US Post Office Not Immune from Tort and Breach of Contract Claim

MB Financial Group, Inc. v. U.S. Postal Service, 545 F.3d 814 (9th Cir., CA, 2008), September 25, 2008.

The USPS, made a mistake and did not make a post office box available for the full term of the contractual lease. The rental fee was $50 for six months. MB Financial alleged it lost hundreds of thousands of dollars worth of business. MB Financial brought claims for breach of contract and negligence.

The Federal Tort Claims Act, 28 U.S.C. § 1346(b)(1) exempts from legal action, “[a]ny claim arising out of the loss, miscarriage, or negligent transmission of letters or postal matter.” The majority held that closing a post office box prematurely does not involve the “loss . . . of letters or postal matter.”

The dissent correctly pointed out the majority ignored congressional intent to immunize the Postal Service from liability arising out of consequential damages claims for failure to deliver mail:

As a society, we have entered into a social contract with the federal government. We pay taxes and receive certain services in return, some of which would never be provided unless the government steps in to correct what economists term a “market failure.” . . . . At bottom, market failure occurs when there is no incentive for private businesses to provide a service. Historically, the provision of national and international mail services at affordable prices has been among the market failures the government has rectified.

Everyone has reasons to sue the USPS but allowing these actions will destroy the Postal Service. The Ninth Circuit misread the statute in order to provide a remedy unintended by congress. MB Financial suffered the loss of its mail – precisely the type of claim protected by sovereign immunity.