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Media Alerts - Alliance of Non-Profit Mailers v. Postal Regulatory Commission
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June 9, 2015
  Alliance of Non-Profit Mailers v. Postal Regulatory Commission
Headline: D.C Circuit Rules Emergency Postage Rate Increases Cannot Continue Indefinitely

Area of Law: Administrative Law

Issue(s) Presented: Whether the 2008 economic crisis justifies an ongoing increase in postage rates.

Brief Summary: The Postal Accountability and Enhancement Act of 2006 created the Postal Regulatory Commission to oversee and administer a pricing regime for the U.S. Postal Service. The Act also imposes caps on prices that the Postal Service may charge, in order to promote stability in postage rates and provide incentives to increase efficiency and reduce costs. Specifically, rates for mailing services over which the Postal Service has either a statutory or practical monopoly, including first class mail, may not increase faster than the rate of inflation, unless the Commission determines that a greater increase is warranted "due to extraordinary or exceptional circumstances."

In 2010 the Postal Service requested an exigent rate increase of more than five percent to respond to the "dramatic, rapid, and unprecedented decline in mail volume" caused by the 2008 recession. The Commission, while agreeing that the recession and the related decline in mail volume constituted an extraordinary circumstance, denied the requested increase on the grounds that the Postal Service had not demonstrated that it needed the increase "due to" the recession. The Postal Service petitioned for review, and the U.S. Court of Appeals for the District of Columbia Circuit affirmed the Commission's position that the Act requires a causal connection between the exigent circumstances and the requested increase. However, it concluded that "due to" was ambiguous and remanded to the Commission to clarify "how closely the amount of the adjustments must match the amount of the revenue lost."

On remand, the Commission issued an order interpreting "due to" to limit rate increases to compensate only for the net adverse financial impact of the exigent circumstance and requiring the Postal Service to quantify that impact to justify a rate increase. The order specifically excludes any negative financial impact not due to exigent circumstances, such as losses from on-going decreases in mail volume due to other factors, from the calculation.

In 2012, the Postal Service renewed is rate increase request, seeking an open-ended 4.3 percent increase. In order to demonstrate that the increase was "due to" the 2008 recession, the Postal Service provided an econometric analysis prepared by an expert. The Commission granted that request in part, permitting the increase but limiting its duration. The Commission concluded that the increase was sustainable only until volume reached a new, post-recession normal, as opposed to pre-recession levels. The Commission concluded that the Postal Service had achieved a "new normal" volume between 2010 and 2012, at which point the Postal Service could reliably predict mail volume and adjust its operations accordingly. Reaching this "new normal" broke the causal connection between the exigent circumstance - the recession - and its economic impact. Therefore, the Postal Service was entitled to increase rates only until it had recovered revenue it had lost before the "new normal" was reached, not to offset ongoing losses caused by decreased mail volumes. The Commission also determined that decreases in mail volume could only be counted once, in the first year in which they occurred, because the Postal Service would be aware of those decreases in subsequent years and should adjust its expectations to those lower volumes. The Postal Service and array of groups representing major mailers sought review of the Commission's order.

The D.C. Circuit held that the "new normal" test survived arbitrary and capricious review. The court approved the "new normal" test, which incorporated four factors assessing economic conditions and the Postal Service's ability to predict and respond to their effect on mail volumes, as a valid exercise of the Commission's discretion to determine whether a rate increase is warranted "due to" an exigent circumstance. The court found that the Commission had permissibly reasoned that circumstances of decreased volume would not remain extraordinary or exceptional indefinitely. However, the court vacated the "count once" rule, determining that the rationales supporting it, that counting in more than one year would make it impossible to accurately calculate the total loss of volume due to the exigent circumstances and that after the first year of losses, the Postal Service would be able to adjust expectations for reduced volume, were in tension with the rationale of the "new normal" rule, which explicitly recognized that it took several years to adjust to economic changes and make accurate predictions about the future.

For the full text of the opinion, see http://www.cadc.uscourts.gov/i...e/14-1009-1555927.pdf

Panel: Brown, Millett, Wilkins

Argument Date: September 9, 2014

Date of Issued Opinion: June 5, 2015

Docket Number: 14-1009

Decided: Reversed and remanded in part

Case Alert Author: Ripple Weistling

Counsel (if known): Paul D. Clement, David M. Levy for Petitioners; Daniel Tenny for Respondent

Author of Opinion: Millett

Case Alert Circuit Supervisor: Elizabeth Earle Beske, Ripple Weistling

    Posted By: Ripple Weistling @ 06/09/2015 12:53 PM     DC Circuit  

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