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• ,l**:~;~_PN-lfMENT**

## OF
.. BEFORE THE
.**l~;\}./SPOfiTATION** 

### ( UNITED STATES DEPARTMENT OF**TRANSPORTl:\;;J;~pJNOPEFtATlQNS** OFFICE OF HEARINGS z 

## ----------------------------x In the Matter of D 

### &M CUSTOM INJECTION MOLDING CORPORATION Respondent. FAA CP11GLOOOO FAA-2011-0679


## ----------------------------x Everett McKinley Dirksen Federal Building Courtroom 1801 219 South Dearborn Street Chicago, Illinois Thursday, August 9, 2012
The above-captioned matter convened, pursuant to notice at 9:00 a.m. BEFORE:

(202) 234-4433 The Honorable RICHARD C. GOODWIN Administrative Law Judge 

# RECEIVED AUG 302012· 

## HEARING DOCKET

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• APPEARANCES:
KATE BARBER, ESQ Federal Aviation Administration 2300 East Devon Avenue DesPlaines, Illinois 60018 SCOTT HAGEN, General Manager D & M Plastics Corporation 150 French Road Burlington, IL 60109

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• C 0 N T E N T S WITNESS DIRECT CROSS REDIRECT RECROSS Joseph Sanders Chris Zawarus Scott Hagan EXHIBITS: Agency's: C-1A

- C-1Y C-2 C-3 C-4 C-5 C-7 Respondent's: Exhibits 1 - 7 14/70 45/72 54/73 67

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IDENT MARK 24 24 29 29 34 34 42 42 42 42 57 57

66 66

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1 P R 0 C E E D I N G S 2 (9:00a.m.) 3 JUDGE GOODWIN: This is a case of 4 D & M Custom Injection Molding Corporation, 5 FAA Docket number 20110679. Counsel, you may 6 identify yourself for the record, please. 7 MS. BARBER: I am attorney Kate 8 Barber with the Federal Aviation 9 Administration. 10 JUDGE GOODWIN: Counsel. 11 MR. HAGEN: I'm not an attorney. 12 I'm Scott Hagen from D&M Plastics. 13 JUDGE GOODWIN: s-c-o-t-t, and 14 then spell your last name? 15 MR. HAGEN: H-a-g-e-n. 16 JUDGE GOODWIN: Are you president 17 or owner? 18 MR. HAGEN: Vice-president and 19 general manager. 20 JUDGE GOODWIN: Ms. Barber, I got 21 a message earlier in the week you were going 22 to talk to the Respondent about potentially
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• 5 1 suspending the case. Did you need time this 2 morning to do that? 3 MS. BARBER: No, Your Honor. I 4 don't believe that we are going to be able to 5 do that. 6 JUDGE GOODWIN: Okay. Counsel for 7 the FAA, do you want to make an opening 8 statement or proceed? I'm going to go over a 9 couple preliminary rules. Everything we do, 10 Mr. Hagen and Ms. Barber knows this, but 11 everything that we do, any exhibits, the 12 transcript, and everything else goes on the 13 internet. 14 If we get to a point where we have 15 any information that's potentially sensitive 16 for any reason, be it personal and business 17 information, social security numbers, or 18 anything else, I prefer either to not put them 19 into evidence or if we put it into evidence, 20 to seal that portion of the record. 21 What I'm going to ask you to do is 22 examine all of your exhibits. Make sure there
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• 6 1 are no dates of birth, no home addresses, no 2 home phone numbers, no cell numbers. If there 3 is, redact them. If things get into evidence 4 what we'll do is we will either seal all or a 5 portion of the record. The transcript goes on 6 there as well, Mr. Hagen. So, it's not only 7 the exhibits. It's the entire transcript. 8 Everything that's being taken down here. 9 I'd ask when your witnesses take 10 the stand, that when they do the identifying 11 information use their business address and 12 business phone number. 13 It doesn't make any difference how 14 you mark your exhibits as long as you don't 15 use the same identification. I'll keep the 16 exhibits, send them to the office, and have 17 someone put them in the record. 18 I normally break around 10:30 for 19 a short break. Break at noon for lunch. If 20 we come back, break someplace between 2:30 and 21 3:00. We' 11 conclude at 4:30 because we need 22 to be out of the courtroom by 5:00, be out of

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1 the courthouse by 5:00. 2 So, any preliminary matters, Ms. 3 Barber? 4 MS. BARBER: Yes, Your Honor. 5 JUDGE GOODWIN: Okay. 6 MS. BARBER: I would first make a 7 motion to deem not admissible any affirmative 8 defenses due to the fact that this is a 9 hearing on sanction only because the 10 Respondent did not file an answer to the 11 complaint. Today we're here for a hearing 12 based on sanction only and I would ask that 13 the Court not allow any affirmative defenses 14 which have not been previously pled. 15 JUDGE GOODWIN: Okay. I don't 16 show that there's any prior motion to deem 17 allegations if it had been filed. So, since 18 we're here what I'll do, is I'll hold that 19 motion and rule on it as I review the case. 20 There may be one, I just don't have one. 21 MS. BARBER: Okay, because I have 22 it if you would like to see it? You had
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1 issued an Order limiting the hearing to 2 sanction. 3 JUDGE GOODWIN: Oh, okay. Just 4 for some reason, I don't have it on my, all 5 right. Do you have any preliminary matters 6 other than that, Ms. Barber? 7 MS. BARBER: That's it, Your 8 Honor. 9 JUDGE GOODWIN: Okay. Do you want 10 to make an opening statement? 11 MS. BARBER: Yes, Your Honor. May 12 it please the Court? 13 JUDGE GOODWIN: Yes. 14 MS. BARBER: Today we are here to 15 assess this sanction against the company of D 16 & MCustom Injection Molding Corporation. We 17 are seeking a civil penalty in the amount of 18 $168,000 due to the violations of the Federal 19 Aviation regulations. 20 Today you're going to hear the 21 aggravating circumstances in regards to this 22 case. This isn't just a paperwork violation,
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1 Your Honor. You're going to hear how the 2 shipment that the shipper, D & M Custom 3 Injection Molding Corporation, put into air 4 transportation was undeclared, forbidden, and 5 eventually started a fire in the flight of the 6 FedEx Flight number 1718. 7 You're going to hear from two 8 witnesses today. The first one is Joe Sanders 9 and he's going to go through his investigation 10 of the case and explain how the sanction was 11 derived in the aggravating factors which led 12 to the sanction amount of $168,000. 13 You're also going to hear from a 14 hazardous material specialist, Chris Zawarus, 15 who also conducted an investigation into the 16 incident at hand, and learn from him what he 17 did. Learn that there was, not only was this 18 shipment was it undeclared and forbidden, but 19 that D & Mhad reasonable knowledge that there 20 were batteries contained in the shipment and 21 that there was hazardous materials in the 22 shipment. And, they should have not only
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1 known, but should have packaged it and 2 declared it properly. 3 We are going to present to the 4 Judge, yourself, that the sanction was indeed 5 calculated based on the 2153B which is the 6 proper sanction analysis. And, we're going to 7 ask that the Judge, not only take judicial 8 notice of the 2153B, but we're also going to 9 enter that into evidence. 10 After we put on our case, we are 11 going to show all the aggravating factors that 12 led to this amount of sanction. We're going 13 to tell you the mitigating factors that we did 14 indeed take into consideration and show that 15 we did not, the FAA, did not even assess the 16 amount of civil penalty that could have done, 17 and that we did take into consideration 18 mitigating factors that may or may not be 19 presented today. 20 At the end of the hearing, we were 21 going to ask that the sanction amount be 22 issued against D &MPlastic Custom Injection
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1 Molding Corporation in the amount of $168,000. 2 Thank you, Your Honor. 3 JUDGE GOODWIN: Okay. Mr. Hagen, 4 you can make a presentation now or you can 5 wait until the beginning of your case. It 6 doesn't make any difference. 7 Ms. Barber, I don't have for some 8 reason, the Order in the case which means 9 absolutelynothingbecause I've been traveling 10 quite a bit and it doesn't surprise me that I 11 don't have the information in my file that I 12 should have. Don't take that to mean anything 13 just other than the fact I don't have it. 14 MS. BARBER: Your Honor, would you 15 like my copy to look at? 16 JUDGE GOODWIN: When you get 17 around to it, Ms. Barber. 18 MS. BARBER: Okay. I have it in 19 my hand if you'd like me to approach the 20 bench? 21 JUDGE GOODWIN: All right. Mr. 22 Hagen; do you want to wait until you have the
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• 12 1 opportunity to present evidence or do you want 2 to argue now? 3 MR. HAGEN: I can wait. 4 JUDGE GOODWIN: All right. Ms. 5 Barber, call your first witness. 6 MS. BARBER: Your Honor, I'd like 7 to call Mr. Joe Sanders to the stand, please? 8 JUDGE GOODWIN: Sir, do you want 9 to approach, stand, raise your right hand? 10 Whereupon, 11 JOSEPH SANDERS 12 was called as a witness and, after being first 13 duly sworn, was examined and testified, as 14 follows: 15 JUDGE GOODWIN: I'm going to ask 16 you to state your name and spell your first 17 and last name. 18 THE WITNESS: My name is Joseph, 19 J-o-s-e-p-h, Sanders, S-a-n-d-e-r-s. 20 JUDGE GOODWIN: S-a-n-d? 21 THE WITNESS: E-r-s. 22 JUDGE GOODWIN: Okay. For the
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• 13 1 court reporter's benefit, I'm going to ask 2 when you're presenting evidence, if the court 3 reporter raises his hand, stop and spell 4 whatever it is as the court reporter is 5 concerned. I'd rather do it as we go along 6 than for him to sit down and go through me and 7 try to figure out what we said at 9:15 in the 8 morning. 9 MS. BARBER: Okay. 10 JUDGE GOODWIN: That way they'll 11 keep him from having your name misspelled and 12 so on. 13 MS. BARBER: Absolutely. 14 JUDGE GOODWIN: Counsel. 15 MS. BARBER: Your Honor, I have 16 all the exhibits ready to give you if you'd 17 like them before? 18 JUDGE GOODWIN: Sure, just bring 19 them up. 20 MS. BARBER: Okay. 21 JUDGE GOODWIN: The way I do this 22 is I put on ID on the exhibit. When I admit
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• 14 1 it, I line through ID and I put the date on 2 it. 3 MS. BARBER: Okay. 4 JUDGE GOODWIN: I'm also going to 5 make a spreadsheet of the attached exhibits 6 when I forward it back to the office. 7 MS. BARBER: Sorry for more 8 procedural matters. Would it be helpful to 9 you if I gave you a packet for yourself right 10 now, too? I did make one for you if you'd 11 like one. Okay
. 12 JUDGE GOODWIN: I'm going to keep 13 the originals. 14 MS. BARBER: Okay. 15 JUDGE GOODWIN: But, let the court 16 reporter 17 MS. BARBER: You just wanted to 18 refer to them. May I proceed? 19 JUDGE GOODWIN: Yes. 20 DIRECT EXAMINATION 21 BY MS. BARBER: 22 Q Okay. Mr. Sanders, you've already
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• 15 1 stated your name and spelled it for the court 2 reporters. Can you please tell us how you're 3 employed? 4 A I am employed as a hazardous 5 material specialist with the Federal Aviation 6 Administration's Minneapolis/St. Paul postal 7 duty. 8 Q And, how long have you worked 9 there? 10 A I have been a hazardous material 11 specialist for ten years now. 12 Q Can you run through your 13 background in investigation or even your 14 career? 15 A Career started back, I was a 16 security policeman in the United Stated Air 17 Force for four years. I was a security 18 officer for City National Bank of Detroit. I 19 was with the Defense Investigative Services as 20 an investigator for 16 years. And, prior to 21 becoming a hazardous material specialist with 22 the FAA, I was a civil aviation security
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1 inspector for about 14 years, I'm sorry, about 2 four years. 3 Q What type of training have you 4 received inhazardous material regulations and 5 investigations? 6 A As an investigator with DIS, 7 Defense Investigative Service, I attendedmany 8 investigative classes. With the Federal 9 Aviation Administration, I attended 10 investigations, classes, cargo security 11 classes. And, as a hazardous material 12 specialist, I have attended the hazardous 13 material's basic course and we also receive 14 recurrent and ongoing training every year. 15 Q How did you become aware of the 16 incident that we are talking about here today 17 with the shipment from D & M? 18 A I was the duty officer for the 19 Minneapolis, St. Paul postal duty on August 20 14th, 2009. And, I was informed that a fire 21 had occurred on a Federal Express aircraft as 22 it landed at the Minneapolis/St. Paul airport
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• 17 1 Q And, what did you do after you 2 were informed of this fire? 3 A I immediately traveled to the 4 Federal Express facility at the 5 Minneapolis/St. Paul airport and began my 6 investigation. 7 Q Please walk us through your 8 investigation. 9 A Upon arriving at the Federal 10 Express facility, I was met by a ramp manager 11 who informed me that the suspected fire had 12 originated in a shipment from D & M Plastics 13 in Burlington, Iowa. 14 The ramp manager took me to the 15 unit load device in which the fire had 16 occurred and informed me that upon the 17 aircraft landing at the Minneapolis/St. Paul 18 airport, the air crew noted the activation of 19 the fire warning light. And, that the air 20 crew had activated the fire suppression system 21 and they had taxied to the Federal Express 22 ramp area.
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• 1 At which time, the Minneapolis/St. 2 Paul airport fire department arrived, removed 3 the unit load device, and again, put out the 4 fire that did remain in that unit load device. 5 Q And, did you investigate that D & 6 M Plastics, how did you determine who the 7 shipper was? 8 A All right. The Federal Express 9 ramp manager provided me with a packing list 10 which identified D & MPlastics as the, as the 11 shipper
. 12 My inspection disclosed five, that 13 it was a, originally a five piece shipment 14 which, a large fiberboard box and that each 15 fiberboard box contained eight small 16 fiberboard boxes. And, in these small boxes 17 was the product which was identified as a 18 Ruyan wrap e-mystick. 19 Q Okay, and did you determine that 20 this shipment originated from Burlington, 21 Illinois? 22 A

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1 packing slip. 2 Q Did you have an opportunity to 3 take pictures or photographs in your 4 investigation? 5 A Yes. I inspected the unit load 6 device and this unit load device still had 7 three of the large fiberboard boxes intact. 8 It also had two salvage bags each with fire 9 damage, small fiberboard boxes that had been 10 contained in the original large fiberboard 11 boxes
. 12 It also had loose E-Mysticks, some 13 of which were glowing to indicate a power 14 source. And, I did take photographs of all of 15 the boxes in, in the ULD. 16 MS. BARBER: May I approach, Your 17 Honor? 18 JUDGE GOODWIN: Yes. 19 BY MS. BARBER: 20 Q I'm going to be showing you what's 21 previouslybeenmarked as Exhibit C-1A through 22 Y. Since there are several photographs, I'm
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1 not going to have you go through every single 2 one of them. But, if you could just sort of 3 quickly go through the pictures that show the 4 most important things and go through and tell 5 us what each one shows you and how it effected 6 your investigation? 7 When you identify the picture, can 8 you also say the name of the exhibit so we're 9 on the same picture? 10 A Yes. Well, Exhibit C-1D depicts 11 the interior of the unit load device with the 12 small fiberboard boxes that were contained in 13 the original large fiberboard box still inside 14 the ULD. And, it shows the fire damage that, 15 that took place inside the ULD. 16 Exhibit C-1E depicts the, one of 17 the salvage bags that contained the fire 18 damaged small fiberboard boxes, along with 19 some of the loose e-my cigarette, oh, I'm 20 sorry, E-Mysticks. 21 Exhibit C-1F also depicts one of 22 the salvage bags within fire damaged small
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1 fiberboard box with the number of the E2 Mysticks loose. 3 Exhibit C-1G is a photograph of 4 the zip lock bag marked as evidence, and this 5 was evidence collected by the Minnesota State 6 fire marshal who had also been on the scene 7 and was conducting an investigation, or did 8 conduct an investigation prior to my arrival. 9 Exhibit C-1H, again, depicts one 10 of the salvage bags and, again, this was a 11 place, these, these fiberboard boxes were 12 placed in the salvage bags by Federal Express 13 personnel. Again, it depicts a fire damaged 14 small fiberboard box, part of the shipment. 15 Exhibit C-1J just depicts some of 16 these small cardboard boxes containing the E17 Mysticks that were inside the small fiberboard 18 boxes. 19 Exhibit C-1K is, depicts on the 20 larger fiberboard boxes. Just indicates that 21 there were no hazardous materials labels or 22 markings to indicating a presence of hazardous
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• 22 1 materials inside the, the packages. 2 C-1L also depicts the three 3 remaining intact fiberboard boxes which 4 indicate that there were no, no labels or 5 markings indicatinghazardous materials on, in 6 the packages. 7 Photograph, or Exhibit C-1R, is a 8 copy of a photograph provided to me by the 9 Minnesota State fire marshal and his 10 investigation. This depicts the lithium 11 metal, or the lithium batteries that were a 12 component of the E-Mystick and the damage that 13 they sustained. 14 Exhibit C-18, again, just more 15 pictures of the lithium batteries and the 16 damage that they sustained in the fire. 17 And,**finally~** Exhibit C-1X depicts 18 the one picture of a fire damaged lithium 19 battery, but also has a photograph of the E20 Mystick contained in the plastic wrapping. 21 And, it indicates some liquid at the bottom 22 which was, was a flammable liquid and
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1 indicates that it did, in fact, leak from the, 2 from the product. 3 Q And, have you had the opportunity 4 to look at all the Exhibits C-1A through Y? 5 A Yes, I have. 6 Q And, you recognize all of the 7 photos? 8 A Yes. 9 Q And, do those fairly and 10 accurately depict the photographs that you 11 took duringyour investigationand/or received 12 during your investigation? 13 A Yes. 14 MS. BARBER: At this time, Your 15 Honor, I would ask to move those into evidence 16 and give it C-1A through Y. 17 JUDGE GOODWIN: Any objection? 18 Agency Exhibits 1 through 1-Y, is that 19 correct? 20 MS: Yes. It's A through Y, and 21 it's C-1 and then I did increments 22 alphabetical.
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• 24 1 JUDGE GOODWIN: Okay. Exhibits 1A 2 through 1Y, inclusive, are hereby admitted as 3 these respective exhibits. 4 (Agency Exhibit Nos. C-1A through 5 C-1Y are received intoevidence.) 6 BY MS. BARBER: 7 Q During the course of your 8 investigation, did you have the opportunity to 9 meet with anybody and to discuss the incident? 10 A Yes, I did. 11 Q And, how did you or who did you 12 meet with and what happened? 13 A As part of the investigation, I 14 contacted the distributor for the wrap, the 15 Ruyan wrap E-Mystick, Mr. William Bartkowski, 16 andRuyanAmerica Incorporated inMinneapolis, 17 Minnesota. 18 Mr. Bartkowski informed that D & M 19 Plastics was contracted by Ruyan America to 20 assemble all the components of the E-Mysticks 21 on behalf of Ruyan America. And, that Ruyan 22 American was in a joint venture with Ruyan
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1 Holdings in. China to distribute these smoking 2 substitute products. 3 Mr. Bartkowski informed me that 4 the 5 E-Mysticks consisted of a air flow sensor, a 6 safety switch, an atomizer, 1.5 milliliters of 7 a, of a liquid, and a LED, and of course, the 8 primary lithium battery. 9 At this time neither Ruyan America 10 or, nor D & M Plastics was aware, or Mr. 11 Bartkowski said the manner of whether or not 12 there were any hazardous materials involved 13 with the production in assembly of this 14 product was ever raised. 15 Q Did you determine in your 16 investigation whether or not the liquid was 17 hazardous material? 18 A Yes, I did. 19 Q And, what was that? 20 A Ruyan America had a laboratory in 21 the Twin Cities conducting flashpoint tests on 22 the liquid that was contained in the ENEAL R. GROSS
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1 Mystick. And, the results of that indicated 2 that the regular E-Mystick had a 93 degree 3 Fahrenheit flashpoint and the menthol brand 4 had a 94 degree Fahrenheit flashpoint. And, 5 that would classify that as a Class 3 6 flammable liquid. 7 Q What is the maximum or the minimum 8 flashpoint product can have before it is 9 determined to be a hazardous material? 10 A 140 degrees Fahrenheit. 11 Q And, during the course of your 12 investigation, did you ever determine, or was 13 it ever determined how the fire on the FedEx 14 flight did start? 15 A The state fire marshal's report 16 indicated that the fire originated with the 17 lithium, the primary, or the lithiumbatteries 18 contained in, in the product. 19 A internal investigation conducted by 20 Ruyan America, their conclusion was that the 21 fire was a result of a component change that 22 Ruyan Holdings in China made to the, one of

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1 the components and that somewhere in, in the 2 process of the shipment, one or more of theE3 Mysticks activated, the safety switch failed, 4 the atomizer continued to vibrate, and 5 generated a dangerous quantity of heat, and 6 that some of the liquid dripped onto this 7 atomizer. And, that was the source of the 8 fire. 9 Q So, two different investigations 10 determined that it was the E-Mystick that did 11 indeed cause the fire? 12 A That is correct that that E13 Mystick generated a dangerous quantity of heat 14 and that that was the source of the fire. 15 MS. BARBER: May I approach, Your 16 Honor? 17 JUDGE GOODWIN: Yes. 18 BY MS. BARBER: 19 Q I'm showing you what's previously 20 been marked as Exhibit C-2. Please tell the 21 Court if you recognize this document and what 22 it is.
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1 A Yes, I do. This is the Minnesota 2 State fire marshal's report that he provided 3 to me. 4 Q And, can you just go over quickly 5 what that told you in your investigations? 6 A The synopsis as it reads here was 7 that the, I'm sorry, the conclusion of the 8 State fire marshal's report was that the area 9 of fire origin is inside cargo container 10 AGAKE44404FX and did not exit that container 11 while inside the aircraft
. 12 The fire's accidental and cause 13 with the only ignition factor being located 14 and the fire degree being the lithium ion 15 batteries that are incorporated individually 16 into the Ruyan wrap mystick individual smoking 17 sticks. 18 Further forensic testing may be 19 necessary to determine why the malfunction on 20 one or more of these units occurred. 21 MS. BARBER: Your Honor, at this 22 time I would ask to move Exhibit C-2 into
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• 29 1 evidence? 2 JUDGE GOODWIN: Any objection? 3 MR. HAGEN: No. 4 JUDGE GOODWIN: Exhibit 2 for 5 identification is received and this is Agency 6 Exhibit 2. 7 (Agency Exhibit No. C-2 was 8 received into evidence.) 9 BY MS. BARBER: 10 Q During the course of your 11 investigation, when you talked to D & M and 12 you discovered how they, what their role in 13 that E-Mystick, the production was, what 14 exactly did you determine? 15 A I determined that D & M Plastics 16 receives the components of the E-Mystick from 17 Ruyan Group Holdings in China, along with 18 instructions on how to assemble the product, 19 along with the packaging to ship the product, 20 and the instructions on how to ship the 21 product. 22 Q What about the liquid that was
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1 contained in the E-Mystick, how did that 2 arrive? 3 A My understanding is that that 4 arrived in barrels from the Ruyan Group 5 Holdings in China. 6 Q Was it already mixed together or 7 were there different liquid that needed to be 8 mixed together? 9 A 

### D & M Plastics mixed the liquid 10 together to, to form the final liquid that was 11 placed inside the E-Mystick
. 12 Q I'm showing you what's been 13 previously marked as Exhibit C-4. 14 recognize C-4? 15 A Yes, I do. 16 Q And, what is this document? 17 A This is the flashpoint test 18 conductedby the, by Legend Technical Services 19 Incorporated. 20 Q And, what does this document tell 21 the reader? 22 A That the flashpoint for the
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• 31 1 mystick regular with alcohol was, is 93 2 degrees Fahrenheit and the mystick menthol 3 with alcohol flashpoint is 94 degrees 4 Fahrenheit. 5 Q And, then you previously stated 6 that you did receive a MSDS in regards to the 7 final liquid product that was inside the E8 Mystick? 9 A That's correct. 10 Q I'm showing what's been previously 11 marked as Exhibit C-5. Is Exhibit C-5 a fair 12 and accurate depiction of the MSDS that you 13 received? 14 A Yes, it is. 15 Q And, what is a purpose of a MSDS? 16 A A MSDS is a material safety 17 datasheet which basically provides all the 18 properties of the, of the commodity or the 19 material to include transport information 20 which lists the proper shipping name, all the 21 hazardous materials, the class, the UN number, 22 and the packing group.
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• 32 1 Q When did you receive the MSDS and 2 from whom? 3 A I received this material safety 4 datasheet during the course of the 5 investigation from Mr. Bartkowski at Ruyan 6 America Incorporated. 7 Q Did you receive a hazardous 8 material incident report? 9 A I did. 10 Q And, what is a purpose of those 11 reports? 12 A The, the airline is required under 13 the regulations to inform the Department of 14 Transportation and the Federal Aviation 15 Administration of incidents in relation to 16 hazardous materials. 17 Q And, in those reports do they 18 discuss what type of damage is done? 19 A Yes, they do. 20 Q And, do they go through and give 21 an approximate amount of the cost of damage? 22 A Yes, they do.
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1 Q Okay. I'm handing what's been 2 previously marked as Exhibit C-3. Please 3 describe Exhibit C-3. 4 A Exhibit C-3 is a hazardous 5 materials incident report, a DOT Form 5800 6 completed by the Federal Express Corporation, 7 describing the, the incident, the hazardous 8 material involved in the incident, and damage 9 that incurred. 10 Q I believe it's paragraph 36, 11 perhaps, that talks about the amount of 12 damage? Is that correct? 13 A Paragraph 32. 14 Q 32. Can you please go through 15 what was marked on the damage report in 16 regards to the monetary amount for damage to 17 each entity? 18 A Yes. The incident report lists a 19 material loss of $15,000, carrier damage of 20 $10,000, property damage of $10,000, response 21 costs of $1,000, and clean up costs of $1,000. 22 Q Thank you.
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• 34 1 MS. BARBER: At this time, Your 2 Honor, I move to enter into evidence C-3. 3 THE WITNESS: Correct. 4 JUDGE GOODWIN: Any objection? 5 MR. HAGEN: No, Your Honor. 6 JUDGE GOODWIN: Agency C-3 for 7 identification is received into evidence. 8 (Agency Exhibit No. C-3 was 9 received into evidence.) 10 BY MS. BARBER: 11 Q As an inspector for the FAA, and 12 during the course of your investigation, what 13 is your next course of action after you've 14 determined that a violation did indeedhappen? 15 What do you do next? 16 A At that point, I determine a 17 recommended sanction amount. 18 Q And, is there any guidance that 19 you use to determine what the recommended 20 sanction would be? 21 A Yes, there is. 22 Q And, what is that?
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1 A That is the Federal Aviation 2 Administration Order, 2153B, specifically 3 Appendix C of that Order. 4 Q And, what are some of the factors 5 or considerations that the Order tells you to 6 take into consideration? 7 A Some of the factors to take into 8 consideration are the circumstances, the 9 extent, the nature, the gravity of the 10 violation, the quantity of material involved 11 in the violation. Whether there was any 12 damage, injury, or illness associated with the 13 violation. The quantity of the material 14 offered by the violator. Whether or not the 15 violator was the manufacturer of the material. 16 Whether the violator reasonably relied on 17 incorrect information. And, of course, 18 whether or not the violator has a history of 19 previous hazardous material regulation 20 violations. 21 Q Did you take into consideration 22 any mitigating factors?
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• 36 1 A Yes. I took into consideration a 2 mitigating factor that D & M Plastics 3 reasonably relied on incorrect information. 4 Q And, who provided that incorrect 5 information? 6 A That was provided by Ruyan America 7 and Ruyan Group Holdings. 8 Q So, you did take this into 9 consideration. And, when you take a 10 mitigating factor into consideration, what 11 does that do to the amount of civil penalty? 12 A I I I did take that into 13 consideration and that would normally reduce 14 the recommended civil penalty. 15 Q And, in this case, the maximum or 16 the highest amount that could be assessed 17 against D & M would be $195,000, is that 18 correct? 19 A That's correct. 20 Q And, $168,000 was the amount that 21 the FAA has asked for today? Is that true? 22 A That's correct.
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• 37 1 Q What were some of the aggravating 2 factors? 3 A The aggravating factors were, of 4 course, the damage, the fire. The fact that 5 is was an undeclared hazardous material 6 shipment. That it was a forbidden material in 7 that it generated a dangerous quantity of 8 heat. And, again, that was an undeclared 9 HazMat. 10 Q When you talk about the, well, the 11 fact that it's undeclared, how is that 12 significant to what happens in these types of 13 cases? 14 A Well, it's significant in that if 15 it were a declared HazMat shipment, hazardous 16 material shipment, this would be recorded on 17 what we call a notification to the pilot in 18 command. So, the flight crew would have that 19 information on hand which would tell them what 20 hazardous materials onboard the aircraft and 21 exact location of that hazardous materials 22 onboard the flight.
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1 In this case, when the fire 2 erupted and the, the aircraft it was on the 3 Federal Express ramp, the responders, the 4 Minneapolis/St. Paul fire department, did not 5 have that information. As the flight crew 6 evacuated the aircraft, they had the 7 notification to pilot in command with them, 8 but since this was an undeclared shipment, 9 that shipment was not listed on the notice to 10 the pilot in command. And, the first 11 responders did not know what hazardous 12 materials was involved with the fire and the 13 location on the aircraft. 14 Q I'd like to talk about, perhaps, 15 the mitigating factors that you took into 16 consideration in that they relied on 17 information from the shipper or the lack 18 thereof. 19 I'd like to draw your attention, 20 may I approach, Your Honor? 21 JUDGE GOODWIN: Yes. 22 BY MS. BARBER:
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1 Q Exhibit C-1Y. Now, on C-1Y there 2 is a picture of the product box, is that 3 correct? 4 A Yes. 5 Q Okay, and on that product box, 6 what is listed as the ingredients? 7 A Other ingredients, well, the first 8 ingredient is listed as lobelia point, I'm 9 sorry, it appears to be five milligrams and it 10 says Indiana tobacco. Other ingredients are 11 listed as propylene, glycol, alcohol, water, 12 imitation flavoring. 13 Q And, lobelia was determined to be, 14 or is a hazardous material or a flammable 15 liquid, is that not true? 16 A That's correct. 17 Q And, each E-Mystick was packaged 18 in that package, is that true? 19 A That's correct. 20 Q And, they were packaged by D & M 21 Plastics? 22 A That's correct. NEAL R. GROSS (202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com

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1 Q And, shipped by D & M Plastics? 2 A That's correct. 3 Q Additionally, when they assemble 4 the E-Mysticks, they put in the D battery into 5 another component with the hazardous material 6 liquid? Is that correct? 7 A That's correct. 8 Q And, then packaged it in that box? 9 A That's correct. 10 Q Okay. One of the factors in 11 taking into consideration the sanction amount 12 is the corrective actions taken by the 13 company. Were there any corrective actions 14 taken that were significant enough to take 15 into consideration? 16 A No. 17 Q And, had they completed any extra 18 training that you were aware of? 19 A Not that I was aware of. 20 Q Had an employee of D & M Plastics 21 had the required training, would they have 22 known to look for a hazardous material on the
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1 package? 2 A Yes. 3 Q And, strike that. 4 MS. BARBER: No further questions, 5 Your Honor. 6 JUDGE GOODWIN: Mr. Hagen, did you 7 want to ask any questions of the witness? 8 MR. HAGEN: No, Your Honor. 9 MS. BARBER: Your Honor, I'd ask 10 to enter into evidence Exhibit C-6 which, and 11 ask that you take judicial notice of the 2153B 12 sanction guidance and hazardous material 13 enforcement. 14 JUDGE GOODWIN: I may have missed 15 it. You discussed Agency Exhibit 4 for 16 identification of the Plaintiff. Don't recall 17 whether I admitted that. 18 MS. BARBER: I would ask to move 19 that into evidence. 20 JUDGE GOODWIN: Mr. Hagen, do you 21 have any objection? 22 MR. HAGEN: No, Your Honor
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1 (Agency Exhibit No. C-4 was 2 received into evidence.) 3 JUDGE GOODWIN: Then Exhibit 5 is 4 the material safety datasheet which consists 5 of ten pages and it's dated, in the upper 6 right-hand corner, October 27. But, again, I 7 don't show that that was offered. 8 MS. BARBER: At this time, I would 9 offer that into evidence. 10 JUDGE GOODWIN: Mr. Hagen, any 11 objection? 12 MR. HAGEN: No, Your Honor. 13 JUDGE GOODWIN: Exhibit 5 for 14 identification is received into evidence as 15 Agency C, Exhibit 5. 16 (Agency Exhibit No. C-5 was 17 received into evidence.) 18 And, you've now have requested 19 that 2150.3B, dated October 1st, '07, be 20 admitted which, Mr. Hagen, Exhibit 6 is the 21 sanction guidance for hazardous material 22 enforcement. Generally, the FAA attorneys
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• 1 always provide a copy and ask it be admitted 2 and I generally don't admit it but take 3 judicial notice of it. 4 What happens is, if I get to the 5 penalty phase we also ensure that we're 6 reviewing the proper addition of the 7 sanction's guidance. It changes from time to 8 time. And, we apply the guidance that was 9 applicable at the time of the incident. 10 So, the Court will take judicial 11 notice of the sanction's guidance. Anything 12 further of this witness? 13 MS. BARBER: No, Your Honor. 14 JUDGE GOODWIN: Sir, I'm going to 15 instruct you not to discuss your testimony 16 with anybody prior to the conclusion of the 17 hearing. It's up to the FAA attorney whether 18 you remain in the courtroom now. 19 MS. BARBER: Your Honor, for 20 housekeeping purposes, I would just, we have 21 C1 through C6 accepted into evidence or 22 admitted?

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1 JUDGE GOODWIN: That's what I 2 show, yes. 3 MS. BARBER: Okay. 4 JUDGE GOODWIN: Well, 1 through 5, 5 6 I'm taking judicial notice of. 6 MS. BARBER: Okay, thank you. 7 JUDGE GOODWIN: Our next witness. 8 MS. BARBER: The FAA calls Mr. 9 Chris Zawarus. 10 JUDGE GOODWIN: Stand and raise 11 your right hand
. 12 Whereupon, 13 CHRISTOPHER G. ZAWARUS 14 was called as a witness and, after being first 15 duly sworn, was examined and testified, as 16 follows: 17 JUDGE GOODWIN: Please be seated. 18 State your full name for the record and spell 19 your first and last name. 20 THE WITNESS: My name is 21 Christopher Zawarus, C-h-r-i-s-t-o-p-h-e-r, 22 last name Z-a-w-a-r-u-s.
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1 JUDGE GOODWIN: I 1m sorry1 give me 2 your last name again. 3 THE WITNESS: Zawarus 1 Z-a-w-a-r4 u-s. 5 JUDGE GOODWIN: Counsel. 6 DIRECT EXAMINATION 7 BY MS. BARBER: 8 Q Mr. Zawarus 1 how are you currently 9 employed? 10 A I 1m a hazardous material 11 specialist with the Federal Aviation 12 Administration. 13 Q And 1 how long have you worked 14 there? 15 A I 1ve been an employee with the 16 Federal Aviation Administration since 17 September of 2001. Been a hazardous material 18 specialist since August of 2002. 19 Q What did you do before you worked 20 for the FAA? 21 A Prior to employment with the FAA/ 22 I worked for the Chicago inspector general 1 S
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1 office as an investigator. 2 Q What type of education did you 3 receive in order to become an investigator? 4 A I have a bachelor's degree in 5 criminal justice from the University of 6 Illinois in Chicago. I was an investigator 7 with the Chicago inspector general's office 8 from May of 1998 through September of 2001. 9 I was a civil aviation security specialist 10 with the FAA from September of 2001 through 11 August of 2002 and I've been a hazardous 12 material specialist from August of '02 through 13 present. 14 As such, I've completed multiple 15 training courses with the FAA. I completed 16 the basic civil aviation security specialist 17 compliance and enforcement course. I've also 18 completed the hazardous materials basic 19 course. Have been to multiple hazardous 20 materials training courses outside agency and 21 we receive recurrent training annually. 22 Q What was your role in the case
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1 that we are here today talking about? 2 A On August 18th of 2009, I was 3 requested by my supervisor to go to D & M 4 Plastics in Burlington, Illinois and conduct 5 further investigation regarding the incident 6 relative to this case. 7 Q And, what information did you 8 gather while you were at D 

### & M Plastics? 9 A At D & M, D & M Plastics I met 10 with Scott Hagen, Mary Lake, who is a shipping 11 manager, and a Robert Everhart, who is the 12 engineering manager. They provided 13 information that indicated they were in 14 contract with Ruyan America to assemble, 15 package, and ship the product in question. 16 Q During the course of your 17 discussion and investigation with D & M 18 Plastics, did you become aware of how they 19 assembled the E-Mysticks? 20 A They receive the components from 21 Ruyan Group Holdings in China which consisted 22 of a primary lithium battery, an atomizer, a
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1 sensor, a microchip, and a LED, and the 2 enclosure for the device. 3 Q How did they receive the liquid 4 material? 5 A It was my understanding that the 6 constituents that made up the solutions in the 7 product were received separately and they 8 mixed the solutions for the regular and 9 menthol product on-site at the Burlington, 10 Illinois facility. 11 Q So, D & M Plastics actually made 12 the final or manufactured the final liquid 13 that went into the E-Mysticks? 14 A Correct. 15 Q Did you determine what was in the 16 liquid material that was placed ·in the E17 Mysticks? 18 A Upon our request, Mr. Hagen and 19 Ms. Lake provided material safety data sheets 20 for the individual components that made up the 21 solutions. 22 Q And, was the material hazardous
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1 when they provided the MSDS to you? 2 A Two of the constituents, ethanol 3 and lobelia, were considered Class 3 flammable 4 liquids. 5 Q Did you later learn that the final 6 product was, in fact, a hazardous liquid? 7 A It's my understanding that further 8 flashpoint testing on the final product 9 determined that it was a regulated material. 10 Q And, in regards to the lithium 11 batteries, are those regulated material? 12 A Yes. 13 Q And, what's significant about 14 lithium batteries? 15 A Lithium batteries, specifically 16 primary lithium batteries, have a propensity 17 to generate dangerous quantities of heat. 18 Q During the course of your 19 investigation, did you determine exactly how 20 many units they assembled? 21 A Based on the information provided 22 during the interviews at D 

### &MPlastics, they
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1 indicated that the shipment in question 2 consisted of 1,000 regular E-Mysticks and 3 1,000 menthol E-Mysticks. 4 Q Did you determine what the weight 5 of those E-Mysticks would be? 6 A I don't recall. 7 Q Is there a quantity or a weight 8 limitation on lithium batteries aboard 9 passenger aircraft or cargo aircraft? 10 A There are quantity limitations 11 related to lithium content, yes. 12 Q Do you have any knowledge of 13 whether or not this shipment that was shipped 14 by D & M was within the limitations? 15 A Based on the, the weights at, as I 16 recall, they did exceed the quantity 17 limitations for transport. 18 Q And, during the course of your 19 investigation when you were there, did you 20 investigate any other violations by other 21 companies? 22 A As a part of the on-site 

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1 inspection, we asked D &MPlastics to review 2 the warehouse and review how they assembled 3 the product. As such, while we were out in 4 the warehouse we were presented with inbound 5 shipments related to the, the pieces of the 6 product that, that they had received to 7 assemble. In part, that shipment contained 8 primary lithium batteries. 9 Q And, did you recover a receiving 10 form from that designed the, that was shipped 11 to them? 12 A Yes. Ms. Lake provided an 13 internal document or receiving form which D & 14 M Plastic used to ensure proper count on 15 inbound shipments. 16 Q Okay. May I approach, Your Honor? 17 JUDGE GOODWIN: Yes. 18 BY MS. BARBER: 19 Q I'm showing you what's previously 20 been marked as Exhibit C-7. Do you recognize 21 this document? 22 A Yes. 

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1 Q And, what is it? 2 A It's a receiving form that Ms. 3 Lake provided. 4 Q And, what is significant at the 5 receiving form? 6 A The receiving form indicates that 7 the product being inspected by D 

### &M Plastic 8 was a battery assembly. 9 Q And, what is the date that they 10 received the batteries? 11 A D & MPlastics stamped it received 12 August 4th of 2009. 13 Q And, was this date prior to the 14 assembly and shipment of the, that we are here 15 in question today? 16 A Yes. 17 Q Are you aware of the amount of 18 sanction that we are asking for in this case? 19 A Yes. 20 Q And, have you had the opportunity 21 to recommend sanctions in various hazardous 22 materials cases? NEAL R. GROSS
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1 Q And, what is it? 2 A It's a receiving form that Ms. 3 Lake provided. 4 Q And, what is significant at the 5 receiving form? 6 A The receiving form indicates that 7 the product being inspected by D & M Plastic 8 was a battery assembly. 9 Q And, what is the date that they 10 received the batteries? 11 A 

### D 

### &MPlastics stamped it received 12 August 4th of 2009. 13 Q And, was this date prior to the 14 assembly and shipment of the, that we are here 15 in question today? 16 A Yes. 17 Q Are you aware of the amount of 18 sanction that we are asking for in this case? 19 A Yes. 20 Q And, have you had the opportunity 21 to recommend sanctions in various hazardous 22 materials cases? NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com (202) 234-4433

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• 53 1 A Yes. 2 Q And, is there any significance 3 that you, as an expert, could agree with or 4 disagree with in regards to the amount of 5 sanction that we are asking for in this 6 instance? 7 A I'm not sure I understand 8 significance? 9 Q Are there any aggravating factors 10 that you're aware of that went into, or that 11 could be taken into consideration in regards 12 to the amount of sanction? 13 A In this case, an aggravating 14 factor was the fact that each of the five 15 packages offered by D & M Plastics exceeded 16 quantity limitations allowable for transport. 17 Q And, in your opinion, does the 18 $168,000 recommended civil penalty, does that 19 fall within that 2153B sanction guidance? 20 A Yes. 21 Q And, actually, could there be q 22 higher amount of CP that could have been 

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1 assessed in this case? 2 A Yes. 3 Q And, that would be $195,000, is 4 that correct? 5 A Correct. 6 MS. BARBER: No further questions, 7 Your Honor. 8 JUDGE GOODWIN: Mr
. Hagen, any 9 questions of this witness? 10 MR. HAGEN: Yes, I do. 11 JUDGE GOODWIN: What I'm going to 12 do is ask you to approach just because it's 13 easier for the court reporter. 14 CROSS EXAMINATION 15 BY MR. HAGEN: 16 Q Just quickly, Mr. Zawarus. You 17 stated that lithium ion batteries are a 18 dangerous HazMat, cannot be transported by air 19 and there's a limitation? 20 A Primary lithium batteries in 21 excessive quantities, yes. 22 Q Okay. On the Agency's, are 

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• 55 1 alkaline batteries okay to ship? 2 A They're a different type of 3 battery. 4 Q And, are there many other 5 batteries that are okay to ship that don't 6 fall under that same classification as the 7 lithium ion? 8 A They're all classified as 9 hazardous material, but based on the type of 10 battery, it may be excepted from the 11 regulation
. 12 Q On the Agency's Exhibit C-7, does 13 it state anywhere that that's a lithium ion 14 battery? 15 A I'm sorry, no, it does not. 16 Q Do you have any evidence that D & 17 Mwas aware or had anything that would prove 18 that we had knowledge that it was a lithium 19 ion battery? 20 A I'm sorry to correct you, it was a 21 primary lithium battery. A primary lithium 22 battery is non-rechargeable and an ionbattery 

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1 

### would be a rechargeable battery. 2 Q 

### Okay. Do you have any evidence 3 that proves that D & 

### M knew that it was a 4 

### primary lithium ion battery? 5 A 

### No. 6 

### MR. HAGEN: Nothing further, Your 7 Honor. 8 

### JUDGE GOODWIN: Any redirect based 9 on the cross? Thank you, Mr. Zawarus. You 10 can step down. 11 

### MS. BARBER: No, Your Honor
. 12 JUDGE GOODWIN: Any further 13 testimony from this witness? 14 

### MS. BARBER: Can I just have a 15 moment, Your Honor? 16 

### JUDGE GOODWIN: Yes. 17 

### MS. BARBER: No, Your Honor, we 18 are concluded with this witness. 19 

### JUDGE GOODWIN: Sir, you can step 20 

### down. I'm going to instruct you not to 21 discuss your testimony with anybody prior to 22 

### conclusion of hearing.
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### Ms. Barber, you want to call your 2 next witness? 3 

### MS. BARBER: At this time, Your 4 Honor, we do not have any more witnesses to 5 call. 6 

### JUDGE GOODWIN: I don't show that, 7 what do you want me to do with Exhibit 7? 8 

### MS. BARBER: Oh, sorry, Your 9 Honor. I would ask that Exhibit 7 be admitted 10 into evidence. 11 JUDGE GOODWIN: Mr
. Hagen, any 12 objection? 13 

### MR. HAGEN: No, Your Honor. 14 

### (Agency Exhibit No. C-7 

### was 15 received into evidence.) 16 

### JUDGE GOODWIN: That concludes the 17 Agency's case? 18 

### MS. BARBER: Yes, Your Honor. 19 JUDGE GOODWIN: Then what we're 20 going to do, it's 10:00. What we're going to 21 22 do is take a break until 10:15. When we re u , . , t rn Mr Hagen we'll give you the

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1 opportunity to present any testimony that you 2 want to. All right, we're off the record 3 until 10:15. 4 (Off the record.) 5 JUDGE GOODWIN: Mr. Hagen, if 6 you'd like to present any evidence or 7 testimony? 8 MR. HAGEN: Your Honor, should I 9 speak from here? 10 JUDGE GOODWIN: Probably, if you 11 don't mind, come up here just because it'd be 12 easier for the court reporter. 13 MR. HAGEN: Okay. 14 JUDGE GOODWIN: It really varies 15 in my hearings depending upon the acoustics. 16 Go ahead. 17 MR. HAGEN: Your Honor, I just 18 have a couple things. We had, it was stated 19 earlier that we didn't respond to the 20 complaint. But, we did respond to the 21 complaint on July 21st, 2011. That response 22 was sent certified mail to the FAA. NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com (202) 234-4433

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1 JUDGE GOODWIN: Well, you're here 2 today so I don't get, I'm not concerned about 3 whether or not you responded. 4 MR. HAGEN: Well, I have that, and 5 part of that response is that that's when we 6 requested for this hearing to be sanctioned 7 only. We don't dispute the facts of what 8 happened, just about how they happened and 9 what our knowledge of them was, and how the 10 sanction was arrived at the, the penalty. We 11 feel it's in access of what the statute would 12 dictate. 13 JUDGE GOODWIN: All right, go 14 ahead. 15 MR. HAGEN: A couple of things. 16 We were contracted by Ruyan America to package 17 these, to finish an assemble and package. 18 And, by finish I mean, they wanted the, the 19 liquid ingredients dispensed over in the 20 United States. 21 Prior to that, all of the battery 22 safety switch electronics, atomizer, housing,

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1 

### was all manufactured in China and given to us. 2 That's what the Agency's C-7 receiving form 3 was. That's what we received was the entire 4 assembly. We had no way of knowing that they 5 

### were lithium ion batteries. 6 

### The MSDS 

### sheets and the other 7 stuff that was received by the Agency came 8 after this incident for future shipments of 9 the product. We were given what was labeled 10 as flavoring and asked to put the cartridge 11 into the units, drop them into a cellophane 12 wrap, put them in box, and ship them. 13 

### Our shipping instructions were 14 given to us by Ruyan America. They asked us 15 to FedEx that shipment overnight on, by plane. 16 We received exactly how to label, what the 17 shipping instructions would be. We received 18 these units in from Ruyan Holdings through 19 Ruyan America and they were air shipped and 20 there was nothing indicating HazMat or, a 21 hazardous material, or any type of special 22 shipping instructions that would need to be 

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1 

### done by this. 2 

### JUDGE GOODWIN: Just for the 3 Court's purposes, and I don't want you to 4 give, be careful about your response, I don't 5 want you to give away any confidential 6 information, but was is an E-Mystick? 7 

### MR. HAGEN: It's an inhaler device 8 that has a dietary supplement in it. 9 

### JUDGE GOODWIN: Okay. So, the 10 lithium battery is, I assume it's a dispenser 11 of some sort and the battery is used to 12 MR. HAGEN: To vaporize the 13 liquid. 14 

### JUDGE GOODWIN: Okay. 15 

### MR. HAGEN: So, again, we did not 16 know that there was any hazardous materials or 17 lithium ion batteries in it. That part, all 18 of the assembly of that was already completed 19 in China. 20 And, as was reported earlier, they 21 made a modification which is what actually 22 

### caused the batteries to overheat.
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1 

### JUDGE GOODWIN: Who's they? 2 

### MR. HAGEN: Ruyan Holdings in 3 China. 4 

### JUDGE GOODWIN: Okay, and for the 5 record that's R-u-y-a-n. Go ahead. So, was 6 there a point in time, when you said there was 7 a change in how Ruyan manufactured, when did 8 that take place with respect to these events? 9 

### MR. HAGEN: It took place, without 10 the knowledge of Ruyan America's knowledge, 11 

### that change took place over in China with this 12 

### shipment. And, no one was notified. We did 13 

### not figure this out until after the 14 

### investigation. That was what Mr. Sanders 15 referred to as Mr. Bartkowski's investigation 16 into modification of the safety switch 17 atomizing device. 18 

### JUDGE GOODWIN: Okay. 19 

### MR. HAGEN: So, I'm sorry, go 20 ahead. 21 

### JUDGE GOODWIN: Go ahead. 22 

### MR. HAGEN: So, the reason that

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1 we're here today for the sanction is taking 2 into considerations, one of the things that we 3 said in our response and attached with, also 4 has an affidavit from Mr. Bartkowski, was that 5 in the sanction to determine, in the section 6 of the 49USCSS5123 as it applies to the, in 7 position of the penalty, penalty 8 considerations on Section C there, paragraph 9 two says, with respect to the violator, the 10 degree of culpability, any history of 11 violations, the ability to pay, and any affect 12 on the ability to continue to do business, all 13 of those are very applicable to D & Min this 14 case. 15 From the culpability to the prior 16 history, we do not ship hazardous materials 17 from our company. We never have and we do 18 have, we have no intention of ever doing it in 19 the future. 20 And, the ability to pay, we also 21 submitted to the Agency a financial statement 22 of corporate debtor and three years of history 

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1 corporate tax returns. 2 JUDGE GOODWIN: Okay, the Agency 3 has that, I don't. 4 MR. HAGEN: I'd like to submit all 5 of this. 6 JUDGE GOODWIN: Can you show it to 7 Ms. Barber? Ms. Barber, if you can't hear, 8 you're welcome to move up closer. I don't 9 know what the acoustics are back there. 10 MS. BARBER: I'm, actually, 11 hearing it
. 12 MR. HAGEN: So, the inability to 13 pay being the primary factor that we'd like to 14 consider. That being said, I have these 15 exhibits labeled 1 through 7. 16 And, I'd like to bring to your 17 attention that on the corporate tax returns, 18 there are names and social securities numbers 19 of the principle officers of the corporation. 20 JUDGE GOODWIN: All right. Ms. 21 Barber, is there anything in your exhibits 22 that would inadvertently disclose security or 

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1 confidential information? Why don't you take 2 a minute and ask your inspector? 3 MS. BARBER: I don't think so, 4 Your Honor. 5 MR. HAGEN: Okay. The processes 6 or anything like that? 7 MS. BARBER: No. 8 JUDGE GOODWIN: What I'll do, Mr. 9 Hagen, is I'll seal, let me take a look at 10 your exhibits first. 11 MR. HAGEN: Should I bring them to 12 you? 13 JUDGE GOODWIN: Yes. Ms. Barber, 14 you've had a chance to, these are all the 15 exhibit? 16 MR. HAGEN: Those are all of them. 17 JUDGE GOODWIN: Have you had a 18 chance to review all these? 19 MS. BARBER: Yes. 20 JUDGE GOODWIN: Okay. Do you have 21 any objections to these being received into 22 evidence?**NE~l**

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### 1 MS. BARBER: The only objection I 2 would have is to renew my objection to 3 submitting the affirmative defense. 4 

### JUDGE GOODWIN: I understand, but 5 these, okay. Objection overruled. 6 

### (Respondent's Exhibit Nos. 1 7 

### through 7 were received into 8 

### evidence.) 9 

### JUDGE GOODWIN: What I'm going to 10 do, Mr. Hagen, is I'm going to seal the 11 exhibits that you presented. What that means 12 is they will not go on the record. The reason 13 I was asking you the questions, Ms. Barber, is 14 the balancing issue or if I'm going to seal 15 one, I should seal them all. 16 

### MS. BARBER: Okay. 17 

### JUDGE GOODWIN: I may ultimately 18 do that just to the interest of fairness. 19 

### MS. BARBER: Okay. 20 

### JUDGE GOODWIN: I had a case 21 recently. It was a HazMat and we got into the 22 manner in which the HazMat was discovered, and
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• 67 1 I ended up sealing the entire record. Ms. 2 Toscano had that case if you want to talk to 3 her and ask her what happened. But, I ended 4 up sealing, with the exception of about three 5 pages, the entire transcript and all the 6 exhibits. Anything else, Mr. Hagen? 7 MR. HAGEN: That's all I have, 8 Your Honor. 9 JUDGE GOODWIN: Okay. Now, Mr. 10 Hagen, while you're standing there, raise your 11 right hand
. 12 Whereupon, 13 SCOTT HAGEN 14 was called as a witness and, after being first 15 duly sworn, was examined and testified, as 16 follows: 17 JUDGE GOODWIN: State your name 18 and, I'm sorry, spell your first and last 19 name. 20 MR. HAGEN: Scott Hagen, S-c-o-t21 t, H-a-g-e-n. 22 JUDGE GOODWIN: Ms. Barber, do you
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1 have any questions? His was more in the sense 2 of an argument than it was evidence, but I'll 3 give you the opportunity to inquiry if you 4 want? You can step back while she 5 MS. BARBER: I don't have any 6 questions, Your Honor. 7 JUDGE GOODWIN: Okay, and Mr. 8 Hagen, I assume that what you presented to the 9 Court are true and accurate records of the tax 10 returns of the corporation? Is that correct? 11 MR. HAGEN: Yes, Your Honor
. 12 JUDGE GOODWIN: Anything else for 13 Mr. Hagen, from the Respondent? 14 MR. HAGEN: Nothing. 15 JUDGE GOODWIN: Anything further 16 in rebuttal, Ms. Barber? 17 MS. BARBER: Yes, Your Honor. 18 MR. HAGEN: Okay. 19 MS. BARBER: I'd like to recall 20 Mr. Joe Sanders, Your Honor. 21 JUDGE GOODWIN: Sir, can you 22 approach? I'll remind you that you're still
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• 69 1 under oath. 2 THE WITNESS: Yes, Your Honor. 3 JUDGE GOODWIN: Mr. Hagen, what's 4 the proper name of the entity because I have, 5 one later is D & M Plastics Corporation, the 6 other is D & M Custom Injection Molding? 7 MR. HAGEN: At the time, it was D 8 & M Custom Injection Moldings doing business 9 as D & M Plastics Corporation. 10 JUDGE GOODWIN: Okay. So, D & M 11 Plastics is a doing business as? The actual 12 entity is D & M Custom Injection? 13 MR. HAGEN: At the time of 14 JUDGE GOODWIN: At the time of the 15 incident? 16 MR. HAGEN: Yes. 17 JUDGE GOODWIN: Okay. Go ahead, 18 Ms. Barber. I just remind you it is, the 19 Respondent's case in chief was limited. So, 20 you're going to limit your inquiry to that 21 which was presented. 22 MS. BARBER: Yes, Your Honor.
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• 70 1 Whereupon, 2 JOSEPH SANDERS 3 recalled as a witness herein, having been 4 previously duly sworn, resumed the stand and 5 testified further as follows: 6 DIRECT EXAMINATION 7 BY MS. BARBER: 8 Q The only question I have for Mr. 9 Sanders is the Respondent referred to the type 10 of battery as a lithium ion battery. What was 11 the type of battery that was -- 12 A It's a lithium metal battery. 13 Q Was that a primary battery? 14 A Primary. The actual proper 15 shipping name is lithium metal battery. 16 Q And, why is that significant? 17 A The properties are different. A 18 lithium ion battery is a rechargeable battery 19 where a lithium metal battery is a non20 rechargeable battery. 21 JUDGE GOODWIN: I think that came 22 out in the other FAA witnesses, well, I don't
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1 

### think Mr. Hagen is disputing the kind of 2 battery. At least I didn't hear anything. 3 

### MS. BARBER: Okay. I just wanted 4 to get it clear for the record. 5 

### JUDGE GOODWIN: All right. 6 

### MS. BARBER: No further questions 7 for Mr. Sanders, but I do have one question 8 for 9 

### JUDGE GOODWIN: Mr. Hagen, did you 10 have any questions of this witness based on 11 the questions just asked? 12 MR. HAGEN: No, Your Honor. 13 

### JUDGE GOODWIN: You can step down. 14 Ms. Barber? 15 

### MS. BARBER: And, I'd like to 16 recall Mr. Zawarus. 17 JUDGE GOODWIN: Okay. I'll remind 18 you, sir, you're still under oath. 19 

### THE WITNESS: Yes. 20 Whereupon, 21 CHRISTOPHER G. ZAWARUS 22 recalled as a witness herein, having been
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1 previously duly sworn, resumed the stand amd 2 testified further as follows: 3 JUDGE GOODWIN: Ms. Barber. 4 DIRECT EXAMINATION 5 BY MS. BARBER: 6 Q During your investigation when you 7 were at D & M Plastics, did you have an 8 opportunity to discuss with Mr. Hagen and the 9 other two individuals you named previously on 10 how the actual components were assembled? 11 A We did discuss assembly, but when 12 we were out in the warehouse, I had an 13 opportunity to observe the batteries as they 14 were received from overseas. And, they came 15 in in boxes. I don't recall exactly how many 16 to a box, but they were in a small sleeve, 17 either green or purple in color. Not sure 18 what the significance of that was, but inside 19 the sleeve was the battery. It was an exposed 20 battery with a microchip assembly already 21 attached to it. 22 Q Was it your understanding that**NE~L**R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com (202) 234-4433

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• 1 part of the purpose or the assembly conducted 2 by D & M Plastics was to take the battery 3 component with the microchip and then, for 4 lack of a better term, build the E-Mystick or 5 assemble it with the liquid? 6 A Correct. 7 Q Okay. So, you saw an exposed 8 battery when you were there? 9 A Correct. 10 Q Okay. 11 MS. BARBER: Thank you, Your 12 Honor. 13 JUDGE GOODWIN: Any questions of 14 this witness, Mr. Hagen? 15 MR. HAGEN: Can I ask from here? 16 JUDGE GOODWIN: Well, you can do 17 it from there. 18 CROSS EXAMINATION 19 BY MR. HAGEN: 20 Q I just wanted to ask you, did you 21 see any kind of labeling whatsoever on what 22 we're calling an exposed battery now that

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• 1 would indicate that it's a battery in the 2 first place, or of what type? 3 A No, sir, but indications given by 4 Ms. Lake were that she was aware it was 5 battery. 6 Q And, this was a completed unit as 7 I stated in my, that all the electronics, 8 everything was a completed unit, right? 9 A No, sir. 10 Q It was not? 11 A I was looking at the inbound 12 packages that were received overseas from 13 China. 14 Q That didn't consist of the 15 battery, the circuit board, the safety switch, 16 the atomizing, and all completed as an 17 assembly? 18 A No, sir. The batteries were 19 received separate. They had the microchips 20 attached to them. They were received in 21 sleeves. 22 Q As a completed assembly unit,
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1 electronic unit? 2 A Not, not with regard to as the, 3 the Mystick, no. 4 MR. HAGEN: I don't know what to 5 do here, Your Honor. I dispute that. We do 6 no more manufacturing whatsoever on the 7 electronic assembly. 8 JUDGE GOODWIN: Well, the thing 9 is, that's going to be an issue that's unclear 10 to the Court because there's no evidence from 11 either one to establish one way or the other
. 12 MR. HAGEN: I have nothing 13 further. 14 JUDGE GOODWIN: Anything further, 15 Ms. Barber? I'm sorry, Mr. Hagen, any further 16 questions? 17 MR. HAGEN: No, Your Honor. 18 JUDGE GOODWIN: Anything else, Ms. 19 Barber, based on the questions of Mr. Hagen? 20 MS. BARBER: Yes. 21 REDIRECT EXAMINATION 22 BY MS. BARBER:
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1 Q At any time did Ms. Lake or anyone 2 else from D 

### &M describe to you exactly what 3 they did, like what their role was? 4 A It was described to me that they 5 were contracted to assemble the product. I 6 did not see the assembly of a product. They 7 did open a product for me when we were in the 8 conference room. And, then when I went out to 9 the warehouse, I observed the inbound 10 shipments of the batteries. 11 MS. BARBER: No further questions, 12 Your Honor. 13 JUDGE GOODWIN: Okay. Sir, you 14 can step down. Anything further, Ms. Barber? 15 MS. BARBER: No, Your Honor. 16 JUDGE GOODWIN: Anything further, 17 Mr. Hagen? 18 MR. HAGEN: No, Your Honor. 19 JUDGE GOODWIN: What I'm going to 20 do is give the two of you the opportunity to 21 brief the issues in this case. It'll be about 22 three weeks before the transcript is
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• 77 1 available. 2 Ms. Barber, what I'm going to ask 3 you to do is, the process, Mr. Hagen, is that 4 this gentleman in front me will type up a 5 transcript. He'11 send it to a court reporting 6 service. At that point, the transcript will 7 be sent to the FAA headquarters in Washington, 8 D.C. and from there it'll go out to the field 9 and Ms. Barber. 10 Ms. Barber, when you get the 11 transcript, I'm going to ask you to call Mr
. 12 Hagen and let him know you have the 13 transcript. Mr. Hagen, the transcript is 14 available on-line or you can contract with 15 this gentleman here to get a copy of it. 16 And, once the transcript, once 17 you've received the transcript, Ms. Barber, 18 what I'll do is issue a post-hearing briefing 19 order probably giving you two to three weeks 20 to brief the issues in the case. Mr. Hagen, 21 you'll have two weeks after that to brief the 22 case and Ms. Barber will have about a week
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1 after that to file rebuttal, if any. 2 If either of you run into a 3 scheduling problem with the briefing order, 4 trials or anything else, coordinate with each 5 other to see if you can agree on an extension. 6 If you can't, let me know and then what I'll 7 do is, if there's any reasonable request, I 8 normally grant an extension. Things happen, 9 vacations pop up, trial schedules interfere, 10 you know, I usually will grant one request to 11 extend it
. 12 Anything else, Ms. Barber? 13 MS. BARBER: No, Your Honor. 14 JUDGE GOODWIN: Mr. Hagen, 15 anything else from you? 16 MR. HAGEN: No, Your Honor. 17 JUDGE GOODWIN: We'll go off the 18 record and thank both of you for coming in. 19 (Whereupon, at 10:40 a.m. the 20 above matter was concluded.) 21 22
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### 202-234.-4.4.33

# •

•

•**·~--------------**

# ........

89 C E R T I F I C A T E

This is to certify that the foregoing transcript

In the matter of: D&M Custom Injection Molding

Before: US DOT

Date: 08-09-12

Place: Chicago, IL

was duly recorded and accurately transcribed under my direction; further, that said transcript is a true and accurate record of the proceedings.**~""""** ># •..J!? ·,....... £
..,·**:~** ...< 

## "f·**,.-T~·;r:~~~,** , Court Reporter

NEAL R. GROSS
(202)234-4433 COURTREPORTERSANDTRANSCRIBERS 1323RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com