(CN) - The U.S. Postal Service must better explain why it authorized an airline to deliver certain freight across otherwise unreachable parts of rural Alaska, the D.C. Circuit ruled.
In late 2009, the Postal Service determined that Peninsula Airways, or PenAir, could carry "nonpriority bypass mail" on five Alaska routes under the Rural Service Improvement Act of 2002.
Nonpriority bypass mail refers to freight carried by small planes to tiny towns in Alaska that are not reachable by land. (Page 2)
The small Alaskan towns involved in the case are Dillingham, King Salmon, Aniak, McGrath and Unalakleet. They can be accessed only by plane or boat, and depend on bypass mail for food, hospital supplies, generators and other necessities.
Though they are small towns, these locations are called "hub points" for even smaller settlements. All bypass mail sent to them comes from either Anchorage or Fairbanks.
The Postal Service considers the type of aircraft and the number of similar carriers serving the same route in determining how much to pay private aircraft mail carriers.
Since competing planes get an equal share of bypass mail on each route under the Postal Service's "equitable tender" practice, each market entrant dilutes the existing
carriers' shares proportionately.
In a federal complaint filed in Washington, D.C., three PenAir competitors - Northern Air Cargo, Tatonduk Outfitters Limited (Events Air Cargo) and Lynden Air Cargo -claimed that the Postal Service determination about PenAir exceeded its statutory authority.
Normally, the Postal Service can contract mail delivery on those routes exclusively to "existing mainline carriers" or carriers who were certified and performing service as of Jan. 1, 2001.
But an exception to the Rural Service Improvement Act says that the Postal Service can also contract "new" carriers, those hired after Jan. 1, 2002, if they provide regular passenger service.
But carriers are not eligible until they have performed two noncontract flights within Alaska per week for at least a year. The law otherwise limits a carrier's eligibility to deliver mail on routes from Anchorage or Fairbanks to the hub points.
PenAir's competitors argued that PenAir was not a "new" carrier, and that, even if it were, PenAir did not satisfy the prior service requirement.
After PenAir intervened in the complaint against the Postal Service, a federal judge sided upheld the agency action at summary judgment, finding that the definition of a "new" carrier is unambiguous and that PenAir is qualified.
In a partial ruling for PenAir's competitors, however, the court held that the supposedly unambiguous prior-service requirement had not yet been satisfied as to PenAir.
Though the court had issued an initial injunction that enjoined the PenAir contract until it satisfied the prior service requirement, the court later credited PenAir's prior service and PenAir resumed the five Post Office routes in December 2010.
In vacating those decisions last week, the D.C. Circuit called this case "a partial primer as to how not to defend or adjudicate a challenge to agency action in federal District Court." (Emphasis in original.)
In two letters granting PenAir's request to serve as an air mail contractor on the five Alaska routes, the program manager of Intra-Alaska Air Transportation, a Postal Service agent, offered only the following explanation: "Having reviewed the matter, we have concluded that your letters describe service which would make you eligible for the equitable tender you have requested in those markets."
The Postal Service's decision "lacked any careful analysis or explanation," Judge Laurence Silberman wrote for a three-judge panel. (pg. 15)
"The District Court should have remanded the case, at the outset, to the Postal
Service for a complete and authoritative agency interpretation of the statute because it is quite obviously ambiguous," Silberman added.
Chief Judge David Sentelle did not join in the last paragraph of the majority opinion, which called it anomalous for the trial court to issue the injunction and not remand the case for further agency action.
Sentelle explained in a concurring opinion that the last paragraph "gratuitously addresses questions not before us and proceeds from a misapprehension of law."
In finding that the District Court should have remanded from the outset, the majority "seems to presuppose that the court cannot construe an ambiguous statute in an agency case but must always remand for the agency's interpretation in the first instance," the opinion states.
"I know of no such rule of law," Sentelle wrote.
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