[Federal Register Volume 69, Number 43 (Thursday, March 4, 2004)]
[Notices]
[Pages 10288-10294]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4784]


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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[Docket No. FMCSA-2003-14794]


Guidance for the Use of Binding Arbitration Under the 
Administrative Dispute Resolution Act of 1996

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Guidance.

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SUMMARY: The Federal Motor Carrier Safety Administration (FMCSA), a 
modal administration within the U.S. Department of Transportation 
(DOT), announces the availability of its Guidance for the use of 
binding arbitration in civil penalty forfeiture proceedings in which 
the only issues remaining to be resolved are the amount of the civil 
penalty owed and the length of time in which to pay it. FMCSA will not 
agree to arbitrate maximum civil penalty cases issued pursuant to 
section 222 of the Motor Carrier Safety Improvement Act of 1999, or any 
cases that require interpretation of the regulations or analysis of 
important policy issues. The Guidance is located on the Internet at 
http://www.dms.dot.gov, under docket number FMCSA-2003-14794.

EFFECTIVE DATE: The Guidance becomes effective immediately upon 
publication in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Steven B. Farbman, (202) 385-2351, 
Federal Motor Carrier Safety Administration, Adjudications Counsel, 400 
7th Street, SW., Washington, DC 20590. Office hours are from 9 a.m. to 
5:30 p.m. e.s.t., Monday through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION: On March 31, 2003, FMCSA published a notice 
in the Federal Register (68 FR 15549) announcing the issuance for 
public comment of its proposed Guidance for the use of binding 
arbitration as an alternative dispute resolution technique in civil 
penalty forfeiture proceedings in which the only issues remaining to be 
resolved are the amount of the civil penalty owed and the length of 
time in which to pay it. In response to a petition from the parties, or 
as a result of the Chief Safety Officer's independent review of case 
pleadings, the Chief Safety Officer will determine if a case is 
appropriate for arbitration and notify the parties in writing that the 
case will be referred to arbitration with the consent of both parties. 
A detailed explanation of the notification and consent process is 
provided in the Questions and Answers portion of the Guidance. Maximum 
civil penalty cases issued pursuant to section 222 of the Motor Carrier 
Safety Improvement Act of 1999 and cases requiring interpretation of 
the regulations or analysis of important policy issues will not be 
selected for binding arbitration. FMCSA will modify or terminate the 
use of binding arbitration if there is reason to believe that 
continuation of this process will be inconsistent with the goals and 
objectives of the Federal Motor Carrier Safety Regulations or Hazardous 
Materials Regulations.
    FMCSA's Guidance, developed pursuant to the Administrative Dispute 
Resolution Act (ADRA) of 1996 (Pub. L. 104-320, 110 Stat. 3870 (October 
19, 1996) (now codified at 5 U.S.C. 571-583)), had been published in 
full on the

[[Page 10289]]

Internet. As was stated in the Federal Register notice published on 
March 31, 2003, FMCSA had submitted the Guidance to the Attorney 
General for consultation and received his concurrence in accordance 
with section 575 of the ADRA. The notice called for public comments to 
be received by U.S. DOT Dockets on or before May 30, 2003.
    To date, no comments have been received by FMCSA on this proposal. 
FMCSA, nevertheless, is making a change to the Guidance. The Guidance 
stated that each party would present evidence supporting the penalty it 
considers appropriate for each violation and the case as a whole. It 
further stated that each party would present to the Arbitrator and the 
opposing party a sealed envelope containing the amount of its proposed 
penalty for each violation as well as a total penalty for the case. The 
Arbitrator, in turn, would determine the appropriate civil penalty for 
each violation as well as the total civil penalty for the case. 
(Emphasis added.) Upon further review, the Agency has concluded that 
having a civil penalty determination made for each violation as well as 
for the entire case could lead to unwarranted results. Under this 
scenario, it would be possible for the Arbitrator to select one party's 
proposed civil penalty for several of the violations, but select the 
other party's total civil penalty as being closest to his or her own 
figure. This will lead to confusion, and the Agency's goal of a more 
efficient and effective resolution of the large volume of adjudication 
cases before FMCSA's Chief Safety Officer may be jeopardized. 
Accordingly, the parties will present evidence and a proposed civil 
penalty only for the case as a whole. The Arbitrator, in turn, will 
determine the civil penalty for the entire case and select the proposal 
that is closer to his or her determination. FMCSA has also added 
language to clarify that the Arbitrator will make a payment plan 
determination if the carrier has requested one. The Attorney General 
has approved the Agency's arbitration concept and does not require that 
these changes be submitted for his concurrence.
    FMCSA's issuance of this Guidance satisfies the requirements 
regarding binding arbitration specified by section 575 of the ADRA of 
1996, and addresses use of binding arbitration in a manner consistent 
with FMCSA's dispute resolution process and its procedural rules of 
practice at 49 CFR part 386. The Guidance may be located on the 
Internet at http://www.dms.dot.gov, under docket number 2003-14794.

    Issued on: February 17, 2004.
Annette M. Sandberg,
Administrator.

Guidance for the Use of Binding Arbitration Under the Administrative 
Dispute Resolution Act of 1996

Dated: February 6, 2004.

Summary

    The primary mission of the U.S. Department of Transportation's 
Federal Motor Carrier Safety Administration (FMCSA) is to prevent 
commercial motor vehicle-related fatalities and injuries. FMCSA 
contributes to reducing crashes and ensuring commercial motor vehicle 
safety through its enforcement of safety regulations, including the 
assessment of civil penalties.
    Because of the large volume of cases before FMCSA's Chief Safety 
Officer for adjudication, the FMCSA has begun to explore whether 
alternative dispute resolution might lead to a more efficient and 
effective enforcement program. This Guidance for the Use of Binding 
Arbitration is being proposed to expand the options for adjudication 
available to motor carriers, brokers, shippers, freight forwarders, and 
other individuals or entities engaged in the use of commercial motor 
vehicles in interstate transportation (hereafter referred to 
collectively as ``carriers''). Rather than submit to the Chief Safety 
Officer cases that only involve a question of the amount of civil 
penalty or terms of payment, carriers may elect to enter into binding 
arbitration.
    This Guidance explains arbitration and addresses critical issues 
relating to the use of binding arbitration. This Guidance provides that 
the use of binding arbitration is entirely voluntary. FMCSA believes 
that, in many cases, the use of binding arbitration can provide 
significant benefits for the agency and the carriers and that this 
Guidance would provide FMCSA with another tool to help achieve its goal 
of effective, efficient, and fair resolution of civil penalty 
enforcement cases. This program may be terminated, modified, or 
permanently adopted as part of the FMCSA's enforcement program in the 
discretion of the Chief Safety Officer (CSO).
    This Guidance is being issued after consultation with the Attorney 
General, pursuant to 5 U.S.C. 575(c).

Background

Alternative Dispute Resolution

    Alternative Dispute Resolution (ADR) describes a variety of 
problem-solving processes available to parties who are ready, willing 
and able to try them in lieu of litigation or other adversarial 
proceedings to resolve disagreements. ADR gives parties an opportunity 
to talk with each other directly under the guidance of a dispute 
resolution professional. ADR processes are generally designed to reduce 
costs, avoid the delays of judicial proceedings, protect the privacy of 
the parties, and increase the level of compliance by involving 
decisionmakers in the process.
    In 1990, President George H.W. Bush signed into law the 
Administrative Dispute Resolution Act of 1990.\1\ The Act defines 
``alternative means of dispute resolution'' to include any procedure 
that is used to resolve issues in controversy, including mediation, 
facilitation, conciliation, fact-finding, mini-trials, use of an 
ombuds, and arbitration. The use of ADR processes was intended to be 
and is voluntary (``if the parties agree to such proceeding'' \2\), and 
it is used in place of traditional adjudication or other formal 
processes. Among other things, the Act required agencies to adopt an 
ADR policy and provide ADR training. These procedural requirements have 
resulted in the increased use of ADR within the Federal government.
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    \1\ Pub. L. 101-552, 104 Stat. 2736 (codified at 5 U.S.C. 571).
    \2\ ``An agency may use a dispute resolution proceeding for the 
resolution of an issue in controversy that relates to an 
administrative program, if the partis agree to such proceeding.'' 
Id. at Sec.  572(a).
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    The 1990 Act expressly authorized the use of arbitration among 
several ADR techniques available to federal agencies for purposes of 
dispute resolution, but specifically permitted agency heads to ``opt 
out'' of arbitration awards:
    (c) The head of any agency that is a party to an arbitration 
proceeding conducted under this subchapter is authorized to terminate 
the arbitration proceeding or vacate any award issued pursuant to the 
proceeding before the award becomes final by serving on all other 
parties a written notice to that effect, in which case the award shall 
be null and void.
    The Administrative Dispute Resolution Act of 1996 \3\ was enacted 
because of the sunset of the 1990 Act. The primary purpose of this new 
statute was to reauthorize the 1990 Act. In addition, it enhanced 
confidentiality protections, simplified the process for acquiring 
neutrals by addressing the development of procedures for obtaining 
neutral third parties as mediators on an expedited basis, and

[[Page 10290]]

authorized fully binding arbitration. The ``opt out'' feature of the 
1990 Act--which rendered federal agency arbitrations less than 
``binding''--was eliminated. The 1996 Act specifically permits federal 
agencies to use ``binding arbitration'' to resolve ``issues in 
controversy.'' In addition, the 1996 Act requires that agencies issue 
guidance as a prerequisite to agencies' use of binding arbitration, in 
consultation with the Attorney General. 5 U.S.C. 575(c).
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    \3\ Pub. L. 104-320, 110 Stat. 3870 (codified at 5 U.S.C. 571).
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    In August 2000, the Federal ADR Council under the leadership of the 
Attorney General approved and endorsed a publication entitled 
``Developing Guidance for Binding Arbitration: A Handbook for Federal 
Agencies (the ``Handbook''). The Handbook was created to assist 
agencies in developing policy for the use of binding arbitration.
    In June 2002, Secretary of Transportation Norman Y. Mineta 
announced a Statement of Policy on ADR. The Department of 
Transportation is committed to advancing its national transportation 
goals through ADR. The Department is using ADR in a variety of areas 
including workplace issues, issuance of regulations, contract and grant 
award and administration, litigation brought by or against the 
Department, and other interactions with the public and the regulated 
community. Because of the volume of cases awaiting a decision of its 
Chief Safety Officer, FMCSA has begun to explore whether ADR may lead 
to a more efficient and effective enforcement program.

FMCSA's Enforcement Program

    The civil penalty enforcement process begins with a compliance 
review that is conducted by an FMCSA Safety Investigator or by State 
enforcement personnel pursuant to the Federal Motor Carrier Safety 
Assistance Program. (Both hereafter referred to as ``SI''). After 
conducting a review of a carrier's operations, the SI discusses the 
review with carrier management personnel. The SI reports on the 
violations discovered, makes recommendations about corrective action 
and future compliance, and provides the motor carrier with a proposed 
safety rating (satisfactory, conditional, or unsatisfactory).
    FMCSA's State Director or Division Administrator ultimately reviews 
the case presented by the SI and decides whether the violations 
documented during the CR warrant a civil penalty enforcement action. If 
so, the agency issues a Notice of Claim (NOC) to the carrier. The NOC 
notifies the carrier of the violations discovered during the CR, 
asserts a claim for the civil penalty applicable to each violation and 
the case in total, and informs the carrier how to respond to the NOC.
    A carrier may respond to the NOC by paying the civil penalty, 
requesting a hearing before an Administrative Law Judge, or requesting 
the CSO to consider the merits of the case on the written record. As 
part of its reply, the carrier may request an opportunity for 
settlement discussion. If the carrier ignores the NOC or does not 
timely reply, the Field Administrator may advise the carrier that it 
has defaulted, that the NOC has become the final agency order, and that 
the carrier owes the civil penalty asserted in the NOC.
    The Service Center Enforcement Team is led by an Enforcement 
Program Manager who negotiates with the carrier over the amount of the 
civil penalty and the terms for payment. To allow the parties an 
opportunity to resolve the matters without resorting to formal 
proceedings, the CSO encourages negotiation of the civil penalty and 
the terms of payment, especially where there is evidence that the 
carrier has undertaken corrective action prior to issuance of the NOC. 
See, e.g., In the Matter of Four Star Transport, Inc., Docket No. FMCSA 
2000-7070-6, March 9, 2001 and In the Matter of AGG Enterprises, Inc., 
Docket No. FMCSA-2001-8689-3, December 17, 2001.
    When the agency and the carrier cannot agree that a violation 
occurred or agree to the amount of the civil penalty, agency attorneys 
will file before the CSO a Motion for Final Order, which is the 
equivalent of a motion for summary judgment. The carrier typically 
responds to the motion and, based on the submission of the parties, the 
CSO issues the final agency decision addressing the violations and, if 
appropriate, assessing the civil penalty.
    Pursuant to 49 U.S.C. 521(b)(2)(D), the amount of the civil penalty 
for violations of the Federal Motor Carrier Safety Regulations shall 
take into effect ``the nature, circumstances, extent, and gravity of 
the violation committed and, with respect to the violator, the degree 
of culpability, history of prior offenses, ability to pay, effect on 
ability to continue to do business, and such other matters as justice 
and public safety may require. In each case, the assessment shall be 
calculated to induce further compliance.'' The amount of the civil 
penalty for violations of the Hazardous Materials Regulations shall 
take into account the factors listed at 49 U.S.C. 5123(c), which are 
nearly identical to those listed in 49 U.S.C. 521(b)(2)(D).

Binding Arbitration

    Binding arbitration is the dispute resolution process most like 
adjudication. In binding arbitration, the parties agree to use a 
mutually selected decisionmaker to hear their dispute and resolve it by 
rendering a decision or award that is binding on the parties. Like 
litigation, binding arbitration is an adversarial, adjudicative process 
designed to resolve the specific issues submitted by the parties. 
Binding arbitration differs significantly from litigation in that it 
does not require conformity with the legal rules of evidence, and the 
proceeding is conducted in a private rather than a public forum. 
Binding arbitration awards typically are enforceable by courts, absent 
defects in the arbitration procedure. Appeal from arbitration awards, 
pursuant to the Federal Arbitration Act, 9 U.S.C. 10, is generally 
limited to fraud or misconduct in the proceedings.
    FMCSA will use a form of arbitration referred to as ``Night 
Baseball.'' Under this format, the Arbitrator will determine the 
appropriate civil penalty without knowledge of the parties' proposals. 
The actual award will be the party's figure that is closer to the 
Arbitrator's determination. The process for reaching the final award 
will be as follows: Each party will present evidence supporting the 
penalty it considers appropriate for the case as a whole. Evidence will 
be presented in accordance with the procedures established by the 
parties within the Arbitration Agreement. No evidence shall be offered 
or accepted concerning whether the violation(s) occurred because the 
parties concede the violations as a condition of arbitration. Neither 
written submissions nor oral argument will contain any reference to the 
amount of the civil penalty proposed by the party. At a time specified 
by the Arbitrator, each party will present to the Arbitrator and to the 
opposing party a sealed envelope containing the amount of its total 
proposed civil penalty for the case and, if necessary, a proposed 
payment plan supported by the evidence. Before opening the envelopes, 
the Arbitrator will determine the total civil penalty and, if 
necessary, a payment plan. His determination will be provided in 
writing to the parties. The Arbitrator will then open the envelopes and 
select the civil penalty and payment plan closer to the Arbitrator's 
determinations. The actual award will be the party's figure and payment 
plan that is closer to the Arbitrator's determination. It is possible 
for the Arbitrator to select the

[[Page 10291]]

civil penalty proposed by one party and the payment plan proposed by 
the other party.
    As discussed later in this guidance, the civil penalty amount 
proposed by the parties may not be set lower than the statutory minimum 
for any violation nor higher then the amount assessed in the NOC. 
Because the 1996 Act requires the parties to agree on a maximum award, 
FMCSA proposes that the maximum award be set at the amount assessed in 
the NOC.

Statutory Considerations for Not Using Arbitration

    The 1996 Act states that agencies should not consider using any 
form of ADR, including binding arbitration, if:
    (1) A definitive or authoritative resolution of the matter is 
required for precedential value, and such a proceeding is not likely to 
be accepted generally as an authoritative precedent;
    (2) The matter involves or may bear upon significant questions of 
Government policy that require additional procedures before a final 
resolution may be made, and such a proceeding would not likely serve to 
develop a recommended policy for the agency;
    (3) Maintaining established policies is of special importance, so 
that variations among individual decisions are not increased and such a 
proceeding would not likely reach consistent results among individual 
decisions;
    (4) The matter significantly affects persons or organizations who 
are not parties to the proceeding;
    (5) A full public record of the proceeding is important, and a 
dispute resolution proceeding cannot provide such a record; or
    (6) The agency must maintain continuing jurisdiction over the 
matter with authority to alter the disposition of the matter in the 
light of changed circumstances, and a dispute resolution proceeding 
would interfere with the agency's fulfilling that requirement.

See 5 U.S.C. 572(b).
    Accordingly, unless the Chief Safety Officer determines that the 
use of binding arbitration will be in the best interests of the 
government, a case will not be submitted to binding arbitration.

Other Statutory Considerations

    The 1996 Act includes a number of provisions relating to 
arbitration. FMCSA's use of binding arbitration will be modeled on 
these provisions.
Authorization of Arbitration
    1. The decision to arbitrate must be voluntary on the part of all 
parties to the arbitration. (See 5 U.S.C. 575(a)(1)).
    2. An agreement to arbitrate must be in writing. It must set forth 
the subject matter submitted to the arbitrator, and must specify the 
maximum award that may be granted by the arbitrator. (See 5 U.S.C. 
575(a)(2)).
    3. FMCSA shall not require anyone to consent to arbitration as a 
condition of entering into a contract or obtaining any other benefit. 
(See 5 U.S.C. 575(a)(3)).
    4. The Field Administrator who offers to use arbitration has the 
authority to enter into a settlement concerning the matter after 
consent to the use of arbitration by the Chief Safety Officer. (See 5 
U.S.C. 575(b)(1) and (2)).
Enforcement of Arbitration Agreements (5 U.S.C. 576).
    Arbitration agreements are enforceable pursuant to 9 U.S.C 4.
Arbitrators (5 U.S.C. 577)
    1. The parties to an arbitration are entitled to participate in 
selecting an arbitrator. (See 5 U.S.C. 577(a)).
    2. An arbitrator shall not have an official financial or personal 
conflict of interest with respect to the issue in controversy, unless 
that interest is fully disclosed in writing and all parties agree that 
he/she may serve as the arbitrator. (See 5 U.S.C. 573, 577(b)).
Authority of the Arbitrator (5 U.S.C. 578)
    1. An arbitrator may regulate the course and conduct of the 
arbitration hearing. (See 5 U.S.C. 578(1)).
    2. An arbitrator may administer oaths and affirmations. (See 5 
U.S.C. 578(2)).
    3. An arbitrator may compel the attendance of witnesses and the 
production of documents only to the same extent the agency involved is 
otherwise authorized by law to do so. (See 5 U.S.C. 578(3)).
    4. An arbitrator may make awards. (See 5 U.S.C. 578(4)).
Arbitration Proceedings (5 U.S.C. 579)
    1. The arbitrator shall set the time and place for the arbitration 
hearing and shall notify the parties of same at least five days before 
the hearing is to take place. (See 5 U.S.C. 579(a)
    2. Parties are entitled to a record of the arbitration hearing. Any 
party wishing a record shall: (1) Make the arrangements for it; (2) 
notify the arbitrator and other parties that a record is being 
prepared; (3) supply copies to the arbitrator and the other parties; 
and (4) pay all costs, unless the parties have agreed to share the 
costs or the arbitrator determines that the costs should be 
apportioned. (See 5 U.S.C. 579(b)(1)-(4)).
    3. At any arbitration hearing, parties are entitled to be heard, to 
present evidence, and to cross-examine witnesses. The arbitrator may, 
with the consent of the parties, conduct the hearing by telephone, 
television, computer or other electronic means, if each party has the 
opportunity to participate. (See 5 U.S.C. 579(c)(1) and (2)).
    4. The arbitrator may receive any oral or documentary evidence that 
is not irrelevant, immaterial, unduly repetitious, or privileged. (See 
5 U.S.C. 579(4)).
    5. The arbitrator shall interpret and apply any relevant statutes, 
regulations, legal precedents and policy directives. (See 5 U.S.C. 
579(5)).
    6. No party shall have any unauthorized ex parte communication with 
the arbitrator relevant to the merits of the proceeding, unless the 
parties agree. If a party violates this provision, the arbitrator shall 
ensure that a memorandum of the communication is included in the 
record, and that an opportunity for rebuttal is allowed. The arbitrator 
may require the party who engages in an unauthorized ex parte 
communication to show cause why the issue in controversy should not be 
resolved against it for the improper conduct. (See 5 U.S.C. 579(d)).
Arbitration Awards
    1. An arbitration award shall include a brief informal discussion 
of the factual and legal bases for the award. Formal findings of fact 
and law are not required. (See 5 U.S.C. 580(a)(1)).
    2. A final award is binding on the parties and may be enforced 
pursuant to 9 U.S.C. 9-13. (See 5 U.S.C. 580(c)).
    3. An arbitration award may not serve as an estoppel in any other 
proceeding and may not be used as precedent in any factually unrelated 
proceeding. (See 5 U.S.C. 580(d)).
Judicial Review (5 U.S.C. 581)
    1. Any action for review of an arbitration award must be made 
pursuant to sections 9 through 13 of title 9, U.S. Code. (See 5 U.S.C. 
581(a)). A court may vacate an award where the award was procured by 
corruption, fraud, or undue means; where there was arbitrator 
partiality, corruption, misconduct or misbehavior; or where an 
arbitrator has exceeded or imperfectly executed the arbitrator's 
powers.
    2. A decision by an agency to use or not to use arbitration shall 
be committed to the discretion of the agency and shall not be subject 
to judicial review, except that arbitration shall only be subject to 
judicial review under section 10(c) of title 9, U.S. Code. (See 5 
U.S.C. 581(b)).

[[Page 10292]]

Questions and Answers on FMCSA's Use of Binding Arbitration

    Issue 1: For what types of cases will FMCSA be willing to use 
binding arbitration?
    Response: FMCSA is generally willing to use binding arbitration for 
the resolution of cases in which the only questions are the amount of, 
and the length of time permitted to pay, the civil penalty. FMCSA will 
not agree to arbitrate maximum penalty cases issued pursuant to section 
222 of the Motor Carrier Safety Improvement Act of 1999, Pub. L. 106-
159, 113 Stat. 1748 (December 9, 1999), 49 U.S.C. 521 note, or any 
cases that deal with an interpretation of the regulations or with 
important policy issues.
    Issue 2: How and by whom will the decision to arbitrate be made?
    Response: The decision to arbitrate is strictly that of the 
parties. As with any other form of ADR, arbitration must be a 
completely voluntary process. Either party may petition the Chief 
Safety Officer for a determination that the case be set for binding 
arbitration and that the Chief Safety Officer issue a Notification of 
Arbitration.
    Issue 3: Who will have authority to authorize arbitration?
    Response: The Chief Safety Officer will decide which cases are 
appropriate for ADR. Again, this class of cases will include only those 
that involve solely a monetary dispute and that do not concern FMCSA 
policy or procedure. The Chief Safety Officer has the discretion to 
delegate this authority to the FMCSA Adjudications Counsel.
    Issue 4: Who has the authority to enter into settlement for FMCSA? 
May this authority be delegated?
    Response: A Field Administrator has the authority to settle a case 
for FMCSA. This authority may be delegated to the Enforcement Program 
Manager.
    Issue 5: How will the cap on the award be established?
    Response: The maximum arbitration award will be set at the civil 
penalty amount assessed in the NOC, or amended NOC, if one is issued.
    Issue 6: Is there a limitation on the length of time for a payment 
plan, if the Arbitrator orders a payment plan?
    Response: The maximum period that the Arbitrator may permit for a 
payment plan is 60 months from the date of the issuance of the Award.
    Issue 7: Who will negotiate the rules and selection of the 
arbitrator?
    Response: The parties must mutually agree upon the arbitrator and 
will have several options from which to choose, including: (1) 
Department of Transportation Board of Contract Appeals Judges or 
representatives from other government agencies who have been trained in 
arbitration; (2) Uncompensated Neutrals from local communities; and (3) 
Compensated Neutrals from outside the government, whose costs are to be 
shared by agreement of the parties. For FMCSA, the decision regarding 
selection of the arbitrator will be that of the Field Administrator. 
The parties will establish the procedural rules that will govern any 
binding arbitration, with input from the selected arbitrator, and 
include the rules in the Arbitration Agreement.
    Issue 8: Who will draft the Arbitration Agreement?
    Response: The parties will draft the Arbitration Agreement, with 
substantive input from the selected arbitrator. A sample Arbitration 
Agreement is included in Appendix A.
    Issue 9: What will the process be for entering into arbitration?
    Response: Once the Chief Safety Officer has determined that a case 
is appropriate for arbitration, he/she will notify the parties to the 
dispute by issuing a Notification of Arbitration, in writing, 
indicating that that the case may be referred to arbitration. The 
Notification will require the parties to indicate agreement or their 
objection to submitting the case to arbitration. The Notification will 
require that each party return (serve) the Notification form--with 
their choice so noted--within 15 days of the date on the Chief Safety 
Officer's Notification. If the carrier opts for arbitration, the matter 
will be so assigned unless the Field Administrator or his/her designee 
submits on the Notification form argument against arbitration. The 
burden will be upon the Field Administrator to demonstrate that the 
case involves a question of regulatory interpretation and/or an 
important policy issue unsuitable for arbitration. After the Chief 
Safety Officer considers the Field Administrator's argument and renders 
a decision, that decision is final.
    Issue 10: How can FMCSA encourage the efficiency of the arbitration 
process?
    Response: Only single arbitrators (rather than panels of 
arbitrators) will handle these cases. To assure maximum efficiency of 
the arbitration process, subject to the consent and cooperation of the 
carrier, FMCSA will encourage:
    A. The resolution of the controversy by means of document review or 
by arbitration via telephone conference in appropriate cases, with the 
consent of the carrier.
    B. The arbitrator to establish reasonable deadlines for any hearing 
and rendering of an award. These timeframes shall be incorporated into 
the Arbitration Agreement.
    Issue 11: What is the arbitrator's role?
    Response: Consistent with the ADRA, the arbitrator will have the 
authority to:
    [sbull] Regulate the course and conduct of arbitration hearings;
    [sbull] Administer oaths;
    [sbull] Compel attendance of witnesses and production of evidence, 
to the extent that the agency is authorized to do so by law;
    [sbull] Issue awards.
    The parties, as part of their Arbitration Agreement, may include 
any specific additional powers they wish the arbitrator to have and 
provide the arbitrator broad discretion in terms of efficient case 
management.
    Issue 12: Will FMCSA permit the use of a panel of arbitrators in 
some circumstances?
    Response: Because of the costs of a panel of arbitrators and the 
lack of complexity in these cases, FMCSA will not agree to a panel of 
arbitrators.
    Issue 13: What selection criteria will be considered in choosing an 
arbitrator?
    Response: The primary criteria for selecting an arbitrator will be: 
(1) Overall reputation of the arbitrator in terms of competence, 
integrity, and impartiality; (2) availability of the arbitrator during 
the periods most convenient for the parties; (3) relative cost; (4) the 
absence of any actual or potential conflict of interest; and (5) 
geographic proximity of the proposed arbitrator to the parties and to 
witnesses if the Arbitration Agreement calls for a hearing.
    Issue 14: Will FMCSA agree to allow non-attorneys to represent a 
party, or for a party to appear pro se at the arbitration?
    Response: Yes. The Rules of Practice for Motor Carrier, Broker, 
Freight Forwarder, and Hazardous Materials Proceeding, 49 CFR part 386, 
are designed to be readily accessible to small business enterprises and 
other entities. Carriers often respond to notices of claim without 
assistance of counsel. Before approving any Arbitration Agreement 
entered into by an unrepresented carrier, the Arbitrator shall require 
such carrier to execute a statement acknowledging the risks and 
limitations inherent in any arbitration.
    Issue 15: What should an Arbitration Agreement include?
    Response: The Agreement should include the following:
    1. The names of the parties.
    2. The issues being submitted to binding arbitration.
    3. The maximum award that the arbitrator may direct.
    4. Any other conditions limiting the range of possible outcomes, 
including

[[Page 10293]]

but not limited to, the statutory minimum for violations of the 
Hazardous Materials Regulations as set forth at 49 U.S.C. 5123(a).
    5. The scope of the arbitration. This will limit time and cost and 
give the arbitrator power to be a ``case manager.'' A sample case 
management provision might read:
    ``The Arbitrator is expected to assume control of the process and 
to schedule all events as expeditiously as possible, to insure that an 
award is issued no later than -- days from the date of this Agreement. 
The penalty will be due to FMCSA thirty days after service of the 
Arbitration Award by the Arbitrator unless a payment plan is ordered by 
the Arbitrator.''
    6. References to all provisions of the 49 CFR part 386 rules 
regarding discovery and the conduct of hearings that the parties may 
wish to apply to the arbitration process.
    7. The name of the arbitrator, the amount of compensation (if any) 
and how it will be paid. (Note: No Agreement shall provide for deposits 
in an escrow account to pay for expenses of the proceeding in advance 
of expenses being incurred.)
    8. The date when the arbitration will commence.
    9. The types of remedies available.
    10. A confidentiality provision referring to the 1996 Act and 
stating that neither the Arbitration Agreement nor the arbitration 
award will be considered confidential.
    11. The bases for appeal.
    12. The arbitration hearing is open only to the parties, their 
representatives and the arbitrator. The hearing is not a public forum.
    13. The Arbitrator's decision will be issued in writing, and will 
state the factual and legal bases and amount of the penalty awarded by 
the Arbitrator.
    14. The carrier will have thirty (30) days from the date of service 
of the award to pay the amount awarded unless the Arbitrator orders a 
payment plan.
    15. The arbitration award is final and has the same force and 
effect as any final agency order. Thus, failure to pay the determined 
award triggers the same Agency remedies, as would the failure to pay a 
civil penalty award entered by the Chief Safety Officer.
    A Sample Arbitration Agreement is included in Appendix A.
    Issue 16: How will FMCSA pay the arbitrator(s)?
    Response: The 1996 Act allows an agency to use, with or without 
reimbursement, the services and facilities of other Federal agencies, 
State, local and tribal governments, public and private organizations 
and agencies, and individuals, with the consent of such agencies, 
organizations, and individuals, and without regard to the provisions of 
31 U.S.C. 1342 (regarding the acceptance of voluntary services). In 
addition, the 1996 Act permits selection of all ADR neutrals, including 
arbitrators, to be done non-competitively. FMCSA and the carrier must 
agree on the selection of the arbitrator.
    FMCSA is considering three categories of potential arbitrators: (1) 
Department of Transportation Board of Contract Appeals Judges or 
representatives from other government agencies who have been trained in 
arbitration; (2) Uncompensated Neutrals from local communities; and (3) 
Compensated Neutrals from outside the government, whose costs are to be 
shared by agreement of the parties. To limit costs, FMCSA is 
considering using Board of Contract Appeals Judges and Uncompensated 
Neutrals from local communities to serve as arbitrators. If the parties 
cannot agree on this no-cost option, the parties will agree in advance 
to share any arbitrator fees and costs, the costs of any transcripts, 
or other costs, all of which will be paid after the award is issued.
    FMCSA will not escrow funds or pay in advance for any such costs.
    Issue 17: Is FMCSA willing to use ``administered arbitration''?
    Response: No. Because of the cost implications, FMCSA will not 
agree to administered arbitration, arbitration administered by an 
outside ADR organization.
    Issue 18: What must the arbitration award include?
    Response: The arbitration award need not be in the form of formal 
findings of fact and conclusions of law, but must be in writing and at 
least provide in summary form the monetary amount of the award, if any, 
and the factual and legal basis for the arbitrator's decision. The 
award will be subject to the ``cap'' and any other limitations agreed 
upon by the parties.
    Arbitration awards are not confidential documents. Awards shall be 
entered into the FMCSA docket for the case. Additionally, awards may be 
posted on the FMCSA Web site and/or published in the Federal Register.
    Issue 19: Will FMCSA allow arbitration on the documents only, 
without a hearing, or a telephonic hearing? If so, in what 
circumstances?
    Response: While the parties to the arbitration are entitled to be 
heard, to present evidence, and to cross-examine witnesses appearing at 
a hearing, due to the nature of these cases, FMCSA encourages 
arbitration on the documents only without a hearing, or a telephonic 
hearing. This has the advantage of saving time, money, and avoiding 
scheduling conflicts. The Arbitration Agreement should allow the 
parties to request a hearing. The Arbitration Agreement should also 
allow the arbitrator discretion to call for an in-person hearing should 
the arbitrator determine that credibility may be a factor in the 
outcome of the award.
    The arbitrator may also conduct, with the consent of the parties, 
all or part of a hearing by telephone, video conferencing, or computer 
as long as each party has an equal opportunity to participate.
    Issue 20: May an arbitration award be used as precedent in any 
other proceeding?
    Response: No, the arbitration award may not be used as precedent 
consistent with 5 U.S.C. 580(d). Nonetheless, by entering into 
Arbitration, the carrier has admitted, or the Chief Safety Officer has 
found, that FMCSA has an appropriate and defined factual basis for the 
violations, and that the violations may be considered in future 
enforcement action(s) by FMCSA.

Appendix A

Agreement to Submit to Binding Arbitration

Section One--Parties and Controversy

    The Federal Motor Carrier Safety Administration and --------
(''Carrier'') (collectively the ``Parties'') voluntarily agree to 
submit the following controversy arising from violations of the 
Federal Motor Carrier Safety Regulations to binding arbitration: 
(briefly describe the controversy).

Section Two--Assignment of Arbitrator

    We agree upon--------as the Arbitrator.

Section Three--Issues of Arbitration

    We agree that the Arbitrator shall be limited to the following 
issues of fact and law: (set forth each issue with specificity, 
including the question of whether a payment plan is appropriate).

Section Four--Costs of Arbitration

    We agree to pay the Arbitrator a fee of $------(``the fee'') for 
the services as an arbitrator. The Fee is based on the issues 
specified in Section Three above.
    We agree to reimburse the Arbitrator for all reasonable out-of-
pocket expenses that the Arbitrator may incur for the arbitration. 
These expenses include but are not limited to: travel, lodging, and 
meals (consistent with Federal per diem standards), long distance 
charges, printing and copying, postage and courier fees.

Section Five--Minimum and Maximum Award

    We agree that the maximum award shall be (the amount demanded in 
the Notice of Claim). This amount is a total of the penalties

[[Page 10294]]

for each of the individual violations as follows:
    We also agree that the minimum award for violation of Hazardous 
Materials Regulations shall be no less than $250 per violation as 
set forth at 49 U.S.C. 5123(a).

Section Six--Management of the Proceeding

    We further agree that the arbitration proceeding will be 
conducted in accordance with procedures established in 49 CFR part 
386 for discovery and hearings. Additional rules and procedures for 
the arbitration may be negotiated and agreed upon by the Arbitrator 
and the Parties at any time during the arbitration process.
    We further agree that we shall faithfully observe this agreement 
and the applicable procedural rules and that we will abide by and 
perform any award rendered by the arbitrator.
    We agree that the Arbitrator will assume control of the process 
and will schedule all events as expeditiously as possible, to ensure 
that an award is issued no later than---- days from the date of this 
Agreement. The penalty will be due to FMCSA 30 days after service of 
the Arbitration Award by the Arbitrator unless the Arbitrator orders 
a payment plan.
    Consistent with the Rules of Practice for Motor Carrier, Broker, 
Freight Forwarder, and Hazardous Materials Proceedings, 49 CFR part 
386, Carriers may be represented by a representative of their choice 
including non-lawyers. Representatives and FMCSA counsel shall be 
responsive to the direction provided by the Arbitrator.
    We understand that neither party shall initiate or participate 
in an ex parte communication with the arbitrator relevant to the 
merits of the proceeding, unless the parties agree. If a party or 
its representative engages in an unauthorized ex parte 
communication, the arbitrator may resolve the case against the 
offending party. Before taking that action, however, the arbitrator 
must allow the offending party to show cause why the issue in 
controversy should not be resolved against it for improper conduct.

Section Seven--Arbitrator's Award

    We agree that the Arbitrator's decision will be issued in 
writing and will state the factual and legal bases and amount of the 
penalty awarded by the Arbitrator. We further agree that the 
arbitration award is final and has the same force and effect as any 
final agency order. Thus, failure to pay the determined award 
triggers the same Agency remedies, as would the failure to pay a 
civil penalty award entered by the Chief Safety Officer.

Section Eight--Confidentiality of the Proceeding

    We agree that the arbitration proceeding is not a public forum 
and will be restricted to the Parties, their representatives, and 
the Arbitrator. We acknowledge and agree that 5 U.S.C. 574 controls 
the confidentiality of the proceeding, and that neither the 
Arbitration Agreement nor the arbitration award may be considered 
confidential.

Section Nine--Judicial Review

    The award shall only be reviewable under the provisions of 5 
U.S.C. 581 and 9 U.S.C. 9-13.

Section Ten--Governing Law

    This agreement is entered into consistent with 5 U.S.C. 571 et 
seq., and we agree that Federal law shall govern this Arbitration. 
The arbitrator shall apply relevant statutory and regulatory 
requirements, legal precedents, and policy directives.

[FR Doc. 04-4784 Filed 3-3-04; 8:45 am]
BILLING CODE 4910-EX-P