955 F.3d 1038
D.C. Cir.2020Background
- UPS petitioned for review of the Postal Regulatory Commission’s (PRC) January 3, 2019 Order adopting final rules for the institutional-cost contribution requirement for competitive products under 39 U.S.C. § 3633(a)(3).
- The Accountability Act requires (1) no cross-subsidization, (2) each competitive product must cover its attributable costs (defined as costs tied via "reliably identified causal relationships"), and (3) all competitive products together must cover an "appropriate share" of institutional (residual) costs, with the PRC required to “consider” the degree to which costs are "uniquely or disproportionately associated" with competitive products in periodic reviews under § 3633(b).
- PRC’s 2019 Order adopted a formula-based method to set the "appropriate share" and concluded there are no costs "uniquely or disproportionately associated" with competitive products that are not already attributed under its § 3633(a)(2) cost-attribution methodology.
- The D.C. Circuit’s 2018 decision in UPS v. PRC upheld the PRC’s cautious incremental-cost attribution method under § 3633(a)(2), which attributes volume-variable and some inframarginal costs but leaves other inframarginal costs as institutional (residual) costs.
- UPS argued the PRC failed to comply with § 3633(b) by (a) conflating or failing to distinguish the statutory phrases "attributable through reliably identified causal relationships" and "uniquely or disproportionately associated," and (b) failing to actually consider any costs under § 3633(b) beyond those already attributed under § 3633(a)(2).
- The court held the PRC’s Order was arbitrary and capricious for failing to explain why the two statutory phrases coincide and for not meaningfully considering costs under § 3633(b), and remanded for further reasoned consideration.
Issues
| Issue | Plaintiff's Argument (UPS) | Defendant's Argument (PRC) | Held |
|---|---|---|---|
| Whether PRC sufficiently considered costs "uniquely or disproportionately associated" with competitive products under § 3633(b) | PRC failed to "consider" such costs separately and thus did not satisfy the statutory mandate | PRC concluded those costs are already captured by its § 3633(a)(2) attribution method, so no separate consideration was necessary | Court: PRC did not adequately consider § 3633(b); remand required |
| Whether "uniquely or disproportionately associated" costs are coextensive with costs "attributable through reliably identified causal relationships" | These statutory phrases are distinct; PRC cannot assume they coincide without explanation | PRC treated the phrases as effectively coincident (or argued they were independently defined but nonetheless fall within attribution) | Court: PRC’s explanation is incomprehensible; it must explain whether and why the phrases coincide or differ |
| Whether the PRC’s rulemaking was arbitrary and capricious under the APA | PRC’s failure to explain and to consider statutorily mandated factors renders the Order arbitrary | PRC argued its prior analyses and responses to comments suffice | Court: No deference—Order is arbitrary and capricious; remand for reasoned decision-making |
Key Cases Cited
- UPS v. PRC, 890 F.3d 1053 (D.C. Cir. 2018) (upholding PRC’s incremental cost-attribution method under § 3633(a)(2))
- U.S. Postal Serv. v. PRC, 785 F.3d 740 (D.C. Cir. 2015) (agency decisions must articulate a comprehensible standard to receive deference)
- Glob. Tel*Link v. FCC, 866 F.3d 397 (D.C. Cir. 2017) (agency reasoning must be comprehensible under the APA)
- BP Energy Co. v. FERC, 828 F.3d 959 (D.C. Cir. 2016) (statutory provisions must be interpreted to give effect to all language)
- Michigan v. EPA, 135 S. Ct. 2699 (2015) (agency actions inconsistent with statutory requirements are unlawful)
- Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29 (1983) (agency must consider statutorily mandated factors and cannot act arbitrarily)
- Mozilla Corp. v. FCC, 940 F.3d 1 (D.C. Cir. 2019) (failure to consider an important aspect of the problem is arbitrary and capricious)
- SEC v. Chenery Corp., 318 U.S. 80 (1943) (courts cannot accept post hoc rationalizations; agency must explain its decision in the first instance)