Opinion ID: 407579
Heading Depth: 2
Heading Rank: 3

Heading: the modifications

Text: 42 The vast majority of petitioners and intervenors in this proceeding assert that the Board failed to provide adequate justification for particular modifications. 12 In addition, several parties argue that specific modifications are unsupported by substantial evidence. 13 The extent and nature of explanations necessary to support the Board's exercise of its section 3625(d) modification powers are far from clear. As we noted earlier, this is the first rate-making proceeding under the Postal Reorganization Act of 1970 in which the Board has not accepted the initial recommended decision of the PRC. Accordingly, the issue of modification has not arisen previously. 43 In ordering modified rates into effect, the Board discussed the inadequacy of projected revenues under the PRC's recommendations. The Board, however, failed to provide explanations for the specific class by class modifications it effected. Several parties therefore contend that the Board failed to provide the reasoned explanation ordinarily required of administrative agencies to support their actions. See SEC v. Chenery Corp., 318 U.S. 80, 94, 63 S.Ct. 454, 462, 87 L.Ed. 626 (1943). 44 The Board's duty to provide explanations for its modifications finds its roots in two sources. First, section 3625(d) states that as a prerequisite to modification, the Board must find 45 (1) such modification is in accord with the record and the policies of this chapter, and (2) the rates recommended by the (PRC) are not adequate to provide sufficient total revenues so that total estimated income and appropriations will equal as nearly as practicable estimated total costs. 46 Section 3625(e) then requires that (t)he decision of the (Board) to approve, allow under protest, reject, or modify a recommended decision of the (PRC) shall be in writing and shall include an estimate of anticipated revenue and a statement of explanation and justification. Second, section 3628 provides that courts of appeals shall review (decisions of the Board) in accordance with section 706 of title 5, and chapter 158 and section 2112 of title 28. 14 47 The Postal Service interprets these sections to require only what was provided by the Board-a generalized statement of the revenue deficiencies in the PRC recommended decisions. Accordingly, the Service states, 48 Having thus persuasively explained why the (PRC's) entire rate package was fatally defective on revenue grounds, the (Board) had no further need to repeat why it was necessary to depart from the (PRC's) recommendation in the instance of each individual component of that recommendation that was modified in accord with record evidence. 49 Brief for Respondent United States Postal Service at 31 n.2. The Service argues that the Board is quite distinct from other administrative agencies because it is free from most of the strictures of the Administrative Procedures Act 15 and is designed to function as an independent agency removed from the political arena, see S.Rep.No. 912, 91st Cong., 2d Sess. 8 (1970). 50 We recognize that an agency's interpretation of its enabling statute is entitled to great deference. Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965). Nevertheless, we consider the Service's interpretation of the type and degree of explanations necessary to support the Board's exercise of its modification power overly simplistic and inconsistent with the rate-making structure of the Act. It is abundantly clear from the legislative history of the Act that ratemaking ... authority (was to be) vested primarily in (the) Postal Rate Commission. S.Rep.No. 912, 91st Cong., 2d Sess. 4 (1970). See United Parcel Service, Inc. v. USPS, 604 F.2d 1370, 1373-74 (3d Cir. 1979), cert. denied, 446 U.S. 957, 100 S.Ct. 2929, 64 L.Ed.2d 815 (1980). Congress intended, moreover, to create in the PRC a body capable of dealing with the highly intricate problems of ratemaking, H.R.Rep.No. 91-1104, 91st Cong., 2d Sess. 5 (1970), reprinted in (1970) U.S.Code Cong. & Ad.News 3649 at 3654, an area that demanded the fulltime skills of professional economists, trained rate analysts, and the like, id.; see 116 Cong.Rec. 27604, 27605 (Aug. 6, 1970) (comments of Rep. Udall). 51 The PRC's predominant role within the rate-making scheme is borne out in the detailed procedural provisions of the Act. The PRC is charged with soliciting testimony and conducting hearings to ensure that the recommended rates are responsive not only to the Postal Service's views, but also to those of users of the mails, 39 U.S.C. § 3624(a). Once adequate testimony and evidence has been presented, the PRC must formulate rates taking into consideration nine specific factors set forth in 39 U.S.C. § 3622(b). Finally, the Board's power to modify a PRC recommendation is limited to the specific circumstance in which the rates recommended by the (PRC) are not adequate to provide sufficient total revenues so that total estimated income and appropriations will equal as nearly as practicable estimated total costs. 39 U.S.C. § 3625(d)(2). 16 52 In this context, we do not believe that the limited and general statement which accompanied the Board's modifications was sufficient. The PRC's recommended rates, reflecting weeks of hearings, were carefully designed to respond to the factors set forth in section 3622(b) 17 and presumably represented a specific interrelationship among the various classes and subclasses of mail. While the Board found that the PRC's end product would generate insufficient revenues, the Board has failed to explain the basis for the particular class by class modifications and the rationale for the new interrelationship created. 18 Given the PRC's expertise in the area of rate-making and the limited basis for modification by the Board, we think such explanations were required. 19 53 A second reason, and one more significant to our review, mandates that the Board provide class by class explanations for its modifications. Under 39 U.S.C. § 3628, we must assess the lawfulness of the modified rates in accordance with the standards set forth in 5 U.S.C. § 706, see note 14, supra. Among the determinations required under section 706 are whether the Board's modifications are supported by substantial evidence in the record and whether they are arbitrary or capricious or otherwise unlawful. We fail to see how this task may be achieved in the absence of an explanation from the Board for each modification. 54 The Postal Service offers several additional arguments why the class by class justifications we request are unnecessary. First, the Service points to National Easter Seal Society for Crippled Children and Adults v. United States Postal Service, 656 F.2d 754 (D.C.Cir.1981) (NESS ), in which the District of Columbia Circuit stated in the context of the Board's modification of a recommended mail classification: 55 Petitioners object that the (Board's) opinion contains no charts or data and does not specify exactly what volumes, costs, and revenues the (Board) foresee(s) resulting from the PRC proposal and from the settlement agreement implemented by the (Board). We do not think that Congress intended to require that level of evidence to justify modification of a PRC recommendation. As Congressman Udall explained: 56 This finding does not require the (Board) to prove that the recommendation produces insufficient revenue-something which would be impossible for them to do before the rates have actually been placed into effect for a period of time. Instead it requires a reasonable finding, supportable and an appropriate exercise of discretion by the (Board), that the recommendation is likely not to produce the required revenue. 57 116 Cong.Rec. 27,606 (1970) (remarks of Rep. Udall, member of the House Post Office and Civil Service Committee). 58 Id. at 765. The Board's conclusion that the PRC's recommended rates will not produce adequate revenues, however, is not at issue here. Rather, the issue is whether, given the Board's reasonable estimate of the Postal Service's revenue needs, the modifications intended to produce those revenues are lawful and supported in the record. 59 The Service also points to the principle that courts must uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 286, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974); Hooker Chemicals & Plastics Corp. v. Train, 537 F.2d 620, 632 (2d Cir. 1976). The Service urges us to review the Board's three decisions to discern a path which justifies the modifications. However, as the Service itself recognizes, Brief for Respondent United States Postal Service at 31 n.2, the Board's decisions are addressed solely to the inadequacy of the PRC recommended rates and not to the reasons for choosing particular modifications. 20 While the Service's brief presents detailed explanations for each of the challenged rates, it is clear that (t)he courts may not accept appellate counsel's post hoc rationalizations for agency action. Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 245, 9 L.Ed.2d 207 (1962). 60 The Service also speculates that the Board must have adopted the reasoning and evidence advanced by the Service to support the rates it initially proposed in commencing the rate-making proceeding, which are in many respects identical to the modified rates. However, as the Supreme Court stated in SEC v. Chenery Corp., 318 U.S. at 94, 63 S.Ct. at 462. 61 The (Securities and Exchange) Commission's action cannot be upheld merely because findings might have been made and considerations disclosed which would justify its order as an appropriate safeguard for the interests protected by the (Holding Company) Act. There must be such a responsible finding. 62 An agency action simply cannot be upheld where a court is left to guess as to the agency's findings or reasons. Greater Boston Television Corp. v. FCC, 444 F.2d 841, 851 (D.C.Cir.1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971). We also observe that the Postal Service's proposals to the PRC came prior to the weeks of hearings conducted pursuant to 39 U.S.C. § 3624. At a minimum, we think it necessary for the Board to evince that it has considered the record as a whole 21 as well as the factors set forth in 39 U.S.C. § 3622(b) in selecting its individual modifications. 63 While the Board's modifications may well be lawful and supported in the record, we simply cannot make those determinations at this juncture. 22 Accordingly, we remand this proceeding to the Board for further justifications subject to our discussion in Section V of this opinion. Additionally, we retain jurisdiction of this matter. The rates as modified will remain in effect in the interim. 23