FMCSA Concedes No Authority to Assess Civil Penalties By Final Agency Order for Certain Commercial Regulations By Administrative Enforcement Proceeding

By:      Gerald D. Borovick

The FMCSA concedes it cannot assess civil penalties for violations of the Federal “Commercial Regulations,” which includes the household goods Consumer Protection Regulations promulgated to protect individual shippers through the A.P.A. rules because Congress never delegated statutory authority conferring necessary jurisdiction to administratively adjudicate such violations and assess a civil penalty against the violator by final agency order.  Consequently, if FMCSA intends to recover civil penalties from the carrier for such violations, it must make a referral to the U.S. Department of Justice and the DOJ, if it takes the case, must file a civil action in the appropriate U.S. District Court under the venue statute permitting recovery of civil penalties in court for such Commercial Regulation violations.

What happened recently:

An enforcement case was brought in a California Federal court against an interstate moving company, with over 20 years’ of interstate household goods registration, by attorneys of the U.S. Department of Justice, acting in coordination with DOT/FMCSA counsel.  The complaint asserts four (4) instances in 2023 of transporting household goods from and to states including California and Massachusetts, over a 16-day period during which, it is alleged, the moving company’s operating authority registration was involuntarily revoked by the FMCSA due to failure to have evidence of insurance (in this case, $750,000 PI/PD public liability coverage) on file with the Agency for the motor carrier operating authority required for the commodity to be carried and CMVs to do the carrying; thereby demonstrating in a public way, such coverage was in force at the time of the moves.[1]  The DOT is seeking civil penalty of $37,400 per alleged violation, $149,600 total pursuant to 49 U.S.C. § 14901(d)(3) – for the so-called “unauthorized household goods transportation” violations.

Why this is a significant development for interstate household goods motor carriers:

This is the first case, to this writer’s knowledge, against an interstate mover for violation of statutes and regulations defined as the “commercial regulations” under Federal transportation law, where the Agency enforcement action is being obtained through the courts and not administratively – all because of a DOT ALJ decision.  In this writer’s opinion, the change in enforcement necessitating that such cases are brought in a U.S. District court is because of a 2019 decision by an administrative law judge; which held that the FMCSA does not have jurisdiction to seek civil penalties in such cases through administrative enforcement actions because Congress has not delegated such authority.[2]  Instead, according to the ALJ, the only venue for adjudicating such cases is in the district courts.  In a comprehensive, scholarly decision, the judge rejected the FMCSA’s assertion that when it comes to the commercial regulations, Congress delegated to it the authority to administratively adjudicate and assess civil penalties for violations.  Instead, after reviewing the statutory history and transfers of authority and delegated responsibilities from before and after the Interstate Commerce Commission, Federal Highway Administration and FMCSA, spanning a period of some 50 years, the judge concluded “[t]he FMCSA cannot . . . grant itself, by regulation or by ‘reasonable interpretation,’ the authority to adjudicate and assess civil penalties for violations of statutes where Congress has explicitly provided such venue shall be the U.S. district courts.”[3]

“. . . Congress has granted the FMCSA authority to investigate carriers to determine whether a violation of 49 U.S.C. Subtitle IV, Part B or the Commercial Regulations has occurred.  FMCSA has been granted the authority to enforce the Commercial Regulations by issuing an appropriate order or claiming a civil monetary penalty.  FMCSA has been granted the authority to settle or compromise such a claim for a civil money penalty.  But FMCSA has not been granted the authority to administratively adjudicate the claim and issue a final agency order assessing the civil money penalty.”  (emphasis added).[4]

The category of statutes and regulations which the mover in the California case is being sued are referred to collectively as the “commercial regulations.”

Significantly for purposes of this alert, the commercial regulations include the Federal Consumer Protection Regulations promulgated by the FMCSA under Title 49 Code of Federal Regulations, part 375 – i.e., the activities and rules an interstate mover is required to follow to protect individual shippers as described in the 2022 version of the FMCSA publication Your Rights and Responsibilities When You Move.

Examples of such Consumer Protection Regulations, which again, are a subset of the commercial regulations, include:

  • Failing to participate in an arbitration program;
  • Collecting more than the original amount of the binding estimate;
  • Failing to retain a copy of an inventory for each move performed for one year as an integral part of the bill of lading;
  • Failing to provide a bill of lading to an individual shipper and obtain from that shipper a signed and dated bill of lading at least 3 days prior to the move;
  • Providing a document which purports to release the carrier or agent from liability.

All such rules (and many more in 49 CFR, part 375) impose a minimum civil penalty of $2,000 per violation.

Background:

Among other Federal legal requirements for interstate transportation operations, interstate household goods motor carriers must follow two types of rules: the Federal Motor Carrier Safety Regulations (the “FMCSRs”) and the Federal Motor Carrier Commercial Regulations (the “FMCCRs”).  The FMCSRs (a/k/a the “safety regulations” or “safety rules”) include hours of service, driver qualification, vehicle maintenance, drug and alcohol testing).  As noted, the FMCCRs include the Consumer Protection Regulations protecting individual shippers promulgated by FMCSA under 49 CFR part 375.

Until the Riojas decision, the FMCSA would bring an enforcement case against a mover asserting violations of the FMCSRs and FMCCRs and claim civil penalties for each, seeking a final agency order confirming the violations and penalty amount.  The cases would be commenced by an administrative enforcement civil penalty proceeding by serving a “Notice of Claim” (the “NOC”).[5]

The NOC is a public charging document, providing official notice to the target, typically a motor carrier, of the allegations that FMCSA asserts it can prove, and that the target of the NOC (called the “Respondent”), must be prepared to meet.

What has not changed after Riojas, is the FMCSA’s jurisdiction over regulated entities, including household goods motor carriers, to obtain a final order through the administrative procedures authorized in the Rules of Practice for civil penalties for violations of the FMCSRs.  In such proceedings, the FMCSA essentially assumes the role of police officer, prosecutor, judge and jury for purposes of deciding what to charge and how high (subject to limits) the civil penalty should be – all through the administrative adjudication process governed by the Rules of Practice.

Currently, and because of Riojas, compliance reviews and other inspections of household goods motor carriers resulting in discovery of claimed violations of FMCSRs and FMCCRs for which the FMCSA (and perhaps an authorized State Partner) intends to take an enforcement action will be addressed in parallel tracks.  The FMCSA will issue a NOC citing violations of the FMCSRs (requiring the Respondent to timely reply and typically request certain types of administrative adjudication or binding arbitration or pay the claim).  Simultaneous with commencement by NOC, the FMCSA may also issue something called a “Letter of Probable Violation,” citing alleged violations of the FMCCRs.  FMCSA recently publicly described its “enforcement” activities against household goods motor carriers “where appropriate, by issuing Letters of Probable Violation” without elaboration.[6]

Agency Corrective Action after Riojas:

FMCSA tells its enforcement personnel that a Letter of Probable Violation (“LOPV”) is the “tool” used as the final FMCSA-initiated option in an effort to enforce commercial regulation violations that the FMCSA deems “Riojas affected.”  In order for a State FMCSA Division to issue the LOPV, the Division is required to obtain the “review and concurrence” from one of the four national FMCSA Service Center enforcement teams the Division serves.  Additionally, the LOPV must be reviewed and approved by the Assistant Chief Counsel for Enforcement and Litigation and Director of Enforcement, or their designees.

FMCSA identifies a policy entitled “Policy for Handling Riojas Affected Violations and Impacts to Existing Policies,” variously in its publicly available Electronic Field Operations Manual.

Indeed, in FMCSA’s publicly available “Operation Protect Your Move (OPYM) Final Report, a Nationwide Enforcement Initiative” states that enforcement personnel utilized a “significant number of LOPVs” in the 2023 OPYM, and that the LOPVs were reviewed in advance by enforcement personnel.  The Final Report notes the FMCSA in March of 2023, delivered two “specialized enforcement tool training sessions” attended by “more than 200 FMCSA staff” which training covered “Riojas prohibitions; [Notice of Enforcement Discretion Determination]; LOPV guidance.”

It would be helpful to know more about the FMCSA’s enforcement of commercial regulations against interstate household goods motor carriers after Riojas and more about the LOPV process.  There are many questions such as whether a LOPV is a condition precedent to the court action or instead, may FMCSA make a referral to the DOJ without one prior to heading to court.

When this writer recently informally requested a copy of the applicable “Policy for Handling Riojas Affected Violations and Impacts to Existing Policies” from a FMCSA representative to better understand when LOPVs are issued and what if any rights and or legal obligations a household goods motor carrier may have in response, he was advised to file a FOIA request.

Therefore, what follows concerning the LOPV is gleaned from an enforcement proceeding appearing in mid May 2024 on Docket Operations[7] against a regulated carrier in which the FMCSA was seeking civil penalties for alleged violations of the FMCSRs via a NOC and for alleged violations of FMCCRs via a LOPV. [8]  It was only because the Respondent in the case apparently mistakenly responded to the LOPV alleged “probable” violations of the FMCCRs using the NOC’s administrative adjudication process rather than replying to the alleged violations of the FMCSRs, that at least one version of a LOPV was publicly disclosed.  It was that mistake, which required the decisionmaker to note on the record that the Respondent’s reply addressing violations in the LOPV “are not relevant” to the proceedings initiated by the NOC for the violations of the FMCSRs.  The decisionmaker noted “Respondent may have been confused when it received the original NOC and the LOPV in the same envelope.

What does FMCSA say in the LOPVs and what, if anything should an interstate motor carrier do in response?

The LOPV identifies the “violations alleged” and “proposed civil penalty” for such “probable” violations.

What advise does FMCSA give the target of the LOPV to do in response?

Notably, nowhere in the LOPV does it state that the target may want to seek the advice of an attorney.

What follows is a summary of what the LOPV said in the enforcement case cited above:

  • The mover is invited to pay the total proposed civil penalty for the “potential” commercial regulation violations. “In response to this Letter you may . . . [p]ay the total proposed penalty” by cashier’s check, certified check or money order. There is no mechanism for payment by electronic means.
  • Instead of paying in full, the mover may request copies of the “evidence” FMCSA maintains it has collected to document the “potential” commercial regulation violations.
  • In addition, the mover may “contact” FMCSA Service Center listed “within thirty (30) calendar days of the date of [the LOPV]” to “request an informal conference to discuss [the assertions made in the LOPV].”
  • Alternatively, the LOPV advises the mover that it may write to the Service Center and include “information” which the mover “believe[s] will explain, excuse, or dispute the alleged [probable] violation(s).”
  • What does it say if the mover takes no action? It answers in the negative:

“[FMCSA] will take no further action . . . for a period of thirty (30) days after service of [the LOPV] to allow [the mover] to take appropriate action to make a payment or request an informal conference.

“If [the mover does] not pay the total proposed penalty or enter into a settlement agreement before the end of the thirty (30) day period, FMCSA may refer alleged [probable] violations to the U.S. Department of Justice for enforcement in the appropriate United States District Court.”  (Emphasis and bracketed information added).

Is there any apparent advantage to paying the proposed civil penalty or perhaps compromising the claimed penalty by a reduced amount and memorializing same in a settlement agreement with the FMCSA?

  • The LOPV advises payment “will not constitute an admission that any violation(s) occurred and will not be used as [carrier’s] history in calculating future penalties. Payment also bars FMCSA from instituting a civil action or other claim for recovery of civil penalties from [the mover] based upon or arising from the specific [probable] violation(s)[,]”  Further, payment of “penalties [as stated in the ‘case” created by the LOPV] does not affect any other claims FMCSA has or may have against [the mover],” including alleged violations for FMCSRs in a separate NOC.

Conclusion:

In a May 22, 2024, press release, two members of Congress announced a bill endorsed by the American Trucking Associations’ Moving & Storage Conference entitled the “Household Goods Shipping Consumer Protection Act.”[9]  Among other reforms, the release states that if enacted, it will “reverse” the holding in Riojas.   One assumes that in order to achieve that objective, Congress will write a bill which makes explicit FMCSA’s authority to impose a sanction or order through an administrative enforcement proceeding for violation of the commercial regulations within jurisdiction delegated to the FMCSA and as authorized by law.

By now, if the reader is continuing to follow along, unless and until that time, it wouldn’t be a bad idea to reach out to a regulatory attorney experienced in the area of interstate household goods transportation to review the facts and circumstances specific to the carrier’s situation.[10]

Dated: Sudbury, MA

June 6, 2024

Andresen & Borovick, LLP

323 Boston Post Road
Sudbury, Massachusetts 01776
www.abmasslaw.com
Tel:  (978) 443-6868

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[1] Buttigieg v. USA Logistics, Inc., 2:24-cv-02573 (D. Cent. Dist. Of CA).

[2] See In Matter Darlene Riojas, Dock. No. FMCSA-2012-0174-0056 (ALJ Order Dismissing Three Charges for Lack of Subject Matter Jurisdiction) sv’d 5-8-19.

[3] Riojas at 13.

[4] Riojas at n.6.

[5] 49 CFR 386.11(c) (2024).

[6] Mon. May 20, 2024, FMCSA Continues Nationwide Crackdown on Fraudulent Household Goods Movers and Brokers.

[7] “Although the Agency’s Rules of Practice use the term ‘Docket Management Facility,’ the correct name of the office is Docket Operations.”  In Matter All Nations Coach, Inc., Dock. No. FMCSA-2013-0315 (Order Denying MTD Pet. for Admin. Rev.) sv’d 9-4-13 at 3.

[8] In Matter Movepro LLC, Dock. No. FMCSA-2023-0202-0002 (Interim Order) sv’d 5-17-24.

[9] Press Release Norton, Ezell Introduce Bipartisan Bill to Strengthen Consumer Protections Against Fraud Involving Residential Moving Companies, May 22, 2024.

[10] This alert does not address whether the Federal statutes permit or enable State authorities, such as a State attorney general or other State regulatory agency from enforcing the Commercial Regulations.