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PEOPLES GAS LIGHT & COKE CO. v. U.S. POSTAL SERV.

February 19, 1981

THE PEOPLES GAS LIGHT AND COKE COMPANY, PLAINTIFF,
v.
UNITED STATES POSTAL SERVICE ET AL., DEFENDANTS.



The opinion of the court was delivered by: Shadur, District Judge.

MEMORANDUM OPINION AND ORDER

Defendants moved to dismiss or alternatively for summary judgment, on jurisdictional and other grounds. This Court took that motion under advisement and proceeded to hearing on Peoples Gas' motion for preliminary injunction February 3-5, 1981.*fn3 For the reasons stated in this memorandum opinion and order, defendants' motion to dismiss or alternatively for summary judgment is denied and Peoples Gas' motion for preliminary injunction is granted.*fn4

Facts*fn5

Ever since it was built in 1933, the Main Post Office at 433 West Van Buren Street, Chicago Illinois, and its surrounding buildings have been heated with steam purchased from Chicago Union Station Company ("Union Station"). In September 1979 Union Station notified defendants of the cancellation of the steam contract effective September 30, 1982. Defendants then commissioned the well-known architectural-engineering firm of Perkins & Will ("P&W") to conduct a study to evaluate available heating source alternatives (as is permissible for the government's letting of contracts for professional services, P&W was selected after a solicitation of firms interested in the work, but the price for the job was then negotiated rather than bid competitively).

P&W worked closely with USPS people in developing the study, which considered a number of alternatives: tieing into the existing steam source, solar energy, a heat pump, coal plants, oil plants, low pressure gas or electric plants, combinations of low and high pressures gas and electric plants, a central high pressure gas plant and a central high pressure electric plant. All except the last two were rejected as not meriting detailed evaluation for a variety of reasons. As between the high pressure gas and electric plants, the June 17, 1980 P&W study ("P&W Study," Pl. Ex. 7) found that the gas plant was economically superior but recommended that the electric alternative be chosen.

While the P&W Study was still in the works (this was particularly true of the economic analysis, which was not then as far advanced as the rest of the Study), the Chicago USPS people held a two-day meeting May 14 and 15, 1980 to brief the prospective "validators" (persons selected as their representatives by the Washington department heads of USPS who sit on the Capital Investment Committee that recommends decisions to the USPS Board of Governors). At that meeting the decision was made to opt for the electric plant, though P&W had not yet completed its Study. After issuance of the P&W Study, the local Operational Requirements Branch of USPS completed its Decision Analysis Report dated July 15, 1980 (the "Analysis," Pl.Ex. 6), updating its May 16, 1980 draft of that report (the "Draft Analysis," Pl.Ex. 5) to conform to the P&W Study. As had the P&W Study, the Analysis at pages 17-18 found that "construction of a gas-fired boiler is economically superior to an electric boiler over the analysis period," but it eliminated that alternative and opted for the electric system. Indeed, that portion of the Analysis was identical to page 13 of the Draft Analysis, which had reflected the gas alternative as having been eliminated as of May 1980, except that the Draft Analysis had contained no reference to the economic superiority of the gas alternative.

Following preparation of the Analysis, the USPS Capital Investment Committee recommended adoption of the P&W Study and Analysis to the Board of Governors of USPS, an 11-member board consisting of nine Presidential appointees plus the Postmaster General and Deputy Postmaster General. On August 5, 1980 the Board of Governors adopted those recommendations.

When Peoples Gas learned of the USPS decision to utilize electric boilers, it sought a meeting with USPS officials and sought to prepare an analysis of the superiority of the gas alternative (as it viewed it), although it was materially handicapped in that respect by not having the P&W Study on which the USPS decision was based. On October 2, 1980 Peoples Gas representatives met with USPS officials (including defendant Gailmard) and presented a study comparing the fuel costs of gas and electric boilers. At that meeting Peoples Gas requested but was denied a copy of the P&W Study. Peoples Gas promptly filed two Freedom of Information Act ("FOIA") requests seeking the P&W Study and all other documents relating to a decision on the heating source alternatives.

On October 22, 1980 Peoples Gas representatives met with defendant Gailmard and P&W representatives and were furnished a response to the Peoples Gas presentation. Although a major criticism by USPS was Peoples Gas' use of data differing from that used by P&W (Peoples Gas renewed its request at the meeting for a copy of the P&W Study and was again rebuffed), P&W confirmed that on its own figures the initial annual fuel cost savings from using gas would exceed $1 million.

On October 28 the Peoples Gas FOIA requests succeeded in dislodging copies of the P&W Study and the Analysis. Peoples Gas then became aware that the basis for rejection of the gas alternative appeared to be an environmental concern over the height of the stack that would be required for gas boilers but not for electric boilers (even though Peoples Gas had previously advised P&W, and USPS official Gailmard was fully aware, that variances for such stacks were obtainable from the City of Chicago as a matter of course). Peoples Gas then sought and obtained written confirmation of the availability of such a waiver from the City of Chicago and wrote defendant Doran November 24, 1980, apprising him that the environmental concerns had been misconceived and requesting a meeting. Doran refused by a December 1 letter.

On December 5, 1980 Peoples Gas sought review at a higher level within USPS by meeting with Assistant Postmaster General Roger Craig, pointing out in its hand-delivered letter that the P&W Study's economic analysis had greatly understated the cost advantage of the gas alternative and that P&W had been mistaken on the environmental factor as well (the height of any required stack). Assistant Postmaster General Craig responded by letter of December 10, stating that "further inquiries and meetings would be inadvisable in that it does not appear sufficiently likely they would produce information pointing conclusively in the direction of reversing our prior decision to justify the activity involved." Peoples Gas promptly wrote to Postmaster General Bolger December 15, 1980 and contemporaneously prepared a protest with USPS under the Postal Contracting Manual.

In the meantime, on November 21, 1980 USPS had issued invitations to bid for the construction of a steam boiler plant powered by electricity, pursuant to the Board of Governors' decision. As a result of the protest filed by Peoples Gas, the bid opening was delayed two weeks to January 20, 1981. Because it was apparent that all possibility of review at the administrative level had been exhausted and that judicial action would be necessary to resolve the matter, Peoples Gas filed suit January 12, 1981.

Jurisdiction and Standing

At the threshold this Court must of course determine whether it has jurisdiction over this action. Peoples Gas relies for that purpose on two statutes:

  The district court shall have original jurisdiction
  of any civil action arising under any Act of Congress
  relating to the Postal Service (28 U.S.C. § 1339,
  "Section 1339").
  Except as provided in section 3628 of this title
  [inapplicable to this case], the United States
  district courts shall have original but not exclusive
  jurisdiction over all actions brought by or against
  the Postal Service (39 U.S.C. § 409(a), "Section
  409(a)").

As for the first of these, National Ass'n of Postal Supervisors v. USPS, 602 F.2d 420, 429 (D.C.Cir. 1979), is directly in point. There the Court of Appeals for the District of Columbia Circuit held squarely "that the jurisdictional provision in 28 U.S.C. § 1339 provides a basis for hearing this action." It went on to state that although subject matter jurisdiction was thus vested in and correctly assumed by the district court, it was also necessary to determine whether judicial review of the agency action was foreclosed on other grounds (id. at 429-30, citations omitted):

  The existence of a jurisdiction-conferring statute
  does not alone create a right of action for judicial
  review of agency action. Such a statute triggers the
  well-established presumption favoring judicial
  oversight of administrative activities, . . . but
  that presumption operates differently depending on a
  judicial determination of congressional intent, the
  functional needs of the agency for flexibility and
  discretion, and the capacity of the courts to resolve
  the issues presented them. Hence the presumption can
  be overcome by evidence of a legislative intent to
  foreclose judicial intervention, . . . or a finding
  that the issues involved are unsuitable for judicial
  determination owing to the character of the
  discretion delegated to the administrative
  agency,. . . . Nonreviewability is not to be casually
  inferred. The case against judicial scrutiny of an
  agency's exercise of discretion must be a compelling
  one. . . . Yet assuming the absence of a
  constitutionally-based claim, if Congress clearly
  intended to preclude or restrict review, if judicial
  interference

  would imperil the policies underlying the lawmakers'
  decision to delegate the discretion, if the nature of
  the administrative discretion is such that the
  conventional tools of judicial analysis are unsuited
  to an examination of its exercise, then a court is
  not at liberty to disregard those limitations and
  proceed to substitute its own judgment for that of
  the administrative agency.

As will be evident from this Court's substantive discussion in this opinion, it has exercised its functions in accordance with both the letter and spirit of that decision.

Although one entry into the lists is enough, Section 409(a) also independently vests this Court with jurisdiction. In an analogous situation, Burns v. USPS, 380 F. Supp. 623, 626 (S.D.N.Y. 1974), held that Section 409's grant of original jurisdiction was substantive in its impact, negating any conclusion "that Congress either impliedly or expressly intended to commit the subject matter of this suit entirely to the Postal Service's discretion." Even though Burns itself was vacated (the litigation having been settled by consent decree), it has been followed by a series of decisions to the same effect, such as Withers v. USPS, 417 F. Supp. 1, 3 (W.D.Mo. 1976); Oates v. USPS, 444 F. Supp. 100, 102 (S.D.N.Y. 1978); Neal v. USPS, 468 F. Supp. 958, 960 (D.Utah 1979); and Pearlstine v. USPS, 469 F. Supp. 1044, 1046 (E.D.Pa. 1979). There are thus two separate and independent grounds on which the USPS effort to avoid this Court's jurisdiction must be rejected.

In addition to its arguments of lack of jurisdiction, USPS urges that Peoples Gas has no standing in this action, first because it has no direct stake in the contract award at issue (it is not of course a disappointed bidder, but rather a disappointed prospective supplier of fuel that would be employed if the gas-fired rather than electric boilers were specified) and second because there is no assurance that the gas alternative will in fact be chosen if Peoples Gas prevails in requiring a new review of the matter by USPS. Neither argument withstands analysis.

As to the first argument, it seeks to exalt form over substance. Peoples Gas is after all a public utility, the possesssor of the legal monopoly over the supply of gas for space heating purposes in Chicago. USPS' (and P&W's) economic analysis confirms that the major economic element in the cost of the heating system over the 20-year analysis period is fuel, rather than construction or maintenance. It would make no sense, either practically or conceptually, to recognize standing for a bidder on the construction contract (see such cases as Airco, Inc. v. Energy Research and Development Adm'n, 528 F.2d 1294, 1296 (7th Cir. 1975); Rossetti Contracting Co. v. Brennan, 508 F.2d 1039, 1042 (7th Cir. 1974)*fn6), but not for Peoples Gas as the assured supplier of gas if USPS reversed its decision on the kind of heating plant to be constructed.

As for the second argument, it proves too much. It would preclude a court from considering any suit in which the claim was that a public official had failed or refused to exercise discretion in an area in which he or she was obligated to do so — a familiar basis for mandamus jurisdiction. In such circumstances the Court will not compel discretion to be exercised in a particular manner, but will rather compel the official to carry out his or her duty to exercise such discretion. Obviously the complaining party will benefit from one means of exercise though not the other — a situation entirely parallel to that in this case — but the lack of certainty of benefit is not considered to defeat standing. This case fits comfortably within the basic standing principles most recently reconfirmed in Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99-100, 99 S.Ct. 1601, 1607-1608, 60 L.Ed.2d 66 (1979), approving Warth v. Seldin, 422 U.S. 490, 498 ff. 95 S.Ct. 2197, 2204, 45 L.Ed.2d 343 (1975). Peoples Gas' prospective loss of business, resulting from the USPS decision favoring the electric power alternative, is comparable to the possible future loss of profits that was found sufficient to confer standing in Ass'n of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 152, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970).

One other point should be mentioned on the standing question. Once as here a plaintiff has demonstrated the potential "injury in fact" necessary to confer such standing, that plaintiff can also assert the public interest in support of its own claim.*fn7 Sierra Club v. Morton, 405 U.S. 727, 737, 92 S.Ct. 1361, 1367, 31 L.Ed.2d 636 (1972).

Laches

USPS asserts laches as a defense to this action, stating that as of November 21 the rights of the third parties became implicated when bids were invited, and citing John W. Danforth Co. v. Veterans Administration, 461 F. Supp. 1062, 1069 (W.D.N Y 1978). This Court finds that position somewhat extraordinary, given the facts that (1) the bulk of the time once the USPS decision first became known was occupied in Peoples Gas' unsuccessful efforts to find out just what they had to counter in order to persuade USPS that it had made (as Peoples Gas viewed it) an incorrect decision and (2) Peoples Gas' diligent efforts to obtain raconsideration at all levels of the USPS ladder.

USPS refused to furnish the P&W Study, the Analysis or any other decision-making information in response to several requests from Peoples Gas, thus forcing Peoples Gas to seek relief under the FOIA. Peoples Gas found itself in the Kafkaesque position of having to work up its own economic analysis in the blind (without knowing the assumptions and analysis employed by P&W, which Peoples Gas would have to meet for any effective comparison). Those efforts, including meetings with the Chicago personnel and P&W representatives, carried into October and November, after which Peoples Gas went up the line of authority — convinced that if it could persuade the responsible officials to review the matter in light of the demonstrated errors by P&W and the Chicago personnel, it could cause the determination to be reviewed and reversed.

When this Court inquired at the hearing whether the government argument was that Peoples Gas should have instituted legal action immediately rather than seeking to persuade USPS of the error of its ways, government counsel disavowed that position. In the circumstances of this case, the statement in Danforth, 461 F. Supp. at 1069-70, might appropriately be paraphrased for this case:

  While plaintiff could have brought the action at an
  earlier time to protest the contract award to
  Hamberger, it did so with reasonable diligence after
  learning of the futility of its administrative
  remedies.

This Court cannot find either that the Peoples Gas delay was unreasonable or that any claimed detrimental reliance by the government was ...


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