Rules of Practice

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

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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

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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]

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