United States Postal Service v. Postal Regulatory Commission and United States of America

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 8, 2010 Decided March 30, 2010
No. 09-1032
UNITED STATES POSTAL SERVICE ,
PETITIONER
v.
POSTAL REGULATORY COMMISSION AND UNITED STATES OF
AMERICA ,
RESPONDENTS
ALLIANCE OF NONPROFIT MAILERS , ET AL .,
I NTERVENORS
On Petition for Review of an Order
of the Postal Regulatory Commission
Miriam R. Nemetz argued the cause for petitioner. With her
on the briefs were Kenneth S. Geller and Melanie W. Rughani.
Eric Fleisig-Greene, Attorney, U.S. Department of Justice,
argued the cause for respondents. With him on the brief were
Michael S. Raab, Attorney, Stephen L. Sharfman, General
Counsel, Postal Regulatory Commission, R. Brian Corcoran,
Assistant General Counsel, and Kenneth E. Richardson,
Attorney.

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1 Pub. L. No. 91-375, § 404, 84 Stat. 719, 723-24 (1970).
Before: TATEL , Circuit Judge, and SILBERMAN and
WILLIAMS , Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge
SILBERMAN .
SILBERMAN , Senior Circuit Judge: The United States
Postal Service seeks review of a Postal Regulatory Commission
order concluding that certain activities carried on by the Service
– the provision of philatelic services (relating to stamp
collecting) and the leasing and licensing of Postal Service
property – are, under the Postal Accountability and
Enhancement Act, subject to the Commission’s review for
possible termination. We deny the Service’s petition.
I
In 1970, what was formerly the cabinet-level Post Office
Department was transformed by statute into the modern
government-owned corporation known as the United States
Postal Service. As part of this transformation, the Service was
given a number of new powers: inter alia, the authority to
acquire, sell, build, and lease property; to provide philatelic
services; and to provide “special nonpostal or similar services.”1
Accordingly, the Service began to engage in a number of
ventures unrelated or only tangentially related to the delivery of
mail. The Service gradually expanded its lines of business, and
by the late 1990s, its nonpostal activities were substantial. They
included computer-based mail, international fax services,
photocopying, philatelic services, antenna leases, and selling
phonecards, T-shirts, mugs, and other souvenirs.

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2 See, e.g., Postal Service Core Business Act of 1996, H.R. 3690,
104th Cong., at 1 (1996).
3 Embracing the Future: Making the Tough Choices to Preserve
Universal Mail Service (2003).
4 The statutory subsection granting this authority – 39 U.S.C. §
404(e) – states in full:
(1) In this subsection, the term “nonpostal service” means any
Congress considered legislation that would eliminate or
limit the Service’s authority to provide such nonpostal services
as early as 1996,2 but these efforts were redoubled following the
2003 publication of a report by a presidential blue-ribbon
commission tasked with making recommendations to improve
the Postal Service. The commission found that the Service had
entered “dubious new business ventures that most Americans
would consider far afield of its basic function – delivering the
mail to everyone.” These efforts largely had not been profitable.
But by forcing private companies to compete against the
Service, these ventures had resulted in market distortion, and the
Service had been distracted from improving traditional postal
services. So the commission recommended that Congress
restrict the Service’s authority to include only services directly
related to the delivery of mail. 3
Congress responded in 2006 with the Postal Accountability
and Enhancement Act. It repealed the Service’s authority to
offer “special nonpostal or similar services,” but it did not
explicitly mention certain nonpostal activities separately
authorized under various statutory provisions, such as the ones
particularly at issue in this case – philatelic and property leasing
activities. It did, however, provide that the Postal Regulatory
Commission was to conduct a review of “each nonpostal service
offered by the Postal Service”4 (emphasis added) to determine

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service that is not a postal service defined under section 102(5).
(2) Nothing in this section shall be considered to permit or
require that the Postal Service provide any nonpostal service
except that the Postal Service may provide nonpostal services
which were offered as of January 1, 2006, as provided under this
subsection.
(3) Not later than 2 years after the date of enactment of the Postal
Accountability and Enhancement Act, the Postal Regulatory
Commission shall review each nonpostal service offered by the
Postal Service on the date of enactment of that act and determine
whether that nonpostal service shall continue, taking into
account–
(A) the public need for the service; and
(B) the ability of the private sector to meet the public need
for the service.
(4) Any nonpostal service not determined to be continued by the
Postal Regulatory Commission under paragraph (3) shall
terminate.
(5) If the Postal Regulatory Commission authorizes the Postal
Service to continue a nonpostal service under this subsection, the
Postal Regulatory Commission shall designate whether the
service shall be regulated under this title as a market dominant
product, a competitive product, or an experimental product.
5 The Commission is empowered to ensure that the Service is not
subsidizing its competitive products with revenues from market
dominant products or engaging in below-cost pricing of competitive
products. The Commission regulates rates for market dominant
whether it should be terminated or continued subject to
Commission regulation as either a market dominant, competitive
or experimental product.5

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products.
6 39 U.S.C. § 102(5).
Several other statutory provisions should be mentioned. A
grandfather clause, § 404(e)(2), ensured that certain existing
nonpostal services could continue pending Commission review,
and § 404(e)(1) defines a nonpostal service as “any service that
is not a postal service” (emphasis added). Elsewhere in the
postal statutes, postal services are defined to cover “the delivery
of letters, printed matter or mailable packages, including
acceptance, collection, sorting, transportation, or other functions
ancillary thereto.” 6
In December of 2007, the Commission started its review of
nonpostal services. The Commission asked the Service to
provide details of all of its activities that did not meet the
statutory definition of a postal service. The Service refused to
do so because, in its view, the Act only gave the Commission
authority to review those nonpostal services previously
conducted under the repealed section of § 404 (which authorized
“special nonpostal or similar services”) and did not give
authority to review activities authorized by specific grants of
authority. Thus, according to the Service, the Commission
could not review the Service’s provision of philatelic services or
its leasing and licensing of property because the Act left in place
specific statutory authorization for those activities in § 404(a)(5)
and § 401(5) respectively. Alternatively, the Service argued that
its leasing and licensing of property were not subject to the
Commission’s review because those were not “services” at all.
The Commission rejected both arguments and ordered the
Service to provide a list of all nonpostal services; the Service
complied but continued to assert that the Commission was
acting ultra vires.

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After nearly a year of adjudicatory proceedings, the
Commission issued the results of the review required by
§ 404(e)(3). Its order, once again, rejected the argument that it
was not authorized to review nonpostal services for which an
independent grant of statutory authority existed. The
Commission explained that under the statute, the Service can
only provide two (mutually exclusive) types of services – postal
services and nonpostal services – and that § 404(e)(3) plainly
requires the Commission to review all nonpostal services. The
Commission added that the Service’s argument that the statute
creates a third category of services – not postal and yet still not
subject to the Commission’s power – ignores the purpose
underlying the Act, which was to rein in all of the Service’s
nonpostal commercial ventures.
Also rejected was the argument that the leasing and
licensing of property did not constitute a “service” under the act.
Since the word “service” was not defined by the statute, the
Commission sought suggestions by parties to the proceeding,
before defining the term as “any ongoing commercial activity
offered to the public for the purpose of financial gain.” The
Commission said that definition encompassed the types of
activities that, in its view, were the cause for congressional
concerns about the Service straying from its core
responsibilities. The Commission concluded that leasing of
property and licensing of intellectual property constituted
services under this definition. However, the Commission did
agree that several revenue-generating activities – including the
sale of property as well as services provided to government
agencies – did not qualify as “services” and thus were not
subject to the Commission’s review.
After its review, the Commission determined that both of
the services relevant to this appeal – philatelic services and the
licensing and leasing of property – should be allowed to

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7 We have the impression that the Service’s real concern may
well be the initiation of possible future activities. That issue is, of
course, not before us.
continue, subject to the Commission’s regulation over philatelic
services as a market dominant product, and licensing and leasing
of property as a competitive product.
II
The Service reiterates before us the same arguments it
presented to the Commission – 1) that the Commission’s
authority under § 404(e)(3) does not extend to nonpostal
services authorized under “independent” explicit grants of
authority and, alternatively, 2) that leasing and licensing of
property does not even constitute a “service.” Although the
Commission authorized the continuation of the activities in
question – philatelic services and leasing – the Service objects
to the regulatory burden it must endure. 7
Taking up the first argument, we note that the Service has
a difficult linguistic task. The key statutory provision on which
the Commission relies, § 404(e)(3), does say that the
Commission shall review each nonpostal service offered by the
Postal Service without any stated limitation. Assuming that
property leasing and philatelic services are nonpostal services,
the plain language of that subsection would appear to cover both
activities (the Service does not challenge the Commission’s
determination that philatelic services are nonpostal services).
In a heroic effort to create at least an ambiguity (the Service
actually goes further to claim the statute plainly supports its
reading), the Service points first to subsection (e)(2), the
grandfather clause, which states that “[n]othing in this section
shall be considered to permit or require that the Postal Service

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8 Some language in the order suggests the Commission
interpreted § 404(e)(2) to prohibit the Service from offering any
nonpostal service – even those specifically authorized – unless it was
grandfathered and received Commission approval. The Commission
now concedes that the phrase “[n]othing in this section” only restricts
(e)(2)’s scope (though presumably the Commission would maintain it
still applies to philatelic services as they are authorized in § 404(a)(5)
– the same statutory section). The Service says this constitutes a post
hoc justification for the Commission’s decision and we must reverse
under S.E.C. v. Chenery Corp., 318 U.S. 80, 87 (1943). We do not
agree. The Commission’s order’s reference to § (e)(2) appears only
a makeweight; the order’s primary reliance is on its interpretation of
§ (e)(3), which independently supports the Commission’s position.
provide any nonpostal service, except that the Postal Service
may provide nonpostal services which were offered as of
January 1, 2006, as provided under this subsection” (emphasis
added). The Service’s argument, as we understand it, is that by
using the phrase “in this section” in § 404 (e)(2), the Congress
meant to cabin § 404(e)(3), another subsection, in the same
fashion, i.e., that § 404(e)(3)’s review authority, despite the
phrase, “each nonpostal service,” was limited only to nonpostal
services that were grandfathered by § 404(e)(2). Of course, the
obvious response is that § 404(e)(3) does not contain the
limitation in § 404(e)(2), and its absence creates a negative
implication – that no limitation was intended. Indeed, the
“nothing in this section” clause’s purpose, apparently was only
to rebut the possible implication that this section could, in any
respect, constitute a new grant of authority to offer nonpostal
services. Thus, we find it difficult to conclude that the limiting
phrase “in this section” in § 404(e)(2) casts any meaning on
§ 404(e)(3). 8
The other statutory interpretation arguments the Service
presents are equally labored. It is claimed that the
Commission’s position, in effect, is that § 404(e)(3) repeals, by

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implication, the separate grants of authority to engage in
philatelic and leasing activities and repeals by implication are
not favored. But that is not the Commission’s position; it is,
rather, that § 404(e)(3) conditions the authority the Service
maintains to engage in those activities. Further, the Service
asserts – based in part on legislative history which revealed no
particular concern about philatelic or leasing services – that it
would not serve the purpose of the statute to include these
activities. But that Congress did not specifically address these
two activities in the legislative history is of no matter; legislative
language often sweeps broader than the exact circumstances that
prompted a statute.
Still we are told the criteria under § 404(e)(3) – determining
whether there is a public need for the services and whether the
private sector can supply the services – are “ill-suited” to apply
to these activities, particularly leasing. But petitioner does not
explain clearly why the criteria are “ill-suited.” The public’s
need can easily refer to the demand for leasing space generally
or the revenue the Service gains from the leasing – the latter of
which the Commission emphasized. One might have thought
that the ability of the private sector to meet the demand would
depend on available competitive leasing space, but the
Commission thought that since real property was unique, it was
not necessary to consider private leasing availability. The
Service could have claimed that the Commission was obliged to
compare alternative leasing opportunities – but that would have
been an arbitrary and capricious challenge to the Commission’s
application of the statute, which petitioner did not make. That
was surely because a remand on that issue would not have
served its interest.
Assuming, arguendo, however, that the Service has
succeeded in at least establishing that the statute is ambiguous,
we turn to the question of Chevron deference vel non. The

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Service contends that since both the Service and the
Commission have authority to interpret the statute, neither is
entitled to deference. It relies on our opinion in Salleh v.
Christopher, 85 F.3d 689, 691 (D.C. Cir. 1996), where both the
Secretary of State and the Foreign Service Grievance Board
relied on separate, and apparently conflicting, provisions of a
statute conferring authority to finally determine whether a
foreign service officer could be discharged. Under those
circumstances, we could afford deference to neither agency.
That is not our case; there is no dispute that the issue before us
is the proper interpretation of § 404(e)(3), and that provision
was clearly delegated to the Commission to implement and
thereby to interpret. See Dep’t of Health and Human Services
v. FLRA, 920 F.2d 45, 48 (D.C. Cir.1990). Therefore, assuming
the statute has some ambiguity, we must defer to the
Commission’s interpretation regarding the coverage of
§ 404(e)(3) and affirm it, if reasonable. Since the Commission’s
interpretation is, at least, the more likely one, it is certainly
reasonable.
That brings us to the petitioner’s alternative argument that
leasing of property is not a service at all. Here we grant readily
petitioner’s contention that the term “service,” which is not
defined in the statute, is unquestionably ambiguous. But as we
have just observed, the Commission is entitled to Chevron
deference as to its construction. It will be recalled that the
Commission’s interpretation of services is “any ongoing
commercial activity offered to the public for the purpose of
financial gain.” Although the Service observed that the
definition neatly avoided implicating services provided to other
government agencies (and therefore it was presumably suspect),
it does not object to the definition on that ground, but rather only
to the Commission’s failure to exclude leasing or licensing of
property.

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In support of its claim that leasing is not a “service,” the
petitioner points to other provisions of the statute, particularly
§ 401(5), which authorized the Service “to hold, maintain, sell,
lease or otherwise dispose of such property or any interest
therein; and to provide services in connection therewith and
charges therefor” (emphasis added). That language indicates,
according to the Service, that Congress recognized that
“services” were in a different category than leasing of property.
We do not think that follows. For one thing, maintenance is
unquestionably a service. Moreover, the sentence can just as
easily be read as meaning leasing and maintenance of property
and other services in connection with such leasing and
maintenance. We can easily conceive of statutory language that
would list undeniable services such as, for example, “security
and maintenance” along with “ancillary services.” Again, we
conclude that the Commission’s construction of § 404(e)(3) this
time to include property leasing and licensing as nonpostal
services is quite reasonable and therefore permissible.
Accordingly, the petition is denied.
So ordered.

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