New York CDL Ruling: Court Blocks $73.5M Highway Cut

The New York CDL fight between Albany and the U.S. Department of Transportation turned in the state’s favor on Friday, when a federal appeals court ruled that the Trump administration overstepped its authority in withholding $73.5 million in highway funds over commercial driver’s licenses issued to noncitizen drivers. The 2nd U.S. Circuit Court of Appeals said the department’s decision “runs afoul of fair notice principles, departs from the regulatory text, and underestimates the complexity of its supposedly ‘common sense’ requirement,” Reuters reported. For the thousands of immigrant truck and bus drivers whose licenses were at the center of the dispute, the ruling removes the federal lever that was being used to force New York to cancel them.

The case is not about who may get a commercial license going forward. It is about whether Washington could punish a state, after the fact, for reading a federal license rule differently than the department later did.

A penalty built on an expiration-date rule

The dispute began with a Federal Motor Carrier Safety Administration audit of New York’s Department of Motor Vehicles. On April 16, 2026, the agency issued a final determination of “substantial noncompliance,” finding that the DMV had issued licenses to nondomiciled drivers, meaning drivers who are not U.S. citizens or green card holders, with expiration dates running past the end of the lawful-presence documents they presented. The determination relied on 49 C.F.R. 384.212(a) as it read before September 2025, according to New York’s petition for review.

The department said 107 of 200 sampled records, more than 53 percent, were issued in violation of federal law, and that DMV systems defaulted to eight-year licenses for foreign drivers. Those are the department’s findings, not a court’s. The penalty it set was $73,502,543, or 4 percent of New York’s National Highway Performance Program and Surface Transportation Block Grant funds. New York’s petition says the determination also warned of possible decertification of the state’s entire CDL program under 49 U.S.C. 31312 and about $147 million a year in additional withholding unless the state took corrective action, including “cancellation of thousands of previously issued CDLs.”

Transportation Secretary Sean Duffy framed the April action as a safety measure, saying the department was “refusing to fund Governor Hochul’s dangerous, anti-American policies.” New York Attorney General Letitia James filed the petition on April 24 under the Hobbs Act, which sends challenges to certain agency orders straight to a court of appeals, and argued that the department had adopted “a new and unsupported interpretation of longstanding federal regulations.” Gov. Kathy Hochul called the cut “political payback” and said it was “reckless” and “illegal.” Spokespeople for Duffy and Hochul did not immediately comment on Friday’s ruling, according to Reuters.

What the fair-notice holding means for drivers and states

Fair notice is a basic limit on agency enforcement: a regulated party cannot be penalized for violating a requirement the agency never clearly stated. By leaning on that principle and on the regulatory text, the court signaled that the department’s “common sense” reading of the old expiration-date rule was not obvious enough to punish New York for missing it. The practical effect is that the licenses the department wanted cancelled are no longer tied to a funding penalty, at least while the ruling stands.

The ruling does not touch the stricter federal rule now on the books. FMCSA’s September 2025 emergency rule limited new nondomiciled licenses largely to H-2A, H-2B and E-2 visa holders, cutting out work permit holders such as asylum applicants and DACA recipients. The D.C. Circuit stayed that interim rule in November 2025, and FMCSA then published a final rule in the Federal Register on Feb. 13, 2026. Drivers holding New York licenses issued under the old rules are shielded from this pressure campaign, but renewals and new applications fall under the current standard.

Federal attention to immigrant truck drivers reaches well beyond licensing offices. Earlier this month, an enforcement sweep focused on commercial drivers led to 230 arrests in 15 states, and in October a judge found a DHS subpoena for CDL records improper. Similar license fights continue elsewhere, including the Tennessee case over licenses tied to work permits.

Reuters did not identify the judges on the panel, and the full opinion was not available for review, so the precise remedy the court ordered is not yet clear. The department’s likely options are a request for rehearing by the full 2nd Circuit or a petition to the Supreme Court. A fair-notice loss is hard to cure with a new letter, because the defect lies in the rule New York was held to, not in how the penalty was announced.

What to watch

The written opinion: whether the court set aside the April 16 determination in full, including the decertification warning and the threatened $147 million a year.
The department’s response: a rehearing petition in the 2nd Circuit, a Supreme Court filing, or a new noncompliance finding written under the post-2025 rules.
Other states: whether states with similar audit findings invoke the fair-notice reasoning against FMCSA.

This article is for general information and is not legal advice.

Sources

Vasanth Vaidyanathan, Esq.

Administrator

Vasanth Vaidyanathan is an immigration attorney with over 20 years of experience focused exclusively on U.S. immigration and nationality law. He holds an LL.M. from California Western School of Law, San Diego and advises individuals and businesses on employment and family-based immigration matters, including H-1B, PERM, EB categories, and adjustment of status. He has also been a featured speaker at immigration seminars across the U.S. To reach Vasanth visit: https://www.vnathan.com/

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