KP Trucking v. DOT ( 2021 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT March 9, 2021
Christopher M. Wolpert
Clerk of Court
KP TRUCKING LLC, erk of Cour
Petitioner,
v. No. 20-9508
(FMCS No. 0258)
UNITED STATES DEPARTMENT
OF TRANSPORTATION; FEDERAL
MOTOR CARRIER SAFETY
ADMINISTRATION (FMCSA),
Respondents.
ORDER AND JUDGMENT’
Before BACHARACH, Circuit Judge, LUCERO, Senior Circuit Judge, and
PHILLIPS, Circuit Judge.
This case involves administrative regulation of the trucking industry.
Under these regulations, safety violations by two companies can be
*
The parties have waived oral argument, and it would not materially
help us to decide the petition for review. See Fed. R. App. P. 34(a)(2)(C);
10th Cir. R. 34.1(G). So we have decided the petition for judicial review
based on the record and the parties’ briefs.
Our order and judgment does not constitute binding precedent except
under the doctrines of law of the case, res judicata, and collateral estoppel.
But the order and judgment may be cited for its persuasive value if
otherwise appropriate. See Fed. R. App. P. 32.1(a); 10th Cir. R. 32.1(A).
combined when one of the companies changes its name or structure to skirt
the consequences of prior violations. 49 C.F.R. § 386.73(b).
Invoking this authority, federal regulators suspended a trucking
company, Eagle Iron & Metal. When Eagle was suspended, another entity
(KP Trucking, LLC) expanded its operations. Regulators viewed KP’s
expansion as an effort to continue Eagle’s operations in order to bypass
penalties and start anew on a fresh slate. KP disagrees and petitions for
judicial review.' We deny the petition.
1. KP emerges when Eagle is suspended.
Trucking companies can operate only when granted operating
authority by the Federal Motor Carrier Safety Administration. See
49 C.F.R. pt. 385. This authority had been granted to Eagle. But the Safety
Administration cited Eagle for safety violations, imposed a penalty, and
suspended Eagle’s registration. Upon Eagle’s suspension, KP quickly filled
the void by taking the steps necessary to obtain reinstatement of its
operating authority.
KP soon drew its own citations for safety violations. The Safety
Administration directed both KP and Eagle to suspend operations and
ordered consolidation of the two companies’ records, finding that KP had
| Regulators also found that another entity, Kenney Balthrop d/b/a
KP’s Trucking, was used to avoid the suspension and penalties imposed on
Eagle. But this finding is not at issue here.
continued Eagle’s operations under a new identity in order to avoid Eagle’s
civil penalty, suspension, and poor compliance history. KP challenges this
finding.
2. The Safety Administration had substantial evidence to find that
KP was merely continuing Eagle’s business for an improper
purpose.
Under the petition for review, we must consider whether KP was
merely continuing Eagle’s operations for an improper purpose. To consider
this issue, we regard the Safety Administration’s finding as presumptively
valid and will grant KP’s petition only if the finding is “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law
or unsupported by substantial evidence.” Andalex Res., Inc. v. Mine Safety
& Health Admin., 792 F.3d 1252, 1257 (10th Cir. 2015). To overcome this
presumption of validity, KP bears the burden of proof. Midwest Crane &
Rigging, Inc. v. Fed. Motor Carrier Safety Admin., 603 F.3d 837, 840
(10th Cir. 2010).
The Safety Administration concluded that KP had acted only to
continue Eagle’s operations and had expanded for an improper purpose. KP
challenges the evidentiary basis for these findings.
A. Substantial evidence existed for the finding of continuity of
Eagle’s operations.
To determine whether KP served merely to continue Eagle’s
operations, the Safety Administration could consider
e the businesses’ management structures,
e their asset purchases or transfers and the related title history,
e employee records, and
e any other information related to the businesses’ general
operations.
49 C.F.R. § 386.73(d). The Safety Administration based its determination
in part on the existence of common ownership, finding that one person
(Kenney Balthrop) owned KP and had an ownership interest in Eagle. KP
does not dispute that Mr. Balthrop is its owner, but does challenge the
finding that he had an ownership interest in Eagle. For this finding, the
Safety Administration could reasonably rely on two pieces of evidence.
First, Eagle had submitted a form in 2010, stating that Mr. Balthrop
was an owner.
FA-5, Evidence p, 52 OMB Wo. 2126-0013
e ‘l in —
4 Department of Transportation MOTOR CARRIER IDENTIFICATION REPORT |
ee (Application for U.S. DOT NUMBER)
REASON FORAILING | (Chock OnlyGne) ~ ~
U new appuication BIENNIAL UPDATE GR CHANGES: (J our GF Business NOTIFICATION (9) REAPPLICATION (AFTER REVOCATION OF NEW ENTRANT)
[TS RAME OF HCTOR CARRIER 2. TRADE OR 0.6.4. (DOING BUSINESS 4S) NAME
EAGLE IRON & METAL LLC
3. PRINGIPAL STREET ADDRESSIROUTE NUMBER | 4 GITY 5. MAILING ADDRESS (FOBOX) | 6. MALINGCITY
4002 HIGHWAY 29 MARLOW 4202 HIGHWAY 29 MARLOW
T.STATEIPROVINCE | 8. ZIPCODE +4 6. COLONIA (MEXICO ONLY) | 10, STATEIPROVINCE 11.ZIP CODE 72.COLONIA (MEXICO ONLY)
| OKLAHOMA | 7088 | OKLAHOMA \73085
13. PRINCIPAL BUSINESS PHONE NUMBER. 14, PRINCIPAL CONTACT CELLULAR PHONE NUMBER | 16. PRINCIPAL BUSINESS FAX HUMBER
(580) 658-6410 (580) 542-7900 | (590) 658-6414
76. USGOT NG. 117. MOR MEO. 18. DUN@ BRADSTREET NO. | #9. RSVTAXID NO, 20. INTERNET E-MAIL ADDRESS
1844562 sone | wosgicimplynat net
2
-GOMPANY OPERATION — (Circle all that apaly)
® interstate Cariar B., inirastabe Hazmal Carrier G, Intrastate Non-Hazmat Gariar D. interstate Shipper E, Intrastate Shipper =F, Vehicle Registrant Only
22. CARRIER MILEAGE (io nearest 10/000 miles for Last Calendar Year) YEAR
23. OPERATION CLASSIFICATION = (Circle All that Apply)
A. Authorized For-Hire ID. Private Passengers (Business) G. U.S. Mail J. Local Govenment
6B. Exempt For-Hire E, Private Passengers (Mon-Bushass) #. Federal Government K_ lan Tribe
© Private Property F. Migrant |, State Government L. Other
24. CARGO CLASSIFICATIONS (Circle All that Apphy}
A GENERAL F. LOGS. POLES, J FRESH PRODUCE P. GRAIN, FEED, KAY ¥. COMMODITIES DRY BULK BS. CONSTRUCTION
FREIGHT BEAMS, LUMBER
B HOUSEHOLD G6. BUILDING K. LIQUIDS/GASES G GOALICOKE W. REFRIGERATED Food 00. WATER WELL
Senne MATERIALE L. INTERMODAL COMT, R MEAT x. BEVERAGES Glories
CG. METAL: SHEETS; Ho MOBILE HOMES SCRAP METAL
COILS; ROLLS Ss M. PASSENGERS & GARBAGE. REFUSE TRASH Y. PAPER PRODUCTS
. MACHINERY,
B. MOTOR VEHICLES LARGE OBJECTS NM. OIL FIELD EQUIPARENT T. U8. Mall 2 utiiny
ERNE © LIVESTOCK U. CHEMICALS AA, FARN SUPPLIES:
AVIA ITONWNA NAY =
HAZARDOUS MATERIALS GARRIED OR SHIPPED (Circle Allthat Apply) O-OARRIED $-SHIPPED EYBULI)- IN CARGO TANKS NB/NON-BULK) - IN PACKAGE
6 8 ADNWI4 B NB) CG S K.OV22A (Ammonia) 3 NBC S Uovaz BNB|G Ss EBHRCG B NB
c 8 BDVI2 B NB/C 8S L.owa2aa BAB CC S VDA BNB'C § $«FF.cLASS& B NG
c s ¢.0N13 B NB CG S (M.DIV2a5 BS NalC S Wovss B NBC 65) «GG.CLASS BA BNE
cos Dowd B NB Cc § M.DNV2ac a wac S XpWS2 BNB/c os HH class ep B NB
c gs Bovis BNB G 8 ©. OIvz2aD BS valC S YVoWSee2 BKB GC 58 JIcLAsSS B NB
Gc Ss FOWL B NB) C SP. Cassa BNB/C SS ZO0VEIA BONB|C os ELEVATED TEMP MAT. BNE
1. KENNY BALTHROP, OWNER
Straight | Truck | rate Heamat |Hazmat Cargo) Mair | Sets! Gus) Min-bus en Hance
Trucks | Tractore | Cargo | Tank Trallare | Coach ‘Number of vehicles carrying numberof (ieeloding the driver) below
| Teri Trucs 78 [946 [ie | i | 18 eis | 18 | S45 iar
OWNED q | | |
TERM LEASED I |
TRIP LEASED | I | | |
237, DRIVER INFORMATION J | INTERSTATE | INTRASTATE, TOTAL DRIVERS TOTAL COL DRIVERS
Wihin 100-Mille Redhs | 2 a
EE Bayond 100- Mile Radius ] - 2 _
28.15 YOUR U.S. DOT MUMBER RE! TION CURRENTLY REVOKED BY THE FEDERAL MOTOR CARRIER SAFETY ADWINISTRATIONT Ye, No x
( Himcernuncerne
ao | TITLES (a.g. PRESIDENT, TREASURER, GENERAL PARTNER, LIMITED PARTNER)
KENNY SALTHROP, OWNER i > WES M BALTEROE,
{Alease pant Name} (Please print Name} Fit
40. CERTIFICATION STATEMENT (to bo completed by an authorized official)
1, WES BALTHROP certify het | am farrier with the Feceral Wolor Camier Safety Fisguisticns ance Federal Havanous Wate ls Regustors
(Please print Name} Under poration of pesjuny, | declare that the information eniered on this mepedt is, the baal of my knawiedge and bolle, 118,
cofrect, ded oomyiebe
Signature WES BALTHROP _ ane 0222/2010 ss 2s
a ee {Plaase orind) tt
Form MCS-150 (Rev, 3-24-2008) Exairation Date: 0a312004
Record at 113.
Second, Eagle stated in 2018 that Mr. Balthrop was an owner of
Eagle:
1» EAGLE IRON & METAL Review Date:
or U.S. DOT #: 1844562 09/19/2018
Part C
The Oklahoma Secretary of State has record of Eagle Iron & Metal DOT# 1844562.
Eagle Iron & Metal DOT# 1844562 owns 7 truck tractors and 7 trailers.
Drivers are paid $150 a load intrastate and up to $500 a load interstate,
Fuel is pai
Kenney Balthrop-owner
Eagle Iron!
Eagle lron & Metal DOT#4844562 was familiar with and has been using the FMCSA website.
FINANCIAL CONDI
Eagle Iron & Meta
N:
OT# 1844562 financial condition appears to be good.
OFFICERS:
Jerry Rogers-DOT & Safety director
PRIOR CONTACT:
Compliance Review conducted 10/12/11 resulting in a Conditional safety rating with violations in Part 382, 391, and 395.
Enforcement 12/9/11 Violations 382.305, and 391.51(b) (2), Settlement amount $4,150 case #OK-2012-0005-US0357
Compliance Review conducted 7/19/12 resulting in a Conditional safety rating with violations in Part 382, 390, 391,
392,395, and 396.
Enforcement 8/15/12 Violations 382.301(a), and 391.51 (b) (2), Settlement amount $6,390 case # OK-2012-0176-US 1239
Compliance Review conducted 4/2/15 resulting in a Non rated review with violations in Part 382, 391, and 396.
Enforcement 8/14/15 Violations 382.301(a), and 382.305(b) (2), Settlement amount $16,470 case #OK-201 5-0099-US0357
SHIPPERS/BROKERS:
Sims
CMC
EMERGENCY RELIEF EFFORT:
Eagle Iron & Metal DOT# 1844562 was not involved in any emergency relief effarts within the last 365 days.
PRE-INVESTIGATION:
Prior to the review Eagle Iron & Metal DOT# 1844562 was contacted via phone on 08/22/2018 at 580-255-6400 and spoke
to Wes Balthrop. The review was scheduled for 8/28/18. The items needed for compliance review list was emailed
(wess@simplynet.net) prior to the review to have prepared.
CDLIS (DRIVER LICENSE) CHECK:
All of Eagle Iron & Metal DOT# 1844562 drivers licenses were checked in CDLIS after arriving at the carrier since they
didn't provide a driver list prior to my arrival. All drivers had valid licenses with the proper endorsements.
INVESTIGATION:
PART 382: CONTROLLED SUBSTANCES AND ALCOHOL TESTING
A full review of Eagle Iron & Metal DOT# 1844562 controlled substances and alcohol program was reviewed. Eagle Iron &
Metal DOT# 1844562 is currently enrolled in a consortium with J. J. Keller & Associates Inc. | spoke to Christopher Nobbe
(920-727-7220 email cnobbe@jjkeller.com), Client Service Specialist I- Driver and Employee Services for J. J. Keller.
Christopher Nobbe sent me a copy of Eagle Iron & Metal DOT# 1844562 driver roster that they provided to J. J. Keller for
Id. at 144.
In finding that KP was used to continue Eagle’s operations, the
Safety Administration relied not only on common ownership but also on
findings as to the two companies’
e use of the same drivers, vehicles, shippers, telephone numbers,
mailing addresses, and email addresses,
e common management, and
e proximity to each another.
KP does not dispute these findings of commonality.
In addition to proximity and commonality in operations, the Safety
Administration relied on KP’s acquisition of Eagle’s assets without any
payment. KP insists that it did pay for Eagle’s assets, pointing to a
contract to buy trucks from Eagle. But in the administrative proceeding,
KP never mentioned or presented this contract.
KP seeks to supplement the administrative record with this contract.
We deny this request. When we review an agency’s decision, we must
focus on the administrative record that already exists, not a newly created
record. Camp v. Pitts, 411 U.S. 138, 142 (1973) (per curiam).
In seeking to expand the administrative record, KP relies on Federal
Rule of Appellate Procedure 16(b). This rule allows the parties to stipulate
to the addition of a document inadvertently omitted from the agency’s
record. But KP does not suggest that the contract was supposed to be in the
administrative record and inadvertently omitted; KP instead asks us to
consider the document even though it was never part of the administrative
record. Even if Rule 16(b) were applicable in this situation, KP has not
justified expansion of the record with the contract. See Am. Mining Cong.
v. Thomas, 772 F.2d 617, 626-27 (10th Cir. 1985) (identifying exceptions
to the rule against the use of extra-record materials).
If we were to consider the contract, we would be evaluating the
factual findings based on evidence that the Safety Administration had no
opportunity to consider. We thus deny the motion to supplement the record.
See N.M. Env’t Improvement Div. v. Thomas, 789 F.2d 825, 835-36 (10th
Cir. 1986) (declining to review information that the petitioner had not
presented during the administrative process).
Even if we were to consider the contract, the Safety Administration
could reasonably have found that KP had not paid for the trucks. According
to the contract, KP bought two trucks from Eagle on May 23, 2018. The
vehicle identification number of one of these trucks was
1FUPCXYB81LG61890. During a compliance review roughly four months
later, however, Eagle provided maintenance records for that same truck,
suggesting that it was still in Eagle’s fleet. Given these records, the Safety
Administration could reasonably infer that Eagle had never parted with
either truck identified in the contract.
B. Substantial evidence existed for the finding of an improper
purpose.
The Safety Administration found not only a continuity in operations
but also an improper purpose, relying primarily on the timing of Eagle’s
suspension and KP’s reinstatement.
In November 2018, the Safety Administration stated that Eagle had
an “unsatisfactory” safety record based on numerous violations. Those
violations led to civil penalties and an order for Eagle to halt operations.
Eagle admitted to some of the violations and entered a settlement
agreement, which allowed continuation of operations only if Eagle made
installment payments on the civil penalties. After one installment, Eagle
stopped paying. As a result, its operations were suspended in May 2019.
Meanwhile, KP twice had its own operating authority suspended for
failing to carry liability insurance. The first suspension order came in
September 2018, and KP did not make efforts to get reinstated until
January 2019—four days before Eagle made its only installment payment.
The second insurance-related suspension came in August 2019, after
Eagle’s operations had been suspended for non-payment of its penalties.
This time, however, KP quickly obtained the required insurance and
restoration of its operating authority.
Eagle’s Settlement Agreement Eagle Suspended
.
Eagle Notified of ° t
Unsatisfactory Safety
Rating
.
Eagle's Only Penalty Payment
KP’s 1st Insurance KP Reinstated
Related Suspension KP’s 2nd Insurance KP Reinstated
Related Suspension
9/5/18 WW/19/18 12/4/18 VWII/MN9 1/15/19 5/1/19 8/20/19 8/29/19
Given Eagle’s inaction when suspended and assessed civil penalties,
the Safety Administration could reasonably regard KP’s quick corrective
action as a ploy for Eagle to
e continue operations through a newly reinstated KP and
e avoid payment of the previously assessed civil penalties.
KP questions the Safety Administration’s inferences from the timing.
KP points out that it too was hit with civil penalties, insisting that if
Mr. Balthrop’s goal was to avoid payment, he would have created a third
business entity to start again on a fresh slate.
KP did not raise this argument when petitioning for review by the
Safety Administration. And KP’s payment of its own penalties does not
undermine the Safety Administration’s conclusion that KP was operating as
a reincarnation of Eagle. A factfinder might have accepted an innocent
explanation for the timing. But a factfinder could also have reasonably
inferred that Mr. Balthrop had decided to resume operations through the
newly reinstated KP to skirt Eagle’s civil penalties, but declined to form a
third entity when KP was assessed its own civil penalties.
10
We conclude that the Safety Administration reasonably found that KP
was continuing Eagle’s operations for an improper purpose, so we deny the
petition for judicial review. We also deny KP’s motion to supplement the
record with the contract to buy Eagle’s trucks.
Entered for the Court
Robert E. Bacharach
Circuit Judge
11