UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
decided: July 12, 1971.
AMERICAN BIBLE SOCIETY, A NONPROFIT ORGANIZATION OF THE STATE OF NEW YORK
WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES, ET AL., APPELLANTS. (D. C. CIVIL ACTION NO. 46-69) AMERICAN BOOK-STRATFORD PRESS, INC. V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES, ET AL., APPELLANTS. (D. C. CIVIL ACTION NO. 941-68) MONTVILLE WAREHOUSING COMPANY, INC., A NEW JERSEY CORP. V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES, ET AL., APPELLANTS. (D. C. CIVIL ACTION NO. 1120-68) AMERICAN BOOK PUBLISHERS COUNCIL, INC., ET AL. V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES, ET AL., APPELLANTS. (D. C. CIVIL ACTION NO. 1194-68) ASSOCIATED BOOK SERVICE, INC. V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES, ET AL., APPELLANTS. (D. C. CIVIL ACTION NO. 1332-68) SCHOLASTIC MAGAZINES, INC. V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES, ET AL., APPELLANTS. (D. C. CIVIL ACTION NO. 1407-68) THE MACMILLAN COMPANY V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES, ET AL., APPELLANTS. (D. C. CIVIL ACTION NO. 1408-68) WAYNE WAREHOUSING CORP. V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES, ET AL., APPELLANTS. (D. C. CIVIL ACTION NO. 1358-68) PRENTICE HALL INC. V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES, JOSEPH THOMAS, POSTMASTER, ENGLEWOOD, NEW JERSEY, APPELLANTS. (D. C. CIVIL ACTION NO. 102-69) HARPER & ROW PUBLISHERS, INCORPORATED V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES AND BERNARD J. HARDING, SCRANTON, PA., POSTMASTER, APPELLANTS. (D. C. CIVIL ACTION NO. 469-69) HADDON CRAFTSMEN, INC. V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES AND BERNARD J. HARDING, SCRANTON, PA., POSTMASTER, APPELLANTS. (D. C. CIVIL ACTION NO. 470-69) REGENSTEINER PUBLISHING ENTERPRISES, INC., AND CHICAGO BOOK MANUFACTURING, INC. V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES AND HENRY MCGEE, POSTMASTER OF THE UNITED STATES POST OFFICE AT CHICAGO, ILLINOIS, APPELLANTS. (D. C. CIVIL ACTION NO. 472-69) NATIONAL BOOK COMPANY OF SCRANTON V. WINTON M. BLOUNT, POSTMASTER GENERAL OF THE UNITED STATES AND BERNARD J. HARDING, SCRANTON, PA., POSTMASTER, APPELLANTS. (D. C. CIVIL ACTION NO. 551-69)
Kalodner, Van Dusen and Aldisert, Circuit Judges.
Author: Van Dusen
Opinion OF THE COURT
VAN DUSEN, Circuit Judge.
These are appeals by the Postmaster General and Local Postmasters (hereinafter sometimes referred to as the Post Office) from orders dismissing as moot suits asking for permanent injunctions against them. The preliminary injunctions were conditioned on the posting of a bond by the plaintiffs to cover damages incurred during the pendency of the injunction. The Post Office claims it is entitled to the bond and, since recovery is dependent on a final judgment on its behalf on the merits of the applications for final injunctions, that the present suits are not moot and should be allowed to go forward to trial. This court's jurisdiction is based on the Administrative Procedure Act, 5 U.S.C. § 500 et seq. (1964) and 28 U.S.C. § 1339 (1964).
On June 29, 1968, the Postmaster General published in the Federal Register a notice of proposed rulemaking dealing with the manner in which volume users eligible for the preferential fourth class rates*fn1 present material for mailing. 33 Fed.Reg. 9554 (1968). This action was taken pursuant to section 108(e) of the Postal Revenue and Salary Act, 39 U.S.C. § 4554(e) (Supp. V, 1964), which provides that, in order to benefit from the special fourth class rates, those who mail in quantities of a thousand or more must do so in the manner prescribed by the Postmaster General.*fn2 After evaluating the views and recommendations submitted in response to the notice, the Postmaster General, on August 9, 1968, promulgated Postal Regulation 135.2(a) (6) to take effect in two stages. 33 Fed.Reg. 11359 (1968). During the first stage, commencing October 1, 1968, mailers would be required to sort and sack identical pieces mailed in quantities of 1000 or more daily, in accordance with the first three digits of the ZIP code. During the second stage, effective January 15, 1969, mailers who presented 1000 or more pieces in a single day would be required to include the full ZIP code on all pieces, both identical and non-identical, to sort and sack identical pieces by three-digit ZIP code areas, and to sort and sack non-identical pieces according to the state of destination.*fn3 Upon being notified by a number of mailers that they would be unable to comply by October 1, 1968, with the requirements becoming effective on that date, the Post Office announced that it would "enter into an agreement to perform on a reimbursable basis separating and sacking services necessary for compliance with the regulation for a period of 60 days * * *" 33 Fed.Reg. 14725 (1968).*fn4
Appellees mail books for publishing houses, book stores, book wholesalers, schools, and libraries. Along with other bulk shippers of fourth-class material, they brought suits in various district courts seeking injunctive and declaratory relief against Postal Regulation 135.2(a) (6). Appellees' complaints generally included allegations that the promulgation of the postal regulation (1) exceeded the scope of the authority conferred on the Postmaster General by 39 U.S.C. § 4554(e) (Supp. V, 1964), (2) was arbitrary and capricious, (3) was adopted without observance of procedures required by law, (4) was contrary to plaintiffs' constitutional rights, privileges, and immunities, and (5) was unsupported by "substantial evidence for its necessity." All appellees sought injunctive relief against the second phase of the regulation. Appellee American Book-Stratford Press also sought relief against the first phase of the regulation. Preliminary injunctions were granted in the cases now before us, conditioned on the posting of security in amounts such as to insure the payment of "such costs and damages as may be incurred or suffered by [the Post Office] if found to have been wrongfully enjoined or restrained."*fn5 Security was posted pursuant to Rule 65(c) of the Federal Rules of Civil Procedure, which contains language substantially the same as that quoted.*fn6 The costs were associated with the sorting and sacking of appellees' mailings. In response to a Notice of Motion, the Judicial Panel on Multidistrict Litigation, on April 3, 1969, transferred 17 cases to the District Court for the District of New Jersey in time for pre-trial discovery.*fn7 In January 1969, the Post Office moved for dismissal of the complaints or for summary judgment. No action on this motion was taken. Subsequently, after meetings with the mailers, the Post Office announced a new rulemaking, with revised proposals designed to amend the challenged regulation.*fn8
On October 16, 1969, the Post Office promulgated a new regulation which became effective on January 1, 1970. 34 Fed.Reg. 16542 (1969). The new provisions, which were not objected to by appellees, amended the regulation previously adopted to the extent that they imposed no duty upon the mailers to sort and sack non-identical pieces. However, the new regulation imposed the more stringent requirement that identical pieces shipped in mailings of 5000 or more be sorted and sacked in accordance with the full five digits of the ZIP code. Otherwise the regulations were similar. The new regulation became effective January 1, 1970. 34 Fed.Reg. 16542 (1969). Prior to the implementation of the amended proposals, the Post Office Department moved for an increase in the security furnished in seven of the pliance were outstripping the amounts cases, claiming that actual costs of comof the bonds. The district court finally denied the motions in November 1969 on the ground that the suits were moot. The court stated:
"I frankly can't see any basis, Mr. Alworth -- I am sorry -- for granting the government's motion to increase the amount of the bonds, in a situation as nebulous as this, absolutely nebulous. We have a new Regulation. The old one is gone. The book people are phasing in to conform to the new Regulation."*fn9
The United States District Court for the District of New Jersey ordered, upon the motion of the Government and the agreement of the mailers, that the preliminary injunctions be modified "to the extent that the plaintiffs and defendant are permitted to take such action as is necessary to comply with Amended Regulation 135.2(a) (6). * * *" Then, on January 26, 1970, the Government moved for the entry of an order vacating all restraints which remained in effect as to the Post Office. On March 3, 1970, the district court ordered that all restraints then in effect be vacated.
Subsequently the plaintiffs moved for an order dismissing the actions without prejudice and without costs, and discharging the bonds. The Post Office Department opposed a dismissal of the actions until damages were assessed against the plaintiffs, but the court ordered that the actions be dismissed without prejudice and without costs, and that the bonds be vacated and discharged.*fn10 The district court noted the "general principle that there can be no recovery of damages caused by a preliminary injunction unless final judgment is in favor of the party that has been enjoined" and said (N.T. 124a-125a):
"The cases are moot. The subject matter of those cases is gone. The old Regulation was challenged. The status quo was maintained until such time as there could be a hearing on the merits. A hearing on the merits never came about because the parties got together and worked out a new Regulation.
"In the absence of any proof, or even a suggestion of proof, that the injunctions were wrongfully issued, or that the defendants were wrongfully restrained, the motions for dismissal of the complaints will be granted and the bonds discharged."
The court entered orders to this effect. The Government appeals from these orders, as well as the orders denying the applications to increase the bonds.*fn11
The two principal questions involved are these:
(1) Is the suit requesting a permanent injunction moot and therefore not justiciable, and
(2) If the case is not moot, is it reviewable in the federal courts?
We do not think this case is moot because if we dismiss this action the Post Office Department will in all likelihood institute suit against the sureties at some future time and, in any such action, the court will be faced with deciding the same issues that are in contention here. No liability can arise on an injunction bond unless there is a final judgment in favor of the party enjoined.*fn12 Therefore, in any independent action on the bond, the court will of necessity judge the merits of plaintiffs' demand for a permanent injunction.
Courts have long recognized the principle that a case is not moot if there is a reasonable likelihood that the parties or those in privity with them will be involved in a suit on the same issues in the future. The Supreme Court has held that the voluntary cessation of allegedly illegal conduct by the defendant will not moot a case if there is a reasonable expectation that the wrong will be repeated. Walling v. Helmerich & Payne, 323 U.S. 37, 43, 65 S. Ct. 11, 89 L. Ed. 29 (1944); Southern Pacific Terminal Co. v. Interstate Commerce Comm'n, 219 U.S. 498, 515-516, 31 S. Ct. 279, 55 L. Ed. 310 (1911); United States v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 307-310, 17 S. Ct. 540, 41 L. Ed. 1007 (1897); see United States v. W. T. Grant Co., 345 U.S. 629, 633, 73 S. Ct. 894, 97 L. Ed. 1303 (1953).*fn13 Also, in United States v. Concentrated Phosphate Export Ass'n, 393 U.S. 199, 89 S. Ct. 361, 21 L. Ed. 2d 344 (1968), the Court held that changed conditions beyond the control of the parties will not moot a case if there is a reasonable possibility that the allegedly illegal activity will occur in the future.
Courts traditionally will not decide moot cases because considerations of judicial economy demand that only live controversies be decided, and because of the belief that there is less chance of a correct result if the parties are not genuinely adverse.*fn14 In a truly adversarial setting, it is reasoned, the parties will be sufficiently interested in the outcome of the case to ensure that all relevant arguments are presented to the court in a manner that will be most helpful to deciding the issues. Judicial economy will not result from dismissal of this action because judicial effort will be expended in the future on the same issues raised here in the context of an independent action on the bond. Also, the parties' substantial interest in the bond assures both their adversity and that they will be sufficiently concerned with the outcome of the suit for permanent injunctive relief to vigorously present the relevant arguments to the court.
In Meyers v. Jay Street Connecting Railroad, 288 F.2d 356 (2nd Cir.), cert. denied 368 U.S. 828, 82 S. Ct. 49, 7 L. Ed. 2d 31 (1961), Meyers had obtained a preliminary injunction prohibiting the railroad from discontinuing service without first obtaining a certificate of public convenience and necessity from the ICC. The preliminary injunction was conditioned upon "security approved by the court in the sum of $50,000. for the payment of such losses which the defendants may encounter or incur * * * until the case is tried should the defendants prevail in this action." Id. at 358 n. 5. The preliminary injunction was appealed and affirmed. Then a final hearing on the merits was held and an order entered providing that the preliminary injunction "was to remain in effect until the Commission's certificate permitting abandonment of the railroad 'became effective.'" Id. at 357-358. After an appeal was taken from this order, the Commission issued the certificate. Since the subject matter of the original complaint was removed, appellees argued that the appeal was moot. The court held that the presence of the bond prevented the case from being moot, stating that the determining factor in its decision was the likelihood that if the case were dismissed, the appellants would bring a suit against the sureties on the bond and raise the same questions. The court stated that "to dismiss [this case] as moot would be formalistic to an extreme * * *." Id. at 360.
Relying primarily on Janssen v. Shown, 53 F.2d 608 (9th Cir. 1931), appellees argue that the withdrawal of the original regulation constituted a settlement of the case by the parties and that the law is clear that in these circumstances courts of equity should not permit recovery on injunction bonds. However, in Janssen the parties moved jointly for dismissal of the case and the Court of Appeals described the dismissal as resulting from "the voluntary and amicable agreement of the parties." Id. at 612. There is no evidence of any agreement between the parties to this suit, either to accept the new regulation in place of the original or to seek dismissal of the action. In fact, the Government expressly denies that there has ever been an agreement. Flexibility is a concomitant of successful government. Administrators must feel free to change policies to more effectively carry out the agency's tasks. To infer an agreement each time an agency changes its policies in a way that favors those with whom it is dealing would discourage attempts at improvement and the exercise of flexibility.
We turn to the extent, if any, of judicial review of Post Office regulations concerning the mailing of fourth class material under preferential rates.
The Administrative Procedure Act states that administrative action is reviewable "except so far as (1) statutes preclude judicial review or (2) agency action is by law committed to agency discretion." 5 U.S.C. § 701 (1964). In Abbott Laboratories v. Gardner, 387 U.S. 136, 140-141, 87 S. Ct. 1507, 18 L. Ed. 2d 681 (1967), the Court stated, "* * * a survey of our cases shows that judicial review of a final agency action by an aggrieved person will not be cut off unless there is persuasive reason to believe that such was the purpose of Congress. * * * In Rusk v. Cort, supra, 369 U.S. 367, at 379-380, 82 S. Ct. 787, at 794, 7 L. Ed. 2d 809, the Court held that only upon a showing of 'clear and convincing' evidence of a contrary legislative intent should the courts restrict access to judicial review. * * *" We do not think there is "clear and convincing" evidence of a Congressional intent to preclude judicial review in section 108(e) of the Postal Revenue Act of 1967. That statute provides that "Articles may be mailed under this section in quantities of one thousand or more in a single mailing, as defined by the Postmaster General, only in the manner directed by him."*fn15 This statute vests wide discretion in the Postmaster General and as a consequence, no court has the power to invalidate his directives on the grounds that they are not economical, efficient or reasonable. The scope of this court's review is quite limited in light of the APA section 10(e) and in light of the language of the statute, clearly vesting wide authority in the Postmaster General in the mailing of fourth-class material. However, we believe that within that narrow zone of reviewability over the Postmaster General's actions which this court does possess, a federal court can reverse actions which are so arbitrary and capricious as to amount to an abuse of discretion, or which are contrary to the Constitution. The cases cited by the Government are not inconsistent with this view. In a number of these cases the courts first indicate that the action of the administrator is unreviewable or that it is unnecessary to decide that question, but then the courts' language indicates that such action is in fact subject to reversal if outside the scope of the administrator's authority, arbitrary or capricious, or otherwise unconstitutional. See United States v. Carmack, 329 U.S. 230, 243 and 248, 91 L. Ed. 209, 67 S. Ct. 252 (1929); Knight Newspapers, Inc. v. United States, 395 F.2d 353, 359 (6th Cir. 1968); Sergeant v. Fudge, 238 F.2d 916, 917 (6th Cir. 1956).
In Doehla Greeting Cards, Inc. v. Summerfield, 97 U.S.App.D.C. 29, 227 F.2d 44 (1955), the court recognized that the Postmaster General's reformation of fourth-class rates would be illegal if it were "not within the officer's statutory powers or, if within those powers, * * * if the powers or their exercise * * * [were] constitutionally void. See Larson v. Domestic and Foreign Commerce Corp., 337 U.S. 682, 69 S. Ct. 1457, 93 L. Ed. 1628 (1949)." Id. at 46. The court found expressly that there was no allegation that the statute was unconstitutional and that the Postmaster General had not acted arbitrarily or capriciously. Id. at 46, 47.*fn16
In Panama Canal Co. v. Grace Line, Inc., 356 U.S. 309, 78 S. Ct. 752, 2 L. Ed. 2d 788 (1958), relied on by the Government in support of its contention that there is no review of the administrative action in this case, the court held that it was without power to force a redetermination of an administrative decision to make an upward adjustment in the tolls, because "initiation of a proceeding for the readjustment of the tolls of the Panama Canal is a matter that Congress has left to the discretion of the Panama Canal Co." Id. at 317, 78 S. Ct. at 757. However, the court indicated that review would be available "where the matter is peradventure clear, where the agency is clearly derelict in failing to act, where the inaction or action turns on a mistake of law." Id. at 318, 78 S. Ct. at 757. The reason the Court did not permit review was because "the present conflict rages over questions that at heart involve problems of statutory construction and cost accounting. * * * These are matters on which experts may disagree; they involve nice issues of judgment and choice * * * which require the exercise of informed discretion." Id., at 317, 78 S. Ct. at 757.
We do not think the district court in this or any case should interfere in decisions of the Postmaster General which involve "nice issues of judgment and choice." However, plaintiffs have alleged that the Government has acted arbitrarily and capriciously, outside the scope of its power, or otherwise violated constitutional rights. Unless these allegations clearly involve matters left to the discretion of the Government, the plaintiffs are entitled to an opportunity to prove their claims.*fn17
The orders of the district court dismissing these actions and vacating and discharging the bounds are hereby reversed and the case is remanded to that court for further proceedings in accordance with this opinion.
As pointed out above at pages 592-594, the Post Office also filed notices of appeal challenging district court orders of November 24, 1969, denying, on the ground of mootness, its motions to increase the amount of the bonds in seven of these actions. For the reasons set forth under I and II above, we have concluded that these suits are not moot and should proceed in the district court. For these reasons, such November 1969 district court orders will be set aside and, since these cases will be remanded, reconsideration of these motions by the district court shall be made in light of this opinion.