MST Exp. v. Department of Transp.

Decision Date05 November 1997
Docket NumberNo. 96-1084,96-1084
Citation108 F.3d 401
PartiesMST EXPRESS and Truckers United for Safety, Petitioners, v. DEPARTMENT OF TRANSPORTATION and Federal Highway Administration, Respondents.
CourtU.S. Court of Appeals — District of Columbia Circuit

Anthony J. McMahon, Trenton, NJ, argued the cause and filed the briefs for petitioners.

Edward R. Cohen, Attorney, U.S. Department of Justice, Washington, DC, argued the cause for respondents, with whom Frank W. Hunger, Assistant Attorney General, and Robert S. Greenspan, Attorney, were on the brief.

Before: SILBERMAN, WILLIAMS, and GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge:

MST Express and Truckers United for Safety petition for review of an order in which the Federal Highway Administration denied both their administrative petition for review of MST's "conditional" safety rating and their challenge to the lawfulness of the FHWA's safety regulation procedures. The petitioners contend that the agency improperly relied upon an unpublished regulation to determine MST's safety fitness rating, contrary to the requirements of 49 U.S.C. § 31144 and of the Administrative Procedure Act, 5 U.S.C. § 553, and failed to develop specific deadlines for making safety fitness determinations, as required by 49 U.S.C. § 31144(a)(1)(C). The petitioners also contend that the evaluation procedure set out in the agency's unpublished regulation is not administered even-handedly and is therefore arbitrary and capricious.

We conclude that FHWA has indeed failed to meet its statutory obligation under 49 U.S.C. § 31144 to prescribe by regulation a means of determining whether an owner or operator of a commercial motor vehicle satisfies the agency's safety fitness requirements. Although the FHWA has developed a method for making safety rating determinations, this method was not promulgated through notice and comment rulemaking. Because the FHWA relied upon an improperly promulgated regulation when it determined MST's safety rating, MST's rating cannot stand. Accordingly, without reaching the petitioners' other objections, we vacate the agency's decision giving MST a conditional safety rating.

I. BACKGROUND

The Motor Carrier Safety Act directs the Secretary of Transportation (who has delegated the responsibility to the FHWA) to "prescribe regulations establishing a procedure to decide on the safety fitness of owners and operators of commercial motor vehicles, including persons seeking new or additional operating authority...." 49 U.S.C. § 31144(a)(1). This procedure is to include:

(A) specific initial and continuing requirements to be met by the owners, operators, and persons to prove safety fitness;

(B) a means of deciding whether the owners, operators, and persons meet the safety fitness requirements under clause (A) of this paragraph; and

(C) specific time deadlines for action by the Secretary in making fitness decisions.

49 U.S.C. § 31144(a)(1). This case concerns primarily the second of these three requirements. The petitioners argue that this statute requires notice and comment rulemaking, and the FHWA does not contest that interpretation.

A. The Regulatory Framework

In accordance with the statutory directive quoted above, the FHWA promulgated through notice and comment rulemaking procedures the Motor Carrier Safety Regulations codified at 49 C.F.R. Part 385. These regulations provide that the FHWA shall assign to a motor carrier a safety rating--satisfactory, conditional, or unsatisfactory--in this way:

Following a safety or compliance review of a motor carrier operation, the FHWA, using the factors prescribed in § 385.7, shall determine whether the present operations of the motor carrier are consistent with the safety fitness standard set forth in § 385.5, and assign a safety rating accordingly.

49 C.F.R. § 385.9. Section 385.7 lists a number of factors that the agency considers in determining a motor carrier's safety rating, such as the adequacy of safety management controls; the frequency and severity of regulatory violations; the number and severity of violations of state safety rules; and the frequency of accidents and "hazardous materials incidents." Section 385.5 makes the resulting safety rating a function of the carrier's "degree of compliance with the safety fitness standard," and provides that:

To meet the safety fitness standard, the motor carrier shall demonstrate that it has adequate controls in place, which function effectively to ensure acceptable compliance with applicable safety requirements to reduce the risk associated with:

(a) Commercial driver's license standard violations (part 383),

(b) Inadequate levels of financial responsibility (part 387),

(c) The use of unqualified drivers (part 391),

(d) Improper use and driving of motor vehicles (part 392),

(e) Unsafe vehicles operating on the highways (part 393),

(f) Failure to maintain accident registers and copies of accident reports (part 390),

(g) The use of fatigued drivers (part 395),

(h) Inadequate inspection, repair, and maintenance of vehicles (part 396),

(i) Transportation of hazardous materials, driving and parking rule violations (part 397) (j) Violation of hazardous materials regulations (parts 170 through 177), and

(k) Motor vehicle accidents and hazardous materials incidents.

Section 385.3 further provides that a carrier shall receive a "satisfactory" safety rating if it "has in place and functioning adequate safety management controls to meet the safety fitness standard prescribed in § 385.5." Safety management controls are adequate if they are "appropriate for the size and type of operation of the particular motor carrier." § 385.3. A carrier receives a "conditional" safety rating if it "does not have adequate safety management controls in place to ensure compliance with the safety fitness standard that could result" in safety violations of the type listed in § 385.5. Finally, a carrier receives an "unsatisfactory" safety rating if it "does not have adequate safety management controls in place to ensure compliance with the safety fitness standard which has resulted" in the types of safety violations listed in § 385.5.

Once the FHWA had promulgated Part 385 the agency went on to develop a "safety fitness rating methodology" (SFRM), which it published as part of its Motor Carrier Training Manual and which it makes available to the public, upon request, in a 15-page document entitled "Explanation of Safety Rating Process." The Explanation proclaims that the SFRM, which was not the product of notice and comment rulemaking, "conforms with 49 C.F.R. 385.5-Safety fitness standard and § 385.7-Factors to be considered in determining a safety rating." The SFRM itself provides FHWA inspectors with detailed guidelines for deriving a motor carrier's safety rating from the data obtained from a compliance review.

Central to the SFRM are "factor ratings." In the SFRM the Federal Motor Carrier Safety Regulations and the applicable Hazardous Material Regulations are grouped into five regulatory areas, or "factors," to wit: General (Parts 387 and 390), Driver (Parts 382, 383, and 391), Operational (Parts 392 and 395), Vehicle (Parts 393 and 396), and Hazardous Material (Parts 177 and 397). There is also an Accident Factor, which does not relate to any specific regulation but rather concerns a carrier's "recordable preventable rate" of accidents.

Various safety regulations are classified in the SFRM as either "acute" or "critical." A regulation is acute if "noncompliance is so severe [as] to require immediate corrective actions by a motor carrier regardless of the overall safety posture of the motor carrier." A regulation is critical if "noncompliance relates to management and/or operational controls." The SFRM provides that the FHWA will assess a carrier one point for each instance of noncompliance with an acute or each pattern of noncompliance with a critical regulation, except that a pattern of noncompliance with a critical regulation concerning Part 395, Hours of Service of Drivers, is worth two points.

The SFRM instructs FHWA safety inspectors to assign the motor carrier a "factor rating" for each of the six factors (enumerated above). The "factor rating" depends upon the number of points assessed for acute and critical violations of the regulations grouped within each factor. The carrier receives a "satisfactory" rating on a factor for which there are no points assessed, a "conditional" rating for a factor with one point, and an "unsatisfactory" rating for a factor with two or more points.

The carrier's final safety rating depends upon the number of unsatisfactory and conditional factor ratings it received. For example, if a carrier has no unsatisfactory factor ratings and no more than two conditional factor ratings, then its overall safety rating is "satisfactory"; if a carrier has no unsatisfactory factor rating but more than two conditional factor ratings, then its overall safety rating is "conditional."

The safety ratings are significant. They are made readily available to other federal agencies and to the public. Insurance companies use the ratings to make risk assessments and shippers consult the ratings when selecting a carrier. Moreover, while a carrier that receives a conditional rating is permitted to continue its normal operations, a carrier with an unsatisfactory safety rating may not transport certain hazardous materials or more than 15 passengers. See 49 C.F.R. § 385.13.

Any carrier that is unsatisfied with its rating may petition the FHWA for review. § 385.15. The agency must notify the carrier in writing of the results of the review, and its decision "will constitute the final agency action." Id. at § 385.15(d).

B. Factual Background

An FHWA inspector conducted a compliance review of MST's operations on April 5, 1995. At the...

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