PORTMANN v. UNITED STATES

Rehearing and Rehearing En Banc Denied July 22, 1982.

CUDAHY, Circuit Judge.

The primary issue in this appeal is whether the doctrine of equitable estoppel may be invoked against the United States Postal Service on the basis of representations made by a postal employee to a potential "Express Mail" customer. The district court, on cross motions for summary judgment, held that estoppel was unavailable against the federal government as a matter of law, and granted summary judgment in favor of the Postal Service on that basis. We reverse and remand for further proceedings.

I.

On January 15, 1980, plaintiff-appellant Michele Portmann, a free lance graphic arts designer, paid the United States Postal Service thirty-one dollars to transport three small packages containing color film separations, taken from photographs of the works of Salvador Dali, from Highland Park, Illinois, to New York City. Portmann alleges that at the time of the mailing, she stated to the Postal Service that her packages contained color separation film of great value, which could not easily be reproduced, and that safe insured carriage was therefore imperative. Portmann further alleges that the postal clerk on duty assured her that by paying $31 for "Express Mail" and special "Document Reconstruction Insurance," Portmann could guarantee that her packages would be "fully insured against loss up to $50,000." Verified Complaint at ¶ 5.1 Relying on this representation, Portmann paid the required "Express Mail" fee and designated the value of package # 1 as $1,000, package # 2 as $2,000 and package # 3 as $3,000.

Package # 3 was never delivered. Upon discovering the loss, Portmann promptly filed an application for indemnity with the Postal Service. In her application, Portmann claimed indemnity for the package in the amount of $3,874, a sum which she claimed represented the cost of reconstructing the lost film. The Postal Service reviewed Portmann's application and determined that the film was "merchandise" as distinguished from "nonnegotiable documents" under the applicable postal regulations, and that Postal Service liability was therefore limited to $500.2 After unsuccessfully pursuing an administrative appeal, Portmann filed the instant suit in federal district court seeking damages of $7,500.3

On October 10, 1980, Portmann filed a Motion for Summary Judgment in the district court, then verifying the contents of her complaint under oath. In her motion, Portmann argued first, that the film separations constituted "documents" rather than "merchandise" under a proper interpretation of the applicable postal regulations, and second that Portmann's reliance on the postal clerk's oral assurances that her packages would be insured up to $50,000 should preclude the government from now limiting coverage to $500, regardless of the actual provisions of the postal regulations. The Government responded with its own Motion for Summary Judgment on November 3, 1980, arguing that Portmann's film separations had been correctly characterized by the Postal Service as "merchandise" rather than nonnegotiable documents and that coverage was therefore limited to $500. In addition, although not expressly admitting the factual allegations upon which Portmann's estoppel claim was based, the Government argued that such allegations, even if true, would not entitle Portmann to relief since "`estoppel cannot be set up against the Government on the basis of an unauthorized representation of an officer or employee ....'" Defendant's Motion for Summary Judgment at 2, quoting Abbott v. Harris, 610 F.2d 563, 564 (8th Cir. 1979).

The district court found for the Government on both issues. First, it confirmed the Postal Service's determination that Portmann's film separations were merchandise, subject to an indemnity limit of $500, rather than nonnegotiable documents, eligible for "Document Reconstruction Insurance" of up to $50,000. Second, the district court determined, as a matter of law, that the Postal Service could not be bound by the erroneous representation of a postal employee. Noting that it was "not without appreciation of the fact that plaintiff may have relied, to her detriment, on the representations of a Postal Service employee," the district court concluded that

Dist.Ct.Op. at 4. This appeal followed.

II.

At the outset, we reject Portmann's contention that the contents of package # 3 qualified as "nonnegotiable documents" within the meaning of the applicable Postal Service regulations. Section 294.21 of the Domestic Mail Manual provides that "nonnegotiable documents" sent by Express Mail "are insured against loss, damage, or delay while in transit," for up to $50,000 per mailing unit.4 Section 294.22 of that Manual states that nonnegotiable documents "include commercial papers, documents, and such written instruments as are used in the conduct and operation of banks and banking institutions that have not been made negotiable or which cannot be negotiated or converted into cash by unauthorized persons without resort to forgery." Nonnegotiable documents also include "valuable records, audit media, and other business records." Such records "may be in conventional hard copy form, data processing cards, tapes, film, microfilm, or other forms of data storage." Domestic Mail Manual § 294.22.

Portmann argues that her color separations should be treated as nonnegotiable documents because they are film and because they have no intrinsic value apart from their message-carrying capacity. This argument, however, misconstrues the import of the word "film" in Section 294.22. Film, in the context of the Domestic Mail Manual, refers only to the medium upon which a business record or other commercial data is carried. It does not purport to classify as nonnegotiable documents all photographic reproductions or transparencies. Plaintiff's film separations, although both "reproductive" and "information carrying," are not valuable solely as a means by which commercial information is carried. We thus agree with the district court's conclusion that "[p]laintiff's goods, while in film form and certainly valuable, do not fit within the limited definition given to nonnegotiable documents [in the Domestic Mail Manual]." Dist.Ct.Op. at 3.

We believe, however, that this conclusion involves a fairly technical question of regulatory interpretation, and that a layperson reading these regulations as they existed as of January, 1980, might reasonably conclude that film separations such as Ms. Portmann's were eligible for Document Reconstruction Insurance.5 Although we reject this interpretation as legally incorrect, we consider its plausibility relevant to our analysis of plaintiff's estoppel claim. See Section IV infra.

III.

The doctrine of equitable estoppel precludes a litigant from asserting a claim or defense which might otherwise be available to him against another party who has detrimentally altered her position in reliance on the former's misrepresentation or failure to disclose some material fact. See 3 J. Pomeroy, Equity Jurisprudence § 804 at 189 (5th ed. 1941); Note, Equitable Estoppel of the Government, 47 Brooklyn L.Rev. 423, 424 (1981). In the United States, the traditional view has been that equitable estoppel will not lie against the Government or any of its agencies.6 Originally, this view rested largely on considerations of sovereign immunity. United States v. Georgia-Pacific Co., 421 F.2d 92, 99 (9th Cir. 1970). Once it was conceded that the government could not be held liable for the wrongful acts of its agents, it followed, as a logical corollary, that the government could not be estopped by the misrepresentations or material omissions of its employees.7

As the doctrine of sovereign immunity eroded, it became necessary to offer other justifications for the government's exemption from equitable estoppel. One such justification invoked a separation of powers rationale; proponents argued that permitting equitable estoppel against the government would, in effect, allow government employees to "legislate" by misinterpreting or ignoring an applicable statute or regulation. Judicial validation of such unauthorized "legislation," it was claimed, would infringe upon Congress' exclusive constitutional authority to make law.8 Although this rationale has some logical appeal, applied literally and generally, it would seem to preclude any application of estoppel against the government including its use in areas such as government procurement contracts and legal proceedings — areas in which the government has long been held subject to estoppel principles.9 Moreover, such a rigid separation of powers analysis contrasts sharply with the more realistic and flexible judicial approach to separation of powers problems in other areas such as legislative delegation. In any event, reliance on a separation of powers rationale to preclude estoppel against the government is considerably less persuasive where only an agency's own regulations are at stake than it would be where adherence to government misinformation threatens to contravene an explicit statutory requirement. See Note, Equitable Estoppel of the Government, 79 Colum.L.Rev. 551, 565-66 (1979). Cf. Gressley v. Califano, 609 F.2d 1265 (7th Cir. 1979).

In addition to invoking a separation of powers rationale, some courts and commentators have relied on public policy considerations to support the no-estoppel rule, drawing in particular on several early Supreme Court opinions in which the Court expressed concern that holding the government bound by the improper acts of its agents might promote fraud and collusion, or lead to the severe depletion of the public treasury at the hands of a few enterprising individuals.10 Critics of this "traditional" view, however, have pointed out that the incidence of "improper collusions" has historically been exceedingly small and that large sums of money are not often at stake in estoppel cases.11 Finally, some courts and commentators have argued that allowing estoppel against the government might interfere with agency flexibility in changing rules and implementing new policies.12 More modern decisions, however, have discredited this rationale, and have noted that a concern for administrative efficiency should not permit the government to deal unfairly or capriciously with its citizens. See, e.g., United States v. Georgia-Pacific Co., 421 F.2d 92, 100 (9th Cir. 1970); Emeco Industries, Inc. v. United States, 485 F.2d 652, 657 (Ct.Cl.1973) (per curiam); Massaglia v. Commissioner of Internal Revenue, 286 F.2d 258, 260 (10th Cir. 1961).

With the growth of the federal government and the broadening of government interaction with private parties, many courts have reconsidered their reluctance to apply the doctrine of equitable estoppel against the government.13 One widely applied judicial technique for limiting the no-estoppel rule posits a distinction between the "sovereign" (or governmental) and the "proprietary" (or nongovernmental) functions of federal agencies.14 Under this approach, activities by the government undertaken primarily for the commercial benefit of the government or an individual government agency are subject to estoppel while actions involving the exercise of exclusively governmental or sovereign powers are not.15 The sovereign/proprietary distinction has proven to be particularly useful in cases involving government contracts. With respect to "proprietary" contracts — that is, essentially commercial transactions involving the purchase or sale of goods or services — courts have tended to find no significant obstacles to the use of estoppel based on the conduct of government agents acting within the scope of their actual or apparent authority.16 On the other hand, government transactions found to be exercises of "sovereign" responsibilities, including a diverse range of loan agreements, subsidies and direct grants have continued to be evaluated according to the traditional rule.17 Such a distinction between the sovereign and proprietary functions of government has served as a shorthand reminder that "protection of the public welfare and deference to Congressional desires are much more apt to outweigh hardships to private individuals in the equitable balance when estoppel is asserted against sovereign acts," than when purely commercial federal interests are at stake.18

Despite its practical appeal, an analysis focusing solely on a sovereign vs. proprietary distinction has several significant shortcomings. First, the line between sovereign and proprietary functions is somewhat artificial and difficult to apply.19 For example, even routine operational contracts of federal agencies may be conditioned on a variety of special requirements imposed by Congress or the Executive for the promotion of national policy goals, thus adding a "sovereign" element to an otherwise purely commercial transaction.20 Second, although there is some early Supreme Court authority to support the distinction,21 more recent Supreme Court decisions have either left the issue open, see Wilber National Bank v. United States, 294 U.S. 120, 55 S.Ct. 362, 79 L.Ed. 798 (1935), or rejected the sovereign vs. proprietary dichotomy altogether. See Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 383, 68 S.Ct. 1, 2, 92 L.Ed. 10 (1947); Indian Towing Co. v. United States, 350 U.S. 61, 65, 68, 76 S.Ct. 122, 124, 126, 100 L.Ed. 48 (1955). Finally, exclusive reliance on such a single factor analysis may mask or contradict more basic constitutional, practical and equitable considerations that should be relevant to determining the availability of estoppel in any particular case. Thus, while we believe that the "proprietary" or commercial character of the government activity at issue in the instant case militates in favor of allowing an estoppel claim,22 we do not view this factor as determinative in all situations.

IV.

The Supreme Court decision most often cited as authority for refusing to apply estoppel against the government, and relied on heavily by the district court in the instant case, is Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947). In Merrill, an agent of the Federal Crop Insurance Corp., a government corporation established by the Department of Agriculture, advised a farmer that the spring wheat the farmer intended to plant on winter wheat acreage was fully insurable against loss under the Federal Crop Insurance Act (FCIA). The agent's advice was incorrect, since a federal regulation specifically excluded from coverage spring wheat planted on winter wheat acreage. Relying on the agent's representation, however, the farmer completed an application and the corporation issued him an insurance policy. Several months later, the farmer lost his crop and sought to recover on his policy. His claim was denied on the ground that the FCIA regulations excluded the insurance of spring wheat replanted on winter wheat acreage. The farmer filed suit against the corporation, charging that he had relied to his detriment on the statements of the corporation's agent, and alleging that his insurance policy was therefore in effect. The Idaho Supreme Court ruled in favor of the farmer, finding that the corporation's function was comparable to that of a private insurance company, which would be bound under similar circumstances. On the theory that the Government was acting in a proprietary, not a sovereign, capacity, the state court estopped the corporation to deny the validity of the policy or the liability of the Government for plaintiff's loss.

The Supreme Court reversed in a 5-4 decision, implicitly rejecting the sovereign/proprietary distinction relied on by the Idaho court, together with that court's attempt to allow an estoppel claim against the government.23 Resting its decision primarily upon a separation of powers rationale, the Merrill Court observed that only Congress had the authority to charge the public treasury, and noted that persons who deal with the government are charged with knowledge of the United States statutes as well as the federal regulations promulgated under them.24 The Supreme Court concluded that since Congress had authorized charges against the treasury only to cover insurance claims properly brought under the FCIA, the Court had no power to enforce Merrill's policy, which directly conflicted with the applicable FCIA regulations.

At least three significant differences distinguish the situation in Merrill from the facts of the instant case. First, at the time Merrill purchased his insurance, the federal government was apparently the only entity providing the type of all risk crop insurance authorized by the FCIA. See 332 U.S. at 383 n.1, 68 S.Ct. at 3 n.1. Thus, even if Merrill had been given accurate information, he would not have been able to procure the insurance he desired from an alternate private source. Merrill's claim of detrimental reliance on the government's misrepresentation was, therefore, relatively weak. In the instant case, by contrast, Portmann alleges that if the government had responded accurately to her inquiries, she would not have contracted with the Postal Service, but would have elected instead to do business with a private carrier which would have insured her separation negatives for their full value. Second, the FCIA regulations at issue in Merrill clearly and explicitly excluded from coverage "spring wheat which has been reseeded on winter wheat acreage in the 1945 crop year." 332 U.S. at 386, 68 S.Ct. at 4, quoting Sec. 414.37(v) of Wheat Crop Insurance Regulations, 10 Fed.Reg. 1591. The postal regulation at issue here, by contrast, is anything but explicit.25 Even if Portmann had examined the regulation independently, therefore, it would not have been unreasonable for her to have assumed, consistent with the postal clerk's representation, that her separation negatives were eligible for document reconstruction insurance. Thus, the Supreme Court's admonition in Merrill that "[m]en [and women] must turn square corners when they deal with the Government,"26 has little application to the instant case. Finally, because the operations of the Postal Service are financed almost entirely from a self-sustaining fund generated out of the business revenue received by the Service, the Merrill Court's reasoning that only Congress has the power to charge the public treasury, is similarly inapplicable to the instant situation. See Part VI infra.

In its more recent decisions, the Supreme Court has backed away from its suggestion in Merrill that equitable estoppel may never be asserted against the federal government. In Montana v. Kennedy, 366 U.S. 308, 81 S.Ct. 1336, 6 L.Ed.2d 313 (1961), the Court rejected an alien's attempt to resist deportation on equitable estoppel grounds, but remarked in dicta that the misconduct of which the petitioner complained was insufficient to estop the government.27 This dictum raised the possibility that certain types of governmental misconduct might be sufficient to create an estoppel. Twelve years later, in United States Immigration & Naturalization Service v. Hibi, 414 U.S. 5, 94 S.Ct. 19, 38 L.Ed.2d 7 (1973) (per curiam), the Supreme Court, referring to the Montana dictum, observed that the Montana Court did not pass on the question "whether `affirmative misconduct' on the part of the Government might estop it from denying citizenship...." 414 U.S. at 8, 94 S.Ct. at 21-22. The Court in Hibi, however, again rejected petitioner's citizenship claim, holding that the governmental action complained of could not be characterized as "affirmative misconduct," and, thus, that estoppel would not lie against the government. See 414 U.S. at 8-9, 94 S.Ct. at 21-22.28 In retrospect, Hibi was not a strong case for invoking estoppel against the government, since not all the requisite elements of an equitable estoppel were present.29 In particular, there was no misrepresentation by the government or its agents, but merely a failure to inform Hibi of his rights under the Nationality Act of 1940. See 414 U.S. at 7-8, 94 S.Ct. at 20-22. Moreover, even assuming that the failure to disclose relevant information might, under some circumstances, provide proper grounds for estopping the government, petitioner in Hibi made no showing that he had relied to his detriment on the government's silence. Note, Equitable Estoppel of the Government, 47 Brooklyn L.Rev. 423, 439 (1981).

Thus, although the Supreme Court has been extremely reluctant to estop the federal government, it has not entirely foreclosed the possibility of applying estoppel in an appropriate case. Indeed, in its most recent decision on the subject, the Supreme Court expressly stated that "[t]his Court has never decided what type of conduct by a government employee will estop the government from insisting on compliance with valid regulations governing the distribution of welfare benefits." Schweiker v. Hansen, 450 U.S. 785, 788, 101 S.Ct. 1468, 1470, 67 L.Ed.2d 685 (1981). Moreover, in refusing to apply estoppel against the Social Security Administration in Schweiker, the Supreme Court carefully distinguished the Social Security issue before it in that case from several other situations, not involving government entitlement programs, in which lower federal courts had applied estoppel against the government.30 The Court noted that in several of the cases it distinguished, "the government had entered into written agreements which supported the claims of estoppel," and that in others, "estoppel did not threaten the public fisc," as the Court felt it would in Schweiker. The instant case arguably exhibits both of these distinguishing characteristics.

In sum, we find nothing in any of the Supreme Court's estoppel decisions which clearly forecloses the availability of estoppel in the instant case. Nor do we believe that this court's decision in Gressley v. Califano, 609 F.2d 1265 (7th Cir. 1979), disposes of Portmann's estoppel argument. Gressley, like Schweiker, was a government benefits case, in which a claimant argued that erroneous information supplied by a Social Security representative should estop the government from denying disability benefits to someone not statutorily entitled to receive such benefits. In the instant case, unlike Gressley, we are not dealing primarily with a statutory benefit but more directly with a written contract between the Postal Service and a private citizen. Under the terms of this contract, the Service agreed, for a valuable consideration, to promptly deliver Portmann's separation negatives to a specified location, or to reimburse Portmann if her articles were lost. In reliance on the postal clerk's assurance that this contract included the purchase of Document Reconstruction Insurance, Portmann agreed to do business with the Postal Service to the exclusion of other express carriers who would have insured her separation negatives for their full value. As a direct result of the government's misrepresentation, therefore, Portmann was barred not from receiving a statutory benefit available only from the government (as in Gressley and Schweiker), but from collecting the actual damages she incurred as a result of the Postal Service's non-delivery, and from contracting with a private entity which would have reimbursed her for this loss. Cf. Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947).

V.

Our conclusion that equitable estoppel may be available against the government in the instant case is supported by numerous decisions of this and other courts of appeal. As early as 1966, this court, in United States v. Fox Lake State Bank, 366 F.2d 962 (7th Cir. 1966), held the federal government estopped to bring an action under the Civil False Claims Act against a bank that had relied heavily on the advice of federal agents in preparing the disputed claims applications. The Fox Lake court held that although "the doctrine of estoppel must be applied with great caution to the government and its officials ... in proper circumstances the doctrine does apply." 366 F.2d at 965. Contemporaneous decisions in the Third and District of Columbia Circuits reached similar holdings. Thus, in Semaan v. Mumford, 335 F.2d 704 (D.C. Cir. 1964), the District of Columbia Circuit held that plaintiff's pleadings and affidavits were sufficient to raise a factual issue as to whether the Library of Congress, by engaging in a course of conduct which had led plaintiff to believe he had been elevated to permanent employee status, was estopped to deny plaintiff the procedural rights of a permanent employee upon discharge. Similarly, in Walsonavich v. United States, 335 F.2d 96, 101 (3rd Cir. 1964), the Third Circuit applied estoppel against the government in a federal tax case, ruling that although estoppel is rarely invoked against the federal government, "there are circumstances where the Government should be required by our law to stand behind [its] written agreements ... in order to prevent manifest injustice." See also United States v. Gross, 451 F.2d 1355, 1358 (7th Cir. 1971) (suggesting that the government may be estopped where "the facts upon which the private party relied to his detriment were addressed or communicated directly to him by a government official"); Manloading & Management Assoc., Inc. v. United States, 461 F.2d 1299 (Ct.Cl.1972) (where agency representative, at bidding conference, had advised prospective contractor that his contract would definitely be renewed for the next fiscal year, government was estopped from reprocuring the contract, in accordance with normal agency procedure, at the start of the new year); Simmons v. United States, 308 F.2d 938, 945 (5th Cir. 1962) (in proper circumstances, equitable estoppel may be invoked against the United States in internal revenue cases).

More recently, in Mendoza-Hernandez v. Immigration & Naturalization Service, 664 F.2d 635 (7th Cir. 1981), this court declined, on the facts before it, to apply equitable estoppel against the Immigration and Naturalization Service (INS) but stated that "affirmative misconduct" which actually prejudiced an alien would estop the government from denying the alien the relief he requested. 664 F.2d at 639. In addition, cases in the Second, Third and Ninth Circuits have squarely held that affirmative misconduct on the part of the INS will estop the government from insisting on compliance with otherwise valid immigration regulations. See Corniel Rodriquez v. Immigration & Naturalization Service, 532 F.2d 301 (2d Cir. 1976) (failure of American consul to warn prospective alien that she would forfeit special immigration status if she married before being admitted to the United States estopped INS from later deporting alien, who had married her childhood sweetheart three days before leaving Dominican Republic); Villena v. INS, 622 F.2d 1352 (9th Cir. 1980) (where INS did not respond to alien's petition for preference classification for almost four years with no apparent justification for the delay, INS was estopped from claiming that the alien had failed to adequately pursue his preference claim); Yang v. Immigration & Naturalization Service, 574 F.2d 171 (3d Cir. 1978) (proof of affirmative misconduct on part of INS would entitle petitioner to relief, on equitable estoppel grounds, from deportation proceedings). See also Santiago v. Immigration & Naturalization Service, 526 F.2d 488 (9th Cir. 1975) (estoppel available in the citizenship and immigration context where there has been affirmative misconduct on the part of the government).

A series of cases in the Ninth Circuit also illustrates the increased judicial willingness to entertain estoppel claims against the federal government. In United States v. Georgia-Pacific, 421 F.2d 92 (9th Cir. 1970), the Ninth Circuit estopped the federal government from enforcing a contract involving the transfer of title to certain forest lands against a defendant who had invested a considerable sum of money in the property, in reliance upon a government land order later declared invalid by the Executive Branch. The court in Georgia-Pacific suggested that the federal government could be estopped where (1) the government is acting in a proprietary capacity; and (2) the government agent whose advice has been relied upon acted within the scope of his authority. 421 F.2d at 100-01. Shortly thereafter, in Brandt v. Hickel, 427 F.2d 53 (9th Cir. 1970), the Ninth Circuit applied estoppel against the federal government even though the representation relied upon was conceded to be unauthorized. In Brandt, plaintiff-appellant had submitted a noncompetitive oil and gas lease bid to a regional Land Management office. The bid was rejected because of a technical error, but the regional Land Manager allowed Brandt 30 days to resubmit her offer, without loss of priority. On the basis of this representation, Brandt opted to forego an appeal of the rejection and, instead, filed an amended offer within the 30 day period. Subsequently, the Secretary of the Interior ruled that the Land Manager's action was unauthorized and without effect, and that by failing to appeal the rejection of her bid, Brandt had forfeited the right to assert the validity of her original offer.31 The Ninth Circuit reversed, holding that the Secretary was estopped to disavow the Land Manager's statement even though that statement "was unauthorized by statute, regulation, or decision." 427 F.2d at 56. In explaining its decision, the Ninth Circuit stated:

427 F.2d at 56.

Twelve years later, in United States v. Lazy FC Ranch, 481 F.2d 985 (9th Cir. 1973), the Ninth Circuit again applied estoppel against the federal government, this time to bar it from maintaining an action to recover excess payments made to several business partners under the Federal Soil Bank Program. The court in Lazy FC Ranch held that estoppel should be available even where the government is acting in a sovereign capacity "if the government's wrongful conduct threatens to work a serious injustice and if the public's interest would not be unduly damaged by the imposition of estoppel." 481 F.2d at 989. Similarly, in California Pacific Bank v. Small Business Administration, 557 F.2d 218 (9th Cir. 1977), the Ninth Circuit, citing both Lazy FC Ranch and § 320 of the Restatement (Second) of Contracts, held that where a private party seeks to estop the government from disavowing an arrangement it had previously condoned or entered into, estoppel should be available "where justice and fair play require it," i.e. where the government's change in position threatens a serious injustice, and the interests of the public will not be unduly jeopardized by the estoppel claim. 557 F.2d at 224. See also Investors Research Corp. v. Securities and Exchange Com., 628 F.2d 168, 174 n.34 (D.C. Cir.), cert. denied, 449 U.S. 919, 101 S.Ct. 317, 66 L.Ed.2d 146 (1980), ("The fundamental principle of equitable estoppel applies to government agencies as well as private parties."). Cf. United States v. Lucienne D'hotelle de Benitez Rexach, 558 F.2d 37, 43 (1st Cir. 1977) ("Although estoppel is rarely a proper defense against the government, there are instances where it would be unconscionable to allow the government to reverse an earlier position.")

Recently, in TRW, Inc. v. Federal Trade Com., 647 F.2d 942 (9th Cir. 1981), the Ninth Circuit reaffirmed its prior decisions holding that equitable estoppel could be applied against the government "in proper circumstances," United States v. Fox Lake State Bank, 366 F.2d 962, 965 (7th Cir. 1966), and set forth five requirements for determining when such circumstances exist:

647 F.2d at 950-51 (citations omitted). In addition, the Ninth Circuit noted that "the government action upon which estoppel is to be based, must amount to affirmative misconduct," which that court defined as "something more than mere negligence." 647 F.2d at 951. Accord United States v. Ruby Co., 588 F.2d 697, 703-04 (9th Cir. 1978), cert. denied, 442 U.S. 917, 99 S.Ct. 2838, 61 L.Ed.2d 284 (1979). We believe that these factors accurately reflect the central equitable considerations relevant to determining the availability of estoppel against the government in any particular case. They should thus form the basis of the district court's inquiry on remand in the instant case. We further believe that other factors identified in this court's prior estoppel decisions, including the type of government activity being pursued, the reasonableness of plaintiff's reliance, and the potential danger, posed by estoppel, of undermining important federal interests or risking a severe depletion of the public fisc, may appropriately be weighed in the equitable balance. See e.g., Strauch v. United States, 637 F.2d 477, 482 (7th Cir. 1980); Champaign County v. United States Law Enforcement Assistance Administration, 611 F.2d 1200, 1205 n.8 (7th Cir. 1979); Gressley v. Califano, 609 F.2d 1265, 1267-68 (7th Cir. 1979).

VI.

Our decision that equitable estoppel may be available against the government in the instant case is also supported by the somewhat unique, quasi-private status of the United States Postal Service. In enacting the Postal Reorganization Act of 1970,32 Congress intended to "[c]onvert the Post Office Department into an independent establishment within the Executive Branch of the Government," unencumbered by direct political pressure and capable of delivering the mail in an efficient and "business like" manner. H.R.Rep.No.1104, 91st Cong., 2d Sess. 1104, reprinted in [1970] U.S.Code Cong. & Ad.News 3649, 3650 (emphasis added). To effectuate this goal, Congress clothed the Service with broad and extensive powers, including the ability "to sue and be sued in its official name," 39 U.S.C. § 401(1), the power "to enter into and perform contracts, execute instruments, and determine the character of, and necessity for, its expenditures," 39 U.S.C. § 401(1), and the authority to "settle and compromise claims by or against it." 39 U.S.C. § 401(3). Moreover, except as specifically provided for in the Reorganization Act itself, Congress exempted the Postal Service from all "Federal law[s] dealing with public or federal contracts, property, works, officers, employees, budgets or funds." 39 U.S.C. § 410 (1976). See H.R.Rep.No.1104, 91st Cong., 2d Sess., reprinted in [1970] U.S.Code Cong. & Ad.News 3649, 3674. In addition, by establishing a special self-sustaining Postal Service Fund within the Treasury Department, and by entrusting the Service with broad financing powers, Congress meant to put the Postal Service on an independent financial basis, requiring only transitional appropriations through the Congressional budgetary process. See Standard Oil Div., American Oil Co. v. Starks, 528 F.2d 201, 203 (7th Cir. 1975); 39 U.S.C. §§ 2003-2009 (1976).

In light of these considerations, virtually all courts that have considered the question have concluded that the Postal Service is not immune, as is the federal government generally, from commercial or judicial garnishment proceedings. See, e.g., Standard Oil Div., American Oil Co. v. Starks, 528 F.2d 201 (7th Cir. 1975); Beneficial Finance Co. v. Dallas, 571 F.2d 125 (2d Cir. 1978); May Dept. Stores Co. v. Williamson, 549 F.2d 1147 (8th Cir. 1977).33 Moreover, in reaching this conclusion, this court, in Standard Oil Div., American Oil Co. v. Starks, took issue, both factually and legally, with the Postal Service's contention that it was entitled to immunity either because "it ha[d] not been `launched into the commercial world'" 528 F.2d at 204, or because it was performing an exclusively governmental function. Speaking for a unanimous panel, Judge Wood stated:

528 F.2d at 204. See also Beneficial Finance Co. v. Dallas, 571 F.2d 125, 128 (2nd Cir. 1978) (Postal Service possesses many powers equivalent to a private business enterprise, and competes with private carriers in the delivery of non-letter mail).

We believe that such considerations also argue in favor of permitting estoppel against the Postal Service in the instant situation. In transporting Ms. Portmann's separation negatives, the Service was not performing an inherently sovereign or peculiarly governmental function. Instead, it was competing directly for plaintiff's business with a number of private express mail carriers. Under these circumstances, we see no reason why the Postal Service should not be held to the same commercial standards in dealing with its customers as would an analogous private entity. Cf. Kennedy Electric Co. v. United States Postal Service, 508 F.2d 954, 959 (10th Cir. 1974) (upholding subcontractor's equitable lien against Postal Service despite Service's claim of immunity, on grounds that "Service is just as amenable to the judicial process as is a private enterprise.")

In addition, we think we would do the Postal Service no competitive favor by conferring on it an absolute immunity from estoppel in the circumstances of this case. As we have suggested, no threat to the public fisc is directly involved. But the dubious privilege of not being bound by the representations of its employees in routine commercial transactions would seem to further reflect on the Service's already tarnished reputation as a provider of regular and express mail service. Certainly, to emphasize the Postal Service's position as merely one of several competitors for express business is to put this case in its own realistic context, quite distinct, for example, from that of the Social Security Administration in Schweiker v. Hansen.

Conclusion

In sum, we hold that the district court erred in concluding, as a matter of law, that equitable estoppel could not lie against the United States Postal Service in the instant situation. We therefore reverse the district court's grant of summary judgment in favor of the government, and remand for a determination whether the factors set out in Part V of this opinion warrant the application of estoppel to the facts of this case.

Reversed And Remanded.