New York sues DOT over $73M CDL funding cut in federal court

Why is DOT withholding $73 million in highway funding from New York?

The U.S. Department of Transportation is withholding approximately $73 million in highway funding from New York because the Federal Motor Carrier Safety Administration (FMCSA) found the state in noncompliance with federal regulations governing commercial driver's licenses issued to non-domiciled individuals. New York Attorney General Letitia James filed a lawsuit April 26 in the Second Circuit Court of Appeals challenging that finding and the funding cut.

The lawsuit argues FMCSA's noncompliance determination "is predicated on an erroneous reading of its own long-standing regulations governing the issuance of CDLs to nondomiciled individuals." New York maintains it has always followed federal CDL rules and that the previous Trump Administration verified the state's compliance year after year.

What non-domiciled CDLs mean for carriers

A non-domiciled CDL is issued to a driver who does not maintain a permanent residence in the issuing state. Federal regulations allow states to issue CDLs to non-domiciled drivers under specific conditions, but FMCSA maintains strict requirements about how states verify eligibility and maintain records.

The dispute centers on whether New York properly issued CDLs to individuals FMCSA believes did not meet the non-domiciled criteria. The agency has not publicly released the specific number of licenses in question or the compliance standard it says New York violated.

Carriers employing drivers with New York-issued CDLs should verify their drivers' licenses remain valid and that the state has not flagged them for revocation. FMCSA has not announced any immediate action against individual CDL holders, but the agency's noncompliance finding against New York could trigger audits of carriers whose drivers hold New York non-domiciled licenses.

New York's legal strategy: Hobbs Act venue

James filed the three-page lawsuit directly in the Second Circuit Court of Appeals rather than a district trial court. Her office said the Hobbs Act requires challenges to federal regulatory agency actions to be filed in appellate courts.

The Hobbs Act, 28 U.S.C. § 2342, gives federal courts of appeals exclusive jurisdiction to review final orders of certain federal agencies, including DOT. By filing in the Second Circuit, New York is treating FMCSA's noncompliance determination as a final agency action subject to immediate judicial review.

New York Governor Kathy Hochul called the DOT action "political payback" in a statement issued by the Attorney General's office. "Ripping away money that goes towards critical safety upgrades on our roads is reckless and it is illegal," Hochul said.

What the funding cut means for New York roads

The $73 million DOT is withholding comes from federal highway safety grants New York uses for road maintenance, signage, guardrails, and other infrastructure projects. The funding cut does not directly affect CDL issuance or motor carrier enforcement, but it reduces the state's ability to maintain roads carriers use.

FMCSA has authority under 49 U.S.C. § 31314 to withhold highway funding from states that fail to comply with federal CDL standards. The agency must first issue a notice of noncompliance and give the state time to correct the violation before withholding funds.

New York's lawsuit does not specify when FMCSA issued its noncompliance notice or what corrective actions the agency demanded. The state argues it has always been in compliance and that no corrective action was necessary.

How this affects carriers with New York CDLs

Carriers should not assume their drivers' New York CDLs are invalid. FMCSA's noncompliance finding is against the state's issuance process, not against individual license holders. Unless New York or FMCSA notifies a driver that their specific CDL is revoked, the license remains valid for operating commercial vehicles.

However, carriers whose drivers hold New York non-domiciled CDLs should prepare for potential FMCSA scrutiny. The agency may target carriers in compliance reviews or roadside inspections to verify that drivers with New York licenses meet federal domicile requirements.

Carriers can verify a driver's CDL status and SAFER profile through FMCSA's public databases. Check that the driver's license state matches their declared domicile and that no disqualifications or restrictions appear on their record.

What happens next in federal court

The Second Circuit will review FMCSA's administrative record to determine whether the agency's noncompliance finding was arbitrary, capricious, or contrary to law. The court will not conduct a new fact-finding process but will assess whether FMCSA followed its own regulations and provided adequate justification for its decision.

New York must demonstrate that FMCSA misinterpreted federal CDL regulations or failed to follow required procedures before withholding funding. The state argues FMCSA's reading of non-domiciled CDL rules contradicts the agency's own long-standing interpretation.

The timeline for appellate review varies, but carriers should expect the dispute to take months. The Second Circuit will likely schedule oral arguments after both sides file briefs. Until the court rules, DOT's funding withhold remains in effect unless New York seeks and obtains a preliminary injunction.

Compliance steps for carriers with New York-licensed drivers

Carriers employing drivers with New York CDLs should take three immediate steps. First, confirm each driver's current CDL status through FMCSA's National Registry. Second, verify that drivers claiming non-domiciled status have documentation supporting their eligibility under 49 CFR § 383.23(b)(10). Third, review your driver qualification files to ensure you have copies of each driver's current medical certificate and CDL.

If FMCSA or New York notifies you that a driver's CDL is under review or subject to revocation, remove that driver from safety-sensitive functions until the issue is resolved. Operating a commercial vehicle without a valid CDL is a federal violation that will hit your CSA scores and can trigger an FMCSA audit.

Carriers based in New York or operating frequently in the state should monitor the Second Circuit docket for updates. The court's decision will clarify whether FMCSA's interpretation of non-domiciled CDL rules stands and whether other states face similar funding cuts for their CDL issuance practices.