UNITED STATES SUPREME COURT DECISIONS ON-LINE

Section 3622(b) of the Postal Reorganization Act (Act) provides that the Postal Rate Commission shall recommend rates for the classes of mail in accordance with nine factors, the third of which (§ 3622(b)(3)) is

"the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type."

In reviewing the ratemaking proceedings involved here, the Court of Appeals for the Second Circuit -- contrary to earlier decisions of the Court of Appeals for the District of Columbia Circuit in reviewing prior ratemaking proceedings -- held that the Act does not require the maximum possible use of cost-of-service principles, including allocation of costs on unverified inferences of causation, but permits use of other approaches, including the Rate Commission's original two-tier approach under which the rate floor for each class of mail was established by first determining the portion of the Postal Service's total costs verifiably caused by ("attributable to") that class of mail, and then "reasonably assigning" remaining costs to the various classes of mail on the basis of the other noncost, discretionary factors set forth in § 3622(b).

Held:

1. Although the Act divides ratemaking responsibility between the Rate Commission and the Postal Service, the legislative history and the Act's structure demonstrate that ratemaking authority was vested primarily in the Rate Commission. Thus, its interpretation of § 3622(b) is due deference. Pp. 462 U. S. 820-821.

2. In enacting the Act to divest itself of its previous control over setting postal rates, Congress was concerned about the influence of lobbyists and resulting discrimination in rates among classes of postal service, but it did not intend to require maximum use of cost-of-service principles or to eliminate the ratesetter's discretion as to the methods for assigning clubjuris

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costs; it simply removed the ratesetting function from the political arena. The legislative history does not suggest that Congress viewed the exercise of discretion as an evil in itself. Pp. 462 U. S. 821-823.

3. The Rate Commission's two-tier approach is a reasonable construction of 3622(b)(3). The two-tier approach -- one tier based on causation and the second tier based on other factors -- is consistent with the statutory language, and is supported by the legislative history. Pp. 462 U. S. 823-825.

4. The statute requires attribution of any costs for which the source can be identified, but leaves it to the Rate Commission, in the first instance, to decide which methods provide reasonable assurance that costs are the result of providing one class of service. Pp. 462 U. S. 825-833.

(a) The Act does not dictate a specific method for identifying causal relationships between costs and classes of mail, but envisions consideration of all appropriate costing approaches. Pp. 462 U. S. 825-826.

(b) The Rate Commission acted consistently with the statutory mandate and Congress' policy objectives in refusing to use accounting principles lacking an established causal basis. On its face, § 3622(b)(3) does not deny to the expert ratesetting agency the authority to decide which methods sufficiently identify the requisite causal connection between particular services and particular costs. The legislative history supports the Rate Commission's view that, when causal analysis is limited by insufficient data, the statute envisions that the Rate Commission will press for better data, rather than construct an "attribution" based on unsupported inferences of causation. Pp. 462 U. S. 826-829.

(c) Because the Rate Commission has decided that methods involving attribution of long-term and short-term variable costs reliably indicate causal connections between classes and postal rates, the Act requires that they be employed. But the Act's language and legislative history support the Rate Commission's position that Congress did not intend to bar the use of any reliable method of attributing costs. Pp. 462 U. S. 829-832.

(d) A statement in the legislative history indicating that the rate floor for each class of mail should consist of short-term variable costs does not demonstrate that the Rate Commission's inclusion of long-term variable costs, and consideration of other methods of identifying causation, are inconsistent with the statutory mandate or frustrate Congress' policy. The statute's plain language and prior legislative history indicate that Congress' broad policy was to mandate a rate floor consisting of all costs that could be identified, in the Rate Commission's view, as causally linked to a class of postal service. Pp. 462 U. S. 832-833.

663 F.2d 1186, affirmed and remanded.

BLACKMUN, J., delivered the opinion for a unanimous Court. clubjuris

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