## u.s. DEPARTMENT OF TRANSPORTATION 

# REcEIvED FEDERAL AVIATION ADMINISTRATION 

## OCT 2 32015
FEDERAL AVIATION ADMINISTRATION ) ) ) ) ) ) ) 

## HEARING DOCKET
Complainant,
v. ) FAA Case No. 2012WP130065 FDMS No. FAA 2013-1080
SCHUMAN AVIATION COMPANY, LTD ) Respondent. ) ) ) COMPLAINANT'S APPEAL BRIEF Pursuant to 14 C.P.R.§ 13.233(d), Complainant files this briefin support ofits appeal ofthe Initial Decision issued by Administrative LawJudge Richard C. Goodwin (ALI) on August 31, 2015, in the above-captioned matter. I. STATEMENT OF THE CASE On February 12, 2014, Complainant filed a Complaint alleging that Respondent, Schuman Aviation Company, Ltd. ("Schuman Aviation"), conducted scheduled operations to Kailua-Kona International Airport (KOA) in Kona, Hawaii, between the dates ofSeptember 8, 2012, and September 13,2012, 1when it was not authorized to do so by its operations specifications, in violation of 14 C.F.R. § 119.5(g). The Complaint also alleged that on or about September 17,2012,two FAA Aviation Safety Inspectors (ASis) requested to inspect Schuman Aviation's records concerning the above-referenced flights, but Schuman Aviation refusedto make any records available atthe time ofthe request, in violation of 14 C.F.R. 

### § 135.73. A hearing on these allegations was held before ALI Goodwin on December 4, 2014, and the ALJ issued his Initial Decision onAugust 31, 2015. In this decision, the ALJ found that Schuman Aviation had violated 14 C.F.R. 

### §§ 119.5(g) and 135.73 as

1 The Complaint erroneously stated that these flights were conducted between September 8, 2012, and September 13, 2008, due to typographical error. The evidence presented at the healing demonstrates that these flights took place during the tive-day periodbetween September 8, 2012, and September 13, 2012.alleged in the Complaint, but declined to assess the $28,000 civil penalty proposed bythe FAA; instead, he found that Complainant had failed to present evidence ofthe appropriateness ofthe sanction and imposed a $10,000 civil penalty. Complainant now appeals the ALI's InitialDecision on the basis of this sanction. II. STATEMENT OF THE FACTS Schuman Aviation is authorized to conduct scheduled air carrier service under 14 C.F.R. part 135 between airports listed in paragraph C070 ofits operations specifications. (Compl.**~~** 1 & 2,**Answer~~** I & 2). Betweenthe dates ofSeptember 8, 2012, and September 12,2012, Schuman Aviation conducted 24 round-trip scheduled flights to Kailua-Kona International Airport (KOA) 

### in Kona, Hawaii. (Ex. A-3; see Tr. 22). These flights were conducted on behalfofMokulele Airlines and
were operated pursuant to a published flight schedule. (Tr. 24, 26; Ex. A-5). Accordingly, these flights constituted scheduled commuter operations under the FARs. (Tr. 27-28, 141-46). Respondent's operations specifications did not authorize itto conduct commuter operations into KOA (Compl.**~** 3,**Answer~** 3; Tr. at 12), because the airportwas not listed in paragraph C070 ofits operations specifications as an authorized airport. (Compl.**~** 4,**Answer~** 4; Tr. 14-15). Accordingly, the ALJ found that by operating 24 unauthorized scheduled flights to KOA, Respondent violated 14 C.P.R.§ 119.5(g) by operating as an air carrier in violation ofits operations specifications. (Decision at 12-13). The 

### ALI also found thatRespondent violated 14 C.P.R. § 135.73 when it denied FAA Aviation SafetyInspectors (ASis) the abilityto inspect its records. (Decision at 12-13). Testimony at the hearing demonstrated that on September 17, 2012, FAA Inspector Joseph Monfort, an ASI at the Honolulu Flight Standards District Office (FSDO), and Inspector Kyle Bartler, also anASI atthe Honolulu FSDO (Tr. 66), visited the offices ofSchuman Aviation to investigate the above-referenced unauthorized flights. (Tr. 12). Inspector Monfort requested to see maintenance logs and daily flight logs for the relevant time period. (Tr. 15). Mr. Schuman, the President andDirector ofOperations ofSchuman Aviation (Tr. 84), initially denied this request. (Tr. 15, 69, 102-104). Approximately two hours later, 2after the ASis left Schuman Aviation's offices and after consultinghis attorney, Mr. Schumancontacted Inspector Monfort and agreed to make the records available. (Tr. 16-17, 70). The records were delivered to the Honolulu FSDO approximately two days later. (Tr. 16-17). The ALJ fouud thatthese facts supported a violation of 14 C.F.R. 

### § 135.73. (Decision at 12-13). After finding these violations, the ALJ assessed a $10,000 civil penalty (Initial Decision at 16), comprised oftwo $5,000 sanctions- one for eachregulation violated by SchumanAviation. !d. at 15. The ALJ declined to assess the $28,000 civil penalty proposedby Complainant (Decision at 13-16), statingthatthe "FAA failed to prove bytestimony and/or evidence ofhow 

### itarrived" attheproposed sanction and thatthathe was "leftto speculate how the figures
... were determined." Id. at 13. Although Complainant submitted a written closing argument on May 27,2015,2 detailing the evidence and explaining whythe proposed sanction conformed to sanction guidance (see Com pl.'s Closing Argument at 9-11), the ALJ held that "theFAApresented no evidence that it considered the nature and circumstances ofthe violation[s]," that the "FAA failed to prove to the ALJ how it usedthe sanction guidance," and finally, thatthe FAA "failedto show howit used aggravating or mitigating factors to adjust the suggested sanction." (Decision at 15). Onthese grouuds, the ALJ summarily stated that "the totality ofthe facts and circumstances" warranted a $10,000 civil penalty. Id. Ill. STATEMENT OF THE ISSUES A. Whether the ALJ Erredby Concluding that Complainant Failed to Meet its Burden ofDemonstrating the Appropriateness ofthe Proposed Civil Penalty. B. Whetherthe ALJ's Imposition ofa $10.000 Civil Penalty for Respondent's Violations is Contraryto Precedent and Policy. IV. STANDARD OF REVIEW Underthe Rules ofPractice, the Administrator considers on appeal whether the ALJ's fmdings offact are supported by a preponderance ofreliable, probative, and substantial evidence. 14 C.F.R.

2 The parties filed written closing arguments in accordance with the request ofALJ Goodwin and the briefmg schedule established by the parties. (See Tr. 156-157). 3§ l3.233(b)(l). The Administrator also considers whether the ALI's conclusions oflaw are in accordance with applicable law, precedent, andpublicpolicy. 14 C.F.R. §13.233(b)(2). Finally, the Administrator considers whetherthe ALJ committedprejudicial errors during the hearing or proceedings. 14 C.F.R. § 13.233(b)(3). Complainantbears the burden ofproving the appropriateness of the civil penalty, but Respondent bears the burden ofproofofan affirmative defense. See 14 C.F.R. § 13.224(a); Tn the Matter ofSeven's Paint & Wallpaper Co., FAA OrderNo. 2001-6 (May 15, 2001). When an ALJ assesses a civil penaltythat is not consistent with agency sanction policy, the Administrator on appeal mayreverse the ALJ. In the Matter ofVentura Air Servs., Inc., FAA OrderNo. 2012-12 (Nov. I, 2012) (citing Folsom's Air Service, FAA Order 2008-11 at 14 (Nov. 6, 2008)). V. ARGUMENT A. The ALJ Erredby Concludingthat ComplainantFailedto Meet its Burden of Demonstratingthe Appropriateness ofthe Proposed Civil Penalty. Complainantbears the burden ofestablishing by a preponderance ofthe evidence thatthe basis for its proposed civil penalty is appropriate. See. e.g.. In the Matter ofLuxemburg, FAA OrderNo. 94- 18 at 6 (June 22, 1994); 14 C.F.R. § 13.224(a). Here, the ALJ determined that Complainant did not meetthis burden onthe grounds that Complainantfailed to: (I) prove to the ALJ how it used agency sanction guidance to arrive atits proposed civil penalty; (2) "prove the existence ofaggravating factors and failed to show how it used aggravating ormitigating factors to adjustthe suggested sanction"; (3) present evidencethatit considered the nature, circumstances, and gravity ofRespondent's violation; and (4) present evidence as to "whetherRegent's [sic] ability to pay was taken into account." (Decision at 15). Contraryto these findings, Complainantpresented testimony atthe hearing and a detailed explanation in its written closing argument that addressed each ofthese concerns and established that the proposed penalty of$28,000was appropriate for Respondent's violations. For the reasons explained below, the ALI's conclusion that Complainantfailed to meetits burden is without merit.

41. ComplainantExplained in its Written Closing Argument and in its Written Rebuttal to Respondent's Closing ArgumentHowthe Penalty Proposed by Complainant Accords with Agency Sanction Guidance. A Complainanthas metits burden ofdemonstrating the appropriateness ofa proposed civil penaltywhen it has demonstratedthrough testimony, evidence, and argumentthatthe proposedpenalty conformsto sanction guidance. Compare Tn the Matter ofNorthwestAirlines, Inc., FAA OrderNo. 1990-37 at 6-9 (Nov. 7, 1990) (Complainant met its burden by introducing relevant portion of Enforcement Sanction Guidance Table andthe corresponding testimony ofa Special Agent as to the securityriskposedbythe alleged violations) with Inthe Matter ofWarbelow's Air Ventures, Inc., FAA Order 2000-3 at 19 (Feb. 2, 2000) (Complainant failed to meet its burden when it "failedto explain to the lawjudge, eitherthrough witnesses or in its written closing argument, exactly how it used its sanction guidance to arrive at a figure"). Although the ALJ states that Complainant failed to prove how itused agency sanction guidance to arrive at its proposed civil penalty (Decision at 15), this assertion is incorrect. Here, Complainant introduced FAA Order 2150.3b into the hearing record and, through its written closing argument,3 demonstrated how the evidence presented atthe hearing, in conjunction with agency sanction guidance, supported the proposed $28,000 civil penalty. Specifically, pages 9 through 11 ofthis closing argument- aptly entitled "The Sanction Sought is Appropriate"- apply agency sanction guidance FAA Order 2150.3B4 to the violations Complainant established atthe hearing. With regard to Respondent's violation of 14 C.F.R. § 119.5(g), Complainant explainedthat FAA Order 2150.3B, Figure B-1-c(2), provides that for a Respondent's operation contraryto its operations specifications, involving technical non-compliance, a minimum civil penalty is warranted. (Compl.'s Closing Argument at 10; see also FAA Order 2150.3B at B-12). For Schuman

3 In accordance with the ALJ's instructions atthe conclusion ofthehearing and the briefing schedule agreedto by the parties (Tr. 156-157), Complainant submitted a written closing argument, which was served onboth Respondent andthe ALJ onMay 27, 2015. 4 At Complainant's request, the ALJ tookjudicial notice ofF AA Order 2150.3B at the hearing, which was marked for identification as Exhibit A-7. (Tr. 31).
5Aviation, a Group III operator, Small Business,5 this corresponds to a minimum civil penalty range of $825 to $3,299. (Compl.'s Closing Argument at I0; see also FAA Order 2150.38 at B-4). Agency sanction guidance generally provides that when assessing a civil penaltywithin a sanction range one should begin with an amount in the middle ofthe range and increase that amount towardthe higher end ofthe range for aggravating factors, ortowards the lower end ofthe range to account for mitigating factors. See FAA Order 2150.38 at 7-9. Complainant explained thatthe midpoint ofthis civil penalty range is $2,062. (Compl.'s Closing Argument at 10). Complainant further explained that because the FAAultimately approved SchumanAviation's amended operations specifications to include KOA as an authorized airport after the unauthorized flights took place (Tr. 38)- thereby allowing Respondent to conduct scheduled operations into KOA- a minimum penalty atthe very bottom ofthis range was used, i.e
.. $825. (Compl.'s closing argument at 10). Because Respondent operated 24 flights to KOA (see Ex. A-3, A-5), a civil penalty of$19,800 ($825 x 24 flights) was warranted for Respondent's 24 violations of 14 C.F.R. 

### § 119.5(g). (Compl.'s Closing Argument at 10). Respondent also reiterated this rationale on page three ofits Rebuttal to Respondent's Closing Argument, served on July 17, 2015. Complainant's closing argument also explains why an $8,000 civil penalty is appropriate for Respondent's failure to make records available to Inspectors Monfort and Bartler, in violation of section 135.73. Specifically, FAA Order 2150.38 recommends a maximum civil penalty for an entity's failure to allow an inspection. Complainant cites in its closing argumentthe following acts set forth in thetable ofsanctions that are analogous to the failure ofan air carrierto allow an inspection of FAA-required records and corroborative ofa recommended maximum civil penalty: (1) Figure B-1- n(2), the failure to make a flight deck seat available to FAA inspector; (2) Figure B-3-b(18), the failure
5 Schuman Aviation's Operations Specifications indicate that it operates seven aircraft underpart 135. See Ex. A-1. Agency sanction guidance classifies such an operation as a Group III operator. See FAA Order 2150.3b atB-3. An air transportation entity is considered a smallbusiness when it has fewer than 1500 employees. See 13 C.P.R. § 121.201. Schuman Aviation's website indicates that it has approximately 22 employees. See Makani Kai Air, Staff, https://www.makanikaiair.com/staff.htrnl (last visited October 20, 2015). The Administrator may consider such information whendetermining whether an entity is a large or small business concern, even when it is not inthe record. See In the Matter ofPinnacle Airlines, Inc., FAA Order No. 2012-2,2012 WL 2588548, at *11 n.l6 (May 22, 2012).
6ofa repair stationtopermit anFAA inspection; (3) Figure B-3-d(2), the failure ofa flight school to permit an FAA inspection; and (4) Figure B-6-a(3), the failure ofairport operatorto permit an FAA inspection. For Schuman Aviation, a Group Ill operator, Small Business, this corresponds to a civil penaltyrange of$7,150 to $11,000, with a midpointrange of$9,075. (Compl.'s Closing Argument at 10; see also FAA Order 2150.3B atB-4). Complainant further explains that because Respondent later agreed, approximatelytwo hours after the initial request, to permitthe inspection ofits records, a civil penalty atthe lower end ofthis range, i.e., $8,000, is an appropriate sanction. Respondent reiteratedthis rationale onpage 3 ofits Rebuttal to Respondent's Closing Argument. The ALJ's opinion, however, appears to not address the merits ofComplainant's written closing argument orrebuttal. Although the ALJ states that "posthearing briefs were filed by both parties" (Decision at 3), he fails to discuss or even address Complainant's written submissions. His opinion thus fails to support his conclusion that Complainant'swritten closing argument (and rebuttal) is insufficient to establish a basis for the proposed civil penalty. Moreover, the ALJ grounds his opinionin the notion that the "FAA failed to prove ...how it arrived at the figure of$11,000 figure for eachviolation." (Decision 13). As illustrated above, atno point does Complainant advance the argument that an $11,000 civil penaltyper violation is warranted; rather, the ALJ appears to misconstrue Complainant's citation in its Complaintto 49 U.S.C. §46301, which authorizes the FAA to assess a maximum ofan $11,000 civil penalty, perviolation, against a small businesses, as argument to this effect. But, as illustrated above, in accordance with agency sanction guidance, Complainant proposed an $825 penalty for each of Respondent's violations of 14 C.P.R. § 119.5(g), and an $8,000 penalty for Respondent's single violation of 14 C.P.R.§ 135.73. For these reasons, the ALJ's finding that Complainant "failedto prove

... how it used the sanction guidance to arrive at its proposal" is wholly unsupported, and is in error.

72. Complainant Explained in its Written Closing Argument that it did not Aggravate the Sanction, but Rather Applied Mitigating Factors. The ALJ erred in concludingthat Complainant "failedto prove the existence ofaggravating factors andfailed to showhow itused aggravating ormitigating factors to adjustthe suggested sanction." (Decision at 15). As a threshold matter, Complainant expressly statedin its closing argument thatitdid not aggravate the sanction. (Compl.'s Closing Argument at 11). Although Complainant enumerates several factors that could have been used to increase the sanction (i.e., Respondent is an air carrier, Respondent's refusalto allow inspection ofits records was deliberate), Complainant exercised its discretion in not increasing the sanction from the midpoint ofthe applicable ranges. Id. Itis axiomatic that Complainant need notprove the existence ofaggravating factors it did not use. Accordingly, the ALJ's conclusion that Complainant failed to prove the existence ofaggravating factors is, atbest, irrelevant. The ALJ's conclusion that Complainantfailed to explain how it used mitigating factors to adjust the sanction is also in error. Complainant considered mitigating factors that it deemed relevantto the violation, see FAA Order 2150.3b at 7-4,6 and detailed its rationale for doing so in its written closing argument. Specifically, with respectto Respondent's section 119.5(g) violation, Complainant considered
as a mitigating factor the fact that Respondent was ultimately granted approval by the FAA to fly into KOA, a fact which was testified to by Inspector Mumford at the hearing. (Tr. 38). Complainant states in its written closing argument: "As far as aggravating ormitigating factors, since
... Respondent's operations to KOA were approved bythe FAA once Respondent submittedthe proper information, a

6 FAA Order 2150.3B provides mitigating and aggravating factors in chapter 7, subparagraphs 4.a. through m., that have beendeveloped overyears ofpolicy making and case adjudication. FAA Order 2150. 3B at Ch. 7, p. 7-4."These factors and elements provide a framework for detennining sanctions for violations specifically listed in the table as well as those not specifically listed. All the factors and elements, however, may not apply to each violation. Onlythose factors and elements that are relevant to a violation are considered in determining a sanction for the violation." ld.
8civil penalty atthe very bottom ofthe range was used." (Compl's ClosingArgument at 10).7 To account for this mitigating factor, Complainant reducedthe sanction from the midpoint ofthe rangespecifically, from $2,062 to $825, per flight into KOA. See id. Complainant also mitigated the penalty proposedfor Respondent's violation ofsection 135.73. As expressly stated in Complainant's written closing argument, the "factthat Respondent did agree about 2 hours later, aftertalking to his attorney, to produce the records is mitigating." (Compl.'s ClosingArgument at 10). The testimony oflnspectors Mumford and Bartler established that Mr. Schuman contacted the FAAwithin a few hours ofthe initial request for records to agree to the inspection. (Tr. 16-17, 70). To account for this mitigating factor, Complainant explicitly decreased the sanction from a midrange penalty of$9,075 to the proposed $8,000. (Compl.'s Closing Argument at 10). Accordingly, the ALJ's conclusionthat Complainant "failedto showhowit used
... mitigating factors to adjust the sanction" is wholly unsupported. Akin to the ALJ's finding that Complainant failed to use agency sanction guidance in support of its proposedcivil penalty, the ALJ similarly erred finding that Complainant did not raise in its closing argument factors relating to mitigation. His opinion does notprovide any elaboration as to whyhe found insufficient Complainant's explanation ofthe mitigating factors it usedto reach the proposed sanction. Accordingly, the ALJ erred in his determination that Complainant failed to articulate mitigating factors for its proposed sanction. To the extent thatthe ALJ used this rationale to decrease the proposed sanction, this also was in error. 3. Complainant Proposed Sanction Takes into Consideration the Nature, Circumstances, and Gravitv ofthe Violations. In his sanction analysis, the ALJ erred in finding that Complainant "presented no evidence that it consideredthe nature and circumstances ofthe violations" or "the extent in gravity [sic] relatedto the violations." (Decision at 15). Complainant's use ofFAA Order 2150.3b's sanction guidance tables to formulate a recommended civil penalty (see Com pl.'s Closing Argument at 9-11) inherently includes an
7 Onpage three ofits Rebuttal to Respondent's Closing Argument, Complainant reiterated this basis as grounds for the reduction ofthe proposed sanction from the midrange recommended by sanction guidance. 9assessment and consideration ofthese factors. As the Administrator has previously explained, "[w]hen the FAA formulated these sanction ranges for different types ofviolations, the agency considered the nature, extent and gravity ofeach general type ofviolation as well as the individual's priorviolation history." Inthe Matter ofVentura Air Servs., Inc., FAA OrderNo. 2012-12 2012 WL 6673077, at *17 (Nov. 1, 2012) (addressingprevious iteration in FAA Order 2150.3A) (citing Inthe Matter ofSchultz, FAA OrderNo. 89-05,1989 WL 550061, at *4 (Nov. 9, 1989)). The sanction table's recommended civil penaltyranges, which are designated minimum, moderate, or maximum, best reflectthe nature, circumstances, and gravity ofeach corresponding violation. See, e.g., In the Matter ofHusted & Husted Air Charter, Inc., FAA OrderNo. 2010-9, 2010 WL 7940358, at *17 (June 16, 2010) ("The Sanction Guidance Table
... sets out penalty recommendations withinthree ranges ofamounts
- designated minimum, moderate, and maximum- to bestreflect the nature and circumstances ofeach violation."). Byway ofillustration, for Respondent's violations of 14 C.F.R. 

### § 119.5(g) Complainant determined that Figure B-l-c(2) in the Sanction Guidance Table, "Operation contrary to ops specstechnical noncompliance," appropriately reflected the nature and circumstances and ofthis case. (See Compl.'s Closing Argument at 10). When selecting an appropriate sanction to address Respondent's operations specifications violations, Complainant had a choice between two levels ofgravity: "technical noncompliance" or "likelypotential or actual adverse effect on safe operation." See FAA Order 2150.3B, Figure B-1-(c)). A minimum penalty is recommended for the former, while a moderate to maximum penalty is recommended for the latter. !d. Complainant's selection of"technical noncompliance" reflects ajudgment ofthe minimal safety risk involved. As Complainant explained in its closing argument, the fact that Respondent was ultimately granted approval to fly into KOAthrough
an amendmentto its operations specifications approximately two weeks after the flights at issue (Tr. 38- 39), evidences that Respondent's operation into this airport likely did nothave an adverse effect on safe operation. (See Compl.'s Closing Argument at 10; Tr. at 37-39). To obtain authority to operate into KOA, Respondent had to submit a written request for an amendment to its OpSpecs, which detailed 10information showing it could operate safely into KOA (for example, a list ofaltitudes Respondent planned to operate at where a single-engine aircraft could, in the event ofengine failure, where an aircraft could safelytouch down on land). (See Tr. 60). However, as explained byASI Monfort atthe hearing, the requirements necessary for operation into KOA are similar to those for airports for which Respondent already had received approval from the FAA to operate into. (See Tr. 38-39, discussing requirements for KOA and Kaluapapa). Thus, the flights Respondent conducted into KOA prior to the formal amendment ofits OpSpecs likely did not present a significant safety risk. Complainant's selection ofthe "technicalnon-compliance" figure inthe Sanction Guidance Table reflects this degree of safety hazard. See FAA Order 2150.3B, Ch.7, '1!4.h(e). Thus, contraryto the 

### ALI's assertion, the minimum-range penaltyproposedby Complainant ($825 for each flight) appropriatelyreflects the nature, circumstances, and gravity ofRespondent's operational violations. A similar analysis applies to Respondent's violation of 14 C.P.R.§ 135.73. Complainant selected several figures in the Sanction Guidance Table thatreflect the failure ofa regulated entityto permit an inspection ofits facilities, equipment, personnel, records, or certificates. (See Complainant's Closing Argument at 10 (citing Fig. B-3-b(18) (Repair Stations), Fig. B-3-d(2) (Part 141 Flight Schools), and Fig. B-6-a(3) (Airport Operators))). Sanction guidance recommends a maximum-range penalty for each ofthese regulated entities' failure to allow an inspection, embodying an agency judgment ofthe seriousness ofa regulated entity's refusal to allowthe inspection ofits records.8 Here, Respondent's failure to permit ASIs Monfort and Bartlerto inspect its daily flight logs upon request is akin to that ofa repair station's "failure to permitFAA to inspect" (Fig. B-3-b(l8)), or an airport operator's "Failure to permitFAA inspector to conduct inspection," each ofwhich warrant a maximumrange penaltyunder sanction guidance. Accordingly, Complainant's utilization ofthese figures to

8 As explainedby AS! Mumfort, Respondent's failure to allow inspection ofrecords is conduct serious enough to possibly warrant the suspension ofits operating certificate. (Tr. 16). See Administrator v. Werth, NTSB EA-4776, 1999 WL 300777, at *I (Respondent's violation ofthe "unequivocalregulatoryrequirement that he allow an inspection 'at any time orplace"' warrants suspension ofa certificate); Fig. B-3-b(lS) (which provides for a maxirnrnn penalty or "Indefinite Suspension until Compliance" for arepair station's failure to permit an FAA inspection). 11propose a maximumcivil penalty for Respondent's 14 C.F.R. 

### § 135.73 reflects the policy ofthe agency thatthe gravity ofsuch a violation warrants a heightened civil penalty. Accordingly, as illustrated above, Complainant's use ofthe Sanction Guidance Table to arrive at its proposed penaltyreflects a considerationthe nature, circumstances, and gravity ofeachviolation. 4. That ComplainantDidNotPresent Evidence ofRespondent's Ability to Pay is Not a Valid Ground for Decreasing the Proposed Sanction. The ALJ also declinedto assess Complainant's proposed civilpenalty because he found that Complainant "presented no evidence
... whether [Respondent's] ability to pay was taken into account." (Decision at 15). The ALJ is correct in stating that among the various factors to consider in determining
an appropriate civil penalty is a respondent's ability to pay the civil penalty and the effect ofa penalty
on a respondent's ability to stay inbusiness. See In the Matter ofFolsom's Air Service, Inc., FAA Order No. 2008-11 at 11 (November 6, 2008). However, financial hardship is an affirmative defense that a respondenthas the burden ofproving. In the Matter ofRushmore Helicopters, Inc., FAA Order 2012-8 at 13-14 (Oct. 11, 2012) (citing In the Matter ofAtlas Frontiers, LLC, FAA OrderNo. 2010-10 (June 16, 201 0)). Thus, it is not Complainant's burden to produce evidence showing Respondent's abilityto pay. Id, See also Inthe Matter ofPhillips Building Supply, FAA OrderNo. 2000-20 at 8 (Aug. 11, 2000) (respondent has burden ofproving "any affirmative defense such as a harmful effect on its ability to continue to do business"). The ALI's suggestion to the contrary- that Complainant was required to presentevidence as to Respondent's ability to pay in order to demonstrate the appropriateness ofa sanction- improperly shifts this burden and is againstthe weight ofestablished precedent. Even ifthe ALJ hadproperly construed this burden, Respondent failed to meet it. The affirmative defense offinancial hardship requires a showing bythe Respondent ofreliable, supporting documentation, such as taxrecords and other company financial data. See In the Matter ofAtlas Frontiers, LLC, FAA OrderNo. 2010-10 at 12 (June 16, 2010) (when "only evidence intherecord" was

12"self-servingtestimony" and company failed to "provide any supporting documentation such as tax records," Respondent failed to bear its burden ofproving financial hardship and inabilityto pay). Here, as in Atlas Frontiers, Respondent did not introduce any evidence as to its inabilityto pay the proposed civil penalty. Respondent only offered testimony at the hearing that "the financial impact would be high" (Tr. 111), and thathis netrevenue was "almostnothing." (Tr. 128). Respondent did not introduce tax returns or any other financial documents atthe hearing to corroborate these statements. (Tr. 128). In fact, Respondent did not even argue that it had any inability to pay the civil penalty in its written closing argument. Accordingly, Complainantwas not obligatedto prove or consider this factor whenreaching its proposed sanction.9 The ALJ seems to suggestthat because "Schumanpresented testimony that the penaltyrequestedwould severe [sic] impact its operations," this should be considered
a mitigating consideration. (Decision at 13). This testimony, however, absentmore, is insufficient. To the extentthat the ALJ decreasedthe proposed sanction due to Complainant'spurportedfailure to considerthis factor, this conclusion is contraryto precedent, and is in error. B. The ALJ's Imposition ofa $10.000 Civil Penalty is Unsupported byhis Opinion and is Contraryto Agency Sanction Guidance and Established Precedent. Atthe conclusion ofhis initial decision, the ALJ assessed a $10,000 civil penalty, comprised of
a $5,000 civil penalty for Respondent's violation ofsection 119.5(g) and a $5,000 civil penalty for Respondent's violation ofsection 135.73. (Decision at 15-16). However, the ALJ's opinion provides no rationale or explanation as to howhe determined these penalty amounts were appropriate for Respondent's violations. Rather, his opinion states simply that he took "the totality ofthe facts and circumstances into account." Id. at 15. This explanation is insufficient. The Rules ofPractice governing FAA civil penalty actions provide that in each decision, the ALJ "shall include findings offact and

9 Complainant also inherently considered Respondent's size and ability to pay a civil penalty when it utilizedthe sanction guidance inFAA Order 2l50.3b, Appendix B, to categorize Respondent as a category III operator and small business concern. Under agency sanction guidance, the minimum, moderate, andmaximumpenalty ranges vary depending onthe size ofthe operator; higher civilpenalty ranges correspondto larger operators, and vice versa.
13conclusions oflaw, andthe grounds supporting those findings and conclusions," for among otherthings, "the amount ofany civil penaltyfound appropriate by the administrative lawjudge." 14 C.F.R. 

### § 13.232 (emphasis added). The Administrative Procedure Act similarly requires that all decisions "shall" include
a statement ofall "findings and conclusions, and the reasons orbasis therefore, on all the material issues offact, law, or discretion presented in the record." 5 U.S.C. 

### § 557(c)(3)(A). Courts have heldthat this provision imposes duties and obligations on ALJs to engage in demonstrably reasoned decisionmaking. See, e.g., Peabody Coal Co. v. Hale, 771 F.2d 246, 247 (7th Cir. 1985) (findingthat "the ALJ did not adequately explain his findings and conclusions in reaching a decision and remand this case to him for further consideration"). An ALJ must "clearly set forth the rationale for his findings offact and conclusions oflaw" because adherence to this obligation is "critical tothe appellate review process." Dir
.. Office ofWorkers' Comp. Programs v. Congleton, 743 F.2d 428,429 (6th Cir. 1984). Here, the ALJ's decision is devoid ofany such explanation. As illustrated bythe previous discussion, an $8,000 and $19,800 civil penalty for Respondent's violations of 14 C.F.R. 

### § 135.73 and 119.5(g), respectively, is appropriate under agency sanction guidance. 10 The $5,000 civil penalty imposedbythe ALJ for each violation does not comport with this guidance, and the ALJ offers no explanation as to why the circumstances here merit such a significant departure from these ranges. Although the ALJ noted that Schuman "subsequently allowed the FAA to inspect its records" and that "Schuman immediately ceased operations when informed it was in violation ofthe FARs," the ALJ failed to relate these facts to his determination ofan appropriate civil penalty. (See Decision at 13).

10 As to Respondent's 14 C.F.R. § 135.73 violation, agency sanction guidance recommends a maximum range penalty, embodying an agencyjudgment ofthe seriousness ofa regulated entity's refusal to allowthe inspection ofits records. See. e.g., FAA Order 2150.2b, AppendixB, Figure B-3-d(2). For Schuman Aviation, a Group III operator, small business concern, this "maximum" penalty corresponds to a civil penaltyrange of$7,150 to $11,000. (Campi.'s Closing Argument at 10; see also FAA Order 2150.3B atB-4). The same rationale applies to Respondent's 24 violations of 14 C.F.R. § 119.5(g). Sanction guidance recommends a minimum civil penalty range of$825 to $3,299, for each technical violation ofan operator's operations specifications. See FAA Order2150.3b, Figure B-l-c(2) & page B-4. Here, Respondent violated this provision on24 separate instances, eachtime it operated into KOA. Even using the lowest civil penalty amount recommended by the sanction guidance- $825- the $19,800 civil penalty that Complainant proposed is an appropriate penalty for Respondent's 24 flights into KOA. 14Because the ALJ failed to explain the rationale for his decisionmaking, it is unclear whatweight, ifany, he gave to these considerations when he imposed a decreased sanction. However, to the extent that he decreased the sanction on these grounds, this was in error. A civil penalty may only be reduced
on the basis ofcorrective action where there is "sufficient, specific evidence ofswift or comprehensive corrective action." In the Matter ofMauna Kea Helicopters, FAA OrderNo. 1997-16 at 10-11 n.15 (May 23, 1997). The fact that "Schuman immediately ceased operations when informed it was in violation" is not a corrective action. Simply complying with a pre-existing regulatory**requirement~** here, to not operate in violation ofOpSpecs- does not warrant reduction. Cf. In the Matter of: Delta Air Lines, Inc., FAA OrderNo. 1992-5, 1992 WL 753173, at *3 (Jan. 7, 1992) (finding that Respondents posting a "reminderto the staffoftheirpre-existing responsibilities, standing alone, does not necessarily constitutethetype ofsignificant corrective action that warrants a reduction ofan otherwise appropriate civilpenalty"). This analysis holds for the section 135.73 violation as well: Schuman's allowing ofF AAto inspect its records is precisely the conductthat was requiredunder the FARs in the first place. Schuman's subsequent compliance with the FARs, which should have occurred in the first instance, is unsufficient corrective action. Moreover, the limited time period between Respondent's refusal ofthe inspection and agreementto allow inspection was already considered by Complainant as a mitigating factor when determiningthe sanction, see supra sections A.1 & A.2, and, therefore, is not an adequate basis for the ALJ's further reduction ofthe civil penalty. The ALJ's civil penalty finding does not comport with the Sanction Guidance Table, which represents the policy ofthe agency. See, e.g., In the Matter ofNorthwestAirlines, FAA OrderNo. 90-37 at 7 (Nov. 7, 1990). The Administrator may reverse on appeal an ALJ's decision regarding the issue of
an appropriate sanction whenthe ALJ's decision differs from the policy expressed in FAA Order 2150.3B. See In the Matter ofNorthwest Airlines, FAA OrderNo. 90-37 at 7 (Nov. 7, 1990); In the Matter of[Air Carrier], FAA OrderNo. 1996-19 at 8 (June 4, 1996) (stating that "ifthe lawjudge does

15notfollow agencypolicy, the agency may impose thatpolicy byreversing the lawjudge's decision on appeal) (citing Association ofAdministrative Law Judges v. Heckler, 594 F. Supp. 1132, 1141 (D.D.C. 1984)). Indeed, the Administrator has "boththe authority and duty to impose the agency's policy on appeal." In the Matter ofWarbelow'sAirVentures, Inc., FAA Order 2000-3,2000 WL 298578, at *9 (Feb. 2, 2000). The Administrator need not remandthe case, however, in orderto impose an appropriate civil penalty. See. e.g., Inthe Matter ofMole-Master Servs. Com., FAA Order No. 2010-11, 2010 WL 7940347, at *5 (June 16, 2010). Instead, the Administrator may impose an appropriate sanction without remand when it wouldbe more efficientto do so. See In the Matter ofEsau, FAA OrderNo. 1991-38 at 7 n. 7 (Sept. 4, 1991) (stating that while itwould notbe inappropriate to remand the case to the ALJ, it
was more efficientfor the Administrator to determine the sanction). Such is the case here. As illustrated in Section A above, Complainant derived its proposed civil penalty using FAA Order 2150.3B and its Sanction Guidance Tables; as such, it reflects the policy ofthe agency and appropriately accounts for the nature, circumstances, gravity, and mitigating factors relating to Respondent's violations. Therefore, the Administrator should reverse the ALJ and impose Complainant's $27,80011 civil penalty on appeal.

11 Complainantrequested a $28,000 civil penalty before the ALJ. Sanction guidance recommends a $27,800 civil penalty for these violations, which Complainantroundedto reach the proposed amount. 16VI. CONCLUSION The ALJerredby concluding that Complainant failed to meet its burden ofdemonstrating the appropriateness ofthe proposed $27,800 civil penalty. Complainant derived its proposed $27,800 civil penaltyusing FAA Order 2150.3b and its incorporated Sanction Guidance Tables, and, as such, the penaltyreflects the policy ofthe agency and appropriately accounts for the nature, circumstances, gravity, and mitigating factors relatingto Respondent's violations. In contrast, the ALJ's sanction determination does not accord with the policy ofthe agency and should be reversed.

By:

Dated: October 23, 2015

17 Respectfully submitted, Peter

### J. Lynch Assistant ChiefCounsel for Enforcement

Federal Aviation Administration Office ofthe ChiefCounsel 800 Independence Ave., S.W. Washington, D.C. 20591 Telephone: (202) 267-5964 Facsimile: (202) 267-5106CERTIFICATE OF SERVICE I hereby certifythat on this date I have sent the foregoing Complainant's Appeal Briefby facsimile andbyU.S. certified mail, return receipt requested, postage prepaid, to: Christopher D. Ferrara, Esq. 3555 Harding Avenue, Suite 2F Honolulu, HI 96816 In addition, I certify that I have on this date personally delivered the original and one copy ofthe foregoing document to: Attn: Hearing Docket Clerk, AGC-430 Wilbur Wright Building- Suite 2Wl000 Federal Aviation Administration 600 Independence Avenue SW Washington, DC 20591

Dated: October 23, 2015

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