Opinion ID: 4525042
Heading Depth: 2
Heading Rank: 2

Heading: The Commission’s Disputed Interpretation and

Text: Application of § 3633(a)(3) The dispositive question before the court in this case is whether the Commission, in reviewing its appropriate share determination, adequately discharged its statutory obligation to “consider” the “degree to which any costs are uniquely or disproportionately associated with any competitive products.” We hold that the Commission failed to do this and, therefore, we are constrained to remand the case. We do not mean to render any decision on what the appropriate share determination under § 3633(a)(3) should be. That is for the Commission to determine in the first instance. At this point, however, the Commission’s interpretation and application of § 3633(a)(3) and (b) are incomprehensible and, thus, unreasonable. No deference is due to the Commission’s current position because the disputed Order fails to apply the relevant terms of the statute, and it offers no reasoned basis for this failure. 18 As detailed above, the Commission’s position appears to be that the term “costs . . . uniquely or disproportionately associated with any competitive products” in § 3633(b) is no broader than – and indeed may coincide with – the term “direct and indirect postal costs attributable to [a particular competitive] product through reliably identified causal relationships,” which defines “costs attributable” in § 3633(a)(2). To reach that conclusion, the Commission assumed that “all costs that are uniquely or disproportionately associated with competitive products exhibit a reliably identified causal relationship with a specific competitive product or group of products and are therefore attributed.” Order at 138, J.A. 657. The Commission thus reasons that none of the Postal Service’s institutional costs – including, apparently, its “remaining inframarginal costs,” UPS v. PRC, 890 F.3d at 1060 – are uniquely or disproportionately associated with its competitive products in the sense intended in § 3633(b). This leads the Commission to conclude that there are no costs for it to “consider” under § 3633(b). See, e.g., Order at 28-29, J.A. 547-48. The Commission’s analysis defies reasoned decision-making. As noted at the outset of this opinion, there are two significant problems with the Commission’s position. First, the Commission has not adequately explained how the statutory phrases “direct and indirect postal costs attributable to [a particular competitive] product through reliably identified causal relationships,” 39 U.S.C. § 3631(b), and “costs . . . uniquely or disproportionately associated with any competitive products,” id. § 3633(b), can effectively coincide. Second, in focusing narrowly on costs attributed to competitive products under § 3633(a)(2), the Commission failed to discharge its responsibility under § 3633(b) to “consider . . . the degree to which any costs are uniquely or disproportionately associated 19 with any competitive products.” Id. § 3633(b) (emphasis added). We elaborate on these points in turn. 1. The Commission’s Interpretation of Costs “Uniquely or Disproportionately Associated with Competitive Products” Under § 3633(b) The Commission’s current analysis of the relationship between costs “attributed through reliably identified causal relationships” and costs “uniquely or disproportionately associated with” is incomprehensible. In the passages from the Commission’s Order reprinted above, the Commission assumes that the Postal Service’s costs can be “uniquely or disproportionately associated with” competitive products only if there is a reliably identified causal relationship between those costs and competitive products. See Initial Notice at 43-44, J.A. 147-48; Order at 138-39, 657-58. In its brief to this court and at oral argument, however, the Commission’s counsel suggests that the Commission gave the phrase “uniquely or disproportionately associated with” a distinct interpretation, and only then proceeded to conclude that there are no costs in that independent category that are not already attributed to competitive products under § 3633(a)(2). See Br. for Respondent at 29-32; Tr. of Oral Argument at 54-55. It is an understatement to say that one is hard-pressed to understand what the Commission means to say regarding the meaning of § 3633(b). At this point, we cannot credit either one of the foregoing interpretations of the Accountability Act. To start, the Commission cannot simply assume that the “uniquely or disproportionately associated with” standard is subsumed by the “reliably identified causal relationships” standard. That would impermissibly conflate the language of § 3633(a)(2) – which incorporates the definition of “costs attributed” from 20 § 3631(b) – with the evidently distinct language of § 3633(b). See BP Energy Co. v. FERC, 828 F.3d 959, 968 (D.C. Cir. 2016) (“Even under the most deferential standard, an agency cannot read statutory provisions out of existence but must interpret statutes ‘so that effect is given to all its provisions . . . [and] no part will be inoperative or superfluous, void or insignificant.’” (alteration in original) (quoting Corley v. United States, 556 U.S. 303, 314 (2009))). Instead, the Commission must explain why these two statutory phrases have the same practical reach despite the use of different language. As noted above, the Commission attempted to offer such an explanation in its brief to this court. The Commission belatedly argues that it did not “equate[]” the two statutory phrases “as an interpretative matter.” Br. for Respondent at 34. Rather, the Commission now contends that it gave independent meaning to the statutory terms “uniquely . . . associated with” and “disproportionately associated with,” using the ordinary tools of statutory interpretation. See id. at 29-34; Tr. of Oral Argument at 54-55. Then, according to counsel, the Commission concluded that “all ‘uniquely associated’ costs and all ‘disproportionately associated’ costs satisfy the Commission’s independent definition of the ‘costs attributable’ to a competitive product.” Br. for Respondent at 31. This line of argument is hard to discern in what the Commission actually said, and it is somewhat hard to fathom on its own terms. But if that is the Commission's view, it must spell it out. In any event, as things stand now, “we simply cannot comprehend the [Commission’s] reasoning” about the meaning and application of § 3633(b). Glob. TelLink v. FCC, 866 F.3d 397, 413 (D.C. Cir. 2017). Therefore, the Commission’s Order is neither reasoned nor reasonable. “At its core, the Commission’s Order is arbitrary and capricious because it fails 21 to articulate a comprehensible standard . . . .” U.S. Postal Serv. v. PRC, 785 F.3d 740, 753 (D.C. Cir. 2015). “[W]e owe no deference to an agency determination that is ‘largely incomprehensible.’” Id. (quoting Coburn v. McHugh, 679 F.3d 924, 926 (D.C. Cir. 2012)). The bottom line is that the Commission has not adequately explained why the statutory phrases at issue here have similar meanings, nor has it demonstrated that these statutory categories, even if distinct in meaning, nevertheless coincide in application. Therefore, the Commission’s application of § 3633(a)(3) and (b) was arbitrary and capricious and must be remanded. 2. The Commission’s Consideration of “Any” Such Costs Under § 3633(b) A second problem with the disputed Order is that, in focusing its analysis on costs attributed to competitive products under 39 U.S.C. § 3633(a)(2), the Commission failed to “consider . . . the degree to which any costs are uniquely or disproportionately associated with any competitive products” as required by 39 U.S.C. § 3633(b). As the plain meaning of that provision suggests, the Accountability Act clearly requires the Commission to consider any costs uniquely or disproportionately associated with competitive products at the time it reviews its appropriate share determination under § 3633(a)(3). This includes, but is not limited to, any costs fitting that description that the Commission may have already considered when it promulgated regulations under § 3633(a)(1) or § 3633(a)(2). The record in this case indicates that the Commission did not follow this statutory mandate. Instead, the Commission, relying on its inadequately explained interpretation of the Accountability Act, focused narrowly on the costs it had considered – and attributed – in promulgating regulations under 22 § 3633(a)(2). At oral argument, counsel for the Commission suggested that by piecing together the Commission’s responses to various comments, we could find that the Commission did indeed consider a broader class of costs. Tr. of Oral Argument at 75; see also Br. for Respondent at 35-38. Even assuming that is right, however, the Commission’s Order does not make it clear or comprehensible, and we cannot fill in the blanks in the Commission’s reasoning. The simple point here is that the Commission erred in concluding that it had discharged its responsibility to consider any costs uniquely or disproportionately associated with competitive products by virtue of the fact that it had already considered these costs when setting the price floor under § 3633(a)(2). An agency Order that is at odds with the requirements of the applicable statute cannot survive judicial review. See, e.g., Michigan v. EPA, 135 S. Ct. 2699, 2706 (2015). “An agency’s failure to consider and address during rulemaking ‘an important aspect of the problem’ renders its decision arbitrary and capricious. A ‘statutorily mandated factor, by definition, is an important aspect of any issue before an administrative agency . . . .’” Mozilla Corp. v. FCC, 940 F.3d 1, 60 (D.C. Cir. 2019) (per curiam) (first quoting Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983); then quoting Pub. Citizen v. Fed. Motor Carrier Safety Admin., 374 F.3d 1209, 1216 (D.C. Cir. 2004)). On the record before us, the Commission’s treatment of § 3633(b) cannot survive judicial review. Therefore, we are constrained to remand the Order to the Commission for further consideration. On remand, the Commission must consider all costs uniquely or disproportionately associated with competitive products in setting the appropriate share, even if it has already accounted for those costs under § 3633(a)(1) and (a)(2). 23 Furthermore, the Commission should fully address the issue left open in the court’s 2018 decision in UPS v. PRC. The court in that decision recognized that, because the costs attributed test under § 3633(a)(2) is conservative, there may be institutional costs that are “uniquely or disproportionately associated with competitive products,” even though they cannot be said to stand in “reliably identified causal relationships” with them. The Commission’s Order in this case does not address this. In addition, the Commission must explain the relevance (if any) of costs it may have considered in implementing § 3633(a)(1). At oral argument, counsel for the Commission suggested that the Commission might not have to further consider costs uniquely or disproportionately associated with competitive products under § 3633(b) because it had already considered them pursuant to § 3633(a)(1). Tr. of Oral Argument at 43-44, 48, 54-55. However, this possibility is offered as nothing more than a fleeting suggestion in the Commission’s Order and its brief to the court. Compare Order at 144, J.A. 663, and Br. for Respondent at 19 (focusing only on § 3633(a)(2)), with Order at 160 n.294, J.A. 679 n.294, and Br. for Respondent at 36 (mentioning the Commission’s test under § 3633(a)(1)). If this point is somehow critical to the Commission’s analysis, the Commission must make that clear in the first instance. See SEC v. Chenery Corp., 318 U.S. 80, 94-95 (1943). We do not mean for these examples to exhaust the issues that the Commission must address on remand, only to illustrate some of what a fuller “consider[ation]” of the relevant costs will involve.