[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