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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 13, 2003 Decided March 14, 2003

No. 01-5449

AID ASSOCIATION FOR LUTHERANS,

APPELLEE

v.

UNITED STATES POSTAL SERVICE,

APPELLANT

–————

Consolidated with

03-5065

–————

No. 01–5450

AMERICAN BAR ENDOWMENT,

APPELLEE

v.

UNITED STATES POSTAL SERVICE,

APPELLANT

–————

Consolidated with

03-5066

–————

 Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.
2

Appeals from the United States District Court

for the District of Columbia

(No. 96cv02694)

(No. 97cv00660)

Edward Himmelfarb, Attorney, United States Department

of Justice, argued the cause for appellant. With him on the

briefs were Roscoe C. Howard, Jr., United States Attorney,

and Anthony J. Steinmeyer, Assistant Director, United

States Department of Justice. R. Craig Lawrence and Vincent H. Cohen, Jr., Assistant United States Attorneys, entered appearance.

Geoffrey W. Peters argued the cause and filed the brief for

appellee Aid Association for Lutherans.

William J. Olson, John S. Miles, and Herbert W. Titus

were on the brief for amicus curiae Free Speech Defense and

Education Fund, Inc. in support of appellee.

Sheila J. Carpenter argued the cause for appellee American Bar Endowment. With her on the brief was Richard

Littell.

Before: EDWARDS, HENDERSON and ROGERS, Circuit Judges.

Opinion for the Court filed by Circuit Judge EDWARDS.

EDWARDS, Circuit Judge: The 1990 amendment to the

Postal Reorganization Act of 1970 (‘‘PRA’’) bars the use of the

reduced nonprofit third-class postage rate for mailings promoting any insurance policy if ‘‘the coverage provided by the

policy’’ is ‘‘generally otherwise commercially available.’’ 39

U.S.C. § 3626(j)(1)(B). In 1992, appellant United States

Postal Service (‘‘Postal Service’’ or ‘‘USPS’’) issued regulations construing this statutory language to bar the use of the

reduced rate for mailings promoting insurance of a general

type (e.g., life, automobile, health) that is commercially available. See 57 Fed. Reg. 28,464, 28,466 (June 25, 1992). Under

the regulations, the Postal Service decided that appellees Aid

Association for Lutherans (‘‘AAL’’) and American Bar Endowment (‘‘ABE’’), both nonprofit, tax-exempt organizations

that offer insurance policies to their members and are eligible
3

for the nonprofit postage rate, were no longer entitled to mail

their insurance-related material at the nonprofit rate to the

extent that the insurance offered was of a general type that is

otherwise commercially available.

Appellees filed separate law suits in the District Court,

alleging that the Postal Service exceeded its statutory authority in promulgating the cited regulations. The District Court

granted judgment for appellees, finding that the regulations

‘‘constitute an impermissible reading of the statute.’’ Aid

Ass’n for Lutherans v. USPS, No. 96-2694, Mem. Op. at 13

(D.D.C. Sept. 13, 2001) (‘‘AAL Mem. Op.’’), reprinted in Joint

Appendix (‘‘JA’’) 157, 169; Am. Bar. Endowment v. USPS,

No. 97-660, Mem. Op. at 6 (D.D.C. Sept. 17, 2001) (‘‘ABE

Mem. Op.’’) (finding the ‘‘identical analysis’’ to apply), reprinted in JA 384, 389. The District Court ordered the postage

refund amounts due to AAL and ABE and entered final

judgment in these cases on January 13, 2003 and February

12, 2003. See AAL v. USPS, Order (D.D.C. Jan. 13, 2003);

ABE v. USPS, Order (D.D.C. Feb. 12, 2003).

Appellant first contends that its regulations are not subject

to judicial review, because 39 U.S.C. § 410(a) exempts the

Postal Service from the judicial review provisions of the

Administrative Procedure Act (‘‘APA’’). The Postal Service

claims further that, if judicial review is proper, the court

should defer to the agency’s statutory interpretation under

Chevron U.S.A. Inc. v. Natural Resources Defense Council,

Inc., 467 U.S. 837 (1984), because the regulations reflect a

permissible construction of 39 U.S.C. § 3626(j)(1)(B). Appellees, in turn, argue that, because the Postal Service acted in

excess of its delegated authority under the statute, judicial

review is available outside of the APA and the disputed

regulations cannot possibly survive scrutiny under any standard of review.

We affirm the judgments of the District Court. Judicial

review is available in this case, because, as appellant concedes, appellees may challenge actions by the Postal Service

that are outside of the scope of its statutory authority.

Appellees’ principal claim here is that the challenged regulations emanated from an ultra vires action by the Postal

Service. We agree. Therefore, it does not matter whether
4

39 U.S.C. § 410(a) precludes traditional APA review. On the

merits, we hold that the Postal Service’s regulations exceed

the agency’s delegated authority under the statute. The

statute permits the agency to regulate solely with respect to

‘‘coverage provided by [an insurance] policy.’’ The agency

ignored this limitation and focused instead on ‘‘types of

insurance.’’ ‘‘Coverage’’ under a policy does not mean the

‘‘type of insurance’’ offered. Therefore, the regulations totally pervert the meaning of the statute. And, in so doing, the

regulations effectively exclude nonprofit organizations from

using the reduced nonprofit postage rate for insurancerelated mailings in markets in which they previously had

access to the reduced rate. There is nothing in this record to

indicate that this was the intention of Congress in enacting 39

U.S.C. § 3626(j)(1)(B). Quite the contrary. Both the clear

terms of the statute and the legislative history suggest otherwise.

I. BACKGROUND

In 1970, Congress enacted PRA, 39 U.S.C. § 101 et seq.,

which created the United States Postal Service. PRA authorized the Postal Service to charge reduced third-class postage

rates to ‘‘qualified nonprofit organizations,’’ defined as ‘‘religious, educational, scientific, philanthropic, agricultural, labor,

veterans, or fraternal organizations or associations not organized for profit and none of the net income of which inures to

the benefit of any private stockholder or individual,’’ former

39 U.S.C. § 4452(d). Id. § 4452(b), (c).

In 1990, Congress amended PRA to place some restrictions

on the use of reduced-rate mail. See 39 U.S.C. § 3626(j).

One such restriction was on mailings promoting insurance

policies. Section 3626(j)(1)(B) bars the use of the reduced

rate for

mail which advertises, promotes, offers, or, for a fee

or consideration, recommends, describes, or announces the availability of–

TTT

(B) any insurance policy, unless the organization

which promotes the purchase of such policy is

authorized to mail at the rates for mail under
5

former section 4452(b) or 4452(c) of this title, the

policy is designed for and primarily promoted to

the members, donors, supporters, or beneficiaries

of the organization, and the coverage provided by

the policy is not generally otherwise commercially

available[.]

Id. § 3626(j)(1)(B). The third condition imposed by this

section on the use of the reduced rates for insurance-related

mailings – i.e., that ‘‘the coverage provided by the policy’’ be

‘‘not generally otherwise commercially available’’ – is the one

at issue here.

In 1992, pursuant to its authority to ‘‘adopt, amend, and

repeal such rules and regulations as it deems necessary to

accomplish the objectives of this title,’’ id. § 401(2), the Postal

Service issued a final rule after notice and comment, amending its Domestic Mail Manual and construing the language of

§ 3626(j)(1)(B). See 57 Fed. Reg. 28,464, 28,466 (June 25,

1992). The rule, which is codified at Domestic Mail Manual

§ E670.5.5, states:

The term ‘‘not generally otherwise commercially

available’’ applies to the actual coverage stated in

the insurance policy, without regard to the amount

of the premiums, the underwriting practices, and the

financial condition of the insurer. When comparisons are made with other policies, consideration will

be given to policy coverage benefits, limitations, and

exclusions, and to the availability of coverage to the

targeted category of recipients. When insurance

policy coverages are compared for the purpose of

determining whether coverage in a policy offered by

an organization is not generally otherwise commercially available, the comparison will be based on the

specific characteristics of the recipients of the piece

in question (e.g., geographic location or demographic

characteristics).

Note: The types of insurance considered to be

generally commercially available include but are not

limited to: Homeowner’s, property, casualty, marine, professional liability (including malpractice),
6

travel, health, life, airplane, automobile, truck, motorhome, motorbike, motorcycle, boat, accidental death

and dismemberment, medicare supplement (medigap), catastrophic care, nursing home, and hospital

indemnity insurance.

Id. In the preamble to the notice of proposed rulemaking,

the Postal Service stated that the statute

looks to the ‘‘coverage provided by the policy,’’ 39

U.S.C. 3626(j)(1)(B), without any indication that

price or the financial conditions or practices of the

insurer should modify this rule. The Postal Service

also does not believe that the presence of unique

elements in a type of policy which is otherwise

commercially available is sufficient for a determination that the policy is not commercially available. In

the example cited above, the primary focus of the

policy was life insurance, rather than coverage to

provide strike benefits. Accordingly, in determining

whether the policy is commercially available, the

policy would be considered life insurance.

56 Fed. Reg. 63,895, 63,896 (Dec. 6, 1991).

Thus, to determine whether ‘‘the coverage provided by the

policy is not generally otherwise commercially available,’’ 39

U.S.C. § 3626(j)(1)(B), the Postal Service looks to whether

the insurance policy fits into one of the broad ‘‘types of

insurance’’ (e.g., life, health, automobile) that are commercially available. It does not look to whether the specific terms,

extent, elements, or details of the coverage provided in the

insurance policy are commercially available. This sweeping

regulatory exclusion is overcome only when a mailer demonstrates that an insurance policy that is within a broad type of

insurance that is generally commercially available is not

commercially available to the specific demographic or geographic group to whom the policy is being targeted and

promoted.

Appellee AAL is a nonprofit, tax-exempt organization that

offers, among other services, its own fraternal life, medical,
7

disability, and long-term care insurance to its members. Appellee ABE is a nonprofit, tax-exempt organization affiliated

with the American Bar Association (‘‘ABA’’) that gives charitable grants for legal research, funded through ABE’s sponsorship of group insurance policies for ABA members. The

group insurance policies that ABE offers to members are

underwritten by major insurance carriers. ABA’s large

membership enables ABE to negotiate coverage for members

on more favorable terms than those available in the general

insurance market. ABE commonly receives annual dividends

on group policies, and members, whose premiums fund the

group policies, are entitled to their share of the return of the

premium in the form of an insurance dividend, but most of

ABE’s insureds choose to donate those dividends to ABE for

its charitable purposes. Both AAL and ABE are ‘‘qualified

nonprofit organizations’’ eligible to mail qualifying matter at

reduced nonprofit rates.

After the Postal Service issued the disputed regulations,

AAL submitted sample materials and requested written clarification regarding the eligibility of its insurance-related mailings for the reduced rate. The Postal Service determined

that AAL’s insurance-related mailings were ‘‘non-permissible

mailings’’ ineligible for the reduced rate under the new

regulations. See Letter from R.C. Payne, MSC Manager/Postmaster, USPS, to Donna Beyer, Manager, Record &

Employee Mail, AAL (Aug. 27, 1992), reprinted in JA 85.

AAL appealed and the Postal Service affirmed its decision,

stating that ‘‘AAL offers insurance (e.g., life, health, longterm care, etc.) which are types of insurance that the Postal

Service considers generally commercially available. Also,

your arguments that there are unusual benefits attached to

some of these policies does not necessarily cause them to be

considered not commercially available.’’ See Letter from

Patricia M. Gibert, Manager, Customer Serv. Support, USPS,

to George E. Miller, Counsel for AAL (June 7, 1994), reprinted in JA 69, 73. AAL’s request for reconsideration was

rejected. See Letter from John H. Ward, USPS, to Geoffrey

W. Peters, Counsel for AAL (July 11, 1996), reprinted in JA

11-16.
8

In a separate administrative action, the Postal Service

determined that ABE’s insurance-related mailings between

March 25, 1991 and December 27, 1993 should not have been

mailed at the reduced nonprofit rates, assessed a postage

deficiency of $250,041.75 against ABE, and required ABE to

pay the regular rates for future insurance-related mailings.

See Letter from Ken Britton, Manager, Customer Serv. Support, USPS, to Charles Lynch, Executive Dir., ABE (Apr. 7,

1994), reprinted in JA 304. ABE appealed the ruling and the

Postal Service affirmed its decision, stating that ABE

offers insurance (e.g., life, health, death and dismemberment, etc.) which are types of insurance that the

Postal Service considers generally commercially

available.

 Also, your argument that the Endowment’s insurance program is promoted solely as a vehicle for

soliciting members to contribute money (in the form

of insurance ‘dividends’ or ‘experience credits’) to

fund the Endowment’s philanthropic endeavors does

not necessarily cause them to be considered not

commercially available.

Letter from John J. Sadler, Manager, Rates & Classification

Serv. Ctr., USPS, to Richard Littell, Counsel for ABE (July

15, 1994), reprinted in JA 318, 320. ABE appealed again

unsuccessfully, although the Postal Service subtracted from

the postage deficiency the mailings made before the Domestic

Mail Manual was amended. See Letter from Anita J. Bizzotto, Manager, Bus. Mail Acceptance, USPS, to Richard Littell,

Counsel for ABE (Jan. 6, 1997), reprinted in JA 188-91.

AAL and ABE filed separate lawsuits in the District Court

challenging the Postal Service’s actions, alleging, inter alia,

that the Postal Service ‘‘exceeded its statutory authority’’ in

promulgating the postal regulations codified at § E670.5.5 of

the Domestic Mail Manual. AAL alleged in its complaint:

The legislative history of the statute TTT makes it

clear that the intent of Congress was not to
9

include insurance such as that offered by fraternal

benefit societies within the ambit of the new restrictions on the use of the nonprofit mail permit. The

regulations promulgated exceed the scope of the

authorizing legislation, contravene the preponderance of legislative history, were not reasonably tailored to accomplish Congress’ objective and should

therefore be set aside.

AAL’s Complaint ¶ 20, reprinted in JA 134, 138. ABE

alleged in its complaint: ‘‘USPS exceeded its authority as

granted by the 1990 Act because it adopted a regulation that

imposed restrictions on insurance-related mailings not contemplated or authorized by Congress.’’ ABE’s Complaint

¶ 21, reprinted in JA 325, 333.

The District Court granted partial summary judgment in

favor of AAL, and granted summary judgment in favor of

ABE. See AAL Mem. Op. at 1, JA 157; ABE Mem. Op. at 1,

JA 384. In AAL, the District Court first held that 39 U.S.C.

§ 410(a) did not preclude judicial review in this case. AAL

Mem. Op. at 4-6, JA 160-62. On the merits, the District

Court held that the Postal Service’s regulations ‘‘constitute an

impermissible reading of the statute.’’ Id. at 13, JA 169.

The District Court noted that, under the Postal Service’s

statutory interpretation, ‘‘a fraternal organization would have

to develop an entirely new, unique category of insurance to

provide to its members TTT different than any other insurance

provided in the United States.’’ Id. at 11, JA 167. The

District Court reasoned that

it is fairly apparent here that Congress did not

intend to restrict the type of insurance mailings to

only those that would qualify under the exemption to

the sort described by counsel. Congress specifically

noted that certain nonprofit organizations would continue to be able to qualify for this exemption if they

met all of the requirements of a three-part test.

The Court is puzzled by this fact, when it appears

that no existing category of insurance policy that is

provided by a fraternal benefit organization would
10

meet the third part of the test. Why did Congress

need the other two parts if it intended to disqualify

all insurance policies under the third prong? By

considering the broad general nature of the policy

(e.g. life, home, auto) when determining whether a

similar type of insurance policy is not generally

otherwise commercially available, Defendant has not

interpreted the exemption, it has eviscerated it.

Id. at 12-13, JA 168-69. The District Court declared invalid

the provision of the Domestic Mail Manual interpreting the

statutory phrase at issue. See AAL Order (D.D.C. Sept. 13,

2001), reprinted in JA 170. The District Court found ‘‘the

identical analysis’’ to apply in ABE. See ABE, Mem. Op. at

6, JA 389.

The instant appeals followed. This court ordered that oral

arguments in the two cases be scheduled on the same day and

that the parties coordinate briefing. In this court, there was

a question as to whether the District Court’s orders were

final and appealable, since the trial court’s initial orders left

the amounts owed by the Postal Service to AAL and ABE to

be determined. See AAL Order, JA 170; ABE Order (D.D.C.

Sept. 17, 2001), reprinted in JA 390. However, just before

oral arguments in this court, the District Court issued orders

setting the refund amounts due to appellees and entered final

judgment in both cases. See AAL Order (D.D.C. Jan. 13,

2003); ABE Order (D.D.C. Feb. 12, 2003). The Postal Service then promptly filed new notices of appeal and filed

motions to consolidate the new and initial appeals in both

cases. The motions were granted. Thus, the disputed judgments before this court are indisputably final and appealable.

II. ANALYSIS

A. Availability of Judicial Review

The Postal Service first contends that 39 U.S.C. § 410(a)

precludes judicial review here, because it explicitly exempts

the Postal Service from the judicial review provisions of the

APA. Section 410(a) provides, in relevant part, that ‘‘no

Federal law dealing with public or Federal contracts, property, works, officers, employees, budgets, or funds, including
11

the provisions of chapters 5 and 7 of title 5 [the APA], shall

apply to the exercise of the powers of the Postal Service.’’ 39

U.S.C. § 410(a). The Postal Service claims that the wellestablished presumption favoring judicial review of administrative action is overcome here by the explicit terms of

§ 410(a). We disagree. The Postal Service assumes that any

right that appellees have to judicial review must arise under

the APA. This assumption is mistaken.

There is no doubt that § 410(a) exempts the Postal Service

from the strictures of the APA in cases involving the APA’s

procedural requirements. See, e.g., Nat’l Easter Seal Soc’y

for Crippled Children & Adults v. USPS, 656 F.2d 754, 766

(D.C. Cir. 1981) (holding that the Postal Service was not

required to follow notice and comment rulemaking procedures). It is also established that, in PRA, Congress affirmatively intended to preclude judicial review of the Postal

Service’s Board of Governors’ decisions to appoint and remove the Postmaster General. See Carlin v. McKean, 823

F.2d 620, 623 (D.C. Cir. 1987) (declining to decide whether

judicial review was available ‘‘under the old administrative

law principles when Congress has explicitly exempted an

agency from the APA’s coverage,’’ because the court was

‘‘quite certain that Congress intended affirmatively to preclude judicial review of the Governors’ decisions to appoint

and remove the Postmaster General’’). These strictures do

not apply in this case, however.

In their complaints, both AAL and ABE allege that, in

promulgating the postal regulations at issue, the Postal Service exceeded its statutory authority by imposing restrictions

on the use of the nonprofit mail permit that were not authorized by Congress. See AAL’s Complaint ¶ 20, JA 138;

ABE’s Complaint ¶ 21, JA 333. It does not matter, therefore,

whether traditional APA review is foreclosed, because ‘‘[j]udicial review is favored when an agency is charged with acting

beyond its authority.’’ Dart v. United States, 848 F.2d 217,

221 (D.C. Cir. 1988). Indeed, the Postal Service concedes

that ‘‘this Court has found a narrow exception to [§ 410’s]

preclusion of review, allowing a court to determine whether

an agency was acting outside the scope of its statutory

authority.’’ Appellant’s Br. 19. ‘‘Even where Congress is

understood generally to have precluded review, the Supreme
12

Court has found an implicit but narrow exception, closely

paralleling the historic origins of judicial review for agency

actions in excess of jurisdiction.’’ Griffith v. FLRA, 842 F.2d

487, 492 (D.C. Cir. 1988) (citing the leading case, Leedom v.

Kyne, 358 U.S. 184, 188 (1958) (finding judicial review proper

despite statutory preclusion of judicial review, where the

NLRB acted ‘‘in excess of its delegated powers and contrary

to a specific prohibition’’ in the NLRA)).

Following the reasoning of American School of Magnetic

Healing v. McAnnulty, 187 U.S. 94 (1902), and its progeny,

the case law in this circuit is clear that judicial review is

available when an agency acts ultra vires. See, e.g., Chamber

of Commerce v. Reich, 74 F.3d 1322, 1327-28 (D.C. Cir. 1996).

In other words, the APA’s stricture barring judicial review

‘‘to the extent that statutes preclude judicial review,’’ 5 U.S.C.

§ 701(a)(1), ‘‘does not repeal the review of ultra vires actions

that was recognized long before, in McAnnultyTTTT When

an executive acts ultra vires, courts are normally available to

reestablish the limits on his authority.’’ Dart, 848 F.2d at

224; see also Reich, 74 F.3d at 1328. Appellees’ claims here,

that the Postal Service ‘‘exceeded its statutory authority’’ in

purporting to apply the statute, clearly admit of judicial

review.

B. Scope of Review

Although there is little doubt about the availability of

judicial review in this case, a question remains regarding the

scope of review. As noted above, the Postal Service claims

that, if judicial review is proper, the court should defer to the

agency’s statutory interpretation under Chevron U.S.A. Inc.

v. Natural Resources Defense Council, Inc., 467 U.S. 837

(1984), because the agency’s interpretation of the statute

reflects a reasonable construction of 39 U.S.C. § 3626(j)(1)(B).

In particular, the Postal Service contends that, in reviewing

whether the agency exceeded its statutory authority in construing the statute, we must confine our inquiry to the

question whether the regulation ‘‘on its face’’ violates

§ 3626(j), and accordingly must limit our analysis to the first

(‘‘intent of Congress is clear’’) step of Chevron and not
13

venture into Chevron’s second (‘‘permissible construction’’)

step. Appellant’s Br. 25-26. Appellant contends that this is

so because the appropriate scope of review is something akin

to ‘‘that appropriate in mandamus actions,’’ Nat’l Ass’n of

Postal Supervisors v. USPS, 602 F.2d 420, 432 (D.C. Cir.

1979) (‘‘National Association’’). Appellant’s Br. 2-26.

In National Association, which was decided prior to Chevron, we held that Congress’ intent to vest in the Postal

Service broad discretion in setting employee compensation

and benefits and to limit judicial oversight of the exercise of

that discretion did not mean that the Postal Service’s decisions were ‘‘entirely insulated from judicial surveillance.

Courts can defer to the exercise of administrative discretion

on internal management matters, but they cannot abdicate

their responsibility to insure compliance with congressional

directives setting the limits on that discretion.’’ National

Association, 602 F.2d at 432. With respect to the matter at

issue in this case – the scope of review of Postal Service

constructions of PRA – we held that ‘‘[t]he judicial role is to

determine the extent of the agency’s delegated authority and

then determine whether the agency has acted within that

authority.’’ Id. We ‘‘owe a measure of deference to the

agency’s own construction of its organic statute, but the

ultimate responsibility for determining the bounds of administrative discretion is judicial.’’ Id. at 432-33 (citations omitted). National Association thus appears almost as a harbinger of Chevron.

Under Chevron, ‘‘if the intent of Congress is clear,’’ the

court ‘‘must give effect to the unambiguously expressed intent

of Congress.’’ Chevron, 467 U.S. at 842-43. If ‘‘Congress has

not directly addressed the precise question at issue,’’ and the

agency has acted pursuant to an express or implied delegation of authority, the agency’s statutory interpretation is

entitled to deference, as long as it is reasonable. Id. at 843-

44. Although an agency manual often may not purport to

carry the force of law, see Christenson v. Harris County, 529

U.S. 576, 587 (2000); United States v. Mead Corp., 533 U.S.

218, 226-27 (2001) (holding that Chevron deference is due only

when the agency acts pursuant to ‘‘delegated authority’’ and
14

the agency action has the ‘‘force of law’’), the Postal Service’s

disputed regulations in this case were adopted pursuant to

notice and comment rulemaking and undoubtedly were intended to carry the force of law. Thus, the conditions for

Chevron review are clearly met.

It is unclear whether there is much of a disjunction between the tests enunciated in National Association and Chevron regarding the scope of review here. It is also unclear

whether the scope of review in this case is ‘‘mandamus-like,’’

which is an odd moniker under existing law. These questions

are abstractly interesting, but ultimately unimportant in the

resolution of this matter. National Association anticipated

Chevron’s framing of judicial review of agency statutory

interpretation as an inquiry into an agency’s delegated authority and its action within that authority. ‘‘Chevron is

principally concerned with whether an agency has authority

to act under a statute.’’ Arent v. Shalala, 70 F.3d 610, 615

(D.C. Cir. 1995). Chevron analysis ‘‘is focused on discerning

the boundaries of Congress’ delegation of authority to the

agency; and as long as the agency stays within that delegation, it is free to make policy choices in interpreting the

statute, and such interpretations are entitled to deference.’’

Id.; see also Mead, 533 U.S. at 226-27 (holding that Chevron

deference is due only when the agency acts pursuant to

‘‘delegated authority’’). With these principles in mind, it is

evident that the scope of review elaborated in National

Association is in all important respects perfectly consistent

with Chevron and Mead. And appellant concedes that National Association controls the scope of review in this case.

Appellant’s suggestion that we must confine our inquiry to

the question whether the regulation ‘‘on its face’’ violates

§ 3626(j), and not venture into Chevron’s second (‘‘permissible construction’’) step, makes little sense under either National Association or Chevron. An agency construction of a

statute cannot survive judicial review if a contested regulation

reflects an action that exceeds the agency’s authority. It

does not matter whether the unlawful action arises because

the disputed regulation defies the plain language of a statute

or because the agency’s construction is utterly unreasonable
15

and thus impermissible. In this case, the Postal Service’s

position seems to be that the disputed regulations are permissible because the statute does not expressly foreclose the

construction advanced by the agency. We reject this position

as entirely untenable under well-established case law. See

Ry. Labor Executives Ass’n v. Nat’l Mediation Bd., 29 F.3d

655, 671 (D.C. Cir. 1994) (en banc) (‘‘Were courts to presume

a delegation of power absent an express withholding of such

power, agencies would enjoy virtually limitless hegemony, a

result plainly out of keeping with Chevron and quite likely

with the Constitution as well.’’) (emphasis in original); see

also Halverson v. Slater, 129 F.3d 180, 187 (D.C. Cir. 1997)

(quoting Ry. Labor Executives, 29 F.3d at 671); Oil, Chem. &

Atomic Workers Int’l Union v. NLRB, 46 F.3d 82, 90 (D.C.

Cir. 1995) (same); Ethyl Corp. v. EPA, 51 F.3d 1053, 1060

(D.C. Cir. 1995) (‘‘We refuse TTT to presume a delegation of

power merely because Congress has not expressly withheld

such power.’’); Natural Res. Def. Council v. Reilly, 983 F.2d

259, 266 (D.C. Cir. 1993) (‘‘ ‘[I]t is only legislative intent to

delegate such authority that entitles an agency to advance its

own statutory construction for review under the deferential

second prong of Chevron.’ ’’) (alteration in original) (quoting

Kansas City v. Dep’t of Hous. & Urban Dev., 923 F.2d 188,

191–92 (D.C. Cir. 1991)).

C. The Statutory Question

Appellees’ principal claim here is that the challenged regulations emanated from an ultra vires action by the Postal

Service. We agree. This being the case, the regulations

cannot survive judicial review under National Association or

Chevron. We now turn to the merits to explain why the

Postal Service’s position fails.

It is undisputed that appellees meet the first two statutory

criteria in § 3626(j)(1)(B) for mailing their insurance materials at the reduced rate. The only issue is the third criterion:

‘‘the coverage provided by the policy is not generally otherwise commercially available.’’ 39 U.S.C. § 3626(j)(1)(B). We

must decide whether the Postal Service’s regulations, construing this statutory language to exclude mailings promoting
16

insurance belonging to general ‘‘types of insurance’’ (e.g., life,

health, disability) that are commercially available, exceeded

the Postal Service’s delegated authority under the statute.

As we noted at the outset of this opinion, the Postal Service’s

position finds no support whatsoever in the record of this

case.

To repeat what we said at the start: The statute permits

the agency to regulate solely with respect to ‘‘coverage provided by [an insurance] policy.’’ The agency ignored this

limitation and focused instead on ‘‘types of insurance.’’ ‘‘Coverage’’ under a policy does not mean the ‘‘type of insurance’’

provided. Therefore, the regulations totally pervert the

meaning of the statute. And, in so doing, the regulations

defy congressional intent by effectively excluding nonprofit

organizations from using the reduced nonprofit postage rate

for insurance-related mailings in markets in which they previously had access to the reduced rate. Our judgment in this

case is the same whether we analyze the agency’s statutory

interpretation under Chevron Step One or Step Two. ‘‘In

either situation, the agency’s interpretation of the statute is

not entitled to deference absent a delegation of authority

from Congress to regulate in the areas at issue.’’ Motion

Picture Ass’n of Am., Inc. v. FCC, 309 F.3d 796, 801 (D.C.

Cir. 2002) (emphasis in original) (citing Ry. Labor Executives,

29 F.3d at 671). The Postal Service has no congressionally

delegated authority to exclude reduced-rate mailings on the

basis of general ‘‘types of insurance.’’ We therefore hold that

the Postal Service’s regulations exceed the agency’s delegated

authority under the statute.

There are two interrelated reasons why we find no delegated authority for the disputed regulations. First, the plain

language of 39 U.S.C. § 3626(j)(1)(B) does not support the

Postal Service’s decision to broadly exclude general ‘‘types of

insurance’’ that are commercially available from eligibility for

the reduced nonprofit postage rates. Second, nothing in the

legislative history indicates that Congress intended the absurd result that is produced by the regulations. Indeed, the

legislative history suggests otherwise.
17

The natural reading of the statutory phrase, ‘‘coverage

provided by the policy is not generally otherwise commercially available,’’ 39 U.S.C. § 3632(j)(1)(B), does not accord with

the definition of ‘‘not generally otherwise commercially available’’ that appears in the agency’s Domestic Mail Manual.

The Postal Service’s regulations construe ‘‘coverage provided

by the policy’’ to refer broadly to ‘‘types of insurance,’’

without regard to the terms and exclusions of coverage under

the policy, the amount and extent of risk covered under the

policy, or the presence of unique elements in a policy. Since

the statute does not define ‘‘coverage,’’ we must presume that

Congress intended to give the term its ordinary meaning.

Ordinarily, in the context of insurance policies, the word

‘‘coverage’’ refers to something more specific than the general

type of insurance such as life or health insurance; it usually

refers to the inclusion or exclusion of specific risks under an

insurance policy. See 7 LEE R. RUSS & THOMAS F. SEGALLA,

COUCH ON INSURANCE § 101:3, at 101-11 (3d ed. 1997). WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY OF THE ENGLISH

LANGUAGE UNABRIDGED 525 (1993) defines ‘‘coverage’’ as ‘‘protection by insurance policy: inclusion within the scope of a

protective or beneficial plan.’’ THE AMERICAN HERITAGE DICTIONARY 334 (2d Coll. ed. 1982) defines ‘‘coverage’’ as ‘‘[t]he

extent of protection afforded by an insurance policy.’’

BLACK’S LAW DICTIONARY 372 (7th ed. 1999) defines ‘‘coverage’’

as ‘‘[i]nclusion of a risk under an insurance policy; the risks

within the scope of an insurance policy.’’ The prior edition of

BLACK’S LAW DICTIONARY 365 (6th ed. 1990) defined ‘‘coverage’’

as ‘‘amount and extent of risk contractually covered by insurer.’’ We think that the agency’s construction of the term

‘‘coverage’’ to mean broadly the general type or category of

insurance provided by the policy contravenes the ordinary

meaning of ‘‘coverage,’’ which normally refers more specifically to the amount and extent of risk included in the scope of a

policy. In short, the Postal Service’s idiosyncratic use of the

word ‘‘coverage’’ has no basis in the ordinary use of term.

The Postal Service’s interpretation also leads to an absurd

result. As the Postal Service conceded at oral argument, this

statutory construction effects a blanket exclusion of nonprofit
18

organizations from use of the reduced postage rates for

insurance-related purposes in markets where nonprofits had

previously used the reduced rates. Virtually all insurancerelated mailings are disqualified from eligibility under this

interpretation. To qualify, a nonprofit organization would

have to develop an entirely unique category of insurance that

is not commercially available, or offer a generally commercially available type of insurance to a particular group for whom

that type of insurance is not commercially available. These

potential exceptions to the blanket exclusion are not significant enough to ameliorate the drastic effect of the agency’s

interpretation: to eliminate nonprofits’ access to the reduced

postage rates for their insurance-related mailings. Given the

extremity of the effect that results from the Postal Service’s

interpretation, we would expect to see some indication that

Congress intended such an effect, but we find no indication in

the statute that its goal is to exclude nonprofits from using

the reduced postage rates to this extent.

The legislative history also gives no indication that Congress intended such a drastic cutback on nonprofits’ use of

the reduced mail permit. Indeed, the legislative history

indicates that Congress clearly intended to continue allowing

nonprofits to promote their services at reduced postage rates.

A Senate Appropriations Committee report regarding spending for fiscal year 1990 stated:

While the Committee continues to support the subsidization of what it considers to be legitimate mailings for the benefit of nonprofit making entities

under the provisions of the Postal Reform Act,

nonetheless, the Committee shares some concerns

about what it considers to be abuses in the revenue

foregone program which place the legitimate use of

subsidies for legitimate mailings in jeopardy. The

Committee believes that the use of nonprofit bulk

mailings to advertise TTT insurance or other services

clearly for the benefit of commercial profitmaking

purposes, particularly where such services have no

relation to the nonprofit organization’s primary mis-
19

sion, are improper uses of the preferred mailer

status and costly to all taxpayers. For this reason,

the Committee has included language in the bill

which eliminates the use of the nonprofit mailer

permit for these purposes. The Committee recognizes that there are certain nonprofit organizations

which provide travel, insurance, and financial services to support the purposes for which the nonprofit

organization was originally established. Under the

language included in the bill, these organizations will

continue to be allowed to use their mailers to promote those services.

S. REP. NO. 101-105, at 43 (1989). The Senate report recommending passage of the final bill stated:

While the Committee continues to support the subsidization of what it considers to be legitimate mailings for the benefit of nonprofit making entities

under the provisions of the Postal Reform Act,

nonetheless, the Committee shares concerns about

what it considers to be abuses in the revenue foregone program which place the use of subsidies for

legitimate mailings in jeopardy.

S. Rep. No. 101-411, at 52 (1990). The Postal Service cites

this passage in its brief to demonstrate that Congress’ primary concern in enacting § 3626(j)(1)(B) was ‘‘to reduce the

cost of subsidized mailings by nonprofits.’’ Appellant’s Br.

29. But these passages indicate that Congress did not intend

to eliminate ‘‘legitimate mailings’’ using the reduced rate,

such as nonprofits’ insurance-related mailings. What Congress apparently did intend to eliminate were ‘‘abuses’’ of the

reduced rate, such as their use for cooperative mailings, in

which a for-profit and a nonprofit company enter an agreement to market for-profit products or services using the

nonprofit mail permit. There is clear evidence that Congress

intended for nonprofit organizations that provide insurance

policies to ‘‘continue to be allowed to use their mailers to

promote’’ their insurance services and make ‘‘legitimate mail-
20

ings for the benefit of nonprofit making entities.’’ S. REP. NO.

101-105, at 43.

The Postal Service contends that the disputed statutory

phrase, ‘‘coverage provided by the policy is not generally

otherwise commercially available,’’ does not speak to the

precise issue. For the reasons stated above, we find no real

ambiguity when the statutory language is fairly construed

using the normal tools of statutory construction. In any

event, however, while ambiguity in a statute may imply a

‘‘delegat[ion] to the agency [of] the power to fill those gaps,’’

see County of Los Angeles v. Shalala, 192 F.3d 1005, 1016

(D.C. Cir. 1999), the agency must still stay within the bounds

of the delegation in promulgating regulations under the statute. In this case, the Postal Service has transgressed the

bounds of any delegation to fill alleged gaps in the statute,

because the statute simply cannot bear the meaning that the

Postal Service seeks to give it. See MCI Telecomms. Corp. v.

Am. Tel. & Tel. Co., 512 U.S. 218, 229 (1994) (‘‘[A]n agency’s

interpretation of a statute is not entitled to deference when it

goes beyond the meaning that the statute can bearTTTT’’).

The agency lacked authority under the statute effectively to

regulate out of the market nonprofits’ use of the reduced

postage rates for insurance-related purposes. The agency’s

statutory interpretation and its effect cannot survive Chevron

Step One because the statutory language and legislative

history unambiguously indicate an intent for nonprofts to

continue to mail insurance-related material at reduced rates.

In the alternative, assuming arguendo that the statutory

language is ambiguous, the regulations constitute an impermissible construction of the statute under Chevron Step Two

because the interpretation is utterly unreasonable in the

breadth of its regulatory exclusion. There is nothing in this

record to indicate that Congress empowered the agency to

effect a blanket exclusion of nonprofits from the use of the

reduced mail permit for insurance-related purposes.

III. CONCLUSION

For the foregoing reasons, we affirm the judgments of the

District Court.