[00:00:00] Speaker 01: Case number 15-1297, United States Postal Service Petitioner versus Postal Regulatory Commission. [00:00:06] Speaker 01: Mr. Bell for the petitioner, Mr. Tenning for the respondent. [00:00:30] Speaker 01: I had, there's been one in between that Hattie had. [00:00:36] Speaker 01: Oh, I know. [00:00:37] Speaker 01: I mean, this is on Groundhog Day, all these things just keep, let it never die. [00:01:14] Speaker 01: Let's wait till the courtroom is clear. [00:01:17] Speaker 01: Just wait till the courtroom is clear. [00:01:18] Speaker 02: They didn't stick around? [00:01:42] Speaker 01: All right. [00:01:43] Speaker 01: Mr. Bell, good morning. [00:01:44] Speaker 01: This is our morning for repeat litigation. [00:01:47] Speaker 00: Apparently so. [00:01:49] Speaker 00: Good morning, Your Honors. [00:01:50] Speaker 00: May it please the Court. [00:01:51] Speaker 00: There's one overriding issue before the Court. [00:01:55] Speaker 00: It's whether the commission on remand changed the test that this Court upheld for determining when the Great Recession ceased being an extraordinary event for purposes under the statute. [00:02:08] Speaker 00: And I think they clearly did. [00:02:10] Speaker 00: And I think if the court agrees, I think the case has to be remanded. [00:02:14] Speaker 00: And I want to explain the context in which this issue arises. [00:02:18] Speaker 00: When the case was last before the court, the court did three things pertinent to the incident case. [00:02:24] Speaker 00: First, it upheld the commission's four part so-called new normal test. [00:02:28] Speaker 00: And that was the test that determined when the Postal Service gained the ability to adjust to the volume losses that the Great Recession caused. [00:02:37] Speaker 00: It also vacated a separate rule, the count once rule, as being inconsistent with the ability to adjust prong of the test. [00:02:47] Speaker 00: And the final thing it did, as to the factual question of when the Postal Service gained the ability to adjust to the volume losses, the court did not disturb the commission's finding. [00:02:57] Speaker 00: But it said the commission was free to consider whether that finding was inconsistent with other aspects of its analysis. [00:03:06] Speaker 00: And it's the commission's resolution of that last question that's before the court now. [00:03:10] Speaker 00: When the case went back on remand, we pointed to essentially three sets of findings that we felt were in conflict. [00:03:16] Speaker 00: Let me just talk to you a second. [00:03:18] Speaker 01: I think it's possible to over-read footnote three. [00:03:24] Speaker 01: And what I'm asking you is, are you over-reading it? [00:03:26] Speaker 01: Are you reading it to say that that panel said, [00:03:30] Speaker 01: to the commission, you need to revisit this or you need to reconsider this. [00:03:35] Speaker 01: If you are, I think you're over reading it. [00:03:36] Speaker 01: I think it's simply saying, this wasn't brief, this isn't before us. [00:03:41] Speaker 01: And almost as a throwaway line, if the commission wants to deal with it, it's free to. [00:03:47] Speaker 01: They could have, I mean, that could have been left out. [00:03:49] Speaker 01: And the point of the footnote is we're not going to consider it. [00:03:53] Speaker 00: Your Honor, I don't interpret what the court said as that they must consider it. [00:03:58] Speaker 00: The commission was free to say, we're not considering it. [00:04:01] Speaker 00: But what the commission did instead was change the test. [00:04:05] Speaker 00: And that, to me, shows that, A, they did consider it. [00:04:08] Speaker 00: You can't change a test without reconsidering your prior analysis. [00:04:12] Speaker 00: And that question is, I think, properly before the court. [00:04:17] Speaker 00: So had the commission merely said, for example, look, we're not addressing this at all, period. [00:04:21] Speaker 00: I can't promise we wouldn't be here. [00:04:24] Speaker 00: It's a very important case to the Postal Service, but I think we'd be in a very different posture. [00:04:27] Speaker 01: Okay, so first of all, what test are you talking about, and how did the Commission change it? [00:04:32] Speaker 00: I think they changed it in two pertinent ways. [00:04:34] Speaker 00: The test is the four-part test, what they call the new normal test. [00:04:39] Speaker 00: It had four prongs to it. [00:04:41] Speaker 00: And I think it boils down to essentially two questions, that test. [00:04:44] Speaker 00: First was when did the Great Recession [00:04:47] Speaker 00: stopped forcing mail volume further down. [00:04:50] Speaker 00: Essentially, when did mail volume plateau at a new and lower level than it was before? [00:04:54] Speaker 00: And the second part of that embodied, I think, in the fourth prong of the test is, when did the Postal Service gain the ability to adjust to that new and lower level? [00:05:02] Speaker 00: So that's the test. [00:05:05] Speaker 00: Now, how the commission changed it. [00:05:07] Speaker 00: It can't change it in two ways. [00:05:08] Speaker 00: First, it changed what ability to adjust means. [00:05:11] Speaker 00: And ability to adjust, now the claim is that ability to adjust just means to take steps to adjust. [00:05:19] Speaker 02: Just as long as the postal service... That's not entirely true. [00:05:21] Speaker 02: I mean, there are data suggesting that in fiscal year 2010, [00:05:28] Speaker 02: the Postal Service was able to enormously improve total factor productivity. [00:05:38] Speaker 02: I myself have some problems on how you deal with an entire year, which after all was broken in days and months, but putting that aside, isn't that, that's what number four calls for. [00:05:52] Speaker 00: That was in respect to that finding, and that was a finding that it made. [00:05:57] Speaker 00: We went back on remand, as we were allowed to do, and said that the reliance on total factor productivity, which is essentially a finding that we became more efficient, does not actually answer... More efficient in light of the decline in volume. [00:06:12] Speaker 02: Well, more of a critical thing, right? [00:06:14] Speaker 02: Well, more efficient, I mean... In doubtless ways, you could have become more efficient. [00:06:18] Speaker 02: apart from the decline in volume, but the point was that this was an increase in efficiency which tended to offset the effects of the decline in volume and the change in unit cost. [00:06:31] Speaker 00: And the point we were making is, there are a couple of points on this. [00:06:35] Speaker 00: As to the increased efficiency, I mean total factor productivity is just a question of how effectively are you using the resources you have. [00:06:43] Speaker 00: And we agree that we were being efficient. [00:06:45] Speaker 02: It also involves unloading some resources, such as the 200,000 decline in employment. [00:06:55] Speaker 00: And again, a couple of points about that. [00:06:56] Speaker 00: First of all, I mean, [00:06:58] Speaker 00: In terms of unloading employment and things like that, we were doing that from day one. [00:07:03] Speaker 00: And so if that were alone enough, I don't think that was the court's understanding of what ability to adjust means or else the count once test itself would have been fine. [00:07:12] Speaker 00: I mean, we were taking steps immediately. [00:07:15] Speaker 00: But to specifically address the question about total factor productivity, we challenge that finding below as being not a good measure of our ability to adjust. [00:07:27] Speaker 02: I think it's remarkable. [00:07:29] Speaker 00: Is that in your brief and alliance? [00:07:36] Speaker 00: I don't know that that specific finding, well, no, it was actually. [00:07:39] Speaker 00: It wasn't there. [00:07:41] Speaker 00: Because what we were saying was that that, I don't know that we used the term total factor productivity, but we said that the finding that we could have adjusted in 2010 was in tension with other findings the commission made. [00:07:52] Speaker 00: The question, or the finding that we could have adjusted in 2010 was based on total factor productivity. [00:07:59] Speaker 00: We did make that challenge. [00:08:00] Speaker 00: I think it's at pages 32 to 34 of the Alliance brief. [00:08:04] Speaker 00: Again, I don't remember that we specifically said total factor productivity, but basically what we had was a finding that you could have adjusted in 2010, and then several findings that suggested we couldn't have adjusted in 2010. [00:08:15] Speaker 00: And that was the conflict that we pointed out in the Alliance briefs. [00:08:21] Speaker 00: If I can turn to the total factor productivity point. [00:08:24] Speaker 00: We said that that's just not a good measure of our ability to adjust. [00:08:28] Speaker 00: All that shows is we were being more efficient. [00:08:30] Speaker 00: We agree we were being efficient, but the problem is we didn't have the revenue that we needed to offset the harm that the Great Recession had done. [00:08:37] Speaker 00: And I think in response, and I think this is remarkable. [00:08:40] Speaker 02: The absence of revenue comes in on the necessary part because of the risk of the Postal Service going broke, right? [00:08:51] Speaker 00: It comes in partly there, but it also comes in the point that the revenue disappeared too quickly for us to catch up to it. [00:08:57] Speaker 00: We've been chasing that volume down, the lack of revenue down for several years. [00:09:01] Speaker 00: And the Commission determined in their financial analysis report that they issued three months after the Order 1926, that it wasn't until 2013 that we brought our, or we started to really, I think the phrase they used was, begin to have appreciable savings from our efforts that we have been engaging in all the way from 2008. [00:09:25] Speaker 00: But back to the total factor productivity point, I think it's remarkable that in response to our argument that, look, total factor productivity isn't a good measure of adjustment, the commission never said, yes, it is. [00:09:36] Speaker 00: It never even relied on that finding. [00:09:39] Speaker 00: It ignored it completely. [00:09:39] Speaker 00: And I think it's also remarkable that the term productivity appears nowhere in the commission's brief on appeal. [00:09:46] Speaker 00: I think what the commission ultimately did was determine that [00:09:52] Speaker 00: that ability to adjust really just meant taking steps. [00:09:56] Speaker 00: And I think the problem with that is that that effectively reads the exigency provision out of the statute. [00:10:04] Speaker 00: To put a finer point on the productivity, productivity is a measure of efficiency, right? [00:10:08] Speaker 00: In order to even qualify for an exigent rate increase, we have to show we were efficient. [00:10:12] Speaker 00: It's right in the statute that we were engaged in honest, efficient, and economical management. [00:10:16] Speaker 00: But now the commission's saying that if you were being efficient, you can't get a rate increase because it's no longer an extraordinary circumstance. [00:10:23] Speaker 00: And that puts the Postal Service in a catch-22. [00:10:25] Speaker 00: We have to show we were efficient. [00:10:27] Speaker 00: We have to show we were taking steps in order to qualify for an increase. [00:10:31] Speaker 00: But if we make that showing, we can't get one. [00:10:33] Speaker 00: And that, to us, is a fundamental misreading of the statute. [00:10:38] Speaker 00: And it's also not consistent with what the commission told this court that the new normal test, or sorry, the ability to adjust prongment, [00:10:46] Speaker 00: The council said that that was the point, and this is at oral argument, transcript page 53, that that was the point where we expected you to entirely adapt going forward. [00:10:57] Speaker 00: Now, council said that was a stray comment that was made during oral argument, but it wasn't. [00:11:01] Speaker 00: It was a direct response to this court's questioning, a long series of questioning that began at page 46 of the transcript about how [00:11:10] Speaker 00: is the count once, the ability to adjust under the count once rule, different from the ability to adjust under the new normal test. [00:11:18] Speaker 00: And counsel's response was basically, look, the count once rule embodied the idea that you have to do something, that you have to take steps, you have to try to cut your costs. [00:11:27] Speaker 00: And that new normal reflected something more robust than that. [00:11:30] Speaker 00: It referred to actual, as they said, the ability to entirely adapt going forward. [00:11:36] Speaker 00: This court vacated the count once rule. [00:11:40] Speaker 00: And now, I think, by saying that ability to adjust just means take steps, the commission is trying to take a concept they said was part of a count once and put it back into the new normal test. [00:11:52] Speaker 00: And I see my time's up already. [00:11:54] Speaker 00: And I just, if I may, I'd like to make one final point as to the ability to adjust. [00:11:59] Speaker 00: Just taking a step back, the ability to adjust [00:12:05] Speaker 00: is important because it's a limitation on the exigency provision. [00:12:08] Speaker 00: That you have an extraordinary event. [00:12:10] Speaker 00: Everybody agrees the Great Recession was an extraordinary event. [00:12:13] Speaker 00: And the ability to adjust is a limitation. [00:12:16] Speaker 00: When you can adjust to the event, it stops being extraordinary. [00:12:19] Speaker 00: That's, I think, at bottom what the principle of this court upheld in the last decision. [00:12:25] Speaker 00: But I would argue the inverse is equally true, that if you can't adjust to a situation, then it doesn't stop being an extraordinary event. [00:12:33] Speaker 00: And in that respect, the ability to adjust is there to protect the Postal Service from events that are beyond its control, events that it can't mitigate effectively. [00:12:40] Speaker 00: And maybe given the procedural posture of this case, the commission wasn't required to answer the question of what could we have done that we didn't do in 2010. [00:12:49] Speaker 00: I mean, their argument, their position is we could have adjusted in 2010, even though we clearly didn't adjust until later. [00:12:56] Speaker 00: At no point has the commission ever said anything we should have done that we didn't do. [00:12:59] Speaker 00: And perhaps they didn't have to answer that question. [00:13:02] Speaker 02: I don't think the conclusion was that you [00:13:06] Speaker 02: or at least started to do, and thereby showed the capacity to do what was necessary. [00:13:13] Speaker 00: And again, I think that's consistent with sort of a take steps approach to what ability to adjust means. [00:13:18] Speaker 00: And again, I think that would all but read the exigency provision out of the statute. [00:13:22] Speaker 00: If taking steps were enough to cut off the recovery, and we have to prove that we were taking steps in order to even qualify for the recovery, then when does the exigency provision ever apply? [00:13:35] Speaker 00: But my final point is just that maybe the commission didn't have to resolve the factual question, but it couldn't get around resolving the question by pretending the question itself doesn't really matter. [00:13:45] Speaker 00: And I think fundamentally, that's what happened on remand. [00:13:48] Speaker 00: The commission basically said, whether you can adjust at all, maybe it's a factor. [00:13:53] Speaker 00: We just mean taking steps. [00:13:55] Speaker 00: But I think that they have read out, I think, what the core protection of the exigency provision was, which is that when we can't adjust, [00:14:03] Speaker 00: to an extraordinary event, then it doesn't stop being extraordinary. [00:14:07] Speaker 00: I'd like to, if I could get some time for rebuttal, I would appreciate it. [00:14:10] Speaker 00: I know if the court doesn't have any further questions, we ask the court remand things. [00:14:15] Speaker 00: Thank you. [00:14:16] Speaker 01: All right. [00:14:16] Speaker 01: Mr. Tenney. [00:14:19] Speaker 03: Thank you, Your Honor. [00:14:20] Speaker 03: May it please the Court. [00:14:22] Speaker 03: Council now concedes that the footnote in this Court's opinion didn't require the Commission to reopen this issue on remand. [00:14:30] Speaker 03: I think I heard him say that, and that would certainly be correct. [00:14:32] Speaker 03: And so this case can begin and end with what the Commission actually did. [00:14:36] Speaker 03: And if you look at 579 of the Joint Appendix, that's page 23 of the new order, the order on review, first sentence, in this section, [00:14:44] Speaker 03: The commission declines to revisit the new normal analysis in order number 1926 that was affirmed by the ANN, that's Alliance Court. [00:14:54] Speaker 03: And then if you just read, it's about five pages of the commission's decision. [00:14:57] Speaker 03: It says over and over again. [00:15:00] Speaker 03: If you look at the next page, page 580, the commission declines to revisit an issue that has already been resolved. [00:15:06] Speaker 03: Then if you flip to the end, and there may be other times in the middle, but 583 at the bottom. [00:15:11] Speaker 03: For the foregoing reason, the commission declines to revisit the new normal analysis in order 1926. [00:15:16] Speaker 03: Now, counsel's argument is that the commission changed the standard, applied a new standard. [00:15:21] Speaker 03: What the commission did was said, we're not changing anything about this. [00:15:24] Speaker 03: We're fixing the count once thing that the problem that this court identified, and then we're done. [00:15:31] Speaker 03: That's what the commission did. [00:15:32] Speaker 01: Now, if you look. [00:15:33] Speaker 01: That's a change. [00:15:34] Speaker 03: What? [00:15:34] Speaker 03: That's a change. [00:15:35] Speaker 03: I'm sorry, they're not changing anything with respect to the new normal. [00:15:38] Speaker 03: They did change. [00:15:39] Speaker 03: This court ordered the commission to change, and the commission did change to the count once. [00:15:44] Speaker 03: And I just make one more point, Your Honor. [00:15:47] Speaker 03: If you look at page 21 of Petitioner's Brief, there's a table there, and it sort of illustrates the difference between these two things. [00:15:55] Speaker 03: There's a bunch of numbers on the table, and what the numbers reflect are [00:15:58] Speaker 03: at the end of its entire analysis, how much mail volume the Commission was counting as due to the Great Recession. [00:16:05] Speaker 03: And you'll see that there are numbers in parentheses. [00:16:08] Speaker 03: Where is this? [00:16:10] Speaker 03: On 21 of Petitioner's Brief, it reflects a chart that's in the Joint Appendix, but it's easily laid out in their brief. [00:16:18] Speaker 03: You'll see that there are numbers, and some of the numbers changed, the negative numbers, there are bolded negative numbers which reflect the changes, they've gotten bigger because the commission corrected the count once mistake that this court identified last time. [00:16:33] Speaker 03: But then toward the right of the table, there's a bunch of zeros. [00:16:36] Speaker 03: And the zeros are where the new normal kicks in. [00:16:38] Speaker 03: So the commission was counting mail volume. [00:16:40] Speaker 03: This court said it was counting it wrong. [00:16:42] Speaker 03: And the commission fixed that. [00:16:43] Speaker 03: There's no dispute about that. [00:16:45] Speaker 03: But then to the right of the table, there are zeros. [00:16:47] Speaker 03: And those zeros are the times when the new normal kicked in. [00:16:50] Speaker 03: So for a first class mail, it kicked in in 2011. [00:16:53] Speaker 03: For standard mail, it kicked in in 2010. [00:16:54] Speaker 03: That's when the zeros start. [00:16:56] Speaker 03: And periodicals, it kicked in in 2012. [00:16:58] Speaker 03: That's when the zeros start. [00:16:59] Speaker 03: Package services, 2010. [00:17:00] Speaker 03: That's when the zeros start. [00:17:02] Speaker 03: The zeros are in the same place on the original order and on remand, because they didn't apply the test anew. [00:17:09] Speaker 03: They didn't change anything. [00:17:11] Speaker 03: They just said, well, we did the first time was good enough. [00:17:13] Speaker 03: It was fine. [00:17:14] Speaker 03: And so the only thing the commission did change is the count once, and nobody's challenging that. [00:17:21] Speaker 03: So that should just be the end of the matter. [00:17:23] Speaker 01: All right. [00:17:24] Speaker 01: I'm on page 588 of the joint appendix. [00:17:29] Speaker 01: I see table 3, which I thought was identical to table 2, but it stops at FY2011, and there isn't that last row of zeros. [00:17:40] Speaker 01: Is that just something that was left off? [00:17:43] Speaker 03: Yeah, table three just reflects, I guess, it just reflects that they only showed things that actually had values other than zero, because the 2012 column in table two of the brief is all zeros, and so that's just left off of table three. [00:18:00] Speaker 03: But I think the numbers are the same. [00:18:01] Speaker 01: All right, so in other words, table three, if it had gone forward, would be the same thing as table two with respect to FY 2012. [00:18:10] Speaker 03: I believe that's correct, Your Honor, yes. [00:18:12] Speaker 03: And lastly, although I think what I've just said disposes of the case and the court doesn't need to get into the analysis, just to be clear on what – when we say the new normal is the point where we expect you to adjust going forward, of course what the commission – that's because these are zeroes. [00:18:29] Speaker 03: What the commission means is at that point we're back to – it's the new normal – we're back to [00:18:34] Speaker 03: you know, inflation-based increases, and we're not counting any more mail volume. [00:18:38] Speaker 03: And so that's not describing, that's not so much describing a parameter of the test as it is the consequence of the test, which this court was quite clear in understanding means this is the stopping point, this is the end, we're not counting any more mail pieces from this date forward. [00:18:54] Speaker 02: I wanted to ask you a question which may or may not be relevant, depending on how one treats the prior opinion. [00:19:07] Speaker 02: ability to adjust operations to the lower volumes. [00:19:13] Speaker 02: There's something anomalous. [00:19:16] Speaker 02: Suppose the post office put on an incredibly persuasive PowerPoint. [00:19:24] Speaker 02: This is what we can do. [00:19:26] Speaker 02: It will really adjust operations. [00:19:30] Speaker 02: It does that in the middle of [00:19:33] Speaker 02: 2009, and it also says you can put this into effect in the middle of 2010. [00:19:41] Speaker 02: So it's demonstrated the ability, but it hasn't been able to do it. [00:19:47] Speaker 02: It's going to take time to do it. [00:19:50] Speaker 02: The formulation there in component four seems extraordinarily loose. [00:19:58] Speaker 03: Well, I guess a few responses. [00:20:00] Speaker 02: You said you should have complained about it. [00:20:02] Speaker 03: But if you go back to, I mean, I guess two responses. [00:20:08] Speaker 03: One is that it's a four-factor test. [00:20:11] Speaker 03: And so this is one of the factors. [00:20:13] Speaker 03: So of course, if male volumes were still going down, if macroeconomic factors were still bad, if they were still unable to predict their male volumes, which are the other three factors, then that's not a justification for being sloppy on a component. [00:20:25] Speaker 03: No, it's not. [00:20:26] Speaker 03: But I'm just saying, if the question is, would the Commission have concluded that a good PowerPoint presentation means the new normal arrives, I just want to make clear that the Commission was not saying that because it had these other three factors. [00:20:37] Speaker 02: But looking at that factor, it's... Let's assume the other three factors have been satisfied. [00:20:42] Speaker 03: Okay. [00:20:42] Speaker 03: So we're already assuming that the economy has recovered, mail volumes are starting to go up again. [00:20:46] Speaker 03: So that's significant. [00:20:47] Speaker 03: But even assuming that, if you look at [00:20:50] Speaker 03: page 98 of the Joint Appendix, which is 94 of the original order. [00:20:54] Speaker 03: And this is where the Commission originally applied the standard. [00:20:59] Speaker 03: And of course, we would submit that since this is what they're challenging, they should have challenged it the last time, as you're under indicated. [00:21:06] Speaker 03: But even talking about it now, the way the Commission applied the standard was to say, [00:21:11] Speaker 03: What they looked at, as earlier Colloquy indicated, was total factor productivity, and they looked at the extent to which the Postal Service had demonstrated an ability to adjust in the sense that they had actually begun to adjust and successfully made adjustments, not that they predicted that they would in the future be able to adjust. [00:21:31] Speaker 03: And so your honor's suggestion that if the Postal Service said, oh, next year we'll be able to do something, the commission would start counting that on the date that they came up with the plan. [00:21:41] Speaker 03: That isn't the way the commission applied the standard the one time that it applied it, which, again, as we've said, was in the order that was at issue last time. [00:21:49] Speaker 02: I mean, in the data on TFT, I think it shows the first quarter continuing to decline. [00:21:56] Speaker 02: It's only in the second quarter, maybe in the third, [00:22:01] Speaker 02: starts to improve. [00:22:03] Speaker 03: I don't have those figures off the top of my head, but even if that's the case, I mean, again, at the risk of belaboring this, this is something that would have been challenged the last time. [00:22:14] Speaker 03: But even taking it up now, the commission was balancing four factors. [00:22:18] Speaker 03: It said sometime in fiscal 2010 is when this happened. [00:22:21] Speaker 02: You're talking about balancing the four factors. [00:22:23] Speaker 02: And part of it relies heavily on this all on most. [00:22:27] Speaker 02: That's really quite scary, I think. [00:22:30] Speaker 02: Because I have to say, it seemed to me that the natural reading of these is that all four have to be satisfied. [00:22:36] Speaker 03: Well, the all or most is a quote both from the commission's order the first time and this court's opinion. [00:22:41] Speaker 02: But it's kind of scary in terms of how regulatory commissions go about their work. [00:22:47] Speaker 03: Well, Your Honor, in practice, the thing to look at, and we have one data point, which is when the commission actually applied the test. [00:22:58] Speaker 03: And it went through all four factors. [00:23:00] Speaker 03: It did its analysis. [00:23:02] Speaker 03: It looked at the macroeconomic factors and the fact that postal volume started to increase again for a given category of mail turned out, in practice, to be the most significant factors, which is appropriate. [00:23:17] Speaker 03: If it were true that two of the factors were plainly satisfied and the other two weren't and then the Postal Service said that that was inappropriate and they properly preserved that argument, then we could argue about whether the commission's verbal formulation was inappropriate. [00:23:34] Speaker 03: But what happened here was that the commission went through all four factors in the prior order, concluded [00:23:41] Speaker 03: pick the dates for the various categories of mail, which the Postal Service acknowledges were largely driven by the macroeconomic factors, which is what one would expect when we're talking about a recession as the exceptional event. [00:23:54] Speaker 03: And then also apply this fourth factor suggests that as early as 2010, they were able to begin to adjust. [00:24:02] Speaker 03: And again, we don't think [00:24:04] Speaker 03: These questions are before the court now, but if they were, we think the court got it right the last time improperly in upholding the commission's approach here. [00:24:13] Speaker 03: Unless there are further questions. [00:24:14] Speaker 01: I have one question on JA 582. [00:24:18] Speaker 01: And the ability to adjust is one of the four prongs of the new normal, right? [00:24:28] Speaker 03: I'm sorry, I'm sorry. [00:24:29] Speaker 01: The ability to adjust is one of the four prongs to determine the new normal. [00:24:34] Speaker 01: Yes. [00:24:35] Speaker 01: All right. [00:24:36] Speaker 01: And that's fine. [00:24:37] Speaker 01: But then if you look at JA582, every time I see the word adjust, I think [00:24:45] Speaker 01: of the fourth prong. [00:24:46] Speaker 01: And so you get to the end of that paragraph, and the commission says the commission's recognition of the limitations and obligations the law imposes on the Postal Service is not inconsistent with the commission's fourth factor of the new normal analysis, which should be this ability to adjust, because the fourth factor simply expects that the Postal Service will, as it did, take steps to adjust to lower [00:25:12] Speaker 01: levels of male volume once the new normal is reached. [00:25:15] Speaker 01: And that sounds like you do the ability to adjust both in determining the new normal and then once it's reached, and the only thing you have left is the necessary proviso that you still use that ability to adjust. [00:25:30] Speaker 03: Well, Your Honor, I think that in order to... [00:25:36] Speaker 03: we try to tease out that sentence, but just to explain how this works. [00:25:40] Speaker 03: So the ability to adjust is one of the factors, and I think what the sentence is saying is simply that the fourth prong of the new normal test is saying that [00:25:52] Speaker 03: once you have an ability to adjust, then we expect you to, and thus, and assuming the other factors are met as well, then we expect that you've reached the new normal, and then from then on, we expect you to adjust going forward. [00:26:05] Speaker 03: And so the fact that there is a factor that's ability to adjust means that if you can adjust, then we expect that you will adjust. [00:26:12] Speaker 03: I think that's probably all the sentence is saying, but in terms of the way it comes in in two places, I think this goes back to a point [00:26:19] Speaker 03: I was trying to make earlier, which is that once the new normal is reached, then we know that we stop counting male volumes as due to the recession and zeros going forward. [00:26:31] Speaker 03: And so then the expectation and [00:26:34] Speaker 03: at that point is that anything that anything further that happens we expect the Postal Service to adjust to in its normal operations, you know, by, you know, just as whenever there's an inflation-based cap, the Postal Service is just supposed to adjust to changes in circumstances. [00:26:50] Speaker 03: And so the [00:26:51] Speaker 03: It's in the test because they didn't want to say that the new normal was reached without considering whether the Postal Service actually would be able to start adjusting. [00:27:02] Speaker 03: And then the consequence of concluding that the new normal was reached, which is all four factors, is that, in fact, as a legal matter, [00:27:09] Speaker 03: is obliged to adjust using the tools that are ordinarily available to it rather than those that are available when there's an exigent circumstance. [00:27:18] Speaker 03: And that's a lot to read into that one sentence, but I think that that explains why that term is sort of used in multiple ways, but they're all sort of related. [00:27:28] Speaker 01: All right, am I wrong then that the Commission has said once the new normal is reached, postal service, you have also reached the ability, I mean you have also adjusted. [00:27:43] Speaker 03: It's not so much that they have adjusted. [00:27:44] Speaker 03: Once the new normal is reached, and this court discussed this point in the previous order, once the new normal is reached, the exigency has ended and we will stop counting mail volume as due to the exigent circumstances and therefore your authority to raise prices above the [00:28:02] Speaker 03: above the inflation cap has ended. [00:28:04] Speaker 03: And when that happens, then the Postal Service – because this is the baseline expectation that Congress had – the Postal Service is expected to adjust its operations to anything that happens outside of exigent circumstances just in the normal course within the inflation-based cap. [00:28:20] Speaker 01: So it has adjusted to the exigent circumstances at that point? [00:28:24] Speaker 03: Well, or it's compelled – I mean, it's – the question of whether it has adjusted is different, I think, to some degree from [00:28:31] Speaker 03: the question of whether it's entitled to raise its prices above inflation in order to adjust. [00:28:40] Speaker 03: And of course, just to give a simple example, and we're not accusing the Postal Service of this, but if the Postal Service had an ability to adjust but had failed to do so because of mismanagement or something, [00:28:51] Speaker 03: That wouldn't change the fact that the new normal had been reached, and then they would be expected to do it going forward. [00:28:56] Speaker 03: So in that sense, I don't want to say they have adjusted. [00:28:58] Speaker 03: But what the commission said is, when there's an ability to begin to adjust, and begin to adjust is the language used on the page I was discussing earlier, page 98, where they actually applied the standard. [00:29:09] Speaker 03: Once that has happened, then that, together with the other factors, suggests that the new normal has been reached, and then we're just back to the inflation cap. [00:29:16] Speaker 03: I think that's all that's going on here. [00:29:18] Speaker 02: OK. [00:29:18] Speaker 02: Obviously, is the inflation, for purposes of this price cap, [00:29:24] Speaker 02: Is it the price inflation or inputs to the Postal Service's activities? [00:29:31] Speaker 03: It's been a while since I looked at this. [00:29:32] Speaker 03: I believe it's general price inflation. [00:29:34] Speaker 03: It's defined in this statute. [00:29:35] Speaker 03: I can flip to it if you want. [00:29:40] Speaker 03: Thank you, Your Honor. [00:29:40] Speaker 01: Thank you. [00:29:43] Speaker 01: Does Mr. Belt have any time? [00:29:45] Speaker 01: All right, why don't you take a couple minutes? [00:29:49] Speaker 00: To answer your question, Judge Williams, yeah, it's general price inflation, CPI. [00:29:53] Speaker 00: I just want to make a couple of points. [00:29:55] Speaker 00: And I think my opponent has essentially, in a way, conceded that the test has changed. [00:30:02] Speaker 00: First of all, the disclaimer that the commission declines to revisit, as it said, doesn't insulate the case from appellate review. [00:30:08] Speaker 00: If the commission says it didn't change the test and then goes and changes the test, then the fact they said they didn't isn't controlling. [00:30:15] Speaker 00: But I want to explain the two ways that I think that they did change the test. [00:30:18] Speaker 00: First, they now say, okay, when the new normal is reached, when the new level of, you know, the lower level of volumes, we just expect that you can adjust. [00:30:27] Speaker 00: Well, that's inconsistent with the test. [00:30:29] Speaker 00: The ability to adjust wasn't a conclusion that was reached once the other prongs were met. [00:30:33] Speaker 00: It was a prong. [00:30:34] Speaker 00: It was its own prong of the test. [00:30:36] Speaker 00: And I think the Commission said it best. [00:30:37] Speaker 00: It summarized its own test. [00:30:39] Speaker 00: on page 559 on remand when it said, the circumstance remained exigent until the Postal Service had an opportunity to adjust to the new normal in the mail economy. [00:30:51] Speaker 00: There are two different concepts there. [00:30:53] Speaker 00: There's the new normal, and then there's our ability to adjust to it. [00:30:56] Speaker 00: You can't jettison, or you can't assume that once the ones met, the others met too, because otherwise it wouldn't be a term for you. [00:31:20] Speaker 02: had in the previous order. [00:31:22] Speaker 00: Well, and that goes back to my question about the as it did refers to taking steps. [00:31:26] Speaker 00: And I would submit that if taking steps were the equivalent of adjusting, then the exigent provision doesn't mean anything. [00:31:33] Speaker 00: And this court wouldn't have vacated the count once rule, which was based on the idea that, well, you were taking steps. [00:31:38] Speaker 00: And the court said, that's not good enough. [00:31:40] Speaker 00: That ability to adjust means something more than that. [00:31:43] Speaker 00: The other way that I think that, if I may, the other way in which I think that my opponent sort of illustrated how the test has changed, they're now referring to this as a four-factor balancing test. [00:31:54] Speaker 00: And it is true that one of the iterations of the test as announced by the court, I think on the commission, I think it was on J90 maybe, was that it all or most. [00:32:03] Speaker 00: The other time, the other iteration said basically all. [00:32:06] Speaker 00: That was a JA6. [00:32:07] Speaker 00: And the proof is in the pudding. [00:32:08] Speaker 00: If you look at how the commission actually analyzed [00:32:12] Speaker 00: that test between pages J, A, 90 to 98, it clearly was deciding that all four factors have to be met. [00:32:20] Speaker 00: Most of the factors, for example, were met for periodicals by 2010, and yet we got the benefit of 2011 for periodicals because one of the factors wasn't met until then. [00:32:30] Speaker 00: And the reason that's significant [00:32:32] Speaker 00: I mean, it's significant because it's a change in the test. [00:32:35] Speaker 00: They're essentially saying we can jettison the ability to adjust if the other three prongs are met. [00:32:41] Speaker 00: And I would also submit that even if not all prongs have to be met for the test to be satisfied, ability to adjust is not one that can be jettisoned because it measures something different. [00:32:52] Speaker 00: The other three measure the extent to which the Great Recession ceases, forcing mail volume down, and the ability to adjust prong [00:33:00] Speaker 00: measure something different. [00:33:02] Speaker 00: When could we deal with it? [00:33:03] Speaker 00: And for those reasons, the commission changed the test, that it articulated to this court and that this court upheld, we ask that the case be remanded for the commission to at least explain why it's changing the test. [00:33:15] Speaker 01: Mr. Bell, it is September, so I can't resist asking you, has anything changed about the tremendous burden you have? [00:33:23] Speaker 01: It's something like $7 billion or whatever every September you have to [00:33:28] Speaker 01: lop off the top and give to the pension fund. [00:33:31] Speaker 01: I may have the number wrong. [00:33:32] Speaker 01: It's a huge number. [00:33:33] Speaker 00: At this point, nothing's changed in terms of our obligations, and nothing's changed in terms of the fact that we are still losing money. [00:33:42] Speaker 00: We were briefed. [00:33:44] Speaker 00: At this point, because we are out of borrowing authority, we have not been paying the [00:33:50] Speaker 00: I mean, we still owe the money, but we don't have the cash to actually pay the pre-funding of the retiree health benefits. [00:33:57] Speaker 00: There was a brief time that putting that aside, and it's hard to put it aside, it's a $5 billion a year obligation, but putting that aside, there was a brief moment [00:34:05] Speaker 00: when the exigent rate increase was in effect, that we were essentially at break even as to everything else. [00:34:10] Speaker 00: But now with the expiration under the commission's order of the exigent surcharge, we're in the red even as to the costs that we can't control, which again, belies the idea that we somehow gained this magical ability to adjust, let alone in 2010. [00:34:23] Speaker 00: Anyway, that's a long answer to a short question. [00:34:26] Speaker 00: And with that, thank you, Your Honor.