UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF HEARINGS

WASHINGTON, D.C.**~----------------------~** IN THE MATTER OF: COASTAL AIR TRANSPORT, INC. FDMS NO. FAA-2011-1005 (Civil Penalty Action)**~----------------------~** Thursday, December 6, 2012
The above-entitled matter came on for continued oral argument via teleconference, pursuant to notice, at 1:30 p.m.
BEFORE:

THE HONORABLE J.E. SULLIVAN Administrative Law Judge 

# RECEIVED DEC1r& 

### 2012 

## HEARING:()QOKET

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.comAPPEARANCES: On Behalf of The Respondent: MICHAEL FOSTER President Coastal Air Transport, Inc. P.O. Box 3985 Christiansted, St. Croix Virgin Islands 00822

(340) 773-6862
On Behalf of The Complainant: RASHAWN RICH GEORGE, ESQ. Office of the Regional Counsel AS0-7 Southern Region Federal Aviation Administration P.O. Box 20636 Atlanta, Georgia 30320

(404) 305-5200 (404) 305-5223 (fax)
Also Present: Cody L. Smith, U.S. Department of Transportation

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE.• N.W. WASHINGTON. D.C. 20005-3701 www.nealrgross.comC 0 N T E N T S ORAL ARGUMENT OF: Rashawn Rich George, Esq., on behalf of Complainant Michael Foster, President on behalf of Respondent

. Rashawn Rich George, Esq., on behalf of Complainant

- Rebuttal

. 3

Page
40
88

114 EXHIBITS IDENTIFIED RECEIVED COMPLAINANT

1 - 12/11/09 FAA Letter 30 2 Cert. Mail Receipt 30 5 10/21/09 Bill of Lading 30 7 11/2/09 CBP Doc. 30 8 - 9 Photos of Fiberboard Box 30 10 Fig. C-1, Matrix/Defin. 30 11 Table of Offenses 30 12

- U.S. Air Carrier Violations 30 14

- Shipper Declaration 17

- Blank Worksheets RESPONDENT

1 - 2 - 3 - 4 5 6 7 3/22/12 Respondent Answer 3/23/12 Motion to Dismiss 7/9/12 Oppos. to Hearing 8/2/12 Respondent Answer 8/7/12 Respondent Answer Fiberboard Box Photo HAZCOM Labels Photo

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35 35 35 35 35 35 35

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35 35 35. 35 35 35 35

www.nealrgross.com4

1 P R 0 C E E D I N G S 2 1:32 p.m. 3 THE COURT: Okay. We're on the 4 record in the matter of Coastal Air Transport, 5 Inc. This is Docket No. FAA-2011-1005. Today 6 is Thursday, December 6, 2012. And the 7 parties have convened for continuing argument 8 on the FAA's Motion for Hearing on Sanction 9 Only. 10 I'll note that we last convened on 11 October 23, 2012. At that time, after some 12 inquiry of the party and discussion if the 13 party had their calendars, oral argument was 14 continued to November 19, 2012 at 1:30 p.m. 15 and later that same day an order granting a 16 brief continuance of oral argument and 17 granting/denying other relief was filed. 18 After that date, on November 6, 19 2012, the FAA filed the Agency's supplemental 20 filing in support of its Motion for Hearing on 21 Sanction Only. And as part of that 22 supplemental filing, the FAA included four new

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(202) 234·4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISlANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com5 1 summary judgment exhibits. 2 And, Ms. George and Mr. Foster, 3 just so that you know, those four new exhibits 4 were identified as Exhibits 1 through 4. 5 As you know in the original 6 filing, the FAA had already identified 13 7 exhibits identified as Exhibits 1 through 13. 8 So rather than have duplicate 9 numbering, I'm going to renumber the four new 10 summary judgment exhibits as 14 through 17, so 11 that there is no duplication and no confusion. 12 After November 6' 2012, the 13 respondent filed the respondent's response on 14 November 8, 2012. And in this response, the 15 respondent included two summary judgment 16 exhibits. 17 And as you know from our October 18 23, 2012 discussion, I had identified some of 19 the respondent's previous material that 20 appeared testimonial in nature. And I had 21 already identified them as respondent's 22 exhibits for the purpose of summary judgment.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISlANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com6 1 So what I'm going to do with the 2 respondent's latest two new exhibits is simply 3 renumber them, so that we again don't have 4 duplication in our numbering system. And so 5 those two exhibits filed on November 8, 2012 6 by the respondent, I'm remarking as Exhibits 7 6 and 7. Let me just double check. Yes, No. 8 6 and 7. 9 And then as you all know, on 10 November 9' 2012, the FAA filed the 11 complainant's I'm getting a lot of noise on 12 the phone. Do I still have Ms. George on the 13 phone? 14 MS. GEORGE: Yes, Your Honor. 15 THE COURT: And Mr. Foster? 16 MR. FOSTER: Yes, Your Honor. 17 THE COURT: Okay. I don't know 18 what is going on, but if there is somebody 19 moving papers or rustling things around, I'm 20 getting a lot of static, so if you could move 21 your papers away from the phone, that would be 22 helpful.

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1 Getting back to, you know, just 2 our summary of what has happened since October 3 23, 2012, I'll note that on Friday, November 4 9, 2012, the FAA filed the complainant's 5 Motion for Continuance of Oral Argument. 6 On November 14, 2012, this 7 tribunal issued an order granting the FAA's 8 Motion for Continuance and granting/denying 9 other relief. 10 As part of this order, the 11 November 19, 2012 motion conference was 12 continued to today's date and time. 13 And then since then, I just 14 received onDecember 5, 2012 the complainant's 15 response to ALJ's order granting Motion for 16 Continuance. So let's talk about that for 17 just a minute and get that off the table. 18 Ms. George, let me chat with you 19 for a moment about that. Typically the 20 response one has to an order is to say thank 21 you for your time and attention. It is not a 22 dialogue necessarily. So I'm presuming you

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.neaJrgross.com8 1 have some type of motion that is contained in 2 this response, but I'm not quite sure what it 3 is. 4 What relief are you asking of the 5 Court today? 6 MS. GEORGE: Your Honor, the 7 Agency is not asking the Court for any relief. 8 However, in the November 14th order granting 9 the continuance, it appeared to the Agency 10 that there were some questions about time line 11 leading up to the Agency's request for the 12 continuance. 13 And, therefore, it was advised to 14 provide some supplemental documentation of the 15 motion that was filed on November 9, 2012. 16 And the filing of yesterday was to do that. 17 THE COURT: Well, let me ask you 18 then about that. When you say it was advised, 19 are you talking about you were advised or your 20 client

-- 21 MS. GEORGE: Yes, Your Honor. 22 THE COURT: All right. Okay. I

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1 did receive that material. Thank you very 2 much. It looks to me like what you are doing 3 is you are simply moving to supplement the 4 record regarding your absence. Would that be 5 a fair statement? 6 MS. GEORGE: That would be very 7 fair. 8 THE COURT: Okay. Then I will 9 simply note that this should be retitled as a 10 complainant Motion to Supplement the Record 11 that was outlined in the November 14, 2012 12 order. 13 And I don't have any problem with 14 that. What I would like, however, is to talk 15 to you a little bit about future problems that 16 may arise for you if you have future medical 17 problems

. 18 If you do have future medical 19 problems, I really would like you to have your 20 own staff take care of your matters for you, 21 as opposed to leaving the Court with a lack of 22 follow-up by you and your office.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com10 1 The order that was issued on 2 November 14, 2012 was pretty specific about 3 all the different actions that this office had 4 to take in order to try and take care of the 5 issue that you left us with. And I'm 6 certainly appreciative of any type of medical 7 concerns that you have and the emergent nature 8 that you had with them. 9 But presumably, you would be 10 leaving those kinds of problems for your 11 colleagues at the FAA to help you out on, as 12 opposed to leaving it for this Court to 13 resolve for you. 14 And so I wanted to get a sense 15 from you that you understood that the Court 16 took a lot of action on your behalf. Happy to 17 do that on a very rare occasion, but it 18 shouldn't be something that you would be 19 expecting us to do ever again in the future. 20 MS. GEORGE: We understand, Your 21 Honor. The motion that we filed on the 9th 22 was in line with previous motions that we

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com11 1 filed over the last 14 years that I have been 2 here in the office, but I have advised the 3 office of

-- about how we should do that in 4 the future going forward. 5 THE COURT: So is it your 6 assertion when you say that you have done this 7 for 14 years, that you just file motions and 8 let the Court take care of it for you? Is 9 that what 10 MS. GEORGE: In previous cases 11 where attorneys have been out of the office on 12 medical issues, such as these, the type of 13 motion that I filed has been the model of what 14 we have done in the past. 15 But we have

-- I have advised the 16 regional counsel here and the managing 17 attorney and all the other attorneys here in 18 the southern region that going forward we need 19 to do more. 20 THE COURT: Thank you so much. I 21 appreciate your assistance to the Court in 22 that matter.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com12 1 Okay. So is there any other thing 2 that you would like to address in this Motion 3 to Supplement the Record that you filed? 4 MS. GEORGE: No, Your Honor. 5 THE COURT: Okay. Then let me 6 talk to Mr. Foster next. 7 Mr. Foster, during this ex parte 8 contact that my staff had with you that is 9 outlined in the November 14, 2012 order, you 10 had indicated that you were planning on 11 getting a fax machine that would be designated 12 for incoming faxes, such as the kind that Ms. 13 George and this office would like to send you. 14 Have you had a chance to get that 15 fax machine up and running, so that we have an 16 alternative to the very slow U.S. Mail route 17 that we have been using for you? 18 MR. FOSTER: Your Honor, we did 19 obtain a fax machine. It wasn't suitable. We 20 had to get another one and it's -- we are 21 waiting for it to be installed and hooked up 22 right now. We had to put another line in the

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(202) 234-4433 COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com13 1 office. 2 THE COURT: When do you anticipate 3 the fax machine being ready to go? 4 MR. FOSTER: The next several 5 days, yes. 6 THE COURT: When you say the next 7 several days, today is December 6, 2012

. When 8 do you anticipate that fax machine being ready 9 to be used? 10 MR. FOSTER: I would say by the 11 10th Your Honor. 

### ' 12 THE COURT: Okay. So what I would 13 like to have you do is contact my office no 14 later than December 11, 2012 and to contact 15 Ms. George's office at the same time and 16 notify both of us as to what the fax number 17 is, so that we have it for your fax number of 18 record. 19 MR. FOSTER: Yes, Your Honor. 20 THE COURT: Okay. Thank you so 21 much. All right. Then let's talk about these 22 exhibits, because I need to find out if there

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com14 1 are any particular objections from the 2 respondent to the FAA exhibits and then if 3 there are objections by the FAA to the 4 respondent's exhibits. 5 Mr. Foster, I'm going to start 6 with you. And let's talk a little bit about 7 the 17 total exhibits that the FAA has filed 8 in support of this motion. And I'm going to 9 exempt a couple of them out right away, based 10 on what I have read. 11 In the materials that are before 12 the Court for this motion, there are several 13 requests for admission, which the FAA has 14 identified and filed, in which you have 15 admitted to certain facts. And part of those 16 are duplicative of the exhibits. 17 So, for example, there was a 18 Request for Admission No. 14, 15, 16 and 17, 19 in which you admitted to those requests. The 20 material referenced in the FAA's Request for 21 Admission Nos. 14, 15 and 17 are identical to 22 the FAA Exhibits No. 3, 4 and 9.

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(202) 234-4433 COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISlANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com15 1 So given the fact that that's 2 absolutely the same material, those are deemed 3 admissible on their face. We don't need to 4 talk about those. 5 There was also an admission to the 6 FAA Request for Admissions No. 16, which is 7 purportedly two pages of photocopies of HAZCOM 8 labels. Unfortunately, however, thematerials 9 filed with the Office of Hearings is 10 completely black, so I have a white page with 11 some blackness on it and no recognizable 12 things to view. 13 So whether or not you admitted to 14 it or not, it's not something I can admit into 15 evidence, because it's completely unreadable. 16 So we are not going to talk about that. 17 Some of the materials that the FAA 18 filed are legal materials. And so legal 19 materials are not factual pieces of evidence 20 and the FAA agreed that on October 23, 2012 21 that those were simply courtesy copies of 22 legal reference material. And those

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com16 1 specifically are Exhibits No. 6, 13, 15 and 2 16. We don't need to talk about those. 3 That leaves us with the following 4 exhibits. And I'm going to outline them for 5 you and then I'm going to ask you if you have 6 any objection to their admissibility. 7 The exhibits that we need to talk 8 about are Exhibits 1, 2, 5, 7, 8, 10, 11, 12, 9 14. 10 MR. FOSTER: Your Honor, what is 11 the

-- I'm not looking at what you are reading 12 right now. What's the date on that motion? 13 THE COURT: Before I answer that 14 question, Mr. Foster, I'm getting a lot of 15 static again. Is there any-- and I'll start 16 with you, Mr. Foster, since we are talking 17 first. Are you moving papers or breathing 18 really close to the phone, by any chance? 19 MR. FOSTER: No, Your Honor. 20 THE COURT: Okay. Ms. 21 MR. FOSTER: I think it's our 22 phone system down here is not the best.

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1 THE COURT: Okay. I'll just check 2 in with Ms. George then. I 3 Ms. George, by any chance, are you 4 moving a lot of papers or breathing into the 5 phone really closely? 6 MS. GEORGE: No, Your Honor. 7 THE COURT: Okay. Well, we will 8 see if the static continues and if so, I'll 9 let the parties know. 10 To answer your question, Mr. 11 Foster, I'm not reading from a document. I'm 12 telling you what the numbers of the exhibits 13 are that the FAA has filed as part of this 14 motion. And I'm going to be asking you to be 15 looking at each of these exhibits and telling 16 me if you object to their admissibility or 17 not. 18 MR. FOSTER: Okay, Your Honor. 19 THE COURT: I'm going to give you 20 those numbers again. The numbers of the 21 exhibits that I need to get a response from 22 you on are: Exhibits 1, 2, 5, 7, 8, 10, 11,

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(202) 234-4433 COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com18 1 12, 14 and 17. 2 You have the ability, Mr. Foster, 3 to object to these exhibits on any number of 4 grounds. My review of the exhibits is to 5 determine whether or not they could be deemed 6 admissible for purposes of review on a summary 7 judgment motion. 8 So do you have those exhibits in 9 front of you? 10 MR. FOSTER: That's what I was 11 asking for, Your Honor, what was the date that 12 they were filed? I have my papers organized 13 on a date basis. 14 THE COURT: Okay. Exhibits 1 15 through 13 were attached to the Agency's brief 16 in support of an alternative Motion for 17 Hearing on Sanction Only and according to the 18 service date, Ms. George served this on July 19 20, 2012. It was received at the Office of 20 Hearings on July 23, 2012. 21 Okay. I just heard a lot of 22 static again. So, Mr. Foster, were you

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE.• N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com19 1 looking through your papers, by any chance? 2 MR. FOSTER: Yes, I was, Your 3 Honor, but I was not shuffling. I was just 4 looking through the folder. 5 THE COURT: Okay. 6 MR. FOSTER: I have that in front 7 of me from July 20, 2012. 8 THE COURT: Okay. Then

-- 9 MR. FOSTER: Agency brief 10 supplement. 11 THE COURT: I presume that you 12 have taken a really good look at this and that 13 you are pretty familiar with Exhibits 1 14 through 13. Do you want to take a look at 15 Exhibit 1 and tell me if there is any 16 objection that you might have to its 17 admissibility? 18 MR. FOSTER: I don't have the 19 exhibits attached to that particular filing. 20 Unfortunately, when I sent my files up to the 21 state, they didn't come back in the same order 22 that I have now. Let me see if I can find it.

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1 What does it deal with? I can answer that 2 directly. 3 THE COURT: Well, I'm not in a 4 position to read you every single exhibit, so 5 I can identify them briefly. 6 Exhibit 1 is a December 11, 2009 7 letter to you from the FAA. Does that sound 8 familiar? 9 MR. FOSTER: Okay. I don't object 10 to that. 11 THE COURT: Okay. How about 12 Exhibit No. 2? 13 MR. FOSTER: That's the copy of 14 the bag that the materials were in? 15 THE COURT: Exhibit No. 2 is a 16 copy of certified mail receipt documentation 17 from the FAA to you. 18 MR. FOSTER: Okay. I don't object 19 to that. 20 THE COURT: Exhibit No. 5 is a 21 partially illegible document and let's see if 22 I can-- it's purported to be an October 21,

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com21 1 2009 Bill of Lading. 2 MR. FOSTER: I don't believe I saw 3 a Bill of Lading. 4 THE COURT: Well, it's not a 5 question of whether you believe you saw it. 6 This was attached to the FAA's Motion for a 7 Summary Judgment, Motion for Hearing on 8 Sanction Only. 9 MR. FOSTER: Right. 10 THE COURT: So

-- 11 MR. FOSTER: Well, I will object 12 to that, because I don't believe there was a 13 Bill of Lading. 14 THE COURT: Okay. Do you realize 15 that you actually argued in your own 16 responsive case that there was a Bill of 17 Lading? 18 MR. FOSTER: There was, it was 19 mentioned in one of the documents that the 20 Customs officers testified to, but, at the 21 time, there was not the actual document 22 attached to that description.

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1 THE COURT: I'll simply note that 2 you are objecting to the admissibility of FAA 3 Exhibit No. 5. Is the basis of your objection 4 that you don't remember ever seeing it? What 5 is the basis? 6 MR. FOSTER: It was not 7 apparently, it was not attached to the 8 documents that I was sent. 9 THE COURT: Okay. 10 MR. FOSTER: I have quite a few 11 exhibits here, but the ones I have are not 12 numbered. 13 THE COURT: Well, if you look at 14 the bottom of the page, the exhibits have been 15 marked with an exhibit stamp and then they 16 have been hand lettered with the number of the 17 exhibits, at least on the ones that I have. 18 MR. FOSTER: Okay. 19 THE COURT: So let's go to

-- 20 MR. FOSTER: All right. 21 THE COURT: Exhibit No. 7. 22 Exhibit No. 7 is dated November 2, 2009 and it

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgrosRcom23 1 purports to be from the U.S. Customs and 2 Border Protection employee, Renee Steele, to 3 FAA Hazmat coordinator, Juan Bulted. It is 4 one page. 5 MR. FOSTER: Okay. I did see 6 that. 7 THE COURT: Do you have any 8 objection to its admissibility? 9 MR. FOSTER: No, Your Honor. 10 THE COURT: Let's move then to 11 Exhibit No. 8. Exhibit No. 8 is purporting to 12 be nine photographs of the exterior, interior 13 and contents of a fiberboard box. 14 MR. FOSTER: Okay. I have seen 15 that. In fact, I had sent copies back with my 16 response. 17 THE COURT: Do you have any 18 objection to the admissibility of Exhibit 8? 19 MR. FOSTER: No, Your Honor. 20 THE COURT: Let's talk about 21 Exhibit No. 10. Exhibit No. 10 is a one page 22 document that is entitled "Matrix and

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1 Definitions,'' Figure C-1. Do you have any 2 objection to its admissibility as documentary 3 evidence? 4 MR. FOSTER: No, I don't, Your 5 Honor. 6 THE COURT: Okay. What about 7 Exhibit No. 11? Exhibit No. 11 purports to be 8 a table of offenses for air carrier and other 9 aircraft operator violations. Do you have any 10 objection to its admissibility? 11 MR. FOSTER: No, I don't, Your 12 Honor. 13 THE COURT: What about Exhibit No. 14 12? This purports to be a partial copy of 15 some documentation regarding violations 16 committed by U.S. air carriers or U.S. 17 commercial operators, classification of air 18 carrier and operator. 19 MR. FOSTER: No objection, Your 20 Honor. I believe that is probably right out 21 of the regulation book. 22 THE COURT: Let's look at Exhibit

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1 No. 14. And Exhibit No. 14 is one of the new 2 exhibits that the FAA filed that is part of 3 its supplemental materials. You will need to 4 give me a minute, so that I can catch up and 5 pull that material in front of me. 6 And I'm so sorry folks. Exhibit 7 14 is a Shipper's Declaration Specimen Design 8 for Manual Completion. It's one page. Does 9 that sound familiar to you at all, Mr. Foster? 10 MR. FOSTER: I'm sorry, the first 11 part of that cut out, Your Honor. I do 12 believe I found the exhibits. I'm looking at 13 --except the last one here is Exhibit 13. I 14 don't have up to Exhibit 14. 15 Was that a new filing that was 16 just sent within the last couple days? 17 THE COURT: Yes. If you recall in 18 my opening remarks, I was talking to Ms. 19 George about her supplemental materials that 20 I received 21 MR. FOSTER: Yes, Your Honor. 22 THE COURT:

-- in 2012. And she

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com26 1 included four new exhibits in those materials. 2 MR. FOSTER: Okay. 3 THE COURT: She had marked the 4 exhibits 1 through 4, but she already had 1 5 through 4 exhibits marked in an earlier 6 filing. So I remarked those new exhibits as 7 Exhibits 14 through 17, so that there was no 8 duplication and so that they were 9 chronologically in order with the prior 13 10 exhibits that were included in her original 11 material. 12 So do you have those in front of 13 you? 14 MR. FOSTER: No, I don't, Your 15 Honor. I have not received them yet. 16 THE COURT: Okay. These were 17 mailed on November 6, 2012, which was a month 18 ago. According to even the slowest U.S. Mail 19 postings, you should have received them by 20 now. 21 MR. FOSTER: Okay. Let me check 22 my documents here, because we did get some

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com27 1 notice from her, but I didn't notice any 2 attachments. Okay. I do have them, Your 3 Honor. I'm sorry. 4 THE COURT: Okay. 5 MR. FOSTER: They were -- again, 6 they are labeled as I see Exhibit 3 is a 7 Hazmat certificate. Exhibit 4 is a chart of 8 some sort. And then there is Exhibit 4, it 9 looks like 42. Am I looking

-- and that's 10 from-- that was dated 11/6. 11 THE COURT: Well, I'm not quite 12 sure that you are looking at the same things 13 that I am. I have before me a document that 14 is entitled "Agency Supplemental Filing in 15 Support of its Motion for Hearing on Sanction 16 Only." 17 Is that the title of the document 18 you are looking at? 19 MR. FOSTER: Yes, it is, Your 20 Honor. 21 THE COURT: Okay. Then if you 22 look past page 15, the very first page after

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com28 1 that is marked as Exhibit 1. And the title is 2 11Shipper's Declaration Specimen Design for 3 Manual Completion. 11 4 MR. FOSTER: Exhibit 1? Yes, I 5 have that, Your Honor. 6 THE COURT: Do you have any 7 objection to its admissibility for purposes of 8 this motion today? 9 MR. FOSTER: No. My copy is 10 blank. 11 THE COURT: So it doesn't say 12 Shipper's Declaration Specimen Design for 13 Manual Completion? 14 MR. FOSTER: Yes, it does, but 15 there is no-- it's not filled in. It's not 16 filled out at all. 17 THE COURT: I'm not saying that it 18 is. 19 MR. FOSTER: Okay. 20 THE COURT: I'm simply saying that 21 this is Exhibit 14 for this motion today. Do 22 you have any objection to its

--
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1 MR. FOSTER: Okay. 2 THE COURT:



### -- admissibility? 3 MR. FOSTER: Let me 4 THE COURT: And I'm hearing 5 MR. FOSTER: Let me change that 6 then. Okay. I am looking at that. 7 THE COURT: Since you now are 8 looking at it, Mr. Foster, do you have any 9 objection to its admissibility for the purpose 10 of this motion? 11 MR. FOSTER: No, Your Honor. 12 THE COURT: Okay. Then our last 13 exhibit for you to look at is Exhibit No. 17 14 in that same package. And Exhibit No. 17, 15 which is marked as Exhibit 4, pages 1 through 16 3, basically, are blank worksheets of various 17 kinds. 18 MR. FOSTER: Yes, I am looking at 19 them, Your Honor. 20 THE COURT: Do you have any 21 objection for admissibility for today's 22 motion?

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1 MR. FOSTER: No, Your Honor. 2 THE COURT: Okay. Thank you very 3 much. 4 (Whereupon, the documents were 5 marked for identification as 6 Complainant Exhibits 1, 2, 5, 7, 7 8, 10, 11, 12, 14, 17 and were 8 received in evidence.) 9 THE COURT: I'm going to go next 10 to you, Ms. George, and we are going to do 11 pretty much the same thing with you. 12 And I'm going to go through the 13 materials that I have pulled out from the 14 pleadings, which could be deemed testimonial 15 in nature by the respondent. And we are just 16 going to look at each one of them to see if 17 you have any objections for consideration. 18 As you know

-- 19 MS. GEORGE: I'm sorry, Your 20 Honor? 21 THE COURT: there is a 22 requirement essentially for this Court to look

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com31 1 at this type of material as part of the 2 record. 3 So the first one is entitled

-- 4 folks, I'm getting a lot of static again. I'm 5 getting a lot of static again, so if either of 6 you have any kind of papers that are near the 7 phone for whatever reason, I'm hearing a lot 8 of static when you move them or shuffle them 9 or touch them. 10 So if you could be very careful 11 about that, I would be most appreciative. 12 So, Ms. George, turning back to 13 you again. The first of the five documents 14 that I found in the litigation file that could 15 be deemed pleadings are as follows: 16 I'm marking them as I go. No. 1, 17 Answer to FAA's Motion for Decision Should not 18 be Granted. 19 MS. GEORGE: Your Honor, what date 20 was that? I'm sorry. 21 THE COURT: I know that it's hard. 22 I'm still getting a lot of static and so --
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(202) 234-4433 COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com32 1 MR. FOSTER: Okay. I'm not 2 hearing it on this side, Your Honor. It's 3 clear and I'm not moving anything around. 4 THE COURT: Okay. 5 MS. GEORGE: I hear the static as 6 well, Your Honor. 7 THE COURT: Thank you. Mr. 8 Foster, thank you for that affirmation. 9 Hopefully if we all are being as limited in 10 our movements as possible, we won't get much 11 static any more. 12 Ms. George, turning back to you. 13 This is a document dated and signed March 22, 14 2012. It's dated and signed by Mr. Foster and 15 it is entitled "Answer to FAA's Motion for 16 Decision Should not be Granted. 11 17 MS. GEORGE: I have it, Your 18 Honor. 19 THE COURT: Do you have any 20 objection to its admissibility as potential 21 testimonial documentation forpurposes of this 22 motion?

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1 MS. GEORGE: I do not have any 2 objection. 3 THE COURT: Okay. Respondent's 4 No. 2, dated and signed by Mr. Foster on March 5 23, 2012. It's entitled ''Motion to Dismiss.'' 6 MS. GEORGE: I don't have any 7 objection to the admissibility, Your Honor. 8 THE COURT: Okay. Respondent's 9 No. 3, dated and signed by Mr. Foster on July 10 9' 2012, one page, and it's entitled 11 "Opposition to Hearing on Sanction Only." 12 MS. GEORGE: I do not have any 13 objections, Your Honor. 14 THE COURT: Respondent's No. 4, 15 eight pages, dated and signed by Mr. Foster on 16 August 2, 2012. It's identified as 17 Respondent's Answer to Initial Discovery. 18 MS. GEORGE: Your Honor, I have 19 two documents entitled "Respondent'sAnswer to 20 Initial Discovery.'' I'm sorry. The one on 21 August 2 I do not have any objection to that. 22 THE COURT: Okay. The fifth of

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISlANDAVE., N.W. WASHINGTON, D.C. 20005·3701 www.nealrgross.com34 1 respondent's exhibits would have been dated 2 and signed by Mr. Foster on August 7, 2012. 3 It is two pages. And it is entitled 4 "Respondent's Answer to General Discovery and 5 Production of Documents." 6 MS. GEORGE: No objections, Your 7 Honor. 8 THE COURT: Okay. Then 9 Respondent's No. 6 is one of the two exhibits 10 that were attached to the respondent's 11 response to FAA Motion for Hearing on Sanction 12 Only that was received by this office on 13 November 8, 2012. It is a photograph of the 14 exterior of a fiberboard box. 15 Do you have any objection to its 16 admissibility? 17 MS. GEORGE: No objection. 18 THE COURT: Respondent's No. 7 is 19 a photograph of two HAZCOM labels, which is 20 one page. And I will simply note for both of 21 you that it's partially illegible for this 22 Court. So it will have limited value.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com35 1 Ms. George, do you have any 2 objection to its admissibility, at least on a 3 limited basis? 4 MS. GEORGE: I do not have any 5 objections, Your Honor. 6 (Whereupon, the documents were 7 marked for identification as 8 Respondent Exhibits 1 through 7 9 and were received in evidence.) 10 MS. GEORGE: If I may, the first 11 copy that the FAA has is a black and white 12 copy. It might be more legible if we send 13 that as a PDF rather than as a photocopy, if 14 you would like. 15 THE COURT: When you say the first 16 copy, what are you talking about? 17 MS. GEORGE: The copy of the 18 HAZCOM labels that both the Agency and the 19 respondent have provided to the Court. It's 20 from an enforcement investigative report 21 compiled by Mr. Juan Bulted, the Agency 22 Special Agent for Hazardous Materials.

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1 It lS a black and white 2 photograph. And in the photocopying of that, 3 it appears that it has become illegible for 4 your purposes. I would be able to provide a 5 PDF copy, a scanned copy of it to be able to 6 read the information there. 7 THE COURT: Okay. So you are 8 referring-- you are saying that Respondent's 9 Exhibit No. 7

-- 10 MS. GEORGE: Yes. 11 THE COURT:

-- actually, well, if 12 you can give me a minute to finish the 13 question, is potentially part of the FAA's 14 Request for Admission No. 16, which purported 15 had two pages of HAZCOM label photographs, 16 which I couldn't see? 17 MS. GEORGE: Yes. Those 18 photographs that are Respondent's Exhibit R7 19 are the same exhibits as the complainant's. 20 THE COURT: Well, I want to ask 21 you about that because your Request for 22 Admissions No. 16 had two pages of photocopies

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com37 1 whereas the Respondent's Exhibit No. 7 only 2 had one photograph. 3 MS. GEORGE: He had provided one 4 page of that document. 5 THE COURT: Okay. Mr. Foster, let 6 me turn back to you then because there has 7 been an offer of alternate filing by the FAA 8 for the photographs that were contained in 9 Request for Admissions No. 16, which you 10 admitted to. 11 Do you have any objection to Ms. 12 George sending an emailed copy to one of the 13 Office of Hearing staff, so that potentially 14 this Court can see a legible, readable copy of 15 that material? 16 MR. FOSTER: No objections, Your 17 Honor. In fact, that's the problem. I have 18 made a copy of her copy, which is a copy of a 19 photograph, so that's why I

-- mine is also 20 very difficult to read. 21 THE COURT: Okay. Then I will ask 22 you, Ms. George, to send a copy of that

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nea!rgross.com38 1 material to Mr. Smith at his email address. 2 And I'm going to give that to you now, but 3 I'll just caution both of you that we don't 4 normally accept email filings. And so this is 5 just for today and for this purpose. 6 MS. GEORGE: I understand, Your 7 Honor. 8 THE COURT: Yes. Are you ready, 9 Ms. George? 10 MS. GEORGE: I am. 11 THE COURT: Okay. It's the first 12 name is cody, 

### c, as in cat, 0, as in orange, 13 D, as in David, Y, as in yellow,

.smith, S, as 14 in Sam, M, as ln Mary, I' as in igloo, T, as 15 in Tom, H, as in happy, @d, as in dog, 0, as 16 in orange, T, as in Tom, .gov. Do you need me 17 to repeat that? 18 MS. GEORGE: No, Your Honor, 19 cody.smith®dot.gov. 20 THE COURT: Correct. Thank you so 21 much. 22 Ms. George, when do you think you

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(202) 234-4433 COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLAND AVE.• N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com39 1 could send that to Mr. Smith? 2 MS. GEORGE: At the conclusion of 3 today's proceedings, I will send him the email 4 copy. 5 THE COURT: Okay. Thank you very 6 much. Okay. So it looks like we have covered 7 all of the exhibits. 8 So then let me do this. Ms. 9 George, and I give this opportunity to 10 everybody who appears, you can either take 11 five minutes and just highlight for me which 12 exhibits you think go to prove which 13 violations. You know, give me your argument 14 and then I can ask you questions after that 15 or, if you prefer, I can ask you questions 16 first. It just depends on what your comfort 17 level is. 18 You may end up answering a lot of 19 my questions with your narrative, but one 20 never knows. So what would you prefer? 21 MS. GEORGE: I would prefer for 22 you to reserve your questions to the end.

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1 THE COURT: Okay. Then counsel, 2 you are welcome to take your five minutes and 3 highlight for us what the gravamen of your 4 motion is. 5 MS. GEORGE: Okay. Your Honor, 6 thank you for the opportunity to speak to you 7 today regarding the Agency's outstanding 8 Motion for Hearing on Sanction Only. 9 In looking at the case that is 10 currently before you, on September 8, 2011, 11 the complainant filed its complaint in this 12 matter against the respondent, Coastal Air 13 Transport. 14 In the complaint, respondent was 15 alleged to have transported hazardous 16 materials on board an aircraft operated by 17 Coastal Air. The shipment consisted of diesel 18 fuel, which is a hazardous material under the 19 Department of Transportation's Hazardous 20 Material Table, which can be found at 49 CFR 21 172.101. 22 At the time of the transportation

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1 of the hazardous material, the respondent was 2 and is currently classified as a will-not3 carry dangerous goods air carrier under 14 CFR 4 Part 135. 5 On March 23, 2012, the respondent 6 in response to the complainant's Motion for a 7 Decision on the Pleadings, which was filed on 8 February 21, 2012, responded in part to the 9 allegations in the complaint. And on August 10 7, 2012, respondent answered the complainant's 11 General Discovery and Production of Document 12 request filed on June 15, 2012. 13 THE COURT: Ms. George? 14 MS. GEORGE: The respondent 15 replied to the Agency. 16 THE COURT: Ms. George, I'm going 17 to ask you to slow down a little bit, because 18 I

-- 19 MS. GEORGE: I apologize. 20 THE COURT: am listening to 21 everything you say and I'm having a hard time 22 keeping up with you. So can you slow down

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1 just a bit? 2 MS. GEORGE: I will. 3 THE COURT: Okay. Thank you. Go 4 ahead. 5 MS. GEORGE: On August 7, 2012, 6 the respondent answered the complainant's 7 General Discovery and Production of Documents 8 filed on June 15, 2012. And in the 9 respondent's reply to the Agency's Request for 10 Admissions, the respondent admitted, first, 11 that it transported on October 21, 2009 two 12 750 milliliter bottles containing fuel oil on 13 board a Flight 413, which were labeled fuel 14 oil, U.N. No. 1993. 15 The respondent also admitted that 16 Exhibit 1 to the discovery, which was a letter 17 dated January 14, 2010, was a true and 18 accurate copy of a letter forwarded from the 19 respondent to the Federal Aviation 20 Administration. 21 THE COURT: And I'm sorry, is that 22 letter contained in your exhibits?

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com43 1 MS. GEORGE: Yes. 2 THE COURT: Which number is it? 3 MS. GEORGE: That letter, if we 4 are going by the exhibit history, the brief 5 number is Exhibit No. 3. 6 THE COURT: Okay. Thank you. Go 7 ahead. 8 MS. GEORGE: The respondent also 9 admitted that the Material Safety Datasheet 10 that was attached as Exhibit 2 to the 11 discovery for fuel oil was a true and accurate 12 copy of the Material Safety Datasheet for the 13 material carried on board of Flight 413 on 14 October 21, 2009. 15 The Material Safety Datasheet 16 bears the 17 THE COURT: And, Ms. George, I'm 18 going to interrupt you again. What I'm 19 interested in knowing is what exhibit number 20 it is for the purpose of the exhibits that you 21 filed. 22 MS. GEORGE: It's Exhibit No. 4.

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1 THE COURT: Okay. Okay. Thank 2 you. Go ahead. 3 MS. GEORGE: Additionally, the 4 respondent admitted that copies of exhibits of 5 true and accurate copies of the hazardous 6 communications level

-- excuse me labels that 7 were attached to the containers of diesel fuel 8 that were carried aboard Flight 413 on October 9 21, 2009 were also true and accurate copies. 10 As we have previously discussed 11 that it would be Respondent's Exhibit R7 and 12 in the complainant's filing those HAZCOM 13 labels, and I apologize I'm looking through 14 our materials at the same time

-- 15 THE COURT: I think the FAA's 16 Request for Admission 17 MS. GEORGE: They are on 18 Exhibits 3 and 4 of the Request for 19 Admissions. 20 Finally, Exhibit 5 of the Request 21 for Admissions was a the respondent 22 admitted was a true and accurate copy of the

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1 Federal Aviation Administration's National 2 OperatorandTrainingManual fornonacceptance 3 and non-transport of dangerous goods in the 4 air signed by the respondent in December of 5 1999. 6 THE COURT: And, Ms. George, that 7 appears to be FAA Exhibit No. 9. Is that 8 correct? 9 MS. GEORGE: Yes, Your Honor. 10 THE COURT: And just so that we 11 are clear, it's not the entire Operations and 12 Training Manual. It appears to be just the 13 cover sheet to it with some signatures and 14 assertions. 15 MS. GEORGE: That is correct. 16 THE COURT: Okay. Go ahead, 17 please. 18 MS. GEORGE: Through the 19 respondent's various admissions and filings, 20 the respondent has admitted that it 21 transported dangerous goods on board a flight 22 on October 21, 2009 when it was not authorized

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com46 1 to do so. 2 The respondent has authenticated 3 the photographs of the shipment at issue, 4 which demonstrate that the package was not 5 properly prepared for shipment in air in 6 accordance with the Hazardous Materials 7 Regulations. 8 By reason of the foregoing, the 9 complainant has alleged that respondent is in 10 violationof separateregulatoryviolations of 11 the HMR as specifically enumerated in its 12 complaint dated September 8, 2011. 13 Please note that although the FAA 14 has included citations to 49 CFR § 171.2(a) 15 and (b) , the general regulation provides an 16 overview of the specific parts of the HMR 17 violated and was not treated as a separate 18 violation for penalty purposes. 19 This action has been supported. 20 This treatment has been supportedby the FAA's 21 decision maker and has been previously 22 recognized.

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1 THE COURT: And I don't

-- 2 MS. GEORGE: In the Matter of 3 Carr, FAA Order FA

-- 4 THE COURT: I'm going to interrupt 5 you. You have lost me. So you are telling me 6 that you have referred to certain statutory 7 authority, but it doesn't matter? 8 MS. GEORGE: What we are saying is 9 that it is included in our complaint, but it's 10 not separate for penalty calculations. 11 THE COURT: All right. Well, let 12 me go to your complaint then. And what page 13 of your complaint are you -- you're talking 14 about paragraph Roman Numeral

-- 15 MS. GEORGE: It's§ 3, paragraphs 16 1 and 2. 17 THE COURT: Okay. So you are not 18 claiming that there are specific violations 19 for those two allegations? 20 MS. GEORGE: Regulations. 21 THE COURT: Okay. 22 MS. GEORGE: Those are general

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com48 1 sections of the HMR and are included in 2 hazardous materials complaints to give a 3 general overview of the violation. 4 THE COURT: Okay. 5 MS. GEORGE: They are not treated 6 for separate penalty calculations under the 7 Agency's Sanction Guidance Policy and Matrix. 8 THE COURT: So are you saying to 9 me that these are not separate violations that 10 you are trying to prove today? 11 MS. GEORGE: That we're not 12 they are violations of the HMR, but they do 13 not lead to a separatepenalty calculation for 14 this_ 15 THE COURT: Okay. So if I found, 16 for example, that the respondent had violated 17

-- Violation No_ 1 on page 3 of the complaint, 18 which is identified as 49 CFR § 171.2(a), it 19 would not, in and of itself, have a minimum 20 $250 fine attached to it? 21 MS. GEORGE: That is correct. 22 THE COURT: And the same would be

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISlANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com49 1 true for Violation No. 2 on page 3 of the 2 FAA's complaint which alleges a violation of 3 49 CFR § 171.2{b)? 4 MS. GEORGE: That is correct, Your 5 Honor. 6 THE COURT: Okay. Thank you. Go 7 ahead. 8 MS. GEORGE: The FAA's decision 9 maker held in the Matter of Carr, which is FAA 10 Order 98-2, that a violation of general 11 introductory sections of the HMR do not 12 necessarily count .as separate violations for 13 sanction purposes. 14 And so you are correct that those 15 two sections would not automatically lead to 16 an assessment of a civil penalty. 17 THE COURT: Okay. Thank you. 18 MS. GEORGE: The complainant 19 alleges that the respondent, Coastal Air, is 20 liable for a civil penalty for violation of 21 the remaining 14 regulations of the HMR cited 22 in its complaint.

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1 The legislative history

-- 2 THE COURT: Just so that we are 3 clear, those would be Violations No. 2 through 4 16? 5 MS. GEORGE: 3 through 6 THE COURT: I'm sorry. 7 MS. GEORGE: 16. 8 THE COURT: 3 through 16. Thank 9 you. Go ahead. 10 MS. GEORGE: Yes. The legislative 11 history of § 5123, which is the Federal 12 Hazardous Materials statute, indicates there 13 was a legislative intent to impose a penalty 14 for each discrete violation of the Hazardous 15 Materials Regulations. 16 Therefore, multipleviolations may 17 be charged. 18 THE COURT: I'm sorry, I'm going 19 to interrupt. I'm interrupting you again. 20 Excuse me. 21 MS. GEORGE: Yes. 22 THE COURT: Could you cite me to

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com51 1 that again? What citation did you give me? 2 MS. GEORGE: That was § 5123 of 3 the Federal Hazardous Materials statute and 4 that's 49 

## usc 5123. 5 THE COURT: Okay. Thank you. Go 6 ahead. 7 MS. GEORGE: Therefore, multiple 8 violations may be charged, even if the 9 violations arise out of a single transaction. 10 This view was supported in FAA v. Landy, 11 that's L-A-N-D-Y, Case Citation 705 F.2d 624 12 (2d Cir. 1983). 13 The statute itself, its 14 legislativehistoryandtheunderlyingpurpose 15 indicates that Congress specifically intended 16 to subject a person to a civil penalty for 17 each violation of an applicable regulation. 18 As a result, so long as each 19 violation requires proof of a fact that the 20 other does not, it passes Constitutional 21 muster. 22 The Supreme Court supported this

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com52 1 view in two separate cases: Whalen v. US, W2 H-A-L-E-N, and that can be found at 445 US 684 3 (1980) and also in Missouri v. Hunter, which 4 is 459 

### us 359 (198 3 ) - 5 In Whalen and in Hunter, the U.S. 6 Supreme Court held that cumulative punishment 7 is authorizedwhen there is a clear indication 8 of legislative intent to authorize multiple 9 punishment. 10 Now, the plain language of § 5123 11 of the Federal Hazardous Materials statute 12 contemplates a civil penalty for each 13 violation of the HMR and leaves no doubt that 14 Congress intended for each violation of a 15 regulation contained in the HMR to constitute 16 an independent basis for a penalty. 17 As a result of the legislative 18 intent of the HMR, the Federal Aviation 19 Administration instituted its Hazardous 20 Materials Sanction policy in 1999 to better 21 promote consistency and penalties imposed in 22 similar cases.

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1 I have a discussion of this in 2 the complainant's brief dated July 20, 2012 at 3 page 7 and paragraph no. 5. 4 To that end, the complainant has 5 established a sanction guided matrix for 6 violations of persons who currently 7 incorrectly offered, accepted or transported 8 hazardous materials. Copies of this matrix is 9 also attached to the July 20, 2012 brief at 10 Exhibits 10, 11 and 12. 11 The, 14 regulatory violations of 12 which the respondent is alleged to have 13 violated and which may lead to civil penalty 14 assessment are grouped in accordance with the 15 sanction guidance matrix into five categories 16 of offense. 17 Those categories are: Improper 18 acceptance of hazardous materials; failure to 19 inspect hazardous shipment properly; failure 20 to provide hazardous materials training; 21 maintain records of training or meet minimum 22 requirements of training and they are to

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE,, N,W, WASHINGTON, D,C, 20005-3701 www.nealrgross.com54 1 notify the FAA of incidents or discrepancies 2 in hazardous material shipments; and failure 3 to provide notice to the pilot in command. 4 A discussion of the five 5 categories of offense are included in the 6 Agency's brief filed on July 20, 2012 at page 7 8 and also in its supplemental filing of 8 November 5, 2012 at pages 10 through 11. 9 Additionally, in the November 5, 10 2012 brief at page 11, the Agency has divided 11 the 14 regulations of what a civil penalty can 12 be assessed into the five categories of 13 offense and that is included on page 11 of 14 that brief. 15 Now, a civil penalty is proposed 16 in this matter in accordance with the 17 complainant's Hazardous Material Policy 18 Matrix. Based upon the facts of this case, a 19 maximum civil penalty for a Group 4 air 20 carrier is required. 21 A definition of a Group 4 air 22 carrier is also included in the July 20, 2012

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(202) 234-4433 COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com55 1 brief at Exhibit No. 12. 2 A review of the matrix reveals 3 that for a failure to inspect maximum civil 4 penalty for a Group 4 carrier is $16,200. It 5 is $16,200, the civil penalty, for improper 6 acceptance, $16,200 for failure to train, 7 $5,500 for failure to notify the FAA and 8 $5,500 for failure to notify the pilot in 9 command. That can be found at Exhibit 11 of 10 the July 20, 2012 brief. 11 In total the Agency is seeking a 12 civil penalty of $59,600 for the violations 13 that have been discussed in this matter. 14 In accordance with the Hazardous 15 Material Sanction Guidelines, the complainant 16 also considered whether the respondent should 17 receive mitigation of the civil penalty. 18 Based upon the Hazardous Material statute's 19 requirement to considerthe violator's ability 20 to pay a civil penalty, the impact of the 21 civil penalty on the violator's ability to 22 continue in business and, as the statute

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com56 1 describes, other matters that justice 2 requires_ 3 Now, this consideration has been 4 determined to be an affirmative defense by the 5 respondent. Consideration may result in the 6 adjustment of a civil penalty if the 7 respondent provides mitigating information 8 that is sufficiently reliable, uncontroverted 9 and documented to support the reduction. 10 The Agency will also consider 11 corrective actions taken by the respondent to 12 support mitigation of the civil penalty. 13 Under the sanction policy, 14 corrective action is action that is remedial, 15 that exceeds the minimum legal requirement. 16 The primary factors in determining whether or 17 not a civil penalty reduction should occur is 18 the extent and the timing of the corrective 19 action. 20 Examples of corrective action that 21 result in civil penalty reduction include 22 systematic changes intended to prevent future

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1 violations and corrective action that 2 commences upon first notification is given 3 greater credit. 4 At all times, it is the 5 respondent's burden of proof to provide 6 evidence of mitigation for consideration. 7 Now, in the FAA's discovery dated 8 June 15, 2012, the complainant asked for a 9 copy of the respondent's training program, 10 referenced in its January 14, 2010 letter. 11 The respondent replied in its August 7, 2012 12 response that it did not pursue a training 13 program. 14 In the respondent's request for 15 production

-- excuse me. In the FAA

-- in the 16 complainant's Request for ProductionNo. 3 and 17 Interrogatory No. 4, the complainant also 18 requested evidence of corrective or remedial 19 actions taken as a result of this matter. 20 The respondent replied in its 21 August 7, 2012 response that all station 22 personnel and flight crews were advised of the

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com58 1 Hazmat requirement. However, respondent did 2 not provide any copies of any such 3 notification nor did it explain what this 4 notification consisted of. 5 The FAA decision maker provided in 6 the case in the Matter of PCI Corporation, FAA 7 Order No. 92-77, it's a December 22, 1992 8 case, and in the Matter of Toyota Motor Sales 9 US, FAA Order No. 94-28, a September 30, 1994 10 case, that the type of corrective action that 11 warrants a significant reduction in civil 12 penalty is action to ensure that hazardous 13 materials are handled in compliance with the 14 HMR in the future. 15 In this case, the respondent has 16 failed to take any corrective action to ensure 17 that a violation such as this does not occur 18 in the future. 19 Additionally, the respondent has 20 failed to meet its burden to show that the 21 civil penalty would not impact its ability to 22 continue in business or that it does not have

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com59 1 the ability to pay the civil penalty. 2 In conclusion, based upon the 3 evidence, the complainant has presented in its 4 filings on February 21, 2012, July 20, 2012, 5 July 26, 2012 and November 6, 2012, there 6 remain no genuine issues of material facts 7 other than a dispute of the sanction. 8 However, the complainant's various 9 filings and submissions also make clear that 10 the civil penalty currently sought in this 11 matter is consistent with the complainant's 12 sanction guidance policy and should also be 13 upheld. 14 Thank you. 15 THE COURT: Now, let's talk a 16 little bit about some of the things that you 17 have mentioned. And I appreciate your lengthy 18 and detailed argument regarding the penalty 19 and all of the legal authority that you have 20 cited, that's always very helpful. 21 But before we even get to the 22 penalty, we have to have a discussion about

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com60 1 what you have proved and how you have proved 2 it in terms of the violations alleged. 3 And so let's kind of backtrack to 4 that discussion. So I'm looking at your 5 complaint, this page 4, and I'm going to start 6 with No. 3, Violation No. 3. 7 And it's about§ 175.3. This is-- 8 and I shouldn't abbreviate, excuse me, 49 CFR 9 § 175.3, in which you allege that Coastal Air 10 accepted for transportation or transit aboard 11 an aircraft a shipment of hazardous material, 12 not prepared for shipment in accordance with 13 this subchapter. 14 And you are absolutely correct 15 that there are a variety of facts that are 16 undisputed by the parties. And it appears to 17 me that it is undisputed by either the FAA or 18 the respondent that on October 21, 2009, 19 Coastal Air Transport, the respondent, did 20 conduct and complete Flight DQ413 from St. 21 Eustatius, NA, to the Alexander Hamilton 22 Airport, St. Croix, Virgin Islands.

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1 On October 21, 2009, the pilot in 2 command of that flight was Captain Michael 3 Foster. Mr. Foster is also the lay 4 representative of the respondent appearing 5 here today. 6 Mr. Foster has acknowledged in 7 pleadings and in other materials before the 8 Court today that he knowingly accepted for 9 transportation by air and transported above 10 the aboard the aircraft a one-piece 11 shipment in a fiberboard box. 12 The fiberboard box shipment held 13 two plastic bags labeled HAZMATPAC and I'll 14 spell that. H-A-Z-M-A-T-P-A-C. Two plastic 15 bags each contained one bottle containing, 16 approximately, 750 milliliters of diesel fuel 17 labeled fuel oil UN No. 1993. 18 It's undisputed that the aggregate 19 volume of the total fiberboard box shipment 20 was less than 1.5 liters. It's undisputed 21 that the diesel fuel is a flammable 22 combustible liquid. It's also undisputed this

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1 one-piece box shipment accepted and 2 transported by Captain Foster on a Coastal Air 3 flight was not further identified beyond what 4 we just talked about as hazardous material. 5 It did not contain a material 6 safety datasheet. It did not contain packing 7 slips. And it did not have hazardous markings 8 or warnings labeled on the box pursuant to 9 Hazardous Material Regulations under 14 CFR 10 171.2(a) and (b) and 14 CFR 175.2(o) and so 11 forth. 12 It is undisputed that this box 13 transported by Captain Foster was identified 14 as diesel fuel with a Hazard Class of 3 and a 15 Packing Group of 3. The respondent's argument 16 is that this was an acceptable form of 17 shipping pursuant to 49 CFR 172.101. 18 It is also undisputed that the 19 fiberboard box as labeled was shipped in the 20 cargo compartment of the aircraft and remained 21 in the cargo compartment during the entire 22 flight.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com63 1 So let's talk about the 2 respondent's assertion. Respondent asserts 3 that he is exempted from the regulations that 4 the FAA claims that he should have followed 5 because he looked at the table contained in 49 6 CFR § 172.101 and he complied with it. 7 Can you tell me why the respondent 8 is wrong? 9 MS. GEORGE: The respondent is 10 wrong for several reasons. The first one, and 11 the most important one, is that the respondent 12 has a will-not-carry dangerous goods or 13 hazardous materials air carrier was not 14 authorized to carry this package at all. 15 The second reason that the 16 respondent is incorrect is that the package-- 17 THE COURT: I'm going to interrupt 18 you. Let me just walk with you about that. 19 So it's the FAA's position that the respondent 20 cannot under any circumstances carry any 21 hazardous material unless the respondent 22 agrees and signs up with the FAA to be a

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1 hazardous material carrier and to comply fully 2 with the FAA requirement. Is that the FAA's 3 position? 4 MS. GEORGE: That is correct. The 5 only exception would be found in 49 CFR 175.10 6 and those are exceptions for passengers, crew 7 members and air operators for the carriage of 8 hazardous materials that are enumerated there 9 that are personal in their personal checked 10 baggage. 11 Diesel fuel is not a hazardous 12 material that would fall under any of the 13 exceptions of 49 CFR 175.10. As a result, the 14 respondent, as an air carrier, was required to 15 transport the package that he did in 16 accordance with the HMR. 17 The HMR requires hazardous 18 materials to be properly classed, labeled, 19 identified, have shipping papers that 20 accompany it, have notification to the pilot 21 in command, have emergency response 22 information contained on it and also in the

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com65 1 documents that are provided to the pilot in 2 command. 3 The shipment that occurred on 4 October 21, 2009 did not contain any of the 5 required documentation labeled in markings 6 that are associated with hazardous material 7 shipments. 8 As a result, there was a violation 9 of 175.3 in that there was improper acceptance 10 of the hazardous materials in this case. 11 THE COURT: Okay.

. So let's talk a 12 little bit about the regulations. Mr. Foster 13 had, and I'm going to give him a chance to 14 talk about this, too, but since you are on the 15 phone and you are the plaintiff, I want to ask 16 you some questions about it, too. 17 Mr. Foster has said that this is a 18 minimal amount of diesel fuel that it could be 19 packaged and carried in the cargo hold 20 pursuant to the regulations that he saw. And 21 you are saying, essentially, that it is 22 absolutely not correct, even for a minimal

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(202) 234-4433 COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com66 1 amount. There has to be some packaging and 2 labeling pursuant to the Hazardous Materials 3 Act. 4 MS. GEORGE: That is correct, Your 5 Honor. 6 THE COURT: Okay. So let's go to 7 Violation No. 4. In a summary judgment 8 motion, you can't just make allegations. You 9 have to point to specific proof. So you 10 touched on this, but I want to just check in 11 with you again. 12 Violation No. 4 basically says 13 that Mr. Foster failed to comply with 49 CFR 14 175.20(a)

. And this you allege has to do with 15 failure to ensure that Hazmat employees 16 receive training. And what factual proof do 17 you have of this violation? Which exhibit are 18 you referring me to for this? 19 MS. GEORGE: One second, Your 20 Honor. In the FAA's first notification to Mr. 21 Foster that there was -- that the shipment 22 that he transported on October 21, 2009,

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1 Special Agent Juan Bulted forwarded a Letter 2 of Investigation dated December 11, 2009 to 3 Coastal Air Transport, Michael Foster. 4 In that excuse me, that is 5 marked as Exhibit No. 1 on the July 20, 2012 6 filing by the Agency. 7 In that letter, specifically on 8 page 2 of it at No. 4, the Agency's Special 9 Agent requested a copy of the hazardous 10 training materials curriculum and training 11 records for each individual involved in the 12 transportation of the shipment on October 21, 13 2009. 14 In response to Mr. Bulted's 15 letter, at Exhibit No. 3, July 20ili brief, Mr. 16 Foster responded and did not provide any 17 copies of training records or materials 18 curriculum used by his company. 19 He indicates 20 THE COURT: I mean, looking at 21 Exhibit No. 3, you are saying because he 22 didn't reference that in his January 14, 2010

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com68 1 letter, you have proven that he doesn't have 2 it? 3 MS. GEORGE: We are saying that we 4 asked him for the documentation. He says that 5 he did not

-- excuse me. He says copies are 6 included. They were not. We also requested 7 copies

-- 8 THE COURT: Well, before you go 9 into they were not, where do you have in your 10 proof a statement that you never received 11 them? 12 MS. GEORGE: That will be in the 13 testimony of the Special Agent. 14 THE COURT: And where is the 15 testimony attached to my motion? 16 MS. GEORGE: It's not attached to 17 your motion, Your Honor. 18 THE COURT: Okay. Then let's go 19 to Violation No. 5. Violation No. 5 asserts 20 that respondent violated 49 CFR § 175.20(b), 21 as in boy. And in this one, there is another 22 one that this is somewhat similar where there

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com69 1 is an assertion that the respondent did not 2 train each of its Hazmat employees. 3 So are you referring again to 4 Exhibit 1 and Exhibit 3 as your proof of this 5 or are there more exhibits that I should be 6 looking at? 7 MS. GEORGE: Exhibit 1 and Exhibit 8 3 . In addition to the respondent's reply to 9 the Agency's discovery in which we again, 10 specifically requested copies of training 11 materials and that was not provided. 12 THE COURT: Okay. And when you 13 say the Agency's request to Mr. Foster or to 14 the respondent for discovery, we are in the 15 motion, it's the factual documentation about 16 that. As I have the exhibits before me, I 17 have the pleadings before me. I need to know 18 where you are pointing me to for the factual 19 evidence that supports that. 20 MS. GEORGE: Just one second, Your 21 Honor. It's in respondent's August 7, 2012 22 reply to the Agency's General Discovery and

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com70 1 Production of Documents. 2 THE COURT: Okay. And let me go 3 to that just very briefly. 4 MS. GEORGE: The question that we 5 asked

-- 6 THE COURT: I see the answer to 7 General Discovery. And where are you 8 referring me to on that two page document? 9 MS. GEORGE: I want to refer to

-- 10 he doesn't list the question. I'm going back 11 to my initial filing. 12 THE COURT: All right_ I see on 13 page 1 of that document statement production. 14 And under production it says No_ 3, "All 15 station personnel and flight crews advised as 16 to Hazmat requirements." 17 MS. GEORGE: That was in response 18 to the Agency's Request for Evidence of 19 Corrective or Remedial Action. However, in 20 No. 6 of the Request for Production, we asked 21 for a copy of Hazardous Materials Training 22 Program, as described in the response letter

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(202) 234-4433 COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nea!rgross.com71 1 of January 14, 2010. 2 And in his response, he replied 3 "We have been advised not to pursue this 4 program. Our refinery operation has closed 5 down in St. Croix, so there is no longer a 6 requirement to transport samples in the 7 future." 8 THE COURT: Okay. And when I look 9 at these kinds of documentation, I am supposed 10 to look at the evidence in a light most 11 favorable to the responding party, not in a 12 light most favorable to you. 13 So it would appear to me that I 14 could look at this and see it in a different 15 light than you are arguing right now. 16 Let me ask you this. In terms of 17 Violation No. 6, this is a violation alleged 18 of 49 CFR § 175.25, you are asserting that the 19 respondent failed to display notices of the 20 requirements applicable to the carriage of 21 hazardous materials aboard the aircraft as 22 well as failed to display notices of the

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com72 1 penalties for failure to comply. 2 What factual documentation do you 3 have to support this particular violation? 4 When I looked at your materials, it did not 5 appear that you were citing me to any exhibit 6 or material that is relevant for my 7 consideration today. Where is the factual 8 documentation about the lack of notices for 9 the aircraft? 10 MS. GEORGE: Your Honor, the 11 documentation or excuse me, the violation, as 12 alleged, was based upon the fact that the 13 respondent is a will-not-carry air carrier. 14 And as a will-not-carry air carrier, does not 15 display notifications regarding hazardous 16 materials in his area. 17 THE COURT: Okay. But that's an 18 argument and I have to be

-- I have to hold 19 you to a factual evidentiary standard. So is 20 there anything in the materials that you have 21 provided that, basically, says that the 22 respondent has violated this section on this

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com73 1 basis? This is how we are going to prove it 2 as opposed to saying, Judge, you can make a 3 reasonable assumption that it didn't occur. 4 MS. GEORGE: No, Your Honor. 5 THE COURT: Okay. Let's go to 6 Violation No. 7. And this is an allegation of 7 respondent violating 49 CFR § 175.2

-- 8 OPERATOR: This conference is 9 scheduled to be disconnected automatically in 10 10 minutes. To extend the time, please, dial 11 366-4000 to speak with a DOT operator. 10. 12 THE COURT: I'm going to see -- I 13 just got a message saying that our conference 14 is about to end, unless we extend it. And so 15 I'm going to ask Mr. Smith to leave the office 16 and call the conference line and see if he can 17 extend it for us. 18 I think it is the 3600, Mr. Smith. 19 I'm going to give this to you to see if you 20 can help us out. If it is not extended, then 21 I will try and call you back using our 22 internal conference line if we get cut off.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com74 1 So folks, Mr. Smith has left the 2 office. And I'll note that he has gone. 3 Let's go back to Violation No. 7. 4 This particular violation alleges that the 5 respondent failed to display notices at each 6 of its facilities where cargo is accepted, the 7 two persons offering such cargo, of the 8 requirements applicable to the carriage of 9 hazardous materials as well as the penalty. 10 What factual evidence does the FAA 11 proffer to tell me what facilities they are 12 talking about respondent has control over and 13 what was or was not posted at those 14 facilities? Can you show me or guide to me 15 the exhibits or other materials that would 16 give me the factual proof to find you have 17 made a prima facie case? 18 MS. GEORGE: The Agency's response 19 is the same as for 175.25, Your Honor. 20 THE COURT: And that would be 21 what? 22 MS. GEORGE: That we do not have

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 WWIN.nealrgross.com75 1 any documentationwithinwhat we have provided 2 to you. However, by omission and the 3 respondent's admissions in his responses to 4 our discovery and his other filings, the 5 violation is supported. 6 THE COURT: Can you even identify 7 for me, based on the material you say is 8 helpful, what facilities you are talking 9 about? 10 MS. GEORGE: We do not have any 11 facilities identified inour file, Your Honor. 12 THE COURT: Okay. Let's talk 13 about Violation No. 8. This is alleged to be 14 a violation of 49 CFR § 175.30(a) (2). And in 15 this one you assert that Coastal Air accepted 16 hazardous material aboard an aircraft where it 17 was not properly shipped and certified. 18 And I presume that you are 19 asserting that you have made the case by 20 factual proof on this particular violation? 21 MS. GEORGE: Yes, Your Honor. 22 Again, we have requested copies of all

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(202) 234-4433 COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISlANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com76 1 documentation for the shipment. Mr. Foster in 2 his reply in January of 2010 provided 3 documents to the Special Agent who was 4 assigned to investigate this matter. And he 5 did not provide any shipping documents, excuse 6 me, hazardous material shipping papers as 7 described in our Exhibit No. 14 to the 8 supplemental filings. 9 That was not prepared nor kept for 10 this shipment. And as a result, there is a 11 violation of 175.30(a) (2) 12 THE COURT: And are you saying 13 that the FAA Exhibit, essentially, No. 17, 14 which has those three boilerplate forms, are 15 mandatory forms for carriers who are 16 transporting hazardous goods? 17 MS. GEORGE: No, Your Honor. I am 18 pointing to what was originally our Exhibit 1 19 of the supplemental filing and renumbered as 20 Exhibit 14. 21 THE COURT: Okay. 22 MS. GEORGE: It is the shipper's

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com77 1 declaration example. 2 THE COURT: And is this something 3 that is a mandatory document that FAA

-- 4 MS. GEORGE: Yes, Your Honor. 5 THE COURT: Okay. And just so you 6 know, folks, Mr. Smith has reentered the 7 hearing room and has notified me by a silent 8 nod that we have extended our conference time, 9 so we should be good to go. 10 Let me talk then about Violation 11 No. 10. This is an assertion of violating 49 12 CFR § 175.30(b). Essentially that there was 13 this hazardous material carried on board, but 14 the operator of the aircraft failed to 15 immediatelyinspect thepackagebeforeplacing 16 it aboard the aircraft. 17 There is an assertion by Mr. 18 Foster that he saw the package, believed that 19 it was properly packaged and carried it onto 20 the aircraft himself as in his role as pilot 21 in command. 22 So how is it, in your opinion,

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(202) 234-4433 COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com78 1 that you have definitively proven this 2 particular violation? 3 MS. GEORGE: It is the Agency's 4 argument, Your Honor, that because thepackage 5 was improperly prepared, that it was, 6 therefore, not properly inspected by an air 7 carrier. 8 Air carriers who are authorized to 9 carry hazardous materials when they are 10 presented with a package as the one that was 11 prepared in this matter, that did not include 12 shipping papers, did not include the proper 13 shipping name attached to the package, did not 14 include orientation markings, did not include 15 hazardous material labels on the outer most of 16 the package. 17 During an inspection of a package 18 presented in that manner would have rejected 19 transportation of the package. 20 THE COURT: So 21 MS. GEORGE: Because the 22 respondent, Coastal Air Transport, in fact did

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(202) 234-4433 COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com79 1 transport the package, it is our allegation 2 that they failed to properly inspect it, based 3 upon the obvious defects that were apparent 4 for a hazardous material shipment. 5 THE COURT: So, Ms. George, it's 6 not just that he didn't inspect it, he didn't 7 properly inspect it pursuant to the Hazmat 8 Regulations? 9 MS. GEORGE: That is correct, Your 10 Honor. 11 THE COURT: Okay. So any factual 12 dispute that Mr. Foster may raise would more 13 likely in the FAA's opinion go to the weight 14 given to the civil penalty, given the nature 15 and circumstances, as opposed to the 16 credibility or proof of the violation itself? 17 MS. GEORGE: That would be 18 correct, Your Honor. 19 THE COURT: Okay. Let's talk 20 about Violation No. 11. It appears to be 21 asserted that whether the respondent 22 violated 49 CFR § 175.30(e) (2) And, in

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(202) 234·4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005·3701 www.nealrgross.com80 1 essence, you are saying that the respondent 2 accepted hazardous material, failed to take 3 reasonable steps to establish that it was 4 properly packaged? 5 MS. GEORGE: That is correct. 6 THE COURT: It sounds like that 7 you are relying upon proof that we have 8 already talked about and that the respondent's 9 defense to this is more a defense to the 10 penalty as opposed to the violation? 11 MS. GEORGE: That is correct, Your 12 Honor. 13 THE COURT: Okay. Let's turn to 14 ViolationNo. 12, which alleges a violation of 15 49 CFR § 175.30(e) (3). And again, we have an 16 allegation that the inside packages did not 17 comply with the specifications on the outside 18 of the overpack. And again, as I understand 19 your argument, the fact that this shipment was 20 not packed according to the Hazmat Regulation 21 is the overriding concern that the FAA has and 22 that the respondent's actions and intent

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com81 1 really goes more to the penalty as opposed to 2 the violation itself? 3 MS. GEORGE: Your Honor, it is our 4 position that a reasonable air carrier and the 5 position that Mr. Foster or Coastal Air was 6 placed in would have taken more steps to 7 determine whether or not the package was 8 correctly presented for air transportation. 9 THE COURT: Okay. Let's go to 10 Violation No. 13. This alleges a violation of 11 49 CFR § 175.33(a). And in this, you are 12 saying that the respondent failed to provide 13 the pilot in command at least, and I quote, 14 ''The following information set forth in this 15 paragraph in writing as early as possible 16 prior to the departure." 17 And then there is no information 18 other than that. What are you talking about? 19 MS. GEORGE: Your Honor, I do 20 apologize. Part of that regulation was not 21 included in the regulation. If you give me 22 two seconds, I would be able to provide that

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1 to you. 2 THE COURT: Well, I have the 3 material here in front of me, but I'm 4 concerned because part of the complaint is 5 supposed to give the respondent adequate 6 notice of the charges and how to respond to 7 them. 8 And in looking in this particular 9 charge, I'm not even sure what you are 10 charging or what the proof is that you are 11 offering to prove the material. So I'm 12 looking at 49 CFR § 175.33(a). And then it 13 talks about hazardous material shipping 14 papers, accurate and legible written 15 information about that shipment and so forth. 16 So what proof do you have in your 17 materials that shows that the respondent 18 violated this particular section? 19 MS. GEORGE: The proof that we 20 have, Your Honor, again, is the absence of a 21 provided

-- of a document, a notice of 22 notice to the pilot in command. It is vowed

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1 the renumbered No. 17 Exhibits, which were 2 examples of written notifications to pilots in 3 command of different air carriers that are 4 required to be provided under the HMR, we have 5 included with our supplemental filing there-- 6 THE COURT: Okay. 7 MS. GEORGE: for this 8 particular shipment, CoastalAir Transport and 9 the documents that we requested did not 10 provide us any information or a copy of a 11 document that would have been provided to the 12 pilot in command or kept in the records of 13 Coastal Air to provide the proper shipping 14 name, classification or division, UN number, 15 the number of packages, the quantity, the 16 packing group of the material, where it was 17 loaded on the cargo hold of the aircraft. 18 That information was not provided to the 19 Agency. And it is a requirement for notices 20 to the pilots in command. 21 THE_ COURT: Okay. Let's go to 22 Violation No. 14, which alleges a violation of

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1 49 CFR § 175.33(b), as in boy. And I have 2 that in front of me as well in which it states 3 that "The written notification to the pilot in 4 command should be readily available, which 5 includes emergency response information, as 6 required by subpart G of Part 172 of this 7 subchapter." 8 Mr. Foster in some of his 9 materials gives this and says that he did, in 10 fact, have the emergency informationavailable 11 that he needed. In looking at his response, 12 what is it that you believe makes not only 13 your prima facie case, but takes away, in your 14 opinion, any reasonable doubt about the 15 genuineness of the fact? 16 You know, I'm looking at this and 17 I say I have a respondent who says that he did 18 have that emergency information. What's 19 missing, in your opinion? 20 MS. GEORGE: Your Honor, what we 21 wouldrequire for hazardousmaterial shipments 22 is on the initial shipping document, the

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com85 1 shipper's declaration, there should also tobe 2 included a telephone number, contact 3 information, who needed to be contacted if 4 there was spillage, if there was a problem 5 with the hazardous material shipment that was 6 transported. 7 We don't have a shipper's 8 declaration for this particular package. 9 Therefore, we do not have emergency response 10 information as required by the HMR that was 11 provided to

-- in writing the pilot in command 12 for this shipment. 13 THE COURT: Okay. Let's go to 14 Violation No. 15. This alleges a violation of 15 49 CFR § 175.35(a) And as I look at my CFRs, 16 I don't see that such a regulation even 17 exists. Can you tell me where you think it 18 might be? 19 MS. GEORGE: Your Honor, I would 20 have to go to the addition of the regulations 21 that were in effect at the time the Notice of 22 Proposed Civil Penalty was issued. There have

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com86 1 been revisions to the regulations since such 2 time. And it is possible that the citation 3 there refers to an earlier regulation that was 4 included. 5 THE COURT: It may also be, and 6 I'm just simply noting this, that it didn't 7 exist even in 2009. But I will give you time 8 to see if you can find it, because at least 9 our office researchers did not find it past 10 the year 2006. 11 MS. GEORGE: I'11 take a look, 12 Your Honor. 13 THE COURT: Okay. I would note 14 for you that there appears to be a similar 15 problem with Violation No. 16, which alleges 16' a violation of 49 CFR § 175.85(a)

. And again, 17 in looking at my current copy of the 18 regulation, no such regulation exists. And it 19 does not appear, at least to my humble 20 research abilities, that it existed in 2009 as 21 well. 22 But if you could provide any

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com87 1 information about that and I'll ask you to do 2 it no later than tomorrow by 5:00, that would 3 be helpful. 4 MS. GEORGE: Will do, Your Honor. 5 THE COURT: Okay. Thank you. And 6 when I say tomorrow by 5:00, I always like to 7 give due dates in terms of calendar dates, 8 December 7, 2012 by 5:00p.m. 9 Ms. George, is there anything else 10 that you would like to talk about based on the 11 Court's inquiry before I turn to the 12 respondent? And I will also give you a chance 13 at the very conclusion to do a final 14 summation. 15 MS. GEORGE: I have nothing 16 further, at this time. 17 THE COURT: Okay. Thank you very 18 much. 19 Mr. Foster, let's talk a little 20 bit about these violations. As I understand 21 your primary argument, you are asserting, 22 essentially, that the FAA is wrong. That, in

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005·3701 www.nealrgross.com88 1 fact, the shipped box that you hand-carried 2 onto the plane on October 21, 2009 was 3 properly packaged, labeled and shipped 4 pursuant to 49 CFR § 172.101. Is that not the 5 gravamen of your argument? 6 MR. FOSTER: Well, Your Honor, I 7 did bring out that the box and packaged 8 material were all DOT-approved packages. And 9 Ms. George has confirmed that with her 10 exhibits. 11 My basic contention is that we 12 would not have knowingly carried what was 13 considered hazardous material and we did not 14 consider these hazardous at the time. And 15 with the HMR 175.10, they do give you a list 16 of many exemptions that may be carried aboard 17 the aircraft without complyingwith the normal 18 Hazmat procedures. 19 And again, we had

-- 20 THE COURT: I'm sorry, I'm going 21 to interrupt you, sir. Tell me again which 22 statute you are referring to for exemption.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE.• N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com89 1 Put it in 2 MR. FOSTER: Well, they don't

-- 3 HM

-- 49 HMR 175.10. 4 THE COURT: Okay. 5 MR. FOSTER: And that's § 4 (i) (I). 6 THE COURT: And this is the 7 section where you talked a little bit about 8 using the alcohol as an analogy? 9 MR. FOSTER: Yes, Your Honor. It 10 says exemptions for passengers, crew members 11 and air operators. And it allows you to carry 12 up to 1.3 gallons of flammable material 13 without complying with the sections of the 14 Hazardous Material Code. 15 THE COURT: And when you say that, 16 you are talking about 49 CFR § 175.10 and are 17 you referring to subsection (2)? Those are 18 aerosols, {2) talks about aerosols. And we 19 are not talking about aerosols. We are 20 talking about diesel fuel. 21 MR. FOSTER: Okay. Your Honor, 22 excuse me.

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1 THE COURT: Can you give me a 2 little better section to look at and talk with 3 about with you? 4 MR. FOSTER: Well, § 2 talks to 5 lighter fluid, lighter fuel, which is 6 basically diesel fuel. But I'm looking at § 7 4(i)(I). 8 THE COURT: Okay. 9 MR. FOSTER: Which talks about 10 carrying alcoholic beverages on board up to 11 1.3 gallons, which would normally be a six12 pack of alcohol up to, I believe it is, 121 13 proof, which is flammable material. 14 THE COURT: Well, most people that 15 I know who drink alcohol would not go and use 16 diesel fuel as a substitute for their 17 entertainment. 18 MR. FOSTER: Yes, Your Honor. 19 THE COURT: So tell me how you 20 think I can get from a drink of beer to diesel 21 fuel under this particular section. 22 MR. FOSTER: Okay. Your Honor,

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com91 1 the guidelines I will

-- I was going by, at 2 the time

-- and we have been operating for 40 3 years now. Our FAA inspectors here in San 4 Juan gave me the same guidelines and they will 5 testify to that, that they had advised me not 6 to develop a Hazmat material course, because 7 we do not regularly carry. We do not carry 8 Hazmat materials. 9 Their guidelines again were you 10 can carry small quantities properly packaged 11 aboard the aircraft or in carry-on baggage or 12 in the cargo compartment and that's the 13 guidelines that we were going by, at the time. 14 We would not have carried it if we 15 had considered it hazardous. And these were 16 pint bottles of low volatility diesel fuel 17 versus, you know, 1.3 gallons of flammable 18 material. 19 THE COURT: Okay. Well, I 20 understand that you had an intent not to 21 violate the regulations. I think that comes 22 through loud and clear in the materials that

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005·3701 www.nealrgross.com92 1 you filed. 2 The problem I have is that the FAA 3 is saying to me look, we have filed all these 4 different documents. We think we have proof 5 for some, if not all, of the violations that 6 we have alleged. And the respondent, Coastal 7 Air, has not challenged these documents in any 8 meaningful way with factual evidence of its 9 own. 10 So one of the obligations that you 11 have in representing the company is to say to 12 me okay, so I have looked at, and I'm just 13 going to give you an example, and reviewed the 14 exhibit marked Exhibit No. 4 in the FAA's 15 materials, which is the Material Safety 16 Datasheet that identifies low sulfur diesel 17 fuel as the shipping liquid. 18 And it is wrong because that's not 19 what we shipped or it's not accurate because 20 it wasn't 1.5 liters of liquid. It was only 21 2 ounces of liquid. I want to know from you 22 if you have some factual evidence that you

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com93 1 think disputes some of the material that I 2 just reviewed with the FAA regarding the 3 violations it is alleging, because you have an 4 obligation as a non-moving party to point out 5 either factual evidence that is in the record 6 that disputes the allegation or the lack of 7 factual allegation or proof regarding about a 8 violation. 9 So I wanted to know just generally 10 if you have an argument to make about the 11 FAA's assertion that regardless of your 12 intent, you actually carried onto that 13 aircraft hazardous material and it wasn't 14 properly shipped according to the Hazmat 15 Regulations. 16 MR. FOSTER: Well, Your Honor, 17 that's what the whole argument hinges on. We 18 are going-- they are allowed 1.3 gallons and 19 that's considered small quantities. The FAA 20 has

-- 21 THE COURT: Well, let me -- before 22 you jump into something else, when you say

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1 they are allowed 1.3 gallons, are you 2 referring me back to RCW

-- I'm sorry, not 3 RCW, 49 CFR § 175.104(i) again? 4 MR. FOSTER: Yes, I am, Your 5 Honor. I'm trying to define small quantities 6 properly packaged, which are the guidelines 7 that we had been given. And we have been 8 doing this for 20, 30 years. And nobody has 9 objected to it in the past. 10 We have brought the samples in on 11 a fairly regular basis. We are not doing it 12 any more and that's the instructions we have 13 given our staff at the different locations 14 that we will not accept anything that is 15 questionable in any way. 16 But the FAA has already confirmed 17 that yes, these were small quantities. And 18 that's our argument that they were small 19 quantities, properly packaged and they

-- we 20 did not consider them hazardous at the time. 21 If we had, we would not have carried them 22 aboard the aircraft.

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1 THE COURT: Okay. Well, I know 2 that there are some small quantities or 3 accepted quantities under the Hazardous 4 Materials Regulations that allow you to carry 5 very small limited amounts of certain types of 6 hazardous material. 7 But according to the FAA, even if 8 you were carryingvery small limitedpackaging 9 materials, you still have to identifyyourself 10 as a hazardous materials carrier. And one of 11 their arguments is that since 1999, you have 12 identified yourself as an operator that does 13 not carry any kind of hazardous material. 14 And as such then, you are in 15 violation of even a small amount. What 16 response do you have to that? 17 MR. FOSTER: That' s in 175 .10

. 18 Again, the same chapter part (a) that 19 subchapter does not apply to the following 20 hazardous materials when carried by aircraft 21 passengers or crew members provided the 22 requirements of 171.15 and 16 are met.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com96 1 So that's what we are going by and 2 again, the guidelines that were given to us 3 30 years ago when we started this operation. 4 THE COURT: Okay. So if I 5 understand it, you are asserting that because 6 you were the pilot, you were a crew member and 7 had the ability to carry small amounts of 8 hazardous material under 49 CFR § 175.10? 9 MR. FOSTER: That's correct, Your 10 Honor. It names both crew members and air 11 operators. 12 THE COURT: And under this 13 particular statute that I have before me, it 14 basically says that there are a variety of 15 different things that one could carry as a 16 crew member, but it doesn't talk about diesel 17 fuel. It does talk about alcoholic beverages 18 and I would agree with that. It does talk 19 about some lighter fuel. But it also says 20 that lighter fuel and I'm looking at 21 subsection (a) (2). 22 And it says "One packet of safety

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com97 1 matches or a lighter intended for use by an 2 individual when carried on one's person or in 3 carry-on baggage only. Lighter fuel, lighter 4 refills and lighters containing unabsorbed 5 liquid fuel (other than liquid gas) are not 6 permitted on one's person or in carry-on or 7 checked baggage. " 8 So lighter fuel, which you 9 indicated in your argument a little earlier is 10 a type of, you know, flammable liquid, and 11 clearly is not allowed under this section. 12 You are making an argument to me, 13 I think, that I should make a leap of faith 14 and say that because alcohol is allowed, 15 diesel fuel should be presumed in small 16 quantities to be no more dangerous than 17 alcohol. 18 Is that kind of where you want me 19 to go? 20 MR. FOSTER: That's a correct 21 assumption, Your Honor. 22 THE COURT: Okay. Do you realize

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com98 1 that I do not have the power to rewrite the 2 Hazmat Regulations? That I have to comply 3 with them. 4 MR. FOSTER: Yes, Your Honor. 5 THE COURT: Okay. It appeared to 6 me in my independent review of the regulations 7 that there are some small limited exceptions 8 to Class 3 ' Package 3 diesel fuel 9 transportation packaging requirements, but 10 that, of course, you still have to be clear or 11 certified, essentially, to accept dangerous 12 goods as a carrier. 13 So I'm not sure I need to go into 14 that particular material at length. 15 Mr. Foster, let me ask you this. 16 Is there anything else that you would like to 17 add to your argument about the violation 18 itself? 19 MR. FOSTER: Your Honor, I think 20 in my -- I brought several iterns out in my 21 response to the FAA motion

-- 22 THE COURT: Yes.

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1 MR. FOSTER:
-- from November 5th. 2 THE COURT: Yes. And let me get 3 your latest materials in front of me, so that 4 I can follow along with you. Okay. I have 5 that in front of me, sir. Go ahead. 6 MR. FOSTER: Okay. In § 4 7 regardless of the complainant's argument, 8 there remain facts that cannot be admitted in 9 there otherwise because of the impossibility 10 of contradiction to complainant's own 11 evidence. 12 THE COURT: And what would those 13 be? 14 MR. FOSTER: And then we -- 15 THE COURT: What would those be? 16 MR. FOSTER: Well, the one 17 statement she made regarding a non18 specification fiberboard box where in her 19 exhibit, which we had labeled R1, clearly 20 showed DOT markings on the box indicating it 21 was a specification box, which is normally 22 used for samples like this.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com100 1 THE COURT: Is it your assertion 2 that by using this box with the DOT marking, 3 that that in and of itself trumps all of the 4 other regulations that the FAA asserts that 5 you violated? 6 MR. FOSTER: Well, the violation 7 was that the shipment was not properly 8 packaged. We are contending that it was 9 properly packaged. And again, the guidelines 10 we were given, small quantities properly 11 packaged and they did use the DOT certified 12 boxes and packaging material to put these 13 items in. 14 So that in itself would indicate

- 15 16 THE COURT: Well, let me ask you 17. about that. You say that the FAA gave you 18 specific guidelines for small packages. Where 19 is that in your material? 20 MR. FOSTER: It would be a witness 21 statement, Your Honor. We have the FAA 22 inspectors that we dealt with on our original

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com101 1 certification were the ones that gave me those 2 guidelines. And additionally, we had other 3 inspectors that gave us the same guidelines. 4 Small quantities properly packaged. 5 THE COURT: Well, today would have 6 been the day to have their testimony in 7 writing and submitted as part of your defense. 8 MR. FOSTER: Yes, Your Honor. 9 THE COURT: Okay. Let me ask you 10 this. You say that in your November 8' 2012 11 respondent's response to FAA Motion for 12 Hearing on Sanction Only, paragraph 5 in 13 encamped. The statement from CBP Officer 14 Steele contradicts this in that the cargo was 15 presented to Customs inside the airport 16 inspection area. 17 How, in your opinion, does that 18 challenge the factual evidence that has been 19 discussed so far that the FAA has presented in 20 this motion? 21 MR. FOSTER: The FAA's information 22 is incorrect, Your Honor. They state that the

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1 box was discovered on board the flight, which 2 was not the case. It was brought into Customs 3 and it was presented for normal inspection as 4 we have done in the past. 5 And that statement by Officer 6 Steele confirms that and that's in the 7 exhibits that were given to me by the FAA. 8 THE COURT: Okay. Well, the 9 concern I have is that I'm looking at the 10 violations that the FAA is alleging against 11 you. And you have heard me go through them 12 one-by-one with Ms. George a little earlier in 13 this proceeding. 14 And there doesn't appear, in my 15 opinion, to be an allegation that you are 16 looking at a violation or a penalty because of 17 where the shipment was found. 18 You know, the FAA in this 19 particular motion did not dispute your 20 assertion that you hand-carried it to the 21 Customs official. So I'm a little unsure as 22 to what you want me to do with that particular

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com103 1 piece of information in this particular 2 motion. 3 MR. FOSTER: Well, I did not hear 4 that mentioned in your current list of 5 charges, but it was in a prior list of 6 charges. 7 THE COURT: Okay. 8 MR. FOSTER: That they stated that 9 the box was discovered on board the aircraft, 10 which is false. It was not discovered on 11 board the aircraft. 12 THE COURT: Okay. All right. 13 Then let's talk about a couple other things. 14 And I'm still looking at your materials here. 15 You had indicated on page 2 of 16 your most recent response, paragraph 8, that 17 you are asking the Court to dismiss this case 18 in its entirety and then you are asking for 19 punitive damages in the amount of $59,600. 20 MR. FOSTER: That's correct, Your 21 Honor. 22 THE COURT: Let's talk about the

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1 Motion to Dismiss first. 2 The Motion to Dismiss is a very 3 rare request in these kinds of cases and the 4 standard for a dismissal is pretty high. 5 Other than your assertion that there has been 6 some inappropriate behavior by the FAA in 7 pursuing these violations, do you have any 8 legal authority that you want to cite to me in 9 this motion that you are making for a 10 dismissal? 11 Any legal authority at all? 12 MR. FOSTER: Well, Your Honor, the 13 FAA has impeached itself in making these 14 inaccurate charges, which are very serious 15 charges. I look at this as a statement under 16 oath when they provide this documentation and 17 they are making charges which are completely 18 false. And I don't feel there is a reason for 19 it. 20 THE COURT: Okay. I'm going to

-- 21 MR. FOSTER: And I 22 THE COURT: Okay. Go ahead, sir.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com105 1 Yes? 2 MR. FOSTER: Well, I would also 3 believe that their fine calculations have 4 taken what is a very minor incident up to the 5 maximum fine that they can possibly impose. 6 And again, we question the motives on this. 7 THE COURT: When you say you 8 question the motives. Are you asserting that 9 there is some type of personal vendetta 10 against your company by the FAA? 11 MR. FOSTER: Well, the FAA by and 12 through their attorney

-- this, again, was a 13 very minor incident and we have gone from a 14 relatively small fine of $250 up to $59,600, 15 which is, in our case, a huge fine. 16 In the event that there was no 17 this caused no danger to crew or passengers or 18 people on the ground. This was a very small 19 incident, if that. 20 THE COURT: Would you agree or 21 disagree that it could have been different? 22 There could have been a fire on the plane and

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com106 1 that everyone on the plane could have died 2 because of it? 3 MR. FOSTER: Your Honor, we carry 4 346 gallons of highly volatile aviation gas in 5 the wing of the aircraft. A pint bottle which 6 would be compatible to a pint bottle of 121 7 or a liter bottle of 121 rum, there would be 8 no reason for that, other than a crash 9 situation, to even be exposed to expose 10 anybody to a hazardous material. 11 THE COURT: Is it your assertion 12 that a bottle of rum has the same flammability 13 as a bottle of diesel fuel? 14 MR. FOSTER: It's a higher 15 volatility than diesel fuel. 16 THE COURT: So it sounds to me 17 like you disagree in part with some of the 18 regulations that the FAA has promulgated as 19 safety requirements. 20 MR. FOSTER: I'm in favor of the 21 regulations limiting hazardous material, 22 that's a safety issue. I'm saying, in this

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1 case, these were very small quantities, which 2 they label, and it has always been the case 3 you can still carry small quantities properly 4 packaged aboard the aircraft. 5 And we are claiming that this 6 shipment fell into that category. 7 THE COURT: Okay. And other than 8 the citation to 49 CFR 175.10, you do not have 9 any other legal authority to offer me in 10 support of that argument or do you? 11 MR. FOSTER: Well, we have 12 witnesses, I don't have a statement from him 13 yet, that works for another oil company that 14 used to work for Hess and he is now working 15 for the rum factory in St. Croix. And he has 16 indicated that there is a higher volatility to 17 the 121 rum than there is a small sample 18 bottle of diesel fuel. 19 THE COURT: Okay. Well, that may 20 very well be. Let's assume that that's true. 21 The problem is that I still don't have a 22 regulation that you can offer me that exempts

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com108 1 the diesel fuel from the Hazardous Materials 2 Regulations. 3 I can't make the same analogy that 4 you do because the regulations don't allow me 5 to. 6 MR. FOSTER: I would be strictly 7 on -- again, on the guidelines that we were 8 given by our FAA inspectors early on and it 9 was just a flat simple statement, small 10 quantities properly packaged are exempt from 11 the Hazmat Regulations. 12 THE COURT: Do you have those 13 recommendations in writing that you could fax 14 to our office by tomorrow at 5:00p.m.? 15 MR. FOSTER: I doubt I could get 16 them by tomorrow, Your Honor_ The one 17 several of the agents that dealt with this 30 18 and 35 years ago are no longer working with 19 the Agency_ 20 THE COURT: Okay. 21 MR. FOSTER: So I would have to 22 track them down.

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1 THE COURT: So is this more 2 anecdotal as to what your memory is of what 3 someone told you a long time ago as opposed to 4 some written instructions they gave you and 5 that you kept? 6 MR. FOSTER: It was as I 7 remember it, Your Honor, verbal instructions. 8 THE COURT: Okay. Okay. Let me 9 ask you this. There has been some talk by Ms. 10 George about the penalty phase. As you may 11 recall on October 23, 2012, we talked about 12 the penalty phase just briefly. And, at that 13 time, I found that this motion was strictly on 14 the violations only, because of the notice 15 that had been given by the FAA in terms of 16 this entitled motion. 17 So my question to you is are you 18 aware that if this case is not settled for 19 whatever reason by the time of the trial date, 20 that you have an obligation to the trial or 21 the hearing with information that addresses 22 all of the nine factors that the FAA has

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com110 1 already identified, that would give you the 2 opportunity to challenge the $59,600 fine that 3 they are alleging should be assessed against 4 you? 5 MR. FOSTER: Yes, Your Honor. 6 THE COURT: Okay. There is a due 7 date of December 5, 2012 for you to file 8 respondent's witness and exhibit list. Have 9 you sent that off to Ms. George yet on behalf 10 of your company? 11 MR. FOSTER: Yes, we have, Your 12 Honor. 13 THE COURT: Okay. Those exhibits 14 should also include any and all financial 15 information that you think wouldbe applicable 16 to the assessment of a fine, if one is 17 imposed. And it should also address any and 18 all of the nine criteria that you could talk 19 about, if you want to, regarding mitigating 20 circumstances, the nature and circumstances of 21 the offense and so forth that I have to look 22 at in reviewing the proposed fine.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE.• N.W. WASHINGTON. D.C. 20005·3701 www.nealrgross.com111 1 So if you did not know that now, I 2 want you to know it as of today, so that if 3 you need to supplement your witness and 4 exhibit list, you can. And I would like you 5 to file, if you need to, any supplemental 6 exhibits and witness lists no later than 7 December 14, 2012. 8 You don't have to file a 9 supplemental, but I'm just concerned that you 10 make sure that you take good care of yourself 11 in this proceeding. Does that make sense to 12 you? 13 MR. FOSTER: Yes, yes, it does, 14 Your Honor. 15 THE COURT: Okay. Then let's just 16 talk about your request for punitive damages 17 in the amount of $59,600. 18 May I make a leap of faith in this 19 one matter and assume that you are asking for 20 the same amount against the FAA that they have 21 asked against you? 22 MR. FOSTER: That's correct, Your

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com112 1 Honor. 2 THE COURT: Okay. In these 3 particular proceedings, we do not assess 4 punitive damages

_ This is not a Court of 5 Equity. It is not an Article 3 Bench. And we 6 do not have the ability to grant punitive 7 damage relief_ So I would not be able to even 8 entertain this type of motion from you. I 9 just wanted to let you know right off the bat_ 10 Does that make sense? Did my 11 explanation make sense to you? 12 MR. FOSTER: Yes, it does, Your 13 Honor. 14 THE COURT: Okay. Is there 15 anything else that you would like to add to 16 yourparticularargument this afternoonbefore 17 I turn back to the moving party? 18 MR. FOSTER: Okay. Just a couple 19 of items, Your Honor that the FAA had 20 mentioned about our failure to take corrective 21 action and that, of course, is not true. 22 We have advised all our employees

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com113 1 not to accept any questionable material in the 2 future, until we get a settlement on this. 3 This is what we consider a gray area as to 4 what is actually a small quantity and what is 5 actually hazardous in small quantities. We 6 are getting different definitions from 7 different sources. 8 The second matter is we have 9 always had Hazmat posters displayed at our 10 counter sites on our different locations that 11 we go to. It is an FAA-approved poster that 12 we have. We do have it pasted to the counter, 13 so it is clearly visible to anybody that 14 travels. 15 THE COURT: Okay. Well, thank you 16 very much for that information. I certainly 17 will take it as part of your argument. 18 Is there anything else that you 19 would like to add before I turn back to Ms. 20 George? 21 MR. FOSTER: No, Your Honor. 22 THE COURT: Okay. Thank you. Ms.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISlANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com114 1 George, I know we have gone way past our 90 2 minute deadline, but as the moving party, you 3 have a right of final reply. You are welcome 4 to take five minutes or less to make any final 5 argument, if you so choose. 6 Do you have anything else you 7 would like to add? 8 MS. GEORGE: Just a couple of 9 points of clarification, Your Honor. 10 The first one is under§ 5123(a) 11 of the Hazardous Material statute. The 12 statute defines acting knowingly. And under 13 the statute it indicates that a person acts 14 normally when the person has actual knowledge 15 of the facts giving rise to a violation where 16 a reasonable person acting in the 17 circumstances or exercising reasonable care 18 would have that knowledge. 19 Mr. Foster has indicated that the 20 company did not know that what they were 21 carrying was hazardous materials. However, 22 under the definition that is contained within

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1 the statute, the knowledge requirement 2 pertains to the respondent's knowledge of what 3 it did or failed to do and not whether or not 4 the respondent was aware of whether a material 5 is classified as a hazardous material or 6 whether his actions would result in a 7 violation of the Hazardous Materials 8 Regulation. 9 Therefore, in essence, the Federal 10 Hazardous Materials statute requires a person 11 to make a reasonable inquiry under the 12 circumstances known to it at the time and 13 exercising reasonable care to gain knowledge 14 of what the material is that it has 15 transported and accepted. 16 The next thing that we wanted to 17 mention

-- 18 THE COURT: Well, before you go on 19 to your next thing, which violation are you 20 alleging this is material to? 21 MS. GEORGE: I'm responding to the 22 respondent's argument today that the company

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com116 1 did not act knowingly when it transported the 2 diesel fuel on board the flight on October 21, 3 2009. 4 THE COURT: Which violation do you 5 think this is applicable to, just so that I 6 know? 7 MS. GEORGE: Actually, all of the 8 violations, Your Honor, because there is a 9 requirement that there was a knowing violation 10 of HMR as the overarching requirement for 11 these types of cases. 12 THE COURT: Okay. Thank you. Go 13 ahead. 14 MS. GEORGE: The second point that 15 we would like to make is that Mr. Foster, as 16 the company's representative, has also 17 indicated that there was a $250 civil penalty 18 that the company could have been assessed. We 19 just want to make note in going forward that 20 under theAgency's HazardousMaterials Penalty 21 Guidelines and the matrix that we have 22 included with our filing on July, excuse me,

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com117 1 I think it is, 20, 2012 at Exhibit 10, 11 and 2 12, those portions are from the Agency's 3 Sanction Guidelines. 4 A $250 civil penalty is the amount 5 of a civil penalty that could be assessed for 6 an individual who then properly accepted

-- 7 excuse me, improperly offered a hazardous 8 material for transportation in the air 9 transportation system. 10 However, for air carriers, 11 specifically Group 4 air carriers of which 12 Coastal Air Transport is, under the matrix, 13 the minimum civil penalty that can be assessed 14 is contained on Exhibit 11 of our July filing. 15 For a proper acceptance, the minimum civil 16 penalty that can be assessed under the matrix 17 is $2,500 with a maximum civil penalty of the 18 $16,200 that we are seeking. 19 For failure to inspect a Hazmat 20 shipment properly, the minimum civil penalty 21 is $5,000 to the maximum of $16,200, that we 22 are seeking.

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com118 1 For failure to provide Hazmat 2 training, the minimum civil penalty is $5,000 3 and the maximum is $16,200 under the matrix. 4 THE COURT: And, Ms. George, I 5 don't need to have you read the rest of 6 Exhibit 11 to me. But let me just make sure 7 I understand. This is an internal guideline 8 for the FAA employees, is it not? 9 MS. GEORGE: It is a published 10 sanction policy. It was published in a 11 Federal Register on April 21, 1999, which 12 indicates how the Agency would be applying the 13 Hazardous Material statute for air 14 transportation of hazardous materials. 15 THE COURT: But the statute itself 16 does not require this to be imposed? 17 MS. GEORGE: The statute does not 18 require it to be imposed. However, the Agency 19 through the decision maker has requested 20 difference to the policy. 21 THE COURT: Thank you. Well, we 22 will have an interesting discussion about

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(202) 234-4433 COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com119 1 that, I'm sure, in January. 2 Anything else that you would like 3 to add? 4 MS. GEORGE: The final thing that 5 we would like to add is on the topic of 6 corrective action. 7 Mr. Foster, the respondent, has 8 indicated that the company has made a decision 9 that it will no longer carry any hazardous 10 materials until a conclusion of this 11 particular matter. 12 I think it is important for us to 13 mention that under case law, specifically in 14 the Matter of TCI, which is, I'm looking for 15 a citation for you, it is TCI Corporation, FAA 16 Order 92-77, December 22, 1992. The decision 17 maker in that case indicated that a decision 18 not to handle hazardous materials in the 19 future does not represent the type of positive 20 corrective action that would warrant 21 consideration in determining a penalty. 22 The decision maker specifically

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(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISlANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com120 1 indicated that this type of a change of policy 2 is one that could be changed at any time. And 3 as a result is not the type of corrective 4 action that we would use for mitigation of a 5 civil penalty. 6 And that's all that I have. 7 THE COURT: Thank you very much. 8 Ms. George, Mr. Foster, thank you 9 very much for the time that you have spent 10 today. It has been very, very helpful for 11 this Court to hear both of your arguments. 12 I'll thank the court reporter, 13 too, for staying beyond the 90 minute proposed 14 time period. 15 Just to remind you all, Ms. 16 George, you have until tomorrow, December 7, 17 2012 at 5:00p.m., to fax Mr. Smith a PDF 18 version of essentially the photographs 19 contained in the FAA's Request for Admission 20 No. 16, which, in essence, also includes 21 respondent's one page photocopy of the same 22 Hazmat labels in respondent's Exhibit No. 1.

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1 In addition, Mr. Foster, you have 2 until December 7, 2012 at 5:00 p.m. to 3 provide, if you have it, a copy of the written 4 regulation that you say you were complying 5 with that the FAA provided to you. 6 You indicated in some of your 7 arguments that you think that it was simply 8 oral only and so the Court also gave you the 9 alternative of providing a testimonial 10 statement from the FAA inspector that you 11 think might be able to assert that with any 12 specificity. 13 In addition, Mr. Foster, you have 14 until December 14, 2012 to file any and all 15 supplemental exhibits and/or witness lists to 16 ensure that you have fully covered your 17 defenses on the penalty phase, which still 18 remains for hearing in January in the hearing 19 dates that we have scheduled in St. Croix, 20 Virgin Islands. 21 I will then issue a decision on 22 the FAA's Motion for Hearing on Sanction Only.

NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com122 1 I'm going to try and get it out no later than 2 December 14, 2012. And I'm hoping to have it 3 out even earlier than that, but I want to wait 4 until the end of tomorrow business day at 5:00 5 p.m. to get any and all supplemental materials 6 that we just talked about. 7 With that, on behalf of the FAA, 8 Ms. George, is there anything else that you 9 would like to add or correct to the record, at 10 this time? 11 MS. GEORGE: No, Your Honor. 12 THE COURT: Mr. Foster, on behalf 13 of Coastal Air, anything you would like to add 14 or correct to the record, at this time? 15 MR. FOSTER: Your Honor, it was 16 December 7th you said for the statements? 17 THE COURT: You have until 18 tomorrow, December 7, 2012 by 5:00p.m. to 19 file one of the two things that we talked 20 about. 21 No. 1' either ' the written 22 instructions that you say you might have

NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com123 1 received from the FAA inspectors years go that 2 qualify the regulations and gave you 3 information that allowed you to believe that 4 you had a right to transport small quantities 5 of diesel fuel, as you have talked about or in 6 the alternative, to submit the statement from 7 the FAA inspector that you thought would 8 corroborate that as well with the specific 9 regulation cited. 10 If you don't file it, that's fine. 11 I'm going to go ahead and issue the decision 12 after December 7, 2012. 13 But because you said that you had 14 that evidence, you just didn't have it at 15 hand, I'm going to give you a chance to file 16 it. And of course, if you send it to me, you 17 send a copy at the same time to Ms. George. 18 And you need to fax it to us, 19 because we are not going to get it by U.S. 20 Mail by tomorrow. It has to be in my hands by 21 tomorrow at 5:00 p.m. 22 In terms of

NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 INW'N.nealrgross.com124

1 MR. FOSTER: Your Honor, that's 2 not going to be sufficient time for me to get 3 statements from FAA inspectors. 4 THE COURT: If you don't, then you 5 are out of time. 6 MR. FOSTER: Okay. 7 THE COURT: You either have

-- you 8 can take the time to find if you have 9 somebody available to you and you can get a 10 statement tomorrow morning and fax it to us by 11 tomorrow afternoon, that's great. But this 12 particular motion was the time for you to 13 provide factual evidence, either by 14 testimonial statement or by factual document. 15 And we have talked about that 16 before. So the time is pretty much up for you 17 to do that. But because I'm giving the FAA an 18 opportunity to file a better copy of the 19 photographs of the Hazmat label, I'm also 20 giving you the same amount of time to provide 21 a supplement to your factual documentation. 22 If you can't make it within the 24

NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com125

1 hours I have given you, then that's okay. You 2 just won't make it. 3 So in terms of the December 14, 4 2012 deadline, that was the deadline for you 5 to file any and all supplemental witness lists 6 and/or exhibit lists for the purposes of the 7 hearing that we have scheduled in January 8 2013. 9 If you have already filed your 10 witness list and exhibit list and you are 11 comfortable that it covers all of the areas 12 that you want to cover, both for potential 13 violation defense and defense against the 14 alleged penalty of $59,600, then you, 15 obviously, don't need to do anything by 16 December 14, 2012. You are done. 17 But if, in this particular 18 conversation andmotion, something rang a bell 19 for you and you think oh, I better add this 20 in, I'm giving you a chance to do that. 21 Does that make sense? 22 MR. FOSTER: On the December 14th

NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com126 1 deadline, yes, it does, Your Honor. 2 I'll be working. I'll be flying 3 all day tomorrow, so I will not be available 4 to do any interviews with any of the FAA 5 people 6 THE COURT: Okay. 7 MR. FOSTER:

-- if I could get a 8 hold of them, so that's not going to work. 9 THE COURT: Okay. Well, I'm sorry 10 it doesn't work out. And I'll look forward to 11 getting material from you, perhaps, on 12 December 14, 2012. 13 And I'm certainly looking forward 14 to seeing both of you in January 2013. 15 With that, on behalf of the FAA 16 and on behalf of the respondent, I'm going to 17 thank both of you, Ms. George and Mr. Foster, 18 for your presence today and all of your 19 assistance. 20 It appears our business is 21 complete. We can go off the record and I wish 22 you all a good day.

NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com127

1 MS. GEORGE: Thank you. 2 THE COURT: Thank you. Bye-bye. 3 MR. FOSTER: Thank you, Your 4 Honor. 5 THE COURT: You're welcome. Bye6 bye. 7 (Whereupon, the Oral Argument was 8 concluded at 3:56p.m.) 9 10 11 12 13 14 15 16 17 18 19 20 21 22

NEAL R. GROSS
(202) 234-4433 COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com___A

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Neal R. Gross & Co., Inc. 202-234-4433 Page 143144
C E R T I F I C A T E

This is to certify that the foregoing transcript

In the matter of: Coastal Air Transport, Inc.

Before: US DOT/FAA

Date: 12-06-12

Place: teleconference

was duly recorded and accurately transcribed under my direction; further, that said transcript is a true and accurate record of the proceedings.

(202)234-4433 Court Reporter

NEAL R. GROSS COURTREPORTERSANDTRANSCRIBERS 1323RHODEISLANDAVE

.. N.W. WASHINGTON,D.C. 20005-3701 WNW.nealrgross.com