UNITED STATES POSTAL SERVICE V. FLAMINGO INDUSTRIES (USA) LTD.
• Supreme Court Shields Postal Service from lawsuits| Court decision (2/25/04)
 
November 12, 2003 (source: Supreme Court)
02-1290 CFX UNITED STATES POSTAL SERVICE V. FLAMINGO INDUSTRIES (USA) LTD.
Court: USCA-9 Grant: 5/27/03
Argument Date: 12/1/03

PETITION FOR A WRIT OF CERTIORARI
June 30, 2003
The U.S. Supreme Court on May 27 rendered a decision in the following case: United States Postal Svc. v. Flamingo Indus., No. 02-1290 -The court will hear arguments next term on whether USPS can be sued under antitrust laws. Flamingo Industries filed an antitrust suit against USPS, alleging that it had artificially created an emergency mail-sack shortage that would allow it to use cheaper Mexican sacks instead of the ones manufactured by Flamingo. The 9th U.S. Circuit Court of Appeals rejected the postal service's argument that it was immune from suit under federal antitrust laws because it was not a "person" as defined by those laws.

Question(s) 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?

Both sides agree that Congress waived the Postal Service’s sovereign immunity in 1970 by declaring that it can "sue and be sued." The key question the Supreme Court is being asked to consider is whether Congress intended this language to apply to antitrust law.
 
May 27, 2003
SUMMARY: (AP) The Supreme Court said it will decide next year whether the U.S. Postal Service can be sued for antitrust violations over the way it handled contracts for mail sacks. Flamingo Industries Ltd. claims the Postal Service is trying to create a monopoly in the mail sack business, driving U.S. companies out of business by transferring work to foreign manufacturers. An appeals court ruled that the Postal Service is a "person" and can be sued under federal antitrust laws. Solicitor General Theodore Olson said that the appeals court decision would create costly problems for the post office, which has 770,000 workers who deliver 200 billion pieces of mail a year, or 40 percent of the word's mail. Flamingo's attorney, Harold Krent, said Congress intended for the Postal Service to be run like a business. "Preventing the Postal Service from anticompetitive behavior would further, not hinder, Congress' intent that the Postal Service compete on an equal footing with entities such as Federal Express and UPS," Kent told justices in a filing.
 

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United States Court of Appeals for the Ninth Circuit court case

FLAMINGO INDUSTRIES (USA) LTD.

AND ARTHUR WAH,

Plaintiffs-Appellants,

v.  UNITED STATES POSTAL SERVICE, an

entity created pursuant to the OPINION

Postal Reorganization Act,

Defendant-Appellee.

Plaintiffs Flamingo Industries and its owner Arthur Wah (collectively "Flamingo") brought suit in the Northern District of California against the United States Postal Service. Flamingo asserted a number of federal and state law claims stemming from the Postal Service’s termination of Flamingo’s contract to produce U.S. Mail sacks. The district court dismissed the suit for lack of jurisdiction and improper venue, and did not reach the merits of any of the claims. Flamingo appeals.

According to the allegations of Flamingo’s complaint, which we take as true for purposes of this appeal, the Postal Service terminated Flamingo’s contract because it wanted to use cheaper mail sacks manufactured in Mexico, sacks that fail to meet safety and quality regulations. To disguise this scheme, the Postal Service adopted outdated requirements for mail sacks that could not be met by the modern machines used by Flamingo and other domestic manufactures, creating a pretext for canceling the domestic mail sack contracts. Once those contracts were canceled, the Service declared a fake emergency in the supply of mail sacks that allowed it to award future contracts to foreign manufactures on a no-bid basis. The Service sought to hide the false nature of this emergency by failing to follow regulations requiring documentation of any emergency.

Based on this alleged conduct, Flamingo asserted five federal antitrust claims, alleging that the Postal Service, in collusion with Mexican mail sack manufacturers, sought to suppress competition and create a monopoly in mail sack production in violation of federal antitrust laws. Flamingo also asserted claims alleging that the Postal Service violated the Postal Service Procurement Manual, the implied covenant of good faith and fair dealing, California Business and Professions Code § 17200, and 42 U.S.C. § 1983.

CONCLUSION

We reverse the district court’s dismissal of Flamingo’s antitrust claims and Procurement Manual claim. We affirm the district court’s dismissal of Flamingo’s claim for breach of the implied covenant of good faith and fair dealing, and its dismissal of the claims asserted under California Business & Professions Code § 17200 and 42 U.S.C. § 1983. The parties shall each bear their respective costs for this appeal.

AFFIRMED in part, REVERSED in part, and REMANDED for further proceedings consistent with this opinion.

Excerpts: PETITION FOR A WRIT OF CERTIORARI

In the Supreme Court of the United States

UNITED STATES POSTAL SERVICE, PETITIONER

v.

FLAMINGO INDUSTRIES (U.S.A.) LTD.
AND ARTHUR WAH

The Solicitor General, on behalf of the United States Postal Service (Postal Service), respectfully petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Ninth Circuit in this case.

QUESTION PRESENTED

The federal antitrust laws apply to a "person," which is defined to include "corporations and associations existing under or authorized by the laws of * * * the United States." 15 U.S.C. 7 (Sherman Act), 12(a) (Clayton Act). The question presented is whether the United States Postal Service is a "person" amenable to suit under the antitrust laws.

STATEMENT

1. Flamingo Industries (USA) Ltd. (Flamingo), a manufacturer of mail sacks, and its owner, Arthur Wah, brought suit in the United States District Court for the Northern District of California against the Postal Service in connection with the Postal Service's termination of a contract with Flamingo to produce U.S. Mail sacks. In addition to asserting claims under the federal procurement laws and state law, the complaint stated five federal antitrust claims, alleging that the Postal Service sought to suppress competition and create a monopoly in mail sack production by procuring cheaper mail sacks that were manufactured in Mexico. The district court dismissed the complaint in its entirety. App., infra, 23a-27a. It dismissed the antitrust claims on the ground that Congress did not intend to impose antitrust liability on the Postal Service. Id. at 23a-24a. The district court explained that, although Congress has waived the Postal Service's sovereign immunity in 39 U.S.C. 401(1) by permitting the agency "to sue and be sued" in its own name, "such language cannot * * * subject [the Postal Service] to liability under the antitrust laws as there was no attempt on the part of Congress to impose liability in the first place." App., infra, 24a (internal quotation marks omitted).

2. The United States Court of Appeals for the Ninth Circuit reversed, in relevant part, holding that the Postal Service is a "person" subject to suit under the federal antitrust laws. App., infra, 1a-22a. The court of appeals acknowledged (id. at 4a) that the issue of a federal agency's amenability to suit is governed by this Court's two-step inquiry set forth in FDIC v. Meyer, 510 U.S. 471, 484 (1994), under which a court must determine, first, whether Congress has waived the agency's sovereign immunity and, second, whether "the source of substantive law upon which the claimant relies provides an avenue for relief" against the federal government.

Under Meyer's first step, the court of appeals held that Congress waived the Postal Service's sovereign immunity by providing in 39 U.S.C. 401(1) that "[t]he Postal Service shall have the . . . power[] to sue and be sued in its official name." App., infra, 4a (brackets in original). In considering the second question, whether the antitrust laws provide a cause of action against the Postal Service, the court of appeals rejected the Postal Service's reliance on precedent (e.g., United States v. Cooper Corp., 312 U.S. 600 (1941); Sea-Land Serv., Inc. v. Alaska R.R., 659 F.2d 243 (D.C. Cir. 1981), cert. denied, 455 U.S. 919 (1982)) holding that the United States and its instrumentalities are not "persons" subject to suit under the antitrust laws. The court reasoned that, "[a]lthough a federal sovereign is not a 'person,' the Postal Service is not a sovereign" because "the Postal Service does not enjoy sovereign immunity." App., infra, 8a. The court accordingly concluded that "[t]he Postal Service's sue-and-be-sued waiver of immunity has created a presumption that the cloak of sovereignty has been withdrawn and that the Postal Service should be treated as a private corporation." Id. at 10a. The court stated, however, that the Postal Service may assert "conduct-based" immunity against antitrust liability "if the action of the Postal Service being challenged was taken at the command of Congress." Id. at 13a.1

REASONS FOR GRANTING THE PETITION

Since the founding of this Nation, postal service operations have constituted an essential "sovereign function." United States Postal Serv. v. Council of Greenburgh Civic Ass'ns, 453 U.S. 114, 121 (1981). Congress carried forward that tradition in the Postal Reorganization Act of 1970 by creating the Postal Service as "an independent establishment of the executive branch of the Government of the United States." 39 U.S.C. 201. Notwithstanding the Postal Service's manifestly governmental character, the court of appeals held that the Postal Service is "not a sovereign" and, therefore, is a "person" subject to suit under the federal antitrust laws. App., infra, 8a.

The court of appeals' decision conflicts with the decision of this Court in United States v. Cooper Corp., 312 U.S. 600 (1941), that the United States is not a "person" under the antitrust laws. The decision conflicts as well with the decisions of the courts of appeals that have held that federal instrumentalities likewise are not "persons" subject to antitrust liability.

The court of appeals' decision also conflicts with the Court's ruling in FDIC v. Meyer, 510 U.S. 471 (1994), that Congress's waiver of sovereign immunity with respect to a federal entity does not create a substantive cause of action against the entity. The court of appeals' decision similarly conflicts with the decisions of other courts of appeals that have specifically held that Congress's waiver of the Postal Service's sovereign immunity does not create liability against the Postal Service.

The court of appeals' decision exposes the Postal Service to significant and unwarranted litigation costs under the antitrust laws, which include treble damages and attorneys' fees. That result could undermine the ability of the Postal Service to carry out its legislative mandate to provide universal mail service at reasonable rates. This Court's review is accordingly warranted.