# RECEIVED

UNITED STATES OF AMERICA 

## OCT 1 92015 FEDERAL AVIATION ADMINISTRATION 

## HEARING DOCKET WASHINGTON, D.C. ) 

### In the matter of ) ) 

### FEDERAL AVIATION ) ADMINISTRATION, ) ) v. ) 

### ) NATIONAL POWER CORPORATION ) FAA DocketNo. CP10GL0212

FDMS No. FAA-2013-0620



### COMPLAINANT'S APPEAL BRIEF Pmsuantto 

### 14 C.P.R.§ 13.233(d), Complainant submits this Appeal Briefwhich perfects Complainant's appeal ofthe Initial Decision ofAdministrative Law Judge Richard C. Goodwin (the "ALJ") issued onJuly 24, 2015 inthe above captioned matter. 

### I. STATEMENT OF THE CASE Complainant served National Power Corporation ("Respondent") with a Notice of Proposed Civil Penalty onJanuary 3, 2011, inthe amount of$66,000, for violations of the Department ofTransportation Hazardous Materials Regulations ("HMRs"). Specifically, Complainant cited violations of49 C.P.R. §§ 171.2( e), 171.22(b)(1), 171.22(g)(2), 172.604(a)(l), 172.702(a) and 173.185(f). A Final Notice ofProposed Civil Penalty was issued on August 1, 2013. Respondent requested a hearing on August 5, 2013, and Complainant filed the Complaint on August 8, 2013. In

### the Complaint, Complainantrequested that the ALJ assess a civilpenalty inthe amount of$66,000 for Respondent's violations ofthe HMRs. On August 19, 2013, a Notice ofAssignment of Proceeding was issued naming the ALJ to preside overthe hearing.

### Respondent filed a Consolidated Motionby Respondent for More Definite Statement, to Strike and Production ofDocuments onAugust 21, 2015. In

### response, Complainant filed anAmended Complaint on September 11, 2013. The ALJ issued an Order Denying Respondent's Motion on September 12, 2013. On September 23, 2013, Respondent filed its Answer. On September 29, 2014, a hearing for this matter was held in Chicago, IL. Complainant filed its Post-Hearing BriefofClosing Argument on December 11, 2014. Respondent filed its Post-Hearing Brief/Closing Argument on January 4, 2015, and Complainant then filed the Agency Response to Respondent's Post-Hearing Briefon January 15, 2015. The ALJ served his Initial Decision onJuly 24, 2015, and Respondent filed its Notice ofAppeal onJuly 29, 2015. Complainant ftled its Notice ofAppeal on August 4, 2015. 

### II. STATEMENT OF FACTS Respondent is a battery manufacturer that regularly ships batteries inthe course of its business. (Tr. 69: 10-18). On May 17, 2010, the FAA conducted a Hazardous Materials ("HAZMAT") inspection ofRespondent's facility. (Tr. 18-9: 17-19). During the course ofthe inspection, an FAA HAZMA T manager, Christopher Zawarus, discovered that Respondent had shipped 11 separate packages containing lithium ion batteries. Exh. Cl

- C11. Lithium ionbatteries are classifiedunder the HMRs as UN 3480, Class 9, Packing Group II. (Tr. 24: 15-21).

2

### Whenreviewing the shippers declarations for dangerous goods 1 

### for the 11 shipments (Tr. 23: 4-13), Mr. 

### Zawarus discovered violations ofthe HMRs. Specifically, Mr. 

### Zawarus found that the employee who prepared and offered the shipments did not receive instruction in the use ofinternational HAZMAT standards for shipping HAZMAT,2 

### the emergency response information provided was not answered 24-hours a day,3 

### no authorization had been obtained from the Pipeline and Hazardous Materials Safety Administration ("PHMSA") for shipping the HAZMAT,4 

### and the packaging used did not meetthe applicable packaging requirements.' (Tr. 26-29: 4-20). Accordingly, Respondent violated four different offense categories: training, emergency response, packaging, and other (failure to receive authorization) 6 See 

### FAA Order 2150.3B at C-12, Matrix & 

### Definitions (Figure C-1). Regarding the training violations, Mr. 

### Zawarus found after reviewing the training record for the employee who prepared the shipments "that her [HAZMA T] training was DOT[-]specific and did not include a course ofstudy in the international standards for which the shippingpaperwas certified." (Tr. 21: 15-20; 26: 7-12). This training was necessary because Respondent utilized packing instruction 965 to prepare the shipment, which is an international instruction. (Tr. 72: 9-18; 75: 3-10). Because Respondent shipped these 11 shipments using aninternational standard, the employee preparing and

1 The shippers declarations ofdangerous goods contain infonnation regarding the nature ofthe shipment including the airway bill, the type ofHAZ:MAT, the packing group, and emergency response information. (Tr. 24-5: 6-9). 2 This was a violation of49 C.F.R. §§ 171.22(g)(2) and 172.702(a) (training). 3 This was a violation of49 C.F.R. § 172.604(a)(l)(emergencyresponse). 4 This was a violation of49 C.F.R. §§ 173.185(!) and 171.22(h)(1)(other, i.e., failure to receive authorization). 5 This was a violation of49 C.F.R. § 171.2(e) (packaging). 6 Complainant laid the foundation and had admitted into evidence 11 separate shipper's declarations for the 11 separate shipments. (Tr.

**23~52).** Allll shipments contained the same HAZMAT and had the same violations identified. !d. The shipments were sent to two different address, one being Agilent Technologies in Santa Rosa, CA, and the other being Creation Technologies, Inc. in Burnaby, British Columbia. (Tr. 71: 14-20; 77: 3-11; Exh. C1-Cl1). 3offering the shipments was required to be trained inthose international standards. (Tr. 72: 9-18). The emergency response number providedby Respondent withthese shipments

was also in not in accordance withthe HMRs. The telephone number suppliedby Respondent was for a "general office numberthat was not answered outside the operating hours ofsix a.m. to sixp.m." (Tr. 22: 3-10; 26: 15-19). "Hazardous materials offered in the [sic] commerce require an emergency response telephone number that's monitored at all times while shipments are in commerce." (Tr. 22: 12-15). This is so that "[i]nthe eventthat there's an incident involving thepackage, frrst responders will contact that number to get response information." (Tr. 22: 16-20). As to the "other" violations, the shipments required- but didnot have-- PHMSA authorization. The batteries shipped by Respondent were models SM 206 and 520-libat-2. (Tr. 121-2: 9-10). The batteries were prototypes and were untested at the time ofthe shipments, therebyrequiring authorization fi"om PHMSA. (Tr. 29: 6-20; 123: 10-20; 131: 4-22; 136-7: 19-2). Respondent admitted thatthe batteries wereuntested atthe time of the shipments. (Tr. 52-3: 16-5; 120-1: 14-8; 124: 14-19). Respondent did not have authorization from PHMSA at the time Respondent offered these shipments for transportationby air. (Answer at 2; Tr. 126: 6-16). Finally, the HMRs require that untested prototype lithium ionbatteries be packaged according to the packaging requirements ofPacking Group I. (Tr. 26-7: 15-7). During the investigation, Mr. Zawarus deternrined thatthe fiberboard boxes used inthe shipments were tested for Packing Group II. (Tr. 27-9: 8-20). Exhibits C-1 to C-11 show that NPC prepared and offered the untested prototype lithium ionbatteries underPacking

4Group II. Further, Mr. Thomas Vrablik, Executive Vice President for Respondent, stated that the batteries contained in the shipments were prepared in accordance with Packing Group II. (Tr. 111: 2-12). ALJ's Written Initial Decision Inhis initial decision, the ALJ found that Respondent violated49 C.F.R. §§ 171.2(e), 171.22(b)(l), 171.22(g)(2), 172.203(±/, 172.604(a)(1)8

, and 172.702(a). Initial Dec. at 29. The ALJ found that Respondent did notviolate 49 C.P.R. § 173.185(±)9 

### Id. The ALJ assessed Respondent a penalty of$12,000.00, a reduction from Complainant's proposed penalty of$66,000.00. 

### Id. at 30. Onthe matter ofpenalty, the ALJ found that Respondent took "swift and comprehensive action during andimmediately after the FAA audit," and "there was no history ofpriorviolations evidencing a systemic corporate culture guilty ofregulatory disregard."

### Id. at 29. The ALJ further found that Respondent "admitted to some ofthe violations," but "[t]he violations were inadvertent and [Respondent] believed, incorrectly, they were in full compliance with the regulations." 

### Id. Next, the ALJ found that the 66 violations "resulted from six (6) acts ofomissions."

### Id. The ALJ also found that Respondent "demonstrated a good cooperative attitude dealing withthe FAA."

### I d. In addition, the ALJ found that Complainant failed to "prove the existence of aggravating factors other than the citation ofsix (6) violations in eleven (11) shipments

7 Complainant didnot cite 49 C.F.R. § 172.203(f) in its Complaint. That regulation is titled "Non-bulk packaging for liquid hazardous materials in Packing Group III" and is not applicable in this case. The ALJ, therefore, erred in fmding that Respondent violated section 172.203(±), as discussed below. 8 TheALJ incorrectly found tl1at Respondent violated "49 C.F.R. § 172.604(a)(10, (sic)." Initial Dec. at 22. The language used in tl1e AU's citation oftl1e regulation ("49 C.F.R. § 172.604(a)(10, (sic)") is the same language containedin49 C.F.R. § 172.604(a)(l), which he, presumably, intended to cite. Initial Dec. at 6, 22. 9 As discussed below, tl1e ALJ appears to have mistakenly cited a later version of49 C.F.R. § 173.185(f). Complainant cited 49 C.F.R. § 173.185(f) as in effect at the time ofthe violations in 2010. 5for the same conduct." Id. Further, he found that Complainant "failed to demonstrate how it used the sanction guidance to arrive at its proposed penalty," and "howits proposed civil penalty was appropriate to the alleged violations."

### Id. The ALJ also found that Complainant "failed to give adequate weight to matters inmitigation ofthe penalty requested." 

### Id. at 30. 

### III. STANDARD OF REVIEW On appeal, the FAA Decisionmaker considers whether each fmding offact is supported by a preponderance ofreliable, probative, and substantial evidence, and whether each conclusion oflaw is made in accordance with applicable law, precedent, and public policy. 14 C.F.R. § 13.233(b)(l)-(2). Complainant bears theburden ofproving the appropriateness ofthe civilpenalty, butRespondentbears the burden ofproving affirmative defenses. 14 C.F.R. § 13.224(a); 

### In re Seven's Paint & 

### Wallpaper, Co., FAA OrderNo. 2001-6, 2001 WL 629388 (May 15, 2011). When anALJ assesses a civil penalty that is not consistent with agency sanctionpolicy, the Administrator may reverse the ALJ. 

### In re Ventura Air Servs., Inc., FAA OrderNo. 2012-12, 2012 WL 6673077 (Nov. 1, 2012). 

### IV. STATEMENT OF THE ISSUES 1. 

### Whether the ALJ's determination that Respondent did not violate 49 C.F.R. § 

### 173.185(t) is supported by a preponderance ofthe reliable, probative, and substantial evidence, and is consistent with applicable law, precedent, and public policy. 2. Whether the ALJ's sanction assessment is supported by a preponderance of the reliable, probative, and substantial evidence, and is consistent with applicable law, precedent, and public policy.

6V. ARGUMENT 1. The ALJ's fmding that Respondent did notviolate 49 C.F.R. § 173.185(t) is not supported by a preponderance ofthe reliable, probative, and substantial evidence, and is not consistent with applicable law, precedent, and public policy. The ALJ found that Respondent did notviolate 49 C.F.R. § 173.185(±), stating that Complainant did notmake a

### prima facie case that Respondent violated this regulation withrespectto any ofthe 11 shipments. Initial Dec. at 23. In 2007, PHMSA issued a final rule "in order to reduce the risks ofbattery-related fires in transportation." 72 FR 44930 (Aug. 9, 2007). The fmal rule revised 49 C.F.R. 

### § 173.185 to require that shippers conform to certainrequirements prior to shipping lithium cells andbatteries. Section (f) ofthe regulation provides that"[a]lithium cell orbatterythat does not comply withthe provisions ofthis subchaptermay be transported onlyunder conditions approved by the Associate Administrator." 49 C.F.R. § 173.185(t) (2010). Inhis findings regarding this violation, the ALJ states that Complainant did not make a

### prima facie case that Respondent violated this regulationbecause "[!]here was no evidence and/or testimony that any ofthe eleven (II) National shipments

...involved lithium ion cells orlithium batteries, that had been damaged or identified by the manufacturer as being defective for safetvreasons; or that National otherwise violation [sic] anyportion of49 C.F.R. 

### § 173.185(±)." Initial Dec. at 23 (emphasis added). The ALJ, however, relied onthe wrong regulation in making this fmding. The language cited usedby the ALJ is from a version ofsection 173.185(±) promulgated in2014. Complainantproperly cited the version ofsection 173.185(±) in effect in2010, the



### 7timeframe ofthese violations. 10 In2014, section 173.185(!) was recodified at 49 C.F.R. § 173.185(g), andthe new regulatory language citedbythe ALJpromulgated at 49 C.F.R. 

### § 173.185(!). 

### See 79 FR 46306 (Aug. 6, 2014). The ALJ found that Respondent violated 49 C.F.R. §§ 171.2(e), 171.22(b)(l), 171.22(g)(2), 172.203(!), 172.604(a)(l), and 172.702(a). Initia!Dec. at 29. Section 173.185(!) requires that ifa lithium ion cell or lithiumbattery does not complywith the HMRs11

, thenit can onlybe transported in accordance with conditions set by the Associate Administrator for Hazardous Materials Safety, PHMSA. Respondent did not have a specialpermission letter from PHMSA or any other documentation ofconditions for shipment from the Associate Administrator. (Answer at 2; Tr. 126: 10-12). Because the shipments did not conformto the HMRs, as evidenced by the ALJ's findings that Respondentviolated49 C.F.R. §§ 171.2(e), 171.22(b)(l), 171.22(g)(2), 172.604(a)(l), and 172.702(a) (as well as the evidence and testimony that supports these findings), and Respondent did nothave a special pennission letter from the PHMSA Associate Administrator, Respondent violated 49 C.F

### .R. § 173.185(!). Therefore, the ALJs finding that Respondent didnot violate 49 C.F.R. § 173.185(!) is not supported by a preponderance ofthe reliable, probative and substantial evidence, and is not consistent with applicable law.

10 See Appendix A for copies of49 C.F.R. § 173.185(1) as in effect in 2010 and in 2014. Paragraph (f) from the 2010 regulation hasbeenmoved to paragraph (g) in the 2014 regulation. 11 Subchapter C contains the HMRs, 49 C.F.R. §§ 171-177. 82. The ALJ's sanction assessment is not supported by a preponderance ofthe reliable, probative, and substantial evidence, and is not consistent with applicable law, precedent, and public policy. The ALJfound that Respondent violated 49 C.F.R. §§ 171.2(e), 171.22(b)(1), 171.22(g)(2), 172.203(£), 172.604(a)(1), and172.702(a). 12 Initial Dec. at 20-23. He determined, however, that the violations warranted a reduction ofthe civil penalty from the $66,000 requested by Complainantto $12,000. The ALJ erred in reducing the sanction andin assessing a $12,000 civil penalty because his basis for reducing the amount ofthe civil penalty was arbitrary and inconsistent with applicable law, precedent, andFAA sanction guidance. A. The ALJ erred in basing his sanction determination on a finding that a single act resulted in Respondent's violations ofthe HMRs. A sanction is appropriately based on the undisputed evidence that Respondent violated the HMRs for 11 distinct shipments. The FAA Decisionmaker may reverse the ALJ's sanction determination on appeal when it is inconsistent with agencypolicy. 

### In re NorthwestAirlines, Inc., at *4 (citing 

### Assoc. of Admin. LawJudges v. Heckler, 594 F.Supp. 1132, 1141 (D.D.C. 1984)); 

### see IranAirv. Kugelman, 996 F.2d 1253, 1262 (D.C. Cir. 1993) (holding that the agency Decisionmaker "remains the final administrative arbiter on questions oflaw andpolicy"). Here, the ALJ found that Respondenthad violated the HMRs alleged for 11 separate shipments. Initial Dec. at 20-23. Specifically, the ALJ found that Respondent violated 49 C.F.R. §§ 171.2(e), 171.22(b )(1), 171.22(g)(2), 172.604(a)(l), 172.702(a), as well as 49 C.F.R. § 172.203(£). 13 

### !d. The ALJ found that these violations ofthe HMRs

were applicable to each ofthe 11 shipments. 

### Id. at 29. However, the ALJ found that these

12 As stated above, 49 C.F.R. § 172.203(±) was not cited in the Complaint and is not applicable to this case. Future discussions in thisbtiefwill no longer reference this regulation. 13 As discussed above, theALJ erred in finding that Respondent violated 49 C.F.R. § 172.203(!). 911 separate shipments, each ofwhichresulted in violations ofthe six HMRs cited in the previous sentence for a total of66 separate violations, were the result of"six (6) acts or omissions."

### Id. The ALJ reasons that "there were six (6) single instances of noncompliance with the CFRs proven whichresulted inmultiple violations ofgeneral and specific regulations involving the same or similar conduct."

### Id. at 28. The ALJ then concluded, after "taking the totality ofthe facts and circumstances into account," that "a fine of$2,000 for each ofthe six (6) violations is appropriate."

### Id. at 28-9. The ALJ did acknowledge that "[t]he violations were serious and couldhave had serious consequences," but that "a total fme of$12,000 is more commensurate with the totality of circumstances, including the nature, extent and gravity ofthe violation, degree of culpability, history ofpriorviolations, financial situation, and othermatters asjustice may require, including aggravating andmitigating factors." 

### Id. at 30. A plainreading of49 U.S.C. § 5123 shows that it is appropriate to assess separate civil penalties for separate violations. Specifically, the statute states "[a] person that knowingly violates this chapter or a regulation, order, special permit, or approval issued under this chapter is liable to the United States Government for a civilpenalty ofat least $250 but not more than $50,000 for each violation." 49 U.S.C. § 5123(a) (2010) (emphasis added). FAA Order 2150.3B provides guidance inthis area by stating:

...for purposes ofdetermining the appropriate sanction, each separate shipment with separate air waybill or shipping papers, separate destination, and/or other evidence establishing it as a separate shipment, is ordinarily considered as a separate incident for purposes ofapplying the sanction guidance analysis.

10FAA Order 2150.3B at C-6-7. The violations citedby the FAAwere from 11 separate shipments with different aiLway bills over a two- and a half-month period and to two separate locations. Here, Complainant charged six separate regulatory violations applicable to the 11 different shipments. The ALJ found five ofthese violations applicable to 11 different shipments, and also found a violation of49 C.F.R. § 172.203(f), which was not cited in the Complainant and is not applicable. Initial Dec. at 29. As discussed above, withthe inclusion ofa violation of49 C.F.R. § 173.185(f) and the eliLnination ofthe violation of 49 C.F.R. § 172.203(f), there were six separate violations for each of 11 shipments. Therefore, there were 66 separate violations ofthe HMRs rather than six single instances ofnoncompliance as the ALJ found. In addition, case law supports treating each shipment separately for the purpose of sanction determination. In a case before the Administratorinvolving two separate shipments ofHAZMA T ontwo separate flights, the Decisionmaker applied FAA guidance to the violations applicable to each shipment separately. 

### See In re Empire Airlines, FAA OrderNo. 2012-10,2012 WL 5378722 *12 (Oct. 11, 2012). The Decisionmaker calculatedthe sanction applicable to each shipment and then totaled the sanction for both shipments to arrive atthe appropriate penalty. 

### Id. So, too, in this case the total sanction shouldbe based on each ofthe 11 shipments. (As discussed below, Complainant appropriately used agency sanction guidance to calculate the ultimate sanctionbased on each ofthe 11 shipments multipliedby the applicable "offense categories.")

11Inview ofthe foregoing, there is no basis to fmd that the 66 violations stem from six single acts or omissions orto base a sanction onthat finding. Complainant respectfully submits that the ALJ's decision to disregard the 11 separate shipments resulting in 66 separate violations for purposes ofsanctionis contrary to precedent and is inconsistent with the FAA's validly adopted sanction guidance. Accordingly, the ALJ erred in assessing a lower civilpenalty onthis basis. B. Complainant's determination ofthe amount ofthe proposed civil penalty was appropriate and theALJ's bases for mitigating sanction are in error. Under the Rules ofPractice in FAA Civil Penalty Actions, 14 C.F.R. § 13.224(a), Complainant mustprove both the regulatory violations and the appropriateness ofthe proposed civil penalty by a preponderance ofthe evidence. 

### In the Matter of Phillips Building Supply, Inc., FAA OrderNo. 2000-20,2000 WL 33125266 at *4 (Aug. 11, 2000). Indetermining the approp1iate amount ofthe civilpenaltyto be assessed, the Complainant's representatives must consult the penalty guidelines, which incorporate the considerations set fmih in 49 U.S.C. § 5123(c). FAA Order 2150.3B, Appendix C at 4-11. These considerations include the nature and circumstances ofthe violation, the culpability ofthe violator, whether the violatorhas a history ofpriorviolations, the violator's ability to pay, and other matters thatjustice requires. 49 U.S.C. § 5123(c); 

### Phillips, at *5. The FAA's penalty guidelines for violations ofthe HMRs, which factor these considerations into the sanction guidance matrix,14 present a series of questions/considerations to assist agency personnel in determining the sanction amount

14 FAA Order 2150.3B provides guidance on case analysis including questions to review when determining an appropriate sanction. Regarding these questions, the guidance states that "[t]he questions review factors involving the nature, circumstances, extent and gravity ofthe violation, the violator's degree ofculpability, and the violator'shistory ofprior violations. Some ofthese factors are already considered to some extent within the various categmies ofthe Sanction Guidance Matrix." Order 2150.3B at C-5 (emphasis added). 12withinthe appropriate range based onthe various aggravating andmitigating factors that may exist inthe case. FAA Order2150.3B, Appendix Cat 5-11. The statute governing the transportation ofhazardous materials, 49 U.S.C. § 5101, 

### etseq. provides that "[a] person that knowingly violates this chapter or a regulation, order, special permit, or approval issued under this chapter is liable to the United States Government for a civil penalty ofat least $250 ($450 for violations related to training) but not more than 

### $50,000for each violation." 49 U.S.C. § 5123(a)(l) and (a)(3) (2010) (emphasis added) 15 Complainanthas developedpenalty guidelines, approvedby the Administrator, to guide prosecutmial discretion and to "promote a relative consistency in determining civil penalties for violations ofthe

... HMR." FAA Order 2150.3A, Appendix 6 at 1 (Apr. 14, 1999). These penalty guidelines were adopted and incorporated into FAA Order 2150.3A, as published inthe Federal Register. 64 Fed. Reg. 19443-19450 (Apr. 21, 1999); 

### seeIn re NorthwestAirlines, Inc., FAA OrderNo. 90-37, 1990 

### WL 656278 at *3 (Nov. 7, 1990) (stating that FAA Order 2150.3A "was prepared to provide compliance and enforcementprogram andprocedural guidance" and that "concerning matters ofagency law andpolicy, administrative lawjudges are subject to the agency"). These penalty guidelines subsequently were amended and incorporated into FAA Order 2150.3B, as published inthe Federal Register, and represent the policy ofthe FAA. 72 Fed. Reg. 55853 (Oct. 1, 2007). The HAZMAT sanction guidance contained FAA Order 2150.3B, Appendix C, "is designed to promote better consistency

so that similarpenalties are imposed in similar cases." FAA Order 2150.3B, Appendix C at2.

15 Ifthe violation isrelated to training, theminimum penalty is $450. 49 U.S.C. § 5123(a)(3). Ifthe violation "results in death, serious illness, or severe injury to any person or substantial destruction of property," the maximum penalty is $100,000. 49 U.S.C. § 5123(a)(2). 13Underthe penalty guidelines contained in FAA Order2150.3B, Appendix C, the section titled Matrix & Definitions (Figure C-1) sets forth the penalty ranges for violations ofthe HMRs. FAA Order 2150.3B, Appendix Cat 12. This sectionprovides for different violation ranges based on the type ofentity and the type ofshipment 

### (i.e., declared orundeclared within or exceeding limitations). 

### !d. Respondent is a battery manufacturerthat regularly ships HAZMAT inthe course ofits business and the shipments were declared. (Tr. 69: 10-18; Exh. Cl

- Cll). Therefore, applying Figure C-1 would result in a civilpenalty for each violation inthe range of$1,000-$5,500. FAA Order 2150.3B, Figure C-1 (cross-referencing "Business Entitythat regularly offers, accepts, or transports hazmat" with "I. Declared Shipment"). Violations are categorized within groups for each offense category such as violations involving shipping papers, labels, markings, packaging, training, emergency response, release into environment, and other. 

### Id. Here, the violations fall into four offense categories: packaging,16 emergency response/7 training, 18 and other. 19 (Tr. 68: 10-15; 94-5: 12-1). Therefore, for Respondent, the appropriate sanctionrange for each ofthe four offense categories is $1,000 to $5,500 for each shipment. FAA Order 2150.3B, Figure C-1. When determining the sanctionto assess in this case, Complainant followed the requirements contained in 49 U.S.C. § 5123(c) as articulated inFAA Order 2150.3B. Specifically, Mr. Zawarus considered the nature, circumstances, extent, and gravity ofthe violation, violator's degree ofculpability, anyhisto1y ofpriorviolations, the ability to pay, and any effect on the ability to continue to do business, and other matters asjustice

16 49 C.F.R. § 171.2(e) (packaging). 17 49 C.F.R. § 172.604(a)(l)(emergencyresponse). 18 49 C.F.R. §§ 171.22(g)(2) and 172.702(a) (training). 19 49 C.F.R. §§ 173.185(!) (approval) and 171.22(b)(I) (other). 14

### requires. (Tr. 67-70: 6-5; 83-7: 12-7; FAA Order 2150.3B, Appendix Cat 2). Many of these considerations have been factored into the various categories ofthe Sanction Guidance Matrix. Order 2150.3B, at C-5. For example, thenature ofthe materials and gravity ofthe violations is considered by applying the Risk Categories in Figure C-2. Order 2150.3B, Appendix Cat 6. Mr. Zawarus testified that lithiumbatteries are assigned

a mininaum weight. (Tr. 63-4: 13-3; Order 2150.3B, Figure C-2 (Lithium ionbatteries are
a Class 9 HAZMAT and considered a Category "C" materials20; 

### therefore, a minimum weight is applied to the sanction)). He added that because the batteries here were untested, they were ofa higherrisk. (Tr. 63-4: 13-3). The violator's degree ofculpability is also considered inthe Sanction Guidance Matrix. Order 2!50.3B, Appendix Cat 7. In addition to the fact that Respondent is an entity thatregularly offers, accepts, ortranspmis batteries, Respondent manufactures batteries, a fact warranting a higher degree ofculpability finding. See Order 2150.3B, Appendix C at 7 ("A manufacturer ofa hazardous material is expected to have complete lmowledge ofthe nature ofthe hazardous material itmanufactures oruses; thus, a high degree ofculpability will ordinarilybe imputed to it.") Aside from the sanction analysis built into the Sanction Guidance Matrix, Mr. 

### Zawarus also considered whetherRespondent was unable to pay orunable to continue to do business; however, no evidence was produced that would support mitigationbased onthis factor. (Tr. 68-9: 16-5). It

### is the Respondent's burden to establish inability to pay. In re Val/amor Tabula, FAA Order No. 2010-6, 2010 WL 7940355, at *7 (June 15, 2010). To establish inability to pay, Respondent "must substantiate his orher

2

## °Category "C" (Minimum Weight) HAZMAT "are materials that present the least amount of1isk to the transportation system." Order 2150.3B, Figure C-2. 

### 15

### claims at the hearing with the types ofrecords that a reasonable personwould accept as reliable and probative onthe issues ofincomes and expenses."

### Id. Athearing, Respondent did notprovide any evidence regarding inability to pay. Initial Dec. at 29. Therefore, the ALI's finding that Respondent presented no evidence ofinability to pay is correct; Complainant was correct to not mitigate the penalty onthis basis. Mr. Zawarus also reviewed Respondent's violation history. (Tr. 93: 4-22). Mr. 

### Zawarus testified that Respondent did nothave a violation history butthat a violation-free history is not mitigating interms ofsanction. 

### Id. This is because regulated entities are expected to have a violation fi·ee history. Id; See also, In re Toyota Motor Sales, USA, Inc., 

### FAA OrderNo. 94-28, 1994 WL 899666 *4 (Sep. 30, 1994) (finding that "aviolation-free history is expected to be the norm, and will notbe considered as mitigating an otherwise reasonable civilpenalty"). Additionally, FAA Order 2150.3B clearly assesses violationhistory as only an aggravating factor. FAA Order 2150.3B provides guidance that ifa violator has a history ofprevious violations, then moderate or maximum weight should be applied to the sanction. FAA Order 2150.3B, Appendix Cat 8. The Order does not call for mitigating a sanctionbased on lack ofa violation history. 

### Id. Therefore, the ALI's fmding that "[t]here was no history ofpriorviolations evidencing a systemic corporate culture guilty ofregulatory disregard," for the purpose of mitigating the sanction is in error. The lack ofa violation history should not be taken into account for the purposes ofmitigationbecause all regulated entities are expected to comply withthe regulations and have a violation free history. Mr. 

### Zawarus also analyzed the fmal factor, i.e., 

### othermatters thatjustice requires, inmaking its sanction determination. Specifically, Mr. 

### Zawarus reviewed the corrective

16

### actions put into place by Respondent. (Tr. 56-9: 19-2). Regarding corrective actions, FAA Order 2150.3B states the FAA may take into account corrective actions in order to reduce sanctionbut "[c]orrective actions thatjustifY reduction ofthe recommended penalty must exceed the minimum legalrequirements." FAA Order 2150.3B, Appendix C at4-5, See also,In reAtlas Frontiers, LLC, FAA Order No. 2010-10,2010 WL 7940346 *7 (June 16, 2010) (quoting FAA Order 2150.3A for the proposition that in order for corrective action to be mitigating, it must exceed the minimum legal requirements). Further, it is the burden ofthe Respondent to prove corrective action as an affirmative defense. In re Seven's Paint & 

### Wallpaper Co., FAA OrderNo. 2001-6, 2001 WL 629388 *3 (May 15, 2001).**~n** 

### this case, there is no evidence that the corrective actions put into effect byrespondent did any more than meetthe legal requirements for transporting untested prototype batte1ies and training employees who ship HAZMAT. (Tr 56-8: 19-4; 83-4: 17-20). Respondent updated the emergency response number, "instructed its employees to discontinue air freight shipments ofuntested prototype batteries pending a receipt ofspecial approval from PHMSA", and its "employees were provided functions (sic) specific training." (Tr. 56: 3-9; 57: 7-13; 114-5: 13-8). Having a correct emergency response numberthat is answered 24-hours a day, as required by the regulations, receiving special approval from PHMSA, as required by the regulations, and providing function specific training to employees who ship HAZMAT, as required by the regulations, are not sufficient to mitigate the sanctionbecause these corrective actions did nothing more than help Respondent meet its regulatory obligations. Therefore, the ALJ

was in error inmitigating the sanctionbased on Respondent's corrective actions. In

17

### contrast, Complainant's analysis ofthis statutory factor is supportedby the evidence and guidance. The ALJ's findings that Respondent admitted to some ofthe violations and was cooperative are not relevant to the sanction analysis. These frndings do notrelate to any ofthe factors discussed in 49 U.S.C. § 

### 5123(c) as articulated in FAA Order 2150.3B. Therefore, the ALJ's reliance onthese findings as mitigationis in error. In any event, the ALJ's finding that Respondent's cooperative attitude is mitigating is wanting because Respondent's attitude did nothing more than ensure that itmetbasic regulatory requirements. The ALJ's finding that Respondent's beliefthey were in full 

### compliance and therefore the violations were inadvertent is somehow mitigating, is also in error. Intent to violate the regulation is not an element ofany ofthe violations citedby Complainant. "[S]hippers are liable and subject to civil penalties as long as they !mow the facts giving rise to the violations."

### In re ScottNovak, FAA OrderNo. 2014-1, 2014 WL 493035 *8 (Jan. 2, 2014). Although Respondent may have thought it was in compliance, it is responsible for the violations because it knew ofthe facts giving rise to the violations, namely that it was shipping lithium ionbatteries by air transportation. Further, FAA Order 2150.3B factors in whether or not a respondent acted mistakenly orintentionally. Among the Offense Categories contained inAppendix C is a category for "Deliberate Violation, or other significant aggravation." FAA Order 2150.3B, Appendix C, Figure C-1. By using the "Declared Shipment" category (as discussed below) and not the "Deliberate Violation, or other significant aggravation," Complainant factored in the

18inadve1ient nature ofthe violations; therefore, the ALJ was iri error iri fmdirig this as a mitigatirig factor to be applied to the sanction. Regardirig the ALJ's finding that the FAA failed to prove the existence of aggravating factors other than the citation ofsix (6) violations iri eleven (11) shipments for the same conduct, this is clearly in error as demonstrated through the discussion above. Complainantprovided evidence that it evaluated and assessed for sanction purposes aggravatirig factors such as the extent ofthe violations, the gravity ofthe violations, the culpability ofRespondent. The ALJ's statement that the "FAA failed to produce anytestimony and/or evidence ofhow it calculated the proposed penalty of$66,000" is finally withoutbasis. The record shows that Complainant, through testimony and argument, established that it considered the nature and circumstances ofthe violation, the culpability ofthe violator, whetherthe violatorhas a history ofprior violations, the violator's ability to pay, and other matters thatjustice requires iri accordance with 49 U.S.C. 

### § 5123(c) and FAA Order 2150.3B, Appendix C. In addition, the sanction analysis perfonned is not one ofsiri1ple "mathematical computation." Order2150.3B, Appendix Cat4. "Evaluation ofthe case is based on the totality ofthe facts and circumstances."

### Id. As discussed above, the violations cited andtheir associated violation categories (packagirig, emergency response, trairiirig, and other) call for a penalty iri the range of $1,000 to $5,500. FAA Order 2150.3B at C-12. Consideririg there were four separate violation categories ofthe HMRs for each of 11 separate shipments, a total penalty between $44,000 

### (11 x (4 offense categories x $1,000)) and $242,000 (11 x (4 offense categories x $5,500)) would be within the sanctionrange. Inthis case, Complairiant

19

### provided evidence ofaggravating factors such as the extent ofviolations, the gravity of violations, and the culpability ofRespondent. There was no evidence mitigating the violations, i.e., eitherthat Respondent was unable to pay orwouldbe unable to continue inbusiness, orthat Respondent's corrective actions exceeded regulatory requirements. Taking into consideration the totality ofcircumstances, for each offense category, a penalty of$1,500 is appropriate. Accordingly, starting in the middle ofthe penalty range and applying the appropriate weighting for the factors discussed above, a total penalty of $66,000, or $1,500 per offense categmy, is appropriate and in accordance withthe Administrator's sanction guidance (11 x (4 x $1,500)). Fnrther, the AU improperly disregarded the Agency's validly adopted sanction guidance containedin FAA Order 2150.3B, Appendix C. In 1999, the FAA established guidance for the determination ofsanctionin cases involving violations ofthe HMRs. See 

### 64 FR 19443 (Apr. 21, 1999). These guidelines were updated and incorporated in FAA Order 2150.3B. 72 

### FR 55853 (Oct. I, 

### 2007). The guidelines incorporated the statutory factors contained in49 U.S.C. § 

### 5123 into the categories established inthe guidelines as well as the weighting analysis that is performed in accordance with the guidelines21 

### 64 FR 19443, 19444. "The Hazardous Materials Sanction Guidance is designed to promote better consistency so that similarpenalties are imposed in similar cases."Id. Sanctions may deviate from therecommended ranges whenthe facts and circumstances ofa particular

case warrant such a deviation but the basis for the deviation "shouldbe explained in

21 49 C.F.R. § 5123(c)- "Penalty Considerations.- In determining the amount ofa civil penalty under this section, the Secretary shall consider- (1) the nature, circumstances, extent, and gravity ofthe violation; (2) with respect to the violator, the degree ofculpability, anyhistory ofprior violations, the ability to pay, and any effect on the ability to continue to do business; and (3) other matters thatjustice requires." 

### 20detail."

### Id. As discussed above, Complainant recommended a sanction that is fully in compliance with the sanction guidance contained in FAA Order 2150.3B, Appendix C. The ALJ inreducing the sanction to $12,000 disregarded the sanction guidance inits entirety. To disregard FAA Order 20150.3B is to go against the public policy of providing consistency in sanctions levied in enforcement cases. Inthis case, the bases for the ALI's departure from FAA Order 20150.3B, Appendix C, are erroneous and therefore against public policy. Forthe forgoing reasons, Complainant submits that a $66,000 civil penalty, which is consistent with statutory sanction considerations andvalidly adopted FAA sanction guidance, is not excessive and is warrantedunderthe facts and circumstances ofthe case. 

### VI. CONCLUSION For all ofthe foregoing reasons, Complainant respectfully requests the FAA Decisiomakerto overturnthe ALI's finding ofno violation of49 C.F.R. § 173.185(f) and his sanction assessment, and assess a civil penalty of$66,000.

Dated: October 19,2015 Respectfully submitted, PeterLynch Assistant ChiefCounsel

for Enforcement
By:CJ!2 Charles Raley, Attorney Enforcement Division, AGC-300 Office ofthe ChiefCounsel Federal Aviation Administration 800 Independence Avenue, S.W. Washington, DC 20591 Phone: (202) 267-3357 Facsimile: (202) 267-5106

21

### Certificate ofService I hereby certifythat on this date I have servedbypersonal delivery, one original and one copy ofComplainant's Appeal Brief

### In the Matter of National Power Corporation, FDMS No. FAA-2013-0620, to: Federal Aviation Administration 800 Independence Avenue, S.W. Washington, D.C. 20591 Attn: FAA Decisionmaker, AGC-430 WilburWright Building- Suite 2Wl000 In addition, I hereby cmiify that on this date I have sent one copy ofthe foregoing documentby certified mail to: Mruiin A. Blumentbal, Esq. I Northfield Plaza, Suite 300 Northfield, 

### IL 60093

Dated: October 19, 2015APPENDIXA 49 C.F.R. § 173.185ill (2010) Lithium cells and batteries. (f) A lithium cell orbattery that does not comply withthe provisions ofthis subchapter maybe transpmted only under conditions approved by the Associate Administrator. 49 C.F.R. § 173.185ill (2014) Lithium cells and batteries. As used inthis section, 

### lithium cell(s) or battery(ieo) includes both lithium metal and lithium ion 

### chemistries.Equipment means the device or apparatus for which the lithium cells or batteries will provide electricalpower for its operation. (f) 

### Damaged, defective, or recalled cells or batteries. Lithium cells orbatteries, that havebeen damaged or identifiedbythe manufacturer as being defective for safety reasons, that have the potential ofproducing a dangerous evolution ofheat, fire, or short circuit (e.g. those being returned to the manufacturer for safetyreasons) may be transported byhighway, rail orvessel only, and mustbe packaged as follows: (1) Each cell orbatterymust be placed inindividual, non-metallic innerpackaging that completely encloses the cell orbattery; (2) The innerpackaging mustbe sun·ounded by cushioning material that is noncombustible, non-conductive, and absorbent; and (3) Each innerpackaging mustbe individuallyplaced in one ofthe following packagings meeting the applicable requirements ofpart 178, subparts L, M, P and 

### Q of this subchapter at the Packing Group I level: (i) Metal (4A, 4B, 4N), wooden (4Cl, 4C2, 4D, 4F), or solidplastic (4H2) box; (ii) Metal (1A2, 1B2, 1N2), plywood (ID), or plastic (1H2) dnnn; or (iii) Except for transportation by aircraft, for a single large battery or for a single battery contained in equipment, the following rigid large packagings are authorized: (A) Metal (SOA, SOB, SON); (B) Rigid plastic (SOH); (C) Plywood (SOD); and

23(4) The outerpackage mustbe markedwith an indication that thepackage contains a "Damaged/defective lithiumionbattery" and/or "Damaged/defective lithium metal battery" as appropriate.

24