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.
2
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
1
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.
3
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
2
“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
4
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
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.
5
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
4
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.
6
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 also Appalachian 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.
7
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
5
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
8
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
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”).
9
For the foregoing reasons, the petition for review is denied.8
So ordered.
8
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).