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ORAL ARGUMENT SCHEDULED FOR MARCH 15, 2011
IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
__________
No. 10-1343 __________
UNITED STATES POSTAL SERVICE, Petitioner,
v.
POSTAL REGULATORY COMMISSION, Respondent.
__________
On Petition for Review from the Postal Regulatory Commission
__________
CORRECTED OPENING BRIEF FOR INTERVENOR
NATIONAL POSTAL MAIL HANDLERS UNION
Bruce R. Lerner BREDHOFF & KAISER, P.L.L.C. 805 Fifteenth Street, N.W. Washington, D.C. 20005 (202) 842-2600 [email protected] Counsel for Intervenor National Postal Mail Handlers Union
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ii
CERTIFICATE OF PARTIES, RULINGS, AND RELATED CASES
The National Postal Mail Handlers Union (“NPMHU”) incorporates the
certifications with regard to parties, rulings, and related cases from the Opening
Brief of Petitioner United States Postal Service, with the caveat that all then-
pending motions for leave to intervene – including the motion filed by the
NPMHU – were granted by this Court by Order dated December 21, 2010.
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iii
TABLE OF CONTENTS
CERTIFICATE OF PARTIES, RULING, AND RELATED CASES ...................... ii TABLE OF CONTENTS ......................................................................................... iii TABLE OF AUTHORITIES .................................................................................... iv
GLOSSARY OF ABBREVIATIONS ...................................................................... vi
SUMMARY OF ARGUMENT ................................................................................. 1
ARGUMENT ............................................................................................................. 2
CONCLUSION ................................................................................................... 15
CERTIFICATE OF COMPLIANCE ....................................................................... 16
CERTIFICATE OF SERVICE ................................................................................ 17
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TABLE OF AUTHORITIES
STATUTES
*39 U.S.C. § 3622(d)(1)(E) ................................................. 1, 2, 3, 4, 5, 9, 11, 12, 13 39 U.S.C. § 3621 (repealed) ...................................................................................... 5
LEGISLATIVE MATERIALS
Congressional Research Service, Postal Reform Bills: A Side-by-Side Comparison of H.R. 22 and S. 662 (updated Aug. 4, 2005) ............................... 8
Executive Office of the President, Office of Management and Budget,
Statement of Administration Position on H.R. 22 (July 26, 2005) ................... 10 H.R. 22, 109th Cong., 1st Sess., § 3622(e) (Jan. 4, 2005) ......................................... 6 H.R. 6407, 109th Cong., 2d Sess. (Dec. 8, 2006) ................................................... 11 H. Rep. No. 109-66 (Part I) (ordered to be printed on April 28, 2005)..................... 6 Letter from Coalition for a 21st Century Postal Service to Susan Collins,
Chairman, Senate Committee on Homeland Security and Governmental Affairs (Apr. 26, 2006) ...................................................................................... 10
Letter from Labor Organizations and Management Associations to Susan
Collins, Chairman, Senate Committee on Homeland Security and Governmental Affairs (March 16, 2006) ............................................................. 9
Letter from Labor Organizations and Management Associations to Tom
Davis, Chairman, House Committee on Government Reform (July 12, 2006) .................................................................................................................... 9
Letter from USPS Board of Governors to the Honorable Tom Davis,
Chairman, House Committee on Government Reform (Sept. 13, 2005) ............ 9 S. 662, 109th Cong., 1st Sess., § 3622(d)(1)(D) (Mar. 17, 2005) .................. 7, 8, 10
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v
S. 1248, 108th Cong., 1st Sess., § 3622(e)(1) (June 18, 2003) ................................ 7 S. 2468, 108th Cong., 1st Sess., §3622(d)(4) (Aug. 25, 2004) ................................ 7 Sen. Rep. No. 108-318 (Aug. 25, 2004) .................................................................... 8
OTHER AUTHORITIES
Webster’s Third New International Dictionary (1986) .......................................... 14
*Authorities upon which we chiefly rely are marked with asterisk.
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GLOSSARY OF ABBREVIATIONS
Commission: Postal Regulatory Commission
CPI: Consumer Price Index
NPMHU: National Postal Mail Handlers Union
PRC: Postal Regulatory Commission
USPS: United States Postal Service
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SUMMARY OF ARGUMENT
The Postal Regulatory Commission acted contrary to law when it
disapproved the U.S. Postal Service request for a rate increase above the rate of
inflation. Although the PRC correctly found that the rate request was precipitated
by “either extraordinary or exceptional circumstances” – namely, the Great
Recession of 2008 and the related drop in mail volume – it erred by concluding
that the Postal Service did not show that its requested rate increase was “due to”
these circumstances. To reach this result, the PRC imposed an unjustified
interpretation upon a simple prepositional phrase – “due to” – that is contained in
the first part of Subsection 3622(d)(1)(E), effectively adding a third step to a
straightforward two-part inquiry set by Congress – namely, (1) is the above-
inflation rate request attributable to either extraordinary or exceptional
circumstances and, if so, (2) is such adjustment reasonable and equitable and
necessary to enable the Postal Service, under best practices of honest, efficient, and
economical management, to maintain and continue the development of postal
services of the kind and quality adapted to the needs of the United States. The
PRC’s interpretation of Section 3622(d)(1)(E) has no support whatsoever in the
plain language of the Postal Accountability and Enhancement Act of 2006, the
legislative history of that act, or the statute’s underlying purpose. Indeed, a
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2
detailed review of the legislative history confirms that the PRC’s view of the
statute is based on a fundamental misunderstanding of the governing language.
ARGUMENT
1. The National Postal Mail Handlers Union (“NPMHU”) has intervened in
this case in support of the U.S. Postal Service’s (“USPS”) petition for review of a
Postal Regulatory Commission (“PRC” or “Commission”) decision denying a rate
adjustment exceeding the rate of inflation pursuant to Section 3622(d)(1)(E) of the
Postal Enhancement and Accountability Act of 2006 (“PAEA”), 39 U.S.C. §
3622(d)(1)(E). Section 3622 of the PAEA generally requires the PRC to establish
a system for regulating rates for market-dominant postal products, and Subsection
(d)(1)(E) specifically states that the PRC’s “system for regulating rates . . . shall
. . . establish procedures” under which “rates may be adjusted on an expedited
basis due to either extraordinary or exceptional circumstances,” provided that the
PRC determines – after notice, comment, and hearing, but within 90 days – that
“such adjustment is reasonable and equitable and necessary to enable the Postal
Service, under best practices of honest, efficient, and economical management, to
maintain and continue the development of postal services” in the United States. In
particular, Section 3622(d)(1)(E) provides as follows:
(d) Requirements.—
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(1) In general.— The system for regulating rates and classes for market-dominant products shall— * * *
(E) . . . [E]stablish procedures whereby rates may be adjusted on an expedited basis due to either extraordinary or exceptional circumstances, provided that the Commission determines, after notice and opportunity for a public hearing and comment, and within 90 days after any request by the Postal Service, that such adjustment is reasonable and equitable and necessary to enable the Postal Service, under best practices of honest, efficient, and economical management, to maintain and continue the development of postal services of the kind and quality adapted to the needs of the United States.
39 U.S.C. § 3622(d)(1)(E).
For reasons fully described by the Postal Service in its opening brief, the
NPMHU submits that the PRC acted contrary to law when it disapproved the
request submitted by the USPS for a rate increase above the rate of inflation. The
PRC correctly began its analysis by finding that the USPS rate request was
precipitated by “either extraordinary or exceptional circumstances” – namely, the
Great Recession of 2008 and the unprecedented drop in mail volume that resulted,
at least in substantial part, from that economic crisis. The PRC also did not dispute
(or did not decide) whether the rates proposed by the Postal Service were
“reasonable and equitable” across classes of mail, whether the rates were necessary
(albeit not by themselves sufficient) to ensure that the Postal Service could
continue to operate routine postal services, or whether the Postal Service had
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4
followed best management practices to operate efficiently and economically
(although the Commission did commend USPS efforts to cut its costs, largely
through massive reductions in the total number of employees and work hours).
Instead, the PRC concluded that the Postal Service did not show that its
requested rate increase was “due to” the economic recession or the decline in mail
volume. To reach this result, the PRC imposed an unprecedented and unwarranted
interpretation upon a simple prepositional phrase – “due to” – that is contained in
the first part of Subsection 3622(d)(1)(E). In so doing, the PRC essentially took a
straightforward two-part inquiry set by Congress – namely, (1) is the above-
inflation rate request attributable to either extraordinary or exceptional
circumstances and, if so, (2) is such adjustment reasonable and equitable and
necessary to enable the Postal Service, under best practices of honest, efficient, and
economical management, to maintain and continue the development of postal
services of the kind and quality adapted to the needs of the United States – and
added a separate analytical step that has no support whatsoever in the plain
language of the PAEA, the legislative history of that act, or the statute’s underlying
purpose.
In its opening brief, the Postal Service has fully explained why the plain
language of the PAEA and underlying purpose of that statute cannot support the
PRC’s determination. This brief, therefore, focuses on a more detailed description
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5
of the legislative history of Section 3622(d)(1)(E) of the PAEA, and confirms that
the PRC’s interpretation of the statute is based on a fundamental misunderstanding
of the governing language. Contrary to the PRC’s Order in this case, once the PRC
concludes that a USPS request for an above-inflation rate increase is precipitated
by “either extraordinary or exceptional circumstances,” then that rate must be
approved under Section 3622(d)(1)(E) if it satisfies the “reasonable and equitable
and necessary” standard set out in the same subsection of the PAEA.
2. A careful examination of the legislative development of the relevant
statutory language conclusively shows that what is now Section 3622(d)(1)(E) of
the PAEA was the result of a legislative compromise reconciling related, but vastly
different, provisions contained in the precursor House and Senate bills. As a
matter of law, and perhaps of equal importance as a matter of common sense, the
terms of this legislative compromise provide the legally binding standard that
should have been implemented by the Commission and that should be enforced by
this Court. This brief therefore analyzes this compromise in some detail.1
When they were initially introduced in 2005, during the first session of the
109th Congress, both the House and Senate postal reform bills included a cap on 1 The NPMHU anticipates that either the intervenors supporting the PRC or Senator Susan Collins appearing as amicus curiae may try to argue that the PRC erred when determining that the 2008 economic crisis and the resulting drop in mail volume presented either extraordinary or exceptional circumstances within the meaning of Section 3622(d)(1)(E). This legislative history also is relevant to rebutting any such arguments.
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rate adjustments tied to the Consumer Price Index (“CPI”). Both bills also
authorized the Commission to permit rate increases above this cap. The bills
differed, however, on the circumstances that would justify such an above-CPI
increase.
The original House bill, H.R. 22, was introduced on January 14, 2005 by
then-Representative John McHugh. H.R. 22 would have allowed the Commission
to permit a rate adjustment exceeding the CPI if the Commission determined that
“such [an] increase is reasonable and equitable and necessary to enable the Postal
Service, under best practices of honest, efficient, and economical management, to
maintain and continue the development of postal services of the kind and quality
adapted to the needs of the United States.” See H.R. 22, 109th Cong., 1st Sess., §
3622(e) (Jan. 4, 2005); see also H. Rep. No. 109-66 (Part I), at 46, 47-48, 86
(ordered to be printed on April 28, 2005). It bears noting, moreover, that this
House-backed standard in H.R. 22 was substantially similar to a provision on
postal rates previously found in 39 U.S.C. § 3621 of the Postal Reorganization Act
of 1970 (“[p]ostal rates and fees shall be reasonable, equitable, and sufficient to
enable the Postal Service under honest, efficient, and economical management to
maintain and continue the development of postal services of the kind and quality
adapted to the needs of the United States”). See USPS Opening Brief at 9-10.
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The relevant Senate bill in the 109th Congress, S. 662, was initially
introduced by Senator Susan Collins on March 17, 2005. In direct contrast to the
House Bill, S. 662 would have imposed a more restrictive standard on above-CPI
rate increases, authorizing the Commission to “establish procedures whereby rates
may be adjusted on an expedited basis due to unexpected and extraordinary
circumstances.” S. 662, 109th Cong., 1st Sess., § 3622(d)(1)(D) (Mar. 17, 2005).
The inclusion in this Senate Bill of the phrase “due to” – prior to the phrase
“unexpected and extraordinary circumstances” – was without comment, and with
no apparent purpose. Indeed, the words “due to” were first used in an earlier
Senate Bill sometime in 2003 or 2004, during the 108th Congress: a Senate Bill
first introduced in June 2003 stated that rates could be increased “when an
unexpected decline in revenue or increase in costs threatens” the Postal Service,
see S. 1248, 108th Cong., 1st Sess., § 3622(e)(1) (June 18, 2003), but then
subsequently was revised at some point before August 2004, when the Senate
Committee on Governmental Affairs reported out S. 2468, a substitute bill that
allowed for expedited and above-inflation rate increases “due to unexpected and
extraordinary circumstances,” see S. 2468, 108th Cong., 1st Sess., §3622(d)(4)
(Aug. 25, 2004). Notably, the 2004 Senate Report accompanying this substitute
bill (S. 2468), which apparently was the first time that the prepositional phrase
“due to” appeared in this section of any postal reform bill, gave no explanation of
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the “due to” language, but instead focused on the then-newly revised standard of
“unexpected and extraordinary circumstances.” Sen. Rep. No. 108-318 at 1 (Aug.
25, 2004) (“S. 2468 grants the new Postal Regulatory Commission the power to
institute emergency price increases due to ‘unexpected and extraordinary
circumstances’”) (internal quotations in original); id. at 11 (“the Postal Regulatory
Commission shall establish procedures under which the Postal Service can adjust
rates on an expedited basis due to unexpected and extraordinary circumstances”).
Returning to 2005 and the 109th Congress, the fundamental differences
between H.R. 22 and S. 662 were highlighted in a series of 2005 reports from the
Congressional Research Service (“CRS”). For example, in an August 4, 2005
report from the CRS, the analyst noted that “significant differences remain[ed]”
between the House and Senate versions of the new ratemaking system, particularly
in the standard provided for exceeding the rate cap for market-dominant prices.
After describing the two different standards, the report noted that “[t]he Postal
Service would like to have [the House] rate-cap escape clause because it believes
that staying below the CPI will be ‘extremely challenging.’” See Congressional
Research Service, Postal Reform Bills: A Side-by-Side Comparison of H.R. 22
and S. 662 at 3 (updated Aug. 4, 2005).2
2 The NPMHU submitted this report from the Congressional Research Service, as well as all of the letters and testimony cited in the following two paragraphs, as exhibits before the Postal Regulatory Commission on August 18, 2010. See Initial
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During the following months, various groups of stakeholders debated the
impact of the differing standards contained in the bills. The Postal Service and
labor and management groups representing Postal Service employees generally
urged lawmakers to reject the more restrictive standard contained in S. 662. See,
e.g., Letter from USPS Board of Governors to the Honorable Tom Davis,
Chairman, House Committee on Government Reform at 3 (Sept. 13, 2005) (“The
Postal Service’s commitment to a CPI rate cap . . . was made with the
understanding that the exigent rate case standard would be ‘reasonable and
necessary,’ rather than ‘unexpected and extraordinary.’”); Letter from Labor
Organizations and Management Associations to Susan Collins, Chairman, Senate
Committee on Homeland Security and Governmental Affairs at 2 (March 16,
2006) (“The Senate approach to PRC exigency is far too narrow, limited only to
‘unexpected and extraordinary circumstances,’ such as biological or chemical
attack on the postal system. It would lead to unnecessary and counterproductive
service cuts in the face of serious external shocks that fall short of national
emergencies.”); Letter from Labor Organizations and Management Associations to
Tom Davis, Chairman, House Committee on Government Reform at 1 (July 12,
2006) (“We . . . urge you to resist the pressure . . . to accept the exigency language Comments of the National Postal Mail Handlers Union Regarding Postal Service Request for a Rate Adjustment Due to Extraordinary or Exceptional Circumstances (Docket No. R2010-4) (Aug. 18, 2010). They are not included in the Joint Appendix before this Court, but are part of the official record before the PRC.
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in the Senate postal reform bill. A price indexing system will only work in the
postal industry if there is sufficient flexibility for the Postal Service to seek the
revenues it needs . . . . The exigency language in Section 3622(e) of your bill,
H.R. 22, provides that flexibility. The language in the Senate bill does not.”).
Mailing groups representing large postal customers and the Bush
Administration generally preferred the Senate version. See, e.g., Letter from
Coalition for a 21st Century Postal Service to Susan Collins, Chairman, Senate
Committee on Homeland Security and Governmental Affairs at 1 (Apr. 26, 2006)
(“We support the Senate provision on the price index for rate setting for market
dominant classes of mail, including . . . the exigency clause for exceeding the
index.”); Executive Office of the President, Office of Management and Budget,
Statement of Administration Position on H.R. 22 (July 26, 2005) at 1 (urging
adoption of Senate proposal in S. 662 for a “rate cap with a strict exigency
requirement”).
Ultimately, however, a compromise was reached. The compromise
language, which now appears in Section 3622(d)(1)(E), first appeared in an
updated and amended version of the Senate bill that was circulated to interested
stakeholders by Senator Collins in October 2006,3 and was formally introduced in
3 Relevant excerpts from this draft Senate Bill were included as Exhibit 7 to the NPMHU’s filing before the PRC. See note 2 supra.
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the House as H.R. 6407, 109th Cong., 2d Sess. (Dec. 8, 2006).4 As eventually
adopted into law, that provision unequivocally authorized the Commission to
approve an expedited rate increase, above that allowed by the CPI cap, if the
adjustment is based on “either extraordinary or exceptional circumstances,” and if
the Commission finds, after notice and hearing, that the adjustment is “reasonable
and equitable and necessary” to enable the Postal Service, operating under “best
practices of honest, efficient, and economical management,” to maintain and
continue the development of postal services of the kind and quality adapted to the
needs of the United States.
In short, after more than two years of congressional debate and
consideration, this final compromise language essentially incorporated the standard
originally contained in H.R. 22, and combined that House-initiated standard with a
substantially more flexible version of the standard that initially was contained in S.
662 when the Senate Bill was first introduced at the start of the 109th Congress in
2005. The final language contained in this compromise provision is significant in
a number of different respects:
4 Meetings and discussions between postal stakeholders continued throughout calendar year 2006. The final bill – including the compromise included in Section 3622(d)(1)(E) – was introduced in the House as H.R. 6407 on December 7, 2006 and passed the House on December 8, 2006. The Senate passed H.R. 6407 on December 9, 2006. The bill was signed into law by President George W. Bush on December 20, 2006.
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First, the compromise language eliminates S. 662’s conjunctive requirement
– that circumstances be both “unexpected and extraordinary” – and replaces that
conjunctive language with explicitly disjunctive language – that circumstances be
“either extraordinary or exceptional” (emphasis added). To ensure that there
would be no doubt about this change, the statute as finally enacted includes not
only the disjunctive “or,” but also adds the word “either” at the beginning of this
phrase to emphasize that either an extraordinary circumstance or an exceptional
circumstance, standing alone, would provide an independent basis for allowing a
rate increase above the CPI cap.
Second, although the compromise provision retains the word “extraordinary”
from the earlier Senate version in S. 662, it substantially increases the flexibility
granted by that term by allowing it to stand on its own as an independent basis for
Commission approval of an above-CPI rate increase, rather than limiting the
permissible basis for such a rate increase to circumstances that were both
“unexpected and extraordinary.”
Third, the compromise language of Section 3622(d)(1)(E) allows for an
above-CPI adjustment because of circumstances that may properly be
characterized as “exceptional,” rather than S. 662’s earlier requirement that the
circumstance be “unexpected,” or more accurately both “unexpected and
extraordinary.” This change makes clear that even completely foreseeable
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13
circumstances properly may form the basis for granting a Postal Service request to
increase rates above CPI. By eliminating the word “unexpected,” and substituting
the word “exceptional,” Congress flatly rejected a foreseeability standard by
rejecting the requirement that circumstances be “unexpected.” Furthermore, even
if the substitute “exceptional” standard were to be read to include, in part, some
reference to foreseeability, the fact that the statutory provision is now expressly
disjunctive – and that circumstances that are either extraordinary or exceptional
will justify an increase – means that reliance on the foreseeability of a
circumstance as the sole basis for rejecting an above-CPI rate request would be
contrary to the statutory language.
Finally, the compromise provision also incorporated H.R. 22’s requirement
that the Commission find that an adjustment is “reasonable and equitable and
necessary to enable the Postal Service under best practices of honest, efficient, and
economical management, to maintain and continue the development of postal
services of the kind and quality adapted to the needs of the United States.” As
noted, this standard is substantially similar to the standard that was applied by the
former Postal Rate Commission when it considered rate increases under the PRA,
looking to the financial needs of the Postal Service in future years. See USPS
Opening Brief at 9-10.
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What is most notable – especially in light of the PRC decision under review
in this Court – is that none of the distinctions or debates between the House and the
Senate, none of the differences between the early Senate versions of the PAEA and
the final version of the PAEA, and none of the letters and other documents
memorializing the debate between and among postal stakeholders makes any
mention whatsoever of the “due to” phrase upon which the PRC decision under
review has placed such great emphasis. There is no indication, either in the plain
language of Section 3622(d)(1)(E) or in its legislative history, of any congressional
intent to give special meaning or emphasis to that prepositional phrase, beyond its
ordinary dictionary definition of “because of” or “attributable to.” See, e.g.,
Webster’s Third New International Dictionary at 699 (1986). At bottom, the PRC
has unilaterally elevated a simple prepositional phrase – never once the subject of
separate comment during the congressional debate – into an independent legal
standard that has no basis in the PAEA’s language or purpose.
3. In short, the PRC correctly found that the rate adjustment requested by
the Postal Service was precipitated by an extraordinary or exceptional
circumstance – namely, the Great Recession of 2008 and the unprecedented drop in
mail volume resulting therefrom – and the PAEA only requires that the PRC next
determine whether the requested rate increase is “reasonable and equitable and
necessary” under the governing statutory language found in Section 3622(d)(1)(E).
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Because the PRC imposed a wholly unsupported meaning upon the prepositional
phrase “due to,” and used that interpretation to reject the Postal Service’s rate
request, the PRC has acted in violation of its governing statute.
CONCLUSION
For the foregoing reasons, and for the reasons stated by the Postal Service,
the petition for review should be granted.
Respectfully submitted, /s/ BRUCE R. LERNER Bredhoff & Kaiser, P.L.L.C. 805 Fifteenth Street, N.W. Washington, DC 20005 (202) 842-2600 [email protected] Counsel for Intervenor National Postal Mail Handlers Union
Date: January 6, 2011
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CERTIFICATE OF COMPLIANCE
I hereby certify that this brief complies with the length limitation established
by this Court’s Order of December 21, 2010 because this brief contains 3,160
words, as counted by Microsoft Word, excluding the parts of the brief exempted by
Federal Rule of Appellate Procedure 32(a)(7)(B)(iii).
/s/ _________________________ Bruce R. Lerner Counsel for Intervenor Date: January 6, 2011
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CERTIFICATE OF SERVICE
I hereby certify that on January 6, 2011, I electronically filed the foregoing
Corrected Opening Brief for Intervenor National Postal Mail Handlers Union by
using the appellate CM/ECF system. All participants are registered CM/ECF
users, and will be served by the CM/ECF system.
/s/ _________________________ Bruce R. Lerner Counsel for Intervenor Date: January 6, 2011
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