“No Shortcut to the PRC” – The Tenth Circuit’s Firm Stand on Mandatory Administrative Exhaustion for PAEA § 404a Claims

1. Introduction

Rapid Enterprises, LLC, doing business as Express One, operated as a “reseller” of United States Postal Service (“USPS”) products, purchasing postage at negotiated discounts and reselling to private shippers. After USPS elected to discontinue its reseller program in 2022, Express One alleged that the Postal Service schemed to terminate the relationship, seize proprietary customer data, and decimate its business. Express One advanced ten causes of action sounding in contract, tort, statutory misappropriation, and equitable estoppel in the District of Utah. The district court dismissed seven claims for lack of subject-matter jurisdiction and the remaining three for failure to state a claim under Fed. R. Civ. P. 12(b)(6).

On appeal, the Tenth Circuit was asked to decide, among other things, whether: (i) the Postal Regulatory Commission (“PRC”) possesses mandatory and exclusive jurisdiction over complaints that USPS violated the anticompetitive-conduct provisions of the Postal Accountability and Enhancement Act (“PAEA”) § 404a; (ii) various intentional-tort and trade-secret claims are barred by sovereign immunity and the Federal Tort Claims Act (“FTCA”); and (iii) Express One’s contract-based theories survive rigorous Rule 12 scrutiny. Exercising jurisdiction under 28 U.S.C. § 1291, the Court of Appeals affirmed the district court across the board, announcing a clear rule that PAEA § 404a claims must first be pursued before the PRC.

2. Summary of the Judgment

• PAEA Claims: The PRC has mandatory and exclusive jurisdiction over § 404a complaints; district courts therefore lack jurisdiction unless and until PRC processes are exhausted.
• Intentional-Tort/Estoppel Claims: Sovereign immunity is not waived under the FTCA for misrepresentation-based claims; estoppel cannot be used to circumvent this bar.
• Remaining Tort Claims: FTCA administrative exhaustion is a prerequisite; Express One’s letter to USPS did not demand a “sum certain” and was hence insufficient.
• DTSA Claim: USPS’s “sue-and-be-sued” clause does not waive immunity for tort-like statutory claims; the DTSA does not itself authorize suit against the federal government.
• Contract Claims: USPS’s termination complied with the contract’s 90-day notice clause; no term restricted USPS’s use of customer information; and a recital referencing “compliance with Title 39” did not incorporate the entire PAEA.
• Motions to Seal: Denied for lack of a compelling interest once USPS declined to justify sealing.

3. Analysis

3.1 Precedents Cited and Their Influence

The panel built its reasoning on a chain of persuasive and binding authorities:

• Free Enterprise Fund v. PCAOB, 561 U.S. 477 (2010) – underscored that when Congress designs an administrative procedure, that route is ordinarily “exclusive” unless Congress says otherwise.
• White v. United States Post Office, 2024 WL 2973705 (10th Cir. 2024) & Bovard v. U.S. Post Office, 1995 WL 74678 (10th Cir. 1995) – unpublished yet persuasive Tenth Circuit opinions holding PRC jurisdiction over § 403(c) service-complaint claims to be exclusive. The panel analogised § 404a to § 403(c).
• Foster v. Pitney Bowes Corp., 549 F. App’x 982 (Fed. Cir. 2013) – found that § 3662 requires exhaustion before the PRC for § 404a claims; heavily relied upon for uniformity among circuits.
• Block v. Neal, 460 U.S. 289 (1983) & Office of Pers. Mgmt. v. Richmond, 496 U.S. 414 (1990) – cementing that misrepresentation-based claims fall within the FTCA’s intentional-tort exception.
• Santos-Zacaria v. Garland, 598 U.S. 411 (2023) – distinguished for its jurisdictional analysis; although it questions labeling exhaustion as “jurisdictional,” the panel found the distinction immaterial here because Express One indisputably failed to exhaust.
• U.S. Postal Serv. v. Flamingo Indus., 540 U.S. 736 (2004) – used to perform a two-step sovereign-immunity test with USPS’s “sue-and-be-sued” clause; demonstrated that waiver does not extend to claims expressly excepted by Congress (here, tort-like claims).

3.2 Legal Reasoning

1. Statutory Text and Structure
   Section 3662(a) states a person “may lodge a complaint with the PRC.” The Court read “may” as permissive on whether to complain at all, but mandatory as to where the complaint must be lodged. Section 409(a)’s general jurisdictional grant is subject to exceptions “otherwise provided in this title,” and § 3662 is precisely such an exception.
2. Sovereign Immunity Framework
   The FTCA waives immunity only for enumerated torts and explicitly excludes claims “arising out of … misrepresentation.” Estoppel and misrepresentation claims, regardless of label, therefore fail. Furthermore, the FTCA’s administrative exhaustion requirement (submission of Standard Form 95 or equivalent “sum-certain” demand) is treated as a prerequisite; Express One’s failure to include a dollar figure doomed the claim.
3. Contract Interpretation
   • The contract allowed termination “at any time” on 90 days’ notice – fully executed.
   • Section I(N) listed data USPS could request; silence on other uses did not amount to a restriction (expressio unius could not create an implied prohibition).
   • Recitals do not incorporate entire statutory regimes absent explicit incorporation language; the reference to “comply with Title 39” expressed intent, not contractual covenant.
4. Implied Duties
   Good-faith and fair-dealing claims cannot override an express right to terminate; nor can they manufacture confidentiality obligations not bargained for. The “superior knowledge” doctrine requires nondisclosure of an existing fact material to performance cost; internal contemplation of program discontinuation is prospective, not vital to performance.

3.3 Potential Impact

• Administrative Law & Postal Litigation: Litigants within the Tenth Circuit must now channel § 404a anticompetition claims through the PRC, eliminating forum-shopping and “dual-track” litigation strategies.
• FTCA Jurisprudence: Reaffirms a restrictive reading of the misrepresentation exception and clarifies that DTSA and other modern federal trade-secret statutes do not circumvent the FTCA bar when the defendant is USPS.
• Government Contracts: Signals to contractors that recitals and generalized statutory-compliance language are insufficient to incorporate detailed regulatory safeguards; critical clauses (e.g., data-use limitations) must be expressly negotiated.
• Sealing Requests: The Court’s insistence on a concrete, “real and substantial” justification underscores the Tenth Circuit’s commitment to public access, even where national-service instrumentalities are involved.

4. Complex Concepts Simplified

• PRC (Postal Regulatory Commission) – An independent agency overseeing USPS’s rates, service standards, and certain statutory compliance. Comparable to the FCC for communications or the SEC for securities.
• PAEA § 404a – A provision limiting USPS from abusing its government position to stifle competition or misappropriate private data obtained through partnerships.
• Exhaustion Requirement – The legal rule that a party must utilize and complete available administrative remedies before seeking judicial review.
• Sovereign Immunity – The doctrine that the United States, as sovereign, may not be sued without its consent; waivers such as the FTCA are narrowly construed.
• FTCA “Intentional-Tort Exception” – 28 U.S.C. § 2680(h) bars suits for certain intentional torts, including misrepresentation and deceit, even though other torts are waived.
• “Sum Certain” – A specific dollar amount required in an administrative claim under the FTCA; without it, the agency lacks notice to settle and courts lack jurisdiction.
• Expressio Unius – A canon of interpretation: the expression of one thing implies the exclusion of others; but it cannot create duties contrary to the contract’s overall text.
• Bait-and-Switch (Good Faith) – Allegation that a contracting party lures its counterpart with favorable terms then changes position to the detriment of the other; actionable only when the conduct breaches agreed-upon contractual expectations.

5. Conclusion

Rapid Enterprises’ sweeping lawsuit was pared down by jurisdictional doctrine and tight contract drafting. Crucially, the Tenth Circuit made explicit what had been intimated in earlier opinions: § 3662 funnels all PAEA § 404a complaints exclusively to the Postal Regulatory Commission. Parties dealing with USPS must therefore build litigation strategies around administrative remedies first.

Additionally, the decision underscores the ongoing vigor of sovereign-immunity constraints—particularly the FTCA’s intentional-tort and exhaustion provisions—and warns government contractors that broad recitals and silence do not protect proprietary information. Future litigants in postal-related disputes, as well as federal contractors more broadly, must heed these lessons: exhaust first, plead a sum certain, negotiate explicit confidentiality, and do not rely on estoppel to bypass the public fisc’s shield.