[Federal Register Volume 60, Number 127 (Monday, July 3, 1995)]
[Proposed Rules]
[Pages 34474-34476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15817]



 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 60, No. 127 / Monday, July 3, 1995 / Proposed 
Rules  


[[Page 34474]]


DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Parts 1 and 47


Rules of Practice

AGENCY: Office of the Secretary of Agriculture, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: We are proposing to amend the Rules of Practice Governing 
Formal Adjudicatory Proceedings Instituted by the Secretary Under 
Various Statutes and the Rules of Practice Under the Perishable 
Agricultural Commodities Act. The purpose of the proposal is to provide 
that the adjudication, under the Perishable Agricultural Commodities 
Act, of whether an individual is ``responsibly connected'' with a 
particular commission merchant, dealer, or broker will be joined with 
any related disciplinary proceedings against the same commission 
merchant, dealer, or broker; and to provide that any adjudications of 
such status be made by Administrative Law Judge of the Department of 
Agriculture.

DATES: Consideration will be given only to comments received on or 
before August 2, 1995.

ADDRESSES: Please send an original and three copies of your comments to 
Barbara S. Good, Trial Attorney, Office of the General Counsel, USDA, 
Room 2446, South Building, 14th Street and Independence Avenue, S.W., 
Washington, DC 20250-1400. Comments received may be inspected at USDA, 
Room 2446, South Building, 14th Street and Independence Avenue S.W., 
Washington, DC 20250-1400, between 9:00 a.m. and 5:30 p.m., Monday 
through Friday, except holidays. Persons wishing to inspect comments 
are encouraged to call (202) 720-7357 in advance to make arrangements.

FOR FURTHER INFORMATION CONTACT:
Mary Hobbie, Assistant General Counsel, Trade Practices Division, 
Office of the General Counsel, USDA, Room 2446 South Building, 14th 
Street and Independence Avenue, S.W., Washington, DC 20250-1400. (202) 
720-5293.

SUPPLEMENTARY INFORMATION: Disciplinary Proceedings. Section 2 of the 
Perishable Agricultural Commodities Act (PACA), 7 U.S.C. 499b, 
proscribes as unfair various conduct on the part of commission 
merchants, dealers, or brokers. The PACA provides redress for such 
unlawful conduct in the form of suspension or revocation of required 
licenses, and to a limited extent, civil penalties. The Agricultural 
Marketing Service (AMS) of the U.S. Department of Agriculture (USDA) 
enforces Sec. 2 of the PACA, in part, through administrative 
proceedings adjudicated by Administrative Law Judges.
    While the PACA is the substantive law governing these 
administrative disciplinary proceedings, The Rules of Practice 
Governing Formal Adjudicatory Proceedings Instituted by the Secretary 
Under Various Statutes (Rules of Practice), at 7 CFR 1.130 et seq., 
provide their procedural framework. Disciplinary proceedings are 
instituted by filling a formal complaint with the Hearing Clerk. The 
respondent is given the opportunity to file an answer to the complaint. 
An Administrative Law Judge determines the issues and makes a decision 
after opportunity for a full evidentiary hearing. Both parties may 
request testimonial and documentary subpoenas. Any decision of the 
Administrative Law Judge may be appealed to the Judicial Officer, 
acting for the Secretary. An appeal from a decision of the Judicial 
Officer may be taken to the appropriate U.S. Circuit Court of Appeals.
    Proceedings to determine responsibly connected status. In addition 
to the proscription against unfair conduct embodied in Sec. 2, 
Sec. 8(b) of the PACA (7 U.S.C. 499h(b)) forbids a licensee from 
employing a person who is or has been ``responsibly connected'' with a 
firm or person whose license has been revoked or is under suspension by 
the Secretary, a person who has been found to have committed any 
flagrant or repeated violation of Sec. 2, or against whom there is an 
unpaid reparation award. Such employment violations subject the 
employing firm or individual to license suspension or revocation.
    The PACA, in Sec. 1(9) (7 U.S.C. 499a), defines ``responsibly 
connected'' to mean ``affiliated or connected with a commission 
merchant, dealer, or broker as (A) partner in a partnership, or (B) 
officer, director, or holder of more than 10 per centum of the 
outstanding stock of a corporation or association.''
    Prior to 1975, the determination as to responsibly connected status 
was made without the benefit of an oral hearing. After the decision of 
the U.S. Court of Appeals for the District of Columbia in Quinn v. 
Butz, 510 F.2d 743 (D.C. Cir. 1975), USDA instituted a procedure 
governed by regulations published at 7 CFR 47.47 et seq. giving any 
person finally determined by the PACA Branch of AMS to have been 
responsibly connected to a firm subject to license revocation or 
suspension the opportunity for an oral hearing before a presiding 
officer appointed by AMS.
    Currently, determinations as to whether an individual is 
responsibly connected to a particular commission merchant, dealer, or 
broker are made independently of any related disciplinary proceeding 
against the commission merchant, dealer, or broker. Although typically 
the two proceedings involve a common fact nucleus, currently no 
mechanism exists for joining the procedures to achieve a more efficient 
use of resources. In addition, in those cases where the individual 
requests oral hearing, responsibly connected proceedings frequently are 
not concluded until the sanction in the related disciplinary proceeding 
has been in effect for a year or more. Thus, although an offending 
entity's license may have been revoked for as much as a year, those 
individuals responsible for the violations may nevertheless continue to 
be employed in the industry pending a determination of responsibly 
connected status.
    The rules currently governing determination of responsibly 
connected status are set out at 7 CFR 47.47 et seq. In brief, these 
rules provide for a preliminary determination by the Perishable 
Agricultural Commodities Branch (PACA Branch), AMS, as to the status of 
a person who is potentially responsibly connected, notification of the 
preliminary determination, and an opportunity to respond and furnish 
evidence to the Chief, PACA Branch. If the Chief, PACA Branch, sustains 
the preliminary determination that the 

[[Page 34475]]
individual is responsibly connected, the individual is then entitled to 
file a petition with the Administrator of AMS for a review proceeding 
and final decision and to request an oral hearing. If an oral hearing 
is requested, it is held before a hearing officer appointed by the 
Administrator. Appeals of adverse decisions of the Administrator lie to 
the U.S. Circuit Courts of Appeal. In any event, no employment sanction 
begins to run until one of the following three conditions set forth in 
Sec. 8(b) of the PACA exists: (1) the license of the firm with which 
the responsible connection exists has been suspended or revoked; (2) 
there is a finding that the firm has committed a flagrant or repeated 
violation of Sec. 2 of the PACA; or (3) the firm has failed to pay a 
reparation award under Sec. 7 of the PACA.
    Proposed rules to combine disciplinary proceedings with 
determinations of responsibly connected status. We propose to modify 
the procedures for determining responsibly connected status to 
accomplish two objectives: (1) To consolidate, where the possibility 
exists, hearings in disciplinary cases and related determinations of 
responsibly connected status; and (2) to provide for review by an 
Administrative Law Judge of the final determination of the Chief, PACA 
Branch that an individual is responsibly connected. Because the issues 
in both types of proceedings are based upon identical or closely-
related facts, and because the sanctions are related, such a procedure 
eliminates the need for duplicative litigation. It also offers the 
advantage of insuring that the sanctions against the licensee and the 
individuals responsibly connected with it will commence concurrently.
    Instead of filing a petition for review with the Administrator of 
AMS, under the proposed procedures, the individual contesting the final 
determination by the Chief, PACA Branch, that he or she is responsibly 
connected will file a petition for review with the Office of the 
Hearing Clerk, and the petition will be decided by an Administrative 
Law Judge, after opportunity for oral hearing. Any hearing on a 
responsibly connected determination will be consolidated with the 
hearing, if any, on the disciplinary matters out of which the issue of 
responsibly connected status arose. Likewise, all responsibly connected 
hearings arising out of the relationship between more than one 
individual and one particular PACA licensee will be consolidated.
    To illustrate by hypothetical, assume that PACA Branch, AMS, 
institutes a disciplinary proceeding against the Acme Produce Company, 
of which the officers, directors, and shareholders of greater than 10 
percent of the stock consist of Able, Jones, and Smith. Under the 
proposal, all issues arising out of the disciplinary infractions 
charged against Acme and all employment sanctions arising out of the 
relationships between Acme on the one hand and Able, Jones, and Smith 
on the other hand will be consolidated for hearing to the extent that 
the employment sanctions originate from Acme's alleged disciplinary 
violations. If for any reason there is no hearing on the issues 
involving Acme, but Able, Jones, and Smith file petitions for review of 
their status as responsibly connected individuals and request hearings, 
those hearings will be consolidated in one proceeding before an 
Administrative Law Judge.
    To the extent that no disciplinary proceeding has been instituted 
against Acme and the proposed employment sanctions against Able, Jones 
and Smith arise under PACA Sec. 8(B)(3) solely from Acme's failure to 
pay one or more reparation awards under PACA Sec. 7, all hearings on 
petitions for review will be consolidated in one proceeding before an 
Administrative Law Judge. The vehicle used to achieve this 
consolidation will be a mandatory joinder under the Rules of Practice 
as amended.
    USDA believes that the proposed procedures, by reducing the 
incidence of multiple hearings, will facilitate speedy enforcement of 
the PACA and will result in savings in employee time and travel 
expense. They will also abolish the need for AMS to employ individuals 
to act as presiding officers at responsibly connected proceedings. In 
1994, presiding officers were paid $26,866, a large portion of which 
would be saved under the proposed new regulation.
Executive Order 12866 and Regulatory Flexibility Act

    The Secretary has determined that, if adopted, this proposed rule 
would not have a significant economic impact on a substantial number of 
small entities. While small entities will continue to be subject to 
identical substantive requirements under the revised procedures, the 
new procedures will not result in any new burdens. The new rule merely 
changes the form of the hearing utilized to determine responsibly 
connected status.
    This proposed rule has been determined not significant for purpose 
of Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget.

Executive Order 12778

    This proposed rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. If this rule is adopted: (1) All State and local 
laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule; and 
(3) administrative proceedings will not be required before parties may 
file suit in court challenging this rule.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1980 does not apply to this proposed 
rule since the proposed rule does not seek answers to identical 
questions or impose reporting or recordkeeping requirements on 10 or 
more persons, and the information collected is not used for general 
statistical purposes.

List of Subjects

7 CFR Part 1

    Administrative practice and procedure, Agriculture, Antitrust, 
Blind, Claims, Concessions, Cooperatives, Equal access to justice, 
Federal buildings and facilities, Freedom of information, Lawyers, 
Privacy.

7 CFR Part 47

    Administrative practice and procedure, Agricultural commodities, 
Brokers.

    For the reasons, set out in the preamble 7 CFR chapter I is 
proposed to be amended as follows:

PART 1--ADMINISTRATIVE REGULATIONS

    1. The authority citation for part 1, subpart H, would continue to 
read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 61, 87e, 149, 150gg, 162, 163, 
164, 228, 268, 490o, 608c(14), 1592, 1624(b), 2151, 2621, 2714, 
2908, 3812, 4610, 4815, 4910; 15 U.S.C. 1828; 16 U.S.C. 620d, 
1540(f), 3373; 21 U.S.C. 104, 111, 117, 120, 122, 127, 134e, 134f, 
1135a, 154, 463(b), 621, 1043; 43 U.S.C. 1740; 7 CFR 2.35, 2.41.


Sec. 1.131  [Amended]

    2. Section 1.131 would be amended as follows:
    a. In paragraph (a), by adding ``1(9),'' immediately after 
``Perishable Agricultural Commodities Act, 1930, sections'' and 
immediately before ``3(c)''.
    3. Section 1.133 would be amended as follows:
    a. In paragraph (b), by adding after ``Filing of complaint'' the 
words ``or petition for review''.
    b. In paragraph (b), by redesignating paragraph (b)(2) as paragraph 
(b)(3), and 

[[Page 34476]]
by adding the following new paragraph (b)(2):


Sec. 1.133  Institution of proceedings.

* * * * *
    (b) * * *
    (2) Any person determined by the Chief, PACA Branch, pursuant to 7 
CFR 47.47 et seq. to have been responsibly connected within the meaning 
of 7 U.S.C. 499a(9) to a licensee who is subject or potentially subject 
to license suspension or revocation as the result of an alleged 
violation of 7 U.S.C. 499b or as provided in 7 U.S.C. 499g(d) shall be 
entitled to institute a proceeding under this section by filing with 
the Hearing Clerk a petition for review of such determination
* * * * *
    4. Section 1.135 would be amended as follows:
    a. In the section heading, by adding the words ``or petition for 
review'' after the word ``complaint'' and before the period.
    b. By designating the text of current Sec. 1.135 as paragraph (a), 
and by adding the paragraph heading ``Complaint.'' immediately after 
the designation of paragraph (a).
    c. By adding the follow paragraph (b):


Sec. 1.135  Contents of complaint.

* * * * *
    (b) Petition for Review. The Petition for Review of responsibly 
connected status shall describe briefly and clearly the determination 
sought to be reviewed and shall include a brief statement of the 
factual and legal matters that the petitioner believes warrant the 
reversal of the determination


Sec. 1.136  [Amended]

    5. Section 1.136 would be amended as follows:
    In paragraph (a), by adding after the last sentence the words ``As 
response to a petition for review of responsibly connected status, the 
Chief, PACA Branch, shall within ten days after service by the Hearing 
Clerk of a petition for review, file with the Hearing Clerk a certified 
copy of the agency record upon which the Chief, PACA Branch, made the 
determination that the individual was responsibly connected to a 
licensee under the perishable Agricultural Commodities Act, 7 U.S.C. 
499a et seq., and such agency record shall become part of the record in 
the review proceeding.''
    6. Section 1.137 would be revised to read as follows:


Sec. 1.137.  Amendment of complaint, petition for review, or answer; 
joinder of related matters.

    (a) Amendment. At any time prior to the filing of a motion for 
hearing, the complaint, petition for review, answer, or response to 
petition for review may be amended. Thereafter, such an amendment may 
be made with consent of the parties, or as authorized by the Judge upon 
a showing of good cause.
    (b) Joinder. Upon application of the Administrator made at any 
time, the judge shall consolidate for hearing with any proceeding 
brought to suspend or revoke a license granted under the Perishable 
Agricultural Commodities Act, 7 U.S.C. 499a et seq., any petitions for 
review of determination of status by the Chief, PACA Branch, that 
individuals are responsibly connected, within the meaning of 7 U.S.C. 
499a(9), to the licensee during the period of the alleged violations. 
In any case in which there is no pending proceeding to suspend or 
revoke the license of a licensee issued under the Perishable 
Agricultural Commodities Act, 7 U.S.C. 499a et seq., but there have 
been filed more than one petition for review of determination of 
responsible connection to the same licensee, such petitions for review 
shall be consolidated for hearing upon motion by the Administrator.
    7. Section 1.141 would be amended as follows:
    a. By adding after the first sentence of paragraph (a) the 
following additional sentence: ``A petition for review shall be deemed 
a request for a hearing.''
    b. By designating the text of current paragraph (e) as paragraph 
(e)(1), and by adding the following new paragraph (e)(2):


Sec. 1.1411  Procedure for hearing.

* * * * *
    (e) * * *
    (2) If the petitioner in the case of a Petition for Review of a 
determination of responsibly connected status within the meaning of 7 
U.S.C. 499a(9), having been duly notified, fails to appear at the 
hearing without good cause, such petitioner shall be deemed to have 
waived his right to a hearing and to have voluntary withdrawn his 
petition for review.
* * * * *

PART 47--RULES OF PRACTICE UNDER THE PERISHABLE AGRICULTURAL 
COMMODITIES ACT

    8. The authority citation for part 47 would continue to read 
follows:

    Authority: 7 U.S.C. 499o; 7 CFR 2.17(a)(8)(xiii), 2.50 
(a)(8)(xiii).

    9. Section 47.47 would be revised to read as follows:


Sec. 47.47  Additional definitions.

    The following definitions, which are in addition to those in 7 CFR 
47.2 (a) through (h), shall be applicable to proceedings under 7 CFR 
47.47 through 47.49.
    (a) Chief means the Chief of the PACA Branch, or any officer or 
employee to whom authority has heretofore lawfully been delegated or to 
whom authority may hereafter lawfully be delegated by the Chief, to act 
in such capacity.
    (b) PACA Branch means the PACA Branch of the Division.
    (c) Petition for review means the document filed requesting review 
by an Administrative Law Judge of the Chief's determination.


Sec. 47.49  [Amended]

    10. Section 47.49 would be amended as follows:
    a. The words ``Regulatory Branch'' would be removed each time they 
occur and the words ``PACA Branch'' would be added in their place.
    b. Paragraph (d) of Sec. 47.49 would be amended by removing all 
words appearing after ``may file'' and adding in their place the words 
``with the Hearing Clerk, pursuant to Sec. 1.130 et seq. of this 
chapter, a petition for review of the determination.''
    c. Paragraphs (e) and (f) would be removed.


Sec. 47.50 through 47.68  [Removed]

    11. Sections 47.50 through 47.68 would be removed.

    Done in Washington, D.C. this 20th day of June, 1995.
Dan Glickman,
Secretary of Agriculture.
[FR Doc. 95-15817 Filed 6-30-95; 8:45 am]
BILLING CODE 3410-01-M