Opinion ID: 374680
Heading Depth: 1
Heading Rank: 3

Heading: The Structure of the Regulatory Scheme

Text: 19 In United Parcel Service, Inc. v. United States Postal Service (UPS I), 604 F.2d 1370 (3d Cir. 1979), we considered the basic structure of the Postal Reorganization Act. We held that the Postal Service could not bring about a change in either rates or classifications of mail without first submitting the proposed change to the Commission. We rejected the contention that the Postal Service could bypass the complex regulatory scheme of the Act by calling a change in the average weight pricing scheme for bulk mailing of parcels an experiment. We held that the proposed experiment involved both rate and classification aspects, and that the Commission could not be bypassed. Id. at 1375-79. Judge Higginbotham dissented, but only on the ground that the Act permitted limited experimentation outside of the regulatory scheme. He did not disagree with the majority's conclusion that the experiment had both rate and classification aspects. Id. at 1383-88. What the Postal Service attempted to accomplish by its proposal to temporarily implement the terms of Request MC78-1 is closely related to what it attempted to accomplish on a more limited scale in the experiment with which we dealt in UPS I. In this case, however, the Postal Service did not attempt to bypass the Commission, but rather attempted to take advantage of temporary authority granted to it in instances of Commission delay in the disposition of a request. The different posture of the case requires a somewhat fuller review of the legislative scheme than was necessary in UPS I. 20 Prior to 1970, Congress retained responsibility for the establishment of postage rates and classifications of postal service. This practice resulted, especially in times of inflation, in chronic postal revenue deficits. See, e. g., Proposed Reorg. of Postal Establishment to Provide for Efficient and Economical Postal Service: Hearings on H.R.17070 Before the Senate Comm. on Post Office and Civ. Serv., 91st Cong., 1st Sess. 503, 507 (1969) (statement of Postmaster General Winton Blount) (urging Congress to provide mechanism for institution of temporary rates). The Postal Reorganization Act of 1970 was intended to alleviate this deficiency by creating an independent Postal Service for which rates and classifications could be more efficiently established and amended. See H.R.Rep.No.91-1104, reprinted in (1970) U.S.Code Cong. & Admin.News, pp. 3649, 3650-51, 3667-69 (accompanying H.R.17070, the 1970 Act). The Act established an independent Postal Service, controlled and directed by nine Governors, who are appointed by the President for staggered nine-year terms. These Governors, along with their appointees, the Postmaster General and Deputy Postmaster General, comprise the Service's Board of Governors. 39 U.S.C. § 202 (1976); H.R.Conf.Rep.No.91-1363, reprinted in (1970) U.S.Code Cong. & Admin.News, pp. 3712, 3712 (accompanying H.R.17070, the 1970 Act); see United Parcel Serv. v. United States Postal Serv. (UPS I), 455 F.Supp. 857, 860 (E.D.Pa.1978), aff'd, 604 F.2d 1370 (3d Cir. 1979). The Act also established an independent quasi-regulatory body, the Postal Rate Commission, which has authority to oversee changes in rates, classifications, and services. 39 U.S.C. §§ 3601-3604. Before instituting any change in rates or classifications, the Postal Service must submit a request for a recommended decision to the Commission which holds evidentiary hearings under the terms of the Administrative Procedure Act and evaluates the proposal of the Postal Service. See id. §§ 3621-3622, 3624. The Governors may approve, reject, allow under protest, or in some circumstances modify the recommended decision. Id. § 3625. The 1970 Act, however, imposed no time limit on the Commission's action on Postal Service requests. Compare Postal Reorganization Act of 1970, Pub.L.No.91-375, 84 Stat. 719, codified in 39 U.S.C. § 3624 (1970), reprinted in (1970) U.S.Code Cong. & Admin.News, pp. 842, 894 with Postal Reorganization Act Amendments of 1976, Pub.L.No.94-421, § 6(a), 90 Stat. 1303 codified in 39 U.S.C. § 3624 (1976) (adding subsection (c) requiring Commission to act within 10 months), reprinted in (1976) U.S.Code Cong. & Admin.News at 90 Stat. 1306. 21 However, the 1970 Act did permit putting into effect temporarily proposed changes in either rates or classifications 90 days after the request had been filed with the Commission. Postal Reorganization Act of 1970, Pub.L.No.91-375, 84 Stat. 719, codified in 39 U.S.C. § 3641(a) (1970), reprinted in (1970) U.S.Code Cong. & Admin.News, pp. 842, 896-97. The 1970 Act had also established a ceiling on temporary rates of the lesser of the proposed rate or a one-third increase over the existing rates, notwithstanding that a higher permanent rate had been requested. See Postal Reorganization Act of 1970, Pub.L.No.91-375, 84 Stat. 719, codified in 39 U.S.C. § 3641 (1970), reprinted in (1970) U.S.Code Cong. & Admin.News, pp. 842, 897. The deficit continued to increase and the Service requested increased permanent rates in order to comply with the statutory mandate that the Service be self-supporting. Because there was no time limit within which the Commission was required to act, however, the Service was operated on a perpetually temporary rate scheme, filing for further increases in rates as soon as the prior request became permanent and instituting ever higher rates 90 days after each filing. This was criticized as giving the Service the control over rates that the Commission should have been exercising. H.R.Rep.No.94-391, 94th Cong., 1st Sess. reprinted in Legislative History of the Postal Reorganization Act Amendments of 1976 at 43, 51 (hereinafter Legislative History ). 22 Congress' overriding concern in 1976 thus was with the continuing deficits of the Postal Service. The Senate Report indicates that the three problems to be remedied by the amendments were reduced service, increased rates, and the operating deficit, all interrelated shortcomings of the system. S.Rep.No.94-966, 94th Cong., 2d Sess. 1-2, reprinted in (1976) U.S.Code Cong. & Ad.News, pp. 2400, 2400-01. In hearings on the House version of the 1976 Amendments, the Chairman of the Commission noted that because the requirement of a formal trial-type hearing applied to its deliberations, it was impossible for the Commission to reach a recommended decision within the 90-day waiting period of the 1970 Act. Proposal to Amend Postal Reorg. Act of 1970: Hearings on H.R.15511 Before the House Comm. on Post Office and Civ. Serv., 93d Cong., 2d Sess. 107, 111 (1974) (statement of Fred Rhodes, Chairman of Postal Rate Commission). The Chairman admitted that the Commission was unable to control rates as long as the Postal Service could institute temporary rates so quickly and suggested that Congress adopt a six-month waiting period with respect to rate and classification changes. Id. at 111, 131-34. The House version of the 1976 bill would have increased the waiting period for temporary instituting of both rates and classifications to 10 months, by amending section 3624 to require Commission action within that period of time, and section 3641 to forestall earlier imposition of temporary changes. See H.R.8603 §§ 7(a), 8(a), 94th Cong., 2d Sess., reprinted in Legislative History at 30. However, under the amended version, temporary rates would not be subject to the 1970 Act's one-third increase ceiling, but instead would be limited to the maximum amount requested as a permanent rate, which the then-Chairman of the Commission argued would give the Service needed control over revenues. See Letter from Clyde S. DuPont, Chairman of Postal Rate Commission, to Hon. David N. Henderson, Chairman of House Committee, reprinted in Legislative History at 64, 66. 23 The Senate version of the bill, which was adopted in relevant part by the Conference Committee, permitted temporary classification changes to be instituted after 90 days, and made only temporary rate changes subject to the ten-month waiting period. See H.R.8603 §§ 5(a), 6(a), reprinted in Legislative History at 243, 276-79 (Senate amendments). Although the reasons behind this distinction are not clear, there are two possible explanations. First, because the major problems with the 1970 Act were the rising deficit and slow pace of the Commission, which resulted in overuse of the temporary rate authority, it may be that the Senate did not view a temporary classification change as a problem needing a remedy. If a change in classification is not a financial question, or if it has only a limited effect on finances, then changes in classification may not have been viewed as responsible in any way for the fiscal plight of the Postal Service. Second, the Senate Report, after noting that classification changes will remain within the original 90-day provision, commented that (t)he Postal Service and the Postal Rate Commission are working closely on the new classification schedule, which will be phased in for the different classes over a three or four-year period. S.Rep.No.94-966, 94th Cong., 2d Sess. 13, reprinted in (1976) U.S.Code Cong. & Admin.News at p. 2412. If it is true that the Postal Service and Commission were developing a new classification schedule jointly, then the Postal Service would have been highly unlikely to make use of the permissive authority to institute temporary changes in classification. Moreover, the perceived infrequency of classification changes or the less complex proof required before the Commission may have led Congress to believe that 90 days would be an adequate time to afford the Commission to act upon proposed classification changes. Whatever the reasoning behind the distinction, the major problem faced by the Service prior to 1976 concerned rates and revenues; in reading and interpreting the Act as amended, rate changes must be viewed in that regulatory context. 24 The Conference Report only notes in passing that the Senate version was adopted; it is otherwise not helpful with regard to legislative intent. See H.R.Conf.Rep.No.94-1444, 94th Cong., 2d Sess. 16-17, reprinted in (1976) U.S.Code Cong. & Admin.News at pp. 2434, 2438. The debates in the Senate underscore that body's concern with rates and with the overuse by the Postal Service of the temporary rate authority, but are of no further aid. See 122 Cong.Rec. 27,089 (1976) (remarks of Senator Gale W. McGee, Chairman of Committee on Post Office and Civil Service) (temporary authority less likely to be used; Act intended to afford relief to ordinary users of mails). However, ten months was generally regarded as the appropriate time period needed for Commission action in rate cases. Senator McGee pointed out that had there been no delays by the Commission, the Service could have erased its deficit, and that the ten-month requirement would speed the actions of the Commission, which was otherwise creating a one-third increase ceiling for periods of time far in excess of ten months and which served to worsen the revenue shortfall. Proposed Postal Reorg. Amendments of 1976: Hearings on S. 2844 Before the Senate Comm. on Post Office and Civ. Serv., Part 4, 94th Cong., 2d Sess. 73-74 (Apr. 20, 1976) (statement of Senator Gale W. McGee, Chairman of Committee on Post Office and Civil Service). Moreover, Senator McGee pointed out on the Senate floor that the longest period of Commission deliberations on a proposed rate change was nine and one-half months, and thus that the ten-month requirement was feasible. 122 Cong.Rec. 27,090-91 (1976). 25 It seems clear from this legislative history that the 1976 Amendments were intended to give the Commission an outside limit of ten months to act upon postal rate requests, and to prohibit the Postal Service from making temporary rate changes during that period. If, then, the request in Docket No. MC78-1 is for rate changes, it could not have been put in effect until it had been before the Commission for ten months. 26 The Postal Service called the request a classification change. The Service argues that it alone has discretion to denominate a request as a rate matter or a classification matter and that its denomination controls. If, however, the Postal Service had such unfettered discretion, the 1976 Amendments would have accomplished nothing, for it is difficult to conceive of any change in postal rates that could not be coupled with some minor or major change in the nature or extent of postal service. Moreover the Commission has rejected the contention that the Postal Service has such unfettered discretion. In exercising the power to extend the ten-month limit for the decision in Docket No. MC78-1, a power applicable only to requests for rate changes, see 39 U.S.C. § 3624(c)(2), the Commission observed: 27 The Postal Service's formalistic argument that it submitted its Request as a proposed classification change pursuant to 39 U.S.C. § 3623 does not obviate the patent rate effects that would accompany implementation of its proposal in this docket. 1 28 Postal Rate Comm'n, Docket No. MC78-1, Order No. 280 at 19 & n.1 (May 18, 1979); see 43 Fed.Reg. 41,441 (1978) (Commission's Notice of filing of Postal Service Request; Commission noting that certain aspects suggest request involves rate changes under § 3622). 29 Next the Postal Service urges that, assuming it has no such unfettered discretion, in this instance the request is either a pure classification change, or one in which classification aspects predominate and rate aspects are merely incidental. On the facts of this case there is, however, an air of unreality about the Postal Service position. Pressed at oral argument for examples of what might be regarded as pure classification changes, the only examples to which its counsel could refer were the recent changes in the permissible size of a first class letter. An example of a pure rate change would be the increase in the rate of postage on a first class letter from fifteen to twenty-five cents. The categories of rates and of classifications inevitably overlap in most other instances. One court has noted that: 30 a classification is a grouping of mailing matter for the purpose of assigning it a specific rate or method of handling. 31 National Ret. Teachers Ass'n v. United States Postal Serv., 430 F.Supp. 141, 146 (D.D.C.1977), aff'd, 193 U.S.App.D.C. 206, 593 F.2d 1360 (D.C.Cir.1979). That definition suggests that it is not possible to establish rates in the absence of classifications of service to which those rates apply. But the fact remains that Congress intended to subject changes in rates to a ten-month rather than a 90-day waiting period before they could be put into effect by unilateral Postal Service action. 32 Next the Postal Service argues that the rate aspects and the service classification aspects of its request are severable. That may be so, but the February 15, 1979 Federal Register notice did not so treat them. Admitting this, the Postal Service suggests that if it can treat the classification aspects as severable, and thus temporarily effective in ninety days, then it must be able to charge the proposed rate for the new service in the interim or else be forced to offer the new service without any increased cost. The logic of this suggestion escapes us. It is within the Postal Service's control whether or not to put a classification of service into effect, and we have no fear that it will not do so until it can collect revenue for the service. In any event, the request in Docket No. MC78-1 clearly does not have severable rate and classification aspects. It embodies a fundamental overhaul of the entire parcel post rate structure. Permitting it to go into effect after 90 days rather than ten months would undermine the regulatory scheme devised by Congress in the 1976 Amendments. 33 We conclude, as did the Commission, that the Request embodied in Docket No. MC78-1 is a request for a change in rates to which section 3624(c)(1) applies, and that the changes it proposes in parcel post rates cannot be put into effect until after the waiting time established in section 3641(a).