Loeffler v. Tisch Reply for the Petitioner

    i

i

No. 86-1431

In The
Supreme Court o f the United States

October Term, 1986

----------------o--------------—

THEODORE J. LOEFFLER,

vs.
Petitioner,

PRESTON R. TISCH, POSTMASTER GENERAL 
OF THE UNITED STATES,

Respondent.

-------------— o----------------

ON W RIT OF CERTIORARI TO THE 
UNITED STATES COURT OF APPEALS 

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE PETITIONER

----------------o----------------

L isa S. V an A mbubg 
Schuchat, Cook & W erner 
1221 Locust St., Suite 250 
St. Louis, Missouri 63103 
314/621-2626
Counsel of Record 
August, 1987

' v iuimII'IG  CO., (800) 225-6964
or call colle^. x , u 2 )  342-2831



*

1

QUESTION PRESENTED

Whether the United States Postal Service, created by 
an act of Congress in 1970 and therein authorized “ to sue 
and be sued,”  39 U.S.C. § 401(1), is immunized against an 
award of prejudgment interest in a suit brought pursuant 
to the Equal Employment Opportunity Act of 1972, 42 
U.S.C. §§ 2000e, et seq.



QUESTION PR ESE N TED .......... _.... ...........................  i
TABLE OF CONTENTS.........................  ii
TABLE OF AU TH O RITIES..................     iii
OPINIONS BELOW.... ................... ..............._ ..............  1
JURISDICTION ..........................     1
STATUTE IN VO LVED ..........................     1
STATEMENT OF THE CASE................................. .. 2
SUMMARY OF THE ARGUMENT ___  3
ARGUMENT ..............................       5

I. The Issue Is the Scope of Congress’ Waiver of 
the Postal Service’s Immunity under the Postal 
Reorganization Act, Not Title V I I ....................... 5

II. Congress Intended that the Postal Service Func­
tion As a Private, Commercial Enterprise.........  19

III. Disallowing Interest Against the Postal Service
Serves No Legislative or Public Purpose______  31

CONCLUSION ......................      36

*

ii

TABLE OF CONTENTS
Page

111

c * sss Pa*e(s)

Active Fire Sprinkler Corp. v. United States 
Postal Service, 811 F.2d 747 (2d Cir. 1987).......  9

Asheville Mica Co. v. Commodity Credit Corp 
239 F.2d 383 (S.D. N.Y. 1965) ...... .............  in n

Associates Finance Services of America, Inc. 
v. Robinson, 528 F.2d 1 (5th Cir. 1978)________  9

Beneficial Finance Co. v. Dallas, 571 F 2d 125 
(2d Cir. 1978) _______ ____________ 25

Bituminous Casualty Corp. v. Lynn, 503 F.2d 
636 (6th Cir. 1974) ...... .................................  jq, 12

Blake v. Califano, 626 F.2d 891 (D.C. Cir. 1980)...  17
Bor-Son Building Corp. v. Heller, 572 F2d 174 

(8th Cir. 1978) ........................... .. .........................  17
Boston Sand v. United States, 278 U S  41 

(1928) .....................-_________________________ 16,17
Butz Engineering Corp. v. United States, 204 

Ct. Cl. 561, 499 F.2d 619 (1974) ........................... 14
Choy v. Farragut Gardens, 131 F. Supp. 609 

(S.D. N.Y. 1955) ............ .. ............ .......................  10
Coley Property Corp. v. United States, 593 

F.2d 380 (Ct. Cl. 1979)................................... 14
Cross v. United States Postal Service, 733 F.2d 

1327, a ff’d en banc by an equally divided court,
733 F.2d 1332 (8th Cir. 1984), cert, denied 
470 U.S. 1051 (1985) ------------------------- 15,17,24,25

Electric Corp. v. United States, 647 F.2d 1082 
(Ct. Cl. 1981) ........................................................ 6

Falls Riverway Realty v. City of Niagara Falls,
754 F.2d 49 (2d Cir. 1985) ..................................  6

TABLE OF AUTHORITIES



\

iv

TABLE OF AUTHORITIES—Continued
Page(s)

Federal Deposit Insurance Corp. v. Glickman,
450 F.2d 416 (9th Cir. 1971) __ ___________ _ 14

Federal Deposit Insurance Corp. v. Harrison,
735 F.2d 408 (11th Cir. 1984) .......................... 13,14

Federal Crop Insurance Corp. v. Merrill, 332 
U.S. 380 (1947) ................................................ ..... 33

Federal Housing Administration v. Burr, 309 
U.S. 242 (1940)................................................. Passim

Ferguson v. Union National Bank of Clarks­
burg, 126 F.2d 753 (4th Cir. 1942) ................... 11

Franchise Tax Board v. United States Postal
Service, 467 U.S. 512 (1984)...........4, 9,13,15,19, 28,

29, 35
General Motor Corp. v. Devex Corp., 461 U.S.

648 (1983) ..............................................................26,32
George Hyman r. Washington Metro Transit 

Authority, 816 F.2d 753 (D.C. Cir. 1987)...........  12
Goodman’s Furniture Co. v. United States Post­

al Service. 561 F.2d 462 (3d Cir. 1977) .............9, 25
Hall v. Bolger, 768 F.2d 1148 (9th Cir. 1974).......9,15
Hooten v. Civil Air Patrol, 161 F. Supp. 478

(E.D. Wis. 1958) ..................................    10
Johnson v. Secretary of United States Depart­

ment of Housing and Urban Development,
710 F.2d 1130 (5th Cir. 1983) ..................... ........  6

K SK  Jewelry Co. v. Chicago Sheraton Corp.,
283 F.2d 8 (7th Cir. I960) .......... ......................... 28

K.T.A. v. Abramson, 275 F.2d 771 (10th Cir.
1960) ............................................       10

Kennedy Electric Co. v. United States Postal 
Service, 508 F.2d 954 (10th Cir. 1974) ....... 10, 25, 32

v

Kiefer £  K iefer v. Reconstruction Finance 
Corp., 306 U.S. 381 (1939) ....... .................. ........  7,8

Kuzma v. United States Postal Service, 798 
F.2d 29 (3d Cir. 1986) ................................. ......... 24

Laird v. Nelms, 406 U.S. 797 (1972) .................. ....  17
Lehman v. Nakshian, 453 U.S. 156 (1981) .............  17
Library of Congress v. Shaw, 106 S. Ct. 2957 

(1986) ......... .'............................................4,16,17, 25, 33
Loeffler v. Tisch, 806 F.2d 817 (8th Cir. 1986)

(en banc) ............................................ .....................  15
Lutz v. United States Postal Service, 538 F.

Supp. 1129 (E.D. N.Y. 1982) ............................. 10
Matter of Toivnsend, 348 F. Supp., 1284

(W.D. Mo. 1972) ....................................................  10
May Department Stores v. Williamson, 549 

F.2d 1147 (8th Cir. 1977) ....................................  25
Milner v. Bolger, 546 F. Supp. 375 (E.D. Cal.

1982) ..............................................10,14,18, 25, 29, 35
Nagy v. United States Postal Service,

773 F.2d 1190 (11th Cir. 1985) ............9,10,15,17, 35
National Association of of Postal Supervisors 

v. United States Postal Service, 602 F.2d 
420 (D.C. Cir. 1979) ................................. ............  24

National Home for the Disabled Volunteer 
c" 'dicrs v. a rish, 229 U.S. 494 (1913) .... ...... 10

New York Guardian Mortgage Corp. v.
Cleland, 473 F. Supp. 422' (S.D. N.Y. 1979)...10,11

North New York Savings Bank v. Federal

TABLE OF AUTHORITIES—Continued
Page(s)

Savings £  Loan Insurance Corp., 561 F.2d 
1355 (D.C. Cir. 1975) ............................... ............ 9,11

People’s Gas Co. v. United States Postal Ser­
vice, 658 F.2d 1182 (7th Cir. 1981) .................... 24



VI

1 ABLE OF AUTHORITIES—Continued

Philadelphia Gear Corp. v. Federal Deposit 
Insurance Corp., 752 F.2d 1131 (10th Cir 
1984) ...........................................................................  14

Portmann v. United States, 674 F 2d 1155 
(7th Cir. 1982) .................. ................................... 26

R <& R Farm Enterprise, Inc. v. Federal 
Crop Insurance Corp.. 788 F.2d 1148 (5th 
Cir. 1986) ...........................................................   9

Reconstruction Finance Corp. v. ,1. G. Menihan 
Corp., 312 U.S. 81 (1941)...................................... 7,

Richardson v. Restaurant Marketing Asso­
ciation, 527 F. Supp. 690 (N.D. Cal'. 1981) .......  37

Shapiro v. Kansas Public Employees Retire­
ment System, 216 Kan. 353, 532 P 2d 1081 
H975) ..................................................................... 12, 31

Slum v. Library of Congress, 747 F.2d 1469
(D.C. Cir. 1984), rev’d, 106 S. Ct. 2957 (1986) 32, 35

Sportiqne Fashions, Inc. v. Sullivan, 597 F 2d 
664 (9th Cir. 1979) ........................................ 9

Standard Oil v. Starks, 528 F.2d 201 (7th
Cir- 1975) ............................................... -............ 25,27

Standard Oil v. United States, 267 U.S. 76
(1925) ..........................................................10,11,12,13

United States v. Edgerton & Sons, Inc 178 
F.2d 763 (2d Cir. 1949) ........ .............. . 10

United States v. Mill Association, Inc. 480 
F. Supp. 3 (E.D. N.Y. 1978)................................i 0, n

United States v. Sherwood, 312 U.S. 584 (1941) 5
Van Winkle v. McLucas, 537 F.2d 246 (6th Cir.

1976), cert, denied, 429 U.S. 1093 (1977) ...........  17

Page(s)

vii

West v. Harris, 573 F.2d 873 (5th Cir. 1978) 
cert, denied, 440 U.S. 946 (1979) ...............’ 9, jj

West Virginia v. United States, 107 S. Ct. 702
(1987> — - ----------------------------------------1______  32

White v. Bloomberg, 501 F.2d 1379 (4th Cir.
1974)  ..... - ............................—r— ......... -10,14,15, 28

Statutes

Backpay Act, 5 U.S.C. § 5596 .......... ........................6 16
Civil Rights Act of 1964, 28 U.S.C. § 1447 and 

42 U.S.C. §§ 1971, 1975a et seq., §§ 2000a et
Seq-------------- ------- ------------------------------------- ----.6,16

Commodity Credit Corporation, 15 U S C 
§ 7146(c) ...................... ...... „...;...................  31

Contract Disputes Act of 1978, 41 U S C 
§§ 601 et seq............................. ’.......... _  lg

Equal Employment Opportunity Act (Title
VII), 42 U.S.C. $$ 2000e et seq......  5 16 17
(Title V II), 42 U.S.C. § 2000e-16 I I I Z Z J ,  ^  28

Export-Import Bank of United States,
12 U.S.C. $ 635(a) (1) ...........................  31

Federal Credit Union,
12 U.S.C. §§ 1751 et seq. 7
12 U.S.C. § 1757(2) ................. ............................. 31

Federal Crop Insurance Corporation 
7 U.S.C. $ 1506(d) ...................... 31

Federal Deposit Insurance Corporation,
Ch. 89, § 8, 48 Stat. 168 (current version at 
12 U.S.C. $$ 1811 et sea.) . n
12 U.S.C. % 1819________ ___ _________1 . Z Z I  31

TABLE OF AUTHORITIES—Continued
Page(s)



V1U

TABLE OF AUTHORITIES—Continued

Federal Home Loan Bank,
12 U.S.C. §§ 1421 et seq................. . 7
12 U.S.C. $ 1432(a) .............. .................................  31

Federal Housing Administration,
Ch. 847, $1,48 Stat. 1246 
(current version at 12 U.S.C.
§§ 1702 et seq.) ... ............ ............... .....................  7

Federal Mortgage Corporation,
Ch. 7, § 1, 48 Stat. 344
(repealed 1961) ...................................................... 7

Federal Savings & Loan Insurance Corporation,
12 U.S.C. $1725 ......................................................  7

Federal Tort Claims Act,
Pub. L. No. 79-601, § 401,
60 Stat. 842 (codified as amended
in scattered sections of 28 U.S.C.) ...............5, 16, 28

Judiciary & Judicial Practice,
28 U.S.C. § 1254(1) ................... .........  .... 1
28 U.S.C. § 2101(c) .................................... 1
28 U.S.C. § 2516(a) ...................... .......................  14

Pennsylvania Avenue Development Corporation,
40 U.S.C. § 875 .................. ..................................... 31

Pension Benefit Guarantee Corporation,
29 U.S.C. $ 1302(b)(1) .............. ...........................  31

Postal Reorganization Act of 1970,
30 U.S.C. §§ 101 et s e q .__________ _______ __19, 23
39 U.S.C. §§ 201 et seq ._______________________ 21
39 U.S.C. § 401(1) ..... ........ ....... ..............1,3,7,18,36
39 U.S.C. § 401(8) ..........................................  24,26
39 U.S.C. § 409(e) .............................. .....  ... 27,34
39 U.S.C. § 2401 ...... .......... .................... . 22
39 U.S.C. § 3612 .......................................  23

Page(s)

IX

Reconstruction Finance Corporation 
Ch. 8, § 1, 47 Stat. 5
(repealed 1957) .......................................  7

Small Business Administration 15,
U.S.C. § 634(b)(1) .............................................  31

Special Act of May 15,1922, Ch. 192,
42 Stat. 1590 ..................................................... 16

Tennessee Valley Authority,
16 U.S.C. §§ 831a et seq......  7
16 U.S.C. § 831c(b) ...........   31

United States Housing Authority,
Ch. 896, § 1, 50 Stat. 888 
(current version at 42 U.S.C.
§§ 1437 et seq.) ........................ ............................. 7

War Risk Act, Ch. 293, 338 Stat.
711 (current version at 38 U.S.C.
§§ 701 et seq.) ___ __ __ __________ j l ,  ^2

L egislative Materials :

116 Cong. Rec. 19,844 ................ 20
116 Cong. Rec. 19,850 .................  ......................  21
116 Cong. Rec. 19,857 ............................. 22
116 Cong. Rec. 20,226 ........................ ...............  23
116 Cong. Rec. 20,227 .......................... . 24
116 Cong. Rec. 21,709 .............................................  24
116 Cong. Rec. 26,957 ...........................................  21 22
116 Cong. Rec. 27,597 .................... .......... _ ’ 2j
116 Cong. Rec. 27,602 ........ ................ 23
116 Cong. Rec. 27,603 ...........................................  21 24
116 Cong. Rec. 27,606 ...... ...................................... ’ 22
116 Cong. Rec. 27,607 ........................................  23
1970 U.S. Code Congressional & Administrative 

News ..................................................................  21

TABLE OF AUTHORITIES—Continued
Page(s)



X

TABLE OF AUTHORITIES—Continued
Page(s)

Other :

Dobbs, Remedies (1982) .............. ..... ......................  32
Note, The Postal Reorganization A ct: A Case 

Study of Regulated Industry Reform, 58 Ya.
L. Rev. 1030 (1972) ..............................    22

Posner, The Economics of Justice, (1981) ..... .....  32
President’s Commission on Postal Reorganiza­

tion, Toward Postal Excellence, (June 1968) ...20, 21
Priest, The History of the Postal Monopoly in 

the United States, 18 J. L. Econ. 33 (1975).......  21
Sutherland, Statutory Construction......................... 28
10 Wright, Miller & Kane, Federal 

Practice and Procedure,
(2d ed. 1983)
Sections 2666, 2670 ................................................  32

OPINIONS BELOW
The Opinion of the United States Court of Appeals 

for the Eighth Circuit En Banc is reported at 806 F.2d 
817 (8th Cir. 1986) and is reprinted in Petitioner’s Petition 
for Writ of Certiorari in the Appendix at page A-l.

The three-judge panel opinion preceding the En Banc 
decision below is reported at 780 F.2d 1365 (8th Cir. 1985) 
and is reprinted in Petitioner’s Petition for Writ of Cer­
tiorari A ppondix at page A-12.

The opinion of the United States District Court for 
the Eastern District of Missouri is unreported but is re­
printed in Petitioner’s Petition for Writ of Certiorari in 
the Appendix at page A-26.

----------------o----------------
JURISDICTION

On December 8, 1986, the United States Court of Ap­
peals for the Eighth Circuit issued it order affirming the 
District Court’s judgment denying prejudgment interest.

A Petition for W rit of Certiorari was filed by Peti­
tioner herein on March 5, 1987. Pursuant to 28 U.S.C. 
§ 2101(c), the Petition was timely filed. Certiorari was 
granted on June 22, 1987. The jurisdiction of this Court is 
invoked under 28 U.S.C. § 1254(1).

----------------o------- —-----
STATUTE INVOLVED

The Postal Reorganization Act of 1970 provides in 
relevant part, as follows at 39 U.S.C. § 401(1):

The Postal Service shall have the following general 
powers:

1. To sue and be sued in its official name; . . . . ”

1



2

STATEMENT OF THE CASE
Petitioner Loeffler is a male rural carrier who pre­

vailed in the district court on his claim of reverse sex 
discrimination against the United States Postal Service 
under Title VII of the Civil Eights Act of 1964, as 
amended, 42 U.S.C.  ̂2000e-16. The district court found 
that the Postal Service unlawfully discharged him because 
of his sex, ostensibly for conduct which female rural car­
riers openly engaged in without suffering like discipline.

The court awarded Loeffler reinstatement, back pay 
of $91,871.00, attorney’s fees and expenses but denied him 
prejudgment interest on his back pay, holding that the 
Postal Service was shielded by the cloak of sovereign im­
munity from an award of prejudgment interest under 
Title VII.

A panel of the United States Court of Appeals for 
the Eighth Circuit upheld the denial of prejudgment inter­
est on the basis of sovereign immunity. Thereafter, a Re­
hearing En Banc was granted and the Court of Appeals, 
in a 6 to 5 opinion, affirmed the denial of prejudgment in­
terest. The Court En Banc reasoned that, when the Postal 
Reorganization Act was passed in 1970, creating the Postal 
Service and subjecting it to a “ sue and be sued”  clause, 
sovereign immunity was waived. However the waiver did 
not reach Title VII, because in 1970, Title VII did not ex­
tend to federal instrumentalities, including the Postal Ser­
vice. Later, in 1972, when Congress amended Title VII to 
reach the federal government, it did not directly speak to 
the question of interest. Therefore, the court reasoned, 
immunity remains in effect to bar interest awards.

This Court granted certiorari to review the issue of 
whether or not the United State Postal Service, created

3

by an act of Congress in 1970 and therein authorized to 
“ sue and be sued,”  is immune to an award of prejudgment 
interest in a suit under Title VII.

----------------o----------------

SUMMARY OF THE ARGUMENT
When Congress authorizes a federal agency to “ sue 

and be sued” , it generally lacks sovereign immunity from 
its inception. This is particularly true for the United 
States Postal Service created by Congress in the Postal 
Reorganization Act of 1970, 39 U.S.C. §§ 401 et seq. (1982), 
to operate as a private commercial enterprise. To un­
derstand the scope of the Postal Service’s broad waiver 
of immunity, it is necessary to focus on Congress’ intent 
under the Postal Reorganization Act, not Title VII.

The Postal Reorganization Act’s legislative history 
strongly supports the conclusion that Congress intended 
that the Postal Service be subject to the same costs of doing 
business as private commercial enterprise. In reorganiz­
ing the Postal Service, one of Congress’ main goals was to 
bring its management efficiency up to the efficiency of a 
successful private industry. Because prejudgment interest 
is a catalyst to the settlement of meritorious claims, it will 
further Congress’ goal of effective managerial decision­
making within the Postal Service.

Prejudgment interest is a normal element of damages 
in employment discrimination cases. Therefore, a judg­
ment in an employment discrimination case against the 
Postal Service is subject to an award of interest, because 
it occupies the same “ non-sovereign”  status as private 
employes. The “ no-interest rule,”  which precludes



4

awards of interest against the government, simply does 
not apply to the Postal Service which does not possess sov­
ereign status except for certain limited purposes such as 
tort claims and certain procedural aspects of suit. These ex­
ceptions are expressly spelled out in the Reorganization 
Act. No other limitations to the broad waiver can be in­
ferred or read into the Postal Reorganization Act or Title 
VII.

Waivers of immunity effected by “ sue and be sued”  
clauses must be liberally construed. The Supreme Court’s 
“ liberal construction rule” , set out in Federal Housing 
Administration v. Burr, has been followed for decades by 
federal courts which interpreted the scope of “ sue and be 
sued”  clauses to allow prejudgment interest against fed­
eral “ sue and be sued”  agencies. This rule was most re­
cently applied by the Court to the Postal Service in Fran­
chise Tax Board v. United States Postal Service and 
should not be compromised by introducing a “ no interest”  
limit to the broad waiver of immunity in the Postal Re­
organization Act.

No Congressional purpose would be served by denying 
interest awards against the Postal Service. Such awards 
would not deplete the public treasury, because Congress 
has provided that all of the Postal Services liabilities are 
to be paid out of its own separate funds. The Postal Ser­
vice is precisely the kind of enterprise which the Supreme 
Court recognized at footnote 5 of its opinion in Library of 
Congress v. Shaw. There, the Court noted that the re­
quirement of an express waiver of sovereign immunity as 
to interest is inapplicable when “ the government lias 
cast off the cloak of sovereign immunity and assumed the 
status of a private commercial enterprise.”

5

ARGUMENT

I. The Issue is the Scope of Congress’ Waiver 
of the Postal Service’s Immunity under the 
Postal Reorganization Act, Not Title VII.

The general rule is that the federal government, as 
sovereign, is immune from suit except when it consents to 
be sued. The government, however, may waive the im­
munity of the sovereign. The scope of the waiver deter­
mines the rights of the plaintiff and the jurisdiction of the 
courts to entertain a suit. See United States v. Sherwood, 
312 U.S. 584 (1941).

The question presented by this case is whether or not 
Congress, in creating the Postal Service by enactment of 
the Postal Reorganization Act of 1970, and therein au­
thorizing it to “ sue and be sued,”  waived the Service’s 
immunity to prejudgment interest under Title VII.

Congressional waivers of sovereign immunity can best 
be analyzed and interpreted by dividing them into two cate­
gories: “ substantive”  waivers and “ status”  waivers.
A substantive waiver occurs when Congress enacts a 
statute permitting a particular cause of action to lie 
against the federal government in general. Rather than 
waiving sovereign immunity for one particular agency or 
instrumentality of the government, the substantive waiver 
applies generally to the “ United States”  which is usually 
the proper party defendant. The 1972 amendments to 
Title VII, Equal Employment Opportunity Act, 42 U.S.C. 
§§ 2000e et seq., represent one instance of substantive 
waiver, just as the Federal Tort Claims Act, P. L. No. 79- 
601, §401, 60 Stat. 842 (1946) (codified as amended in



6

scattered sections of 28 U.S.C. (1982)), and a host of other 
statutes that open the door to litigants against the federal 
government for certain substantive causes of action.1 
These statutory waivers pierce the shield of sovereign 
immunity which is normally in place for most federal 
agencies.

The second category is that which this case presents, 
the status waiver, which is triggered when Congress 
charters a new agency and authorizes it to “ sue and be 
sued”  in its own name. The status of the agency as the 

sovereign”  is waived at its inception by the insertion 
in its charter of a “  sue and be sued ’ ’ clause. However, 
sovereign status may not be fully waived if Congress ex­
pressly limits the power to “ sue and be sued”  in the agen­
cy ’s charter. In status waiver cases, judgments are 
entered against agencies in their own names, and not the 
United States generally. See Falls Riverway Realty v. 
City of Niagara Falls, 754 F.2d 49, 55 (2d Cir. 1985) 
(citing Federal Housing Administration v. Burr, 309 U.S. 
242, 250-51 (1940)). As a result, these agencies pay the 
judgments out of their own funds and not out of general 
treasury revenue. See Johnson v. Secretary of and United 
States Department of Housing and Urban Development, 
710 F.2d 1130, 1138 (5th Cir. 1983); Electric Corporation 
v. United States, 047 F.2d 1082, 1084 (Ct. Cl. 1981). The

See, e.g. Contract Disputes Act of 1978, 41 U.S.C. §§ 601 
et seq. (1982 & Supp. II 1984); Backpay Act, 5 U.S.C. § 5596 
(1982); Civil Rights Act of 1964, 28 U.S.C. § 1447 and 42 
U.S.C. §§ 1971, 1975a, et seq., 2000a et seq. (1982); Tucker 
Act, Ch. 359, 24 Stat. 505 (1887) (codified as amended in 
scattered sections of 28 U.S.C.)

7

Postal Service is one such agency, authorized to “ sue and 
be sued” .2 Its “ sue and be sued”  clause effects a broad 
waiver of sovereign immunity. Historically, federal courts 
have construed the scope of status waivers liberally to in­
clude the same suits and natural incidents thereof as are 
available against private entities.

Congress enacted a number of status waiver statutes 
during the New Deal era when it launched the federal gov­
ernment into the arena of private commercial enterprise 
and chartered several government corporations to restore 
the Nation’s depressed economy.3 Federal Housing Ad­
ministration v. Burr, 309 U.S. 242 (1940), is the seminal 
case in a trilogy of status waiver decisions handed down 
by the Supreme Court during this period of time. See 
Kiefer & K iefer v. Reconstruction Finance Corp., 306 
U.S. 381 (1939); Reconstruction Finance Corp. v. J. G.

2 Postal Reorganization Act of 1970, 39 U.S.C. § 401(1) (1982).
3 See, e.g. Reconstruction Finance Corporation, Ch. 8, § 1 

4/ St;.t. d U93-'1 '-"vealed 1957); Federal Home Loan Bank, 
12 U.S.C A. §§1421 et seq. (West 1957 and Supp. 1987)- 
Tennessee Valley Authority, 16 U.S.C.A. §§ 831a et seq. 
(West 1985); Federal Credit Union, 12 U.S.C.A §§ 1751 et 
seq. (West 1980 and Supp. 1987); Federal Mortgage Cor­
poration, Ch. 7, §1, 48 Stat. 344 (1934) (repealed 1961)- 
Federal Housing Administration, Ch. 847, § 1, 48 Stat. 1246 
(1934) (current version at 12 U.S.C.A. §§ 1702 et seq. (West 
1980 and Supp. 1987); Federal Savings & Loan Insurance 
Corporation, 12 U.S.C.A. § 1725 (West 1980 and Supp. 
1987); United States Housing Authority, Ch. 896, § 1, 50 
Stat. 888 (1937) (current version at 42 U.S.C.A §§ 1437 
et seq. (West 1978 and Supp. 1987)); Federal Deposit In­
surance Corporation, Ch. 89, §8, 48 Stat. 168 (1933) (cur­
rent version at 12 U.S.C.A. §§ 1811 et seq. (West 1980 and 
Supp. 1987)); See Kiefer & Kiefer v. Reconstruction Finance 
Corp., 306 U.S. 381, 390 n. 3 (1939) (comprehensive list of 
statutes containing "sue and be sued" clauses).



8

Menihen Corp., 312 U.S. 81 (1941). In these cases, the 
Court developed principles governing interpretation of the 
scope of “ sue and be sued”  clauses. The Court declared 
that an agency does not possess sovereign immunity merely 
because it does the government’s work and immunity is 
not readily implied in the face of a “ sue and be sued’ ’ 
clause. See Kiefer S K iefer v. Reconstruction Finance 
Corp., 306 U.S. at 388-89.

The Court’s decision liberally construing “ sue and be 
sued ’ ’ clauses stated as follows:

[W ]e start from the premise that such waivers by Con­
gress of governmental immunity in case of such federal 
instrumentalities should be liberally construed. This 
policy is in line with the current disfavor of the doc­
trine of governmental immunity from suit, as evidenced 
by the increasing tendency of Congress to waive the 
immunity where federal governmental corporations are 
concerned. Hence, when Congress establishes such an 
agency, authorizes it to engage in commercial and 
business transactions with the public, and permits it 
to “ sue and be sued” , it cannot be lightly assumed that 
restrictions on that authority are to be implied. Rather 
if the general authority to “ sue and be sued”  is to be 
delimited by implied exceptions, it must be clearly 
shown that certain types of suits are not consistent 
with the statutory or constitutional scheme, that an 
implied restriction of the general authority is neces­
sary to avoid grave interference with the perform­
ance of a governmental function, or that for other rea­
sons it was plainly the purpose of Congress to use the 
“ sue and be sued”  clause in a narrow sense. In the 
absence of such showing, it must be presumed that 
when Congress launched a governmental agency into 
the commercial world and endowed it with authority 
to “ sue or be sued” , that agency is not less amenable 
to judicial process than a private enterprise under like 
circumstances would be.

9

Clearly the words “ sue and be sued”  in their normal 
connotation embrace all civil process incident to the 
commencement or continuance of legal proceedings.

Federal Housing Administration v. Burr, 309 U.S. at 242 
(emphasis added) (citations and footnote omitted) (quoted 
with approval in Franchise Tax Board v. United States 
Postal Service, 467 U.S. 512, 517-18 (1984)).

In Federal Housing Administration v. Burr, the Court 
characterized the “ sue and be sued”  clause in the enabling 
statute of the Federal Housing Administration as a broad 
waiver of immunity, stripping the agency of its status as 
the sovereign and placing it in the same position as a pri­
vate commercial enterprise. Any limits to the broad 
waiver must be expressed in the enabling statute and no 
limitations to the waiver will be inferred unless such limi­
tations appear to be consistent with the “ plain”  intent of 
Congress.

The liberal construction rule has often been applied by 
the federal courts in broadly interpreting the scope of 
“ sue and be sued”  clauses in the charters of federal agen­
cies.4 A  general waiver of sovereign immunity renders * 1

Active Fire Sprinkler Corp. v. United States Postal Serv., 811 
F.2d 747 (2d Cir. 1987); R & R Farm Enter., Inc. v. Federal 
Crop Ins. Corp., 788 F.2d 1148 (5th Cir. 1986); Hall v. Bol- 
ger, 768 F.2d 1148 (9th Cir. 1985); Nagy v. United States 
Postal Serv., 773 F.2d 1190 (11th Cir. 1985); Sportique 
Fashions, Inc. v. Sullivan, 597 F.2d 664 (9th Cir. 1979); 
Associates Fin. Servs. of Am., Inc. v. Robinson, 528 F.2d
1 (5th Cir. 1978); West v. Harris, 573 F.2d 873 (5th Cir. 
1978), cert, denied, 440 U.S. 946 (1979); Goodman's Furni­
ture Co. v. United States Postal Serv., 561 F.2d 462 (3d 
Cir. 1977); North New York Sav. Bank v. Federal Sav. &

(Continued on following page)



10

the agency liable for the “ natural and appropriate inci­
dents of legal proceedings’ ’ and interest is included in 
that category. Reconstruction Finance Corp. v. J. G. 
Menihan Corp., 312 U.S. 81, 85 (1941); Milner v. Bolger, 
546 F. Supp. 375, 382 (E.D. Cal. 1982). In following the 
liberal construction rule of Federal Housing Administra­
tion v. Burr, the federal courts have routinely allowed re­
covery of prejudgment interest against “ sue and be sued’ ’ 
agencies as a normal incident of relief where the amount 
recoverable is liquidated.5

(Continued from previous page)
Loan Ins. Corp., 515 F.2d 1355 (D.C. Cir. 1975); White v. 
Bloomberg, 501 F.2d 1379 (4th Cir. 1974); Bituminous Cas. 
Corp. v. Lynn, 503 F.2d 636 (6th Cir. 1974); Kennedy Elec. 
Co. v. United States Postal Serv., 508 F.2d 954 (10th Cir. 
1974); K.T.A. v. Abramson, 275 F.2d 771 (10th Cir. 1960); 
United States v. Edgerton & Sons, Inc., 178 F.2d 763 (2d 
Cir. 1949); Lutz v. United States Postal Serv., 538 F.Supp. 
1129 (E.D. N.Y. 1982); New York Guardian Mortgage Corp. 
v. Cleland, 473 F. Supp. 422 (S.D. N.Y. 1979); United States 
v. Mill Ass'n Inc., 480 F. Supp. 3 (E.D. N.Y. 1978); Matter 
of Townsend, 348 F. Supp. 1284 (W.D. Mo. 1972); Ashe­
ville Mica Co. v. Commodity Credit Corp., 239 F. Supp. 
383 (S.D. N.Y. 1965); Hooten v. Civil Air Patrol, 161 F. 
Supp. 478 (E.D. Wis. 1958); Choy v. Farragut Cardens, 131 
F. Supp. 609 (S.D. N.Y. 1955).
National Home for the Disabled Volunteer Soldiers v. Par­
rish, 229 U.S. 494 (1913) (interest allowed against Home 
that has powers to sue and be sued. No specific expressed 
restriction of interest mentioned in the statute creating the 
Home.); Standard Oil v. United States, 267 U.S. 76 (1925) 
(When U.S. went into insurance business and provided 
that it could be sued, it accepted the ordinary incidents of 
suits in such business including prejudgment interest.); 
Nagy v. United States Postal Serv., 773 F.2d 1190 (11th Cir. 
1985) (Prejudgment interest awarded because a "sue and 
be sued" clause creates a presumption of waiver of sov­
ereign immunity for all purposes. Thus, barrier to award of 
prejudgment interest was lifted.); Kennedy Elec. v. United

(Continued on following page)

11

Standard Oil v. United States, 267 U.S. 76 (1925) is 
one of the earliest Supreme Court decisions concerning a 
“ sue and bo sued’ ’ agency and pre judgment interest. In 
Standard Oil, Congress had enacted the War Risk Act, Ch.

(Continued from previous page)
States Postal Serv., 508 F.2d 954 (10th Cir. 1974) (breach of 
contract action in which the amount due to plaintiff was 
readily ascertainable. The fact that liability was disputed 
does not preclude prejudgment interest.); New York Guard­
ian Mortgage v. Cleland, 473 F. Supp. 422 (S.D. N.Y. 1979) 
(Veteran Administrator given power to "sue and be sued" 
when embarking on a business venture such as issuing insur­
ance, accepts equal footing with private parties as to the 
usual incidents of suit, including the award of interest.); 
Asheville Mica Co. v. Commodity Credit Corp., 239 F. Supp. 
383 (S.D. N.Y. 1965) (Unless congressional intent granting 
immunity is shown, immunity from interest is not extended 
to government corporations authorized to engage in com­
mercial transactions with the public.); Ferguson v. Union 
Nat. Bank of Clarksburg, 126 F.2d 753 (4th Cir. 1942) (Court 
allowed recovery of interest against Administrator stating 
that when the United States agreed to be sued as an in­
surer, thfe recovery of interest for delay in payment was 
proper since interest is an ordinary incident of a suit on 
an ir.jurancc- '-''-“ Met.); United States v. Mill Ass'n, Inc., 
480 F.Supp. 3 (E.D. N.Y. 1978) (Court allowed recovery of 
prejudgment interest against Department of Housing and 
Urban Development holding that the usual rule that the 
United States cannot be subjected to the payment of in­
terest unless authorized is not necessarily applicable when 
the defendant is a separate governmental agency.); North 
New York Sav. Bank v. Federal Sav. & Loan Ins. Corp. 515 
F.2d 1355 (D.C. Cir. 1975) (The Federal Savings and Loan 
Insurance Corporation was given the power to sue and 
be sued by Congress. It is a separate corporate body in 
the insurance business and is assumed to have accepted 
the ordinary incidents of suits in such a business, which in­
clude prejudement interest.); West v. Harris, 573 F.2d 873 
(5th Cir. 1978), cert, denied, 440 U.S. 946 (1979) (Prejudg­
ment interest awarded against the National Flood Insurers

(Continued on following page)



12

293, 38 Stat. 711, 712 (1914) (current version at 38 U.S.C., 
$§701 et seq. (1982)) creating within the Department of 
the Treasury a Bureau of War Risk Insurance with the 
capacity to be sued if there was a dispute over an insur­
ance claim. Congress had launched the Bureau of War 
Risk Insurance into the insurance business, fully intend­
ing the agency to compete in the private market for profit.

When the United States went into the insurance busi­
ness, issued policies in familiar form and provided 
that in case of disagreement it might be sued, it must 
be assumed to have accepted the ordinary incidents of 
suits in such business.

Standard Oil v. United States, 267 U.S. at 79.

(Continued from previous page)
Association (NFIA) because it is not an arm of the sov­
ereign, but an association of private insurers. Even though 
the government has a financial stake in the program that 
is not enough to cloak the NFIA in the robe of sovereign 
immunity from awards of interest.); Bituminous Cas. Corp. 
v. Lynn, 503 F.2d 636 (6th Cir. 1974) (Interest awarded 
against Department of Flousing and Urban Development 
because it had embarked on a business venture with) the 
power to sue and be sued. Thus, the United States places 
itself on equal footing with private parties as to the usual 
incidents of suits, which include prejudgment interest.); 
George Hyman v. Washington Metro Transit Auth., 816 F.2d 
753 (D.C. Cir. 1987) (Although the court refused to award 
prejudgment interest because of Virginia law forbidding it, 
the court agreed with the federal rule that when government 
instrumentalities engage primarily in commercial activities, 
the "sue and be sued" clause waives immunity both from 
suit and the common incidents thereof, including awards 
of prejudgment interest.); Schapiro v. Kansas Pub. Employ- 
ees Retirement Sys., 216 Kan. 353, 532 P.2d 1081 (1975) 
(Where legislature consents that one of its agencies may 
be sued on express contracts, the waiver of sovereign im- 
munity should extend to every aspect of its contractual 
liability, including the recovery of interest.)

13
These factors persuaded the Supreme Court to permit 

an award of prejudgment interest against the United 
States.6

The liberal construction rule regarding the scope of the 
“ sue and be sued”  clauses in the charters of federal agen­
cies is not without exception. Under the exceptions out­
lined in Federal Housing Administration v. Burr, prejudg­
ment interest would be foreclosed i f :

1. The award of prejudgment interest is inconsistent 
with the statutory or constitutional scheme;

2. Denial of prejudgment interest is necessary to 
avoid grave interference with the performance of a gov­
ernmental function; or

3. It was plainly the purpose of Congress to use the 
“ sue and be sued”  clause in a narrow sense. See Federal 
Housing Administration v. Burr, 309 U.S. at 245; Fran­
chise Tax Board v. United States Postal Service, 467 U.S. 
at 519. For example, with respect to the Federal Deposit 
Insurance Corporation, the courts have recognized that 
Congress intended the “ sue and be sued”  clause in its 
Charter to be narrowly construed with respect to certain 
of its governmental, as opposed to its proprietary func­
tions.7 The courts have not, however, noted such distinc­

6 Standard Oil v. United States, is unusual in that the Bureau 
of War Risk Insurance was not authorized to sue and be 
sued in its own name, leaving the United States as the party 
defendant. In most status waiver cases, Congress author­
izes the agency to be sued in its official name. Thus, any 
judgment against the agency is not a judgment against 
the United States but against the agency itself.

7 See, e.g., Federal Deposit Ins. Corp. v. Harrison, 735 F.2d 
408 (11th Cir. 1984). ("Proprietary governmental functions

(Continued on following page)



14
tions in the legislative history of the Postal Reorganiza­
tion Act. The overwhelming majority of status waiver 
decisions regarding “ sue and be sued”  agencies have al­
lowed prejudgment interest as a normal incident of re­
covery.8 * *

(Continued from previous page)
include essentially commercial transactions involving the 
purchase or sale of goods and services and other activities 
for the commercial benefit of a particular governmental 
agency. Whereas [when the Federal Deposit Insurance 
Corporation (FDIC) acts in its] sovereign role, the govern­
ment carries out unique governmental functions for the 
benefit of the whole public[.]" Id. at 411.); Federal De­
posit Ins. Corp. v. Harrison, 735 F.2d 408 (when FDIC acted 
as a receiver and liqudiating agent for a failed bank it 
stands in the shoes of the insolvent bank, and thus, per­
formed the same function as any assuming bank and should 
be treated no differently.); Philadelphia Gear Corp. v. Fed­
eral Deposit Ins. Corp., 752 F.2d 1131 (10th Cir. 1984) 
(Court refused to allow the award of prejudgment interest 
against the FDIC acting in its capacity as an insurer for de­
lays in paying insurance claims, since Congress had ex­
pressly recognized such delays would occur and thereby 
did not waive FDIC's immunity to prejudgment interest.); 
Federal Deposit Ins. Corp. v. Clickman, 450 F.2d 416 (9th 
Cir. 1971) ("When the FDIC acts in its capacity as a fed­
eral insurer it is immune from suit." Id. at 418.).
The exception to this general rule is cases handed down 
by the Court of Claims. In suits against the government in 
the Court of Claims, the proper party defendant is the 
"United States" and not the agency in its official name. The 
Act of Congress which confers jurisdiction in the Court of 
Claims contains a provision which states, "Interest on a 
claim against the United States shall be allowed in a judg­
ment of the Court of Claims only under a contract or Act 
of Congress expressly providing for payment thereof." 28 
U.S.C. § 2516(a) (1982). Thus, the Court of Claims may 
only award interest against the government if the agency's 
enabling statute expressly provides for the award of inter­
est. See, e.g. Coley Prop. Corp. v. United States, 593 F.2d 
380 (Ct. Cl. 1979); Butz Eng'g Corp. v. United States, 204 
Ct. Cl. 561, 499 F.2d 619 (1974). See also, Milner v. Bolger, 
546 F. Supp. 375, 381 (E.D. Cal. 1982); White v. Bloomberg, 
501 F.2d 1379,1384, n.6 (4th Cir. 1974).

15

Citing the liberal construction rule of the trilogy head­
ed by Federal Housing Administration v. Burr, the Elev­
enth Circuit has held that in Title V II cases, the Postal 
Service is not immunized from prejudgment interest. Nagy 
v. United States Postal Service, 773 F.2d 1190, 1193 (11th 
Cir. 1985). The Nagy court, also citing Franchise Tax 
Board, distinguished the Postal Service from other fed­
eral agencies with sovereign immunity because of the Re­
organization A ct’s “ sue and be sued”  clause. This de­
cision squarely conflicts with the holding of the Court of 
Appeals in this case in which a sharply divided court en 
banc has reached the opposite conclusion. Loeffler v. 
Tisch, 806 F.2d 817 (8th Cir. 1986) (en banc, decided 6-5). 
See Cross v. United States Postal Service, 733 F.2d 1327, 
a ff ’d en banc by an equally divided court, 733 F.2d 
1322 (8th Cir. 1984), cert, denied, 470 U.S. 1051 (1985). 
The Fourth Circuit in White v. Bloomberg, 501 F.2d 1379 
(4th Cir. 1974) cites Federal Housing Administration v. 
Burr and the “ sue and be sued”  clause of the Postal Re­
organization Act in support of its holding that the Postal 
Service is not immune from post-judgment interest under 
the Backpay Act. Additionally, the Ninth Circuit has 
allowed post-judgment interest on an award of attorney’s 
fees against the Postal Service under 29 U.S.C. § 791, hold­
ing that interest was not barred by sovereign immunity 
because of the Reorganization A ct’s broad waiver. Hall 
v. Bolger, 768 F.2d 1148, 1151 (9th Cir. 1985). Conse­
quently, the ’liberal construction rule established by the 
Supreme Court during the New Deal era is well-settled 
and has consistently and recently served as authority for 
allowing awards c f interest against federal agencies en­
gaged in private enterprise, including the Postal Service.



16
In contrast to the liberal construction of “ sue and be 

sued”  clauses, the federal courts have restrictively inter­
preted substantive waivers of immunity by Congress. These 
substantive waivers do not focus on any particular agency 
of the government. Rather, they provide litigants with 
access to the “ United States”  for certain causes of ac­
tion or incidents of suit previously unavailable because of 
sovereign immunity. Substantive waiver legislation 
abounds in the codified laws of the United States.9

In Boston Sand v. United States, 278 U.S. 41 (1928), 
the Court set the narrowest possible boundaries for in­
terpreting the scope of substantive waivers. The case con­
cerned a waiver of sovereign immunity for libel in admir­
alty to recover damages done to a private ship by a col­
lision with a United States destroyer.10 Although the stat­
ute held the United States liable the “ same as a private 
party” , the Court declined to infer from this language that 
Congress intended the United States to be liable for in­
terest as a normal incident of suit.

More recently, the Court reaffirmed the narrow scope 
of substantive waivers in Library of Congress v. Shaw, 106 
S.Ct. 2957 (1986) when it held that Title VII does not sub­
ject the United States to liability for prejudgment interest

9 5ee, e.g. Equal Employment Opportunity Act, 42 U.S.C. 
§§ 2000e et seq. (1982); Federal Tort Claims Act, Pub. L. 
No. 79-601, §401, 60 Stat. 842, 843-47 (1946) (codified 
as amended in scattered sections of 28 U.S.C. (1982)); Con­
tract Disputes Act of 1978, 42 U.S.C. §§ 602 et seq. (1982 
& Supp. II 1984); Backpay Act, 5 U.S.C. § 5596 (1982); 
Tucker Act, Ch. 359, 24 Stat. 505 (1887) (codified as amend­
ed in scattered sections of 28 U.S.C.); Civil Rights Act of 
1964, 28 U.S.C. § 1447 and 42 U.S.C. §§ 1971, 1975a et seq., 
§§ 2000a et seq. (1982).

10 By authority of the Act of May 15, 1922, ch. 192, 42 stat. 
1590 (1922).

17
despite the statute’s wording that “ the United States shall 
be liable for costs the same as a private person.”  42 
U.S.C. §2000e-5(k). Again, the Court declined to infer 
liability in the absence of express language permitting re­
covery of interest within the substantive waiver statute, 
Title VII. The vast majority of federal courts have 
followed the Boston Sand principle of limiting the scope of 
substantive waivers to the express statutory language and 
not permitting interest to be recovered against the “ United 
States”  absent expiuss statutory permission.11

This case, however, concerns a status waiver and 
not a substantive waiver of sovereign immunity. But 
for the “ sue and be sued”  clause in the charter of the 
Postal Service, and the legislative history of the Postal 
Reorganization Act, this issue would have been governed 
by the holding in Library of Congress v. Shaw that Title 
VII of the 1964 Civil Rights Act does not waive the gov­
ernment’s traditional immunity from interest. The reso­
lution of the interest issue in this case, however, turns upon 
an analysis of Congress’ intent regarding the Postal Re­
organization Act and the “ sue and be sued”  clause in the 
charter of the Postal Service. The Court must now deter­
mine the scope of Congress’ waiver of the Postal Service’s 
“ sovereign status”  in the “ sued and be sued”  clause.

Adopting the reasoning of the majority opinion in 
Cross v. United States Postal Service,11 12 the court below

11 See, e.g. Laird v. Nelms, 406 U.S. 797 (1972), Lehman v. 
Nakshian, 453 U.S. 156 (1981); Blake v. Califano, 626 F.2d 
891 (D.C. Cir. 1980); Bor-Son Building Corp. v. Heller, 572 
F.2d 174 (8th Cir. 1978); Van Winkle v. McLucas, 537 F.2d 
246 (6th Cir. 1976), cert, denied, 429 U.S. 1093 (1977).

12 733 F.2d 1327, aff'd en banc by an equally divided court, 
733 F.2d 1332 (8th Cir. 1984), cert, denied, 470 U.S. 1051 
(1985).



18

based its holding upon an erroneous premise: “ I f  a 
waiver of immunity with respect to interest is to be found 
at all, it must be found in the statute that give rise to the 
cause of action.” 13 In other words, the court determined 
the scope of a status waiver, the Postal Reorganization 
Act, by looking to Congress’ intent regarding a substan­
tive waiver, Title VII. This erroneous premise was re­
jected by the Eleventh Circuit in Nagy:

Under that view, a general waiver of sovereign im­
munity, such as Section 401(1), would have no effect 
on the analysis of this issue. We find the dissent in 
Cross more persuasive and respectfully decline to 
follow the majority’s opinion.

Nagy v. United States Postal Service, 773 F.2d 1190 1192 
n.2 (11th Cir. 1985).

The fallacy of the premise is best articulated by the court 
in Milner v. Bolger:

Concluding that the Postal Service is liable for inter­
est on judgments will in no way undermine or distort 
the rationale behind Title VII, but concluding that the 
Postal Service is not liable for interest on Title VII 
judgments would in fact distort the provisions of 39 
U.S.C. § 401(1). To adopt the argument of the Postal 
Service would require this court to find that Congress, 
by including the Postal Service within the ambit of 
Title VII, reinstated the sovereign immunity it had 
previously waived. Such a conclusion cannot be drawn 
from inference, and nothing in the statute or legisla­
tive history has been suggested to support said argu­
ment.

Milner v. Bolger, 546 F.Supp. 375, 383 (E.D. Cal. 1982).

13 Id. at 1329 (citations omitted).

19

Proper analysis of this issue must take into con­
sideration Congress’ intent when it created the Postal 
Service in 1970. At that time, the Postal Service was 
stripped of its sovereign status. The 1972 Amendments to 
Title VII cannot logically be read to reinstate sovereign 
immunity to the Postal Service with respect to prejudg­
ment interest which is a normal incident of recovery in 
employment discrimination actions.

The Loeffler majority opinion cannot be reconciled 
with Federal Housing Administration v. Burr and Fran­
chise Tax Board v. United States Postal Service. Indeed, 
were the majority rationale the rule of law, each of the 
above cases would have been decided differently. For in 
both Franchise Tax Board and Federal Housing Admin­
istration v. Burr, the plaintiffs did not base their actions 
on the statutes creating the agencies but on state laws. 
State law cannot effect a waiver of the federal agency’s 
immunity. Yet, this Court held that the statutes creating 
the agencies broadly waived their immunity and made 
them liable to all civil process incidental to the commence­
ment of legal proceedings. Federal Housing Administra­
tion v. Burr, 309 U.S. at 242. In sum, the Loeffler major­
ity opinion is at odds with well-settled authority cited 
above, holding that status waivers of immunity such as 
that expressed in the Postal Reorganization Act are to be 
broadly and liberally applied and limitations on the broad 
waiver may not be inferred.

II. Congress Intended that the Postal Service 
Function As a Private, Commercial Enterprise.

The Postal Service is a “ sue and be sued”  agency 
which Congress created pursuant to the Postal Reorganiza­



20

tion Act of 1970, 39 U.S.C. §§ 101 et seq. (1982 & Supp. II, 
1984 & Supp. I ll , 1985). This Act was prompted by a con­
sensus that the old postal system was in need of drastic 
reform .14 The Post Office Department, as a result of 
political influence-peddling, had evolved into a bureaucratic 
nightmare, literally paralyzed by mounting deficits and in­
efficient management.

In the late sixties, the Chicago Post Office nearly 
stopped functioning, prompting President Johnson to ap­
point a Special Commission, headed by former head of 
AT&T, Frederick R. Kappel, to study the problems, recom­
mend necessary reforms and to report upon the desirability 
of transferring postal delivery functions to a government 
corporation. 116 Cong. Rec. 19,844 (1970). After com­
pleting the study, The President’s Commission cited three 
causes of management paralysis in the Post Office:

“ 1. Because it is financed in part from the Federal 
Treasury, the Post Office is enmeshed in the Fed­
eral budgetary process, and thus cannot be man­
aged as its business character demands.

2. Because of statutory constraints, the nominal man­
agers of the system cannot make the adaptation 
required by a fast-moving economy.

3. Because of the system for selecting postal man­
agers, normal line relationships between them and 
top management are impossible.”

President’s Conunission on Postal Reorganization, Toward 
Postal Excellence, 35 (June 1968).

The report identified “ effective management leader­
ship”  as the key to solving these problems.

14 116 Cong. Rec. 19,844 (1970).

21

[The Postal Service] needs a management free to 
manage with all that entails: Authority matched with 
responsibility; a sound cost accounting and an informa­
tion system so that they know where they have been 
and where they are going.

Id. at 63. The Commission stressed the need to allow the 
new Postal Service independence in its own management 
and finances.

Thus, through the Postal Reorganization Act of 1970, 
Congress set out to purge political influence from the 
postal system by abolishing the Post Office and replacing 
it with an independent, self-financed agency of the Execu­
tive Branch, the United States Postal Service. Congress 
did so. hoping that the introduction of private corporate 
incentives and management techniques would enable the 
postal service to sustain itself.15 “ Top management must 
be given authority, consistent with its responsibilities to 
provide an efficient and economical postal system.”  1970 
U.S. Code Cong. & Admin. News, 3649, 3653.

Congress patterned the management structure of the 
new Postal Service on the private corporate model, with a 
politically balanced nine member Board of Governors de­
termining policy and the Postmaster General acting as the 
chief managing officer. 39 U.S.C. §§201 et seq. (1982). 
116 Cong. Rec. 26,957, 27,597, 26,603 (1970). The Board, 
not the President, would select the Postmaster General and 
also have the sole power to remove him. Management 
officials were no longer politically appointed but were

15 116 Cong. Rec. 19,850 (1970). See Priest, The History of the
Postal Monopoly in the United States, 18 J. L. & Econ., 33, 
68 (1975).



22

to bo hired, promoted and fired solely on the basis of merit 
and performance. 116 Cong. Rec. 26,957 (1970).

Financially, Congress intended the Postal Service to 
eventually become self-supporting.16 39 U.S.C. § 2401 
(1982). Congress created a special Postal Service Fund, 
a revolving fund in the Treasury of the United States, 
“ available to the Postal Service without fiscal-year limita­
tion to carry out the purposes, functions, and powers 
authorized by this title.”  39 U.S.C. §2003. In addition, 
Congress granted the Postal Service broad financing and 
borrowing powers. 39 U.S.C. § 2005.

Although Congress provided for a thirteen-year tran­
sition period in which some monies would be needed from 
the General Treasury to maintain certain public service 
functions, its goal was to reduce public appropriations to 
zero after the transition time. 116 Cong. Rec. 27,606 (1970). 
Congress also authorized the Postal Service to issue up to 
10 billion dollars in revenue bonds, providing added flexi­
bility to the Service’s borrowing power. Thus, although 
management would get some revenue from public funds, 
such appropriations were available only for a limited time 
and only for certain governmental use of the mails and for 
certain types of public service mail. The remainder of 
postal revenues would come from charges for services.

Financial independence was seen as an encouragement 
to effective management decision-making.17 The Postal 
Rate Commission, established by Congress along with the

16 116 Cong. Rec. 19,857 (1970).
17 See Note, The Postal Reorganization Act: A Case Study of

Regulated Industry Reform, 58 Va. L. Rev. 1030, 1044-46
(1972).

23

Postal Service, is authorized to challenge postal rates which 
exceed the amount needed by an “ honest, efficient and eco­
nomical management to maintain and continue the develop­
ment of postal services of the kind and quality adapted to 
—  2 -cU; United States.”  39 U.S.C. §3621 (1982).
Thus, the Postal Rate Commission had great potential to 
effectively pressure postal management into efficient con­
duct.18 Congress built into the reorganization a number of 
incentives to encourage the same effective decision-making 
found in successful private corporations.

In addition to management structure and financial 
independence, Congress also modeled Postal Sendee labor 
and employee relations after private industry. Its goal 
was to improve the salary and working conditions of postal 
employees to compete with the private sector. See 39 
U.S.C. §§ 101, 103 (1980). Collective bargaining pro­
cedures, as in private industiy, would govern wages, hours 
and fringe benefits, subject to the National Labor Relations 
Act with certain limited exceptions including the prohibi­
tion of strikes.19 Section 410 of the Act also frees the 
Postal Service from most federal laws and regulations im­
posed upon other federal agencies with a few exceptions in 
the area of personnel. Congress intended to preserve for 
the Postal Service as great a degree of independence as 
possible. 116 Cong. Rec. 27,607 (1970). As Senator McGee 
remarked in introducing the Senate version of the Act:

Delivering mail is simply not in the same category of
policy making and program development as foreign
policy, national defense, housing, highway construc-

18

19

See Id. at 1049.
116 Cong. Rec. 20,226, 27,602 (1970).



24
tion or health and education assistance to state and 
local governments. It is an essential business-oriented 
service. The committee has no intention of establish­
ing any postal system which does not have a direct 
and continuing responsibility to the people and to 
Congress, but we do believe that its role can be ful­
filled with a greater degree of efficiency if it is re­
moved from the ordinary channels, administrative con- 
tiols, and legislative restrictions of other agencies in 
the Executive Branch.

116 Cong. Rec. 21,709 (1970) (Emphasis added).

Finally, Congress gave the Postal Service a host of 
other powers typically possessed by private corporations, 
which underscore the independence of the new agency: 
‘ including the power to make and perform contracts; to 

keep its own system of accounts; to buy, sell, lease, and 
opeiate property; to accept gifts; and to compromise 
claims against it. ” 20

An examination of the clear legislative history of the 
Postal Reorganization Act compels the conclusion that 
Congress intended the newly created Postal Service to op­
erate as a private commercial enterprise.21 Virtually 
every federal circuit agrees that with the Postal Reorgani­
zation Act, Congress intended to launch the Postal Service 
into the commercial world.22

Cf ° j s v. United States Postal Service, 733 F.2d 1327 1332 
V* ™ : a" c by f n d u a lly  divided court, 733 F.2d 1332 (8th 
Cir 1984), cert, denied, 470 U.S. 1051 (1985) (Arnold, )., dis­
senting from panel opinion). See 39 U.S.C. §§ 401(3)-(9).

21 116 Cong. Rec. 20,227, 27,603 (1970).

22 e Kuzma v- United States Postal Serv., 798 F.2d 29 31 (3d 
Cir. 1986); People's Gas Co. v. United States Postal Serv. 
658 F.2d 1182, 1201-02 (7th Cir. 1981); National Ass'n. of

(Continued on following page)

25

The Postal Service is precisely the kind of enterprise 
the Supreme Court recognized in footnote five of Library 
of Congress v. Shaw: “ The no-interest rule is similarly in­
applicable where the government has cast off the cloak of 
sovereignty and assumed the status of a private commer­
cial enterprise.”  106 S.Ct. at 2963 n.5.

With the “ sue and be used”  clause, Congress cast off 
the cloak of sovereign immunity for the Postal Service, 
intending it to be financially independent of the United 
States Treasury, under similar management incentives and 
labor relation rules as private industry.

It therefore follows logically that Congress would have 
intended that the Postal Service function as nearly as pos­
sible under the same economic risks as private enterprise. 
Prejudgment interest is always a consideration in private 
corporate decision-making. Choices must be made in con­
tract and employment disputes regarding whether to settle, 
compromise or litigate.23 Interest is a factor in the de-

(Continued on following page)
Postal Supervisors v. United States Postal Serv., 602 F.2d 420 
431 (D.C. Cir. 1979); Beneficial Finance Co. v. Dallas 571 
F.2d 125, 128 (2d Cir. 1978); Goodman's Furniture Co v 
United States Postal Serv., 561 F.2d 462, 464 (3d Cir. 1977)- 
May Dep't Stores v. Williamson, 549 F.2d 1147, 1148 (8th 
Cir. 1977); Standard O il v. Starks, 528 F.2d 201, 202 (7th Cir 
1976); Kennedy Elec. Co. v. United States Postal Serv., 508 
F.2d 954, 957 (10th Cir. 1974); Milner v. Bolger, 546 F. Supp. 
375, 377-78 (E.D. Ca. 1982); Cross v. United States Postal 
Serv., 733 F.2d 1327, 1331, aff'd en banc by an equally di­
vided court, 733 F.2d 1332 (8th Cir. 1984), cert, denied, 470 
U.S. 1051 (1985). (Arnold, J., dissenting from panel opinion).
In addition to the power to "sue and be sued" Congress, in 
401 grant the power to "settle and compromise claims7 by 

or against it"[.] 39 U.S.C. § 401(8) (1982).



2G

cision-making process which can encourage settlement of 
meritorious claims and discourage prolonged litigation. 
See General Motors Corp. v. Devex Corp., 461 U.S. 648, 
656 n.10 (1983).

If “ effective management leadership”  includes con­
sideration of prejudgment interest in decisions regarding 
settlement of meritorious claims, then allowing litigants 
to recover interest against the Postal Service furthers Con­
gress’ main goal in the reorganization. This was the rea­
soning of the court in Portmann v. United States, 674 F.2d 
1155 (7th Cir. 1982), in which the court held that the Postal 
Service was not immune from the doctrine of equitable es­
toppel in a case involving representations by a postal em­
ployee to a potential “ Express Mail”  customer. Citing 
the competitive nature of the agency’s business, the court 
saw “ no reason why the Postal Service should not be held 
to the same commercial standards in dealing with its cus­
tomers as would an analogous private entity.”  Id. at 1169. 
The court then stated:

We think we would do the Postal Service no com­
petitive favor by conferring on it an absolute immu­
nity 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 fur­
ther reflect on the Service’s already tarnished repu­
tation as a provider of regular and express mail ser­
vice.

Id. Just as the Postal Service must face the same competi­
tive risks and challenges as private enterprise in dealing 
with its customers, so too must it face up to these same 
pressures and obligations in dealing with its own em­
ployees.

27

Had prejudgment interest been an economic factor in 
the decision-making process, this case might long ago have 
been settled. Instead, the Postal Service enjoyed the free 
use of over Ninety Thousand Dollars of Mr. Loeffler’s 
back wages for five long years during which time the Dis­
trict Court’s findings, based primarily on the resolution 
of credibility issues, were appealed and subsequently af­
firmed. Hiding behind the immunity shield, the Postal 
Service management has so far paid significantly less than 
its private counterparts for poor decision-making. Immu­
nity, in this case has impeded the quality of manage­
ment leadership and frustrated Congress’ intent to bring 
the Postal Service’s management into the same market 
place as other private enterprise.

*urt.— more, against the backdrop of the well-
established “ liberal construction rule”  that Congress cre­
ated the Postal Service in 1970. Under the rule, the courts 
may not infer limitations where none explicitly exists in 
the broad waiver of immunity effected by the “ sue and be 
sued”  clause in the Postal Service’s charter. This is par­
ticularly true with respect to the Postal Reorganization 
Act for two reasons. First, Congress expressed a clear 
intent that the Postal Service function as nearly as pos­
sible as a private commercial enterprise. Second, Con­
gress expressly limited the broad waiver of immunity both 
substantively and procedurally in the Postal Reorganiza­
tion Act in two main respects: (1) the applicability of the 
Federal Tort Claims Act and (2) procedural matters re­
lating to suits against the United States. 39 IT.S.C. § 409.

As the court stated in Standard Oil Div. American Oil 
Co. v. Starks, 528 F.2d 201 (7th Cir. 1975):



28

These specific and isolated limitations indicate beyond 
doubt that the waiver to sue and be sued applied to all 
other litigation. See K SK  Jewelry Co. v. Chicago 
Sheraton Corp., 283 F. 2d 8, 11 (7th Cir. 1960); White 
v. Bloomberg, 501 F.2d 1379, 1386 (4th Cir. 1974); 
Sutherland, Statutory Construction Section 47.23.

Id. at 203. Had Congress intended further limitations on 
the broad waiver of sovereign immunity for the Postal 
Service, it most certainly would have expressed its intent 
within the enabling statute. It strains the “ liberal con­
struction rule”  to infer limits on a broad waiver of immu­
nity in the face of explicitly stated lindtations within the 
enabling statute.24

The Supreme Court’s most recent reaffirmation of the 
liberal construction rule with respect to the Postal Service 
is its decision in Franchise Tax Board v. United States 
Postal Service, 467 U.S. 512 (1984) in which the scope of 
the “ sue and be sued”  clause in the 1970 charter of the 
Postal Service was broadly interpreted to include a gar­
nishment action against the Postal Service. In Franchise 
Tax Board, the Court again embraced the liberal construc­
tion rule of Federal Housing Administration v. Burr:

Congress has launched [the] Postal Service into the 
commercial world hence . . . not only must we liberally

24 Section 409(c) provides that the Federal Tort Claims Act 
shall apply to tort claims arising out of activities of the 
Postal Service. Section 410 itemizes those federal laws ap­
plicable to the Postal Service including Title VI of the Civil 
Rights Act of 1964. Title VII is absent from this list. The 
Senate version had contained a provision making Title VII 
applicable to the Postal Service, however, it was later de­
leted in the conference report. Title VII was later made ap­
plicable to the Postal Service in the 1972 amendments to 
Title VII. Equal Employment Opportunity Act 42 U.S.C. 
§ 2000e-16 (1982).

29
construe the ‘ sue and be sued’ clause, but also we must 
presume that the Service’s liability is the same as that 
of any other business.

467 U.S. at 519 (emphasis added). The Court character­
ized Congress ’ waiver of sovereign immunity of the Postal 
Service as “ broader”  than the status waiver in Federal 
Housing Administration v. Burr. Id. Furthermore, the 
Court n o '.a  thfl me “ nearly universal conclusion of the 
lower federal courts has been that the Postal Reorganiza­
tion Act constitutes a waiver of sovereign immunity ’ ’ Id. 
at 519, n.12 (citations omitted). The Court’s authority for 
the preceding statement includes Milner v. Bolger25 which 
held the Postal Service liable for interest under Title VII 
citing the “ sue and be sued”  clause in its charter.

The Postal Service’s liability “ is the same as that 
of any other business,”  and “ Congress intended the Postal 
Service to be treated similarly to other self-sustaining 
ventures.” 26 It logically follows that Congress intended 
the Postal Service be subject to prejudgment interest 
which is a normal incident of relief in employment suits. 
In Federal Housing Administration v. Burr, the Court 
states that the Federal Housing Administration had the 
came liability as private enterprise for “ certain types of 
suit.”  If the Postal Service is liable for the same “ types 
of suit,”  in this instance Title VII, then it should not be 
immune to normal elements of damages, such as prejudg­
ment interest, incidental to the same “ types of suit.”  
See Milner v. Bolger, 546 F. Supp. 375, 382 (E.D. Cal. 
1982).

23 546 F. Supp. 375 (E.D. Cal. 1982).
26 Franchise Tax Board v. United States Postal Serv., 467 U S 

512, 523 (1984).



30

As a policy matter, liberal construction of the “ sue 
and be sued clause”  in the Postal Reorganization Act 
furthers Congress’ intent to launch the Postal Service into 
the world of private enterprise. The Postal System must 
be perceived by those with whom it does business not as 
“ the government”  with its bureaucratic entanglements, but 
as a business competitor, subject as nearly as possible to 
the same market pressures and liabilities as its private 
counterparts. It is more desirable to do business with an 
agency unshielded by governmental immunity. Ideally, all 
competitors, including federal agencies launched by Con­
gress into private commercial enterprise, should operate 
under the same market pressures and play by the same 
rules of competition. Against the backdrop of the “ liberal 
construction rule” , Congress need not expressly itemize 
all causes of action, elements of damage and incidents of 
suit for which it intends an agency to be liable. Rather, 
with one broad sweep, Congress may effect the same result 
with insertion into the agency’s charter of a “ sue and be 
sued”  clause.

The clause can also have prospective effect as to newly- 
enacted statutory protections such as Title VII. The 
court’s decision below denies prospective effect to the 
“ sue and be sued”  clause for a normal element of damages, 
interest, in a remedy, Title VII, which became applicable 
to the Postal Service after its genesis. According to this 
reasoning, Congress would have to expressly state in each 
new remedial substantive waiver legislation that interest 
is available against identified federal instrumentalities 
which, by Acts of Congress, have assumed the status of 
private commercial enterprise. An affirmation of the 
Court of Appeals’ decision in this case would seriously

31
undermine the liberal construction rule, placing Congress 
in an awkward position not only with respect to the Postal 
Service but also with respect to scores of other Federal 
instrumentalities authorized to “ sue and be sued.” 27

The liberal construction rule, however, permits “ sue 
and be sued”  agencies to be sued under statutory remedies 
enacted after the agency was chartered. Here, had Con­
gress not expressly in the Postal Reorganization Act ex­
empted the Postal Service from Title VII, then under the 
liberal construction rule, the Postal Service would have 
been liable under Title VII back in 1970. When the 1972 
Amendments to Title VII were passed extending Title VII 
jurisdiction to the Postal Service, the Postal Service still 
“ wore the shoes”  of private enterprise and did not have 
sovereign status. Consequently, the Postal Service’s lia­
bility under Title VH should be the same as a private com­
mercial enterprise, including liability for prejudgment 
interest.

III. Disallowing Interest Against the Postal Ser­
vice Serves No Legislative or Public Purpose.

Interest has been defined as compensation for the use, 
detention or forbearance of money. Shapiro v. Kansas

27 See, e.g., Export-Import Bank of United States, 12 U.S.C.A. 
§ 635(a)(1) (West 1957 and Supp. 1987); Federal Deposit 
Insurance Corporation, 12 U.S.C.A. § 1819 (West 1980); Fed­
eral Credit Union, 12 U.S.C.A. § 1757(2) (West, 1980); Ten­
nessee Valley Authority, 16 U.S.C.A. §831c(b) (West 1985); 
Federal Home Loan Bank, 12 U.S.C.A. § 1432(a) (West Supp. 
1987); Pennsylvania Avenue Development Corporation, 40 
U.S.C.A. § 875 (West 1986); Pension Benefit Guarantee Cor­
poration, 29 U.S.C.A. § 1302(b)(1) (West 1985); Small Busi- 
;,os A-, -!"!:trzt:cn 15 U.S.C.A. § 634(b)(1) (West 1976); 
Commodity Creuu Corporation, 15 U.S.C.A. § 7146(c) (West 
Supp. 1987); Federal Crop Insurance Corporation, 7 U.S.C.A. 
§ 1506(d) (West Supp. 1987).



32

PubliG Empl°yees Retirement System, 216 Kan. 353, 532 
•2d 1081 (1975). As the court therein stated:

W r UF f0C,ety t0day money is a commodity with a 
legitimate price on the market and loss of its use 
whether occasioned by the delay or default of an or-

S  b r r pe“ a V ti26n’ S'ate ”

M  at 1084. Judge Posner said, “ [a] loan without interest

1 5 9 ^ 9 8 1 ^  ] "  R P°Sner’ Th<3 Ec°n0inics of Justice>

Ih e Supreme Court has characterized prejudgment 
in erest as an element of complete compensation.”  West 
Virginia v. United States, 107 S. Ct. 702, 706 (1987). It is 
a normal incident of recovery under breach of contract 
and employment discrimination actions where the amount 
owed (backpay) is liquidated and determinable at any 
given time.28 As noted by Judge Ginsberg in her dissent 
m Shaw v. Library of Congress, 747 F.2d 1469 (D C Cir 
1984), rev’i ,  106 S. Ct. 2957 (1986): “ prejudgment iuteri 

• • • generally ranks as an element of damages, not as 
a component of ‘ costs’. ”  Id. at 1488 (citing to 10 C 
Wright, A. Miller and M. Kane, Federal Practice and Pro­
cedure, Sections 2666, 2670 (2d ed. 1983)). Its availability 
depends upon the substantive law (state or federal) that 
governs the controversy. See General Motors Corn v 
Devex Corp., 461 U.S. 648 (1983).

The ‘ ‘ no interest rule ”  is an outgrowth of the principle 
of sovereign immunity and is relevant only in substantive

£7ec CoD°vb l p65' 7f  '1982)' 5ee als°  Kennedy 
H r 1074w  - 5 °  States Postal Serv., 508 F.2d 954 (10th
tract daim)!Pre,UdSment mterest uPheld on plaintiff's con-

33

waiver cases involving the government or its agencies 
which enjoy sovereign status. The rule is that interest 
may ™  against the “ United States”  in the
absence of an express statutory waiver. The rule’s pur­
pose is prevention of direct and costly charges on the public 
leasury. Therefore, courts have a duty to carefully ob­

serve express conditions defined by Congress before allow-

'm  Sm hooWardS' ^  Fedeml Cr°P d u ra n ce  Corp. v 
stated:’ ^  ^  (1M7)‘ ^  reCently’ the ^nrt

tt]he purpose of the rule is to permit the government
fp p f°CCT r  an aPParently favored position,”  by pro

interest

Library of Congress v. Sliaw, 106 S. Ct. 2957, 2962 (1986) 
(citation omitted). Because substantive waivers are nar­
rowly construed by the courts, no awards of interest will 
be made against the United States unless the statute giv­
ing rise to the claim expressly provides for interest as an 
incident of suit or as a normal element of damages.

The “ no interest rnle”  is inapplicable, however, in 
states waiver cases where the defendant, as a “ sue and be 
sue agency, does not enjoy “ sovereign status” . What­
ever causes of action, elements of damages, incidents of 
suit or process are available to a litigant against a private 
commercial enterprise would also be available against a 

sue and be sued”  agency which Congress intended to 
func ion as a private commercial enterprise, unless the 
charter of the agency expressly limited the broad waiver 
o immunity. Usually, judgments against “ sue and be 
sued ’ agencies reach the agency’s own funds and not the 
general treasury of the United States.



If the Court permitted prejudgment interest awards 
against the Postal Service, it would not be subjecting the 
U. S. Treasury to direct or even indirect charges, for the 
Postal Service has control of its own revolving fund, 
separate and apart from the general revenues of the 
United States Treasury. In addition, Congress expressly 
stated in Section 409(e) that “ [a] judgment against the 
government of the United States arising out of activities 
of the Postal Service shall be paid by the Postal Service 
out of any funds available to the Postal Service ”  39
U.S.C. § 409(e)' (1982). Clearly then, the public treasury 
will not be put at risk if this Court permits an award of 
interest against the Postal Service. Congress intended 
that the Postal Service pay its own liabilities out of its 
own funds. If the purpose of the “ no interest rule”  is 
to protect the United States treasury, then it is sense, 
less to apply the rule to the free enterprise-like Postal 
Service, because the general funds in the United States 
Treasury are already shielded by Section 409(e).

Furthermore, neither of the three exceptions to the 
liberal construction rule applies to the awarding of pre- 
judgment interest. As has already been shown, by per­
mitting awards of prejudgment interest against the Postal 
Service, the Court will be furthering Congress’ intent to 
shake up the post office department with the efficiencies 
of private enterprise. Monetary interest awards against 
the Postal Service will not prevent or delay the delivery 
of the mail. A quick perusal of the Yellow Pages will 
confirm that delivery of the mail is no longer purely 
a governmental function. The Postal Service hotly com­
petes with other carriers for over-night mail delivery, 
package delivery, and local courier services.

35

Acknowledging that the public service raison d'etre 
imposes certain limitations on business operations of the 
Postal Service, the court in Milner v. Bolger examined 
the question of whether or not an award of prejudgment 
interest would impede its public-service function and con­
cluded that it would not. “ The award of interest on 
judgments will m no way impair the ability of the Postal 
Service to ‘ bind the Nation together . . . ’ ”  Milner v 
Bolger, 546 F.Supp. 375, 380 (E.D. Cal. 1982).

The Supreme Court in Franchise Tax Board, unani­
mously decided just two years before Shaw and not re­
ferred to at all by the Court in Shaw, specifically stated 
that “ we must presume that the [Postal] Service’s liability 
is the same as that of any other business.”  104 S. Ct. at 
2554.  ̂ Clearly then this Court has already recognized that 
the Postal Service is a private commercial enterprise for 
purposes of sovereign immunity. Certainly, one cannot 
conclude that,Congress intended to narrowly construe the 
“ sue and be sued”  clause on the basis of the legislative 
history of the Postal Reorganization Act. It is equally 
illogical to use the substantive waiver provisions of Title 
VII applicable to the United States government as a limi­
tation on the status waiver effected by the Postal Re­
organization Act. It strains reason to argue, as the Postal 
Service has, that Title VII is an indication of Congress’ 
intent to narrowly construe the “ sue and be sued”  clause 
m the Postal Service charter. As the court in Nagy v. 
United Stales .Postal Service, 777 F.2d 1190 (11th Cir 
1985), stated.

iTQh7eo P0Stal^ erViCe argues that in deluding it in the 
1972 amendments to Title VII, Congress demon­
strated an intent to construe the “ sue and be sued”



4

clause narrowly, in effect, to repeal partially the gen- 
eral waiver.created by Section 401(1). The difficulty 
with this argument is that the Postal Service has not 
shown this to be the plain purpose of Congress. The 
unequivocal teaching of Burr is that a limitation on 
a general waiver of sovereign immunity will not be 
readdy inferred. We find no plain purpose in the 
1972 amendments to Title VII to limit the general 
waiver of sovereign immunity in Section 401(1).

U . at 1193. Consequently, this case is neither the time nor 
place to create non-competitive, non-market protections for 
the Postal Service.

In short, none of the three exceptions to the liberal 
construction rule applies to this case. Indeed, an award 
of prejudgment interest against the Postal Service fur­
thers Congress’ intent that the Service operate as a 
private enterprise. Vulnerability to prejudgment interest 
encourages a higher level of managerial decision-making. 
The public interest is best served by increased managerial 
elficiency within, the Postal Service. Consequently, an 
award of prejudgment interest simply furthers the pur­
poses of the Reorganization Act and imposes no burden 
at all upon the public treasury.

4 *

36

----------------o—----------- -

CONCLUSION

The reasoning of the court era banc below is errone­
ous in that it does not defer to the well-settled rule that 
status waivers of immunity must be liberally construed. 
Federal courts have consistently interpreted the scope of 
“ sue and lie sued”  clauses to allow awards of interest.

37

This is particularly true for agencies such as the Postal 
Service which Congress clearly intended to function as 
a private commercial enterprise.

Allowing awards of interest against the Postal Ser­
vice will encourage early settlement of meritorious claims 
and more cost-eflective managerial decision-making. Cost- 
effective management was a primary goal of Congress 
in enacting the Postal Reorganization Act. Furthermore 
awards of interest would not deplete the public treasury 
because the Postal Service, under the Reorganization Act 
must pay its own liabilities. Therefore, the purpose of 
the “ no-interest rule,”  which is to protect the public fisc, 
would not be served by a denial of interest in this case! 
To the contrary, Congress’ intentions would best be served 
by allowing the recovery of interest to Theodore Loeffler 
an employee of the Postal Service, who prevailed on his 
Title VII claim.

Accordingly, for all the above reasons, Petitioner 
prays this Honorable Court to reverse the decision of 
the Court of Appeals and to remand this case to the trial 
court for an award of prejudgment interest in an amount 
to be determined by the trial court, in its discretion.29

I o t8; d e, as.toL thLe amount of interest to be awarded 
the trial court might be instructed to employ the method­
ology suggested by the court in Richardson v. Restaurant
t b f ? i| g v n Sn ’' 52l  F‘ Supp- 690 (N.D. Cal. 1981) "n that Title VII case, the court stated that "interest on anv
award in this case shall be calculated from the end of eac^
§4% ,* / f S a!ter' ° n the amou" ‘ then due and owing at 90 /o of the average prime rate for the year in which the 
calendar quarter occurs." Id. at 698.