UNITED STATES POSTAL
SERVICE,
Plaintiff
v.
UNIVERSITY
PUBLISHING
CORPORATION,
Defendant
IP 92-414
C
UNITED STATES
DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF INDIANA,
INDIANAPOLIS DIVISION
835 F. Supp.
489;
1993 U.S. Dist. LEXIS 15182
October 15, 1993,
Decided
October 15, 1993, Filed
DISPOSITION: [**1] The
Plaintiff's motion for summary judgment is granted in part
and denied in part.
COUNSEL: For Plaintiff: Winfield
Ong, Office of the United States Attorney, 5th Floor, United
States Courthouse, 46 East Ohio Street, Indianapolis,
Indiana 46204.
For Defendant: Geoffrey M. Grodner,
Mallor Clendening Grodner & Bohrer, 511 Woodcrest Drive,
P.O. Box 5787, Bloomington, Indiana 47407-5787.
JUDGES: BARKER
OPINIONBY: SARAH EVANS BARKER
OPINION: [*490] MEMORANDUM ENTRY:
The University Publishing Corporation ("UPC") collects and
sells alumni directories. It creates demand for its product
by contracting with universities to solicit orders via mail
from alumni who then respond not only with requests for the
directories but also with contributions. UPC takes a fixed
fee from all contributions resulting from its mailings. The
United States Postal Service ("USPS") believes that UPC
wrongly availed itself of the third-class, bulk mailing
rate, which requires a special permit that UPC lacks but
which many of its clients have. According to the USPS,
postal regulations do not allow an entity such as UPC to use
the special rate when it shares in the costs, risks, and
benefits of the mailing. The USPS moves the Court to enter
summary judgment in its [**2] favor and find that
UPC is liable to it in the amount of $ 211,225.25 for
mailings it made using the third-class, bulk mailing rate
between January, 1988, and July, 1989. UPC disputes the
amount of the deficiency and asserts the affirmative
defenses of estoppel, laches, consent, and accord and
satisfaction. USPS's motion is granted in part and denied in
part.
Because the Chicago Rates and
Classification Center ("Classification Center") already has
rejected UPC's appeal requesting that the deficiency
assessment be set aside, procedurally this matter is before
the Court as an appeal from an agency adjudication. Pursuant
to the Administrative Procedure Act, courts must "hold
unlawful and set aside agency action, findings, and
conclusions found to be
arbitrary [or]
capricious
" 5 U.S.C.A. @ 706(2)(A). This standard
applies to "informal" agency adjudications, such as the one
at issue here. See United States v. An Article of
Device
Diapulse, 768 F.2d 826, 829 (7th Cir. 1985). In
its findings, the Classification Center explained:
Section 625.52, Domestic Mail Manual,
states that cooperative mailings may [**3] be made
at the special bulk rates only when each of the cooperating
organizations is individually authorized to mail at the
special rates at the post office where the mailing is
deposited. A cooperative mailing is a mailing in which one
or more parties cooperate with an authorized nonprofit
mailer to share the cost, risk, and benefits of the
mailing.
Postal regulations do not allow matter
associated with joint business ventures between an
authorized nonprofit organization and a commercial firm to
be mailed at the special rates. Typically, with a joint
business venture, both parties contribute something (a list
of names and use of the special rate authorization by the
nonprofit [*491] party, and overall coordination of
the fund-raising effort by the commercial party) and both
parties take something out (a share of the
proceeds/profits).
In our opinion, the mailings in question
were cooperative ventures. Both your for-profit corporation
and the nonprofit organizations shared in the cost, risk,
and benefits of these mailings. UPC gained considerably
through the sale of their business product, the alumni
directories. Because UPC is not an authorized nonprofit
organization, postage [**4] on the mailings was due
at the applicable regular bulk rate.
See Exhibit 5, Administrative Record,
Letter to H. David Hilliard from Robert J. Reeves, Rates and
Classification Center, October 11, 1990, at 1-2 ("USPS Final
Decision"). Section 625.521 of the Domestic Mail Manual
("DMM") states: Cooperative mailings may be made at the
special bulk rates only when each of the cooperating
organizations is individually authorized to mail at the
special bulk rates at the post office where the mailing is
deposited. Cooperative mailings involving the mailing of any
matter on behalf of or produced for an organization not
itself authorized to mail at the special bulk rates at the
post office where the mailing is deposited must be paid at
the applicable regular rates
DMM @ 625.521 (1992). Although DMM @
625.52, which is captioned "Cooperative Mailings", does not
define "cooperative mailing", the USPS construes that term
to mean "a mailing in which one or more parties cooperate
with an authorized nonprofit mailer to share the cost, risk,
and benefits of the mailing." USPS Final Decision, at 1.
This Court is required to give great deference to an
agency's interpretation of [**5] its own
regulations. "'An agency's construction of its own
regulation binds a court in all but extraordinary cases.'"
Hoffman Homes, Inc. v. Administrator, U.S.E.P.A., 999 F.2d
256, 260 (7th Cir. 1993), citing, Homemakers N. Shore, Inc.
v. Bowen, 832 F.2d 408, 411 (7th Cir. 1987); see also
Peabody Coal Co. v. Director, OWCP, 972 F.2d 178, 183 (7th
Cir. 1992). The USPS definition of "cooperative mailing" is
reasonable and the Court will not disturb it. Nor can the
Court say that the USPS's application of that definition and
of DMM @ 625.52 to the facts of this case is arbitrary and
capricious. DMM @ 625.521 describes when cooperative
mailings may be made using the special bulk rates. According
to UPC, it "receives the first $ 15.00 of every alumni
contribution to defray the costs incurred in producing and
mailing the letters and directories." Brief of UPC, at 2.
This billing practice places the UPC mailings squarely
within the definition of a "cooperative mailing" because
UPC's revenues are linked to the success of the mailings in
generating alumni contributions. DMM @ 625.521 requires that
[**6] each cooperating organization be individually
authorized to mail at the special bulk rate. UPC lacks such
authorization.
UPC contends that even if liability can
be established, its affirmative defenses of estoppel,
consent, laches, and accord and satisfaction should prevent
the USPS from collecting the deficiency against it. UPC
believes that the USPS's acceptance of its mailings over
eighteen months estops it from denying that it agreed to
process the mailings at the lower rate. This argument is
indistinguishable from the UPC's defense of consent, and the
Court will dispose of these arguments together. UPC is quick
to point to the Seventh Circuit's decision in Portmann v.
United States, 674 F.2d 1155 (7th Cir. 1982), where the
court allowed the plaintiff to invoke estoppel against the
USPS based on misrepresentations made by a postal employee
regarding the USPS's Express Mail service. But the facts of
this matter are readily distinguishable because the record
contains no evidence that anyone at the USPS engaged in
conduct that was "done with the intention, or at least with
the expectation, that it will be acted upon by the other
party, and, thus relying, [**7] he must be led to
act upon it." Portmann, 674 F.2d at 1164 n.29, citing, J.
Pomery, Equity Jurisprudence @ 805 at 191-92. Proof of such
conduct is a necessary element of estoppel. See id. While
the Seventh Circuit has held that affirmative misconduct "is
not a requirement in the unique situation in which a party
seeks to estop the Postal Service from relying on Express
Mail insurance limits," Azar v. United [*492] States
Postal Service, 777 F.2d 1265, 1271 (7th Cir. 1985), this
matter does not involve express mail, a domain in which the
USPS competes directly with private enterprises. The
rationale for this holding is that "Congress's intent to
create a competitive enterprise would be ill-served by a
rule insulating the Service from the same kind of liability
shouldered by its competitors." Id. In addition, this is not
a situation where the USPS communicated its intentions or
expectations, as occurred in Portmann or Azar. UPC argues
that the USPS's acceptance of its mailings without warning
that they were subject to a higher rate is enough to create
an estoppel. But this Court is at a loss to see how the
silent [**8] acceptance of letters for mailing
indicates the kind of intentional or expectant conduct that
is an element of estoppel. In Portmann, the Seventh Circuit
examined the U.S. Supreme Court's holding in United States
Immigration and Naturalization Service v. Hibi, 414 U.S. 5,
38 L. Ed. 2d 7, 94 S. Ct. 19 (1973) and noted that: "Hibi
was not a strong case for invoking estoppel against the
government, since not all the requisite elements of an
equitable estoppel were present. In particular, there was no
misrepresentation by the government or its agents, but
merely a failure to inform Hibi of his rights
"
Although the court did not foreclose the possibility that
silence could create an estoppel, this Court concludes that
the evidence adduced in the record before it is not
sufficient to withstand the USPS's motion for summary
judgment; UPC has pointed to nothing in the record to
establish that the USPS acted with the intent or the
expectation that UPC would conclude that it was entitled to
use the lower mailing rate based on the non-profit status of
its clients. That the USPS approved the applications of
UPC's clients to mail materials from the Bloomington,
Indiana Post [**9] Office adds nothing because the
application does not advise the USPS whether the printer or
agent will "share the cost, risk, and benefits of the
mailing." USPS Final Decision, at 1.
While the burden rests squarely on the
party moving for summary judgment to show "that there is an
absence of evidence to support the nonmoving party's case",
Celotex Corp. v. Catrett, 477 U.S. 317, 325, 91 L. Ed. 2d
265, 106 S. Ct. 2548 (1986), the nonmoving party responding
to a properly made and supported summary judgment motion
still must set forth facts showing that there is a genuine
issue of material fact and that a reasonable jury could
return a verdict in its favor. See Wolf v. City of
Fitchburg, 870 F.2d 1327, 1329 (7th Cir. 1989); Posey v.
Skyline Corp., 702 F.2d 102, 105 (7th Cir. 1983), cert.
denied, 464 U.S. 960, 78 L. Ed. 2d 336, 104 S. Ct. 392
(1983). UPC has failed to meet this burden on its defenses
of estoppel and consent.
The result is the same for UPC's laches
and accord and satisfaction defenses. While the Seventh
Circuit has held that "laches is generally and we think
correctly assumed to be applicable to suits by government
[**10] agencies as well as by private parties",
N.L.R.B. v. P*I* E Nationwide, Inc., 894 F.2d 887, 894 (7th
Cir. 1990), UPC has not come forward with any evidence
showing that the USPS knew of UPC's billing arrangements
with its clients prior to the conclusion of its
investigation. See Matson v. Matson, 569 N.E.2d 732, 733
(Ind.App. 5 Dist. 1991)("Laches requires the presence of
three elements: (1) inexcusable delay in asserting a right;
(2) an implied waiver arising from knowing acquiescence in
existing conditions; and (3) a change in circumstances
causing prejudice to the adverse party.")(emphasis added).
The accord and satisfaction defense fails as a matter of law
because a postal clerk lacks the authority to accept less
postage than the postal regulations require. "'Of this it is
enough to say that the United States is neither bound nor
estopped by the acts of its officers or agents in entering
into an arrangement or agreement to do or cause to be done
what the law does not sanction or permit.'" Office of
Personnel Management v. Richmond, 496 U.S. 414, 110 S. Ct.
2465, 2469, 110 L. Ed. 2d 387 (1990), citing, Utah Power
& Light Co. v. United States, 243 U.S. 389, 408-409, 61
L. Ed. 791, 37 S. Ct. 387 (1917). [**11]
The only remaining issue then is damages.
The USPS originally tried to collect over $ 300,000.00 from
UPC but discovery revealed that the USPS had made an error
[*493] in its calculations. UPC contends that the
USPS also has mistakenly included "courier mailings" in the
$ 211,225.25 deficiency assessment which the USPS presently
seeks. According to UPC, these are mailings where it
prepares materials for clients and then delivers them to the
post office, acting as little more than a courier.
Defendant's Brief, at 3. As the Court understands it, these
are not cooperative mailings since UPC does not share in any
"risks, costs, or benefits" and instead collects a fixed sum
for a service. The Court concludes that a genuine issue of
material fact remains regarding the amount of the deficiency
which UPC owes to the USPS.
The Plaintiff's motion for summary
judgment is granted in part and denied in part.
It is so ORDERED this 15th day of
October, 1993.
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana
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