United States Court of Appeals, District of Columbia Circuit
Douglas F. Carlson, Petitioner
Postal Regulatory Commission, Respondent Pitney Bowes Inc. and United States Postal Service, Intervenors
May 10, 2019
Petition for Review of an Order of the Postal Regulatory
Douglas F. Carlson, Pro se, argued the cause and filed the
briefs for petitioner.
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.
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,  as inconsistent
with the Administrative Procedure Act (APA).
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
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)
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. 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).
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)).
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.
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. §
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. 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. As a percentage, it was the largest
increase since 1995.
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.
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).
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.
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."
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.
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
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.
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).
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).
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).
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.
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.
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. §
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).
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 ...