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PITNEY BOWES INC. v. USPS

November 5, 1998

PITNEY BOWES INC., Plaintiff,
v.
UNITED STATES POSTAL SERVICE, Defendant.



The opinion of the court was delivered by: URBINA

MEMORANDUM OPINION

 GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS AND DENYING THE CROSS-MOTIONS FOR SUMMARY JUDGMENT

 I. INTRODUCTION1

 Plaintiff Pitney Bowes Inc. ("Pitney Bowes") brought this action against Defendant United States Postal Service ("Postal Service") claiming the Postal Service, through the promulgation of regulations breached an agreement with Pitney Bowes regarding interest income from funds deposited by postage meter customers. Pitney Bowes seeks to enjoin the Postal Service from enforcing its regulations, and seeks judgment against the Postal Service in an amount to be determined at trial plus interest and costs of suit.

 This matter comes before the court on the Postal Service's motion to dismiss under Fed. R. Civ. P. 12(b)(1), (6) or, in the alternative, for summary judgment, and Pitney Bowes's cross-motion for summary judgment. Addressing first the Postal Service's motion for dismissal, the court concludes that the 1995 CMRS regulations, which direct postal meter users to send payments for resetting postage meters directly to the Postal Service (rather than to the postage meter resetting companies), constituted neither a change in ratemaking nor a change in mail classification. Therefore, the Postal Service need not have sought a recommendation from the Postal Rate Commission. Accordingly, the court the court dismisses, for failure to state a claim upon which relief may be granted, Fed. R. Civ. P. 12(b)(6), Pitney Bowes's third claim for relief, which alleges that the 1995 CMRS regulations exceeded the Postal Service's statutory authority because the Postal Service did not seek a recommendation from the Postal Rate Commission.

 The court also concludes that Congress exempted the Postal Service's 1995 Computerized Remote Meter Resetting System regulations from judicial review. Accordingly, the court dismisses, for failure to state a claim upon which relief may be granted, Fed. R. Civ. P. 12(b)(6), the portion of Pitney Bowes's complaint that substantively challenges the regulations. The court denies the Postal Service's motion to dismiss as it relates to the remainder of Pitney Bowes's complaint.

 Turning to the cross-motions for summary judgment, the court concludes that genuine issues of material fact exist, which need be resolved to determine whether a contractual arrangement existed between the Postal Service and Pitney Bowes and, if so, the terms of that contract. Additionally, genuine issues exist, at a minimum, as to Pitney Bowes's reasonable, investment-backed expectations. Accordingly, summary judgment is not appropriate at this juncture on the Fifth Amendment takings claim either. Consequently, the court denies the cross-motions for summary judgment.

 II. BACKGROUND

 Pitney Bowes manufactures and rents postage meters. (Am. Compl. at 1.) Postage meters "stamp" letters and parcels with imprints equivalent to postage stamps as the indicia of postage payment. (Pl.'s Mem. in Supp. of Mot. for Summ. J. at 4.) In the 1960s Pitney Bowes invented and patented what became known as the Computerized Remote Meter Resetting System ("CMRS"), which it continues to market under the trade name Postage by Phone. (Pl.'s Rule 108(h) Stmt. P 3; Am. Compl. at 1-2.) The CMRS permits postage meter users to reset their meters (i.e., purchase more postage) through telephonic communications at their places of business, rather than mechanically at a post office or on-site, and thereby enables postage meter users to obtain immediate access to postage on demand. (Pl.'s Rule 108(h) Stmt. P 3; Def.'s Rule 108(h) Stmt. P 1; Am. Compl. at 1-2.)

 In the early 1970s, Pitney Bowes presented its CMRS system to the Postal Service, and proposed that the Postal Service authorize it for use in the United States. (Pl.'s Rule 108(h) Stmt. P 4.) Between then and 1978 Pitney Bowes and the Postal Service exchanged oral and written communications reflecting a variety of proposals involving varied terms relating to the CMRS. (Pl.'s Rule 108(h) Stmt. P 6; Def.'s Rule 108(h) Stmt. P 6.)

 In 1978 the Postal Service and Pitney Bowes executed a "Statement of Understanding," which gave Pitney Bowes the right to operate the CMRS. (Am. Compl. at 2; Def.'s Mem. in Supp. of Mot. to Dismiss at 3.) In other words, Pitney Bowes became a meter resetting company. Under the regulatory scheme that followed the advent of the CMRS, customers' payments initially went to the meter resetting companies' lockbox bank, and then to the meter resetting companies' trustee bank. (Def.'s Rule 108(h) Stmt. at P 12; Def.'s Mem. in Supp. of Mot. to Dismiss at 3.) The funds remained with the trustee bank until the customers reset their meters, at which time the funds went to the Postal Service. *fn2" (Def.'s Rule 108(h) Stmt. P 13; Def.'s Mem. in Supp. of Mot. to Dismiss at 3-4.) For the limited time between when the funds arrived at the meter resetting company's trustee bank and when the funds went to the Postal Service, the funds earned interest, and the meter resetting companies retained that interest. (See Am. Compl. at 3; Def.'s Mem. in Supp. of Mot. to Dismiss at 4; Def.'s Rule 108(h) Stmt. at P 16.)

 Following the execution of the 1978 Statement of Understanding, Pitney Bowes entered into an agreement with the Hartford National Bank and Trust Company, which agreed to act as trustee of the CMRS customer advance deposits, and Pitney Bowes agreed to act as the agent of the trustee. (Pl.'s Rule 108(h) Stmt. P 11.) Pitney Bowes also entered into written contracts and trust agreements with the CMRS customers, wherein the customers appointed Pitney Bowes as their agent and expressly waived any claim to interest or other income earned by the trustee bank's investment of their advance deposits. (Pl.'s Rule 108(h) Stmt. P 13.) While the parties dispute the mechanics of the transfer of funds, they appear to agree that the interest earned on the advance deposits ultimately went to Pitney Bowes. (Pl.'s Rule 108(h) Stmt. P 12; Def.'s Rule 108(h) Stmt. P 12.)

 Between 1978 and 1995 the CMRS became a commercial success. (Am. Compl. at 2.) Actually, four companies, including Pitney Bowes, had authorization to act as meter resetting companies. (Def.'s Mem. in Supp. of Mot. to Dismiss at 2; Def.'s Rule 108(h) Stmt. P 3) Of these, Pitney Bowes controlled 89% of the market, which consisted of over 1.1 million outstanding CMRS meters as of February 1998. (Def.'s Mem. in Supp. of Mot. to Dismiss at 2; Def.'s Rule 108(h) Stmt. P 4.)

 On June 9, 1995, the Postal Service promulgated new regulations governing the CMRS, 60 Fed. Reg. 30,714. (See Def.'s Rule 108(h) Stmt. P 5; Pl.'s Rule 108(h) Stmt. P 21; Am. Compl. at 3; Def.'s Mem. in Supp. of Mot. to Dismiss at 2.) Pitney Bowes's grievance stems from the fact that these 1995 CMRS regulations directed customers to send their to a Postal Service lockbox account for processing and transfer to the United States Treasury. (Def.'s Mem. in Supp. of Mot. to Dismiss at 5-6; Def.'s Rule 108(h) Stmt. P 22.) Because the CMRS regulations cut out the meter resetting companies' lockbox banks and trustee banks, Pitney Bowes no longer had the opportunity to retain the customer interest on advance deposits. *fn3" The 1995 CMRS regulations also continued to require the meter resetting companies to perform most of the CMRS services. (Am. Compl. at 3.)

 Pitney Bowes's amended complaint alleges six causes of action: (1) the Postal Service unjustly enriched itself at the expense of Pitney Bowes and its CMRS customers; (2) the Postal Service, through the promulgation of the CMRS regulations, breached the 1978 Statement of Understanding and related agreements, upon which Pitney Bowes justifiably relied; (3) the Postal Service did not seek a decision from the Postal Rate Commission authorizing the "fee" represented by the interest on advance deposits "appropriated and retained by the Postal Service," thereby exceeding the Postal Service's authority; (4) the CMRS regulations are arbitrary and capricious, in that they do not relate to any legitimate Postal Service purpose; (5) the Postal Service wrongfully appropriated monies, payable to Pitney Bowes pursuant to contractual arrangements between Pitney Bowes and its CMRS customers; and (6) the Postal Service's actions in promulgating the CMRS regulations and breaching the contractual arrangement constituted an unconstitutional taking under the Fifth Amendment. (Am. Compl. at 4, 13-14.) Pitney Bowes alleges jurisdiction under 28 U.S.C. §§ 1331(a), 1339 and 39 U.S.C. § 409(a).

 III. DISCUSSION

 A. Motion to Dismiss

 i. Standard of Review

 Before a court may decide the merits of a case, the court must first have jurisdiction to hear it. See Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991) (citing Bell v. Hood, 327 U.S. 678, 682, 90 L. Ed. 939, 66 S. Ct. 773 (1946)). The standard of review for a motion to dismiss pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction depends upon the purpose of the motion. See Freiburger v. Emery Air Charter, Inc., 795 F. Supp. 253, 256 (N.D. Ill. 1992); 5A Wright & Miller, Federal Practice & Procedure: Civil 2d § 1361 at 456 (2d ed. 1990). If the motion challenges the sufficiency of the allegations of subject matter jurisdiction, the district court must accept all of the complaint's well-pleaded factual allegations as true and draw all reasonable inferences from those allegations in the plaintiff's favor. United Trans. Union v. Gateway Western R. Co., 78 F.3d 1208 (7th Cir. 1996) (citing Rueth v. EPA, 13 F.3d 227, 229 (7th Cir. 1993)); 5A Wright & Miller, § 1363 at 456. The plaintiff bears the burden of persuasion to establish subject matter jurisdiction by a preponderance of the evidence. Darden v. United States, 18 Cl. Ct. 855, 859 (Fed. Cl. 1989); Kehr, 926 F.2d at 1409; Boudreau v. United States, 53 F.3d 81, 82 (5th Cir. 1995).

 A motion to dismiss pursuant to Rule 12(b)(6) does not test whether the plaintiff will prevail on the merits but instead whether the claimant has properly stated a claim. See Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974). The court may dismiss a complaint for failure to state a claim only if "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984); see also Conley v. Gibson, 355 U.S. 41, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). As with motions under Rule 12(b)(1), the court must accept ...


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