Rules of Practice

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