possesses
a residuum of authority to interpret mail classifications in
the process of implementing them, so long as that
interpretation does not effect a substantive change in the
types of mail or the identity of mailers encompassed within
n13. Brief for Appellants at 15.
This conclusion is fairly apparent from
the language of 39 U.S.C. @ 3623 (1976), the provision of
the Act governing mail classifications. That section
requires that USPS request a recommended decision from the
PRC only "on Changes in the mail [**8]
classification schedule." n14 The conclusion also stems from
the practical reality that a classification schedule can
only define general outlines; USPS must retain some
flexibility and discretion to interpret the general
provisions of the mail classification schedule in day-to-day
implementation. n15 USPS need not rely solely on
case-by-case interpretation. It may choose to exercise its
rulemaking power n16 by an interpretative rule. Such an
interpretative rule is general, in the sense that it guides
all postal officials in applying a mail classification and
assures that they will provide a consistent and uniform
interpretation, but the rule remains one of interpretation
of the classification.
n14. 39 U.S.C. @ 3623(b) (1976) (emphasis added).
n15. This view is reflected in the recent recommended
opinion and recommended decision of the PRC in Docket No.
MC76-5, Basic Mail Classification Reform Schedule Proper
Scope and Extent of Schedule, Vol. 1, at 108-16 (Nov. 29,
1978). This recommended decision has not yet been approved
by the Governors of USPS.
n16. 39 U.S.C. @ 401(2) (1976) (USPS has the power to
"adopt, amend, and repeal such rules and regulations as it
deems necessary" to accomplish its objectives).
The essence of appellants' claim is not
that USPS has no interpretative discretion, but that @
134.57 does indeed work a change in the scope of a mail
classification. In support, appellants place principal
reliance on the language of DMCS @ 300.221 and the statutory
classification that it replaced. n17 [*1364] Under
those provisions, the third-class bulk nonprofit rate is
available for matter "mailed by" qualified nonprofit
organizations. These words are read literally by appellants,
so as to place no restriction on what may be mailed so long
as the mailing itself is by the qualified nonprofit
organization. Thus, appellants argue that by adopting @
134.57, USPS impermissibly restricted the availability of
the special third-class rate, a function reserved to the
n17. 39 U.S.C. @ 4452 (1964) (superseded). Strictly
speaking, @ 134.57, which was issued in 1975, interpreted
the old statutory classification, which remained in effect
as a regulation of the Postal Service following the
enactment of the Act and prior to final approval of the
DMCS, which did not occur until 1976. See note 2 Supra.
We believe USPS validly exercised its
interpretative discretion in concluding in @ 134.57 that the
"mailed by" language of the governing provisions contained,
by fair implication, limitations on the use of the nonprofit
rate. Congress, in enacting the statutory classification,
and the PRC, in adopting it following passage of the Act,
established certain criteria for qualification for the
nonprofit rate. Chief among them was the requirement that an
organization be a "religious, educational, scientific,
philanthropic, agricultural, labor, veterans or fraternal"
organization. n18 The USPS interpretation reflects a
conclusion that Congress and the PRC contemplated that the
nonprofit rate would be used for the purposes of the listed
organizations, and not for other purposes such as commercial
activities inconsistent with the grant of qualification.
Viewed in this light, @ 134.57's limitations are eminently
reasonable as effectuating the implicit purpose of the
n18. DMCS @ 300.221, quoted in note 2 Supra.
n19. Further support is found in 39 U.S.C. @ 403(c) (1976),
which prohibits USPS from granting any "undue or
unreasonable preferences" to mail users. USPS could
certainly take this prohibition into account in devising the
proper interpretation of the applicable classifications. We
do not suggest, however, that @ 403(c) provides USPS the
power unilaterally to change classifications when it
perceives undue discrimination or preferences in the
classifications established by the PRC. In that
circumstance, the proper recourse would be a request to the
PRC for a recommended decision on a classification
Appellants' position implies that,
whatever the reasonableness of USPS's interpretation, it
represents a departure from USPS's prior actual practice or
policy. Yet appellants point to no record evidence
demonstrating a different application by USPS prior to the
issuance of @ 134.57. The record does not illuminate the
practice of the Post Office Department under the statutory
classification prior to the enactment of the Postal
Reorganization Act. But it does show that since the passage
of the Act, USPS has applied the classification in a manner
consistent with the interpretation adopted in @ 134.57. n20
In this posture, we credit USPS's contention that the
interpretation did not change appellants' rights and
obligations under DMCS @ 300.221 and the earlier
n20. See J.A. at 133-81.
B. Notice And Comment Requirement
Appellants' other contentions do not require extended
discussion. As to the claim that notice and comment
procedures were not followed, USPS urges that 39 U.S.C.
[**12] @ 410(a) (1976) exempts it from the
requirements of the APA. n21 We do not decide this
[*1365] question. Our discussion of @ 134.57 as an
exercise of interpretative discretion by USPS indicates
that, in any event, the section would fall within the
"interpretative rule" exception to the notice and comment
n21. 39 U.S.C. @ 410(a) (1976) provides in pertinent
part: Except as otherwise provided
no Federal law
dealing with public or Federal contracts, property, works,
officers, employees, budgets, or funds, including the
provisions of chapters 5 and 7 of title 5 (the APA), shall
apply to the exercise of the powers of the Postal Service.
The district court concluded that a reading of @ 410(a) that
exempted USPS from the APA would defy "simple rules of
grammar." National Retired Teachers Ass'n v. USPS, 430 F.
Supp. 141, 147 (D.D.C.1977). In the district court's view,
the APA's rulemaking provision, 5 U.S.C. @ 553 (1976), was
not a federal law "dealing with public or Federal contracts,
property, works, officers, employees, budgets, or funds."
USPS contends that its view is entirely supportable by a
natural reading of @ 410(a). In effect, insertion of the
phrase "including the provisions of chapters 5 and 7 of
title 5" reflected a congressional conclusion that the APA
was itself a law dealing with federal officers or employees.
USPS finds further support in the numerous points in the Act
at which Congress expressly made portions of the APA
applicable, an effort that would have been superfluous if
the APA applied in any event. See 39 U.S.C. @ 410(b) (1976)
(Freedom of Information Act, 5 U.S.C. @ 552 (1976); Privacy
Act, 5 U.S.C. @ 552a (1976); Sunshine Act, 5 U.S.C. @ 552b
(1976), apply to USPS); 39 U.S.C. @ 3001(f) (1976)
(mailability proceedings to be conducted in accordance with
APA); 39 U.S.C. @ 3603 (1976) (PRC action subject to APA).
n22. 5 U.S.C. @ 553(b)(A) (1976); See generally Guardian
Fed. Sav. & Loan Ass'n. v. Federal Sav. & Loan Ins.
Corp., 191 U.S.App.D.C. 135, 589 F.2d 658 (1978).
C. Propriety Of Summary Judgment
We find little merit in appellants' claim of error in
the granting of summary judgment. The associations assert
that a genuine issue of fact remained as to whether the
Director of the Office of Mail Classification considered all
factors in concluding that Retired Persons Services
benefited in part from the cooperative mailing. Because RPS
is a nonprofit corporation controlled by the associations,
it is argued, any benefit inures not to the corporation but
to the associations' membership. We do not think form can be
so lightly disregarded. The separate corporate structure was
necessary precisely because RPS's commercial activities are
inconsistent with the types of purposes required for
qualification under DMCS @ 300.221. The associations could
not have engaged in such activity themselves without risking
loss of their nonprofit privileges. The focus of @ 134.57 is
the nature of the activities of [**14] the
cooperative organizations, not the ultimate beneficiaries of
the mailing. For this reason, the Director's determination
that the cooperative mailing proposed here fell within the
rule is clearly supportable. n23
n23. Appellants also point to a letter from the Director
of the Office of Mail Classification that, it is claimed,
raises a material issue of USPS's interpretation of @
134.57. J.A. at 288-90. Certain language in that letter does
suggest that ownership of the matter sought to be mailed is
the determinative criterion, one that is arguably met by the
associations' proposed mailing. But the letter holds only
that ownership is a necessary condition to eligibility of a
mailing for the nonprofit rate. Since the permit holder was
found not to own the matter in issue, there was no occasion
to consider whether ownership was also a sufficient
condition to availability of the nonprofit rate.