The legal battle between New York and the Department of Transportation (DOT) over the state’s issuance of commercial driver’s licenses to non-domiciled persons is headed to federal court.

Letitia James, New York’s Attorney General, announced Friday that her office had filed a lawsuit in the Second Circuit Court of Appeals challenging the DOT over its decision to withhold approximately $73 million in highway funding because the state had not revoked CDLs from holders the federal government believes were improperly issued to non-domiciled individuals.

In a prepared statement issued by James’ office, New York Gov. Kathy Hochul described the DOT action as “political payback.”

State: always been in compliance

“Here’s the truth,” Hochul said in the statement. “New York has always followed federal rules when issuing CDLs, something even the previous Trump Administration verified year after year. Ripping away money that goes towards critical safety upgrades on our roads is reckless and it is illegal.”

The lawsuit itself is brief, just three pages excluding signatures pages and an addendum. It is filed in an appellate court rather than a district court because, James’ office said, that is the proper venue for challenges to the actions of a federal regulatory agency under the terms of the Hobbs Act.

But there is enough in the lawsuit to sum up New York’s argument. 

The decision by the Federal Motor Carrier Safety Administration (FMCSA) to find New York in noncompliance with federal regulations on non-domiciled CDLs, the lawsuit says, “is predicated on an erroneous reading of its own long-standing regulations governing the issuance of CDLs to nondomiciled individuals, and the relevant standards for establishing a finding of substantial noncompliance.”

FMCSA, the state adds, “does not acknowledge that its novel interpretation of these preexisting regulations represents a substantive change in agency position, and it has failed to account for the substantial reliance interests that this change upends.”

How the feds see the New York arguments

FMCSA appeared to sum up New York’s arguments in an April 16 letter to  Hochul and Mark J.F. Schroeder, the state’s commissioner of motor vehicles.  It was that letter, described as a “final determination of substantial noncompliance,” that then served as the basis for the federal cutoff of funds, announced the same day.

“New York reiterated its assertion that it strictly adhered to the Federal requirements in a manner consistent with FMCSA’s own longstanding interpretation and administrative oversight in practice,” the FMCSA letter says. “New York argues that FMCSA’s February 13, 2026 final rule cannot impact the lawfulness of DMV’s past practices that occurred before the final rule’s effective date. New York also argues that FMCSA has conducted several annual reviews of New York’s CDL program and has never found DMV to be noncompliant with its Federal obligations for issuing non-domiciled CDLs and CLPs, or otherwise.”

But, the agency adds, New York’s “arguments are without merit.”

The agency’s response to its summation of New York’s argument, in its April 16 letter, touch on several points.

Past performance does not guarantee future results

One is that prior declarations of a clean bill of health count for little in new audits. “The Agency cannot be stopped from enforcing safety regulations—nor are Federal standards waived—simply because a State’s noncompliant practice went undetected in prior sample sets,” FMCSA said in the letter.

Another point of disagreement between the state and FMCSA are New York’s practices after a revised September 2025 rule on the renewal of expiring CDLs for non-domiciled drivers, in particular the status of an Employment Authorization Document (EAD).

“FMCSA did not assume that DMV would treat an EAD as valid in perpetuity; DMV is required to review a driver’s lawful presence documents at the time of each transaction, including when the driver renews a CDL,” FMCSA said in its letter.  

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