Appeals Court issues exigency case decision

The Appeals Court for the DC Circuit today released its long awaited decision in the US Postal Service’s appeal of the Postal Regulatory Commission’s order limiting the USPS’s exigency rate increase. The court denied most of the USPS appeal, as well as arguments raised by mailer groups, but sent the case back to the PRC for reconsideration of the “count once” rule, which limited the calculation of “exigent” losses to a one year period.

Click here to download the decision as a .pdf file.

From the decision:

The Postal Service says the Commission’s decision did not go far enough; mailer industry groups say the Commission went too far; and the Commission says it got the order just right. We hold that the Commission’s “new normal” determination is reasonable, but its rule that lost mail volumes should be counted only once makes no sense on this record. We therefore grant the Postal Service’s petition for review in part. Finally, because the Commission’s econometric analysis was well within the wide bounds of agency expertise, we deny the separate petition for review filed by representatives of the mailing industry.

The Court summarized the problem it had with the “count once” rule:

In enforcing a “count once” limitation for lost mail, the Commission refused to recognize the cost to the Postal Service of lost mail volume beyond the year in which it first
disappeared. For example, a worker laid off during the recession might cancel her cable subscription, and no longer pay her monthly bill by mail. The Commission would count that change as a loss of no more than twelve pieces of mail; the Postal Service would count it as lost volume for as long as the recession stands between that worker and her cable subscription. If it takes her four years to find a new job and resubscribe, the Postal Service would count forty-eight lost pieces of mail.

Order 1926 offered two rationales for its “count once” rule: First, the Commission worried that counting mail as lost any year beyond the first “makes it impossible for the Commission to fulfill its statutory mandate to calculate the total amount lost due to the exigent circumstance.” Order 1926, at 95. Second, “once a piece of mail is lost in a given year due to the Great Recession, in subsequent years, the Postal Service is aware of that loss and adjusts it expectations to continue without that mail piece.”

Neither of those rationales makes sense juxtaposed against the Commission’s immediately preceding explanation that the “new normal”—not the arbitrariness of turning a calendar— defines when the Postal Service “regain[ed] its ability to predict or project mail volumes” or to “adjust to the lower volumes.” Order 1926, at 86.

The “new normal” rule also demonstrates that it is entirely possible—not “impossible” at all to identify a stopping point for the recession’s exigent impact on lost mail volume. The Commission, in fact, did just that in adopting its “new normal” rule. Specifically, to pinpoint when the Postal Service regained the ability to accurately predict mail volumes, the Commission credited [USPS witness Thomas E.] Thress’s testimony that “when we made a forecast in 2008 and 2009, there were terrible, terrible forecasts. * * * Now, 2011, ’12, ’13, we’re back to a world similar to where we were before in terms of we have a better handle on our forecast.” To determine the Service’s ability to adjust to lost volume, the Commission then considered macroeconomic variables: “[a] good measure of the Postal Service’s ability to adjust to changing circumstances is Total Factor Productivity,” a variable that suggested that the Service regained its ability to adjust in 2010—more than one year after the start of the recession. There is no reason that the same considerations, rather than a mechanical tally of the time passed since the recession, could not guide the Commission’s determination of when to stop counting lost mail volume.

In sum, the “new normal” rule was well reasoned and grounded in the evidence before the Commission. It comfortably passes deferential APA review; the “count once” rule’s controversion of the new normal rule’s premises does not and must be vacated.

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