US DEPARTMENT OF TRANSPORTATION

IN THE MATTER OF: CAROLINA BLUE AIR, LLC

FAA Docket Number CP10EA0010 FDMS Number FAA-2010-0972

PREHEARING CONFERENCE BEFORE THE HONORABLE JUDGE RONNIE A. YODER

U.S. DEPARTMENT OF TRANSPORTATION OFFICE OF HEARINGS WASHINGTON, D.C.

MAY 3, 2011 2:57 P.M.PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 2

1 PREHEARING CONFERENCE 2 MAY 3, 2011 3 This is a Prehearing Conference in Carolina 4 Blue Air, LLC, FAA Docket Number CP10EA0010, FDMS 5 Number FAA-2010-0972 and on the phone we have for the 6 FAA Office making the complaint Zachary Berman, 7 Attorney and for Carolina Blue we have Mr. McDonough. 8 We also have on the telephone a Court Reporter who will 9 transcribe the proceedings. A copy of the transcript 10 automatically goes to the Judge and to the FAA which 11 pays for the transcript. Mr. McDonough if you want a 12 copy, you will need to arrange that with the Court 13 Reporter. 14 MR. MCDONOUGH: Yes sir. 15 THE COURT: At some point it will show 16 up in the DMS, our Docket Management System and you can 17 download it from DMS, but I can't tell you just when 18 that will happen so you can follow your own advise as 19 to whether you should or should not get a transcript 20 ordered from the reporter. Now, Mr. McDonough I assume 21 you are not an attorney; would that be correct? 22 MR. MCDONOUGH: It is correct, I am not. 23 THE COURT: Okay. I mentioned that only 24 because when when principal of a party, appear in the 25 course of one of these proceedings, um, it you ofPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 3

1 course are not sworn, but nevertheless whatever you say 2 winds up being a part of the record and could in fact 3 wind up being used in a hearing if this goes to 4 hearing, do you understand what I mean? 5 MR. MCDONOUGH: Yes sir. 6 THE COURT: It also means that as a 7 principal making statements on the record you should be 8 aware of the fact that willful false statements to a 9 Federal officer is a Federal felony, so I mean all I am 10 trying to do is make sure you are aware of the of the 11 importance of of of what you say in this context, okay? 12 MR. MCDONOUGH: Yes sir. 13 THE COURT: Okay. Now, another 14 relationship uh in the record which I thought we should 15 clear up, uh, is the relationship between Carolina Blue 16 and Millionaire. You, uh you are uh, President of 17 Millionaire, is that correct? 18 MR. MCDONOUGH: Yes sir. 19 THE COURT: And and, do you have a 20 relationship with Carolina Blue? 21 MR. MCDONOUGH: Carolina Blue is a 22 tenant and they have a management agreement with 23 Millionaire to track and schedule their maintenance and 24 only maintenance. The company has its own crew, uh, 25 and that situation has changed recently in that thePREHEARING CONFERENCE 05/03/2011 CCR#16632-1 4

1 pilot that was employed by Carolina Blue has had a bout 2 with cancer and we doubt seriously he will be 3 returning. He has a son who is still participating as 4 one of the three crew members and the other two crew 5 members on the airplane are supplied by me at a rate, 6 and a the, yeah that was the answer to your question. 7 THE COURT: When you say they are a 8 tenant, that sounds like a ground services arrangement? 9 MR. MCDONOUGH: Yes sir, they they store 10 their airplane in our on our premises. 11 THE COURT: Okay, uh, but apart from 12 that, uh, the two companies are separate and distinct? 13 MR. MCDONOUGH: Yes sir. 14 THE COURT: Okay, and so your capacity 15 then here is as a retained representative of Carolina 16 Blue? 17 MR. MCDONOUGH: Uh, that is way to 18 describe it, yes sir. 19 THE COURT: Well, I want to make you are 20 appearing on behalf of Carolina Blue and I just want to 21 make sure the the context in which you are appearing 22 for Carolina Blue. 23 MR. MCDONOUGH: Well, without being 24 asked the question, I will offer the a statement that 25 may or may not be relevant.PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 5

1 THE COURT: Sure. 2 MR. MCDONOUGH: We charge we charge a 3 fee monthly for the services we provide and when this 4 letter of investigation appeared, the owner of the 5 airplane took the position that, if there is any 6 problems, it is my problem not his, and that is my.... 7 THE COURT: Because you are the ones who 8 provide the uh, the inspection services 9 MR. MCDONOUGH: And he more or less 10 implied that if there is a fine involved in it, then 11 it's my fine to pay and he doesn't want to hear about 12 it, so 13 THE COURT: I see. 14 MR. MCDONOUGH: I really 15 THE COURT: You are not 16 MR. MCDONOUGH: I apologize. 17 THE COURT: You are appearing for them, 18 but you are appearing also for your own self interest. 19 MR. MCDONOUGH: Yes, and and Judge I I 20 apologize to you. I have already apologized to Zach 21 Berman. I am not trying to pass myself off as an 22 attorney, I am doing this because I can't afford an 23 attorney 24 THE COURT: Yeah. 25 MR. MCDONOUGH: And and, well we I don'tPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 6

1 know that I can 2 THE COURT: Well, we try hard to see to 3 it that people understand what is going on or whether 4 their attorneys or not and sometimes the attorneys seem 5 to have as much of a problem with that as the non6 attorneys if that helps you at all, and it probably 7 MR. MCDONOUGH: I just uh, I wanted to 8 clear up that I I have a lot of respect for the system 9 and I am not trying to pass myself off as a charlatan. 10 THE COURT: Well, I don't think anyone 11 suspected that. Uh, I called the Prehearing Conference 12 to see if we could try to sort out some of the issues. 13 I know there is a Motion pending of uh, it is not clear 14 to me that there might be two Motion pending, uh, but 15 to date, we have not seen anyone treat your original 16 response to the complaint as a Motion, although, it was 17 it was it referred to itself from time to time as a 18 Motion. Um, in any event, our our concern here is not 19 so much with procedural technicalities but with uh, 20 with sorting out just uh just what the issues are and 21 where we think the dispute is and what remains an 22 issue. Uh, uh among other things, you've already 23 mentioned the question of of finances and I am 24 wondering if this went to hearing whether ability to 25 pay would be one of the issues. Do you know what IPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 7

1 mean? 2 MR. MCDONOUGH: I do know what you mean 3 and I don't know how to respond to that. I I 4 THE COURT: It would not be a question 5 of your ability to pay; it would be a question of 6 Carolina Blue's ability to pay. Do you understand? 7 MR. MCDONOUGH: I do understand. 8 THE COURT: Well, do you know whether 9 Carolina Blue would be raising 10 MR. MCDONOUGH: I would have to assume, 11 yes, that they would be in a position that they would 12 have the money to pay. 13 THE COURT: Okay, that is a that is a 14 different response. The question has to do with one of 15 the factors that has to be considered in determining a 16 level of penalty if there is a penalty, and one of 17 those factors, uh, if the respondent wishes to raises 18 it, is ability to pay, and if they are concerned about 19 their own ability to pay; if paying the penalty would 20 in fact impact their ability to continue in business, 21 uh, or is beyond their means to pay, then that is 22 something that that the respondent would raise and the 23 respondent would need to introduce evidence on that 24 subject, and so Now do you understand what I mean about 25 MR. MCDONOUGH: Yeah.PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 8

1 THE COURT: Whether their ability to 2 pay is going to be raised? 3 MR. MCDONOUGH: I do. 4 THE COURT: Okay, so the question is 5 would Carolina Blue be contending that the size of this 6 penalty might uh, seriously impact their ability to 7 continue in business or put them out of business, or 8 MR. MCDONOUGH: The answer would be no. 9 THE COURT: No. Okay, so ability to pay 10 then we will assume is not in this case unless I hear 11 something to the contrary. If it were in the case 12 then, Carolina Blue would need to provide, uh, Counsel 13 for Complainant with financial information to 14 demonstrate that the penalty would would negatively 15 impact their business status. Do you understand? 16 MR. MCDONOUGH: Yes. 17 THE COURT: Okay, so we will assume that 18 is not the case. Now, it is my understanding that what 19 is in the case is is a question of when inspections are 20 required and and I gather there is a difference of 21 opinion between yourself on the one hand and the 22 Complainant on the other hand with respect to what the 23 what those requirements are, and a a should I 24 understand that that Millionaire arranges for these 25 inspections when they think they should be done?PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 9

1 MR. MCDONOUGH: We do not always do all 2 of the maintenance, however, we present the pilot with 3 a Do List of when the inspections are due. 4 THE COURT: So you have a list that 5 tells uh, Carolina Blue when the inspections need to be 6 done? 7 MR. MCDONOUGH: Yes sir. 8 THE COURT: And then where do they get 9 them done? 10 MR. MCDONOUGH: Uh, here sometimes and 11 uh, maintenance facilities for that model aircraft, at 12 other times the the logbook entry that is in question 13 was not at Millionaire. The logbook question the 14 logbook date that is in question was at uh, a facility 15 in uh, Illinois. 16 THE COURT: Illinois. You, know, I am 17 of course concerned about that entry but I, at the 18 moment I am concerned about the general approach of 19 Millionaire and Carolina Blue to uh, the scheduling and 20 and conducting these these inspections. And, you said 21 that you give the Carolina Blue pilot a a schedule 22 showing him when inspections should be done, is that 23 correct? 24 MR. MCDONOUGH: Yes sir. 25 THE COURT: Do you have, uh, thePREHEARING CONFERENCE 05/03/2011 CCR#16632-1 10

1 document there that shows uh, the history of 2 inspections for uh, this aircraft? 3 MR. MCDONOUGH: I have a document in 4 front of me that shows the compliance times for that 5 specific AD. 6 THE COURT: Yeah, that is what I that is 7 what I mean. 8 MR. MCDONOUGH: Yeah. 9 THE COURT: And that is the one that 10 starts off AD98-13- it says 5 but it should be 15? 11 MR. MCDONOUGH: Yes, it is handwritten? 12 THE COURT: Yeah. Dated July something? 13 MR. MCDONOUGH: Yes sir. 14 THE COURT: That is off of my Xerox but 15 then it starts with August 4, 1998? 16 MR. MCDONOUGH: Yes. 17 THE COURT: And the next inspection 18 after that was November 17, 1998? 19 MR. MCDONOUGH: That is the form, yeah. 20 THE COURT: Okay, so we are both looking 21 at the same document. You have that too Mr. Berman? 22 MR. BERMAN: Yes. 23 THE COURT: Okay good. Now, uh, so if 24 we went on down through this list would these 25 inspection dates reflect the dates that you told themPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 11

1 were scheduled for doing the inspections? 2 MR. MCDONOUGH: Not necessarily Judge, 3 we we have not been involved in the airplane that long. 4 We probably got involved in the airplane in 2007 or 5 2008. 6 THE COURT: Okay. 7 MR. MCDONOUGH: So these are all 8 inspections that had been done through the previous 12 9 years of that AD? 10 THE COURT: And who was doing it then? 11 MR. MCDONOUGH: Uh, different people at 12 different places. I I don't have each one of the one 13 of my mechanics researched the sign-offs for that AD 14 through the logbooks and I I do not have that in front 15 of me, but 16 THE COURT: I am just wondering about 17 the the Corporate approach to these inspections that 18 uh, Carolina Blue has evinced since 1998. 19 MR. MCDONOUGH: Judge, I don't know how 20 long Carolina Blue owned that airplane. 21 THE COURT: Oh, I 22 MR. MCDONOUGH: I think 23 THE COURT: You mean this may go beyond 24 Carolina Blue? 25 MR. MCDONOUGH: Yes sir.PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 12

1 THE COURT: Would you happen to know how 2 long Carolina Blue has owned the airplane? 3 MR. MCDONOUGH: No, but I can find out. 4 I can produce when they bought the airplane. 5 THE COURT: Well, let's start with 2007 6 and, uh, then uh, and assume that as least as of that 7 time, they own the airplane and you were scheduling the 8 inspections, or you were indicating that the date that 9 they should be scheduled. 10 MR. MCDONOUGH: Alright. 11 THE COURT: Okay. Uh, so we get July 12 31, 2007 as the first inspection following a December 13 22, 2006 inspection. 14 MR. MCDONOUGH: I see that, yes. 15 THE COURT: Okay, would that July 31, 16 2007 inspection be one that you gave them a schedule 17 for? 18 MR. MCDONOUGH: Um, I can't say that 19 without uh, looking back and seeing how long we had it, 20 but I would assume that what they were told is that the 21 inspection was due in July. 22 THE COURT: Oh, I see. As long as you 23 have been doing it, you have told them a month in which 24 the inspection was due? 25 MR. MCDONOUGH: Yes, along with otherPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 13

1 things, you know, perhaps a 2 THE COURT: But you have not told them 3 the date on which it was due? 4 MR. MCDONOUGH: I can't say that either 5 Judge, you know, it the simple problem for a mechanic 6 is that he will just take a date and write six months 7 from it, and use the same date when not necessarily 8 that is the day that it is due, and the other side 9 THE COURT: Uh, I am trying to avoid 10 getting into a discussion of what the regulation 11 requires and 12 MR. MCDONOUGH: I understand I 13 understand. 14 THE COURT: what an inspector might or 15 might not do. I am trying to find out what, in fact, 16 occurred with respect to the scheduling of inspections 17 under this under this AD. 18 MR. MCDONOUGH: What I do have in front 19 of me is the West Star sign-off and the West Star sign20 off told them it was next due on February 20th. That 21 would have been the August one 22 THE COURT: I'm sorry. 23 MR. MCDONOUGH: The one in question was 24 done on August 20, 2009, in the second column. 25 THE COURT: Okay.PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 14

1 MR. MCDONOUGH: And that one was the one 2 it ref referenced in in its text that the next one 3 would be due February 20, 2009. 4 THE COURT: Okay, and you said that was 5 a West Star sign-off? 6 MR. MCDONOUGH: Yes sir, that is it is a 7 logbook entry from and its part of, uh and it is part 8 of exhibit uh it is part of the Complainant's Motion to 9 Decision. Exhibit A2-21. 10 THE COURT: Okay. So that was a Notice 11 from West Star to Carolina Blue that it should have 12 been done by February 20? 13 MR. MCDONOUGH: That is that is what it 14 says, yes. 15 THE COURT: Okay, and you aren't 16 involved in getting it inspected? 17 MR. MCDONOUGH: I believe that we did 18 the next one which was the one that was done on March 19 2nd. 20 THE COURT: Well, yeah, but 21 MR. MCDONOUGH: I think Millionaire did 22 the one on March 2nd. 23 THE COURT: The August 20 inspection was 24 or culminated in a Notification from West Star that the 25 next inspection was due February 20, is that right?PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 15

1 MR. MCDONOUGH: That yes, I'll find it. 2 THE COURT: And then 3 MR. MCDONOUGH: I am going to find it 4 and see. I don't see it written that way in the in the 5 logbook entry. 6 THE COURT: Oh I see here, I have the 7 West Star Aviation, uh, logbook entry and about halfway 8 down that document, which appears as Exhibit A-2, page 9 two of three. It says next due 20 February, do you see 10 that? 11 MR. MCDONOUGH: Yes. 12 THE COURT: Okay, so at least West Star 13 Aviation is telling Carolina Blue that this inspection 14 was due on February 20, is that not correct? 15 MR. MCDONOUGH: West Star Aviation is 16 saying that, however, in the in the previous 17 inspections the logbook entry would have said, in some 18 of the previous logbook entries, the entry would have 19 said due February. 20 THE COURT: Yeah, well. Let's just deal 21 with this one for the moment. 22 MR. MCDONOUGH: Alright. 23 THE COURT: We will get back to some 24 previous inspections because I have some issues with 25 them. Uh, but this one does say, and it says it toPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 16

1 Carolina Blue not to Millionaire, correct? 2 MR. MCDONOUGH: Correct. 3 THE COURT: Uh, so it says that the next 4 inspection is due February 20, correct? 5 MR. MCDONOUGH: Yes. 6 THE COURT: And you didn't have anything 7 to do with scheduling that inspection, or did you? 8 MR. MCDONOUGH: Only only to present it 9 in a on a a status sheet to the crew operating the 10 airplane. 11 THE COURT: Well, did they get a copy of 12 this logbook entry? 13 MR. MCDONOUGH: Yes. 14 THE COURT: Okay, when you say it was 15 presented on a status sheet, is that something 16 different from the 17 MR. MCDONOUGH: Something that we 18 create. 19 THE COURT: Okay, so you gave them a 20 status sheet. 21 MR. MCDONOUGH: A synopsis. A synopsis 22 is the best way to describe it, the upcoming 23 maintenance. 24 THE COURT: Also gave them the logbook 25 entry?PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 17

1 MR. MCDONOUGH: No, we would have given 2 them a a statement from looking at the logbook entries. 3 THE COURT: Okay, so the the uh, 4 document that you gave to them, uh, did not include 5 everything that was on this logbook entry? 6 MR. MCDONOUGH: I don't have the thing 7 the sheet of paper in front of me but I have a sample 8 of what it would look like that I could present. 9 THE COURT: Would it would it have uh, 10 the due date information that is included on the 11 MR. MCDONOUGH: It did it did in fact 12 say February 20th. 13 THE COURT: Oh, okay. 14 MR. MCDONOUGH: And I believe I believe 15 in error. It should have said February, not February 16 20th. 17 THE COURT: Well, whatever 18 MR. MCDONOUGH: That is what I am 19 THE COURT: Well, whatever you believe 20 MR. MCDONOUGH: Right, I got it I got 21 it. 22 THE COURT: West Star 23 MR. MCDONOUGH: Having said that, yes, 24 it did say February 20th. 25 THE COURT: It did say February 20.PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 18

1 MR. MCDONOUGH: It did. 2 THE COURT: You then, in preparing your 3 summary to Carolina Blue said February 20. 4 MR. MCDONOUGH: Before the end of 5 February is what we told them. 6 THE COURT: I am sorry, no. 7 MR. MCDONOUGH: It was printed. 8 THE COURT: We have to be careful about 9 what we say here. 10 MR. MCDONOUGH: It was printed on the 11 sheet due February 20th and when the pilot questioned 12 it, he was told it is due before the end of February by 13 our Director of Maintenance. 14 THE COURT: Ah, so your Director of 15 Maintenance told Carolina Blue that they didn't have to 16 do it until the end of February? 17 MR. MCDONOUGH: That is correct. 18 THE COURT: Okay. Now now we will get 19 back to my previous question. Did you have anything to 20 do with expectuating that inspection, I mean, you gave 21 this information to their pilot. Who causes the 22 inspection to occur? 23 MR. MCDONOUGH: The pilot goes to the 24 Director of Maintenance and says the airplane is 25 THE COURT: Whose Director ofPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 19

1 Maintenance? 2 MR. MCDONOUGH: Mine. 3 THE COURT: Yours. 4 MR. MCDONOUGH: Millionaire. 5 THE COURT: Okay, so the pilot goes to 6 the Director of Maintenance and he says, the plane 7 needs inspection. Is that what you are telling me? 8 MR. MCDONOUGH: Yes sir. 9 THE COURT: And do you know when that 10 occurred? 11 MR. MCDONOUGH: It looks like it uh 12 occurred somewhere it was the completion of the work 13 was on March 2nd. 14 THE COURT: Well, my question is do you 15 know when he went to the Director of Maintenance and 16 said the plane needs inspection? 17 MR. MCDONOUGH: I don't know exactly 18 when. Obviously after he flew it, uh, on the day it is 19 alleged in the 20 THE COURT: Was that generally the way 21 the inspections were arranged? 22 MR. MCDONOUGH: Yes. 23 THE COURT: Okay, and and who who then 24 was responsible to see to it that these inspections got 25 done before the six month period was up, however youPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 20

1 calculate it. Whose responsibility was that? 2 MR. MCDONOUGH: Well, it would have been 3 the pilot in commands responsibility. 4 THE COURT: To ask for an inspection? 5 MR. MCDONOUGH: Correct. 6 THE COURT: And to get it completed? 7 MR. MCDONOUGH: Right, but we did not 8 have the authority to tell them that they couldn't fly 9 the airplane. 10 THE COURT: Okay, well even on your 11 interpretation, this inspection would have been due by 12 February 28th, is that correct? 13 MR. MCDONOUGH: 28th yeah. 14 THE COURT: So it was late anyway is 15 that right? 16 MR. MCDONOUGH: No sir, no sir. Because 17 it wouldn't have been due until the 15th of March if 18 the plane hadn't been operated. 19 THE COURT: I thought it had to be done 20 within 60 days. 21 MR. MCDONOUGH: Or the plane not flown 22 until it was done and and I believe 23 THE COURT: I'm sorry, where does it say 24 that? 25 MR. MCDONOUGH: Well it is not due ifPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 21

1 the plane is not being operated, and I believe that the 2 lapse in 3 THE COURT: Mr. Berman do you agree with 4 that? 5 MR. BERMAN: Well, uh, well, I would 6 agree that it is not an operational violation if they 7 we alleged that they didn't do an AD by 8 THE COURT: Well, I am not saying that 9 it would be an operational violation. I mean, you 10 can't operate a an un-airworthy aircraft if you don't 11 operate it, but that isn't my question is it? 12 MR. BERMAN: Correct. Uh, well, I would 13 disa disagree with Mr. McDonough, I would say that it 14 was, according to the a AD, it was required to be done 15 by by a certain date which we believe was February 16 20th. 17 THE COURT: Yeah, I understand. So, Mr. 18 McDonough you heard that? 19 MR. MCDONOUGH: Yes. 20 THE COURT: You understand of course, 21 the distinction between complying with the AD on the 22 one hand and operating an un-airworthy aircraft on the 23 other? 24 MR. MCDONOUGH: Yes I do. 25 THE COURT: Are you aware of anythingPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 22

1 that that modifies the AD that says you don't have to 2 complete the inspection if the plane isn't being 3 operated? 4 MR. MCDONOUGH: Uh, I am not sure that 5 uh, we are talking about the same we are not saying it 6 the same way. Obviously 7 THE COURT: Okay. 8 MR. MCDONOUGH: If the if the AD expired 9 on the 28th of February. 10 THE COURT: Yeah. 11 MR. MCDONOUGH: And the the company had 12 no plans to use the airplane until the following week; 13 the plane would be down all week. 14 THE COURT: Yeah. 15 MR. MCDONOUGH: It would be it would be 16 at the discretion of the scheduler in the maintenance 17 shop what day they got to the AD. 18 THE COURT: Okay, my question is. Do 19 you have 20 MR. MCDONOUGH: No, I do not believe 21 that the AD the AD is only overdue if the airplane is 22 flown. 23 THE COURT: Well, do you have anything 24 in the AD that says that? 25 MR. MCDONOUGH: Uh, I will look and seePREHEARING CONFERENCE 05/03/2011 CCR#16632-1 23

1 if the AD says before further flight. 2 THE COURT: Well, Mr. Berman says that 3 is just not so. 4 MR. MCDONOUGH: Well, then this would be 5 a different AD than any of the others because the way 6 the way it is that even if 7 THE COURT: I am charged with dealing 8 with this one at the moment. You don't want me to try 9 all the others. 10 MR. MCDONOUGH: No sir, but it would 11 save you from a further flight or something like that, 12 it would not say, you know, that uh, I will have to 13 find the AD in this stack and give me moment and I 14 will try and I will try and locate what you asked me 15 for. 16 THE COURT: It is a couple places in my 17 file here. It is Exhibit A-1. 18 MR. MCDONOUGH: I've got it. 19 THE COURT: Mr. Berman these these 20 Directives uh, run to the owner of an aircraft is that 21 correct? 22 MR. BERMAN: Well, whoever well 23 generally the operator or someone who has operational 24 control over the over the aircraft. 25 THE COURT: Well, let me back up just aPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 24

1 minute. If I own the aircraft I have no responsibility 2 under the AD? Uh, if I give it to somebody else to 3 operate? 4 MR. BERMAN: Well, it depends uh, on the 5 understanding like for example, if you have a big 6 airline, they lease aircraft from from a company, they 7 we hold the airline responsible and not the8 THE COURT: You mean the leasee? 9 MR. BERMAN: Right. 10 THE COURT: Okay, so generally you are 11 concerned with operators not with owners on this AD? 12 MR. BERMAN: Uh, whoever it is more 13 important to us whoever it is more relevant who 14 operates; and if the owner and operator could be the 15 same person. 16 THE COURT: Oh I understand that, but 17 that of course is not my question. 18 MR. BERMAN: Right. 19 THE COURT: My question is to whom does 20 the AD give a direction? 21 MR. BERMAN: Uh, to whoever is 22 responsible for maintaining ? 23 THE COURT: That is chronological? That 24 is exactly what I'm asking, who is responsible? Are 25 you telling me that an owner is not responsible forPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 25

1 maintenance of the aircraft if they turn it over to 2 someone else for operations? 3 MR. BERMAN: No, it would depend on what 4 the Agreement is between the owner and the operator. 5 THE COURT: Okay, it doesn't depend on 6 law? It depends on the Agreement? 7 MR. BERMAN: Well if the 8 THE COURT: Well, I have had cases in 9 which it has been suggested to me that the fact that 10 you asked someone else to do maintenance on your 11 aircraft and they do it badly, doesn't excuse you from 12 liability, would you agree with that? 13 MR. BERMAN: Yes. 14 THE COURT: Okay, so that is a question 15 of the let's call them an owner-operator turning it 16 over to a maintenance outfit to do maintenance, and and 17 so I guess my question is, if you are the owner and you 18 turn it over to someone else to operate, and they turn 19 it over to this maintenance person who is responsible, 20 only the operator? 21 MR. BERMAN: If a wait if let's say the 22 owner turns it to someone else to operate, the operator 23 gets someone to do the maintenance, who is responsible 24 for that maintenance, just the operator. And the 25 maintenance people of course, or is the ownerPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 26

1 responsible as well? 2 THE COURT: If you don't know just I 3 don't know is always a sufficient answer. 4 MR. BERMAN: I am not sure. 5 THE COURT: Alright, well, that is a 6 better answer than a wrong answer. 7 MR. BERMAN: I think it was it would 8 depend on what kind of arrangements there are. 9 THE COURT: I am just trying to sort 10 what the what the direction of the AD is and to whom it 11 runs, and what I hear Mr. McDonough saying is that it 12 runs to the operator and 13 MR. BERMAN: In this case we are 14 alleging that Carolina Blue Air maintained and operated 15 this aircraft. 16 THE COURT: And, maybe that is the 17 answer with respect to what your position is because it 18 doesn't say anything about who owned it, does it? 19 MR. BERMAN: I admitted, I don't think 20 it is in dispute that Carolina Blue Air maintained and 21 operated the aircraft. 22 THE COURT: I understand that, but but 23 you don't allege anything about whether they owned it? 24 MR. BERMAN: That is correct. 25 THE COURT: Well, so that would,PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 27

1 presumably under your theory of the case is irrelevant? 2 MR. BERMAN: Right. 3 THE COURT: You don't have to prove 4 ownership in order to prove a violation? 5 MR. BERMAN: Correct. 6 THE COURT: Okay. 7 MR. MCDONOUGH: Judge, I have an answer 8 to your first question about the March 2nd? 9 THE COURT: Where would that be? 10 MR. MCDONOUGH: The question was uh, uh, 11 is there anything in the AD that says before the plane 12 is flown. 13 THE COURT: Yes. 14 MR. MCDONOUGH: It is on a paragraph 15 lower case "a" within seven months or 330 flight hours. 16 THE COURT: I am looking through that. 17 MR. MCDONOUGH: It is Exhibit A-1 and it 18 has got of four on the bottom of the page. That is all 19 it says. THE COURT: 0-4. 20 MR. MCDONOUGH: Of four. 21 THE COURT: I have got one of four, two 22 of four, three of four, and four of four. 23 MR. MCDONOUGH: Well, I don't know, mine 24 just says 25 THE COURT: I have one that just saysPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 28

1 one of four. 2 MR. MCDONOUGH: Yes, and it says 3 compliance in the middle of the page, and it is just 4 after the uh title of the AD. It is probably on the 5 first page. THE COURT: A-1? 6 MR. MCDONOUGH: Is it A-1 perhaps, and 7 then it comes down and it says within seven months or 8 330 flight hours. 9 THE COURT: That is three of four. 10 MR. MCDONOUGH: Okay, I don't have the 11 numbers written on my 12 THE COURT: It says within seven months 13 or 330 flight hours? 14 MR. MCDONOUGH: Right. 15 THE COURT: That is the effective date 16 of the AD? 17 MR. MCDONOUGH: Right right, and that is 18 paragraph A. If you go to paragraph one Perform. 19 THE COURT: Yes. 20 MR. MCDONOUGH: To perform an 21 inspection. If any discrepancies if found prior to 22 further flight repair. So it is prior to further 23 flight that quantifies when it is due, not the fact 24 that the calendar passed. 25 THE COURT: UhPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 29

1 MR. MCDONOUGH: The airplane may sit for 2 a month and not be operated and the AD is not in fact 3 overdue. 4 THE COURT: Uh do you agree with that 5 Mr. Berman? 6 MR. BERMAN: Yeah, you know, to some 7 extent I do in the sense that you don't have to repair 8 it until further flight but you still have to do the 9 inspection by that date. 10 MR. MCDONOUGH: I disagree. I would say 11 the inspection is due by that date but doesn't have to 12 be done by that date. It is listed as due by that 13 date. Anything any time you operate the airplane after 14 that date the airplane would be in violation. 15 THE COURT: Well yeah, I understand that 16 MR. MCDONOUGH: And if the plane if the 17 plane was getting engines changed and it sat in the 18 hangar for two months, and and, see this is where this 19 is where part of this problem is. If the airplane went 20 into the shop on August 1st to get a major inspection 21 and happened to be finished at the August 20th date, 22 there is no we are confusing the 43-9 sign-off date, 23 time, with an effective date of an AD, and it would not 24 be effective until the airplane was operated. Before 25 andPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 30

1 THE COURT: I know understand your 2 position with respect to that, but I don't know that it 3 that it addresses the facts in this case. It is not or 4 maybe it does with respect to your theory of the case. 5 Are you saying that this plane was in fact not operated 6 prior to February? 7 MR. MCDONOUGH: No sir, I am not saying 8 that in this case, but I am saying that in this history 9 of AD compliance that was provided and written sheet 10 there may be some intervals in there that are more than 11 six months. 12 THE COURT: Yeah. 13 MR. MCDONOUGH: And that may well be the 14 answer for that. 15 THE COURT: Okay, in this particular 16 case, was the plane operated between February 28 and 17 March 2? 18 MR. MCDONOUGH: No sir. 19 THE COURT: It was not? 20 MR. MCDONOUGH: It was not. It was 21 operated it was finished I don't have the schedule but 22 I can produce it, it was finished before the end of 23 February and then it went into maintenance. 24 Maintenance was completed on the 2nd of March. 25 THE COURT: Oh.PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 31

1 MR. MCDONOUGH: And there is really no 2 way to tell when the AD was done only that the date of 3 the AD was a logbook entry was done on the 2nd of March 4 saying that, that AD had been complied with. That does 5 not become the effective date of the AD for the next 6 time. Uh, in my argument, and I apologize 7 THE COURT: What becomes the effective 8 date for the next time, when they finish the previous 9 inspection, and you get your your statement from the 10 maintenance facility, is that correct? 11 MR. MCDONOUGH: Well, like you say, that 12 is my interpretation of this case, and I say no, but I 13 I I am sitting listening; I am not trying to force 14 anything on anybody. I just disagree that we are 15 confusing an effective date of an AD with a 43-9 16 logbook entry. 17 THE COURT: Well, we are going to get to 18 that. 19 MR. MCDONOUGH: I understand that and I 20 apologize for jumping ahead, I am just saying that I 21 don't believe I don't believe it has been done if the 22 airplane is going to be flown. The airplane is not 23 illegal if a month went by before the AD was complied 24 with. 25 THE COURT: As long as it is notPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 32

1 operating? 2 MR. MCDONOUGH: Correct. 3 THE COURT: That is your position? 4 Okay, and if the other dates on this list in seven, 5 eight nine, ten, we will find that uh, the January 10 6 inspection was within the six months under anybody's 7 computation. The uh, July 18 inspection was not within 8 the Government's calculation but was within yours. 9 MR. MCDONOUGH: Yes sir. 10 THE COURT: And the same would be true 11 of the next one? 12 MR. MCDONOUGH: Yes sir. 13 THE COURT: And the next one? 14 MR. MCDONOUGH: Well, the next one was 15 not done by us, the 20th one? 16 THE COURT: January 30, 2009 and then 17 MR. MCDONOUGH: The second one was and 18 the July one was. 19 THE COURT: July 31, and that was six 20 months plus one day. 21 MR. MCDONOUGH: Yeah, yeah, I didn't 22 calculate it like that, I don't know. 23 THE COURT: Well, July 31 is is six 24 months plus one day. So, okay, on the other hand if we 25 look back before 2007, we get a picture of inspectionsPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 33

1 that uh varied rather substantially from one time to 2 the next. 3 MR. MCDONOUGH: Agree. 4 THE COURT: And you don't know the 5 extent to which any of that could be or should be 6 attributable to planes not being operated? 7 MR. MCDONOUGH: I don't know, but I 8 suspect that. 9 THE COURT: You suspect it wasn't being 10 operated? 11 MR. MCDONOUGH: Right. If you look at 12 the amount of hours between the intervals was not very 13 much. 14 THE COURT: You are just telling us 15 because it reflects a pattern of attitude on the part 16 of a of a Carolina Blue. 17 MR. MCDONOUGH: If in fact they did own 18 it in those years. I would have to research that for 19 you. 20 THE COURT: Yeah. That is true; we 21 don't really know who owned it then. Okay, but so the 22 ones the only ones we really know about are these since 23 2007 and they are there, the only dispute really is the 24 one that you uh the one that you focused on and I have 25 looked uh, uh, at your argument with respect to thatPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 34

1 and frankly I have a very difficult time uh uh 2 MR. MCDONOUGH: I'm listening. 3 THE COURT: Making that consistent with 4 the language of the AD. Um, just as as a novice 5 looking at the language, if it says it is not supposed 6 to exceed six months, I would assume that, that would 7 be six months from the date; it would not be six 8 calendar months. It would be six months, whatever that 9 is. 10 MR. MCDONOUGH: Well, that is what the 11 Government 12 THE COURT: In fact, you could pay off a 13 note at the bank within six months, and you come in two 14 days late, your house may be gone. 15 MR. MCDONOUGH: Well 16 THE COURT: If you have 17 MR. MCDONOUGH: That may be, that may be 18 THE COURT: All I'm saying is that in 19 general parlance I would have thought that if you were 20 talking about something being done within six months it 21 would be six months from the date, whatever that date 22 is, now that is just a general parlance approach, but 23 then if you look at if you look at the language in the 24 Directive, which is and in the manual you of course are 25 familiar with the manual?PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 35

1 MR. MCDONOUGH: Once again Judge, the 2 manual is referring to the effective date of the AD, 3 the initial compliance, as quoted. 4 THE COURT: And that of course was not 5 my question. 6 MR. MCDONOUGH: Okay. 7 THE COURT: My question was, you are 8 familiar with the manual? 9 MR. MCDONOUGH: Yes. 10 THE COURT: Okay. 11 MR. MCDONOUGH: I have it in front of me 12 on the computer. 13 THE COURT: If we look at the manual 14 where we find there aren't many places where we find 15 this juxtapositions of uh months on the one hand and 16 calendar months on the other hand, but this is one 17 place where there is that juxtapositions in the manual, 18 and the manual says that the time is measured from the 19 effective date, and if it is within X months then it is 20 X months after the effective date, which is date to 21 date, and 22 MR. MCDONOUGH: And I would agree with 23 that. 24 THE COURT: That is what it says, okay 25 MR. MCDONOUGH: I guess soPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 36

1 THE COURT: If it if it calls for 2 compliance within calendar months then that is month to 3 month. Now, whether that is in the context of this, uh 4 specific section of the AD it does set forth a uh, a 5 juxtaposition in months and calendar months and and 6 suggests that, that is what it has in mind when it is 7 talking about months and calendar months. Certainly in 8 this context, is that would you agree with that? 9 MR. MCDONOUGH: Um, I will say yes, I 10 agree with it. 11 THE COURT: Yeah, so if it means that in 12 this context, why should we assume it means something 13 else in another context? 14 MR. MCDONOUGH: Because the effective 15 date of the AD is very clear on the initial compliance. 16 THE COURT: Isn't the effective date of 17 subsequent inspections of ? 18 MR. MCDONOUGH: No. 19 THE COURT: Why not? 20 MR. MCDONOUGH: Because it is a 43-9 21 logbook entry for a a 22 THE COURT: Well I think it does have a 23 date on it doesn't it? 24 MR. MCDONOUGH: It does, it has a wide 25 scope of events on there, where there would be a 12PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 37

1 year inspection, 300 hour engines, and you know 2 THE COURT: But it has a specific date 3 for the completion of this incidence. 4 MR. MCDONOUGH: But that doesn't that 5 doesn't make it correct, the fact that one mechanic 6 transcribes the day as the day of the month makes the 7 entry correct. 8 THE COURT: It does have a date for the 9 completion of this inspection, does it not? 10 MR. MCDONOUGH: Yes. 11 THE COURT: Okay, and indeed it is that 12 date that is reflected in the uh, uh, in the compliant 13 X52.35 that you were referring to earlier? 14 MR. MCDONOUGH: Yes. 15 THE COURT: Okay. Yeah, that was the 16 West Star sign-off? 17 MR. MCDONOUGH: Yes. 18 THE COURT: And what you are telling me 19 is that let me if I am hearing you correctly, that the 20 way you run Millionaire and the way you run Carolina 21 Blue, uh, is consistent with well, the way you schedule 22 Carolina Blue's inspections is consistent with the 23 position you are taking about the time for inspection, 24 is that right? 25 MR. MCDONOUGH: Yes.PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 38

1 THE COURT: And so you may wind I mean 2 if this decision goes the other way, uh, you may wind 3 up with violations all over the place for both of those 4 airlines? That was a question. 5 MR. MCDONOUGH: It was a question. Yeah, 6 I disagree. I disagree that that 7 THE COURT: If the decision 8 MR. MCDONOUGH: I I I understand what 9 you are saying Judge. If you decide that that the 10 paragraph that applies to the initial compliance of the 11 AD applies to all of the recurrent thresholds. 12 THE COURT: Yeah. 13 MR. MCDONOUGH: And that 14 THE COURT: From day to day 15 MR. MCDONOUGH: That whoever signed off 16 the AD date and puts the date that they signed the 17 airplane off 18 THE COURT: Yeah. 19 MR. MCDONOUGH: That is now the 20 effective date of the AD? 21 THE COURT: Yeah. 22 MR. MCDONOUGH: And if that is the case, 23 I may have a problem. 24 THE COURT: Yeah, uh well I 25 MR. MCDONOUGH: If that is true, I mayPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 39

1 have a problem. 2 THE COURT: In multiplying your 3 problems, but I think it is important to achieve uh, 4 uh, a a clear delineation of when these things are due, 5 so you don't have to wonder 6 MR. MCDONOUGH: And I 7 THE COURT: And nobody has to wonder. 8 MR. MCDONOUGH: That is my argument, 9 sir. When it says 180 days, it is pretty clear and 10 AD's do say that. AD's will say 72 hours, AD's will 11 say 12 THE COURT: Yeah. 13 MR. MCDONOUGH: Three business days. 14 AD's are worded they are worded all over the scope. 15 THE COURT: In the cases that I have Mr. 16 McDonough, it would often be much easier if people 17 wrote things differently, but the fact is, we have got 18 to deal with what we've got, not with what you wish it 19 were, and to be clearer for you. 20 MR. MCDONOUGH: Yes sir. 21 THE COURT: And the problem I have, uh, 22 is that just on the face of this, when it says six 23 months I would take that to mean six months. Not only 24 would I take it to mean six months, but the manual 25 would suggest that the manual takes it to be sixPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 40

1 months, date to date, and beyond that, we haven't found 2 any cases suggesting that it means anything else. Are 3 you aware of any previous cases holding that 4 MR. MCDONOUGH: That was my only risk in 5 presenting this letter was I don't know you know, not 6 being a lawyer, I don't know if there is a precedent or 7 a case that says, you know but 8 THE COURT: Well, I have got several 9 lawyers, and as a matter of fact, three of them sitting 10 in here in the room with me. 11 MR. MCDONOUGH: In my in my blue collar 12 world of trying to read AD's on a mechanics floor. 13 THE COURT: Sure. 14 MR. MCDONOUGH: It is uh every other 15 thing in the industry is calendar months, unless it 16 specifies 180 days, it is subject to interpretation, 17 and and the fact that it is subject to interpretation 18 and we are really dealing with three days. 19 THE COURT: Well, I wouldn't go down 20 that road. 21 MR. MCDONOUGH: Well, I understand that 22 I understand that and, you know, if you let me speak 23 long enough I will probably get both feet in my mouth, 24 however 25 THE COURT: I am just I am just trying toPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 41

1 keep us on the track of what actually is an issue here, 2 and and, uh, well with 3 MR. MCDONOUGH: With the lack of 4 THE COURT: A lot of the issues that 5 seem to me Mr. Berman can you tell me how the FAA gets 6 involved in "policing" the timeliness of these 7 inspections? 8 MR. BERMAN: Well, well they do periodic 9 inspections. I don't know if they can catch every 10 violation. They just depend on the uh, logbook records 11 when they happen to do inspections. 12 THE COURT: Okay, you say they do 13 periodic inspections of the logbooks for the aircraft, 14 right? 15 MR. BERMAN: Well they might focus on a 16 particular operator of an aircraft or uh if a but they 17 rely on the paperwork to make sure when they do it, to 18 determine compliance of AD's, you know, obviously I 19 would have to look at the paperwork. 20 THE COURT: Yeah, and we are blessed by 21 the fact that we are only looking on a date, and we 22 only have to worry about one kind of inspection and 23 your inspector has to worry about lots of different 24 papers and lots of different inspections. Uh, but what 25 I am trying to get is is some understanding of howPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 42

1 something like this comes to the FAA's attention, and 2 what I have heard you say is that the FAA inspectors, 3 these are are these FAA employees or are they 4 independent contractors? 5 MR. BERMAN: They are FAA employees. 6 THE COURT: Okay. The FAA inspectors 7 periodically will will what go to a uh maintenance 8 facility or to a ground facility for an aircraft 9 carrier? 10 MR. BERMAN: Right, and in this 11 particular case they did a records check. They checked 12 the they were checking the maintenance records. 13 THE COURT: At the maintenance facility 14 or at the at the owners or operators facility? 15 MR. BERMAN: Uh, this was at the 16 Millionaire Millionaire facility, and 17 THE COURT: So that is a maintenance 18 facility, and they didn't do all of the maintenance for 19 this aircraft. Would they nevertheless have all the 20 maintenance records for these for this aircraft? 21 MR. BERMAN: Uh, would they have all the 22 I am not sure 23 THE COURT: Well, in looking at in 24 looking at this exhibit, uh, the one that we have been 25 looking at with the compliance times for AD98-1315, uh,PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 43

1 if you look back over that, things have I would say 2 gotten, uh, substantially more consistent in the period 3 that we have been looking at than they were in the 4 period before that, do you understand what I mean? 5 MR. BERMAN: Yes, yes. 6 THE COURT: Are you aware of any other 7 compliance, uh, proceedings involving this aircraft, 8 uh, against Millionaire or or I mean, against Carolina 9 Blue or its predecessors? 10 MR. BERMAN: Uh, yeah, back in the 11 investigative file it says that no prior violation 12 THE COURT: Oh, I see. Because if you 13 look at this one, and you find and you go back to 1998, 14 you find uh seven months and then 19 months, then there 15 was a five month, then there was a six month plus 13 16 days, then there was a seven month, and an eight month, 17 then you get a couple of shorties, two months and five 18 months, then you get six months plus six days, uh, then 19 you get ten months, then you get six plus 14, uh, then 20 you get eight and you get seven. If you if you look at 21 these generically, what you wind up is a lot more that 22 are not within six months than there are that are. I 23 am just wondering if that is is a representative 24 picture of of how this AD gets enforced. 25 MR. BERMAN: Well, I would hope not,PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 44

1 although, I am not sure if the aircraft from the 2 previous it might make a difference if the aircraft was 3 flown. 4 THE COURT: Well, that is what Mr. 5 McDonough was suggesting, that that maybe it wasn't 6 wasn't being operated. Uh, and he wasn't of course 7 sure who owned it, he said. Uh, so maybe we maybe we 8 won't pursue that any further, but uh, if if we don't 9 pursue that any further what we are left with gentleman 10 is one question, and that is the question of whether 11 six months from a given date means six months from the 12 date or whether it means six calendar months from that 13 month and uh, uh, I haven't seen anything to suggest uh 14 that it should be the latter. Uh, I I don't see it in 15 the language of the AD. I don't see it in the 16 interpretation in the manual, and I don't see it just 17 as a matter of general common sense. I certainly don't 18 see it, uh, in the history of the of the inspections uh 19 for this aircraft. Uh, indeed, if these were actually 20 inspections of an aircraft in operation it would 21 suggest that, that there was precious little attention 22 being given to when the inspections were to occur, but 23 but again, we don't know who was operating the aircraft 24 or whether they were being operated. Uh, I would 25 think, uh, uh, Mr. McDonough if if you wind upPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 45

1 concluding that this case needs to go to hearing, you 2 might want to do your best to try to clarify what in 3 fact the history of inspections of this this aircraft 4 while Carolina Blue had it was. It strikes me also 5 that you are at something of a disadvantage when you 6 are trying to defend uh the activities of uh a a a 7 carrier that basically has this claimed responsibility 8 for this. Uh, based on what you have said, they have 9 said that if there is a problem here it is your problem 10 not theirs, and 11 MR. MCDONOUGH: Well 12 THE COURT: And I gather that they have 13 said that because you have told them that uh, they 14 don't have to do it within six months but only within 15 six calendar months, is that correct? 16 MR. MCDONOUGH: Yes it is. 17 THE COURT: Yeah. 18 MR. MCDONOUGH: And you know, I mean, I 19 THE COURT: Your basis for that is how 20 long have you been in this business? 21 MR. MCDONOUGH: A little over 40 years. 22 THE COURT: Yeah, and during I don't 23 know how old this AD is when was it issued? 24 MR. MCDONOUGH: 1998. 25 THE COURT: 1998, so it has been aroundPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 46

1 almost almost, well 13 years, and you have been 2 operating under that for 13 years and this is the first 3 time anyone suggested to you that it it is day to day 4 rather than month to month? 5 MR. MCDONOUGH: Yes. 6 THE COURT: You have not had any uh 7 cases against Millionaire. 8 MR. MCDONOUGH: Never, not for this. I 9 mean 10 THE COURT: And had Millionaire 11 essentially how many aircraft does Millionaire have? 12 MR. MCDONOUGH: Millionaire operates on 13 an air taxi certificate, four of its own jets and two 14 of them are managed. We own two and two are managed by 15 other people. This particular airplane is not on our 16 air taxi certificate. 17 THE COURT: I understand. 18 MR. MCDONOUGH: This airplane is just a 19 THE COURT: Okay, but you have four that 20 you do operate and those are all operated with an 21 inspection assumption that they are due uh, a calendar 22 month 23 MR. MCDONOUGH: A calendar month 24 THE COURT: Basis. 25 MR. MCDONOUGH: Yes sir. Unless itPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 47

1 specifically stated otherwise 2 THE COURT: I understand, well 3 MR. MCDONOUGH: And I am not being a 4 wise guy saying that, but if it is left to a mechanic 5 on the floor to interpret it is going to be interpreted 6 differently every time. 7 THE COURT: Well, I don't propose to 8 leave it to a mechanic on the floor. I mean, you 9 aren't telling me that if 10 MR. MCDONOUGH: No sir, I am not telling 11 you anything, I am listening. 12 THE COURT: Yeah. Uh, because if we 13 decided the day to day, I would trust that the mechanic 14 on the floor would would come to know that and would 15 act accordingly. 16 MR. MCDONOUGH: You are correct. 17 THE COURT: Yeah, but what concerns me 18 is that this uh this has been around for 13 years, how 19 many? Twenty-three years and we aren't aware of any 20 previous cases on the subject. Are you aware of any 21 Mr. Berman? 22 MR. BERMAN: Yeah. 23 THE COURT: Are you aware of this 24 question arising? 25 MR. BERMAN: Uh, it hasn't been broughtPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 48

1 up before, no. 2 THE COURT: So you aren't in a position 3 to tell me what the industry generally is doing? 4 MR. BERMAN: No I am not. 5 THE COURT: Well, I can tell you what 6 someone who has been in the industry for 40 years is 7 generally doing, uh, with respect to two aircraft 8 companies, air carriers and I assume you know that too 9 know. 10 MR. BERMAN: Yes. 11 THE COURT: And that concerns me a 12 little bit that this position is just now surfacing, 13 and that is something that seems to me you might want 14 to take into account in in deciding where this case 15 might go with respect to settlement. I mean, I don't 16 and I don't hear that anybody had uh, an intent to 17 either ignore or violate the regulation involved. I 18 understand that, that is not a requirement for 19 violation, but what I am saying is, uh, uh, we are 20 looking at a situation where apparently, not just one, 21 but two airlines were trying to comply with the 22 regulations and uh, took a different view of what that 23 meant. Uh, Mr. McDonough, I I gather from an 24 operational standpoint, I can't imagine that it would 25 make a substantial difference, uh, in terms ofPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 49

1 operations, whether this runs to the end of the month 2 or to a date specific, or does that make sense? 3 MR. MCDONOUGH: I can't see how it 4 would. 5 THE COURT: Yeah, it is just a question 6 of when you program it in to get the inspection. 7 MR. MCDONOUGH: And and if I may Judge, 8 further in the airworthiness directed manual, we have 9 addressed a paragraph that applies to the initial 10 compliance that the other paragraphs are very specific 11 that they say do not use calendar time. 12 THE COURT: Well, where they say that 13 then obviously you aren't doing it, see? 14 MR. MCDONOUGH: I don't speak. I just 15 be quiet and listen. 16 THE COURT: No, you are doing fine. I 17 am just I am just I think it is important for all of us 18 to understand what these regulations say, what the 19 manuals say and and what on...what they appear to mean, 20 and and where they specifically say one thing you know 21 that is what they mean. Where they don't specifically 22 say one or the other, then we have to decide what they 23 mean, and and uh, I don't know whether anything 24 MR. MCDONOUGH: I don't see how it could 25 possibly be critical, if it was calendar, if it wasPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 50

1 consecutive unit, or 180 days. 2 THE COURT: I understand what you are 3 saying. It is better 4 MR. MCDONOUGH: Well, if it eliminates a 5 violation I agree. 6 THE COURT: Someone has to decide what 7 it does mean. 8 MR. MCDONOUGH: Yes sir. 9 THE COURT: And at least in the first 10 instance that someone has got to be me. 11 MR. MCDONOUGH: Yes sir. 12 THE COURT: And and I mean, now that can 13 be appealed uh to the Administrator, but if I decide 14 that it means day to day, that is the position that FAA 15 staff has taken, it will be the position that the ALJ 16 has taken, and it will be a formal determination on the 17 record that, that is what the law is. Uh 18 MR. MCDONOUGH: And like I said, that is 19 the one thing that I was unaware of it, because there 20 was something like that in the in the record and and 21 THE COURT: Well, I am not aware of it 22 either Mr. McDonough, I am just saying that if this 23 goes on uh, without settlement that is what you will 24 wind up with. 25 MR. MCDONOUGH: Yeah.PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 51

1 THE COURT: You will wind up with that 2 kind of determination, and maybe that is better, but 3 uh, uh, in the meantime you are faced with a situation 4 where the law doesn't look all that good for you, it 5 seems to me, and the question is, what kind of penalty 6 level, uh, makes sense. Now, are you are you telling 7 me that uh, that uh Millionaire has more financial 8 problems than Carolina Blue. 9 MR. MCDONOUGH: Well, you know, we have 10 struggled for every little bit business that we get, 11 and, you know when this presented itself, you know, you 12 have the option of throwing your hands up and saying it 13 is not my problem, it is yours, and losing the entire 14 account. 15 THE COURT: Yeah. 16 MR. MCDONOUGH: Or, arguing your 17 position, and I don't feel that my position is weak, 18 uh, I wouldn't be here if I did. I think I think I 19 think I have a good argument. I think I have a very 20 good argument. You know, I apologize again for for not 21 presenting it through an attorney but I couldn't find 22 an attorney that would be able to argue it this way. 23 THE COURT: Well, you don't you don't 24 need to apologize for not having an attorney. That I 25 meanPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 52

1 MR. MCDONOUGH: And I, you know, I would 2 not be here if I wasn't absolutely certain that you 3 know if I thought I was wrong I would have settled it 4 as quickly as possible or gotten out of you know, come 5 to some sort of uh, of different arrangement. 6 THE COURT: Yeah. 7 MR. MCDONOUGH: Yeah, you know my 8 thoughts were when this happened that there is and I I 9 don't want to expand and waste your time but there 10 isn't anybody that you can discuss it with. The answer 11 you get from your local FSDO is take it before the 12 Judge. 13 THE COURT: Yeah. 14 MR. MCDONOUGH: They are not interested, 15 they don't care. 16 THE COURT: Yeah, uh, well what I am 17 hearing you say is that maybe you don't want to settle 18 this case; you want to get someone to decide it. 19 MR. MCDONOUGH: I I want to make a fair 20 business decision Judge. 21 THE COURT: Well I I 22 MR. MCDONOUGH: I want to I am not 23 looking to set the world on fire I am too old for that. 24 THE COURT: But, but but I am here to 25 tell you that on the legal issue it strikes me you havePREHEARING CONFERENCE 05/03/2011 CCR#16632-1 53

1 a very difficult case, and and if indeed you lose on 2 the legal issue the only remaining issue is level of 3 penalty, and and that is why I was inquiring. Uh, if 4 there is a penalty assessed, it won't be assessed 5 against you. It will be assessed against Carolina 6 Blue, and they may not like that well they may 7 MR. MCDONOUGH: Well, they would look to 8 me to pay it. 9 THE COURT: And they may or may not look 10 to you to pay it, I can't go there 11 MR. MCDONOUGH: I I'm 12 THE COURT: And in deciding the level 13 of that penalty nobody is going to look at your 14 finances, they are going to look at Carolina Blue's 15 finances, and and, uh, there is just no two ways around 16 that, so the issue then becomes what is an appropriate 17 level of penalty for Carolina Blue, uh, who basically 18 turns this over to you and says hands off, and frankly, 19 from our perspective, that is not a very appealing, uh, 20 approach. Uh, and now the penalty as calculated uh, by 21 the Complainant I gather that refers to one violation 22 of uh, inspection out of time and four violations of 23 operation, is that right Mr. Berman? 24 MR. BERMAN: Yeah, that is correct. 25 THE COURT: Yeah, and that is becausePREHEARING CONFERENCE 05/03/2011 CCR#16632-1 54

1 there were four separate flights? 2 MR. BERMAN: Correct. 3 THE COURT: Yeah. Well, I don't know 4 what to tell you, uh, uh, you fellows what on this 5 subject uh, I would like to give you an opportunity to 6 try to settle the case if you can, uh, and let me know, 7 uh, if it is not going to settle, then, uh uh, I am not 8 sure that there is any need for a hearing here. Uh I 9 am there are some items that we could look at further, 10 but essentially it comes down to the question of what 11 this language in the in the AD means, and the level of 12 penalty would be primarily effected by uh, ability to 13 pay if that were an issue, uh, but it isn't an issue, 14 and the respondent is not, uh, well I guess you 15 through...they through you are are making the 16 contention that, that they have done the best they 17 could and and should and ought to be given some 18 consideration because of that, but uh, I I think you 19 folks might want to talk about this and uh and get back 20 to me. I still have a Motion pending from from the 21 Complainant and, uh, did we get a response we have your 22 response to that Motion, uh, what I might do is set a 23 date and and you can tell me by that date whether the 24 case is settling or not, and if it isn't settling, uh, 25 I think you might submit whether you want a a hearingPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 55

1 on this issue or whether you want to decide it on 2 submission, and so forth and and that would be good to 3 get from each of you. Does that make sense to uh to 4 you Mr. Berman? 5 MR. BERMAN: Yes. 6 THE COURT: Mr. McDonough? 7 MR. MCDONOUGH: Yes sir. 8 THE COURT: Okay, so how much time 9 should we allow for you to to consider that and get 10 back to me on whether this should be tried or 11 submitted? 12 MR. BERMAN: Well, when I submitted 13 them, I could you know, I don't think that this case 14 requires a hearing. Uh 15 THE COURT: I hear that. My question 16 though is the amount of time in which you would get 17 back to me and tell me whether it would settle or 18 whether it needs to go to hearing, or 19 MR. BERMAN: From my end, uh, it all 20 depends on whether, I don't know how much talking Mr. 21 McDonough has to do to, you know, his people, but I 22 don't think it should take long, probably a week. Mr. 23 McDonough, would, I don't know. 24 THE COURT: Mr. McDonough, is a week 25 good for you or you I normally give two weeks, butPREHEARING CONFERENCE 05/03/2011 CCR#16632-1 56

1 since you don't have uh, ability to pay issues, if you 2 can do it within a week that is fine. I am not pushing 3 either one of you; I just want to have a date. 4 MR. MCDONOUGH: A week is good. 5 THE COURT: Okay, we'll make it May 9, 6 and so someone will get back to me, tell me whether the 7 case is settling, and each of you will get back to me 8 now, uh, uh, Mr. Berman has already said he doesn't 9 think it needs a hearing, but but we will give him an 10 opportunity to reflect on that and so each of you 11 should advise me on the ninth whether you want you 12 submitted or whether you want a hearing, okay? 13 MR. MCDONOUGH: Okay. 14 THE COURT: Alight. Thank you both very 15 much, appreciate it. 16 MR. BERMAN: Thank you. 17 MR. MCDONOUGH: Thank you. 18 THE COURT: That concludes the 19 Prehearing Conference. 20 (WHEREUPON, the Prehearing Conference was concluded at 21 4:18pm) 22 23 24 25PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 57

1 CAPTION 2 3 The Hearing in the matter, on the date, and at the time 4 and place set out on the title page hereof. 5 6 It was requested that the Hearing be taken by the 7 reporter and that same be reduced to typewritten form. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25PREHEARING CONFERENCE 05/03/2011 CCR#16632-1 58

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