U.S. Postal Service v. Flamingo Industries, et al. (02/25/2004)

Questions presented: Whether the U.S. Postal Service is a "person" amenable to suit under federal antitrust laws, which define person to include "corporations and associations existing under or authorized by" the laws of the United States?

BY: MORGAN EVANS, MEDILL NEWS SERVICE

Whats the difference between a Flamingo and a Mexican mail sack? A lot, according to Flamingo Industries, an Illinois-based mail sack manufacturer.

In 2000, Flamingo sued the U.S. Postal Service in federal court in California under federal antitrust laws, alleging that the Postal Service tried to create a monopoly when it ended Flamingos contract to make mail sacks. Flamingo said the Postal Service wanted to buy cheaper mail sacks from Mexico.

Flamingo claimed the Postal Service changed its mail sack standards, making them impossible to make with modern machines, and declared a "fake emergency in the supply of mail sacks." Flamingo said this emergency would have allowed the Postal Service to give no-bid contracts to foreign manufacturers without allowing domestic companies to compete for them.

The District Court dismissed the monopoly claim because the federal government is protected by sovereign immunity from antitrust liability. It dismissed a claim for the "breach of the implied covenant of good faith and fair dealing" because Flamingo had not exhausted "administrative remedies" under the Federal Torts Claim Act. The court dismissed the remaining claims based on a lack of jurisdiction and improper venue (because neither party is from California).

The 9th Circuit Court of Appeals unanimously affirmed on a number of the counts, but reversed on the key finding of sovereign immunity from antitrust liability (and also on the issue of the Postal Service violating its own procurement manual). It ruled that the 1970 Postal Reorganization Act reorganized the Postal Service to such an extent that it lost its sovereign status, and thereby waived the its sovereign immunity, a cloak that protects government agencies from being sued. It also held that the Postal Service can be sued under federal antitrust laws, which allow for suits against "persons."

In disposing of the first question, the 9th Circuit pointed to the language in the 1970 act that provides that the Postal Service has the power "to sue and be sued in its official name." In passing the law, Congress made it clear that the Postal Service was to be run more like a business than its predecessor as it was being launched into the commercial world, Judge David Thompson wrote for the 9th Circuit panel.

The panel then addressed whether the waiver of sovereign immunity reaches federal antitrust actions as well as other suits, and concluded it did.

Although a federal sovereign is not a "person" under the antitrust laws, the court said emphatically, "the Postal Service is not a sovereign." In so concluding, the 9th Circuit distinguished a number of precedents that stood for the proposition that federal instrumentalities are immune from antitrust liability.

"Because the Postal Service is an entity with the status of a private commercial enterprise, it fits within the common meaning of the word Ôperson, just as does any other private corporation," Thompson wrote.

Harold Krent, a lawyer representing Flamingo Industries, said the Postal Service shouldnt be exempt from anything.

"The Postal Service should abide by all the rules that Federal Express and UPS have to abide by," he said.

In its petition for Supreme Court review, the U.S. Solicitor General argued for the Postal Service that if it were open to antitrust suits, it would be exposed to costs it cant afford. The petition noted that the Postal Service, which employs 770,000 workers and delivers 200 billion pieces of mail a year, might experience "significant and unwarranted litigation" that would undermine its ability "to provide universal mail service at reasonable rates."

Both sides agree that Congress waived the Postal Services sovereign immunity in 1970 by declaring that it can "sue and be sued." The key question the Supreme Court was being asked to consider was whether Congress intended this language to apply to antitrust law.

On May 27, 2003, the U.S. Supreme Court accepted review in the case, and on Feb. 25, 2004, unanimously reversed. For the Court, Justice Anthony Kennedy wrote that the postal service is not a separate antitrust person from the United States but is part of the government, and therfore not subject to antitrust liability.

Attorneys: For U.S. Postal Service:THEODORE B. OLSONSolicitor General, Counsel of RecordROBERT D. MCCALLUM, JR.Assistant Attorney GeneralEDWIN S. KNEEDLERDeputy Solicitor GeneralLISA S. BLATTAssistant to the Solicitor GeneralMARK B. STERNR. CRAIG GREEN