Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-04-01286/USCOURTS-caDC-04-01286-0/pdf.json

Parties Involved:
Ace Doran Hauling & Rigging Co.
Terminated Party
Commodity Carriers, Inc.
Petitioner
Federal Motor Carrier Safety Administration
Respondent

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 19, 2005 Decided January 20, 2006

No. 04-1286

COMMODITY CARRIERS, INC.,

PETITIONER

v.

FEDERAL MOTOR CARRIER SAFETY ADMINISTRATION,

RESPONDENT

On Petition for Review of an Order of the

Federal Motor Carrier Safety Administration

Anthony J. McMahon argued the cause for the petitioner.

Mark S. Davies, Attorney, United States Department of

Justice, argued the cause for the respondent. Peter D. Keisler,

Assistant Attorney General, and Robert S. Greenspan, Attorney,

United States Department of Justice, and Jeffrey A. Rosen,

General Counsel, Brigham A. McCown, Chief Counsel, and

Cheryl J. Walker, Attorney, United States Department of

Transportation, were on brief. August E. Flentje, Attorney,

United States Department of Justice, entered an appearance.

Before: HENDERSON, GARLAND and GRIFFITH, Circuit

Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

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Owner operators “are usually not licensed as motor carriers” but

“perform services under contract to licensed carriers.” Study of

Interstate Commerce Commission Regulatory Responsibilities

Pursuant to Section 210(a) of the Trucking Industry Regulatory

Reform Act of 1994, 1994 WL 639996, at *52. They “lease their

equipment with themselves as drivers to trucking companies on an

individual trip or longer-term basis” and “supply equipment (their

trucks) and skilled drivers (themselves) to motor carriers who would

otherwise have to make the capital investment and bear employment

costs themselves.” Id. 

KAREN LECRAFT HENDERSON, Circuit Judge: Commodity

Carriers, Inc. (CCI) petitions for review of an order of the

Federal Motor Carrier Safety Administration (FMCSA), an

agency within the United States Department of Transportation

(Department). In the order the FMCSA assigned CCI a

“conditional” safety rating based on CCI’s failure to obtain and

retain the toll receipts of its independently-contracted drivers

who own and operate their own trucks. CCI challenges the

FMCSA’s order primarily on the ground that the FMCSA was

required and failed to engage in notice and comment rulemaking

before mandating that such owner operators maintain toll

receipts. For the reasons set out below, we conclude that notice

and comment was not necessary. We further conclude the

FMCSA was not constrained from enforcing the toll receipt

requirement based on issue preclusion and that the requirement

is not arbitrary and capricious.

I.

The Congress has directed the Department to establish by

regulation a procedure to “determine whether an owner or

operator is fit to operate safely commercial motor vehicles.” 49

U.S.C. § 31144(a)(1), (b)(1).1

 Among its specific statutory

duties, the Department is to “prescribe requirements for . . .

maximum hours of service of employees of . . . a motor private

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“A compliance review may be conducted in response to a request

to change a safety rating, to investigate potential violations of safety

regulations by motor carriers, or to investigate complaints or other

evidence of safety violations.” 49 C.F.R. § 385.3.

3

Section 385.7 provides as follows:

 The factors to be considered in determining the safety

fitness and assigning a safety rating include information from

safety reviews, compliance reviews and any other data. The

factors may include all or some of the following:

 (a) Adequacy of safety management controls. The

adequacy of controls may be questioned if their degree of

formalization, automation, etc., is found to be

carrier.” Id. § 31502(b)(2). Pursuant to its delegated authority

under 49 C.F.R. § 1.73, the FMCSA has promulgated

regulations governing hours of service, which regulations set

limits on the number of consecutive hours a driver may operate,

id. § 395.3, and direct that “every motor carrier shall require

every driver used by the motor carrier to record his/her duty

status for each 24 hour period,” id. § 395.8(a). The regulations

further require each motor carrier to maintain “records of duty

status”—commonly known as logs—“and all supporting

documents for each driver it employs for a period of six

months.” Id. § 395.8(k)(1). 

To enforce its safety regulations the FMCSA has established

a procedure under which it conducts a “compliance review” of

a particular carrier,2

 that is, an “on-site examination of motor

carrier operations,” including, inter alia, “drivers’ hours of

service.” Id. §§ 385.9(a), 385.3. Following the compliance

review, the FMCSA assigns the motor carrier one of three

alternative safety ratings, “satisfactory,” “conditional” or

“unsatisfactory,” based on factors enumerated in the regulations.

Id. §§ 385.9(a), 385.7.3

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substantially below the norm for similar carriers.

Violations, accidents or incidents substantially above the

norm for similar carriers will be strong evidence that

management controls are either inadequate or not

functioning properly.

 (b) Frequency and severity of regulatory violations.

 (c) Frequency and severity of driver/vehicle regulatory

violations identified in roadside inspections.

 (d) Number and frequency of out-of-service

driver/vehicle violations.

 (e) Increase or decrease in similar types of regulatory

violations discovered during safety or compliance

reviews.

 (f) Frequency of accidents; hazardous materials

incidents; accident rate per million miles; preventable

accident rate per million miles; and other accident

indicators; and whether these accident and incident

indicators have improved or deteriorated over time.

 (g) The number and severity of violations of state safety

rules, regulations, standards, and orders applicable to

commercial motor vehicles and motor carrier safety that are

compatible with Federal rules, regulations, standards, and

orders.

49 C.F.R.§ 385.7.

In November 2000 the FMCSA conducted a compliance

review of CCI during which the FMCSA investigator examined

the randomly selected logs of six company drivers and five

owner operator drivers and discovered, from toll receipts CCI

retained, that three of the six company drivers had falsified their

log entries. When he inquired about toll receipts for the five

owner operator drivers, the investigator was told CCI did not

require that owner operator drivers furnish toll receipts. The

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The investigator reported that “there was no other accurate means

of verifying those drivers’ logs, such as on-board computers or other

supporting documents showing a date, time and location.” Decl. of

Robert B. Woods ¶ 10.

investigator recommended a conditional safety rating based on

CCI’s “failing to preserve driver’s records of duty status

supporting documents for 6 months,” JA 9, asserting that,

without the toll receipts, he was unable to verify the accuracy of

the owner operators’ logs.4

 

CCI petitioned for administrative review of the conditional

safety rating. In a final decision dated June 30, 2004, the

FMCSA Assistant Administrator denied the petition, rejecting

CCI’s contention that it was not required to maintain the toll

receipts of owner operator drivers. Relying on our decision in

Darrell Andrews Trucking, Inc. v. FMCSA, 296 F.3d 1120, 1125

(D.C. Cir. 2002), the Assistant Administrator first determined

that toll receipts are among the “supporting documents” a carrier

is required to maintain for “each driver it employs” under 49

C.F.R. § 395.8(k)(1). He then concluded that owner operator

drivers are employees for whom such records must be kept

because FMCSA regulation 390.5 expressly defines the term

“employee” as “including an independent contractor while in the

course of operating a commercial motor vehicle.” On August 2,

2004 CCI petitioned for review of the final FMCSA decision.

II.

CCI first challenges the FMCSA’s interpretation of section

395.8(k)(1) to require a carrier to maintain drivers’ toll receipts

on the ground that no such requirement is expressly set forth in

the regulations. CCI contends that, because the FMCSA failed

to establish the toll receipt requirement through a formal

rulemaking accompanied by public notice and an opportunity for

comment, its applying the requirement to CCI violates both the

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Motor Carrier Safety Act and the Administrative Procedure Act.

See 49 U.S.C. § 31144(b)(1) (“The Secretary shall maintain by

regulation a procedure for determining the safety fitness of an

owner or operator,” including “[s]pecific initial and continuing

requirements with which an owner or operator must comply to

demonstrate safety fitness.”); 5 U.S.C. § 553(c) (“After notice

required by this section, the agency shall give interested persons

an opportunity to participate in the rule making through

submission of written data, views, or arguments with or without

opportunity for oral presentation.”); see alsoAppalachian Power

Co. v. EPA, 208 F.3d 1015, 1024 (D.C. Cir. 2000) (“It is

well-established that an agency may not escape the notice and

comment requirements . . . by labeling a major substantive legal

addition to a rule a mere interpretation.”). Therefore, CCI

argues, it cannot be assigned a conditional rating for failing to

maintain toll receipts. We disagree.

CCI’s challenge to the FMCSA’s interpretation of section

395.8(k)(1) is foreclosed by our decision in Darrell Andrews.

There, we upheld the interpretation, concluding that (1) it is a

“reasonable construction” of the regulation, 296 F.3d at 1126,

and that (2) the FMCSA had issued a “prior informal

adjudication on this issue,” which was “quite clear and

completely in accord with” the interpretation, id. at 1127 (citing

In re Nat’l Retail Transp., Inc., No. R1-92-03 (FMCSA Sept. 12,

1996)). We had no occasion in Darrell Andrews, however, to

address the FMCSA’s extension of this interpretation to owner

operator drivers and we therefore found inapposite the carrier’s

reliance on the FMCSA’s decision in Ace Doran Hauling &

Rigging Co. (FMCSA Feb. 24, 2000) (Ace Doran I), which

changed the carrier’s rating from conditional—assigned for

failure to maintain owner operator toll receipts—to satisfactory.

See Darrell Andrews, 296 F.3d at 1127 n.5. CCI asserts that Ace

Doran I precludes the FMCSA from assigning a conditional

rating in this proceeding. We reject this argument for the

following reasons.

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For this reason, as well as because CCI was not a party to Ace

Doran I, we reject CCI’s contention that the doctrine of issue

preclusion forecloses a conditional safety rating.

6

The FMSCA subsequently issued a final order denying

reconsideration and imposing a civil penalty on Ace Doran. Ace

CCI contends Ace Doran I represents a “definitive

interpretation” of section 395.8(k)(1) as not requiring a carrier

to maintain owner operator toll receipts and that the FMCSA

therefore could not permissibly revise the interpretation without

notice and comment. See Alaska Prof’l Hunters Ass’n, Inc. v.

FAA, 177 F.3d 1030, 1034 (D.C. Cir. 1999) (“When an agency

has given its regulation a definitive interpretation, and later

significantly revises that interpretation, the agency has in effect

amended its rule, something it may not accomplish without

notice and comment.” (citing Paralyzed Veterans of Am. v. D.C.

Arena, 117 F.3d 579, 586 (D.C. Cir. 1997)). We find this

argument unpersuasive. First, we do not read Ace Doran I as

offering any interpretation of section 395.8(k)(1), definitive or

otherwise. That decision concluded the FMCSA had wrongly

assigned Ace Doran a conditional rating because the carrier

“had reasonable grounds to believe it was not required to

collect and maintain toll receipts from its owner operator

drivers” based on agency “guidance” documents. Ace Doran I

at 15 (emphasis added). No opinion was given on the meaning

of the regulation itself.5

 Moreover, the interpretation of section

95.8(k)(1) in Ace Doran I was not definitive; it was almost

immediately contradicted by Ace Doran Hauling & Rigging Co.

(FMCSA July 11, 2000) (Ace Doran II), in which the Acting

Chief Safety Officer, citing the definition of “employee” in

FMCSA’s regulations, concluded that “Ace Doran had

reasonable grounds to believe that it was required to maintain all

supporting documents from its owner operator drivers.” Ace

Doran II at 12 (emphasis added).6

 Further, the interpretation

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Doran Hauling & Rigging Co. (FMCSA Feb. 8, 2000) (Ace Doran

III). This order was vacated on May 10, 2001. The FMCSA is

currently conducting a rulemaking on hours of service and supporting

documents which would, inter alia, “clarify that motor carriers are

currently required to retain all ‘supporting documents’ that all drivers

(including independent contractors) receive during a trip” and thereby

“resolve the confusion created by” Ace Doran I and Ace Doran II.

Hours of Service of Drivers; Supporting Documents, 69 Fed. Reg.

63,997, 64,003-04 (Nov. 3, 2004) (proposed rules). 

7

We also note that CCI was on individual notice from previous

enforcement actions that the FMCSA (and its predecessor, the Federal

Highway Administration) required a carrier to maintain the toll

receipts of owner operators. See, e.g., FHA v. CCI, 1999 WL

33738402, at *2 & n.12 (May 27, 1999) (“Commodity Carriers had a

duty to verify its drivers’ logs” and to “compare[] the logs with the toll

receipts,” noting “[t]hat duty applies to owner-operator drivers as well

as employee drivers”).

CCI advances—that section 395.8(k)(1)’s requirement that

carriers maintain drivers’ toll receipts does not apply to owner

operator drivers—is, as noted in both Ace Doran II and the

FMSCA decision here, directly at odds with the express

language of FMSCA regulations directing that a carrier maintain

supporting materials “for each driver it employs,” 49 C.F.R. §

395.8(k)(1), and defining an employee as “any individual, other

than an employer, who is employed by an employer and who in

the course of his or her employment directly affects commercial

motor vehicle safety,” expressly “including an independent

contractor while in the course of operating a commercial motor

vehicle,” id. § 390.5.7

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In addition to the arguments addressed above, CCI contends

FMCSA’s interpretation of section 395.8(k)(1) is arbitrary and

capricious based on “common knowledge in the industry” regarding

drivers’ trading or selling toll receipts. It fails, however, to cite record

evidence of such practices. See In re Sang Su Lee, 277 F.3d 1338,

1345 (Fed. Cir. 2002) (“reference to common knowledge ‘does not in

and of itself make it so’ absent evidence of such knowledge” (quoting

Smiths Indus. Med. Sys., Inc. v. Vital Signs, Inc. 183 F.3d 1347, 1356

(Fed. Cir. 1999)); cf. Chirino v. NTSB, 849 F.2d 1525, 1527 (D.C. Cir.

1988) (relying on “common knowledge among pilots within the

industry” regarding requirement of simulator training to obtain aircraft

rating because agency “adduced evidence” before administrative law

judge to support such knowledge).

For the foregoing reasons, the petition for review is denied.8

So ordered.

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