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Commonwealth of Pennsylvania v. United States Postal Service

argued counsel amended january 11 1994.: September 28, 1993.



Before: Scirica, Alito and Seitz, Circuit Judges.

Author: Alito


ALITO, Circuit Judge :

The Commonwealth of Pennsylvania, Department of Environmental Resources ("DER") appeals from a district court order granting judgment on the pleadings in favor of the United States Postal Service on the DER's claim for civil penalties based on violations of state environmental requirements. The district court held that the Postal Service retained sovereign immunity with respect to these penalties. We hold that the district court's reasoning is inconsistent with governing Supreme Court precedent, and we therefore reverse the district court's order and remand for further proceedings.


In 1991, the DER filed a complaint with the Pennsylvania Environmental Hearing Board seeking civil penalties from the Postal Service for violations of the Pennsylvania Clean Streams Law, 35 Pa. Cons. Stat. Ann. § 691 et seq. (1993), and the "earth disturbance permit" that the DER had issued to the Postal Service in connection with the construction of a post office facility near Harrisburg, Pennsylvania. The Postal Service removed the case to the United States District Court for the Middle District of Pennsylvania and filed an answer asserting the affirmative defense of sovereign immunity. The Postal Service subsequently moved for judgment on the pleadings, and the district court granted that motion based on sovereign immunity.

In analyzing the question of sovereign immunity, the district court began by examining the Supreme Court's decisions in Franchise Tax Board v. United States Postal Service, 467 U.S. 512, 81 L. Ed. 2d 446, 104 S. Ct. 2549 (1984), and Loeffler v. Frank, 486 U.S. 549, 100 L. Ed. 2d 549, 108 S. Ct. 1965 (1988). These decisions, the district court noted, broadly construe the "sue- and-be-sued" provision of the Postal Reorganization Act of 1970 ("PRA"), 39 U.S.C. § 401(1) (1988),*fn1 to mean that the Postal Service is "amenable to all civil incidents of suit." Dist. Ct. Op. at 7. Under these decisions, the district court stated, exceptions to this waiver may be recognized

only if (1) subjecting the Service to the penalty is inconsistent with the Constitution, the Clean Water Act or the Postal Act; (2) an implied restriction on the waiver is necessary to avoid "grave interference[] with a governmental function"; or (3) for other reasons it was plainly Congress' intent not to allow a state regulatory agency to collect civil penalties from a federal instrumentality such as the Postal Service.

Id. at 7-8 (citations omitted).

The court then discussed the second of these exceptions -- avoiding "grave interference" with a governmental function -- and concluded that this exception did not apply here. Stating that "the only function which remains exclusive to the Postal Service is the delivery of what is defined as 'letter mail,'" the court observed that "there is nothing to indicate that the imposition of civil penalties will interfere in any manner whatsoever with that function, much less a suggestion that it would pose a 'grave interference.'" Id. at 8. The court also observed that such penalties would "not have any impact on the public treasury" since the Postal Service receives no tax dollars. Id.

The district court then turned to the question whether subjecting the Postal Service to civil penalties for state environmental violations would be inconsistent with the PRA or the Clean Water Act ("CWA"), 33 U.S.C. §§ 1251-1387 (1988). The court found that such penalties would not conflict with the PRA but would conflict with the federal facilities provision of the CWA, 33 U.S.C. § 1323. The court noted that this provision generally waives the sovereign immunity of federal departments, agencies, and instrumentalities with respect to the enforcement of federal and state environmental laws and that this provision applies to the Postal Service, since it is an "independent establishment of the executive branch." 39 U.S.C. § 201 (1988). The court also noted, however, that the Supreme Court has held that the waiver contained in the federal facilities provision of the CWA does not apply to state-imposed penalties for past environmental violations. United States Department of Energy v. Ohio, 118 L. Ed. 2d 255, 112 S. Ct. 1627 (1992). Because the waiver in the federal facilities provision of the CWA is more specific than that in the PRA and was enacted several years later, the court reasoned that the waiver in the CWA prevailed. The court thus held that "the Clean Water Act, by necessary implication, limits the sue-and-be-sued waiver of sovereign immunity of the Postal Act" and that the Postal Service is therefore "immune from civil penalties for past violations" of state environmental requirements. Dist. Ct. Op. at 16-17. The DER then appealed.*fn2

On appeal, the DER argues that the "sue-and-be-sued" clause in the PRA broadly waived the Postal Service's sovereign immunity and that none of the three exceptions noted in Franchise Tax Board and Loeffler applies. The DER then contends that the district court's reliance on the narrower waiver subsequently enacted as part of the CWA is inconsistent with the Supreme Court's reasoning in Loeffler. According to the DER, "Loeffler. . . rejected the argument -- adopted by the district court below -- that a later adopted subject-specific statute operates to restrict the broad waiver effected by the PRA." Appellant's Br. at 22.

The Postal Service, although urging us to affirm the decision of the district court, concentrates heavily on arguments quite different from those adopted by that court. While the district court based its decision on the federal facilities provision of the CWA, the Postal Service argues that it is not necessary for us to rely on the CWA at all. The Postal Service contends that the "sue-and-be-sued" provision of the PRA does not waive its immunity from state regulation and does not apply to civil penalties because they do not constitute one of the "natural and appropriate incidents of legal proceedings." Loeffler, 486 U.S. at 555. Furthermore, the Postal Service argues that Missouri Pacific Railroad v. Ault, 256 U.S. 554, 65 L. Ed. 1087, 41 S. Ct. 593 (1921), stands ...

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