author: Justice Marshall Justice O’Connor,

text:
    MENNONITE BOARD OF MISSIONS v. ADAMS
    No. 82-11.
    Argued March 30, 1983
    Decided June 22, 1983

      Marshall, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, White, Blackmun, and Stevens, JJ., joined. O’Connor, J., filed a dissenting opinion, in which Powell and Rehn-QUIST, JJ., joined, post, p. 800.

      William J. Cohen argued the cause for appellant. With him on the brief was C. Whitney Slabaugh.

      Robert W. Miller argued the cause and filed a brief for appellee.
   Justice Marshall

delivered the opinion of the Court.

This appeal raises the question whether notice by publication and posting provides a mortgagee of real property with adequate notice of a proceeding to sell the mortgaged property for nonpayment of taxes.

I — I

To secure an obligation to pay $14,000, Alfred Jean Moore executed a mortgage in favor of appellant Mennonite Board of Missions (MBM) on property in Elkhart, Ind., that Moore had purchased from MBM. The mortgage was recorded in the Elkhart County Recorder’s Office on March 1, 1973. Under the terms of the agreement, Moore was responsible for paying all of the property taxes. Without MBM’s knowledge, however, she failed to pay taxes on the property.

Indiana law provides for the annual sale of real property on which payments of property taxes have been delinquent for 15 months or longer. Ind. Code §6-1.1-24-1 et seq. (1982). Prior to the sale, the county auditor must post notice in the county courthouse and publish notice once each week for three consecutive weeks. §6-1.1-24-3. The owner of the property is entitled to notice by certified mail to his last known address. §6-1.1-24-4. Until 1980, however, Indiana law did not provide for notice by mail or personal service to mortgagees of property that was to be sold for nonpayment of taxes.

After the required notice is provided, the county treasurer holds a public auction at which the real property is sold to the highest bidder. § 6-1.1-24-5. The purchaser acquires a certificate of sale which constitutes a lien against the real property for the entire amount paid. §6-1.1-24-9. This lien is superior to all other liens against the property which existed at the time the certificate was issued. Ibid.

The tax sale is followed by a 2-year redemption period during which the “owner, occupant, lienholder, or other person who has an interest in” the property may redeem the property. §6-1.1-25-1. To redeem the property an individual must pay the county treasurer a sum sufficient to cover the purchase price of the property at the tax sale and the amount of taxes and special assessments paid by the purchaser following the sale, plus an additional percentage specified in the statute. §6-1.1-25-2. The county in turn remits the payment to the purchaser of the property at the tax sale. §6-1.1-25-3.

If no one redeems the property during the statutory redemption period, the purchaser may apply to the county auditor for a deed to the property. Before executing and delivering the deed, the county auditor must notify the former owner that he is still entitled to redeem the property. §6-1.1-25-6. No notice to the mortgagee is required. If the property is not redeemed within 30 days, the county auditor may then execute and deliver a deed for the property to the purchaser, §6-1.1-25-4, who thereby acquires “an estate in fee simple absolute, free and clear of all liens and encumbrances . ” § 6-1. l-25-4(d).

After obtaining a deed, the purchaser may initiate an action to quiet his title to the property. § 6-1.1-25-14. The previous owner, lienholders, and others who claim to have an interest in the property may no longer redeem the property. They may defeat the title conveyed by the tax deed only by proving, inter alia, that the property had not been subject to, or assessed for, the taxes for which it was sold, that the taxes had been paid before the sale, or that the property was properly redeemed before the deed was executed. §6-1.1-25-16.

In 1977, Elkhart County initiated proceedings to sell Moore’s property for nonpayment of taxes. The county provided notice as required under the statute: it posted and published an announcement of the tax sale and mailed notice to Moore by certified mail. MBM was not informed of the pending tax sale either by the County Auditor or by Moore. The property was sold for $1,167.75 to appellee Richard Adams on August 8, 1977. Neither Moore nor MBM appeared at the sale or took steps thereafter to redeem the property. Following the sale of her property, Moore continued to make payments each month to MBM, and as a result MBM did not realize that the property had been sold. On August 16,1979, MBM first learned of the tax sale. By then the redemption period had run and Moore still owed appellant $8,237.19.

In November 1979, Adams filed a suit in state court seeking to quiet title to the property. In opposition to Adams’ motion for summary judgment, MBM contended that it had not received constitutionally adequate notice of the pending tax sale and of the opportunity to redeem the property following the tax sale. The trial court upheld the Indiana tax sale statute against this constitutional challenge. The Indiana Court of Appeals affirmed. 427 N. E. 2d 686 (1981). We noted probable jurisdiction, 459 U. S. 908 (1982), and we now reverse.

II

In Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 314 (1950), this Court recognized that prior to an action which will affect an interest in life, liberty, or property protected by the Due Process Clause of the Fourteenth Amendment, a State must provide “notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Invoking this “elementary and fundamental requirement of due process,” ibid., the Court held that published notice of an action to settle the accounts of a common trust fund was not sufficient to inform beneficiaries of the trust whose names and addresses were known. The Court explained that notice by publication was not reasonably calculated to provide actual notice of the pending proceeding and was therefore inadequate to inform those who could be notified by more effective means such as personal service or mailed notice:

“Chance alone brings to the attention of even a local resident an advertisement in small type inserted in the back pages of a newspaper, and if he makes his home outside the area of the newspaper’s normal circulation the odds that the information will never reach him are large indeed. The chance of actual notice is further reduced when, as here, the notice required does not even name those whose attention it is supposed to attract, and does not inform acquaintances who might call it to attention. In weighing its sufficiency on the basis of equivalence with actual notice, we are unable to regard this as more than a feint.” Id., at 315.

In subsequent cases, this Court has adhered unwaveringly to the principle announced in Mullane. In Walker v. City of Hutchinson, 352 U. S. 112 (1956), for example, the Court held that notice of condemnation proceedings published in a local newspaper was an inadequate means of informing a landowner whose name was known to the city and was on the official records. Similarly, in Schroeder v. New York City, 371 U. S. 208 (1962), the Court concluded that publication in a newspaper and posted notices were inadequate to apprise a property owner of condemnation proceedings when his name and address were readily ascertainable from both deed records and tax rolls. Most recently, in Greene v. Lindsey, 456 U. S. 444 (1982), we held that posting a summons on the door of a tenant's apartment was an inadequate means of providing notice of forcible entry and detainer actions. See also Memphis Light, Gas & Water Div. v. Craft, 436 U. S. 1, 13-15 (1978); Eisen v. Carlisle & Jacquelin, 417 U. S. 156, 174-175 (1974); Bank of Marin v. England, 385 U. S. 99, 102 (1966); Covey v. Town of Somers, 351 U. S. 141, 146-147 (1956); New York City v. New York, N. H. & H. R. Co., 344 U. S. 293, 296-297 (1953).

This case is controlled by the analysis in Mullane. To begin with, a mortgagee possesses a substantial property interest that is significantly affected by a tax sale. Under Indiana law, a mortgagee acquires a lien on the owner’s property which may be conveyed together with the mortgag- or’s personal obligation to repay the debt secured by the mortgage. Ind. Code §32-8-11-7 (1982). A mortgagee’s security interest generally has priority over subsequent claims or liens attaching to the property, and a purchase-money mortgage takes precedence over virtually all other claims or liens including those which antedate the execution of the mortgage. § 32-8-11-4. The tax sale immediately and drastically diminishes the value of this security interest by granting the tax-sale purchaser a lien with priority over that of all other creditors. Ultimately, the tax sale may result in the complete nullification of the mortgagee’s interest, since the purchaser acquires title free of all liens and other encumbrances at the conclusion of the redemption period.

Since a mortgagee clearly has a legally protected property interest, he is entitled to notice reasonably calculated to apprise him of a pending tax sale. Cf. Wiswall v. Sampson, 14 How. 52, 67 (1853). When the mortgagee is identified in a mortgage that is publicly recorded, constructive notice by publication must be supplemented by notice mailed to the mortgagee’s last known available address, or by personal service. But unless the mortgagee is not reasonably identifiable, constructive notice alone does not satisfy the mandate of Mullane,

Neither notice by publication and posting, nor mailed notice to the property owner, are means “such as one desirous of actually informing the [mortgagee] might reasonably adopt to accomplish it.” Mullane, 339 U. S., at 315. Because they are designed primarily to attract prospective purchasers to the tax sale, publication and posting are unlikely to reach those who, although they have an interest in the property, do not make special efforts to keep abreast of such notices. Walker v. City of Hutchinson, supra, at 116; New York City v. New York, N. H. & H. R. Co., supra, at 296; Mullane, supra, at 315. Notice to the property owner, who is not in privity with his creditor and who has failed to take steps necessary to preserve his own property interest, also cannot be expected to lead to actual notice to the mortgagee. Cf. Nelson v. New York City, 352 U. S. 103, 107-109 (1956). The county’s use of these less reliable forms of notice is not reasonable where, as here, “an inexpensive and efficient mechanism such as mail service is available.” Greene v. Lindsey, supra, at 455.

Personal service or mailed notice is required even though sophisticated creditors have means at their disposal to discover whether property taxes have not been paid and whether tax-sale proceedings are therefore likely to be initiated. In the first place, a mortgage need not involve a complex commercial transaction among knowledgeable parties, and it may well be the least sophisticated creditor whose security interest is threatened by a tax sale. More importantly, a party’s ability to take steps to safeguard its interests does not relieve the State of its constitutional obligation. It is true that particularly extensive efforts to provide notice may often be required when the State is aware of a party’s inexperience or incompetence. See, e. g., Memphis Light, Gas & Water Div. v. Craft, supra, at 13-15; Covey v. Town of Somers, supra. But it does not follow that the State may forgo even the relatively modest administrative burden of providing notice by mail to parties who are particularly resourceful. Cf. New York City v. New York, N. H. & H. R. Co., 344 U. S., at 297. Notice by mail or other means as certain to ensure actual notice is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interests of any party, whether unlettered or well versed in commercial practice, if its name and address are reasonably ascertainable. Furthermore, a mortgagee’s knowledge of delinquency in the payment of taxes is not equivalent to notice that a tax sale is pending. The latter “was the information which the [county] was constitutionally obliged ... to give personally to the appellant — an obligation which the mailing of a single letter would have discharged.” Schroeder v. New York City, 371 U. S., at 214.

We therefore conclude that the manner of notice provided to appellant did not meet the requirements of the Due Process Clause of the Fourteenth Amendment. Accordingly, the judgment of the Indiana Court of Appeals is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion.

It is so ordered.

Justice O’Connor,

with whom Justice Powell and Justice Rehnquist join,

dissenting.

Today, the Court departs significantly from its prior decisions and holds that before the State conducts any proceeding that will affect the legally protected property interests of any party, the State must provide notice to that party by means certain to ensure actual notice as long as the party’s identity and location are “reasonably ascertainable.” Ante, at 800. Applying this novel and unjustified principle to the present case, the Court decides that the mortgagee involved deserved more than the notice by publication and posting that were provided. I dissent because the Court’s approach is unwarranted both as a general rule and as the rule of this case.

In Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 314 (1950), the Court established that “[a]n elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” We emphasized that notice is constitutionally adequate when “the practicalities and peculiarities of the case . . . are reasonably met,” id., at 314-315. See also Walker v. City of Hutchinson, 352 U. S. 112, 115 (1956); Schroeder v. New York City, 371 U. S. 208, 211-212 (1962); Greene v. Lindsey, 456 U. S. 444, 449-450 (1982). The key focus is the “reasonableness” of the means chosen by the State. Mullane, 339 U. S., at 315. Whether a particular method of notice is reasonable depends on the outcome of the balance between the “interest of the State” and “the individual interest sought to be protected by the Fourteenth Amendment.” Id., at 314. Of course, “[i]t is not our responsibility to prescribe the form of service that the [State] should adopt.” Greene, supra, at 455, n. 9. It is the primary responsibility of the State to strike this balance, and we will upset this process only when the State strikes the balance in an irrational manner.

From Mullane on, the Court has adamantly refused to commit “itself to any formula achieving a balance between these interests in a particular proceeding or determining when constructive notice may be utilized or what test it must meet.” 339 U. S., at 314. Indeed, we have recognized “the impossibility of setting up a rigid formula as to the kind of notice that must be given; notice required will vary with circumstances and conditions.” Walker, supra, at 115 (emphasis added). Our approach in these cases has always reflected the general principle that “[t]he very nature of due process negates any concept of inflexible procedures universally applicable to every imaginable situation.” Cafeteria & Restaurant Workers v. McElroy, 367 U. S. 886, 895 (1961). See also Mathews v. Eldridge, 424 U. S. 319, 334-335 (1976).

A

Although the Court purports to apply these settled principles in this case, its decision today is squarely at odds with the balancing approach that we have developed. The Court now holds that whenever a party has a legally protected property interest, “[n]otice by mail or other means as certain to ensure actual notice is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interests ... if [the party’s] name and address are reasonably ascertainable.” Ante, at 800. Without knowing what state and individual interests will be at stake in future cases, the Court espouses a general principle ostensibly applicable whenever any legally protected property interest may be adversely affected. This is a flat rejection of the view that no “formula” can be devised that adequately evaluates the constitutionality of a procedure created by a State to provide notice in a certain class of cases. Despite the fact that Mullane itself accepted that constructive notice satisfied the dictates of due process in certain circumstances, the Court, citing Mullane, now holds that constructive notice can never suffice whenever there is a legally protected property interest at stake.

In seeking to justify this broad rule, the Court holds that although a party’s inability to safeguard its interests may result in imposing greater notice burdens on the State, the fact that a party may be more able “to safeguard its interests does not relieve the State of its constitutional obligation.” Ante, at 799. Apart from ignoring the fact that it is the totality of circumstances that determines the sufficiency of notice, the Court also neglects to consider that the constitutional obligation imposed upon the State may itself be defined by the party’s ability to protect its interest. As recently as last Term, the Court held that the focus of the due process inquiry has always been the effect of a notice procedure on “a particular class of cases.” Greene, supra, at 451 (emphasis added). In fashioning a broad rule for “the least sophisticated creditor,” ante, at 799, the Court ignores the well-settled principle that “procedural due process rules are shaped by the risk of error inherent in the truthfinding process as applied to the generality of cases, not the rare exceptions.” Mathews v. Eldridge, supra, at 344; see also Califano v. Yamasaki, 442 U. S. 682, 696 (1979). If the members of a particular class generally possess the ability to safeguard their interests, then this fact must be taken into account when we consider the “totality of circumstances,” as required by Mullane. Indeed, the criterion established by Mullane “ ‘is not the possibility of conceivable injury but the just and reasonable character of the requirements, having reference to the subject with which the statute deals.’” 339 U. S., at 315 (quoting American Land Co. v. Zeiss, 219 U. S. 47, 67 (1911)).

The Court also suggests that its broad rule has really been the law ever since Mullane. See ante, at 796-797, n. 3. The Court reasons that before Mullane, the characterization of proceedings as in personam or in rem was relevant to determining whether the notice given was constitutionally sufficient, and that once Mullane held that the “power of the State to resort to constructive service” no longer depended upon the “historic antithesis” of in rem and in personam proceedings, 339 U. S., at 312-313, constructive notice became insufficient as to all proceedings.

The plain language of Mullane is clear that the Court expressly refused to reject constructive notice as per se insufficient. See id., at 312-314. Moreover, the Court errs in thinking that the only justification for constructive notice is the distinction between types of proceedings. See ante, at 796-797, n. 3. The historical justification for constructive notice was that those with an interest in property were under an obligation to act reasonably in keeping themselves informed of proceedings that affected that property. See, e. g., North Laramie Land Co. v. Hoffman, 268 U. S. 276, 283 (1925); Ballard v. Hunter, 204 U. S. 241, 262 (1907). As discussed in Part II of this dissent, Mullane expressly acknowledged, and did not reject, the continued vitality of the notion that property owners had some burden to protect their property. See 339 U. S., at 316.

B

The Court also holds that the condition for receiving notice under its new approach is that the name and address of the party must be “reasonably ascertainable.” In applying this requirement to the mortgagee in this case, the Court holds that the State must exercise “reasonably diligent efforts” in determining the address of the mortgagee, ante, at 798, n. 4, and suggests that the State is required to make some effort “to discover the identity and whereabouts of a mortgagee whose identity is not in the public record.” Ante, at 799, n. 4. Again, the Court departs from our prior cases. In all of the cases relied on by the Court in its analysis, the State either actually knew the identity or incapacity of the party seeking notice, or that identity was “very easily ascertainable.” Schroeder, 371 U. S., at 212-213. See also Mullane, 339 U. S., at 318; Covey v. Town of Somers, 351 U. S. 141, 146 (1956); Walker, 352 U. S., at 116; Eisen v. Carlisle & Jacquelin, 417 U. S. 156, 175 (1974). Under the Court’s decision today, it is not clear how far the State must go in providing for reasonable efforts to ascertain the name and address of an affected party. Indeed, despite the fact that the recorded mortgage failed to include the appellant’s address, see ante, at 798-799, n. 4, the Court concludes that its whereabouts were “reasonably identifiable.” Ante, at 798. This uncertainty becomes particularly ominous in the light of the fact that the duty to ascertain identity and location, and to notify by mail or other similar means, exists whenever any legally protected interest is implicated.

HH h-1

Once the Court effectively rejects Mullane and its progeny by accepting a per se rule against constructive notice, it applies its rule and holds that the mortgagee in this case must receive personal service or mailed notice because it has a legally protected interest at stake, and because the mortgage was publicly recorded. See ante, at 798. If the Court had observed its prior decisions and engaged in the balancing required by Múlleme, it would have reached the opposite result.

It cannot be doubted that the State has a vital interest in the collection of its tax revenues in whatever reasonable manner that it chooses: “In authorizing the proceedings to enforce the payment of the taxes upon lands sold to a purchaser at tax sale, the State is in exercise of its sovereign power to raise revenue essential to carry on the affairs of state and the due administration of the laws. . . . ‘The process of taxation does not require the same kind of notice as is required in a suit at law, or even in proceedings for taking private property under the power of eminent domain.’” Leigh v. Green, 193 U. S. 79, 89 (1904) (quoting Bell’s Gap R. Co. v. Pennsylvania, 134 U. S. 232, 239 (1890)). The State has decided to accommodate its vital interest in this respect through the sale of real property on which payments of property taxes have been delinquent for a certain period of time.

The State has an equally strong interest in avoiding the burden imposed by the requirement that it must exercise “reasonable” efforts to ascertain the identity and location of any party with a legally protected interest. In the instant case, that burden is not limited to mailing notice. Rather, the State must have someone check the records and ascertain with respect to each delinquent taxpayer whether there is a mortgagee, perhaps whether the mortgage has been paid off, and whether there is a dependable address.

Against these vital interests of the State, we must weigh the interest possessed by the relevant class — in this case, mortgagees. Contrary to the Court’s approach today, this interest may not be evaluated simply by reference to the fact that we have frequently found constructive notice to be inadequate since Mullane. Rather, such interest “must be judged in the light of its practical application to the affairs of men as they are ordinarily conducted.” North Laramie Land Co., 268 U. S., at 283.

Chief Justice Marshall wrote long ago that “it is the part of common prudence for all those who have any interest in [property], to guard that interest by persons who are in a situation to protect it.” The Mary, 9 Cranch 126, 144 (1815). We have never rejected this principle, and, indeed, we held in Mullane that “[a] state may indulge” the assumption that a property owner “usually arranges means to learn of any direct attack upon his possessory or proprietary rights.” 389 U. S., at 316. When we have found constructive notice to be inadequate, it has always been where an owner of property is, for all purposes, unable to protect his interest because there is no practical way for him to learn of state action that threatens to affect his property interest. In each case, the adverse action was one that was completely unexpected by the owner, and the owner would become aware of the action only by the fortuitous occasion of reading “an advertisement in small type inserted in the back pages of a newspaper [that may] not even name those whose attention it is supposed to attract, and does not inform acquaintances who might call it to attention.” Mullane, supra, at 315. In each case, the individuals had no reason to expect that their property interests were being affected.

This is not the case as far as tax sales and mortgagees are concerned. Unlike condemnation or an unexpected accounting, the assessment of taxes occurs with regularity and predictability, and the state action in this case cannot reasonably be characterized as unexpected in any sense. Unlike the parties in our other cases, the Mennonite Board had a regular event, the assessment of taxes, upon which to focus, in its effort to protect its interest. Further, approximately 95% of the mortgage debt outstanding in the United States is held by private institutional lenders and federally supported agencies. U. S. Dept, of Commerce, Bureau of the Census, Statistical Abstract of the United States: 1982-1983, p. 511 (103d ed.). It is highly unlikely, if likely at all, that a significant number of mortgagees are unaware of the consequences that ensue when their mortgagors fail to pay taxes assessed on the mortgaged property. Indeed, in this case, the Board itself required that Moore pay all property taxes.

There is no doubt that the Board could have safeguarded its interest with a minimum amount of effort. The county auctions of property commence by statute on the second Monday of each year. Ind. Code §6-1.1-24-2(5) (1982). The county auditor is required to post notice in the county courthouse at least three weeks before the date of sale. § 6-1.1-24-3(a). The auditor is also required to publish notice in two different newspapers once each week for three weeks before the sale. §§6-1.1-24-3(a), 6-1.1-22-4(b). The Board could have supplemented the protection offered by the State with the additional measures suggested by the court below: The Board could have required that Moore provide it with copies of paid tax assessments, or could have required that Moore deposit the tax moneys in an escrow account, or could have itself checked the public records to determine whether the tax assessment had been paid. 427 N. E. 2d 686, 690, n. 9 (1981).

When a party is unreasonable in failing to protect its interest despite its ability to do so, due process does not require that the State save the party from its own lack of care. The balance required by Mullane clearly weighs in favor of finding that the Indiana statutes satisfied the requirements of due process. Accordingly, I dissent.

       Because a mortgagee has no title to the mortgaged property under Indiana law, the mortgagee is not considered an “owner” for purposes of § 6-1.1-24-4. First Savings & Loan Assn. of Central Indiana v. Furnish, 174 Ind. App. 265, 272, n. 14, 367 N. E. 2d 596, 600, n. 14 (1977).

       Indiana Code §6-1.1-24-4.2 (1982), added in 1980, provides for notice by certified mail to any mortgagee of real property which is subject to tax sale proceedings, if the mortgagee has annually requested such notice and has agreed to pay a fee, not to exceed $10, to cover the cost of sending notice. Because the events in question in this case occurred before the 1980 amendment, the constitutionality of the amendment is not before us.

       The decision in Mullane rejected one of the premises underlying this Court’s previous decisions concerning the requirements of notice in judicial proceedings: that due process rights may vary depending on whether actions are in rem or in personam. 339 U. S., at 312. See Shaffer v. Heitner, 433 U. S. 186, 206 (1977). Traditionally, when a state court based its jurisdiction upon its authority over the defendant’s person, personal service was considered essential for the court to bind individuals who did not submit to its jurisdiction. See, e. g., Hamilton v. Brown, 161 U. S. 256, 275 (1896); Arndt v. Griggs, 134 U. S. 316, 320 (1890); Pennoyer v. Neff, 95 U. S. 714, 726, 733-734 (1878) (“[D]ue process of law would require appearance or personal service before the defendant could be personally bound by any judgment rendered”). In Hess v. Pawloski, 274 U. S. 352 (1927), the Court recognized for the first time that service by registered mail, in place of personal service, may satisfy the requirements of due process. Constructive notice was never deemed sufficient to bind an individual in an action in personam.

      In contrast, in in rem or quasi in rem proceedings in which jurisdiction was based on the court’s power over property within its territory, see generally Shaffer v. Heitner, supra, at 196-205, constructive notice to nonresidents was traditionally understood to satisfy the requirements of due process. In order to settle questions of title to property within its territory, a state court was generally required to proceed by an in rem action since the court could not otherwise bind nonresidents. At one time constructive service was considered the only means of notifying nonresidents since it was believed that “[pjrocess from the tribunals of one State cannot run into another State.” Pennoyer v. Neff, supra, at 727. See Ballard v. Hunter, 204 U. S. 241, 255 (1907). As a result, the nonresident acquired the duty “to take measures that in some way he shall be represented when his property is called into requisition.” Id., at 262. If he “fail[ed] to get notice by the ordinary publications which have been usually required in such cases, it [was] his misfortune.” Ibid.

      Rarely was a corresponding duty imposed on interested parties who resided within the State and whose identities were reasonably ascertainable. Even in actions in rem, such individuals were generally provided personal service. See, e. g., Arndt v. Griggs, supra, at 326-327. Where the identity of interested residents could not be ascertained after a reasonably diligent inquiry, however, their interests in property could be affected by a proceeding in rem as long as constructive notice was provided. See Hamilton v. Brown, supra, at 275; American Land Co. v. Zeiss, 219 U. S. 47, 61-62, 65-66 (1911).
      Beginning with Mullane, this Court has recognized, contrary to the earlier line of cases, that “an adverse judgment in rem directly affects the property owner by divesting him of his rights in the property before the court.” Shaffer v. Heitner, supra, at 206. In rejecting the traditional justification for distinguishing between residents and nonresidents and between in rem and in personam actions, the Court has not left all interested claimants to the vagaries of indirect notice. Our cases have required the State to make efforts to provide actual notice to all interested parties comparable to the efforts that were previously required only in in personam actions. See infra, this page.

         In this case, the mortgage on file with the County Recorder identified the mortgagee only as “MENNONITE BOARD OF MISSIONS a corporation, of Wayne County, in the State of Ohio.” We assume that the mortgagee’s address could have been ascertained by reasonably diligent efforts. See Mullane v. Central Hanover Bank & Trust Co., 339 U. S., at 317. Simply mailing a letter to “Mennonite Board of Missions, Wayne County, Ohio,” quite likely would have provided actual notice, given “the well-known skill of postal officials and employés in making proper delivery of letters defectively addressed.” Grannis v. Ordean, 234 U. S. 385, 397-398 (1914). We do not suggest, however, that a governmental body is required to undertake extraordinary efforts to discover the identity and whereabouts of a mortgagee whose identity is not in the public record.

       Indeed, notice by mail to the mortgagee may ultimately relieve the county of a more substantial administrative burden if the mortgagee arranges for payment of the delinquent taxes prior to the tax sale.

       This appeal also presents the question whether, before the County Auditor executes and delivers a deed to the tax-sale purchaser, the mortgagee is constitutionally entitled to notice of its right to redeem the property. Cf. Griffin v. Griffin, 327 U. S. 220, 229 (1946). Because we conclude that the failure to give adequate notice of the tax-sale proceeding deprived appellant of due process of law, we need not reach this question.

       In Mullane v. Central Hanover Bank & Trust Co., 339 U. S., at 314, we held that “[p]ersonal service has not in all circumstances been regarded as indispensable to the process due to residents, and it has more often been held unnecessary as to nonresidents.”

       The Court is simply incorrect in asserting that before Mullane, constructive notice was rarely deemed sufficient even as to in rem proceedings when residents of the State were involved, ante, at 796-797, n. 3. See, e. g., Longyear v. Toolan, 209 U.S. 414, 417-418 (1908). See also Note, The Constitutionality of Notice by Publication in Tax Sale Proceedings, 84 Yale L. J. 1505, 1507 (1975) (“This rule [permitting constructive notice] was . . . extended to all in rem proceedings, whether involving property owned by nonresidents or residents”).

       In Mullane, the Court contrasted those parties whose identity and whereabouts are known or “at hand” with those “whose interests or whereabouts could not with due diligence be ascertained.” 339 U. S., at 318, 317. This language must be read in the light of the facts of Mullane, in which the identity and location of certain beneficiaries were actually known. In addition, the Court in Mullane expressly rejected the view that a search “under ordinary standards of diligence” was required in that case. Id.. at 317.

       The Court suggests that the notice that it requires “may ultimately relieve the county of a more substantial administrative burden if the mortgagee arranges for payment of the delinquent taxes prior to the tax sale.” Ante, at 800, n. 6. The Court neglects the fact that the State is a better judge of how it wants to settle its tax debts than is this Court.

       This is not to say that the rule espoused must cover all conceivable mortgagees in all conceivable circumstances. The flexibility of due process is sufficient to accommodate those atypical members of the class of mortgagees.

       The Court holds that “a mortgage need not involve a complex commercial transaction among knowledgeable parties . . . .” Ante, at 799. This is certainly true; however, that does not change the fact that even if the Board is not a professional moneylender, it voluntarily entered into a fairly sophisticated transaction with Moore. As the court below observed: “The State cannot reasonably be expected to assume the risk of its citizens’ business ventures.” 427 N. E. 2d 686, 690, n. 9 (1981).


source: Caselaw Access Project

author: Justice Blackmun

license: Public Domain

text:
    NATIONAL ASSOCIATION OF GREETING CARD PUBLISHERS v. UNITED STATES POSTAL SERVICE et al.
    No. 81-1304.
    Argued December 1, 1982
    Decided June 22, 1983

      Blackmun, J., delivered the opinion for a unanimous Court.

      Matthew S. Perlman argued the cause for petitioner in No. 81-1304. With him on the briefs was Richard J. Webber. Bernard G. Segal argued the cause for petitioner in No. 81-1381. With him on the briefs were Robert L. Kendall, Jr., James D. Crawford, and John E. McKeever.

      John H. Garvey argued the cause for respondents in both cases. With him on the brief for the United States Postal Service were Solicitor General Lee and Deputy Solicitor General Getter. Robert A. Saltzstein, Stephen M. Feldman, and Joseph J. Saunders filed a brief for respondent American Business Press. Dana T. Ackerly and Charles Lister filed briefs for respondent Direct Mail/Marketing Association, Inc. Raymond N. Shibley, Michael F. McBride, and W. Gilbert Faulk, Jr., filed a brief for respondent Dow Jones & Co., Inc. David C. Todd and Timothy J. May filed a brief for respondents Mail Order Association of America et al. David Minton filed a brief for respondent Magazine Publishers Association, Inc. Alan R. Swendiman and William J. Olson filed a brief for respondents March of Dimes Birth Defects Foundation et al. Toni K. Allen, Robert M. Lichtman, and John M. Burzio filed a brief for respondents Newsweek, Inc., et al. IanD. Volner, Richard M. Schmidt, Jr., and Mark L. Pelesh filed a brief for respondents Recording Industry Association of America et al.

       Together with No. 81-1381, United Parcel Service of America, Inc. v. United States Postal Service et al., also on certiorari to the same court.

       W. Terry Maguire, Pamela Riley, and Arthur B. Sackler filed a brief for the American Newspaper Publishers Association et al. as amici curiae urging affirmance.

   Justice Blackmun

delivered the opinion of the Court.

These cases arise out of the most recent general postal ratemaking proceeding, the fifth under the Postal Reorganization Act. At issue is the extent to which the Act requires the responsible federal agencies to base postal rates on cost-of-service principles.

I — I

A

When, in 1970, Congress enacted the Postal Reorganization Act (Act), 39 U. S. C. § 101 et seq., it divested itself of the control it theretofore had exercised over the setting of postal rates and fees. The Act abolished the Post Office Department, which since 1789 had administered the Nation’s mails. See Act of Sept. 22, 1789, ch. 16, 1 Stat. 70. In its place, the Act established the United States Postal Service as an independent agency under the direction of an 11-member Board of Governors. 39 U. S. C. §§201, 202. The Act also established a five-member Postal Rate Commission (Rate Commission) as an agency independent of the Postal Service. § 3601.

Basic to the Act is the principle that, to the extent “practicable,” the Postal Service’s total revenue must equal its costs. § 3621. Guided by this principle, the Board of Governors, when it deems it in the public interest, may request the Rate Commission to recommend a new rate schedule. § 3622. After receiving the request, the Rate Commission holds hearings, § 3624(a), and formulates a schedule, §3624 (d). Section 3622(b) provides that the Rate Commission shall recommend rates for the classes of mail in accordance with nine factors, the third of which is “the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type.” The Governors may approve the recommended rate schedule, may allow it under protest, may reject it, or, in limited circumstances, may modify it. §3625. The Governors’ decision to order new rates into effect may be appealed to any United States court of appeals. § 3628.

Questions confronting us in these cases are whether the Rate Commission must follow a two-tier or a three-tier process in setting rates, and the extent to which the Rate Commission must base rates on estimates of the costs caused by providing each class of mail service.

B

In its first two ratemaking proceedings under the Act, the Rate Commission determined that § 3622(b) establishes a two-tier approach to allocating the Postal Service’s total revenue requirement. See Postal Rate Commission, Opinion and Recommended Decision, Docket No. R74-1, pp. 4, 91-93 (1975); PRC Op. R71-1, pp. 39-41 (1972). Under this approach, the Rate Commission first must determine the costs caused by (“attributable to”) each class of mail, § 3622(b)(3), and on that basis establish a rate floor for each class. PRC Op. R74-1, pp. 92,93,110. The Rate Commission then must “reasonably assign,” see § 3622(b)(3), the remaining costs to the various classes of mail on the basis of the other factors set forth in § 3622(b). See PRC Op. R74-1, pp. 91-94.

In the first proceeding, the Rate Commission concluded that the Act does not dictate the use of any particular method of identifying the costs caused by each class. PRC Op. R71-1, pp. 42-47. Without committing itself to any theory for the future, it chose to attribute those costs shown to vary with the volume of mail in each class over the “short term” — the period of a single year. Although it considered other methods, it found the short-term approach to be the only feasible one, given the limited data developed by the Postal Service. Id., at 47-62.

In the second proceeding, the Rate Commission again viewed the choice of a costing system as within its discretion. PRC Op. R74-1, pp. 92-93, 127. Although the Postal Service contended that short-term costs should again control attribution, the Rate Commission determined that it could reliably attribute more costs through a long-term variable costing analysis. That method attributes costs by identifying cost variations associated with shifts in mail volume and with shifts in the Postal Service’s capacity to handle mail over periods of time longer than one year. Id., at 111-112, 126-127. The Rate Commission did not go beyond attributing long-run variable costs, because the statute forbids attribution based on guesswork, see id., at 110-111, and because the Rate Commission was unable to find “any other reliable principle of causality on [the] record,” id., at 94. The Rate Commission urged the development of improved data for future proceedings, so that it could identify more causal relationships, and thereby attribute more costs. Id., at 110-111.

C

Reviewing the second proceeding, the United States Court of Appeals for the District of Columbia Circuit rejected the Rate Commission’s approach. National Assn. of Greeting Card Publishers v. USPS, 186 U. S. App. D. C. 331, 569 F. 2d 570 (1976) (NAGCP I), vacated on other grounds, 434 U. S. 884 (1977). The court held that the Act’s principal goals of eliminating price discrimination among classes of mail and curtailing discretion in ratesetting, 186 U. S. App. D. C., at 348-350, 569 F. 2d, at 587-589, require the Rate Commission “to employ cost-of-service principles to the fullest extent possible.” Id. at 354, 569 F. 2d, at 593; see id., at 348, 569 F. 2d, at 587. Therefore, the court stated, the Act mandates not only attribution of variable costs, but also “extended attribution” of costs that, “although not measurably variable,” can reasonably be determined to result from handling each class of mail. Id., at 347, 569 F. 2d, at 586. The court required the Rate Commission to allocate some costs on the basis of “cost accounting principles.” Id., at 344, 569 F. 2d, at 583; see id., at 347, 352, 569 F. 2d, at 586, 591. This involves apportioning costs on the basis of “distribution keys,” such as the weight or cubic volume of mail, notwithstanding the lack of proof that such factors play a causative role. Id., at 344, 352, 569 F. 2d, at 583, 591.

The Court of Appeals, citing the language and purposes of the statute, also required the Rate Commission to follow a three-tier, rather than a two-tier, procedure in setting rates. In the court’s view, the first two tiers — attribution and assignment — are to proceed on a cost-of-service basis. Id., at 347, and n. 59, 353-354, 569 F. 2d, at 586, and n. 59, 592-593. Only those “residual costs” that cannot be attributed or assigned on the basis of reasonable inferences of causation may be distributed, in the third tier, among the classes of mail on the basis of § 3622(b)’s noncost, discretionary factors. Id., at 348, 569 F. 2d, at 587.

Despite its doubts about NAGCP I, PRC Op. R77-1, p. 9 (1978), the Rate Commission attempted to comply in the fourth ratemaking proceeding. It adhered to its view that variability is the key to attribution, because only with “some showing of volume variability over the long run” could it have reasonable confidence that particular costs were the consequence of providing the service. Id., at 84. Because the data on long-run costs had improved, the Rate Commission found that its long-run analysis satisfied NAGCP 7’s requirement of “extended attribution” without resort to mere “inferences of causation.” PRC Op. R77-1, at 10, 85.

Turning to the intermediate assignment tier created by NAGCP 7, the Rate Commission found a group of nonvariable “Service Related Costs” to be reasonably assignable to first-class and certain categories of second-class mail. Service Related Costs were defined as the fixed delivery costs incurred in maintaining the current 6-day-a-week delivery schedule for those classes, rather than a hypothetical 3-day-a-week schedule. See PRC Op. R77-1, at 87-124.

D

The current controversy began on April 21, 1980, when the Postal Service requested from the Rate Commission a fifth increase in postal rates. Following extensive hearings, the Rate Commission recommended continued assignment of Service Related Costs in order to comply with the Court of Appeals’ three-tier approach, see PRC Op. R80-1, pp. 145-156, despite the Postal Service’s rejection of the concept, see Decision of the Governors of the United States Postal Service on Rates of Postage and Fees for Postal Services, March 10,1981, App. to Pet. for Cert. 13b-14b (Decision of the Governors). The Rate Commission also made clear that while it did not consider variability analysis to be the sole statutory basis for attribution, only long-run variability analysis had been shown to be accurate enough to permit attribution. PRC Op. R80-1, pp. 129-131, 140, and n. 2. The Governors, under protest, permitted these rates to go into effect.

On petitions for review, the United States Court of Appeals for the Second Circuit held that Congress had not intended to require the maximum possible use of cost-of-service principles in postal ratesetting. Newsweek, Inc. v. USPS, 663 F. 2d 1186 (1981). The Second Circuit stated that although the Rate Commission is free to use the approach the District of Columbia Circuit had required, the Act permits the use of other approaches as well, including the Rate Commission’s original two-tier approach to ratesetting. Under the Second Circuit’s construction, § 3622(b)(3) requires that the rate floor for each class consist of attributable costs based, at a minimum, on short-term variability; reasonable assignment may proceed on the basis of the other factors set forth in § 3622(b). The court remanded to the agencies for reconsideration.

Because of the inconsistencies in the holdings of the Second and District of Columbia Circuits, we granted certiorari. 456 U. S. 925 (1982).

II

As a threshold matter, it is useful to set forth what is, and what is not, at issue in this litigation. Of the factors set forth in § 3622(b), only subsection (b)(3) is styled a “requirement.” With the approval of both Courts of Appeals, the Rate Commission has concluded that notwithstanding its placement as the third of nine factors, this distinction dictates that “attribution” and “assignment” define the framework for ratesetting. In addition, the Rate Commission takes the view that “causation is both the statutory and the logical basis for attribution.” PRC Op. R74-1, p. 110. The parties do not dispute these premises, and we see no reason to question them.

At issue is the Rate Commission’s consistent position that the Act establishes a two-tier structure for ratesetting, and that the Act does not dictate or exclude the use of any method of attributing costs, but requires that all costs reliably identifiable with a given class, by whatever method, be attributed to that class. An agency’s interpretation of its enabling statute must be upheld unless the interpretation is contrary to the statutory mandate or frustrates Congress’ policy objectives. FEC v. Democratic Senatorial Campaign Committee, 454 U. S. 27, 32 (1981). Although the Postal Reorganization Act divides ratemaking responsibility between two agencies, the legislative history demonstrates “that ratemaking . . . authority [was] vested primarily in [the] Postal Rate Commission.” S. Rep. No. 91-912, p. 4 (1970) (Senate Report); see Time, Inc. v. USPS, 685 F. 2d 760, 771 (CA2 1982); Newsweek, Inc. v. USPS, 663 F. 2d, at 1200-1201; NAGCP III, 197 U. S. App. D. C., at 87, 607 F. 2d, at 401. The structure of the Act supports this view. While the Postal Service has final responsibility for guaranteeing that total revenues equal total costs, the Rate Commission determines the proportion of the revenue that should be raised by each class of mail. In so doing, the Rate Commission applies the factors listed in § 3622(b). Its interpretation of that statute is due deference. See Time, Inc. v. USPS, 685 F. 2d, at 771; United Parcel Service, Inc. v. USPS, 604 F. 2d 1370, 1381 (CA3 1979), cert. denied, 446 U. S. 957 (1980).

Ill

In NAGCP I, the Court of Appeals for the District of Columbia Circuit discerned in the Act an overriding purpose to minimize the Rate Commission’s discretion by maximizing the use of cost-of-service principles. According to the Court of Appeals, the Rate Commission’s failure to use “cost accounting principles” to attribute costs, and its failure to “assign” costs on the basis of extended inferences of causation as a middle ratesetting tier, frustrated these congressional goals. Animating the court’s view was the fact that Congress, in passing the Act, was disturbed about the influence of lobbyists on Congress’ discretionary ratemaking and the resulting discrimination in rates among classes of postal service; in the Act, Congress sought to “get ‘politics out of the Post Office.’” 186 U. S. App. D. C., at 349, 569 F. 2d, at 588 (quoting H. R. Rep. No. 91-1104, p. 6 (1970) (House Report)).

Without doubt, Congress did have these problems in mind, but we agree with the Second Circuit that the District of Columbia Circuit misunderstood Congress’ solution. See 663 F. 2d, at 1198. Congress did not eliminate the rate-setter’s discretion; it simply removed the ratesetting function from the political arena by removing postal funding from the budgetary process, see § 3621 (Postal Service is to be self-supporting), and by removing the Postal Service’s principal officers from the President’s direct control. House Report, at 6, 12, 13, 18-19; Senate Report, at 8. In addition, Congress recognized that the increasing economic, accounting, and engineering complexity of ratemaking issues had caused Members of Congress, “lacking the time, training, and staff support for thorough analysis,” to place too much reliance on lobbyists. House Report, at 18. Consequently, it attempted to remove undue price discrimination and political influence by placing ratesetting in the hands of a Rate Commission, composed of “professional economists, trained rate analysts, and the like,” id., at 5, independent of Postal Service management, id., at 13, and subject only to Congress’ “broad policy guidelines,” id., at 12. Congress sought to ensure that the Postal Service would be managed “in a businesslike way.” Id., at 5; see id., at 11-12. There is no suggestion in the legislative history that Congress viewed the exercise of discretion as an evil in itself. Congress simply wished to substitute the educated and politically insulated discretion of experts for its own.

I — I <

We turn now to the narrower contentions about the meaning of § 3622(b)(3). In determining whether the Rate Commission’s two-tier approach to ratesetting is contrary to the mandate of the Act or frustrates its policies, we begin with the statute’s language. See North Dakota v. United States, 460 U. S. 300, 312 (1983); Dickerson v. New Banner Institute, Inc., 460 U. S. 103, 110 (1983). Once the Rate Commission has allocated all attributable costs, § 3622(b)(3) directs that each class must bear, in addition, “that portion of all other costs . . . reasonably assignable” to it. While the verb “attribute” primarily connotes causation, the verb “assign” connotes distribution on any basis. On its face, therefore, the section suggests one ratemaking tier based on causation, and a second based on other factors. We see no justification for the interposition of an intermediate causation-based assignment tier. The Rate Commission’s two-tier approach is consistent with the statutory language.

Moreover, the legislative history supports the Rate Commission’s approach. The report of the President’s Commission on Postal Organization (Kappel Commission) found that it would be unfair to require the users of one class of service to pay for expenditures demonstrably related to another class. See Kappel Commission, Towards Postal Excellence: The Report of the President’s Commission on Postal Organization 130 (1968) (Kappel Commission Report). But, on the basis of detailed studies of the Post Office, the report concluded that “[a] large segment of postal costs . . . does not result from handling a particular class of mail but is the cost of maintaining the postal system itself.” Id., at 30. The Kappel Commission proposed a two-tier ratemaking process, very similar to the Rate Commission’s approach, to allocate among the classes of mail these two groups of costs.

The House version of § 3622(b)(3) closely followed the Kappel Commission’s proposal, see House Report, at 6, directing the establishment of rates “so that at least those costs demonstrably related to the class of service in question will be borne by each such class and not by other classes of users of postal services or by the mails generally.” H. R. 17070, 91st Cong., 2d Sess., § 1201(c) (1970). Although the House bill did not address the criteria that would govern distribution of the remaining costs among the various classes of mail, there was no suggestion of a second, more attenuated, causation-based tier as required by the District of Columbia Circuit.

The Senate bill, although not expressly calling for a rate floor for each class, required the Rate Commission to consider among other factors “operating costs, the amount of overhead, and other institutional costs of the Postal Service properly assignable to each class of mail.” S. 3842, 91st Cong., 2d Sess., §3704(g)(3) (1970). The Senate bill’s use of the word “assignable,” which the District of Columbia Circuit believed mandated a causation-based “assignment” tier, see NAGCP I, 186 U. S. App. D. C., at 347, n. 59, 569 F. 2d, at 586, n. 59, does not undercut the reasonableness of the Rate Commission’s construction. There is no suggestion either in this language or elsewhere in the legislative history that the Senate envisioned a three-tier approach. In fact, the Senate Report accompanying the bill suggested a two-tier approach, allocating some costs on cost-of-service principles, and allocating other costs through consideration of the overall value of the service provided and other factors. See Senate Report, at 11.

As discussed above, the language of the compromise bill enacted into law is fully consistent with a two-tier structure, and there is no legislative history to the contrary. We conclude that the Rate Commission’s two-tier approach is a reasonable construction of § 3622(b)(3).

V

We now turn to the nature of the first tier, the statutory requirement of attribution.

A

The Court has observed: “Allocation of costs is not a matter for the slide-rule. It involves judgment on a myriad of facts. It has no claim to an exact science.” Colorado Interstate Co. v. FPC, 324 U. S. 581, 589 (1945). Generally, the legislature leaves to the ratesetting agency the choice of methods by which to perform this allocation, see, e. g., American Commercial Lines, Inc. v. Louisville & N. R. Co., 392 U. S. 571, 590-593 (1968); Colorado Interstate Co., 324 U. S., at 589, although if the statute provides a formula, the agency is bound to follow it. Ibid.

We agree with the Rate Commission’s consistent position that Congress did not dictate a specific method for identifying causal relationships between costs and classes of mail, but that the Act “envisions consideration of all appropriate costing approaches.” PRC Op. R71-1, p. 46; see PRC Op. R74-1, pp. 92, 127; PRC Op. R80-1, pp. 129-133. The Rate Commission has held that, regardless of method, the Act requires the establishment of a sufficient causal nexus before costs may be attributed. The Rate Commission has variously described that requirement as demanding a “reliable principle of causality,” PRC Op. R74-1, p. 94, or “reasonable confidence” that costs are the consequence of providing a particular service, PRC Op. 77-1, p. 84, or a “reasoned analysis of cost causation.” PRC Op. R80-1, p. 131. Accordingly, despite the District of Columbia Circuit’s interpretation, the Rate Commission has refused to use general “accounting principles” based on distribution keys without an established causal basis. But the Rate Commission has gone beyond short-term costs in each rate proceeding since the first.

B

Section 3622(b)(3) requires that all “attributable costs” be borne by the responsible class. In determining what costs are “attributable,” the Rate Commission is directed to look to all costs of the Postal Service, both “direct” and “indirect.” In selecting the phrase “attributable costs,” Congress avoided the use of any term of art in law or accounting. In the normal sense of the word, an “attributable” cost is a cost that may be considered to result from providing a particular class of service. On its face, there is no reason to suppose that § 3622(b)(3) denies to the expert ratesetting agency, exercising its reasonable judgment, the authority to decide which methods sufficiently identify the requisite causal connection between particular services and particular costs.

The legislative history supports the Rate Commission’s view that when causal analysis is limited by insufficient data, the statute envisions that the Rate Commission will “press for . . . better data,” rather than “construct an ‘attribution’” based on unsupported inferences of causation. PRC Op. R74-1, pp. 110-111. Before passage of the Act, Congress had set rates based on the Post Office’s ungainly “Cost Ascertainment System,” which allocated — on the basis of “distribution keys” like those advocated by the District of Columbia Circuit — all postal expenses to one or another class of mail. The Kappel Commission determined that this approach was “arbitrary [and] uninformative.” Kappel Commission Report, at 30; see id., at 131. Many costs are institutional, and the inferences of causation supporting the Post Office’s allocation of costs to the different classes were simply unsupported by the data. Id., at 29-31, 132-135. In proposing the two-tier approach, therefore, the Kappel Commission stated that each class of service would recover all costs “demonstrably related” to it in order to avoid the inequity of users of one class subsidizing users of another class; however, the “[r]emaining institutional costs would not be apportioned to the several classes of mail by rigid accounting formulas.” Id., at 61-62.

The House bill tracked these recommendations, see generally House Report, at 6, and adopted a rate floor consisting of “demonstrably related” costs, H. R. 17070, 91st Cong., 2d Sess., § 1201(c) (1970), which it described as “identifiable costs.” House Report, at 10. The Senate bill did not explicitly include a causally based rate floor. See 116 Cong. Rec. 22053 (1970) (remarks of Sen. Fannin). But the Senate plainly rejected the notion of binding ratesetters to “accounting principles” akin to those used in the Cost Ascertainment System. The Senate Report stated that “no particular cost accounting system is recommended and no particular classification of mail is required to recover a designated portion of its cost beyond its incremental cost.” Senate Report, at 17.

The conference bill enacted into law incorporated the rate floor contained in the House version, but replaced the phrase “demonstrably related” costs with “attributable” costs. Debate on the ratemaking aspects of the conference bill was sparse. On the floor of the House, one conferee defined “attributable” costs as “capable of objective determination and proof either by empirical observation or deductive analysis.” 116 Cong. Rec. 27606 (1970) (remarks of Rep. Udall). On the Senate floor, the Act’s sponsor explained that attributable costs were “actual postal costs.” Id., at 26954 (remarks of Sen. McGee). Neither explanation suggests that the conference bill resurrected accounting principles like those used in the discredited Cost Ascertainment System. The Rate Commission, therefore, acted consistently with the statutory mandate and Congress’ policy objectives in refusing to use distribution keys or other accounting principles lacking an established causal basis.

C

The Postal Service contends that Congress intended long-term and short-term variable costs to be attributed, but that Congress did not direct attribution of costs, apart from fixed costs incurred by a particular class, that do not vary directly or indirectly with volume. We agree that, because the Rate Commission has decided that these methods reliably indicate causal connections between classes of mail and postal rates, the Act requires that they be employed. But the Act’s language and legislative history support the Rate Commission’s position that Congress did not intend to bar the use of any reliable method of attributing costs. See PRC Op. R71-1, pp. 42-46.

The record before Congress in 1970 indicated that identifying which classes cause specific costs was a “most difficult” task, Foster Associates Study, at 1-5, and that a long-run variable cost approach was “the best available measure” of cost causation. Id., at 1-6. The Kappel Commission consequently recommended that each class bear, “as a minimum,” all “demonstrably related” capital and operating costs — “[i]n economic terms . . . the long-run variable costs ascribable to it.” Kappel Commission Report, at 131. Although the House bill adopted the Kappel Commission’s requirement that each class bear its “demonstrably related costs,” we do not believe that in so doing it intended to limit attribution to the long-run variable approach. The Kappel Commission did not emphasize technical matters, focusing instead on the need for nonarbitrary demonstrations of causation. Postmaster General Blount informed the House that the phrase “demonstrably related costs” was employed to avoid the confusion generated by the use of terms of art such as “marginal” or “incremental” costs. “Demonstrably related costs,” he explained, “are those costs which can be traced directly to the class of service in question .... [W]e believe that the legislative history has made amply clear what the term means, without shackling future generations to any particular economic theory.” Hearings on Post Office Reorganization before the House Committee on Post Office and Civil Service, 91st Cong., 1st Sess., 1273 (1969) (Post Office Response to Memoranda Submitted by J. Edward Day).

The House Report did not mention any particular costing technique. In defining the rate floor established by the House bill, it explained only that each class would be required to bear “at least its own identifiable costs.” House Report, at 10. Given the House Report’s repeated statements that Members of Congress are ill-equipped to deal with the highly technical economic, accounting, and engineering questions lying at the heart of the ratemaking process, it is implausible to suppose that the House intended to prescribe for the experts appointed to resolve this problem a formula for identifying causal relationships. It is also unlikely that the House intended to limit the Postal Service forever to accounting methods current at the time the bill was enacted.

The Conference Committee abandoned the phrase “demonstrably related costs” in favor of “attributable” costs, a phrase that connotes the use of judgment and has no technical meaning or significant antecedent legislative history. It also retained the House bill’s explicit requirement of a rate floor. In so doing, the conferees ensured that identification of causal relationships would not be limited to those methods discussed in the Kappel Commission Report, but would encompass all postal costs, whether “direct or indirect,” that the experts, on whatever reasoned basis, found to be attributable to a particular class of mail.

D

The Second Circuit found controlling the definition of “attributable” costs contained in the Statement of the Managers on the Part of the House, appended to the Conference Report on the Act, H. R. Conf. Rep. No. 91-1363, pp. 79-90 (1970). Newsweek, Inc. v. USPS, 663 F. 2d, at 1199-1200. The House Managers stated that the conference substitute established a rate floor for each class of mail “equal to costs . . . that vary over the short term in response to changes in volume of a particular class or, even though fixed rather than variable, are the consequence of providing the specific service involved.” H. R. Conf. Rep. No. 91-1363, at 87 (emphasis supplied). The Rate Commission specifically addressed and rejected this argument when it was advanced by the Postal Service in the first two ratemaking proceedings, see PRC Op. R74-1, pp. 101-102, 126-127; PRC Op. R71-1, pp. 42-46, and even the Postal Service since has abandoned it. The statute’s plain language and prior legislative history, discussed above, indicate that Congress’ broad policy was to mandate a rate floor consisting of all costs that could be identified, in the view of the expert Rate Commission, as causally linked to a class of postal service. We cannot say that the House Managers’ Statement alone demonstrates that the Rate Commission’s view is “inconsistent with the statutory mandate or . . . frustrate[s] the policy that Congress sought to implement.” FEC v. Democratic Senatorial Campaign Committee, 454 U. S., at 32.

h — H >

We hold that the Rate Commission has reasonably construed the Act as establishing a two-tier ratesetting structure. First, all costs that in the judgment of the Rate Commission are the consequence of providing a particular class of service must be borne by that class. The statute requires attribution of any cost for which the source can be identified, but leaves it to the Commissioners, in the first instance, to decide which methods provide reasonable assurance that costs are the result of providing one class of service.

For this function to be performed, the Postal Service must seek to improve the data on which causal relationships may be identified as the Rate Commission remains open to the use of any method that reliably identifies causal relationships. In our view, the Rate Commission conscientiously has attempted to find causal connections between classes of service and all postal costs — both operating costs and “overhead” or “capacity” costs — where the data are sufficient. PRC Op. R74-1, pp. 126-127; see PRC Op. R80-1, pp. 129-131. The Rate Commission is to assign remaining costs reasonably on the basis of the other eight factors set forth by § 3622(b).

Inasmuch as the rates at issue were established according to the District of Columbia Circuit’s erroneous view of the Act, we agree with the Second Circuit that this matter must be remanded to the agencies. While we do not agree with all that the Second Circuit said in its opinion, we affirm its judgment in remanding the cases. The remand will be for further proceedings consistent with this opinion.

It is so ordered.

       All citations to statutes herein refer to provisions of Title 39 of the United States Code.

       The Postal Service and Rate Commission classify the various types of mail through a process similar to that governing ratesetting. See §§ 3623, 3625. Presently, the four broad classes of mail are first class (letters, post cards, and small sealed parcels), second class (newspapers, magazines, and other periodicals), third class (single piece service for small parcels, cata-logues, and other items, and certain bulk mail services), and fourth class (primarily parcel post). See Brief for United States Postal Service 4, n. 4.

       Section 8622(b) provides in relevant part:
      “(b) Upon receiving a request [from the Postal Service], the [Rate] Commission shall make a recommended decision ... in accordance with the policies of this title and the following factors:
      “(1) the establishment and maintenance of a fair and equitable schedule;
      “(2) the value of the mail service actually provided each class or type of mail service to both the sender and the recipient, including but not limited to the collection, mode of transportation, and priority of delivery;
      “(3) the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to that class or type plus that portion of all other costs of the Postal Service reasonably assignable to such class or type;
      “(4) the effect of rate increases upon the general public, business mail users, and enterprises in the private sector of the economy engaged in the delivery of mail matter other than letters;
      “(5) the available alternative means of sending and receiving letters and other mail matter at reasonable costs;
      “(6) the degree of preparation of mail for delivery into the postal system performed by the mailer and its effect upon reducing costs to the Postal Service;
      “(7) simplicity of structure for the entire schedule and simple, identifiable relationships between the rates or fees charged the various classes of mail for postal services;
      “(8) the educational, cultural, scientific, and informational value to the recipient of mail matter; and
      “(9) such other factors as the Commission deems appropriate.”

       Opinions and Recommended Decisions of the Rate Commission are cited herein as “PRC Op.,” followed by the docket number.

       In addition to variable costs, the Rate Commission consistently has attributed fixed costs incurred for the benefit of a single class. See PRC Op. R74-1, p. 76; PRC Op. R80-1, App. B, p. 52 (1981). These “specific fixed costs” constitute a small percentage of all costs. See Brief for United States Postal Service 6. n. 9.

       The Rate Commission attributed 60% of the Postal Service's total revenue requirement in the first proceeding, see App. 239a, and in the second the data provided by the Postal Service had improved enough to support a rate floor consisting of 52.5% of total postal costs. See PRC Op. R80-1, App. B, p. 28.

       Such accounting principles are used in utility ratemaking proceedings that employ “fully allocated costing” systems. Under such systems, a specific cause is assigned to every cost incurred by a utility. The Post Office employed such a system prior to the Act. See infra, at 827, and n. 22.

       The court said that attributable and assignable costs are distinguishable in that “the latter concept permits a greater degree of estimation and connotes somewhat more judgment and discretion than the former.” 186 U. S. App. D. C., at 348, n. 59, 569 F. 2d, at 588, n. 59.

       Challenges to the third ratemaking proceeding, Docket No. R76-1, which was completed prior to the Court of Appeals’ decision in NAGCP I, see 186 U. S. App. D. C., at 339, n. 21, 569 F. 2d, at 578, n. 21, were dismissed as moot because they still were pending when the administrative decisions in the fourth ratemaking proceeding were complete. National Assn. of Greeting Card Publishers v. USPS, No. 76-1611 (CADC June 27, 1978) (NAGCP II) (order).

       By this method, the Rate Commission attributed almost 65% of total costs. PRC Op. R77-1, p. 156 (table).

       The Rate Commission concluded that these nonvariable costs constituted slightly over 7% of the Postal Service’s total revenue requirement.
      On the assumption that the Postal Service and the Rate Commission would continue to improve and extend their attribution and assignment techniques, the District of Columbia Circuit affirmed the Governors’ decision to put into effect the Rate Commission’s recommendations. See National Assn. of Greeting Card Publishers v. USPS, 197 U. S. App. D. C. 78, 82-104, 607 F. 2d 392, 396-418 (1979) (opinion of Leventhal, J.) (NAGCP III), cert. denied, 444 U. S. 1025 (1980).

       More than 64% of total costs were attributed by this method. PRC Op. R80-1, p. 222 (table).

       Decision of the Governors, App. to Pet. for Cert. lb. The Governors also returned the matter to the Rate Commission for reconsideration. After the Rate Commission twice substantially reaffirmed its recommendations, the Governors exercised their statutory authority to modify the decision, § 3625(d), by, among other changes, abandoning the Service Related Costs concept. See Decision of the Governors Under 39 U. S. C. Section 3625 in the Matter of Proposed Changes in Postal Rates and Fees, Docket No. R80-1 Before the Postal Rate Commission (Sept. 29, 1981). This modification was appealed to the United States Court of Appeals for the Second Circuit, which remanded to the Governors for further explanation of their reasoning. Time, Inc. v. USPS, 685 F. 2d 760 (1982). The Governors complied with the remand, Further Explanation and Justification Supporting the September 29, 1981 Decision of the Governors of the United States Postal Service on Rates of Postage and Fees for Postal Services (Dec. 20, 1982), and the Second Circuit recently denied petitions for review. Time, Inc. v. USPS, Nos. 81-4183, 81-4185, 81-4203, 81-4205, and 81-6216 (June 8, 1983). These matters are not before us.

       The Governors’ subsequent decision to modify the rates at issue, see n. 13, supra, has not mooted the controversy. Postal rates frequently are in effect too briefly for litigation concerning them to be completed before they are superseded. See Reeves, Inc. v. Stake, 447 U. S. 429, 434, n. 5 (1980). Before judicial review of the second and third ratemaking proceedings could be concluded, for example, new rates resulting from the third and fourth ratemaking proceedings had gone into effect. See NAGCP I, 186 U. S. App. D. C., at 339, n. 21, 569 F. 2d, at 578, n. 21; NAGCP III, 197 U. S. App. D. C., at 82, n. 3, 607 F. 2d, at 396, n. 3. The questions before the Court are certain to be central to future proceedings, and there is more than a “reasonable expectation” that petitioners, who have taken part in most or all of the challenges to prior rate schedules, will be affected by these future proceedings. See Weinstein v. Bradford, 423 U. S. 147, 149 (1975); Reeves, Inc. v. Stake, 447 U. S., at 434, n. 5; Murphy v. Hunt, 455 U. S. 478, 482 (1982).

       The Rate Commission is not a party to this action. We are informed that the Rate Commission agrees with the Postal Service that the decision of the Second Circuit is correct and should be affirmed. Brief for United States Postal Service 49, n. 46. We do not understand this statement to indicate that the Rate Commission agrees with all the reasoning in the Postal Service’s brief, or that it has abandoned the consistent reading it has given the Act in the first five ratemaking proceedings.

       It is the Rate Commission, not the Postal Service, that conducts extensive hearings, § 3624, and applies the ratemaking factors enumerated in § 3622(b). The Postal Service may modify a Rate Commission recommendation only if the recommended rates will not produce revenues equal to the Postal Service’s estimated costs. § 3625(d)(2).

       The District of Columbia Circuit read the statute to require an intermediate “assignment” tier that, like attribution, must be based on causation principles. The court believed that “Congress did not intend that all postal costs be either attributed or assigned,” because some unattributable postal costs “will exist but will not be ‘reasonably assignable’ to any particular class or type.” NAGCP I, 186 U. S. App. D. C., at 348, 569 F. 2d, at 587 (emphasis in original). This followed, the court believed, from the section’s requirement that each class bear “only ‘that portion of all other costs . . . reasonably assignable.’” Ibid., quoting §3622(b)(3) (the District of Columbia Circuit’s emphasis deleted). But § 3622(b)(3) does not provide that only a portion of all other costs is to be assigned. It says, instead, that through the process of assignment each class of service will receive its reasonable portion of all other costs.

       First, rates for each class of mail “would cover the costs demonstrably related to that class of service.” Second, “Remaining institutional costs” would be apportioned to the various classes on the basis of market factors, not causation. Kappel Commission Report, at 61-62; see id., at 130-132.

       Petitioner National Association of Greeting Card Publishers and inter-venor Direct Mail/Marketing Association question the legality of assigning — or attributing — Service Related Costs. We do not rule on this issue. The Rate Commission developed the concept of Service Related Costs only to conform to the District of Columbia Circuit’s erroneous view that “assignment” is an intermediate tier requiring attenuated inferences of causation. “When an administrative agency has made an error of law, the duty of the Court is to ‘correct the error . . . , and after doing so to remand the case to the [agency] so as to afford it the opportunity of examining the evidence and finding the facts as required by law.’ ” NLRB v. Pipefitters, 429 U. S. 507, 522, n. 9 (1977), quoting ICC v. Clyde S.S. Co., 181 U. S. 29, 32-33 (1901). The Rate Commission also should assess the impact on the Service Related Costs concept of Congress’ recent prohibition of any deviation from the present 6-day delivery schedule. See Omnibus Budget Reconciliation Act of 1981, § 1722, 95 Stat. 759.

       In the first ratemaking proceeding, the Rate Commission used short-run variable costs “because that approach [was] the only viable costing presentation before us.” PRC Op. R71-1, p. 56. It stated that “long-run incremental costing (for example) ‘remains theoretical and is unproven’ on this record.” Id., at 56-57. Once long-run costing became feasible, the Rate Commission adopted it.

       The study of postal ratesetting on which the Kappel Commission based its recommendations defined direct costs as “[t]hose elements of cost which can be unequivocally related to a particular product or output,” and indirect costs as “[tjhose elements of cost which cannot unequivocally be associated with a particular output or product.” Foster Associates, Inc., Rates and Ratemaking: A Report to the President’s Commission on Postal Organization, App. A, pp. iii, iv, reprinted in Kappel Commission Report Annex (1968) (Foster Associates Study).

       See generally id., at 1-8 to 1-11, 2-8 to 2-12, 4-8 to 4-24; id., at App. B; Report on Post Office Department Relating to Survey of Postal Rates Structure, Letter from Postmaster General Transmitting a Report on his Survey of Postal Rates, H. R. Doc. No. 91-97 (1969).

       The House was aware of the deficiencies of the Cost Ascertainment System since it had held hearings on the subject. See Hearings on Post Office Cost Ascertainment System before the Subcommittee on Postal Rates of the House Committee on Post Office and Civil Service, 91st Cong., 1st Sess., 72 (1969) (testimony of James W. Hargrove, Assistant Postmaster General). The following year, the Subcommittee, through its Chairman, expressed its approval of the Post Office’s recent decision “to abolish the cost ascertainment system and supply postal figures based on demonstrably related costs.” Hearings on Postal Rates and Revenue and Cost Analysis before the Subcommittee on Postal Rates of the House Committee on Post Office and Civil Service, 91st Cong., 2d Sess., 1 (1970) (remarks of Rep. Olsen).

       Petitioner United Parcel Service argues that extended use of cost-of-service principles is necessary to avoid subsidization of those classes of mail for which the Postal Service has competition, such as parcel post, by other classes of mail for which the Postal Service enjoys a statutory monopoly, such as first class. Brief for Petitioner United Parcel Service of America, Inc., 39-42. Congress’ concern about such cross-subsidies, of course, was one motive for including the rate floor established in § 3622(b)(3). But Congress adopted the Kappel Commission’s conclusion that, unless a reliable connection is established between a class of service and a cost, allocation of costs on cost-of-service principles is entirely arbitrary. Beyond requiring the attribution of all costs for which a reliable connection can be established, Congress intended to prevent undue imposition on users of monopolized classes, and to prevent unfair competition, in two ways. First, by making the Rate Commission independent of operating management, Congress meant to minimize the temptation to solve fiscal problems by concentrating rate increases on first-class mail, which is by far the major source of postal revenue. Senate Report, at 13. Second, § 3622(b) requires the Rate Commission to consider, in “assigning” costs remaining above the rate floor, “the effect of rate increases upon the general public . . . and enterprises in the private sector of the economy engaged in the delivery of mail matter other than letters,” § 3622(b)(4), and “the available alternative means of sending and receiving letters and other mail matter at reasonable costs,” § 3622(b)(5).

       The study underlying the Kappel Commission Report rejected a short-term approach as likely to generate widely fluctuating rates. Foster Associates Study, at 1-5 to 1-6. It recommended measuring variability not just with respect to units of output, but with respect to other variables as well, such as the capacity necessary to produce that output. Id., at 3-33 to 3-34.

       The Kappel Commission explained the rate floor in these terms:
      “[T]o avoid undue discrimination every class of service should, as a minimum, pay for all of those costs which it alone causes. Thus . . . each . . . class of mail should pay for those added costs of processing and delivery which it causes the Post Office to incur. It makes no difference whether these costs are capital costs or operating costs, nor should the inquiry be confined to what costs the class has generated historically, but should extend to include what costs it will cause in the foreseeable future.” Kappel Commission Report, at 131 (emphasis in original); see id., at 61-62.

       At one point, the Senate Report states, without elaboration, that “no particular cost accounting system is recommended and no particular classification of mail is required to recover a designated portion of its cost beyond its incremental cost.” Senate Report, at 17. Arguably, this statement suggests, as a minimum, the use of some form of variability analysis. As the Foster Associates Study explained, “incremental costs” may mean short-run costs, excluding overhead, or may mean long-run costs, including capacity costs and other overhead. Foster Associates Study, App. A, at iv, and n. 1. Whatever the Senate Report meant by “incremental costs,” the quoted passage itself leaves open the possibility that the Rate Commission may find that other “accounting methods” are appropriate. Like the House, the Senate believed that Congress should be taken out of the ratemaking process and the task put in the hands of an “expert commission,” which would allocate costs “on a scientific or quasi-scientific basis.” Senate Report, at 11. The bill initially passed by the Senate spoke of assigning any type of postal cost, including overhead costs, wherever proper. S. 3842, 91st Cong., 2d Sess., §3704(g)(3) (1970).

       The Second Circuit apparently believed that the Managers’ Statement was the Report of the entire Conference Committee. 663 F. 2d, at 1200. Were this the case, its definition would be due great weight. The Conference Report, however, contained only the text of the Act. There is no dispute that the House Managers’ Statement became available only after the Senate had completed its consideration of the Conference Report. See PRC Op. R80-1, App. B, p. 11. Thus, while certainly significant, this statement does not have the status of a conference report, or even a report of a single House available to both Houses. See Vaughn v. Rosen, 173 U. S. App. D. C. 187, 193, 623 F. 2d 1136, 1142 (1975); K. Davis, Administrative Law Treatise §3A.31, p. 175 (1970 Supp.).

       The Rate Commission constantly has stressed the importance to its ratesetting function of receiving more comprehensive and more detailed data from the Postal Service. See PRC Op. R80-1, pp. 107, 111-112, 209-211; PRC Op. R77-1, pp. 85-87; PRC Op. R76-1, pp. 83-87, and App. E; PRC Op. R74-1, pp. 110-111, 123-127; PRC Op. R71-1, pp. 48-57. The importance of a detailed data base was emphasized in the Foster Associates Study, at 5-21, and in the Kappel Commission Report, at 62. The Senate Report recognized that achievement of the Act’s ambitious goals would depend on cooperation between the two agencies. Senate Report, at 13. The Postal Service, which “alone takes in the full scope of Postal Service operations . . . [and] alone is in a position to influence the Postal Service’s day-to-day accounting procedures and record keeping,” Association of American Publishers, Inc. v. Governors of United States Postal Service, 157 U. S. App. D. C. 397, 408, 485 F. 2d 768, 779 (1973) (concurring opinion), must constantly seek to aid the Commission in fulfilling § 3622(b)’s requirement that all costs capable of being considered the result of providing a particular class of service are identified, and borne by that class.