Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Carlson v. Postal Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

September 13, 2019

Douglas F. Carlson, Petitioner
v.
Postal Regulatory Commission, Respondent Pitney Bowes Inc. and United States Postal Service, Intervenors

          Argued May 10, 2019

          On Petition for Review of an Order of the Postal Regulatory Commission

          Douglas F. Carlson, Pro se, argued the cause and filed the briefs for petitioner.

          Joshua M. Salzman, Attorney, U.S. Department of Justice, argued the cause for respondent. With him on the brief were Michael S. Raab, Attorney, David A. Trissell, General Counsel, Postal Regulatory Commission, Anne J. Siarnacki, Deputy General Counsel, and Laura E. Zuber, Attorney.

          Before: Millett, Katsas, and Rao, Circuit Judges.

          RAO, CIRCUIT JUDGE.

         Wedding invitations, birthday cards from grandma, and electricity bills all travel through the United States Postal Service with a simple first-class stamp. Perhaps unnoticed by many who use the "Forever Stamp," in January 2019, the Postal Service raised the price of this stamp by five cents, a ten-percent increase. Douglas Carlson's pro se petition challenges this stamp price hike, which is part of Postal Regulatory Commission Order 4875, [1] as inconsistent with the Administrative Procedure Act (APA).

         We agree with Carlson that the stamp price hike did not meet the APA's requirements for reasoned decisionmaking. The Commission failed to provide an adequate explanation of the increase and, relatedly, failed to respond to public comments challenging the increase under relevant statutory factors and objectives included in the Commission's organic statute, the Postal Accountability and Enhancement Act (PAEA). Accordingly, we grant the petition for review and vacate the part of Order 4875 addressing rate adjustments for the category of first-class mail. Because the category of first-class rates is severable, we leave the remainder of the Order intact.

         I.

         We begin with the statutory requirements governing the Commission. In enacting the PAEA, Congress moved from an adjudicatory model of postal rate review to a regulatory one. "[A]dministrative procedures are divided into two categories," adjudication and rulemaking, with the latter defined as "prospective decisions of general applicability focusing on policy." 2 Charles H. Koch, Jr. & Richard Murphy, Administrative Law & Practice § 5:1 (3d ed. 2019). Regulation "is primarily concerned with policy considerations" while "adjudication is concerned with the determination of past and present rights and liabilities." Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 219 (1988) (Scalia, J., concurring) (quoting Attorney General's Manual on the Administrative Procedure Act 14 (1947) ("AG Manual")).

         Before the PAEA, adjudication of postage rates was a lengthy process that delayed rate changes by as much as eighteen months. S. Rep. No. 108-318, at 3-4 (2004). The PAEA reconstituted the Postal Rate Commission as the Postal Regulatory Commission, an agency headed by five commissioners appointed by the President and removable only for stated causes.[2] See 39 U.S.C. §§ 501-02. The PAEA strengthened the role of the Commission by repealing the Postal Service's authority to modify rates without the Commission's approval. See PAEA, Pub. L. No. 109-435, § 201(b), 120 Stat. 3198, 3205 (2006) (repealing 39 U.S.C. § 3625). The PAEA also abolished the requirement for the Commission to hold a hearing on the record prior to adopting any rate change. Id. (repealing 39 U.S.C. § 3624). Instead, Congress directed the Commission to establish "a modern system for regulating rates and classes for market-dominant products." 39 U.S.C. § 3622(a).

         Rather than adjudicate rates through fact-intensive hearings, the PAEA requires the Commission to establish a regulatory system for rate approval and then evaluate and approve specific postal rates through rulemaking, subject to review under the standards of the APA. Id. §§ 3622, 3663. Because "[t]he APA does not contemplate the use of adjudication to develop rules," Ala. Power Co. v. FERC, 160 F.3d 7, 11 n.5 (D.C. Cir. 1998), Congress's decision to replace the Commission's adjudicatory model with a regulatory model guided by APA standards is significant. See Bowen, 488 U.S. at 218 ("The entire [APA] is based upon a dichotomy between rule making and adjudication." (quoting AG Manual)).

         The PAEA dictates that the Commission's regulatory system "shall be designed" to achieve nine statutory objectives and "shall take into account" fourteen statutory factors. 39 U.S.C. § 3622(b)-(c) (reproduced in Appendix, infra). The Commission established the required "modern system for regulating rates" in November 2007. See generally Postal Regulatory Comm'n, Order No. 43, 72 Fed. Reg. 63, 662 (Nov. 9, 2007) (the "system regulation"). The part of the system regulation relevant to this case addresses rate adjustments of general applicability. See 39 C.F.R. pt. 3010, subpart B. Under the system regulation, the Postal Service initiates a proposed rate change by providing notice to the public and to the Commission. Id. § 3010.10(a). Such notice must be provided at least forty-five days prior to a rate change, and the Postal Service is encouraged to provide as much advance notice as practicable. Id. § 3010.10. The Postal Service's notice must include, among other things, "[a] discussion that demonstrates how the planned rate adjustments are designed to help achieve the objectives listed in 39 U.S.C. § 3622(b) and properly take into account the factors listed in 39 U.S.C. § 3622(c)." Id. § 3010.12(b). The notice must also include any "other information" that would assist the Commission in issuing "a timely determination of whether the planned rate adjustments are consistent with applicable statutory policies." Id. § 3010.12(b)(12). The Postal Service's notice serves as the proposed rule before the Commission issues a final regulation, i.e., the rate approval order.

         After receiving notice from the Postal Service, the Commission establishes a docket allowing twenty days for public comment on the proposed change. Id. § 3010.11(a). Within fourteen days of the end of the comment period, the Commission must "issue an order announcing its findings." Id. § 3010.11(d). The system regulation does not specify how the Commission must consider the PAEA's objectives and factors; however, rate adjustments must be "consistent with applicable law." Id. § 3010.11(e), (i). If the Commission finds that a proposed rate adjustment is inconsistent with applicable law, the Postal Service must amend its notice, include "sufficient explanatory information to show that all deficiencies identified by the Commission have been corrected," and allow an additional seven-day period of public comment. Id. § 3010.11(f), (g).

         The Postal Service proposed the stamp price hike in October 2018 as part of a series of adjustments to the category of first-class postage rates.[3] See U.S. Postal Serv., Notice of Market-Dominant Price Change, Dkt. No. R2019-1 (Oct. 10, 2018), J.A. 1. Under the proposal, the rate for a one-ounce, stamped letter would increase from fifty cents to fifty-five cents. This ten percent increase required the Service to adjust other classes of first-class postage rates in order to stay within the overall statutory price increase cap of about 2.5 percent. See 39 U.S.C. § 3622(d)(1)(A). The proposal thus decreased the price of some first-class mail products and increased others by a smaller percentage. The stamp price hike, however, was remarkable-the largest absolute increase in the price of stamps since 1863.[4] As a percentage, it was the largest increase since 1995.[5]

         The Postal Service justified the magnitude of the stamp price hike by asserting an interest in keeping the price of stamps "at round numbers divisible by five." J.A. 8. According to the Postal Service, this approach helps to achieve "simplicity of structure"-one of the fourteen factors under the PAEA, see 39 U.S.C. § 3622(c)(6)-by "facilitat[ing] convenience for retail customers" through "a straightforward, understandable pricing structure." J.A. 8-9. The Postal Service sought to minimize concern about the size of the stamp price hike by asserting that corresponding reductions in postage rates for first-class mail products with nonstandard weight or shape would mitigate the impact of the increased price of first-class letter stamps. Moreover, the Service stated its intent to keep stamp prices divisible by five in future years, suggesting that a large increase in the price of stamps in 2019 might postpone the need for another increase, "subject to the business conditions that obtain in coming years." J.A. 9.

         The Commission opened a docket to receive public comment for the required twenty days. See Postal Regulatory Comm'n, Order No. 4851, 83 Fed. Reg. 52, 242 (Oct. 16, 2018). During this time, the Commission received thirty-four comments, including a comment from Carlson, a postal customer and watchdog. See Carlson v. U.S. Postal Serv., 504 F.3d 1123 (9th Cir. 2007).

         Carlson raised a series of arguments against the stamp price hike, including that the Service failed to account for several statutory objectives and factors. First, Carlson argued that keeping the price of a stamp divisible by five did not promote the value of "simplicity of structure" under 39 U.S.C. § 3622(c)(6). J.A. 95-100. Second, he disputed the Postal Service's evaluation of the stamp price hike's likely impact and argued that the detrimental "effect of rate increases upon the general public" weighed against the Postal Service's proposal under 39 U.S.C. § 3622(c)(3). J.A. 103-05. Third, he argued that raising the price of stamps by five cents was inconsistent with the statutory objective of "establish[ing] and maintain[ing] a just and reasonable schedule for rates" under 39 U.S.C. § 3622(b)(8). J.A. 104. The Greeting Card Association similarly commented on flaws in the Postal Service's simplicity-of-structure rationale and noted the need to consider other statutory factors. J.A. 111-16. The Association for Postal Commerce argued that increasing the price of stamps in five-cent increments could reduce "predictability and stability in rates," contrary to the statutory objective under 39 U.S.C. § 3622(b)(2). J.A. 89.

         After the close of the public comment period, the Commission issued Order 4875. The Order included a finding that the overall first-class mail rate adjustments, including the stamp price hike, were "consistent with 39 U.S.C. §§ 3622(d) and 3622(e), and may take effect as planned." J.A. 250. The Order referenced, but did not resolve, Carlson's disagreement with the Postal Service's simplicity-of-structure rationale. Instead, the Order encouraged the Postal Service "to collaborate with mailers . . . about pricing" in order to reassess the utility of keeping stamp prices divisible by five in the future. J.A. 209. Aside from "simplicity of structure," the Commission did not cite any of the PAEA objectives and factors listed in subsections 3622(b) and (c), but instead evaluated the increase only for compliance with quantitative rate caps established by other provisions of the PAEA. The Commission determined that the Postal Service's proposal complied with the rate cap and approved the rate increase, stating that "subject to certain limitations, most prominently the price cap, the PAEA gives the Postal Service pricing flexibility within First-Class Mail." J.A. 208-09.

         Carlson timely petitioned this Court for review of the first-class rate adjustments in Order 4875, arguing that the stamp price hike violated the APA because the Commission failed to consider relevant statutory objectives and factors and failed to provide a reasoned explanation of the exercise of its authority under the system regulation. The PAEA grants this Court jurisdiction over orders or decisions of the Commission and incorporates the APA as the framework for review. 39 U.S.C. § 3663; see also GameFly, Inc. v. Postal Regulatory Comm'n, 704 F.3d 145, 148 (D.C. Cir. 2013). Because Carlson is proceeding pro se, we construe his filings liberally. See, e.g., United States v. Gooch, 842 F.3d 1274, 1278 (D.C. Cir. 2016).

         II.

         Carlson claims that the stamp price hike is arbitrary and capricious under the APA because the Commission failed to consider the objectives and factors listed in the PAEA. The Commission agrees that these statutory factors and objectives are relevant to rate review, but maintains that it has discretion to defer consideration of those provisions until after approving a rate change, especially given its interpretation that the PAEA requires the Commission to evaluate rate-change proposals quickly.

         We conclude that the Commission's consideration of this increase fell short of the APA's requirements for reasoned decisionmaking because the Commission failed to provide an adequate explanation for the stamp price hike, and, relatedly, failed to respond to public comments challenging the stamp price hike under the PAEA's statutory factors and objectives. Moreover, the PAEA does not require the Commission to rush to decision. Based on the text and structure of the PAEA, we conclude that the PAEA requires consideration of all relevant statutory objectives and factors as part of the regulatory process and does not authorize the Commission to defer evaluation of those objectives and factors until after it approves a rate change. Finally, the system regulation requires the Commission to determine that proposed rate adjustments are "consistent with applicable law," 39 C.F.R. § 3010.11(e), before issuing a rate approval order. At a minimum, this also required the Commission to comply with the APA and the PAEA by weighing the statutory factors and objectives before adopting the stamp price hike.

         A.

         The stamp price hike is part of Order 4875, which is a "rule" within the meaning of the APA because it is an "approval . . . for the future of rates." See 5 U.S.C. § 551(4); see also Order No. 43, 72 Fed. Reg. at 63, 666 ("The notice and comment guarantees of section 553 of the APA apply to . . . rate adjustments."). When reviewing a rule under the APA, we will set aside an order that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" or that is "in excess of statutory jurisdiction, authority, or limitations, or short of statutory right." 5 U.S.C. § 706(2)(A), (C). "The APA's arbitrary-and-capricious standard requires that agency rules be reasonable and reasonably explained." Nat'l Tel. Coop. Ass'n v. FCC, 563 F.3d 536, 540 (D.C. Cir. 2009). An agency violates this standard if it "entirely fail[s] to consider an important aspect of the problem." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). An agency also violates this standard if it fails to respond to "significant points" and consider "all relevant factors" raised by the public comments. Home Box Office, Inc. v. FCC, 567 F.2d 9, 35-36 (D.C. Cir. 1977).

         Accordingly, an agency must respond to comments "that can be thought to challenge a fundamental premise" underlying the proposed agency decision. MCI WorldCom, Inc. v. FCC, 209 F.3d 760, 765 (D.C. Cir. 2000). An agency need not "discuss every item of fact or opinion included in the submissions made to it." Del. Dep't of Nat. Res. & Envtl. Control v. EPA, 785 F.3d 1, 17 (D.C. Cir. 2015) (citation omitted). An agency's response to public comments, however, must be sufficient to enable the courts "to see what major issues of policy were ventilated . . . and why the agency reacted to them as it did." Id. (citation omitted). Even when an agency "has significant discretion in deciding how much weight to accord each statutory factor," that does not mean it is "free to ignore any individual factor entirely." Tex. Oil & Gas Ass'n v. EPA, 161 F.3d 923, 934 (5th Cir. 1998) (citing Weyerhaeuser Co. v. Costle, 590 F.2d 1011, 1045 (D.C. Cir. 1978)) (evaluating agency's consideration of statutory factors under arbitrary-and-capricious review).

         The PAEA sets forth a framework of statutory objectives and factors for consideration in rate setting. While the statute does not specify how these objectives and factors must be accounted for in any particular rate order, the Commission must apply the relevant objectives and factors to individual rate adjustments. Our cases confirm this and provide some limited guidance. We have held that "[i]n reviewing [proposed] rates for market-dominant products, the Commission must consider the statutory factors set out in 39 U.S.C. § 3622(c)." Newspaper Ass'n of Am. v. Postal Regulatory Comm'n, 734 F.3d 1208, 1210 (D.C. Cir. 2013). The factors listed in the PAEA "establish[] rate requirements for all market-dominant products." Id.; see also U.S. Postal Serv. v. Postal Regulatory Comm'n, 676 F.3d 1105, 1107 (D.C. Cir. 2012) (for purposes of the Commission's annual compliance determination, "the PAEA provides the Commission with fourteen factors to consider when reviewing Postal Service rates" in effect during the preceding year).

         Congress left the Commission leeway to establish, through regulation, a process for considering the PAEA's objectives and factors. 39 U.S.C. § 3622(a)-(c). We recognize that not every statutory factor and objective will be relevant to an individual rate assessment and that the weight accorded particular factors may therefore vary in each case. But this does not mean the Commission may simply disregard the objectives and factors when approving rate adjustments. Pursuant to the APA, the Commission's orders must be "reasonable and reasonably explained." Nat'l Tel. Coop. Ass'n, 563 F.3d at 540.

         Indeed, the Commission has long recognized that the PAEA's objectives and factors are relevant to the assessment of postage rates. See Order No. 43, 72 Fed. Reg. at 63, 665 (explaining that the system regulation requires the Postal Service to address statutory objectives and factors as part of "a broad range of relevant issues in any notice of rate adjustment"); Postal Regulatory Comm'n, Order No. 203, 74 Fed. Reg. 20, 834, 20, 841 (May 5, 2009) (stating that Order 43 implemented "a system of ratemaking to foster achievement of the requirements, objectives, and factors spelled out in" 39 U.S.C. § 3622(b)-(c)). Similarly, in this case, the Commission acknowledges that lack of compliance with the objectives and factors can justify disapproval of a rate-change proposal and that the objectives and factors are relevant in the annual compliance review and adjudication of complaints.

         Moreover, consideration of the statutory factors is implicitly required by the Commission's system regulation. Under the system regulation, the Postal Service's initial notice to the Commission of a proposed rate change must include "[a] discussion that demonstrates how the planned rate adjustments are designed to help achieve the objectives listed in 39 U.S.C. § 3622(b) and properly take into account the factors listed in 39 U.S.C. § 3622(c)." 39 C.F.R. § 3010.12(b)(7). More generally, the Postal Service must provide all information the Service believes "will assist the Commission to issue a timely determination of whether the planned rate adjustments are consistent with applicable statutory policies." Id. § 3010.12(b)(12).

         The Commission must then determine whether the Postal Service's planned rate adjustments are "consistent with applicable law," id. § 3010.11(e), before the adjustments may take effect. If the Commission finds the rate adjustments are "inconsistent with applicable law," the Postal Service must submit an amended notice explaining how it has modified the proposal to comply with relevant law. Id. § 3010.11(f). If an amended notice is still "found to be inconsistent with applicable law, the Commission shall explain the basis of its determination and suggest an appropriate remedy." Id. § 3010.11(j).

         The system regulation therefore makes clear that the Commission must exercise its rulemaking authority consistent with applicable law, which at a minimum includes the requirements of the PAEA and the APA. After receiving the Postal Service's notice, the Commission must independently determine whether a proposed rate adjustment is "consistent with applicable law." A proper application of the system regulation thus ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.