Time, Inc., et al., Petitioners, v. United States Postal Service, Respondent, 667 F.2d 329 (2d Cir. 1981)

In these two dockets, Time, Inc. and Newsweek, Inc. petitioned this court on September 30, 1981, to review an order of the Board of Governors of the United States Postal Service (the Board) adopted on the previous day. Later on the day of September 30, National Association of Greeting Card Publishers (NAGCP or the movant) and Mail Order Association of America petitioned for review of the same order in the Court of Appeals for the District of Columbia Circuit. That court consolidated those and other petitions and transferred them to this circuit pursuant to 28 U.S.C. § 2112. We consolidated the Time and Newsweek petitions of our own motion and the Postal Service has moved for consolidation of the others with them. On December 1, 1981, we denied a motion of NAGCP to transfer all the petitions to the Court of Appeals for the District of Columbia Circuit.

This opinion is addressed to another motion of NAGCP, heard on the same day, in which it asks us to exercise our power under 5 U.S.C. § 552b(h) (2)¹  to inquire into an alleged violation by the Board of the requirement of 5 U.S.C. § 552b(b) that "Except as provided in subsection (c), every portion of every meeting of an agency shall be open to public observation" or, in the alternative, to suspend proceedings on these petitions for review until decision by the District Court for the District of Columbia of an action for injunctive relief filed by NAGCP in that court on October 5, 1981. The facts giving rise to NAGCP's claim are as follows:

As recounted in a recent opinion of this court, Newsweek, Inc. v. United States Postal Service, 663 F.2d 1186, 1191-1192 (1981), the proceedings culminating in the order here under review began with a request by the Postal Service dated April 21, 1980, to the Postal Rate Commission (PRC)²  for a recommended decision on changes in postal rates. As there stated, this request initiated R80-1, a general rate-making proceeding, wherein, after extensive hearings, the PRC, on February 19, 1981, forwarded to the Board a recommended decision which slashed $1 billion from the Postal Service's proposed general revenue requirements and made many changes in cost distribution and rates as compared with those proposed by the Postal Service. The Board, on March 10, 1981, pursuant to 39 U.S.C. § 3625(c) (2), returned the recommendation to the PRC for reconsideration but allowed the bulk of the decision to take effect under protest. While proceedings for the review of that order were pending, the PRC upon reconsideration submitted to the Board, on June 4, 1981, a second recommended decision which, with one minor exception, recommended the same rates and fees that were contained in its first. On this occasion the Board, on June 29, 1981, reiterating the views stated in its March 10 opinion, rejected the PRC's Recommended Decision upon Reconsideration and requested a second reconsideration and a further recommended decision.

Anticipating the receipt of such a recommended decision, the Board, on September 16, 1981, announced in the Federal Register its intention to meet on September 22, 1981, 46 F.R. 46,040-46,056, to consider, inter alia, the PRC's recommended decision and also announced that it might decide to close that portion of the meeting.³  The PRC submitted its recommended decision upon further reconsideration, which again reaffirmed the views expressed in its initial recommended decision of February 19, 1981. At its September 22 meeting, the Board voted to consider the PRC's recommended decision as its first agenda item and also that the portion of the meeting dealing with the PRC's recommendation be closed. As stated in a notice published on September 25, 1981, 46 F.R. 47,350,

the Governors determined, in accordance with 5 U.S.C. 552b(d) (1) and (e) (2), that the portion of the meeting to be closed was exempt from the open meeting requirement of the Government in the Sunshine Act pursuant to 5 U.S.C. 552b(c) (10) in that it was likely to specifically concern agency participation in a civil action or proceeding.⁴ 

The Board, not having concluded its deliberations on September 22, 1981, also published on September 25 a notice, which we reproduce in the margin,⁵  of a closed special meeting to be held on September 29 to consider the PRC's recommended decision. At the September 29 meeting, the Board, by unanimous vote, invoking its authority under 39 U.S.C. § 3625(d), changed many of the recommendations made by the PRC, including a change of the rate for the first ounce of first-class letter mail to 20 cents as the Postal Service had initially proposed.

By letter dated September 30, 1981, to the General Counsel of the Postal Service, counsel for NAGCP requested "a complete copy of the transcript or tapes of the Board of Governors' closed meetings of September 22, 1981 and September 29, 1981",⁶  see 5 U.S.C. § 552b(f) (2). The Assistant General Counsel declined, stating:

The Board, however, has determined, pursuant to subsection (f) (2) of the Act, that the discussions in the meetings contained information that might properly be withheld from the public under the provisions of the Act and that the transcript of the discussion should not be made publicly available. As a result we are not at liberty to furnish the materials you have requested.

As you may be aware, the meetings were closed to public observation in reliance on subsection (c) (10) of the Act. Given the prospect of litigation which was present at the time of the meetings and the need for the candid discussion of the Postal Service's participation in the litigation, we think that the decisions to close the meetings and not to make transcripts of the meetings available were both proper and appropriate in the public interest.

In consequence, as stated above, NAGCP brought an action under § 552b(h) (1) in the District Court for the District of Columbia and later made this motion to us under § 552b(h) (2).

Section 552b(c) of 5 U.S.C. qualifies the "open meeting" provision of § 552b(b) by providing that

Except in a case where the agency finds that the public interest requires otherwise, the second sentence of subsection (b) shall not apply to any portion of an agency meeting, and the requirements of subsections (d) and (e) shall not apply to any information pertaining to such meeting otherwise required by this section to be disclosed to the public, where the agency properly determines that such portion or portions of its meeting or the disclosure of such information is likely to-

do any one of ten matters. The exclusion here relevant is (10), which reads as follows:

specifically concern the agency's issuance of a subpena, or the agency's participation in a civil action or proceeding, an action in a foreign court or international tribunal, or an arbitration, or the initiation, conduct, or disposition by the agency of a particular case of formal agency adjudication pursuant to the procedures in section 554 of this title or otherwise involving a determination on the record after opportunity for a hearing.

The Board argues that the first agenda item of the September 22 meeting and the whole of the September 29 meeting specifically concerned "the agency's participation in a civil action or proceeding". It points out that 39 U.S.C. § 3625 afforded it a choice among many different strategies-approving the PRC's recommended decision; allowing the decision to take effect under protest and either itself seeking judicial review or returning the recommendation to the PRC for a still further recommended decision; rejecting the recommended decision; or, what it did here, modifying the recommended decision by a unanimous written concurrence of all Governors then in office upon making specified findings.⁷  Some of these courses would involve additional proceedings before the PRC; one of them would have the consequence, unusual with administrative agencies of entitling the Board to appeal from its own order; and almost any was highly likely, in view of the history of this docket, to provoke appeals by others,⁸  as these very proceedings prove. The movant answers that to read the litigation provision of § 552b(c) (10) so broadly as to include substantive discussion, rather than "legal strategy", see S.Rep. No. 354, 94th Cong., 1st Sess. 26 (1975), with respect to the action under contemplation, would make the exception swallow the rule; that at least some of the issues stated by the General Counsel to have been discussed at the closed meetings bore on future litigation solely in the way that decision on the merits in any decision before an agency would do; and that only the in camera examination authorized by § 552b(h) (1) can separate the protected wheat from the disclosable chaff. The Board responds by arguing that 5 U.S.C. § 552b(f) (2) makes each agenda item the relevant unit so that if the item contains some material exempt under clause (c) (10), the entire meeting on that item gains exemption despite the "portion or portions" language,⁹  claiming support from an excerpt from S.Rep. No. 354, supra, at 31, stating

(a)gencies need not edit a transcript or electronic recording of the ... discussion of a particular matter word by word so as to make abbreviated portions of the record of the meeting available to the public. Where sensitive matters are an integral part of the record of the discussion of a matter, no part of the record need be made public.

see also p. 20, and from the opinion in A.G. Becker Inc. v. Board of Governors of the Federal Reserve System, 502 F. Supp. 378, 386-88 (D.D.C. 1980). In what is stated to be the only previous decision with respect to application of the litigation exception to the Postal Service, Graphnet, Inc. v. United States Postal Service, No. 80-0246, D.D.C., decided February 4, 1980, Judge Richey ruled in favor of the Board; however, that decision might be distinguishable because there the recommended decision of the PRC relied in part on an opinion of the FCC, Graphnet, Inc., 73 F.C.C.2d 283 (1979), which the Postal Service was already challenging on appeal.

Although such exceedingly difficult questions will inevitably arise in the case of other agencies, we find it unnecessary to resolve them here, since we think the closed meeting fell within the language of § 552b(c) (10) exempting

the initiation, conduct, or disposition of the agency of a particular case of formal agency adjudication pursuant to the procedures in section 554 of this title or otherwise involving a determination on the record after opportunity for a hearing.

Section 3624(a) of Title 39 provides

that the Commission shall not recommend a decision until the opportunity for a hearing on the record under sections 556 and 557 of title 5 has been accorded to the Postal Service, users of the mails, and an officer of the Commission who shall be required to represent the interests of the general public.

Sections 556 and 557 require considerably more rigorous procedures than those generally applicable to rulemaking under § 553.

Although the last clause of § 552b(c) (10) could be literally read as limited to "adjudication", we think Congress also intended to cover rulemaking "involving a determination on the record after opportunity for a hearing"-in other words, to include all cases for which the procedures of §§ 556 and 557 were required. Any other reading would render the "or otherwise" clause largely surplusage since, save as indicated in footnote 10, infra, § 554 covers "every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing". Indeed the House Report expressly states that exception (c) (10) applies both to "formal agency adjudication or determinations on the record after opportunity for a hearing (formal rule making)", H.R. Rep. (Judiciary Committee) No. 880 (Part II) 9, reprinted in (1976) U.S. Code Cong. & Admin. News, 94th Cong., 2d Sess. 2212, 2219 (1976).¹⁰  The evident sense of Congress was that when a statute required an agency to act as would a court, its deliberations should be protected from disclosure as a court's would be.

When the court inquired at argument as to the applicability of the last clause of exception (10), the movant responded that, while this might protect the PRC, it did not cover the Board. Again this is too literal a reading. While the PRC "conduct(s)" the major portion of a postal rate proceeding, the Board initiates and disposes of it, 39 U.S.C. §§ 3623(b), 3625. The function of the PRC is similar to that of an administrative law judge making a recommended decision under 5 U.S.C. § 557(b), except for the limitations in disposition imposed on the Board by 39 U.S.C. § 3625. Although § 3624's requirement of a hearing on the record applies in terms only to the PRC's conduct of the proceedings, there is no reason to suppose that Congress intended the protection of exception (c) (10) to apply only to meetings of the PRC which cannot result in action having legal effect but not to meetings of the Board which do.

It remains to consider whether upholding the exception under the final clause of subsection (c) (10) rather than under the "participation in a civil action or proceeding" clause would violate the rule of SEC v. Chenery Corp. (Chenery I), 318 U.S. 80, 87, 95, 63 S. Ct. 454, 459, 462, 87 L. Ed. 626 (1943), "that an administrative order cannot be upheld unless the ground upon which the agency acted in exercising its powers were those upon which its action can be sustained." As later explained in Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168-69, 83 S. Ct. 239, 245-246, 9 L. Ed. 2d 207 (1962), the rationale of the Chenery rule is that a reviewing court cannot be sure that the agency would have acted for any reason other than that on which it relied; as stated in Chenery II, 332 U.S. 194, 196, 67 S. Ct. 1575, 1577, 91 L. Ed. 1995 (1947), the purpose of the rule is to avoid "propel(ling) the court into the domain which Congress has set aside exclusively for the administrative agency." See also Chenery I, 318 U.S. at 88, 63 S. Ct. at 459. The Court has later spoken of "the limited office" of the Chenery decision, Penn Central Merger and N & W Inclusion Cases, 389 U.S. 486, 518-19 n.10, 88 S. Ct. 602, 618 n.10, 19 L. Ed. 2d 723 (1968).

To preclude reliance on the second clause of exemption (10) would press the Chenery doctrine too far since the only determination required under that clause is that withholding the transcript is not contrary to the public interest, § 552b(c), and the Board has already decided this in claiming an exemption under the first clause of (10). No one reading the Board's statement of its reasons for closing the meeting could doubt for a moment that it would have followed the same course if it had known that the last clause of (c) (10) afforded a surer ground than the litigation exception. As Justice Fortas said in NLRB v. Wyman-Gordon Co., 394 U.S. 759, 766-67 n.6, 89 S. Ct. 1426, 1430, n.6, 22 L. Ed. 2d 709 (1969), "Chenery does not require that we convert judicial review of agency action into a ping-pong game." Here the Board's desire to keep its deliberations on the PRC's recommendation closed to the public for any lawful reason is beyond possible question. It would have welcomed knowledge of a further ground for doing so.

In view of our conclusion that the Board's action in closing part of the September 22 and all of the September 29 meeting was proper under the final clause of § 552b(c) (10), we, of course, decline the invitation to avail ourselves of the discretionary power of inquiry conferred on us by 5 U.S.C. § 552b(h) (2). Indeed, we would do this even if we entertained more doubt with respect to the applicability of the (c) (10) exception than we do. Our judgment on these petitions for review will hinge on the sufficiency of the record to support the findings of the Board under 39 U.S.C. § 3625(d), not upon how the Governors reached the conclusions that they did. United States v. Morgan (Morgan IV), 313 U.S. 409, 421-22, 61 S. Ct. 999, 1004, 85 L. Ed. 1429 (1941). We likewise deny NAGCP's alternative motion to suspend these review proceedings pending a possibly contrary decision with respect to the exemption by the District Court for the District of Columbia. Whatever that court may decide,¹¹  and a decision either way could well be appealed, it cannot "set aside, enjoin, or invalidate" the action taken by the Board, § 552b(h) (2). Furthermore, suspension of these proceedings, with the attendant delay, would disregard Congress' direction to make petitions like these "a preferred cause" and to "expedite judgment in every way", 39 U.S.C. § 3628.

The motion and the alternative motion are denied.