Aid Association for Lutherans v. United States Postal Service

Notice: This opinion is subject to formal revision before publication in the
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before the bound volumes go to press.
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 13, 2003 Decided March 14, 2003
No. 01-5449
AID A SSOCIATION FOR LUTHERANS,
A PPELLEE
v.
U NITED S TATES P OSTAL S ERVICE,
A PPELLANT
–————
Consolidated with
03-5065
–————
No. 01–5450
A MERICAN B AR E NDOWMENT,
A PPELLEE
v.
U NITED S TATES P OSTAL S ERVICE,
A PPELLANT
–————
Consolidated with
03-5066
–————
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.

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Appeals from the United States District Court
for the District of Columbia
(No. 96cv02694)
(No. 97cv00660)
Edward Himmelfarb, Attorney, United States Department
of Justice, argued the cause for appellant. With him on the
briefs were Roscoe C. Howard, Jr., United States Attorney,
and Anthony J. Steinmeyer, Assistant Director, United
States Department of Justice. R. Craig Lawrence and Vin-
cent H. Cohen, Jr., Assistant United States Attorneys, en-
tered appearance.
Geoffrey W. Peters argued the cause and filed the brief for
appellee Aid Association for Lutherans.
William J. Olson, John S. Miles, and Herbert W. Titus
were on the brief for amicus curiae Free Speech Defense and
Education Fund, Inc. in support of appellee.
Sheila J. Carpenter argued the cause for appellee Ameri-
can Bar Endowment. With her on the brief was Richard
Littell.
Before: E DWARDS, H ENDERSON and R OGERS, Circuit Judges.
Opinion for the Court filed by Circuit Judge E DWARDS .
EDWARDS, Circuit Judge: The 1990 amendment to the
Postal Reorganization Act of 1970 (‘‘PRA’’) bars the use of the
reduced nonprofit third-class postage rate for mailings pro-
moting any insurance policy if ‘‘the coverage provided by the
policy’’ is ‘‘generally otherwise commercially available.’’ 39
U.S.C. § 3626(j)(1)(B). In 1992, appellant United States
Postal Service (‘‘Postal Service’’ or ‘‘USPS’’) issued regula-
tions construing this statutory language to bar the use of the
reduced rate for mailings promoting insurance of a general
type (e.g., life, automobile, health) that is commercially avail-
able. See 57 Fed. Reg. 28,464, 28,466 (June 25, 1992). Under
the regulations, the Postal Service decided that appellees Aid
Association for Lutherans (‘‘AAL’’) and American Bar En-
dowment (‘‘ABE’’), both nonprofit, tax-exempt organizations
that offer insurance policies to their members and are eligible

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for the nonprofit postage rate, were no longer entitled to mail
their insurance-related material at the nonprofit rate to the
extent that the insurance offered was of a general type that is
otherwise commercially available.
Appellees filed separate law suits in the District Court,
alleging that the Postal Service exceeded its statutory author-
ity in promulgating the cited regulations. The District Court
granted judgment for appellees, finding that the regulations
‘‘constitute an impermissible reading of the statute.’’ Aid
Ass’n for Lutherans v. USPS, No. 96-2694, Mem. Op. at 13
(D.D.C. Sept. 13, 2001) (‘‘AAL Mem. Op.’’), reprinted in Joint
Appendix (‘‘JA’’) 157, 169; Am. Bar. Endowment v. USPS,
No. 97-660, Mem. Op. at 6 (D.D.C. Sept. 17, 2001) (‘‘ABE
Mem. Op.’’) (finding the ‘‘identical analysis’’ to apply), reprint-
ed in JA 384, 389. The District Court ordered the postage
refund amounts due to AAL and ABE and entered final
judgment in these cases on January 13, 2003 and February
12, 2003. See AAL v. USPS, Order (D.D.C. Jan. 13, 2003);
ABE v. USPS, Order (D.D.C. Feb. 12, 2003).
Appellant first contends that its regulations are not subject
to judicial review, because 39 U.S.C. § 410(a) exempts the
Postal Service from the judicial review provisions of the
Administrative Procedure Act (‘‘APA’’). The Postal Service
claims further that, if judicial review is proper, the court
should defer to the agency’s statutory interpretation under
Chevron U.S.A. Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837 (1984), because the regulations reflect a
permissible construction of 39 U.S.C. § 3626(j)(1)(B). Appel-
lees, in turn, argue that, because the Postal Service acted in
excess of its delegated authority under the statute, judicial
review is available outside of the APA and the disputed
regulations cannot possibly survive scrutiny under any stan-
dard of review.
We affirm the judgments of the District Court. Judicial
review is available in this case, because, as appellant con-
cedes, appellees may challenge actions by the Postal Service
that are outside of the scope of its statutory authority.
Appellees’ principal claim here is that the challenged regula-
tions emanated from an ultra vires action by the Postal
Service. We agree. Therefore, it does not matter whether

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39 U.S.C. § 410(a) precludes traditional APA review. On the
merits, we hold that the Postal Service’s regulations exceed
the agency’s delegated authority under the statute. The
statute permits the agency to regulate solely with respect to
‘‘coverage provided by [an insurance] policy.’’ The agency
ignored this limitation and focused instead on ‘‘types of
insurance.’’ ‘‘Coverage’’ under a policy does not mean the
‘‘type of insurance’’ offered. Therefore, the regulations total-
ly pervert the meaning of the statute. And, in so doing, the
regulations effectively exclude nonprofit organizations from
using the reduced nonprofit postage rate for insurance-
related mailings in markets in which they previously had
access to the reduced rate. There is nothing in this record to
indicate that this was the intention of Congress in enacting 39
U.S.C. § 3626(j)(1)(B). Quite the contrary. Both the clear
terms of the statute and the legislative history suggest other-
wise.
I. BACKGROUND
In 1970, Congress enacted PRA, 39 U.S.C. § 101 et seq.,
which created the United States Postal Service. PRA autho-
rized the Postal Service to charge reduced third-class postage
rates to ‘‘qualified nonprofit organizations,’’ defined as ‘‘reli-
gious, educational, scientific, philanthropic, agricultural, labor,
veterans, or fraternal organizations or associations not orga-
nized for profit and none of the net income of which inures to
the benefit of any private stockholder or individual,’’ former
39 U.S.C. § 4452(d). Id. § 4452(b), (c).
In 1990, Congress amended PRA to place some restrictions
on the use of reduced-rate mail. See 39 U.S.C. § 3626(j).
One such restriction was on mailings promoting insurance
policies. Section 3626(j)(1)(B) bars the use of the reduced
rate for
mail which advertises, promotes, offers, or, for a fee
or consideration, recommends, describes, or an-
nounces the availability of–
TTT
(B) any insurance policy, unless the organization
which promotes the purchase of such policy is
authorized to mail at the rates for mail under

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former section 4452(b) or 4452(c) of this title, the
policy is designed for and primarily promoted to
the members, donors, supporters, or beneficiaries
of the organization, and the coverage provided by
the policy is not generally otherwise commercially
available[.]
Id. § 3626(j)(1)(B). The third condition imposed by this
section on the use of the reduced rates for insurance-related
mailings – i.e., that ‘‘the coverage provided by the policy’’ be
‘‘not generally otherwise commercially available’’ – is the one
at issue here.
In 1992, pursuant to its authority to ‘‘adopt, amend, and
repeal such rules and regulations as it deems necessary to
accomplish the objectives of this title,’’ id. § 401(2), the Postal
Service issued a final rule after notice and comment, amend-
ing its Domestic Mail Manual and construing the language of
§ 3626(j)(1)(B). See 57 Fed. Reg. 28,464, 28,466 (June 25,
1992). The rule, which is codified at Domestic Mail Manual
§ E670.5.5, states:
The term ‘‘not generally otherwise commercially
available’’ applies to the actual coverage stated in
the insurance policy, without regard to the amount
of the premiums, the underwriting practices, and the
financial condition of the insurer. When compari-
sons are made with other policies, consideration will
be given to policy coverage benefits, limitations, and
exclusions, and to the availability of coverage to the
targeted category of recipients. When insurance
policy coverages are compared for the purpose of
determining whether coverage in a policy offered by
an organization is not generally otherwise commer-
cially available, the comparison will be based on the
specific characteristics of the recipients of the piece
in question (e.g., geographic location or demographic
characteristics).
Note: The types of insurance considered to be
generally commercially available include but are not
limited to: Homeowner’s, property, casualty, ma-
rine, professional liability (including malpractice),

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travel, health, life, airplane, automobile, truck, moto-
rhome, motorbike, motorcycle, boat, accidental death
and dismemberment, medicare supplement (medi-
gap), catastrophic care, nursing home, and hospital
indemnity insurance.
Id. In the preamble to the notice of proposed rulemaking,
the Postal Service stated that the statute
looks to the ‘‘coverage provided by the policy,’’ 39
U.S.C. 3626(j)(1)(B), without any indication that
price or the financial conditions or practices of the
insurer should modify this rule. The Postal Service
also does not believe that the presence of unique
elements in a type of policy which is otherwise
commercially available is sufficient for a determina-
tion that the policy is not commercially available. In
the example cited above, the primary focus of the
policy was life insurance, rather than coverage to
provide strike benefits. Accordingly, in determining
whether the policy is commercially available, the
policy would be considered life insurance.
56 Fed. Reg. 63,895, 63,896 (Dec. 6, 1991).
Thus, to determine whether ‘‘the coverage provided by the
policy is not generally otherwise commercially available,’’ 39
U.S.C. § 3626(j)(1)(B), the Postal Service looks to whether
the insurance policy fits into one of the broad ‘‘types of
insurance’’ (e.g., life, health, automobile) that are commercial-
ly available. It does not look to whether the specific terms,
extent, elements, or details of the coverage provided in the
insurance policy are commercially available. This sweeping
regulatory exclusion is overcome only when a mailer demon-
strates that an insurance policy that is within a broad type of
insurance that is generally commercially available is not
commercially available to the specific demographic or geo-
graphic group to whom the policy is being targeted and
promoted.
Appellee AAL is a nonprofit, tax-exempt organization that
offers, among other services, its own fraternal life, medical,

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disability, and long-term care insurance to its members. Ap-
pellee ABE is a nonprofit, tax-exempt organization affiliated
with the American Bar Association (‘‘ABA’’) that gives chari-
table grants for legal research, funded through ABE’s spon-
sorship of group insurance policies for ABA members. The
group insurance policies that ABE offers to members are
underwritten by major insurance carriers. ABA’s large
membership enables ABE to negotiate coverage for members
on more favorable terms than those available in the general
insurance market. ABE commonly receives annual dividends
on group policies, and members, whose premiums fund the
group policies, are entitled to their share of the return of the
premium in the form of an insurance dividend, but most of
ABE’s insureds choose to donate those dividends to ABE for
its charitable purposes. Both AAL and ABE are ‘‘qualified
nonprofit organizations’’ eligible to mail qualifying matter at
reduced nonprofit rates.
After the Postal Service issued the disputed regulations,
AAL submitted sample materials and requested written clari-
fication regarding the eligibility of its insurance-related mail-
ings for the reduced rate. The Postal Service determined
that AAL’s insurance-related mailings were ‘‘non-permissible
mailings’’ ineligible for the reduced rate under the new
regulations. See Letter from R.C. Payne, MSC Manag-
er/Postmaster, USPS, to Donna Beyer, Manager, Record &
Employee Mail, AAL (Aug. 27, 1992), reprinted in JA 85.
AAL appealed and the Postal Service affirmed its decision,
stating that ‘‘AAL offers insurance (e.g., life, health, long-
term care, etc.) which are types of insurance that the Postal
Service considers generally commercially available. Also,
your arguments that there are unusual benefits attached to
some of these policies does not necessarily cause them to be
considered not commercially available.’’ See Letter from
Patricia M. Gibert, Manager, Customer Serv. Support, USPS,
to George E. Miller, Counsel for AAL (June 7, 1994), reprint-
ed in JA 69, 73. AAL’s request for reconsideration was
rejected. See Letter from John H. Ward, USPS, to Geoffrey
W. Peters, Counsel for AAL (July 11, 1996), reprinted in JA
11-16.

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In a separate administrative action, the Postal Service
determined that ABE’s insurance-related mailings between
March 25, 1991 and December 27, 1993 should not have been
mailed at the reduced nonprofit rates, assessed a postage
deficiency of $250,041.75 against ABE, and required ABE to
pay the regular rates for future insurance-related mailings.
See Letter from Ken Britton, Manager, Customer Serv. Sup-
port, USPS, to Charles Lynch, Executive Dir., ABE (Apr. 7,
1994), reprinted in JA 304. ABE appealed the ruling and the
Postal Service affirmed its decision, stating that ABE
offers insurance (e.g., life, health, death and dismem-
berment, etc.) which are types of insurance that the
Postal Service considers generally commercially
available.
Also, your argument that the Endowment’s insur-
ance program is promoted solely as a vehicle for
soliciting members to contribute money (in the form
of insurance ‘dividends’ or ‘experience credits’) to
fund the Endowment’s philanthropic endeavors does
not necessarily cause them to be considered not
commercially available.
Letter from John J. Sadler, Manager, Rates & Classification
Serv. Ctr., USPS, to Richard Littell, Counsel for ABE (July
15, 1994), reprinted in JA 318, 320. ABE appealed again
unsuccessfully, although the Postal Service subtracted from
the postage deficiency the mailings made before the Domestic
Mail Manual was amended. See Letter from Anita J. Bizzot-
to, Manager, Bus. Mail Acceptance, USPS, to Richard Littell,
Counsel for ABE (Jan. 6, 1997), reprinted in JA 188-91.
AAL and ABE filed separate lawsuits in the District Court
challenging the Postal Service’s actions, alleging, inter alia,
that the Postal Service ‘‘exceeded its statutory authority’’ in
promulgating the postal regulations codified at § E670.5.5 of
the Domestic Mail Manual. AAL alleged in its complaint:
The legislative history of the statute TTT makes it
clear that the intent of Congress was not to

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include insurance such as that offered by fraternal
benefit societies within the ambit of the new restric-
tions on the use of the nonprofit mail permit. The
regulations promulgated exceed the scope of the
authorizing legislation, contravene the preponder-
ance of legislative history, were not reasonably tai-
lored to accomplish Congress’ objective and should
therefore be set aside.
AAL’s Complaint ¶ 20, reprinted in JA 134, 138. ABE
alleged in its complaint: ‘‘USPS exceeded its authority as
granted by the 1990 Act because it adopted a regulation that
imposed restrictions on insurance-related mailings not con-
templated or authorized by Congress.’’ ABE’s Complaint
¶ 21, reprinted in JA 325, 333.
The District Court granted partial summary judgment in
favor of AAL, and granted summary judgment in favor of
ABE. See AAL Mem. Op. at 1, JA 157; ABE Mem. Op. at 1,
JA 384. In AAL, the District Court first held that 39 U.S.C.
§ 410(a) did not preclude judicial review in this case. AAL
Mem. Op. at 4-6, JA 160-62. On the merits, the District
Court held that the Postal Service’s regulations ‘‘constitute an
impermissible reading of the statute.’’ Id. at 13, JA 169.
The District Court noted that, under the Postal Service’s
statutory interpretation, ‘‘a fraternal organization would have
to develop an entirely new, unique category of insurance to
provide to its members TTT different than any other insurance
provided in the United States.’’ Id. at 11, JA 167. The
District Court reasoned that
it is fairly apparent here that Congress did not
intend to restrict the type of insurance mailings to
only those that would qualify under the exemption to
the sort described by counsel. Congress specifically
noted that certain nonprofit organizations would con-
tinue to be able to qualify for this exemption if they
met all of the requirements of a three-part test.
The Court is puzzled by this fact, when it appears
that no existing category of insurance policy that is
provided by a fraternal benefit organization would

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meet the third part of the test. Why did Congress
need the other two parts if it intended to disqualify
all insurance policies under the third prong? By
considering the broad general nature of the policy
(e.g. life, home, auto) when determining whether a
similar type of insurance policy is not generally
otherwise commercially available, Defendant has not
interpreted the exemption, it has eviscerated it.
Id. at 12-13, JA 168-69. The District Court declared invalid
the provision of the Domestic Mail Manual interpreting the
statutory phrase at issue. See AAL Order (D.D.C. Sept. 13,
2001), reprinted in JA 170. The District Court found ‘‘the
identical analysis’’ to apply in ABE. See ABE, Mem. Op. at
6, JA 389.
The instant appeals followed. This court ordered that oral
arguments in the two cases be scheduled on the same day and
that the parties coordinate briefing. In this court, there was
a question as to whether the District Court’s orders were
final and appealable, since the trial court’s initial orders left
the amounts owed by the Postal Service to AAL and ABE to
be determined. See AAL Order, JA 170; ABE Order (D.D.C.
Sept. 17, 2001), reprinted in JA 390. However, just before
oral arguments in this court, the District Court issued orders
setting the refund amounts due to appellees and entered final
judgment in both cases. See AAL Order (D.D.C. Jan. 13,
2003); ABE Order (D.D.C. Feb. 12, 2003). The Postal Ser-
vice then promptly filed new notices of appeal and filed
motions to consolidate the new and initial appeals in both
cases. The motions were granted. Thus, the disputed judg-
ments before this court are indisputably final and appealable.
II. A NALYSIS
A. Availability of Judicial Review
The Postal Service first contends that 39 U.S.C. § 410(a)
precludes judicial review here, because it explicitly exempts
the Postal Service from the judicial review provisions of the
APA. Section 410(a) provides, in relevant part, that ‘‘no
Federal law dealing with public or Federal contracts, proper-
ty, works, officers, employees, budgets, or funds, including

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the provisions of chapters 5 and 7 of title 5 [the APA], shall
apply to the exercise of the powers of the Postal Service.’’ 39
U.S.C. § 410(a). The Postal Service claims that the well-
established presumption favoring judicial review of adminis-
trative action is overcome here by the explicit terms of
§ 410(a). We disagree. The Postal Service assumes that any
right that appellees have to judicial review must arise under
the APA. This assumption is mistaken.
There is no doubt that § 410(a) exempts the Postal Service
from the strictures of the APA in cases involving the APA’s
procedural requirements. See, e.g., Nat’l Easter Seal Soc’y
for Crippled Children & Adults v. USPS, 656 F.2d 754, 766
(D.C. Cir. 1981) (holding that the Postal Service was not
required to follow notice and comment rulemaking proce-
dures). It is also established that, in PRA, Congress affirma-
tively intended to preclude judicial review of the Postal
Service’s Board of Governors’ decisions to appoint and re-
move the Postmaster General. See Carlin v. McKean, 823
F.2d 620, 623 (D.C. Cir. 1987) (declining to decide whether
judicial review was available ‘‘under the old administrative
law principles when Congress has explicitly exempted an
agency from the APA’s coverage,’’ because the court was
‘‘quite certain that Congress intended affirmatively to pre-
clude judicial review of the Governors’ decisions to appoint
and remove the Postmaster General’’). These strictures do
not apply in this case, however.
In their complaints, both AAL and ABE allege that, in
promulgating the postal regulations at issue, the Postal Ser-
vice exceeded its statutory authority by imposing restrictions
on the use of the nonprofit mail permit that were not autho-
rized by Congress. See AAL’s Complaint ¶ 20, JA 138;
ABE’s Complaint ¶ 21, JA 333. It does not matter, therefore,
whether traditional APA review is foreclosed, because ‘‘[j]udi-
cial review is favored when an agency is charged with acting
beyond its authority.’’ Dart v. United States, 848 F.2d 217,
221 (D.C. Cir. 1988). Indeed, the Postal Service concedes
that ‘‘this Court has found a narrow exception to [§ 410’s]
preclusion of review, allowing a court to determine whether
an agency was acting outside the scope of its statutory
authority.’’ Appellant’s Br. 19. ‘‘Even where Congress is
understood generally to have precluded review, the Supreme

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Court has found an implicit but narrow exception, closely
paralleling the historic origins of judicial review for agency
actions in excess of jurisdiction.’’ Griffith v. FLRA, 842 F.2d
487, 492 (D.C. Cir. 1988) (citing the leading case, Leedom v.
Kyne, 358 U.S. 184, 188 (1958) (finding judicial review proper
despite statutory preclusion of judicial review, where the
NLRB acted ‘‘in excess of its delegated powers and contrary
to a specific prohibition’’ in the NLRA)).
Following the reasoning of American School of Magnetic
Healing v. McAnnulty, 187 U.S. 94 (1902), and its progeny,
the case law in this circuit is clear that judicial review is
available when an agency acts ultra vires. See, e.g., Chamber
of Commerce v. Reich, 74 F.3d 1322, 1327-28 (D.C. Cir. 1996).
In other words, the APA’s stricture barring judicial review
‘‘to the extent that statutes preclude judicial review,’’ 5 U.S.C.
§ 701(a)(1), ‘‘does not repeal the review of ultra vires actions
that was recognized long before, in McAnnultyTTTT When
an executive acts ultra vires, courts are normally available to
reestablish the limits on his authority.’’ Dart, 848 F.2d at
224; see also Reich, 74 F.3d at 1328. Appellees’ claims here,
that the Postal Service ‘‘exceeded its statutory authority’’ in
purporting to apply the statute, clearly admit of judicial
review.
B. Scope of Review
Although there is little doubt about the availability of
judicial review in this case, a question remains regarding the
scope of review. As noted above, the Postal Service claims
that, if judicial review is proper, the court should defer to the
agency’s statutory interpretation under Chevron U.S.A. Inc.
v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984), because the agency’s interpretation of the statute
reflects a reasonable construction of 39 U.S.C. § 3626(j)(1)(B).
In particular, the Postal Service contends that, in reviewing
whether the agency exceeded its statutory authority in con-
struing the statute, we must confine our inquiry to the
question whether the regulation ‘‘on its face’’ violates
§ 3626(j), and accordingly must limit our analysis to the first
(‘‘intent of Congress is clear’’) step of Chevron and not

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venture into Chevron’s second (‘‘permissible construction’’)
step. Appellant’s Br. 25-26. Appellant contends that this is
so because the appropriate scope of review is something akin
to ‘‘that appropriate in mandamus actions,’’ Nat’l Ass’n of
Postal Supervisors v. USPS, 602 F.2d 420, 432 (D.C. Cir.
1979) (‘‘National Association’’). Appellant’s Br. 2-26.
In National Association, which was decided prior to Chev-
ron, we held that Congress’ intent to vest in the Postal
Service broad discretion in setting employee compensation
and benefits and to limit judicial oversight of the exercise of
that discretion did not mean that the Postal Service’s deci-
sions were ‘‘entirely insulated from judicial surveillance.
Courts can defer to the exercise of administrative discretion
on internal management matters, but they cannot abdicate
their responsibility to insure compliance with congressional
directives setting the limits on that discretion.’’ National
Association, 602 F.2d at 432. With respect to the matter at
issue in this case – the scope of review of Postal Service
constructions of PRA – we held that ‘‘[t]he judicial role is to
determine the extent of the agency’s delegated authority and
then determine whether the agency has acted within that
authority.’’ Id. We ‘‘owe a measure of deference to the
agency’s own construction of its organic statute, but the
ultimate responsibility for determining the bounds of adminis-
trative discretion is judicial.’’ Id. at 432-33 (citations omit-
ted). National Association thus appears almost as a har-
binger of Chevron.
Under Chevron, ‘‘if the intent of Congress is clear,’’ the
court ‘‘must give effect to the unambiguously expressed intent
of Congress.’’ Chevron, 467 U.S. at 842-43. If ‘‘Congress has
not directly addressed the precise question at issue,’’ and the
agency has acted pursuant to an express or implied delega-
tion of authority, the agency’s statutory interpretation is
entitled to deference, as long as it is reasonable. Id. at 843-
44. Although an agency manual often may not purport to
carry the force of law, see Christenson v. Harris County, 529
U.S. 576, 587 (2000); United States v. Mead Corp., 533 U.S.
218, 226-27 (2001) (holding that Chevron deference is due only
when the agency acts pursuant to ‘‘delegated authority’’ and

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the agency action has the ‘‘force of law’’), the Postal Service’s
disputed regulations in this case were adopted pursuant to
notice and comment rulemaking and undoubtedly were in-
tended to carry the force of law. Thus, the conditions for
Chevron review are clearly met.
It is unclear whether there is much of a disjunction be-
tween the tests enunciated in National Association and Chev-
ron regarding the scope of review here. It is also unclear
whether the scope of review in this case is ‘‘mandamus-like,’’
which is an odd moniker under existing law. These questions
are abstractly interesting, but ultimately unimportant in the
resolution of this matter. National Association anticipated
Chevron’s framing of judicial review of agency statutory
interpretation as an inquiry into an agency’s delegated au-
thority and its action within that authority. ‘‘Chevron is
principally concerned with whether an agency has authority
to act under a statute.’’ Arent v. Shalala, 70 F.3d 610, 615
(D.C. Cir. 1995). Chevron analysis ‘‘is focused on discerning
the boundaries of Congress’ delegation of authority to the
agency; and as long as the agency stays within that delega-
tion, it is free to make policy choices in interpreting the
statute, and such interpretations are entitled to deference.’’
Id.; see also Mead, 533 U.S. at 226-27 (holding that Chevron
deference is due only when the agency acts pursuant to
‘‘delegated authority’’). With these principles in mind, it is
evident that the scope of review elaborated in National
Association is in all important respects perfectly consistent
with Chevron and Mead. And appellant concedes that Na-
tional Association controls the scope of review in this case.
Appellant’s suggestion that we must confine our inquiry to
the question whether the regulation ‘‘on its face’’ violates
§ 3626(j), and not venture into Chevron’s second (‘‘permissi-
ble construction’’) step, makes little sense under either Na-
tional Association or Chevron. An agency construction of a
statute cannot survive judicial review if a contested regulation
reflects an action that exceeds the agency’s authority. It
does not matter whether the unlawful action arises because
the disputed regulation defies the plain language of a statute
or because the agency’s construction is utterly unreasonable

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15
and thus impermissible. In this case, the Postal Service’s
position seems to be that the disputed regulations are permis-
sible because the statute does not expressly foreclose the
construction advanced by the agency. We reject this position
as entirely untenable under well-established case law. See
Ry. Labor Executives Ass’n v. Nat’l Mediation Bd., 29 F.3d
655, 671 (D.C. Cir. 1994) (en banc) (‘‘Were courts to presume
a delegation of power absent an express withholding of such
power, agencies would enjoy virtually limitless hegemony, a
result plainly out of keeping with Chevron and quite likely
with the Constitution as well.’’) (emphasis in original); see
also Halverson v. Slater, 129 F.3d 180, 187 (D.C. Cir. 1997)
(quoting Ry. Labor Executives, 29 F.3d at 671); Oil, Chem. &
Atomic Workers Int’l Union v. NLRB, 46 F.3d 82, 90 (D.C.
Cir. 1995) (same); Ethyl Corp. v. EPA, 51 F.3d 1053, 1060
(D.C. Cir. 1995) (‘‘We refuse TTT to presume a delegation of
power merely because Congress has not expressly withheld
such power.’’); Natural Res. Def. Council v. Reilly, 983 F.2d
259, 266 (D.C. Cir. 1993) (‘‘ ‘[I]t is only legislative intent to
delegate such authority that entitles an agency to advance its
own statutory construction for review under the deferential
second prong of Chevron.’ ’’) (alteration in original) (quoting
Kansas City v. Dep’t of Hous. & Urban Dev., 923 F.2d 188,
191–92 (D.C. Cir. 1991)).
C. The Statutory Question
Appellees’ principal claim here is that the challenged regu-
lations emanated from an ultra vires action by the Postal
Service. We agree. This being the case, the regulations
cannot survive judicial review under National Association or
Chevron. We now turn to the merits to explain why the
Postal Service’s position fails.
It is undisputed that appellees meet the first two statutory
criteria in § 3626(j)(1)(B) for mailing their insurance materi-
als at the reduced rate. The only issue is the third criterion:
‘‘the coverage provided by the policy is not generally other-
wise commercially available.’’ 39 U.S.C. § 3626(j)(1)(B). We
must decide whether the Postal Service’s regulations, con-
struing this statutory language to exclude mailings promoting

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insurance belonging to general ‘‘types of insurance’’ (e.g., life,
health, disability) that are commercially available, exceeded
the Postal Service’s delegated authority under the statute.
As we noted at the outset of this opinion, the Postal Service’s
position finds no support whatsoever in the record of this
case.
To repeat what we said at the start: The statute permits
the agency to regulate solely with respect to ‘‘coverage pro-
vided by [an insurance] policy.’’ The agency ignored this
limitation and focused instead on ‘‘types of insurance.’’ ‘‘Cov-
erage’’ under a policy does not mean the ‘‘type of insurance’’
provided. Therefore, the regulations totally pervert the
meaning of the statute. And, in so doing, the regulations
defy congressional intent by effectively excluding nonprofit
organizations from using the reduced nonprofit postage rate
for insurance-related mailings in markets in which they previ-
ously had access to the reduced rate. Our judgment in this
case is the same whether we analyze the agency’s statutory
interpretation under Chevron Step One or Step Two. ‘‘In
either situation, the agency’s interpretation of the statute is
not entitled to deference absent a delegation of authority
from Congress to regulate in the areas at issue.’’ Motion
Picture Ass’n of Am., Inc. v. FCC, 309 F.3d 796, 801 (D.C.
Cir. 2002) (emphasis in original) (citing Ry. Labor Executives,
29 F.3d at 671). The Postal Service has no congressionally
delegated authority to exclude reduced-rate mailings on the
basis of general ‘‘types of insurance.’’ We therefore hold that
the Postal Service’s regulations exceed the agency’s delegated
authority under the statute.
There are two interrelated reasons why we find no delegat-
ed authority for the disputed regulations. First, the plain
language of 39 U.S.C. § 3626(j)(1)(B) does not support the
Postal Service’s decision to broadly exclude general ‘‘types of
insurance’’ that are commercially available from eligibility for
the reduced nonprofit postage rates. Second, nothing in the
legislative history indicates that Congress intended the ab-
surd result that is produced by the regulations. Indeed, the
legislative history suggests otherwise.

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The natural reading of the statutory phrase, ‘‘coverage
provided by the policy is not generally otherwise commercial-
ly available,’’ 39 U.S.C. § 3632(j)(1)(B), does not accord with
the definition of ‘‘not generally otherwise commercially avail-
able’’ that appears in the agency’s Domestic Mail Manual.
The Postal Service’s regulations construe ‘‘coverage provided
by the policy’’ to refer broadly to ‘‘types of insurance,’’
without regard to the terms and exclusions of coverage under
the policy, the amount and extent of risk covered under the
policy, or the presence of unique elements in a policy. Since
the statute does not define ‘‘coverage,’’ we must presume that
Congress intended to give the term its ordinary meaning.
Ordinarily, in the context of insurance policies, the word
‘‘coverage’’ refers to something more specific than the general
type of insurance such as life or health insurance; it usually
refers to the inclusion or exclusion of specific risks under an
insurance policy. See 7 L EE R. RUSS & T HOMAS F. SEGALLA,
COUCH ON I NSURANCE § 101:3, at 101-11 (3d ed. 1997). WEB-
STER ’S T HIRD N EW INTERNATIONAL D ICTIONARY OF THE E NGLISH
LANGUAGE UNABRIDGED 525 (1993) defines ‘‘coverage’’ as ‘‘pro-
tection by insurance policy: inclusion within the scope of a
protective or beneficial plan.’’ THE A MERICAN H ERITAGE DIC-
TIONARY 334 (2d Coll. ed. 1982) defines ‘‘coverage’’ as ‘‘[t]he
extent of protection afforded by an insurance policy.’’
BLACK ’S LAW D ICTIONARY 372 (7th ed. 1999) defines ‘‘coverage’’
as ‘‘[i]nclusion of a risk under an insurance policy; the risks
within the scope of an insurance policy.’’ The prior edition of
B LACK ’S LAW DICTIONARY 365 (6th ed. 1990) defined ‘‘coverage’’
as ‘‘amount and extent of risk contractually covered by insur-
er.’’ We think that the agency’s construction of the term
‘‘coverage’’ to mean broadly the general type or category of
insurance provided by the policy contravenes the ordinary
meaning of ‘‘coverage,’’ which normally refers more specifical-
ly to the amount and extent of risk included in the scope of a
policy. In short, the Postal Service’s idiosyncratic use of the
word ‘‘coverage’’ has no basis in the ordinary use of term.
The Postal Service’s interpretation also leads to an absurd
result. As the Postal Service conceded at oral argument, this
statutory construction effects a blanket exclusion of nonprofit

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organizations from use of the reduced postage rates for
insurance-related purposes in markets where nonprofits had
previously used the reduced rates. Virtually all insurance-
related mailings are disqualified from eligibility under this
interpretation. To qualify, a nonprofit organization would
have to develop an entirely unique category of insurance that
is not commercially available, or offer a generally commercial-
ly available type of insurance to a particular group for whom
that type of insurance is not commercially available. These
potential exceptions to the blanket exclusion are not signifi-
cant enough to ameliorate the drastic effect of the agency’s
interpretation: to eliminate nonprofits’ access to the reduced
postage rates for their insurance-related mailings. Given the
extremity of the effect that results from the Postal Service’s
interpretation, we would expect to see some indication that
Congress intended such an effect, but we find no indication in
the statute that its goal is to exclude nonprofits from using
the reduced postage rates to this extent.
The legislative history also gives no indication that Con-
gress intended such a drastic cutback on nonprofits’ use of
the reduced mail permit. Indeed, the legislative history
indicates that Congress clearly intended to continue allowing
nonprofits to promote their services at reduced postage rates.
A Senate Appropriations Committee report regarding spend-
ing for fiscal year 1990 stated:
While the Committee continues to support the subsi-
dization of what it considers to be legitimate mail-
ings for the benefit of nonprofit making entities
under the provisions of the Postal Reform Act,
nonetheless, the Committee shares some concerns
about what it considers to be abuses in the revenue
foregone program which place the legitimate use of
subsidies for legitimate mailings in jeopardy. The
Committee believes that the use of nonprofit bulk
mailings to advertise TTT insurance or other services
clearly for the benefit of commercial profitmaking
purposes, particularly where such services have no
relation to the nonprofit organization’s primary mis-

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sion, are improper uses of the preferred mailer
status and costly to all taxpayers. For this reason,
the Committee has included language in the bill
which eliminates the use of the nonprofit mailer
permit for these purposes. The Committee recog-
nizes that there are certain nonprofit organizations
which provide travel, insurance, and financial ser-
vices to support the purposes for which the nonprofit
organization was originally established. Under the
language included in the bill, these organizations will
continue to be allowed to use their mailers to pro-
mote those services.
S. R EP. NO. 101-105, at 43 (1989). The Senate report recom-
mending passage of the final bill stated:
While the Committee continues to support the subsi-
dization of what it considers to be legitimate mail-
ings for the benefit of nonprofit making entities
under the provisions of the Postal Reform Act,
nonetheless, the Committee shares concerns about
what it considers to be abuses in the revenue fore-
gone program which place the use of subsidies for
legitimate mailings in jeopardy.
S. Rep. No. 101-411, at 52 (1990). The Postal Service cites
this passage in its brief to demonstrate that Congress’ pri-
mary concern in enacting § 3626(j)(1)(B) was ‘‘to reduce the
cost of subsidized mailings by nonprofits.’’ Appellant’s Br.
29. But these passages indicate that Congress did not intend
to eliminate ‘‘legitimate mailings’’ using the reduced rate,
such as nonprofits’ insurance-related mailings. What Con-
gress apparently did intend to eliminate were ‘‘abuses’’ of the
reduced rate, such as their use for cooperative mailings, in
which a for-profit and a nonprofit company enter an agree-
ment to market for-profit products or services using the
nonprofit mail permit. There is clear evidence that Congress
intended for nonprofit organizations that provide insurance
policies to ‘‘continue to be allowed to use their mailers to
promote’’ their insurance services and make ‘‘legitimate mail-

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ings for the benefit of nonprofit making entities.’’ S. R EP. NO.
101-105, at 43.
The Postal Service contends that the disputed statutory
phrase, ‘‘coverage provided by the policy is not generally
otherwise commercially available,’’ does not speak to the
precise issue. For the reasons stated above, we find no real
ambiguity when the statutory language is fairly construed
using the normal tools of statutory construction. In any
event, however, while ambiguity in a statute may imply a
‘‘delegat[ion] to the agency [of] the power to fill those gaps,’’
see County of Los Angeles v. Shalala, 192 F.3d 1005, 1016
(D.C. Cir. 1999), the agency must still stay within the bounds
of the delegation in promulgating regulations under the stat-
ute. In this case, the Postal Service has transgressed the
bounds of any delegation to fill alleged gaps in the statute,
because the statute simply cannot bear the meaning that the
Postal Service seeks to give it. See MCI Telecomms. Corp. v.
Am. Tel. & Tel. Co., 512 U.S. 218, 229 (1994) (‘‘[A]n agency’s
interpretation of a statute is not entitled to deference when it
goes beyond the meaning that the statute can bearTTTT’’).
The agency lacked authority under the statute effectively to
regulate out of the market nonprofits’ use of the reduced
postage rates for insurance-related purposes. The agency’s
statutory interpretation and its effect cannot survive Chevron
Step One because the statutory language and legislative
history unambiguously indicate an intent for nonprofts to
continue to mail insurance-related material at reduced rates.
In the alternative, assuming arguendo that the statutory
language is ambiguous, the regulations constitute an imper-
missible construction of the statute under Chevron Step Two
because the interpretation is utterly unreasonable in the
breadth of its regulatory exclusion. There is nothing in this
record to indicate that Congress empowered the agency to
effect a blanket exclusion of nonprofits from the use of the
reduced mail permit for insurance-related purposes.
III. C ONCLUSION
For the foregoing reasons, we affirm the judgments of the
District Court.

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