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NATIONAL RETIRED TEACHERS ASSN. v. USPS

April 7, 1977

NATIONAL RETIRED TEACHERS ASSOCIATION, et al., Plaintiffs
v.
UNITED STATES POSTAL SERVICE, et al., Defendants



The opinion of the court was delivered by: SMITH, JR.

Two nonprofit organizations enjoying preferred third-class mailing rates seek an order declaring invalid an August, 1975 United States Postal Service (USPS) regulation which was invoked to prohibit them from mailing material pertaining to a separate, but affiliated, nonprofit organization not qualifying for the lower rates. They also seek a refund of the amounts expended to post the material at the applicable regular rate.

 In 1970, Congress by passing the Postal Reorganization Act *fn1" revamped the entire U.S. postal system. The Act established two independent agencies, United States Postal Service and the Postal Rate Commission (PRC). While USPS was charged with managing the daily operations of the postal system, the PRC was given broad authority over changes in mail rates and classifications. *fn2"

 Long prior to the Act, Congress had established a statutory program entitling "qualified nonprofit organizations" *fn3" to mail at preferred rates. Chief among the purposes of the program was to "promote charitable causes". *fn4" Although the 1970 legislation repealed the statutory basis for the program, agency regulations *fn5" implementing the program were continued in force pending revision or repeal by USPS or a court of competent jurisdiction. *fn6" These regulations were recently ratified by the PRC. *fn7"

 Plaintiff National Retired Teachers Association (NRTA) is a nonprofit membership association, composed of retired school teachers, incorporated for the purposes, inter alia, of "[fostering] and [promoting] the social welfare, educational, scientific and philanthropic objectives and needs of retired teachers, administrators, and all other persons who either are members of the Association or are eligible for membership. . . ." *fn8" During the period pertinent to this lawsuit, NRTA has been exempt from taxation under § 501(c)(4) of the Internal Revenue Code *fn9" and has also been authorized, under applicable regulations, *fn10" to post mail at special third-class nonprofit rates.

 Having similar aims, the two associations share physical facilities and administrative personnel and jointly select an "Executive Director" as chief administrative officer of both organizations. *fn12" The bylaws governing the associations provide for consultation between their respective executive committees on matters of "common interest." *fn13" Furthermore, in order to avoid duplication of administrative expenses, such as postage fees, the two organizations have formed the NRTA-AARP Administrative Fund.

 Retired Persons Services, Inc. (RPS) is a nonprofit membership corporation, organized under the laws of the District of Columbia, which operates six "NRTA-AARP Pharmacy Service" outlets, providing mail order services from a pharmacy products catalog for members of NRTA and AARP. Under a license agreement with NRTA and AARP, RPS is required to remit to those two organizations one percent of the gross receipts on all sales from these outlets. *fn14" RPS is neither tax exempt under I.R.C. § 501 nor qualified to mail at the special third-class nonprofit rates. It draws its trustees exclusively from the leadership of NRTA and AARP and, in the event of dissolution, its assets revert to those two associations. RPS is not a party to this action.

 Defendants are USPS and its employee, Darwin Sharp, Director of the Office of Mail Classification, Rates and Classification Department.

 During the summer of 1975, NRTA and AARP jointly sought to mail a catalog of pharmaceutical products, available from the RPA service outlets, to their newly-enrolled members. The catalog met the requirements, set forth in Postal Service Manual § 134.2, *fn15" with respect to printing, size and weight of third-class mailing matter. However, USPS refused to accept the list for mailing at the third-class preferred rates.

 Shortly, thereafter, on August 26, 1975, "in order to make it clear that an organization authorized to mail at the special bulk third-class rates for qualified nonprofit organizations may mail only its own matter at these rates and may not delegate or lend the use of its permit to any other person, organization, or association," *fn16" USPS added § 134.57 to the Postal Service Manual. *fn17" Essentially, it provides that an organization qualified to mail at the preferred third-class rate "may mail only its own matter at these rates." (emphasis added). "Cooperative mailing involving the mailing of matter in behalf of or produced for an organization not authorized to mail at the special bulk third-class rates for qualified nonprofit organizations" *fn18" were to be paid at the applicable regular rate.

 On October 3, 1975, NRTA and AARP requested a ruling from defendant Sharp. By letter dated November 25, 1975, Mr. Sharp denied the request to mail the catalog at the lower rates. On January 26, 1976, plaintiffs instituted this action, which is now before the Court on Cross-Motions for Summary Judgment and plaintiffs' Motion to Strike Attachments.

 Plaintiffs raise three distinct arguments in support of their Motion for Summary Judgment. They first contend that, in promulgating § 134.57, USPS has encroached on territory which Congress specifically reserved to itself and that the regulation is, therefore, void as in excess of USPS' statutory prerogatives. *fn19" This proposition, however, is supported by neither the legislative history nor a plain reading of the statute itself. *fn20"

 Plaintiffs assert that "the legislative history indicates that Congress intended to retain for itself exclusive authority over the highly political subject of preferred rate authorizations." *fn21" Indeed, § 1202 of H.R. 17070 (the House bill, which, although substantially amended, later became law) originally provided that " Congress by legislation shall determine which classes of postal users, if any, shall be entitled to send mail free of postage or at rates some specified percentage lower than those established by the Postal Service . . . ." *fn22" (emphasis added). It was felt that the matter of free or reduced rate mailing was a "question of policy" more suited to congressional determination than to the expertise of a ratemaking commission. *fn23" However, § 1202 was not reported out of conference, and no similar provision was substituted. *fn24" On the contrary, notwithstanding the observations of the House Committee some four years later, *fn25" and subject to congressional power to amend or repeal the statute, Congress unmistakably delegated its ratemaking and classification prerogatives to the PRC. *fn26" Its objective was to remove political influence from the day to day management of the postal system. *fn27" ...


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