JEROME B. SIMANDLE, Chief District Judge.
When an insured package and its contents are damaged in the mail, the sender or the addressee may make a claim for the loss. The Postal Service processes that claim in accordance with regulations contained in its Domestic Mail Manual, the requirements of which are allegedly not displayed to the claimant who initiates an online claims process. One requirement in the D.M.M. is that the claimant bring the damaged packaging and contents to a post office for inspection. In the present case, Plaintiff, who was the insured sender, claims he supplied accurate, detailed photos of the packaging damage, taken by the addressee, but was uninformed of the Postal Service's requirement to obtain and present the actual packaging until after the addressee had discarded it. Plaintiff alleges that the Postal Service arbitrarily failed to consider the photographs as the substantial equivalent and rejected his claim for failure to present the original packaging. This case presents, among other issues, whether the Postal Service's denial was arbitrary, capricious, or otherwise not in accordance with law.
This matter comes before the Court on Defendant United States Postal Service's motion for summary judgment. [Docket Item 7.] Plaintiff filed a response [Docket Item 10] and the motion is decided without oral argument pursuant to Rule 78, Fed. R. Civ. P.
On June 7, 2016, Plaintiff Jeffrey Nisnick filed a civil lawsuit in the small claims court of the New Jersey Superior Court in Burlington County, demanding $750 in compensatory damages, as well as punitive damages and costs. Defendant subsequently removed the case to this Court and Plaintiff filed an Amended Complaint on July 20. 2016. [Docket Items 1, 6.] Plaintiff also now states that he seeks an injunction "that forces the Defendant to immediately stop their misconduct as well as revise their website to properly notify and instruct all future claimants of what will be required during the claims submission and review process. Said revision should not allow online claimants to start an online claim without having agreed to having understood the pertinent version of instructions, and same instructions should be reiterated in the confirmation emails." [Docket Item 10-4 at 15 to 16.]
Defendant argues, first, that Plaintiff failed to exhaust his administrative remedies by failing to comply with Defendant's regulations concerning indemnity claims for insured mail. Defendant also argues that Plaintiff has not produced any evidence that its denial of his claim for that failure to comply with regulations was arbitrary and capricious. Plaintiff contests these arguments, stating that Defendant presented ambiguous and sometimes conflicting instructions for pursuing his insurance claim and that this conduct was arbitrary and capricious. He also contends that Defendants' employees engaged in actions which were arbitrary and capricious. For the reasons discussed below, the Court finds that any failure to exhaust administrative remedies shall be excused, and that the record contains sufficient evidence and/or allegations to allow a reasonable finder of fact to find in favor of Plaintiff. Accordingly, Defendant's Motion for Summary Judgment will be denied.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff's suit arises out of his purchase of insurance on a package he shipped with Defendant on February 11, 2016. [Docket Item 1-1 at 6.] Plaintiff filed a claim under that insurance policy when the package was received by the addressee in a damaged condition. Plaintiff contends that Defendant wrongfully denied his insurance claim, thereby breaching its contract with Plaintiff. [
All facts are taken from the complaints, motion papers, responses, and exhibits thereto; they are construed in the light most favorable to Plaintiff, the nonmoving party.
Plaintiff sold a microphone preamp on eBay to a buyer located in Florida. [Docket Item 10-3 at 55; 10-4 at 10.] Plaintiff bought optional insurance from Defendant for $7.00 in addition to postage in the amount of $10.66 to send the item via Priority Mail. [Docket Item 10-3 at 61.] Plaintiff shipped the item with Defendant at the Mount Laurel Post Office on February 11, 2016. [Docket Item 10-3 at 78.] The tracking number of the item was 9406209699938205425411. [Docket Item 10-3 at 74.] On or around February 17, 2016, the buyer contacted Plaintiff to tell him that the item had arrived damaged. The outer packaging was damaged and the item inside was broken. [Docket Item 10-3 at 62.] The buyer included clear, color, and reasonably detailed photographs of both the damaged packaging and the broken preamp. [Docket Item 10-3 at 66-69.]
Plaintiff submitted a claim under the insurance he purchased from Defendant on the same date, February 18, 2016, by going to Defendant's website. [Docket Item 10-4 at 10.] Plaintiff claims that when he submitted the claim, the website had, at or near the top of the webpage, the "Start an Online Claim" button, followed by a blank space equivalent to several lines of text, followed by an abridged set of instructions for filing an insurance claim. [Docket Items 10-4 at 8; 10-3 at 14.] Those instructions included the following language, approximately three paragraphs down:
[Docket Items 10-4 at 9; 10-3 at 17.] Plaintiff contends that Defendant redesigned this webpage in April of 2016 to place the abridged instructions above the "Start an Online Claim" button. [Docket Item 10-4 at 8.] He also contends that the language quoted above was changed sometime between April and August of 2016 from "If you received something damaged, please hang onto it" to "If you received something damaged, please hang onto the original packaging and damaged item[.]" [Docket Item 10-4 at 14.]
Plaintiff states that the confirmation email from Defendant he received on February 18, 2016, acknowledging the opening of his claim, did not contain, reiterate, or otherwise refer Plaintiff to the abridged instructions on the USPS website or to the Domestic Mail Manual. [Docket Item 10-4 at 10.] He also states his belief that he was not provided with and did not see any instructions to the effect that he needed to retain the original packaging and not reship the damaged item on the USPS website once he clicked the "Start an Online Claim" button and began the online claims process.
Sometime between February 18 and February 22, 2016, Defendant prepared and sent a letter to Plaintiff regarding his claim, which stated:
[Docket Items 7-3 at 2; 10-3 at 39.] Defendant also requested that Plaintiff provide evidence of insurance and mailing in the form of a receipt or mailing label. [Docket Item 10-3 at 40.] Plaintiff contends that he received this letter on February 26, 2016. This was two days after he received the return-shipped item from the eBay buyer, and accordingly, several days after the buyer shipped the item back to Plaintiff without the damaged original packaging. [Docket Item 10-5 at 2; 10-3 at 51.] Plaintiff states that he mailed his appeal package with supporting documentation to the USPS Claims Division in St. Louis, MO, on March 2, 2016, from the Marlton, NJ Post Office. [Docket Item 10-2 at 3.]
Defendant's internal regulations, viewable at http://about.usps.com/postalbulletin/2014/pb22383/html/info_001.htm, state that when "customers bring their damaged item to the Post Office for damage inspection," Postal Service employees must complete PS Form 3831, Receipt for Article(s) Damaged in Mails (which is then provided to the customer), and, "[i]n the back office," complete PS Form 2856, Damage Report of Insured Parcel and Contents (which is not to be provided to the customer before or after the employee completes it). [Docket Item 7-1 at 4.] While those regulations indicate only that those procedures should be followed when a customer brings "their damaged item" for inspection, this internal regulation also includes a "FAQ" section that states, in response to a question about whether the addressee or the sender should bring the package to a local Post Office, "The addressee should retain the damaged package, all contents, wrappings, packaging, etc., until he or she received a letter from USPS instructing him or her to bring it to the Post Office for inspection."
Plaintiff contends that "postal employees were unwilling to inspect the Plaintiff's materials and unwilling to even begin to fill out PS Form 2856." [Docket Item 10-5 at 3.] He states that he "brought his `damaged item' to two Post Offices for damage inspection, and none of the above `actions required' [by the internal regulations cited above] by postal service employees were willing to be performed by postal service employees at either location." [Docket Items 10-5 at 4, 9; 10-3 at 51.]
On March 22 or March 23
On April 12 or 13, 2016, Defendant prepared and sent a letter to Plaintiff telling him that it was not changing its original decision to deny his claim. [Docket Items 7-3 at 4; 10-3 at 42.] The letter stated: "This office never received proof of damage (PS Form 2856). This was requested from the addressee and the mailer. Please provide this office with an official damage report (PS Form 2856) along with a written appeal for the item(s) and/or container of the claim referenced above so that an accurate decision can be made on the claim." [
On April 21 or 22, 2016, Plaintiff received another letter, this one from Debra C. Fuller, a Domestic Claim Appeal Specialist with Defendant's Office of the Consumer Advocate. In this letter, Defendant stated that it "must uphold the decision issued by the St. Louis Accounting Services officials for this claim. Postal regulations provide that the damaged article, container, packaging, and any other items received must be presented by the addressee to the Postal Service for inspection in support of claims for damage (Domestic Mail Manual, Section 609.2). The original mailing container and packaging were not presented for inspection. Therefore, we were unable to determine if the items were damaged by postal mishandling. . . . Under the above circumstances, your claim cannot be approved for payment. This office is the final level of postal authority concerning claim appeals." [Docket Item 10-3 at 43.]
Plaintiff subsequently filed his small claims case, and Defendant removed to this Court.
II. STANDARD OF REVIEW
At summary judgment, the moving party bears the initial burden of demonstrating that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a);
A factual dispute is material when it "might affect the outcome of the suit under the governing law," and genuine when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party."
However, a claim of sovereign immunity is assessed as a motion for dismissal for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1).
Similarly, a claim that a plaintiff has failed to exhaust administrative remedies is proper grounds for dismissal for lack of subject matter jurisdiction, not summary judgment.
A. Tort claims
Plaintiff argues that Defendant engaged in deceptive trade practices, including "bait and switch." To the extent that these claims sound in tort, they must be dismissed.
It is well-settled that "the Postal Service enjoys federal sovereign immunity absent a waiver."
To the extent that Plaintiff's claims sound in tort, Defendant has sovereign immunity under § 2680(b) of the FTCA and those claims must be dismissed.
B. Contract claims
Because Plaintiff's claims sound at least equally in contract due to the insurance he purchased before shipping his item, which contract thereof he claims Defendant breached, § 2680(b) does not preclude his suit entirely. "However, traditional contract doctrine does not apply to claims for breach of postal insurance contracts because the `postal insurance regulations are promulgated pursuant to statutory authority, and therefore have the force and effect of law.'"
While Plaintiff lays out evidence that he was not provided with the regulations contained in the D.M.M., nor directed to the D.M.M., and claims that he had no actual knowledge of its contents (which were at times, he claims, even contradicted by other instructions USPS provided), it is well settled law that "the DMM is incorporated by reference into the Code of Federal Regulations, it is deemed published in the Federal Register, 39 C.F.R. § 111.1, and a plaintiff is presumed to have notice of the DMM's contents."
Section 609 of the D.M.M. provides as follows with regard to insurance claims for lost or damaged packages:
[Docket Item 7-3 at 7 to 9.] If customers wish to contest an initial determination of the Postal Service, they may appeal within 30 days. [DMM § 609.6.2, Docket Item 7-3 at 15.] The DMM also provides for one further level of appeal, to be filed within 30 days of the intermediate decision, for "final review and decision." [DMM § 609.6.3, Docket Item 7-3 at 15.]
Defendant claims that Plaintiff's case must be dismissed because Plaintiff failed to exhaust his administrative remedies before filing his case. The Court disagrees.
"In order for the USPS to be liable under a contract theory, a party seeking to recover for the loss of registered mail must exhaust all `administrative remedies available under the postal regulations'" before the party files a lawsuit.
It appears undisputed to the Court that Plaintiff appropriately and timely filed his initial insurance claim as well as all appeals. The basis for Defendant's claim that Plaintiff failed to exhaust his administrative remedies is that Plaintiff did not bring the original damaged packaging for inspection to his local post office. Because of this, no Postal Service employee filled out PS Form 2856. Because it lacked this completed form in hand, Defendant denied Plaintiff's claim.
Plaintiff counters that he did not know of the requirement to bring the original packaging for inspection at the Post Office and did not learn of it in timely enough fashion to allow for that to happen (i.e., by instructing the addressee/eBay buyer not to discard the packaging, asking the eBay buyer to mail the packaging back to Plaintiff intact, and/or asking the eBay buyer to take the packaging and item to the Post Office himself for inspection). Aside from the presumption of knowledge of the D.M.M.'s provisions that is applicable to Plaintiff, it does not appear that Plaintiff was substantively or actually informed of this requirement until Defendant's February letter — or, at least, there is a genuine issue of material fact as to this issue. As noted, Plaintiff obtained from the addressee and provided to the Postal Service detailed color photographs of the damaged packaging and contents. Plaintiff states that he behaved reasonably by refunding the buyer and providing a return shipping label.
It appears, furthermore, that when Plaintiff did learn of the requirement, he brought the photos of the original packaging (which a reasonable finder of fact could conclude accurately and clearly represented the damage to that packaging) to two Post Offices, but no Postal Service employee would fill out or file PS Form 2856. Plaintiff argues in essence that, contrary to Defendant's letters to him and its current position, Defendant itself frustrated his ability to provide Defendant with PS Form 2856, and his failure to do so should not constitute failure to exhaust his administrative remedies when Defendant itself was the cause of the omission.
Defendant claims that the case of
The Court does not find
The Court is mindful of the importance of requiring administrative exhaustion "because it serves the twin purposes of protecting administrative agency authority and promoting judicial efficiency."
However, on the facts of this case, and in this rare instance, the Court is inclined to find that Plaintiff has exhibited substantial compliance with the administrative process provided for in the D.M.M. and has not failed to exhaust that process. In the alternative, the Court finds that, on these facts and in this rare instance, any such failure to exhaust should be excused.
The vast majority of cases with which this Court is familiar where claims against the Postal Service were dismissed for failure to exhaust administrative remedies involved plaintiffs like Mr. Dosso who inexplicably failed to timely and appropriately pursue their indemnity claims under the D.M.M. or I.M.M.'s administrative process: who failed to file a claim at all, or who filed one or none of the prescribed appeals. These claims were dismissed without prejudice.
This is not that case. Here, Plaintiff followed the D.M.M.'s provisions to what he claims was the best of his ability. It is undisputed that he timely filed his claims and pursued the necessary levels of the D.M.M.'s appeals process. Although Defendant states that it "provid[ed] Mr. Nisnick at least three opportunities during the administrative process to comply with the requirements of the Domestic Mail Manual" [Docket Item 7-1 at 6], the Court believes that there is sufficient evidence to allow a reasonable finder of fact to conclude that such opportunities were illusory. While Defendant contends that "neither Mr. Nisnick nor the recipient ever brought the container, packaging or the damaged contents to a local Post Office for inspection[,]" Plaintiff avers that he did go to his local Post Office with clear
To the extent that Plaintiff failed to comply strictly with the provisions of the D.M.M. because he did not and/or could not present the original packaging material, the Court finds relevant to the instant set of facts the established exceptions of futility; a lack of available remedies with genuine opportunity for adequate relief; and lack of agency authority to change its decision in a way that would meet Plaintiff's objections.
Establishing futility "must be anchored in demonstrable reality. A pessimistic prediction or a hunch that further administrative proceedings will prove unproductive is not enough to sidetrack the exhaustion rule. . . . [A]n essential element of the claim of futility . . . is that all reasonable possibilities of adequate administrative relief have been effectively foreclosed."
On the facts in this case, the Court finds that the futility exception applies because Plaintiff, were he again to resort to Defendant's administrative process, would have no available avenues for relief. He has pursued his claim under the D.M.M., appealed it as prescribed by the D.M.M., and obtained a final, unfavorable, decision. The only thing he has not done— i.e., the failure that Defendant points to as Plaintiff's failure to exhaust, namely, to present the original packaging for inspection at the Post Office—is something that is no more in his power now than it was when he initially filed his appeals. To instruct Plaintiff to return to that process, especially when he has already received a final determination from the Office of the Consumer Advocate, would be to instruct Plaintiff to ask for something he will not receive.
Further, to the extent that Defendant claims that the D.M.M.'s provisions are absolute and final and "USPS personnel are NOT authorized to change or waive these regulations," [Docket Item 7-1 at 13], the Court also finds that Defendant lacks the authority to change its decision in a way that would meet Plaintiff's objections, which the Court understands to be Plaintiff's contention that it was arbitrary and capricious under the circumstances for Defendant to ignore the evidence he did have of the damaged packaging (i.e., the photographs) and insist on the packaging itself, which was no longer available.
For these reasons, the Court finds that Plaintiff's purported failure to exhaust the administrative remedies available to him under the D.M.M. is excused and declines to dismiss his claims for lack of subject matter jurisdiction.
2. Arbitrary and Capricious, an Abuse of Discretion, or Otherwise not in Accordance with the Law
Defendant argues that it is entitled to summary judgment because "the record lacks any evidence that could meet the `arbitrary and capricious' standard." [Docket Item 7-1 at 17.] As Defendant puts it: "The simple fact is that Mr. Nisnick never complied with the Postal Service's repeated requests to produce the alleged damaged package for inspection."
Under the Administrative Procedure Act, the court "may not overturn a USPS action unless it was arbitrary and capricious."
Furthermore, the magistrate judge who tried the case actually examined the box and came to the conclusion that it was more likely than not (because the original mailing label with Barton's handwriting was still on top of it, primarily) that the red, white, and blue USPS tape was not on the package as a result of a USPS employee tampering with the package. It was for that reason that the court found "that Mr. Barton has failed to provide evidence that the box was tampered with while in the custody of the Postal Service sufficient for this Court to overturn the Postal Service's denial of his insurance claim. . .. Considering all the evidence, the Court finds that Mr. Barton has not met his burden of demonstrating that the Postal Service's actions in denying his insurance claim were `arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.'"
The posture of the case in
The Court also finds instructive the recent opinion in
Here, Plaintiff has provided the letters of denial, unlike the plaintiff in
The Court does not find, at this stage of the litigation, that any of the above decisions were, in fact, arbitrary, capricious, or otherwise not in accordance with law. However, in light of the factual record that has been developed and Plaintiff's allegations, the Court is not inclined to grant summary judgment to Defendant on this issue because there is a legitimate dispute whether Defendant's insistence upon literal compliance with its regulations, wherein Defendant itself may have frustrated Plaintiff's reasonable efforts of compliance, was arbitrary and capricious. These disputes will require trial.
For the reasons discussed herein, Defendant United States Postal Service's motion for summary judgment will be denied. The accompanying Order will be entered.