Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Ascom Hasler Mailing Systems, Inc v. United States Postal Service

September 30, 2011

ASCOM HASLER MAILING SYSTEMS, INC., PLAINTIFF,
v.
UNITED STATES POSTAL SERVICE, DEFENDANT.
NEOPOST, INC., PLAINTIFF,
v.
UNITED STATES POSTAL SERVICE, DEFENDANT.



The opinion of the court was delivered by: Paul L. Friedman United States District Judge

OPINION These consolidated cases are before the Court on the parties' objections to the report and recommendation of Magistrate Judge John M. Facciola dated February 3, 2011. In that report and recommendation, Magistrate Judge Facciola recommended (1) that plaintiffs' motion for summary judgment be granted on plaintiffs' contract claim and that defendant's motion for summary judgment be denied on that claim; (2) that defendant's motion to dismiss and the parties' cross-motions for summary judgment be denied as moot on plaintiffs' remaining claims; and (3) that defendant's motion to strike certain affidavits submitted in support of plaintiffs' motion for summary judgment be denied as moot. See Ascom Hasler Mailing Sys. Inc. v. USPS ("R&R"), Civil Action Nos. 00-1401 & 00-2089, 2011 WL 1044480, at *5 (D.D.C. Feb. 3, 2011).

Rule 72(b) of the Federal Rules of Civil Procedure authorizes the referral of dispositive motions to a magistrate judge for a report and recommendation. When a party files written objections to any part of the magistrate judge's recommendation, the Court considers de novo those portions of the recommendation to which objections have been made, and "may accept, reject, or modify the recommended decision; receive further evidence; or return the matter to the magistrate judge." FED. R. CIV. P. 72(b)(3). The parties each have filed objections to Magistrate Judge Facciola's report and recommendation, and briefing on those objections now is complete. Upon consideration of the parties' papers, the relevant legal authorities, and the entire record in this case, the Court will reject Magistrate Judge Facciola's recommendations; will deny in part, deny as moot in part, and grant in part defendant's motion to dismiss; will deny defendant's motion to strike; and will deny the parties' cross-motions for summary judgment.*fn1

I. BACKGROUND

Magistrate Judge Facciola previously has described the factual and procedural background on this case. See, e.g., R&R, 2011 WL 1044480, at *1-2; see also Ascom Hasler Mailing Sys., Inc. v. USPS, Civil Action Nos. 00-1401 & 00-2089, 2010 WL 4116858, at *1 (D.D.C. Oct. 19, 2010); Ascom Hasler Mailing Sys., Inc. v. USPS, Civil Action Nos. 00-1401 & 00-2089, 2007 WL 724896, at *1-2 (D.D.C. 2007). The Court therefore will limit its discussion accordingly and will draw largely from Magistrate Judge Facciola's prior decisions.

In the 1960s, Pitney Bowes invented and patented the Computerized Remote Meter Resetting System ("CMRS"). R&R, 2011 WL 1044480, at *1. Marketed to the public under the trade name "Postage by Phone," this CMRS system "permits customers to use their phones to purchase more postage [for their postage meter] without having to take the meter to the nearest post office to have it reset." Ascom Hasler Mailing Sys., Inc. v. USPS, 2007 WL 724896, at *1.

In 1978, defendant, the United States Postal Service ("USPS"), and Pitney Bowes entered into a Statement of Understanding ("SOU") that gave Pitney Bowes the right to operate the new CMRS system. R&R, 2011 WL 1044480, at *1. Later, USPS authorized plaintiffs Ascom Hasler Mailing Systems, Inc. ("Ascom") and Neopost, Inc., corporations that are competitors of Pitney Bowes, to operate their own version of this CMRS system as well. Id.*fn2

Under the CMRS system, "customers advanced payments for postage" to meter resetting companies like Pitney Bowes, Ascom, and Neopost. Ascom Hasler Mailing Sys., Inc. v. USPS, 2007 WL 724896, at *1. As a result, this CMRS system provided a significant financial advantage to these meter resetting companies. See id. As Magistrate Judge Facciola explained:

[Customers'] money went first to the meter resetting companies' lockbox banks and from there to the companies' trustee banks. The funds remained with the trustee banks until the customer actually used the postage it had purchased for the postage meter. At that point, the funds went from the appropriate trustee bank to the Postal Service. During the interval between receipt of the advance payment from the customer and the transmittal of those funds to the Postal Service, the funds in the meter resetting companies' trustee accounts earned interest, which the meter resetting companies kept. It was hardly small change; the interest amounted to millions of dollars a year.

R&R, 2011 WL 1044480, at *1.

This process changed in 1995 when USPS promulgated new regulations governing the meter resetting system. R&R, 2011 WL 1044480, at *1. The 1995 regulations required that customers "send their advance payments directly to the Postal Service for ultimate transmittal to the United States Treasury. As a result, the meter resetting companies could no longer collect the interest on their customers' advance deposits." Id. Compare 39 C.F.R. § 501.15(d) (Under the 1995 regulations, a CMRS customer must submit deposits "to the Postal Service's designated bank account."), with 44 FED. REG. 21,015, at 21,017 (Apr. 9, 1979) (Before the promulgation of the 1995 regulations, a CMRS customer would submit an advance deposit to a trustee bank that then would be wired to the Postal Service Federal Reserve Bank Account following a transaction.).

Two years after the new regulations went into effect, on December 19, 1997, Pitney Bowes sued USPS, alleging that USPS, "through the promulgation of [the 1995] regulations, breached an agreement with Pitney Bowes regarding interest income from funds deposited by postage meter companies." Pitney Bowes, Inc. v. USPS, 27 F. Supp. 2d 15, 17 (D.D.C. 1998). Among other things, Pitney Bowes claimed that USPS "unjustly enriched itself at the expense of Pitney Bowes and its CMRS customers"; that USPS "through the promulgation of the CMRS regulations, breached the 1978 [SOU] and related agreements, upon which Pitney Bowes justifiably relied"; that USPS "wrongfully appropriated monies, payable to Pitney Bowes pursuant to contractual arrangements between Pitney Bowes and its CMRS customers"; and that USPS' "actions in promulgating the [1995] CMRS regulations and breaching the contractual arrangement constituted an unconstitutional taking under the Fifth Amendment." Id. at 19.

That case was assigned to Judge Urbina. In 1998, Judge Urbina issued an opinion in which he denied cross-motions for summary judgment, concluding, among other things, that there were genuine issues of material fact. Pitney Bowes, Inc. v. USPS, 27 F. Supp. 2d at 25.

Regarding Pitney Bowes' contract claim and its Fifth Amendment takings claim, Judge Urbina concluded: "[T]he factual record requires further development for a determination of whether a contract existed and, if so, certain of its terms. Further, [the] factual record requires further development for a determination of Pitney Bowes's reasonable, investment-backed expectations. Thus, . . . summary judgment is not appropriate at this juncture." Id. Shortly thereafter, in 1999, that case settled. See R&R, 2011 WL 1044480, at *2.

In 2000, Ascom and Neopost filed similar suits against USPS arising out of USPS' promulgation of the 1995 regulations. See generally Ascom Compl.; Neopost Compl. The complaints of Ascom and Neopost are substantively identical, making the same eight claims against USPS:

(1) USPS' actions constitute a taking of plaintiffs' private property for public use without just compensation in violation of the Fifth Amendment to the United States Constitution. Ascom Compl. ¶¶ 52-56; Neopost Compl. ¶¶ 49-53.

(2) USPS unjustly enriched itself at plaintiffs' expense. Ascom Compl. ¶¶ 57-59; Neopost Compl. ¶¶ 54-56.

(3) USPS breached the terms of its express, implied, or quasi-contractual arrangements with plaintiffs. Ascom Compl. ¶¶ 60-64; Neopost Compl. ¶¶ 57-60.

(4) Plaintiffs were third-party beneficiaries of the 1978 SOU between Pitney Bowes and USPS. Ascom Compl. ¶¶ 65-69; Neopost Compl. ¶¶ 61-65.

(5) By compensating Pitney Bowes but not plaintiffs, USPS breached its constitutional obligation to treat similarly situated parties equally. Ascom Compl. ¶¶ 70-72; Neopost Compl. ¶¶ 66-69.

(6) Plaintiffs relied to their detriment on USPS' promise that they would be permitted to keep interest, and they are now entitled to it. Ascom Compl. ¶¶ 73-76; Neopost Compl. ¶¶ 70-72.

(7) USPS violated a duty to treat regulated parties equally in compensating Pitney Bowes but not plaintiffs. Ascom Compl. ¶¶ 77-79; Neopost Compl. ¶¶ 73-75.

(8) Plaintiffs are entitled to recovery in quantum meruit. Ascom Compl. ¶¶ 80-82; Neopost Compl. ¶¶ 76-79.

Shortly after plaintiffs' filed their complaints, USPS moved to dismiss all eight claims on the ground that each failed to state a claim upon which relief could be granted; USPS also asserted that this Court lacked jurisdiction over this case. See Ascom Hasler Mailing Sys., Inc. v. USPS, 2007 WL 724896, at *2. On March 6, 2007, Magistrate Judge Facciola issued a memorandum opinion recommending that USPS' motion to dismiss be denied except as to plaintiffs' fourth claim, the third-party beneficiary claim, on which he recommended that USPS' motion be granted. Id. at *7. Both sides filed objections to that memorandum opinion.

On September 27, 2007, the Court issued a Memorandum Opinion and Order resolving the parties' objections. See generally Memorandum Opinion and Order, Sept. 27, 2007 [Dkt. No. 95]. First, regarding USPS' jurisdictional arguments, the Court held: "Congress has waived sovereign immunity via the 'sue and be sued' clause of the Postal Reorganization Act, and neither the Contract Disputes Act nor the Tucker Act deprive this Court of jurisdiction." Id. at 6. The Court then dismissed plaintiffs' third-party beneficiary claim, but denied USPS' motion to dismiss regarding the other seven claims in plaintiffs' complaint. Id. at 6-7.

On June 4, 2010, the parties filed cross-motions for summary judgment; USPS also filed a motion to dismiss certain claims for lack of subject matter jurisdiction or for failure to state a claim. And in the course of briefing the cross-motions, on June 21, 2010, USPS filed a motion to strike certain affidavits that plaintiffs rely upon in their motion for summary judgment. Magistrate Judge Facciola held a motions hearing on November 5, 2010, and he issued his report and recommendation on those four motions on February 3, 2011.

II. FEBRUARY 3, 2011 REPORT AND RECOMMENDATION In his report and recommendation, Magistrate Judge Facciola recommended that plaintiffs' motion for summary judgment be granted on the contract claim and that USPS' motion for summary judgment be denied on that claim. R&R, 2011 WL 1044480, at *5. He further recommended that USPS' motion to dismiss and the parties' cross-motions for summary judgment be denied as moot on the remaining claims. Id. Finally, he recommended that USPS' motion to strike be denied as moot because he avoided relying on any of the objected-to affidavits in arriving at the conclusions in his report and recommendation. Id.

In his analysis, Magistrate Judge Facciola stated that "[t]he central dispute between the parties is whether there came into existence a contract from which would flow an obligation to continue to pay the plaintiffs the interest as long as they continued to permit USPS' customers to use their meter resetting systems." R&R, 2011 WL 1044480, at *2. Magistrate Judge Facciola then focused on what he considered to be four undisputed material facts in the record. He stated:

Discounting the parties' characterizations, I do not see any dispute as to the following material facts:

1. After the 1978 SOU, USPS desired to encourage competition between Pitney Bowes and its competitors in the meter resetting business in the interest of having a level playing field.

2. The desire to foster competition in this manner led USPS employees to inquire when Neopost would develop its competing product.

3. During conversations between Neopost officials and USPS officials, the latter referred to Neopost's capability to generate the same income stream as Pitney Bowes was generating and indicated that Neopost would be treated as Pitney Bowes was treated.

4. Neopost expended substantial resources to bring its system on line.

R&R, 2011 WL 1044480, at *2-3.

In view of those four undisputed material facts, Magistrate Judge Facciola concluded that USPS entered into separate contracts with each plaintiff, that is, Ascom and Neopost. R&R, 2011 WL 1044480, at *3-4. He further concluded that there was no fair argument that the contracts were not definite in their duration and terms: the contracts' "duration and terms were simplicity itself - plaintiffs would be treated the same as Pitney Bowes with reference to Pitney Bowes' capture of the interest on customers' accounts for as long as Pitney Bowes captured that interest. No more no less." Id. And finally, he concluded that there was "no genuine issue of material fact that the powers possessed by the [USPS] official with whom plaintiffs dealt when they made the agreement to develop the system, Fred Ganley, included authority over all regulations and compliance issues pertaining to meter resetting systems and new product development." Id. According to Magistrate Judge Facciola, the nature of Mr. Ganley's duties required the conclusion that Mr. Ganley had implied actual authority to bind USPS to contracts with plaintiffs. Id. Consequently, Magistrate Judge Facciola recommended that plaintiffs' motion for summary judgment be granted on the contract claim.

Having found the existence of contracts with clear terms, Magistrate Judge Facciola then recommended denying as moot USPS' motion to dismiss, which does not pertain to the contract claim, and recommended denying the parties' cross-motions for summary judgment on the remaining claims. R&R, 2011 WL 1044480, at *5. Furthermore, because he did not rely on any of the plaintiffs' affidavits that were objected to by USPS in arriving at his conclusion that the parties entered into contracts, he recommended denying as moot USPS' motion to strike. Id.

Both sides filed timely objections to Magistrate Judge Facciola's report and recommendation. Plaintiffs' objection is a limited one. As they describe it, "[p]laintiffs do not object to Judge Facciola's rulings on the pending motions, or his analysis of the claims, save for one paragraph discussing the duration of the contract." Pls. Objections at 1. As discussed, regarding the duration and terms of the contract, Magistrate Judge Facciola concluded: "Its duration and terms were simplicity itself - plaintiffs would be treated the same as Pitney Bowes with reference to Pitney Bowes' capture of the interest on customers' accounts for as long as Pitney Bowes captured that interest. No more no less." R&R, 2011 WL 1044480, at *4 (emphasis added). Plaintiffs believe that the italicized language is at odds with the substance of Magistrate Judge Facciola's report and recommendation. See Pls. Objections ¶¶ 1-3. Plaintiffs contend that if that italicized language is applied literally, then plaintiffs' right to collect interest income would have terminated when the regulations changed in 1995 because Pitney Bowes was no longer collecting interest at that time. See id. ¶ 3. According to plaintiffs, the more appropriate conclusion on the duration of the contract, consistent with the substance of the report and recommendation, is that the "contract . . . came into existence as a result of the parties' actions [and] endures for as long as USPS customers continue to use [p]laintiffs' CMRS to pay for postage." Id. ¶ 7.

In contrast to plaintiffs' limited objection, USPS argues in its objections that Magistrate Judge Facciola's report and recommendation should be rejected entirely, and that the Court should dismiss certain claims and should grant summary judgment to USPS on all other claims. Def. Objections at 1-2. USPS disputes Magistrate Judge Facciola's legal conclusion that USPS entered into contracts with Ascom and Neopost. See id. USPS argues further that, to the extent that there is any evidence of a contract between Neopost and USPS, there is no evidence whatsoever in the record that USPS entered into a contract with Ascom. See id. at 1-3. Finally, USPS argues that even if there were contracts with both Ascom and Neopost, there is no evidence in the record of any breach of such contracts. See id. at 12-13.

III. LEGAL STANDARD

A. Rule 72(b)

Both parties have served and filed specific written objections to the proposed recommendations of Magistrate Judge Facciola regarding (1) USPS' motion to dismiss under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure; (2) the parties' cross-motions for summary judgment under Rule 56; and (3) USPS' motion to strike. Where, as here, a party files written objections to any part of a magistrate judge's recommendation, the Court considers de novo those portions of the recommendation to which objections have been made, and "may accept, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.