[Federal Register Volume 61, Number 56 (Thursday, March 21, 1996)]
[Rules and Regulations]
[Pages 11501-11504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6693]



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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: Final rule.

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SUMMARY: We are amending 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. This final rule provides 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 that any adjudications of such status will be made by 
Administrative Law Judges of the Department of Agriculture. USDA 
believes that the 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 new regulation.

EFFECTIVE DATE: This final rule is effective April 22, 1996.

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 SW., 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 section 2 of the PACA, in part, through

[[Page 11502]]
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 1.130-1.151 
provide their procedural framework. Disciplinary proceedings are 
instituted by filing 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 
section 2, section 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 section 2, or against 
whom there is an unpaid reparation award. Such employment violations 
subject the employing firm or individual to license suspension or 
revocation. On November 15, 1995, the PACA Amendments of 1995 were 
signed into law. One of those amendments, 7 U.S.C. 499h(e), provides 
for the sanction of civil penalties in lieu of revocation or suspension 
of license. The final rule reflects this amendment.
    The PACA, in section 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 47.47-47.68 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 an 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 47.47-47.68. 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 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 section 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 section 
2 of the PACA; or (3) the firm has failed to pay a reparation award 
under section 7 of the PACA.

Proposed Rule

    On July 3, 1995, we proposed 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 the disciplinary 
proceedings and the responsibly connected hearings are based upon 
identical or closely-related facts, and because the sanctions are 
related, such a procedure eliminates the need for duplicative 
litigation. The procedure we proposed 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 would file a petition for review with the Office of the 
Hearing Clerk, and the petition would 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 relationships between more than one 
individual and one particular PACA licensee would 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

[[Page 11503]]
sanctions against Able, Jones and Smith arise under PACA section 
8(b)(3) solely from Acme's failure to pay one or more reparation awards 
under PACA section 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.

Comments on the Proposed Rule

    We solicited comments concerning the proposal for a 30-day comment 
period ending August 2, 1995. We received no comments from members of 
the public. However, upon thorough review of the rule as proposed, we 
have determined that several minor changes are appropriate in order to 
better reflect the intent of the proposal.
    We have amended 7 CFR 1.132, Definitions, to add the definition of 
``petitioner.'' This obviates any confusion with respect to the 
denomination of the parties to a proceeding pursuant to the PACA. The 
person filing a petition for review shall be called ``petitioner.''
    In Sec. 1.133(b)(2), we have clarified in the final version that 
the new procedures apply whenever there is an issue of responsibly 
connected status where, for whatever reason, a licensee is potentially 
subject to license suspension or revocation. Thus, the new procedures 
apply whether the potential license suspension or revocation stems from 
alleged violation of 7 U.S.C. 499b (unfair practices), 7 U.S.C. 499h(b) 
(employment violations), or as provided in 7 U.S.C. 499g(d) (failing to 
pay reparation awards).
    We are also modifying language in the final version of 7 CFR 1.136 
to clarify that the Chief, PACA Branch, must file the record with the 
hearing clerk 10 days after service of the petition for review upon the 
Chief, PACA Branch.

Conclusion

    Based on the rationale in the proposed rule and this rulemaking 
document, we are adopting the provisions of the proposal as a final 
rule except as previously discussed in this rulemaking document and 
except for minor editorial changes for clarity.

Executive Order 12866 and Regulatory Flexibility Act

    The Secretary has determined that this final 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 rule has been determined not significant for purposes of 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget.

Executive Order 12778

    This rule has been reviewed under Executive Order 12778, Civil 
Justice Reform. (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 rule 
since the 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 part 1 and 7 CFR 
chapter I are amended as follows:

PART 1--ADMINISTRATIVE REGULATIONS

    1. The authority citation for part 1, Subpart H, continues to read 
as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 61, 87e, 149, 150gg, 162, 163, 
164, 228, 268, 499o, 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, 11, 117, 120, 122, 127, 134e, 134f, 
135a, 154, 463(b), 621, 1043; 43 U.S.C. 1740; 7 CFR 2.35, 2.41.


Sec. 1.131  [Amended]

    2. Section 1.131 is amended as follows:
    a. In paragraph (a), in the listing, by adding ``1(9),'' 
immediately after the entry ``Perishable Agricultural Commodities Act, 
1930, sections'' and immediately before ``3(c)''.
    3. Section 1.132 is amended by adding, in alphabetical order, a new 
definition to read as follows:


Sec. 1.132  Definitions.

* * * * *
    Petitioner means an individual who has filed a petition for review 
of a determination that the individual is responsibly connected to a 
licensee within the meaning of 7 U.S.C. 499a(9).
* * * * *
    4. Section 1.133 is amended as follows:
    a. In paragraph (b), by revising the paragraph heading; and
    b. In paragraph (b), by redesignating paragraph (b)(2) as paragraph 
(b)(3), and by adding a new paragraph (b)(2), to read as follows:


Sec. 1.133  Institution of proceedings.

* * * * *
    (b) Filing of complaint or petition for review. * * * (2) Any 
person determined by the Chief, PACA Branch, pursuant to 7 CFR 47.47-
47.68 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 499h(b) or as provided in 7 U.S.C. 499g(d) shall be 
entitled to institute a proceeding under this section and to have 
determined the facts with respect to such responsibly connected status 
by filing with the Hearing Clerk a petition for review of such 
determination.
* * * * *
    5. Section 1.135 is amended as follows:
    a. By revising the section heading;
    b. By designating the text of current Sec. 1.135 as paragraph (a), 
and by adding a heading to newly designated paragraph (a); and
    c. By adding paragraph (b), to read as follows:


Sec. 1.135  Contents of complaint or petition for review.

    (a) Complaint. * * *
    (b) Petition for review. The Petition for Review of responsibly 
connected status

[[Page 11504]]
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.
    6. Section 1.136 is amended by adding a sentence at the end of 
paragraph (a) to read as follows:


Sec. 1.136  Answer.

    (a) * * * As response to a petition for review of responsibly 
connected status, the Chief, PACA Branch, shall within ten days after 
being served by the Hearing Clerk with 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.
* * * * *
    7. Section 1.137 is 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 a 
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. The Judge shall consolidate for hearing with any 
proceeding alleging a violation of 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 alleging a violation of 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.
    8. Section 1.141 is amended as follows:
    a. By adding a new sentence after the first sentence of paragraph 
(a);
    b. By designating the text of paragraph (e) following the heading 
as paragraph (e)(1), and by adding a new paragraph (e)(2), to read as 
follows:


Sec. 1.141  Procedure for hearing.

    (a) * * * A petition for review shall be deemed a request for a 
hearing.* * *
* * * * *
    (e) Failure to appear. (1) * * *
    (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 voluntarily withdrawn his 
petition for review.
* * * * *

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

    9. The authority citation for part 47 continues to read as follows:

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


Sec. 47.47  Additional definitions.

    10. Section 47.47 is revised to read as follows:


Sec. 47.47  Additional definitions.

    The following definitions, which are in addition to those in 
Sec. 47.2 (a) through (h), shall be applicable to proceedings under 
Secs. 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 that 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]

    11. Section 47.49 is amended as follows:
    a. In paragraphs (a), (b), and (c), the words ``Regulatory Branch'' 
are removed each time they occur and the words ``PACA Branch'' are 
added in their place.
    b. Paragraph (d) is amended by removing all words appearing after 
``may file'' and adding in their place the words ``with the Hearing 
Clerk, pursuant to Sec. 1.130-1.151 of this title, a petition for 
review of the determination.''.
    c. Paragraphs (e) and (f) are removed.


Sec. 47.50 through 47.68  [Removed]

    12. Sections 47.50 through 47.68 are removed.

    Done in Washington, DC, this 29th day of February 1996.
Dan Glickman,
Secretary of Agriculture.
[FR Doc. 96-6693 Filed 3-20-96; 8:45 am]
BILLING CODE 3410-01-M