MAIL TRANSPORTATION, INC. et al v. USA

Filing 44

REPORTED ORDER denying 2 Motion for TRO; denying 2 Motion for Preliminary Injunction; granting in part and denying in part 20 Motion to Dismiss - Rule 12(b)(1) and (6). Signed by Judge Victor J. Wolski. (jad) Copy to parties.

In the United States Court of Federal Claims
No. 17-934C
(Filed August 3, 2017)

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MAIL TRANSPORTATION, INC., *
et al.,
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Plaintiffs,
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v.
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THE UNITED STATES,
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Defendant.
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Bid protest; Motion to Dismiss,
RCFC 12(b)(1) & 12(b)(6); USPS;
Highway Contract Route; Postal
Vehicle Service; 39 U.S.C. § 5005;
Motion for a Preliminary Injunction,
RCFC 65.

David P. Hendel, Husch Blackwell LLP, with whom was Brian P. Waagner,
both of Washington, D.C., for plaintiffs.
Adam E. Lyons, Commercial Litigation Branch, Civil Division, Department of
Justice, with whom were Chad A. Readler, Acting Assistant Attorney General,
Robert E. Kirschman, Jr., Director, and Franklin E. White, Jr., Assistant Director,
all of Washington, D.C., for defendant. Redding C. Cates, United States Postal
Service, Washington, D.C., of counsel.
ORDER
WOLSKI, Judge.
This matter has been brought as a bid protest by eighteen holders of
Highway Contract Route (HCR) contracts with the United States Postal Service
(USPS or the Postal Service). First Am. Compl. ¶ 11. The Postal Service has
informed the plaintiffs that it plans to terminate certain of their contracts in order
to convert the routes to Postal Vehicle Service (PVS) routes, with mail delivery
performed by postal employees. See Ex. 6 to Compl. The conversions are expected
to be done by September 1, 2017, to comply with an arbitration award stemming
from a labor dispute between the Postal Service and the American Postal Workers
Union, AFL-CIO (APWU). Exs. 5 & 6 to id. Under the award, 110 routes were to be
converted to PVS routes for a four-year period, because USPS violated a collective

bargaining agreement provision by failing to provide the APWU with timely notice
of its intent to renew HCR contracts. Ex. 1 to Compl. at 2, 22.
The plaintiffs contend that the Postal Service violated 39 U.S.C. § 5005(c) in
deciding to convert their routes from HCR to PVS. First Am. Compl. ¶¶ 41–44.
This provision states that “[t]he Postal Service, in determining whether to obtain
transportation of mail by contract . . . or by Government motor vehicle, shall use the
mode of transportation which best serves the public interest, due consideration
being given to the cost of the transportation service under each mode.” 39 U.S.C.
§ 5005(c). The plaintiffs argue that this section requires analysis that the Postal
Service has failed to perform, and have moved for a preliminary injunction to
prevent USPS from terminating their contracts and converting the routes. First
Am. Compl. ¶ 44; Mem. Supp. Pls.’ Appl. TRO & Mot. Prelim. Inj. (Pls.’ Br.) at 1–4,
19–22, 32. The government opposes this request and moves to dismiss the case
under Rules 12(b)(1) and 12(b)(6) of the Rules of the United States Court of Federal
Claims (RCFC). Def.’s Resp. Opp’n Appl’n TRO & Mot. Prelim. Inj. (Def.’s Opp’n);
Def. Mot. Dismiss (Def.’s Mot.). 1 Defendant argues that no procurement is at issue
and that 39 U.S.C. § 5005(c) does not apply to the challenged decision. Def.’s Mot.
at 12–16.
With respect to jurisdiction, the Court concludes that the plaintiffs have
brought an action “objecting to” an “alleged violation of statute or regulation in
connection with a procurement or a proposed procurement.” 28 U.S.C. § 1491(b)(1).
The Federal Circuit has held that our bid protest jurisdiction includes challenges to
violations of law “involv[ing] a connection with any stage of the federal contracting
acquisition process, including ‘the process for determining a need for property or
services.’” Distributed Sols., Inc. v. United States, 539 F.3d 1340, 1346 (Fed. Cir.
2008) (quoting what is now 41 U.S.C. § 111). Applying this holding, several of our
court’s decisions have found contractor challenges to in-sourcing decisions to be
within our bid protest jurisdiction. See, e.g., Dellew Corp. v. United States, 108 Fed.
Cl. 357, 370 (2012); Elmendorf Support Servs. Joint Venture v. United States, 105
Fed. Cl. 203, 208 (2012); Santa Barbara Applied Research, Inc. v. United States, 98
Fed. Cl. 536, 542–43 (2011).
The government attempts to distinguish these cases as concerning a
particular statute applying to the U.S. Department of Defense, and involving an
element of choice not available to the Postal Service due to the arbitrator’s decision.
Def.’s Reply Supp. Mot. Dismiss (Def.’s Reply) at 2–7. But jurisdiction was found in
those decisions not because of the substance of the statute allegedly violated, but
At the conclusion of last week’s hearing on the motions, the Court granted the
government’s motion in part, dismissing plaintiffs’ breach of contract claims as
beyond our court’s jurisdiction because contracting officers’ decisions on the claims
had yet to issue. See Order (July 27, 2017) at 1; 41 U.S.C. § 7104(b)(3).

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rather because the decision of the government “was to stop procuring services from
plaintiff and instead to use government employees,” which “necessarily included the
process for ‘determining the need for . . . services’ that plaintiff currently provides.”
Elmendorf Support Servs., 105 Fed. Cl. at 208; see also Santa Barbara Applied
Research, 98 Fed. Cl. at 543 (describing challenged decision as “to stop procuring
services from [plaintiff] and to instead use Air Force civilian personnel to do the
same work”). That same determination --- whether to continue with services
provided by contract or to have the services performed by government employees --is what is being challenged by the plaintiffs here. And while the arbitrator ordered
that 110 routes were to be converted from HCR to PVS, the exact routes to be
converted were left to be negotiated between the Postal Service and the APWU, Ex.
1 to Compl. at 2, 22. Ultimately, most of the routes selected for conversion were not
among the routes at issue in the arbitration. See App. to Def.’s Opp’n (DA) at 36.
Thus, the government participated in a process to determine which services should
remain under contract and which should be converted to PVS, making the matter
indistinguishable from the aforementioned precedents, which the Court finds
persuasive. The plaintiffs’ challenge to the conversion decision is within our court’s
subject-matter jurisdiction.
The government argues in the alternative that plaintiffs have failed to state a
claim upon which relief can be granted. Def.’s Mot. at 13–16; Def.’s Reply at 9–11.
Defendant maintains that 39 U.S.C. § 5005(c) applies only to determinations to
obtain services by contract, and not to the use of government employees. Def.’s Mot.
at 14–15. For sure, the plain language of the statute would not make it applicable
to every determination to use postal employees to provide mail delivery services.
But the statute clearly mandates that “in determining whether to obtain
transportation of mail by contract . . . or by Government motor vehicle,” the Postal
Service “shall use the mode of transportation which best serves the public interest,
due consideration being given to the cost of the transportation service under each
mode.” 39 U.S.C. § 5005(c). The decision of which routes to convert involved
exactly that determination, and thus the statute applies. The government also
maintains that the plaintiffs concede that costs were considered, at least in the
arbitrator’s decision. Def.’s Reply at 8 (citing Compl. ¶ 27). But, as was noted
above, the specific routes to be converted were not determined in the arbitration
award, and most of those selected were not the subject of the arbitration
proceedings. See DA at 36. The Court concludes that plaintiffs have stated a claim
upon which relief can be granted.
Turning to the plaintiffs’ motion for a preliminary injunction under RCFC 65,
such extraordinary relief requires that the plaintiffs establish they are “likely to
succeed on the merits, [are] likely to suffer irreparable harm in the absence of
preliminary relief, that the balance of equities tips in [their] favor, and that an
injunction is in the public interest.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S.
7, 20 (2008) (citations omitted). Considering the materials presented to the Court
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regarding this motion, and the arguments made at the hearing, the Court concludes
that the plaintiffs have failed to establish a likelihood of success on the merits, and
thus cannot obtain the equitable relief they seek.
The plaintiffs contend that the Postal Service failed to perform the analysis
required under 39 U.S.C. § 5005(c) in selecting routes to be converted from HCR to
PVS. Pls.’ Br. at 19–22. The government, however, has produced a sworn
declaration from a USPS employee, Brent Raney, which states that “[t]he Postal
Service based its determination of suitability of conversion to PVS on a number of
factors, all of which ultimately related to cost and ensuring the uninterrupted
service of mail.” DA at 36, ¶ 16. Moreover, the evidence before the arbitrator
included testimony that in two quarters of 2015, the costs of mail delivery by PVS
were equal to or less than the costs as HCR routes for 41 and 57 of the 110 HCR
routes under consideration, respectively. Ex. 1 to Compl. at 10 (page 8 of the
arbitrator’s decision). The plaintiffs argue that the government has not
demonstrated that the Postal Service used a particular form that is allegedly
employed in making determinations under 39 U.S.C. § 5005(c). Opp’n to Mot.
Dismiss & Reply Br. Supporting Appl. TRO & Mot. Prelim. Inj. at 22–23. But
neither the statute nor any regulation identified by the plaintiffs requires the Postal
Service to use any form or observe any other particular formality in connection with
the Section 5005 analysis. At this stage of the proceedings, it appears that the
relative costs of mail delivery by postal employees and by private carriers were
considered in the selection of routes for conversion from HCR to PVS, and without
further factual development or additional briefing concerning what “serv[ing] the
public interest” entails, the Court cannot find that the plaintiffs are likely to
succeed in showing that costs were not given their “due consideration” in the
selection of routes to convert. 39 U.S.C. § 5005(c).
Although the Court finds the absence of a likelihood of success on the merits
to be fatal to plaintiffs’ requested injunction, see FMC Corp. v. United States, 3 F.3d
424, 427 (Fed. Cir. 1993), the other three factors will be briefly discussed.
Regarding irreparable harm, to the extent that the four-year periods during which
the converted routes are reserved for PVS delivery do not overlap with the time
remaining on their HCR contracts (for which breach of contract damages might be
available), the plaintiffs have sufficiently established that they would suffer injury
that is not compensable. See MORI Assocs. v. United States, 102 Fed. Cl. 503, 552
(2011). The balance of equities does not tip decisively in either direction, as the
plaintiffs’ loss of the ability to compete for a renewal of their HCR routes and the
corresponding potential cost savings to the government must be weighed against
the Postal Service’s obligation to implement an arbitration award that was designed
to remedy a persistent violation of the APWU’s contractual right to notice regarding
HCR route renewal. And although the crux of the plaintiffs’ case is that the Postal
Service failed to properly consider costs and thus failed to determine if route
conversion serves the public interest, an injunction will not necessarily be in the
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public interest --- given that the arbitrator’s decision rested on the Postal Service’s
failure to allow the APWU to participate in the process of determining whether
HCR renewals were in the public interest. See Ex. 1 to Compl. at 21–22. 2
For the foregoing reasons, the defendant’s motion to dismiss the first count of
plaintiffs’ amended complaint is DENIED, 3 and the plaintiffs’ motion for a
preliminary injunction is DENIED.
IT IS SO ORDERED.
s/ Victor J. Wolski
VICTOR J. WOLSKI
Judge

The Court notes that the Federal Arbitration Act, pursuant to which the
underlying arbitration was conducted, provides a procedure whereby non-parties to
an arbitration who are adversely impacted by an award, such as plaintiffs, may
apply to a district court for relief from that award. See 9 U.S.C. § 10(c).

2

Because time was of the essence, it was agreed at the hearing that the
government’s motion would apply to the subsequently-filed First Amended
Complaint. See Order (July 27, 2017) at 1. The government’s motion was grantedin-part at that time, see supra note 1, and thus is now denied-in-part.
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