Reese Bros. v. United States Postal Service (905 F. Supp. 2d 223, 2012)

United States District Court for the District of Columbia 2012-11-27

Judiciary and Judicial Procedure Postal Service

Citations

Full opinion text

MEMORANDUM OPINION

ELLEN SEGAL HUVELLE, District Judge.

Plaintiff Reese Brothers, Inc. (“RBI”) brings this action against the United States Postal Service (“Postal Service” or “USPS”) seeking to set aside a final agency decision that assessed a revenue deficiency against RBI in excess of $3.5 million for improper use of the nonprofit mailing rate (“Final Agency Decision”). RBI also seeks damages for the injury to its business allegedly caused by that decision. The Postal Service filed a counterclaim against RBI to collect the unpaid deficiency, and a third-party claim based on a theory of successor liability against Reese Teleservices, Inc. (“RTI”), which acquired RBI in December 2002, and The Resources Group, LLC (d/b/a TRG Holdings, Inc.) (“TRG”), which now has a controlling interest in RTI.

Before the Court are the parties’ cross-motions for summary judgment on all claims. These include: (1) RBI’s motion for partial summary judgment on its complaint against the Postal Service (partial only in that it does not include damages) (“RBI Mot.”); (2) the Postal Service’s cross-motion for summary judgment on RBI’s complaint, on its counterclaims against RBI, and also on its third-party complaint against RTI and TRG (“PS Mot.”); -and (3) RTI and TRG’s joint motion for summary judgment on the Postal Service’s third-party complaint (“RTI/TRG Mot.”). For the reasons stated herein, RBI’s motion will be granted in part and denied in part; the Postal Service’s motion will be granted in part and denied in part; and RTI/TRG’s motion will be denied. The Final Agency Decision will be upheld except as to the amount of the assessed deficiency, which will be set aside.

BACKGROUND

I. STATUTORY AND REGULATORY BACKGROUND

A. Origins of Reduced Rates for Mail Sent by Qualified Nonprofit Organizations (the “Nonprofit Rate”)

Congress adopted the first statutory mail classification providing a reduced rate for certain mail sent by qualified nonprofit organizations in 1951. See Act of Oct. 30, 1951, Pub. L. No. 233, § 6, 65 Stat. 672, 673 (1951) (codified at 39 U.S.C. § 4452 (1964)); see also Nat’l Retired Teachers Ass’n v. U.S. Postal Serv., 593 F.2d 1360, 1361 n. 2 (D.C.Cir.1979). When the Postal Reorganization Act (“PRA”) was enacted in 1970, establishing the United States Postal Service as “an independent establishment of the executive branch of the Government of the United States,” it provided that qualified nonprofit organizations would continue to be eligible for a reduced rates. Postal Reorganization Act, Pub. L. No. 91-375, §§ 201, 3626, 84 Stat. 719, 720, 762-63 (1970) (codified at 39 U.S.C. §§ 201, 3626). The mail classification schedule the Postal Service thereafter adopted included the following provision:

The nonprofit bulk rate is available for bulk rate third-class mail mailed by qualified nonprofit organizations. A qualified nonprofit organization is a religious, educational, scientific, philanthropic, agricultural, labor, veteran’s or fraternal organization or association that is not organized for profit and none of the net income of which inures to the benefit of any private stockholder or individual. Before being entitled to mail at the nonprofit bulk rate, the organization shall furnish proof of its qualifications to the Postal Service.

DMCS § 300.221 (emphasis added).

B. Postal Service Regulations re Use of the Nonprofit Rate

The PRA authorized the new Postal Service “to adopt, amend, and repeal such rules and regulations as it deems necessary to accomplish the objectives of this title.” 39 U.S.C. § 401(2) (1970). It also exempted the Postal Service from chapters 5 and 7 of the Administrative Procedure Act (“APA”). Id. § 410(a) (“no Federal law dealing with public or Federal contracts, property, works, officers, employees, budgets, or funds, including the provisions of chapters 5 and 7 of title 5, shall apply to the exercise of the powers of the Postal Service”). Chapter 5 of the APA, entitled “Administrative Procedure,” generally sets forth the procedural requirements for administrative decision-making, including rulemaking and adjudication. Chapter 7, entitled “Judicial Review,” generally sets forth the requirements for and scope of judicial review of administrative decisions.

In 1975, the Postal Service issued a regulation that “define[d] the conditions under which nonprofit organizations qualified for special third-class mailing privileges under [DMCS § ] 300.221.” Nat’l Retired Teachers, 593 F.2d at 1361; see 40 Fed. Reg. 37,209 (Aug. 26, 1975). In relevant part, that regulation provided:

An organization authorized to mail at the [nonprofit] rates for qualified nonprofit organizations may mail only its own matter at these rates. An organization may not delegate, or lend the use of its permit to mail at [nonprofit] rates to any other person, organization, or association. Cooperative mailings may not be made at the [nonprofit] rates for qualified nonprofit organizations if one or more of the cooperating persons or organizations is not entitled itself to the special rates. Cooperative mailings involving the mailing of matter in behalf of or produced for an organization not authorized to mail at the [nonprofit] rates for qualified nonprofit organizations must be paid at the applicable regular rate....

Postal Service Manual § 134.57. In 1979, the Court of Appeals for the District of Columbia Circuit upheld this regulation as “a valid exercise by [the Postal Service] of its authority to interpret the mail classification schedule established by the PRC,” specifically the requirement that the mail matter be “mailed by qualified nonprofit organizations.” Nat’l Retired Teachers, 593 F.2d at 1361 n. 2,1364.

The regulation was carried over without substantive change to the Domestic Mail Manual (“DMM”), although it was subdivided into two parts within a subsection entitled “Eligible Matter.” See DMM § 625.5. The first part, entitled “Matter of Eligible Organizations,” stated:

An organization authorized to mail at the [nonprofit] rates may mail only its own matter at these rates. An organization may not delegate, or lend the use of its authorization to mail at the [nonprofit] rates to any other person or organization.

DMM § 625.51. The second part, entitled “Cooperative Mailings,” stated:

Cooperative mailings may not be made at the [nonprofit] rates for qualified nonprofit organizations if one or more of the cooperating persons or organizations is not entitled itself to the special rates. Cooperative mailings involving the mailing of matter in behalf of or produced for an organization not authorized to mail at the [nonprofit] rates for qualified nonprofit organizations must, be paid at the applicable regular rate....

DMM § 625.52. In 1981, the Postal Service amended DMM § 625.52 “to clarify that a cooperative mailing may be made at the [nonprofit] rates by two or more nonprofit organizations only when each of the cooperating organizations is authorized to mail at the special rates at the post office where the cooperative mailing is deposited.” 46 Fed. Reg. 25,090 (May 5, 1981) (emphasis added). Thereafter, and throughout the time period relevant to this case, DMM § 625.52 provided:

Cooperative mailings may be made at the special bulk rates only when each of the cooperating organizations is individually authorized to mail at the [nonprofit] rates at the post office where the mailing is deposited. Cooperative mailings involving the mailing of any matter in behalf of or produced for an organization not itself authorized to mail at the [nonprofit] rates at the post office where the mailing is deposited must be paid at the applicable regular rates....

DMM § 625.521.

C. Responses to Perceived Misuse of the Nonprofit Rate

1. Postal Service

In 1989 and 1990, the Postal Service issued several lengthy interpretive rulings to further define its “cooperative mailing” regulation. First, in July 1989, the Postal Service issued Customer Support Ruling, PS-209. (See PS Mot., Ex. H (“PS-209”).) In relevant part, PS-209 provided:

The term “Cooperative Mailing” refers to mailings made at the [nonprofit rate] in which one or more parties “cooperate” with the authorized permit holder....

Under [the applicable rules], the mailing must be owned by the authorized nonprofit entity at the time of mailing in order to be mailed at the special rates. A cooperative mailing may be considered proper if the authorized organization uses a for-profit entity (or other unauthorized entity) as an agent.

The mailer must be able to show, however, that the relationship is a legitimate principal/agent relationship in order to use the special rates. Mailings may not be sent at the special rates if made in conjunction with or in support of a venture of an unauthorized entity or a joint venture between authorized and unauthorized entities even if it is claimed that the mail matter itself is “owned” by the authorized entity.

An examination of the mailing piece is not sufficient for a determination that the cooperative mailing is not acceptable at the special rate. Instead, it is necessary to determine the relationship between all of the participating entities. This requires a review of all contracts executed by the parties, as well as other documents which may demonstrate its relationship between them. Provisions in these documents showing that the parties are not engaged in a joint venture or that the unauthorized party is the agent of the authorized nonprofit entity are relevant, but are not determinative evidence of the relationship between the parties.

Determining Factors

Factors that may be considered in determining whether a mailing is cooperative include the following:

• The identity of the party that devised, designed, prepared, and paid for the mailpiece;

• The identity of the party which directly or indirectly paid the postage on the mailing;

• How the unauthorized parties are compensated;

• How the profits and revenues from the enterprise supported by the mailing are divided;

• What risks are entailed in the enterprise supported by the mailing, and whether the parties share the risk;

• How managerial decisions are made concerning the content of the mailings or the enterprise it supports, and who makes those decisions;

• The contribution each participant makes toward the enterprise supported by the mailing (e.g., money, service, managerial decision making, etc.);

• The intent and interests of the participants; and,

• Any other evidence that may be relevant to the standards discussed above.

Joint Business Venture

When a nonprofit and for-profit organization enter into a joint business venture, the joint business venture is not entitled to mail at the special rates. Typically both parties put something in (a list of names and use of special rate permit for the nonprofit party, and payment of printing and mailing costs by the for-profit organization) and both parties take something out (a share of the proceeds/profits)....

(PS-209, at 1-2.)

Shortly thereafter, in August 1990, the Postal Service issued Publication 417, “Special Bulk Third-Class Rates,” and Publication 417A, “Customer Guide To Cooperative Mailings,” “to remind mailers concerning the types of organizations which may be authorized to mail at the [nonprofit] rates, and what restrictions exist on matter which may be mailed at those rates.” 55 Fed. Reg. 38,793 (Aug. 17, 1990). As explained by the Postal Service, the impetus for issuing these additional publications was that “[a] recent investigation by the Postal Inspection Service has documented what appears to be the proliferation of improper cooperative mailings made at the [nonprofit] rates.” Id. The Postal Service further explained that:

Instead of relying chiefly on “after-the-fact” investigations, the Postal Service wants to remind the nonprofit mailing community of the cooperative mailing rules and encourage improved compliance by providing information to help mailers determine whether planned mailings are cooperative. The information in publications 417 and 417A is designed to assist organizations in avoiding cooperative mailing problems. Nonprofit organizations should consider the factors explained in those publications when deciding whether or not to enter into specific fund-raising programs with commercial firms.

The Postal Service encourages mailers who review the information found in publications 417 and 417A, and have questions concerning whether or not mailings they are considering as part of a fundraising program will be eligible for the special rates, to submit a sample of the mailpiece or pieces, as well as a copy of the contracts and all other documentation affecting the relationship between the parties, to the appropriate field division manager of mailing requirements for review.

Id. In relevant part, these new publications stated (RBI Appendix, Jan. 31, 2012 (“RBI App”), Tab B (“Publication 417/417A”)):

5-1 OVERVIEW

A cooperative mailing is a mailing produced by an authorized organization that “cooperates” with one or more organizations to share the cost, risk, or benefit of the mailing. Cooperative mailings may not be entered at the [nonprofit] rates unless all cooperating organizations are authorized to mail at these rates at the post office of mailing. Furthermore, the cooperative mail rule prevents authorized organizations from sharing their authorizations with others who are not authorized. The rule restricts [nonprofit] mailings to the authorized organizations’ own mail.

5-2 ELIGIBLE MAILINGS

5-2.1 Eligibility Factors

For determining whether a mailing is eligible for the Nonprofit Standard Mail rates, the Postal Service evaluates the answers to these questions:

• Who devised, designed, and paid for the mailpiece?

• Who paid the postage on the mailing, either directly or indirectly?

• How are the profits and revenues divided from the mailing or an enterprise it supports?

• What risks are entailed with the mailing or with an enterprise it supports and who bears these risks?

• Who makes managerial decisions about the content of the mailing or the enterprise it supports?

• What are the participants’ intentions and interests?

5-2.2 Commercial Mailing Agent

An authorized organization may use a commercial mailing agent (or other unauthorized entity) if the organization can show that the relationship is a legitimate principal-agent relationship. If a question arises whether a mailing is eligible for the [nonprofit] rates, the authorized organization must provide, on request, documentation of the relationship that includes all contracts between the organization and other parties to the mailing. []

5-3 INELIGIBLE MAILINGS

Mail matter associated with joint enterprises between an authorized organization and a commercial enterprise (or other unauthorized mailer) is ineligible for the [nonprofit] rates. Typically, ineligible cooperative mailings are arranged as follows:

• Both parties contribute something to the mailing:

—A list of names and use of the [nonprofit] authorization by the authorized organization.

—Payment of printing or mailing costs by the commercial enterprise.

• Both parties take something out of the mailing (a share of the proceeds or profits).

(Publication 417/417A at 19-20.)

2. Congress

Congress shared the Postal Service’s “concerns about what it considers to be abuses in the [use of the nonprofit rate] which place the use of subsidies for legitimate mailings in jeopardy.” See, e.g., S.Rep. No. 101-411 (1990). In 1990, it indicated that as part of “its annual statutory oversight hearings concerning the Postal Service,” one of the issues to “be explored” was “so-called cooperative mailings in which nonprofit permit holders team with commercial vendors to market products or services through use of the nonprofit permit, and the Postal Service’s stepped up actions to restrict such mailings.” H.R.Rep. No. 101-419 (1990). Ultimately, Congress amended § 3626 of the PRA to expressly exclude several types of mail from the nonprofit rate, first in 1990 and then again in 1993. See Postal Service Appropriations Act, 1991 (“1991 Appropriations Act”), Pub. L. 101-509, § 1, 104 Stat. 1389 (1990) (codified at 39 U.S.C. § 3626(j)(l)(A)-(C)); Revenue Forgone Reform Act, Pub. L. 103-123, § 705, 107 Stat. 1267 (1993) (codified at 39 U.S.C. § 3626(j)(l)(D)).

In 1990, Congress added subsections (j)(l)(A)-(C) which excluded from the nonprofit rate, subject to certain conditions, “mail which advertises, promotes, offers, or, for a fee or consideration, recommends, describes, or announces the availability of

(A) any credit, debit, or charge card, or similar financial instrument or account, provided by or through an arrangement with any person or organization not authorized to mail at the [nonprofit] rates

(B) any insurance policy, unless the organization which promotes the purchase of such policy is [a qualified nonprofit organization], the policy is designed for and primarily promoted to the members, donors, supporters, or beneficiaries of the organization, and the coverage provided by the policy is not generally otherwise commercially available; or

(C) any travel arrangement, unless the organization which promotes the arrangement is [a qualified nonprofit organization], the travel contributes substantially (aside from the cultivation of members, donors, or supporters, or the acquisition of income or funds) to one or more of the purposes which constitutes the basis for the organization’s authorization to mail at such rates, and the. arrangement is designed for and primarily promoted to the members, donors, supporters, or beneficiaries of the organization.

39 U.S.C. § 3626(j)(l)(A)-(C). In addition, Congress added subsection (k), which provided that “[n]o person or organization shall mail, or cause to be mailed by contractual agreement or otherwise, at the [nonprofit rate], any matter to which those rates do not apply,” “authorized the Postal Service to “assess a postage deficiency in the amount of the unpaid postage against any person or organization which violates paragraph (1) of this subsection,” and established an administrative appeal process for challenging a deficiency assessment. See 39 U.S.C. § 3626(k)(l)-(3). Subsection (k) also directed the Postal Service to “maintain procedures for the prompt collection of postage deficiencies” and authorized it to “in its discretion, following] the issuance of a final decision regarding a deficiency ... deduct the amount of that deficiency incurred during the previous 12 months from any postage accounts or other monies of the violator in its possession.” Id. § 362600(3).

In 1993, Congress added subsection (j)(l)(D), which additionally excluded from the nonprofit rate “mail which advertises, promotes, offers, or, for a fee or consideration, recommends, describes, or announces the availability of ...

(D) any product or service (other than any to which subparagraph (A), (B), or

(C) relates), if—

(i) the sale of such product or the providing of such service is not substantially related (aside from the need, on the part of the organization promoting such product or service, for income or funds or the use it makes of the profits derived) to the exercise or performance by the organization of one or more of the purposes constituting the basis for the organization’s authorization to mail at such rates; or

(ii) the mail matter involved is part of a cooperative mailing (as defined under regulations of the Postal Service) with any person or organization not authorized to mail at the [nonprofit] rates;

39 U.S.C. § 3626(j)(l)(D) (emphasis added).

After each set of amendments, the Postal Service amended the DMM to implement the changes, but it did not alter the existing “Cooperative Mailing Regulation.” See 56 Fed. Reg. 46,551, 46,554-55 (Sept. 13, 1991) (amending DMM § 625.52); 59 Fed. Reg. 23,158 (May 5, 1994) (same). Both when it proposed and when it adopted the new regulations, the Postal Service expressly stated its view that the new statutory restrictions were “supplementary to, rather than a change to or replacement for, the existing postal regulations which restrict cooperative mailings” and that “mailings which are not third-class matter or which are ‘cooperative’ under existing rules are ineligible to be entered at the special rates, regardless of whether or not they violate the new restrictions.” 56 Fed. Reg. 11,537 (proposed Mar. 19, 1991); see also 56 Fed. Reg. 46,551 (Sept. 13, 1991) (same); 58 Fed. Reg. 64,918 (proposed Dec. 10, 1993) (same); 59 Fed. Reg. 23,158, 23,159 (May 5, 1994) (same). A number of comments to the first proposed rule objected to the Postal Service’s interpretation, contending that “the Postal Service should consider only the new criteria expressly stated in the new law in determining whether a mailing involving either travel or insurance programs is eligible for the special rates.” 56 Fed. Reg. 46,551. The Postal Service disagreed, noting that:

After careful review of the comments and the legislation, the Postal Service remains of the opinion that the new rules are supplementary to the existing rules that a qualified nonprofit organization may mail only its “own” matter at the special rates, and may not send matter “in behalf of or produced for” an ineligible person or organization. These criteria have been upheld in Federal court as a valid rule limiting the use of the special rates to the material Congress intended to subsidize under 39 U.S.C. 3626. National Retired Teachers Association v. U.S. Postal Service, 593 F.2d 1360 (D.C.Cir.1979), affirming 430 F.Supp. 141 (D.D.C.1977). Indeed, the district court noted that these common sense restrictions prevent a nonprofit organization from acting as the special-rate mailing agent of a commercial enterprise, and stated that the failure to stop such practices “would have been an egregious breach of (the Postal Service’s) statutory duty.” 430 F.Supp. at 147. Nothing in the text or history of new section 36260) appears to be at odds with these existing criteria. Significantly, the legislation does not amend the existing subsections that were the basis for those rules, or provide any indication that the rules would not apply to certain mailings. Instead, the legislation simply added a further restriction to the existing laws, in the form of new subsection 0). The Service also notes as additional support of its position, that the Postal Rate Commission in its Report To The Congress: Third-Class Nonprofit Mail Study, PRC Docket No. SS91-1 (July 8, 1991), stated, at page 30 of that Report, that “we fully agree with the Service’s position that the new regulations supplement longstanding postal regulations restricting cooperative mailings.” Consequently, the final rule which is adopted here will be considered by the Postal Service to be supplementary to existing regulations.

56 Fed. Reg. 46,551 (emphasis added).

There is no indication in the text or legislative history of the 1993 amendments or thereafter that Congress disagreed with the Postal Service’s interpretation of § 3626(j) as supplemental to, rather than a replacement for, its existing Cooperative Mailing Rules.

II. FACTS

A. RBI

RBI is a Pennsylvania corporation that was founded by two brothers, Barry Reese and Ralph Reese. (RBI Mot. at 4; PS Statement of Material Facts Not in Genuine Dispute (“PS Facts”) ¶ 1; PS Mot., Exs. A, B, V.) During the relevant time period, a significant part of its business was fundraising for nonprofit organizations. (RBI Mot. at 4.) Pursuant to contracts with its nonprofit clients, RBI raised money by contacting potential donors by telephone, soliciting charitable donations, and then mailing a “pledge notice” to collect the promised donation. (RBI Mot. at 4; PS Facts ¶¶ 7, 8; PS Mot., Exs. C-G; see also PS Facts ¶¶ 18-21 (describing sample contract).) (RBI refers to this process as “telefundraising”; the Postal Service refers to it as “outbound telemarketing”). After sending the initial pledge notice, RBI would send subsequent mailings depending on the terms of the contract and whether the pledge to donate was immediately fulfilled. (PS Facts ¶ 13.) Generally, RBI’s contracts provided that its invoices would only be paid if the fund-raising campaign generated sufficient funds to cover the costs RBI incurred in conducting the telemarketing and mailing — a so-called “breakeven guarantee.” (PS Facts ¶¶ 28-31.) RBI would typically send the pledge notice at the first-class mailing rate, but subsequent mailings (which could be as many as six if the pledge was not fulfilled) at the nonprofit rate. (RBI Mot. at 5; PS Facts ¶¶ 12, 13, 17.)

B. RBI’s Use of the Nonprofit Mailing Rate

In order to send mail at the nonprofit rate, RBI had to deliver the mailing, which it would have printed, assembled, and presorted, to a special Postal Service facility (known as a Business Mail Entry Unit (“BMEU”)), accompanied by a “Statement of Mailing” (Postal Service Form 3602) on which would be recorded the date of the mailing, the number of pieces in the mailing, and the postage charged. (RBI Mot. at 5-6 & Ex. 1, Tab 2.) The form, which would be signed by the permit holder or agent, certified that

(1) the mailing does not violate DMM § 625; (2) only the mailer’s matter is being mailed; (3) this is not a cooperative mailing with other persons or organizations that are not authorized to mail at [nonprofit] rates at this office; (4) this mailing has not been undertaken by the mailer on behalf of or produced for another person or organization not authorized to mail at [nonprofit] rates at this office; and (5) it will be liable for and agrees to pay, subject to appeals prescribed by postal laws and regulations, any revenue deficiencies assessed on this mailing, whether due to a finding that the mailing is cooperative or for other reasons.

(Id., Ex. 1, Tab 2.) After “examination of the mailing and the accompanying postage statement [the Form 3602],” the mailing would be “accepted” and the Form 3602 date-stamped and marked “accepted.” (RBI Mot. at 6 & Ex. 1, Tab 2.) Although the Postal Service employee who accepts the mailing has to certify that the “mailing had been inspected concerning: 1) eligibility for the rate of postage claimed; 2) proper preparation (and presort where required); 3) proper completion of the statement of mailing; and 4) payment of the required annual fee” (RBI Mot., Ex. 1, Tab 2), the “employee’s signature on the postage statement and the subsequent acceptance of the mailing do not constitute verified accuracy of that statement, and do not limit the ability of the [Postal Service] to demand proper payment after acceptance when it becomes apparent such payment was not made.” DMM § G020.2.2 (1998). It is RBI’s mailings from 1993-1998 at the nonprofit rate that are at issue in this litigation.

C. Postal Service’s Assessment of a Revenue Deficiency Against RBI

In 1997, a Postal Service Revenue Assurance Analyst decided to investigate RBI’s posting of millions of pieces of mail at the nonprofit rate. (RBI Mot. at 6; PS Facts ¶¶ 79, 80.) After an initial review of the mailpieces, he enlisted the assistance of a Postal Inspector to subpoena and review RBI’s contracts with its nonprofit clients and its Form 3602s. (RBI Mot. at 6; PS Facts ¶ 81.)

On June 1, 1998, the Postal Service notified RBI that the Revenue Assurance Analyst and Postal Inspection Service had completed their joint review of RBI’s mailings at the nonprofit rate from January 1, 1993, through December 31, 1997, and determined “that certain nonprofit mailings presented by [RBI] were ineligible for the nonprofit rates claimed.” (RBI App., Tab A, at 1938 (“Deficiency Letter”).) For these ineligible mailings, the Postal Service assessed a “revenue deficiency” against RBI in , the amount of $3,223,580.99, “the difference between the nonprofit rate claimed and the regular rate.” (Id.) In addition, RBI was advised that it “must immediately discontinue mailing at the nonprofit ... rate, or give us an opportunity to review your contracts with the nonprofit permit holders to determine that each contract meets the eligibility requirement for this rate.” (Id.)

A more detailed explanation for the Postal Service’s decision was set forth in its “Preliminary Investigative Summary Report,” which it included with the June 1, 1998 letter. (PS Mot., Ex. J, at 1 (“Investigative Report”).) According to the Investigative Report, the review looked at RBI’s “PS Form 3602, ‘Statement of Mailing,’ ” “actual contracts made between [RBI] and certain nonprofit organizations,” and the “rules, regulations and customer support rulings governing cooperative nonprofit mailings.” (Id.) In explaining the decision, though, the Report focused on RBI’s contracts and its determination based on those contracts that “a relationship exists between [RBI] and certain nonprofit organizations that is indicative of the relationship found in ineligible cooperative nonprofit mailings.” (Id. at 2.)

The Investigative Report included a table that showed “the discounted postage claimed by RBI, the actual postage owed to the USPS, and the difference between the two amounts.” (Id. at 3.) On July 6, 1998, Ralph Reese sent a letter to the Postal Service requesting “an exact copy of each signed mail receipt for items on the spreadsheets detailed in the exhibits.” (RBI Mot., Ex. 2.)

The Deficiency Letter further advised RBI that its nonprofit mailings between January 1, 1998, and June 1, 1998 would also be reviewed and that it would “be notified of the revenue deficiency which is due for these mailings.” (Deficiency Letter at 1.) On July 31, 1998, the Postal Service issued a “Supplemental Investigative Summary Report,” covering that time period and adding $376,487.24 to the assessed deficiency. (PS Mot., Ex. K, at 2 (“Supp. Report”).) In a letter dated August 20, 1998, the Postal Service directed RBI to pay this additional deficiency by September 20, 1998, unless it exercised its right to file an administrative appeal. (PS Mot., Ex. L, at 1.)

D. Administrative Appeals of Assessed Deficiency

On August 27, 1998, RBI notified the Postal Service that it would appeal the assessed deficiency. (PS Mot., Ex. BB.)

1. Initial Agency Decision

In its initial appeal to the Northern Virginia Rates and Classification Service Center, RBI challenged both the conclusion that RBI’s mailings were “cooperative mailings” under the Cooperative Mailing Rules and the calculation of the deficiency amount. RBI’s appeal was rejected on March 1, 1999. (PS Mot., Ex. CC (“Initial Agency Decision.”)) The Initial Agency Decision gave a lengthy explanation for why the Postal Service concluded that RBI’s mailings were “cooperative mailings,” the relevant portions of which are set forth here:

[RBI], a for-profit entity, is not authorized to mail at the [nonprofit] rate. The basis for the revenue deficiency is [RBI’s] impermissible use of the [nonprofit] rate for its mailings in cooperation with various organizations set forth in Enclosure A hereto. The deficiency assessed represents the difference between the [nonprofit] rate claimed and the regular rate for Standard A postage. ... [T]he Domestic Mail Manual (DMM) generally provides that “cooperative mailings” such as those at issue in this revenue deficiency assessment, may be made at the [nonprofit] rate only when each of the cooperating organizations is individually authorized to mail at those rates at the post office where the mailing is deposited. Cooperative mailings involving the mailing of any matter on behalf of or produced for an organization not itself authorized to mail at the [nonprofit] rates where the mailing is deposited must be paid at the applicable regular rates.

The postal term “cooperative mailing” refers to mailings made at the [nonprofit] rates in which one or more of the parties “cooperate” with the authorized Nonprofit organization. A cooperative mailing can be defined as a mailing produced by an authorized organization that “cooperates” with one or more organizations to share the cost, risk, or benefit of the mailing. Pursuant to ... the DMM, an organization that is authorized to mail at the [nonprofit] rates may only mail its own matter at those rates, and the organization may not delegate or lend the use of its authorization to mail at the [nonprofit] rates to any other person or organization. For that reason, cooperative mailings that are made on behalf of or produced for any organization that is not itself authorized to mail at the [nonprofit] rates must be paid at the applicable regular rate.

Under the rules, the mailing must be owned by the authorized Nonprofit entity at the time of the mailing in order to be mailed at the special rates, and, for that reason, as the [RBI’s] appeal points out, a cooperative mailing can be proper if the authorized organization uses a for-profit entity as an agent to mail matter which the Nonprofit organization owns. However, the mailer must be able to show that the relationship is a legitimate principal/agent relationship in order to use the [nonprofit] rate, and mailings may not be sent at the [nonprofit] rates if the mailing is made in support of a venture of an unauthorized entity or a cooperative enterprise between authorized and unauthorized entities, even if it is claimed that the mail matter itself is “owned” by the authorized entity. Ordinarily, a legitimate agent will not bear the risk of a venture that it is handling on behalf of a principal. Excellent guidance concerning the rules relating to cooperative mailings is set forth in Customer Support Ruling PS-209 and Chapter 5 of Publication 417, copies of which have been furnished to you.

In order to determine whether a cooperative mailing is acceptable at the [nonprofit] rate, an examination of the mail-piece is usually not sufficient, because it is necessary to determine the relationship between all of the participating entities. For this reason, we undertook a review of all the contracts that were furnished to us by [RBI] as evidence of the relationship between the parties which produced the mailings that are at issue here.

Generally, when a Nonprofit and a for-profit organization enter into a cooperative business venture, mail generated by the cooperative business venture is not eligible for the [nonprofit] rates. The crucial elements used to analyze cooperative mail ventures are the allocation of the risk, and division of profits and management control. Factors to be considered include the identities of the party that devised, designed, prepared and paid for the mailpiece, and the party that directly or indirectly paid the postage on the mailings; the manner in which the unauthorized parties are compensated, the profits and revenues from the enterprise supported by the mailing are divided, the risks associated with the enterprise supported by the mailing are shared, and the managerial decisions are made concerning the content of the mailings or the enterprise it supports; the contribution which each participant makes towards the enterprise supported by the mailing; and the intent and interest of the participants in the mailings.

All of the contracts furnished to us by [RBI] relating to this revenue deficiency bear evidence of the type of cooperative venture which is not authorized to mail at the [nonprofit] rate. This is so particularly in light of the allocation of risk and the division of profits and management control associated with the endeavors between the parties. All of the contracts contain some form of a so-called “break-even guaranty.” This means that [RBI] will get paid only if the fund-raising efforts which are the basis of the cooperative venture are successful.

Furthermore, [RBI] maintains partial management control; because the parties are required to cooperate and to agree on changes to the materials which the cooperative venture prepares, and/or because the caging agent utilized to handle the funds generated by the endeavor is subject to approval by the parties. Another example of shared management control is [RBI’s] right to continue collecting on pledges after the period of contract performance, including the mailing of dunning notices.

As further evidence of a cooperative venture, some of the contracts contain an explicit division of profits which sets forth a percentage split of any revenues generated by the endeavors and/or for a minimum guaranteed amount to be paid to the Nonprofit entity. This latter term ensures that if the fundraising effort generates no donations, it is [RBI], not the Nonprofit entity, which will absorb the loss. Finally, in some of the agreements, [RBI] has and/or retains rights to the donor files/lists compiled and used in the solicitation efforts.

While it is trae that some of the contracts set forth a fee schedule under which [RBI] is paid a specific amount for each of the specific types of services which it has agreed to perform, this is not the type of “fee-for-service” arrangement recommended by the Postal Service to avoid implicating the cooperative venture prohibition on use of the [nonprofit] rate. This is so because these contracts also provide that the Nonprofit is not obligated to pay the invoices from [RBI] unless the fundraising efforts of the cooperative venture generate sufficient funds to pay them. Once again, it is this sharing of risk between the Nonprofit and for-profit entities that renders the mailings ineligible for the [nonprofit] rate.

(Initial Agency Decision at 1-3.) However, the Initial Agency Decision did not address RBI’s contention that even if the Cooperative Mailing Rules were properly applied, the deficiency amount was too high because some of the mailings were not pursuant to RBI’s contracts with its nonprofit clients, but rather were pursuant to simple purchase orders.

2. Final Agency Decision

RBI appealed the Initial Agency Decision to the Business Mail Acceptance Manager, at USPS Headquarters, again challenging both the application of the Cooperative Mailing Rules and the calculation of the deficiency amount. On March 13, 2000, the Postal Service issued its Final Agency Decision, upholding the “mail classification ruling underlying the deficiency and calculation of the amount [of the deficiency].” (PS Mot., Ex. DD, at 1.) The Postal Service concluded that RBI’s mailings on behalf of its nonprofit clients were “cooperative mailings” and, therefore, not eligible for the nonprofit mailing rate because:

Some of the crucial elements the Postal Service uses to analyze cooperative mail ventures are allocation of risk, division of profits and management control. Other factors we consider include identity of the parties who devised, designed, prepared and paid for the mailpiece, and the parties who directly or indirectly paid postage on the mailings. We must also consider how each cooperating party is compensated, how the profits and revenues are divided and the risks associated with the enterprise supported by the mailing are shared.

The contracts RBI provided relating to the postage deficiency bear evidence of the type of cooperative venture that is not authorized to mail at the [nonprofit] rates. This is especially true when considering the allocation of risk and division of profits and management control between the parties. Each contract contains some form of “break-even guaranty,” meaning RBI receives payment from its nonprofit clients only if its fund-raising efforts on their behalf are successful. This is the essence of the type of cooperative venture that cannot enter its matter at the [nonprofit] rate.

(Final Agency Decision at 1.) As for the other issues raised by RBI on appeal, the final agency decision referred back to the Initial Agency Decision and stated that the Postal Service “concurs with those responses and believes they were fully and accurately explained.” (Id.) The Final Agency Decision, however, did not address RBI’s contention that the deficiency amount was too high because it included mailings of newsletters pursuant to purchase orders and eligible for the nonprofit rate.

On March 17, 2000, the Postal Service notified RBI that although it had “announced a new direction for it’s [sic] revenue assurance process,” whereby “revenue deficiencies will not be assessed in the future unless the customer had ‘prior notice’ of the applicable mailing standards,” the deficiency against RBI would “not be forgiven” because RBI was a “professional mailer with volumes/mailings in 1997 alone of 11,923,963 pieces of mail and $2,001,683 in postage” and because RBI had been “assessed additional postage in 1990 for mailing cooperative mailings that did not qualify for the non-profit rates,” and it had been made aware “at that time ... of the eligibility requirements for the non-profit rates of postage.” (PS Mot., Ex. EE, at 1.)

Thereafter, the Postal Service and RBI reached an agreement “regarding the time frame” within which RBI could “file a request for the mitigation of [the] postal deficiency,” with the Manager of Finance, in Pittsburgh, Pennsylvania, who had the authority to reduce or waive the deficiency, but could not revisit the mail classification decision. (RBI Mot., Ex. 4, at 1-2; see also PS Mot., Ex. FF (“Mitigation Decision”) (“mail classification issues ... are outside the scope of this review”).) RBI submitted its request for mitigation on or about April 27, 2000. (Mitigation Decision at 1.) On February 15, 2001, the Postal Service granted the request in part, forgiving the portion of the debt “that resulted from mailings before June 1996.” (Id.) The Finance Manager explained that he thought it “reasonable” to forgive that portion of the debt, because, although “the Management Instruction governing the assessment and collection of revenue deficiencies did not set forth any timeframe for assessing postage owed the agency as a result of past mailings,” he “ha[d] determined that deficiencies assessed against other mailers were often limited to a two-year period.” (Id.) Applying that adjustment, the Postal Service recalculated RBI’s debt to be $1,646,277.95, and the amount forgiven to be $1,953,790.28. (Id. at 2.) RBI was instructed to submit payment by March 30, 2001. (Id.) The Postal Service informed RBI that its forbearance decision was the “final agency response” concerning the revenue deficiency. {Id. at 1.)

E. Developments After the Final Agency Decision

1. RBI’s Sale of Assets to RTI

In the early 2000s, RBI started to experience financial difficulties. Eventually, after first selling its major subsidiary and engaging in a significant restructuring, on December 31, 2002, RBI entered into an “Asset Purchase Agreement” with RTI, pursuant to which RTI purchased certain assets and assumed certain liabilities from RBI for a one-time payment of $10,000.00. (PS Mot., Ex. U, at 1 & ¶¶ 1-2 (“Asset Purchase Agreement”); PS Facts ¶ 129.)

When the Asset Purchase Agreement was executed, the corporate structures of both RBI and RTI were altered. RTI had been incorporated in October 2002 by RBI’s Executive Vice-President, Chris Ungarino, who was initially its sole owner and 100% shareholder. (PS Mot., Ex. Q; PS Fact ¶ 123.) Prior to the sale, as had been the case since RBI’s formation, Barry and Ralph Reese were equal 50/50 shareholders in RBI, equal partners in running the company, and the only members of RBI’s Board of Directors. (PS Facts ¶ 1; PS Mot., Ex. W.) Barry Reese was RBI’s Chairman, President and Treasurer (PS Facts ¶ 2; PS Mot., Ex. W), while Ralph Reese was RBI’s Vice President and Secretary. (PS Facts ¶ 3; PS Mot., Ex. W.) The day the Asset Purchase Agreement was executed, Barry Reese resigned as President and Chairman of the Board, leaving Ralph Reese as the sole officer while James Epstein became RBI’s President. (PS Facts ¶¶ 124-25, 139.) RTI was restructured to split its stock among Barry Reese (49%), Ungarino (47%), and Charlie O’Hanlon (4%), who also comprised the RTFs Board of Directors. (PS Facts ¶¶ 123, 125, 139; PS Mot., Ex. R; PS Mot., Ex. W.) Ungarino became RTI’s President, while Barry Reese became Chairman of the Board, and its Secretary and Treasurer. (PS Facts ¶¶ 14CM3; PS Mot., Ex. W.)

Pursuant to the Asset Purchase Agreement, RTI, which had no existing assets or business, acquired “substantially all of the assets used or held in connection with the [RBI’s] [b]usiness” of “outbound telemarketing services to nonprofit and commercial customers.” (Asset Purchase Agreement at 1; PS Mot., Ex. Q; PS Facts ¶ 112, 132.) These assets included RBI’s entire business operation, and all of its employees (with the exception of Ralph Reese and James Epstein), its clients, physical plants, computers, call centers, and office space. (Asset Purchase Agreement ¶ 1; see also PS Facts ¶133, 137.) The assets RBI expressly retained included “domain names” and “fictitious business names,” trademarks, service marks, and copyrights, publishing agreements; rights to certain tax refunds, sundry office furniture; RBI’s ownership interests in CommComm and its overseas calling operation in the Philippines; RBI’s proprietary telemarketing management software (known as the Reese Brothers Information Management System or “RIMS”); and RBI’s database of information pertaining to the then current charitable donors including names, addresses, telephone numbers, history and frequency of giving. (Asset Purchase Agreement, Schedule 1; PS Facts ¶ 134.) Eventually, the software was also sold to RTI. (PS Facts ¶ 135.) As for liabilities, the Asset Purchase Agreement specifically identifies the liabilities expressly assumed by RTI. (Asset Purchase Agreement, Schedule 3 (“Assigned Liabilities”).) The “assigned liabilities” did not include RBI’s liability for the postal deficiency. (Id.; RTI/TRG Mot. at 2.) In addition, RTI entered into a Non-Competition, Non-Solicitation and Confidentiality Agreement with Ralph Reese, under which it paid him the sum of $500,000.00 in monthly installments. (Asset Purchase Agreement ¶ 10 & Ex. C; RTI/TRG Mot. at 9.)

2. RTI’s Sale of Stock to TRG

Several years later, on April 6, 2005, RTI sold 73% of its stock to TRG for a “net equity value” of $14,800,000, giving TRG a controlling interest in RTI. (PS Mot., Ex. Z; PS Facts ¶ 148.) At that time, Barry Reese and O’Hanlon resigned their positions with RTI. (PS Mot., Ex. AA; PS Facts ¶ 148.) Ungarino continued on with RTI as its President and CEO and retained a 27% stock ownership, while also becoming TRG’s new president and chief executive officer. (PS Facts ¶ 148.) Barry Reese also entered into a Non-Competition/Non-Solicitation Agreement with RTI and Ralph Reese renewed his existing Non-Competition Agreement. (PS Mot., Ex. Z.)

III. PROCEDURAL HISTORY

In 2006, more than five years after the Postal Service issued its forbearance decision, RBI filed this action, seeking “to set aside the [Postal Service’s] final agency decision affirming the postal deficiency and forbearance decision.” (Compl. ¶ 59, June 6, 2006.) RBI’s complaint includes claims that the Postal Service’s Cooperative Mailing Rules are unconstitutional (Compl. ¶¶ 39-48 (Counts 1-10)), contrary to congressional intent (id. ¶ 50 (Count 12)) and arbitrary and capricious (id. ¶ 51 (Count 13)), and claims that the Postal Service’s decision applying the Cooperative Mailing Rules to RBI and the deficiency assessment were arbitrary and capricious (id. ¶¶ 52-55 (Counts 14-17)). The Postal Service filed a counterclaim against RBI seeking to collect the full amount of the assessed deficiency ($3,600,068.23), along with a third-party complaint against RTI and TRG to collect the debt based on a theory of successor liability. (Counterclaim and Third-Party Compl., June 27, 2006.)

Now before the Court are the parties’ cross-motions for summary judgment. RBI seeks summary judgment on all of its claims against the Postal Service, except for its potential claim for damages. The Postal Service seeks summary judgment on RBI’s claims against it, on its claims against RBI, and on its claims against RTI and TRG. RTI and TRG seek summary judgment on the Postal Service’s claims against them.

ANALYSIS

The pending motions for summary judgment present two overarching questions: (1) should the Postal Service’s Final Agency Decision be set aside as to liability and/or the deficiency; (2) and, if not, are RTI and/or TRG jointly and severally liable along with RBI for the deficiency.

I. REVIEW OF THE FINAL AGENCY DECISION

RBI challenges the Final Agency Decision on the following grounds: (1) that the Cooperative Mailing Rules exceed the Postal Service’s delegated authority because they are inconsistent with congressional intent; (2) that the Cooperative Mailing Rules — facially and as applied to RBI — are unconstitutional; and (3) the Postal Service’s determination that RBI’s mailings were ineligible for the nonprofit mailing rate and that it owed a deficiency in excess of $3.5 million was arbitrary and capricious.

A. Challenge to the Cooperative Mailing Rules as Contrary to Congressional Intent

RBI claims that the Cooperative Mailing Rules exceed the Postal Service’s delegated authority insofar as they exclude from the nonprofit rate, cooperative mailings that do not involve the advertisements of “products and services.” (RBI Mot. at 10.) “An agency construction of a statute cannot survive judicial review if a contested regulation reflects an action that exceeds the agency’s authority.” See Aid Ass’n for Lutherans v. U.S. Postal Serv., 321 F.3d 1166, 1174 (D.C.Cir.2003). RBI bases its argument on 39 U.S.C. § 3626(j)(l)(D)(ii), which was added to the PRA in 1993 and provides that the nonprofit rate:

shall not apply to mail which advertises, promotes, offers, or, for a fee or consideration, recommends, describes, or announces the availability of ...

(D) any product or service ... if—

... (ii) the mail matter involved is part of a cooperative mailing (as defined under regulations of the Postal Service) with any person or organization not authorized to mail at the [nonprofit] rates

§ 3626(j)(l)(D)(ii). RBI asserts that Congress’ clear intent in enacting this subsection was to establish that the only cooperative mailings that could be excluded from the nonprofit rate were those described in § 3626(j)(l)(D)(ii). Accordingly, RBI argues, the Cooperative Mailing Rules exceed the Postal Service’s authority because they exclude mailings (such as RBI’s mailings on behalf of its nonprofit clients) that are not within the parameters of subsection (D)(ii).

The two-step Chevron analysis applies when the question is whether the Postal Service’s construction of a statute and regulations promulgated thereunder are contrary to congressional intent. See Aid Ass’n for Lutherans, 321 F.3d at 1174 (citing Chevron USA Inc. v. Nat’l Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)). At Chevron step one, the reviewing court must determine “whether Congress has directly spoken to the precise question at issue.” Chevron, 467 U.S. at 842, 104 S.Ct. 2778; AAL, 321 F.3d at 1174. “If a court, employing traditional tools of statutory construction, ascertains that Congress had an intention on the precise question at issue, that intention is the law and must be given effect.” Chevron, 467 U.S. at 843 n. 9, 104 S.Ct. 2778. However, “if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Chevron, 467 U.S. at 843, 104 S.Ct. 2778.

Here, the “precise question at issue” is whether the only cooperative mailings that can be excluded from the nonprofit rate are those encompassed by the prohibition in subsection (D)(ii). RBI maintains that the answer to that question is yes. (RBI Mot. at 9-10) (Congress clearly intended that “to be excluded from the nonprofit rate ... mail must both ‘advertise, promote, offer [etc.... a] product or service’ and run afoul of the USPS’s cooperative mailing rule.” (quoting § 3626(j)(l)(D)(ii)).) The Court does not agree. Considering the text, structure and legislative history, Congress’s intent in enacting subsection Cj)(l)(D)(ii) is not clear. First, when in 1990 and 1993, Congress added express exclusions to the PRA as to what type of mail could be mailed at the nonprofit rate, see (A)-(C) (1990 Amendments); id. (D) (1993 Amendments), it was against the backdrop of the existing Cooperative Mailing Rules and the Court of Appeals’ decision in 1979 upholding those rules as a proper exercise of the Postal Service’s authority. Yet, nowhere in the text does it explicitly state that the subsection (D)(ii) exclusion is the “only” type of cooperative mailing that is excluded from the nonprofit rate. Indeed, with the single exception of the reference in subsection (D)(ii) to “cooperative mailings” as being “defined under regulations of the Postal Service,” there is no other reference in the PRA to cooperative mailings. Nor is there anything in the legislative history to support RBI’s position. To the contrary, Congress’ most clearly expressed concern related to the overuse or abuse of the nonprofit rate. See, e.g., S.Rep. No. 101-411; H.R.Rep. No. 101-419. In addition, after the 1990 amendments, when the Postal Service, as part of its adoption of implementing regulations, announced its view that those amendments had no effect on preexisting restrictions on the use of the nonprofit rate, including the Cooperative Mailing Rules, there is no indication in the legislative record thereafter and leading up to the 1993 amendments that Congress disagreed with that view. Nor did it respond or express disagreement when the Postal Service indicated its view that the 1993 amendments did not alter or replace its existing Cooperative Mailing Rules.

RBI relies heavily on the Court of Appeals’ decision in Aid Ass’n for Lutherans, but that case is distinguishable. In Aid Ass’n for Lutherans, plaintiff challenged the Postal Service regulations that implemented subsection (j)(l)(B) of the 1990 amendments. See Aid Ass’n for Lutherans, 321 F.3d at 1167 (citing 57 Fed. Reg. 28,464, 28,466 (June 25, 1992)). The statute provided generally that insurance policies could not be sent at the nonprofit rate, but recognized an exception where “the coverage provided by the policy is not generally otherwise commercially available.” 39 U.S.C. § 3626(j)(l)(B). Thus, Congress had expressly identified a subset of insurance policies that a qualified nonprofit would be allowed to mail at the nonprofit rate. The challenged regulations narrowed the exception by providing that the nonprofit rate would be limited to instances where the “type of insurance” (e.g., life, automobile, health) was not generally otherwise commercially available. The Court held that the Postal Service had exceeded its delegated authority by limiting the exception because Congress clearly intended to allow use of the nonprofit rate for the insurance policies described in subsection (B). See Aid Ass’n for Lutherans, 321 F.3d at 1168 (quoting § 3626(j)(l)(B) (emphasis added)) (“statute permits the agency to regulate solely with respect to ‘coverage provided by [an insurance] policy’”). In contrast, in subsection (D)(ii), Congress expressly identified a certain type of cooperative mailing as excluded from the nonprofit rate. The Cooperative Mailing Rules, which were in place long before subsection (D)(ii) was enacted, do not narrow this statutory exclusion, but rather, they enlarge the universe of cooperative mailings barred from using the nonprofit rate. Thus, unlike the regulations in Aid Ass’n for Lutherans, the Cooperative Mailing Rules do not directly conflict with any statutory provision.

Given the above, although there is no question that subsection (D)(ii) expressly proscribes use of the nonprofit mailing rate for advertisements of “products and services” in “cooperative mailings,” the Court is not persuaded that by enacting this provision, Congress clearly intended to significantly narrow the existing Cooperative Mailing Rules. Accordingly, as the statute is silent or ambiguous “on the precise question at issue,” the inquiry must proceed to Chevron step two.

At Chevron step two, if the agency’s “choice represents a reasonable accommodation of conflicting policies that were committed to the agency’s care by the statute,” a court will not disturb that choice “unless it appears from the statute or legislative history that the accommodation is not one that Congress would have sanctioned.” Chevron, 467 U.S. at 845, 104 S.Ct. 2778 (quoting United States v. Shimer, 367 U.S. 374, 382-83, 81 S.Ct. 1554, 6 L.Ed.2d 908 (1961)); see United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 131, 106 S.Ct. 455, 88 L.Ed.2d 419 (1985) (Chevron step two entails evaluation of agency action “in light of the language, policies and legislative history of the Act.”). The Cooperative Mailing Rules easily satisfy this standard.

First, the Court of Appeals has previously held that an earlier, but substantially similar, version of the Cooperative Mailing Regulation was a proper exercise of the Postal Service’s authority. See Nat’l Retired Teachers, 593 F.2d at 1363-64. Admittedly, that case came before the enactment of the 1990 or 1993 amendments to the PRA, but, as noted above, neither set of amendments directly or by implication altered the existing Cooperative Mailing Rules or overruled Nat’l Retired Teachers Ass’n. As the Court in Nat’l Retired Teachers Ass’n emphasized, the “practical reality [is] that a classification schedule can only define general outlines,” so the Postal Service “must retain some flexibility and discretion to interpret the general provisions of the mail classification schedule in day-to-day implementation.” Id. at 1363. The Court further held that the Postal Service “need not rely solely on case-by-case interpretation. It may choose to exercise its rulemaking power by an interpretative rule. Such an interpretative rule is general, in the sense that it guides all postal officials in applying a mail classification and assures that they will provide a consistent and uniform interpretation, but the rule remains one of interpretation of the classification.” Id. As for the Cooperative Mailing Regulation specifically, the Court held that that Postal Service had “validly exercised its interpretative discretion in concluding ... that the ‘mailed by’ language [in the classification schedule] contained, by fair implication, limitations on the use of the nonprofit rate.” Id. at 1364. Accordingly, the Court held that the Cooperative Mailing Regulation was “eminently reasonable as effectuating the implicit purpose of the [classification schedule]” to ensure that “that the nonprofit rate would be used for the purposes of the listed organizations, and not for other purposes such as commercial activities inconsistent with the grant of qualification.” Id.

Second, it is apparent that at the time Congress adopted subsection (j)(l)(D)(ii), it was deeply concerned about the costs associated with the use and abuse of the nonprofit rate. See, e.g., S.Rep. No. 101-411. Given that concern, as other courts have determined, it is unreasonable to conclude that while enacting specific exclusions from the nonprofit rate, Congress would simultaneously nullify the Postal Service’s existing Cooperative Mailing Rules. See, e.g., United States v. Raymond & Whitcomb Co., 53 F.Supp.2d 436, 441 n. 4 (S.D.N.Y.1999) (§ 3626(j)(1)(C) “in no way broadens the right to use the non-profit rate for travel mailings that otherwise would be ineligible cooperative mailings”); U.S. Postal Serv. v. University Pub. Corp., 835 F.Supp. 489, 491 (S.D.Ind.1993) (“The USPS definition of ‘cooperative mailing’ is reasonable and the Court will not disturb it.”); United States ex rel. Saklad v. Lewis, Civ. Act. No. 97-10052-MLW (D. Mass. Mar. 5 2