Judge Rejects Private Carriers’ Bid to Keep Routes

WASHINGTON (CN) – Denying private contractors’ request for a restraining order, a federal judge ruled the U.S. Postal Service must abide by an arbitration order to give more than 100 routes to its own union workers.

Earlier this month, the National Star Route Mail Contractors Association asked the Washington, D.C. federal court for an injunction to keep the Postal Service from abiding by an arbitration decision that settled a labor dispute with the American Postal Workers Union.

The union had argued the Postal Service violated a collective bargaining agreement by awarding private contracts for transport of the mail without prior notice to the union. An arbitrator agreed, finding it breached a “national agreement” that requires advance notice and discussion before it uses third-party contractors for specific routes.

The arbitrator said it was unlikely the disputed routes would have been granted to in-house drivers, even with proper notice, but nonetheless said the Post Office should ditch its contracts with National Star.

To settle its dispute with the union, the Postal Service canceled 102 contracts to give the work to in-house employees. National Star argued the move will not save any money, but will cost the trade group’s members hundreds of jobs.

“The terminated contractors will lose more than $57 million in revenue per year, be forced to lay off longtime employees, and be left with idled and underutilized equipment and facilities,” the 3,000-member association claimed in its Nov. 30 complaint.

National Star said the contract terminations violate the Postal Reorganization Act, which allows the Postal Service to contract with third-party contractors or use in-house drivers.

The law stipulates that when choosing between the two, the Postal Service “shall use the mode of transportation which best serves the public interest,” and must consider the cost, according to National Star’s complaint.

In a ruling issued Monday, U.S. District Judge Colleen Kollar-Kotelly found the court did not have jurisdiction over National Star’s lawsuit and that its claims were not yet ripe for adjudication. The judge denied the association’s request for a temporary restraining order and preliminary injunction.

“On the record before this Court, it is ultimately uncertain whether the contracts held by any of plaintiff’s members will be terminated by the Postal Service,” the judge wrote. “The arbitration award provides the Postal Service with wide latitude to negotiate with the union, to apply the Postal Reorganization Act’s § 5005 public-interest analysis to identify which routes are best suited for conversion, to extend the timeframe for compliance with the award, and to come back to the arbitrator to revisit the remedy if necessary.”

Kollar-Kotelly said the U.S. Court of Federal Claims is the proper venue for National Star’s claims.

“The Court finds that plaintiff’s request here is a request for specific performance,” she wrote.Plaintiff has made no effort to show that it would be unable to recover an appropriate damages remedy in the Court of Federal Claims for wrongful termination of the contract, and therefore has not shown that the relief available there would be ‘inadequate.’”

While the judge denied its request for a restraining order and injunction with prejudice, she said National Star is not barred from seeking relief in the appropriate forum.

In an interview with Courthouse News earlier this month, David P. Hendel, an attorney for National Star, said an expert witness for the American Postal Workers Union estimated that in-house drivers cost $1.6 million to $3.5 million more per fiscal quarter than private contractors would charge for the same work.

Despite continued growth in income year over year, the Postal Service has still been struggling financially for years due to a congressional mandate that requires it to prefund retiree health benefits, causing a $5.6 billion deficit in the 2016 fiscal year. The service said that without the prefunding obligation, it would have recorded a profit of about $200 million.

On its website, the Postal Service says it is not taxpayer funded and increased costs from using in-house drivers will not come from taxpayer money.

“The Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations,” its website states.

The Postal Service did not immediately return a request for comment Thursday.

Hendel is an attorney with the Washington firm Husch & Blackwell.

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