UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF HEARINGS

IN THE MATTER OF: PAZ AVIATION, INC. Respondent
Thursday, April 9, 2015 FDMS No. FAA-2014-0807 1



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The teleconference convened, pursuant to notice, at 10:00 a.m. BEFORE: THE HONORABLE J.E. SULLIVAN, Administrative Law Judge

(202) 234-4433 

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NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com2 APPEARANCES:
On Behalf of the Complainant: WILLIAM VINES, ESQ. of: Federal Aviation Administration Office of the Regional Counsel, AS0-7 Southern Region 1701 Columbia Avenue College Park, Georgia 30337 (404) 305-5200
On Behalf of the Respondent: DAVID M. McDONALD, ESQ. of: McDonald & McDonald, Attorneys at Law P.O. Box 669122

(202) 234-4433 Miami, Florida 33166-9428 (305) 643-5313

NEAL R. GROSS COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLANDAVE., N.W WASHINGTON, D.C. 20005-3701 www.nealrgross.com3

1 P-R-0-C-E-E-D-I-N-G-S 2 10:35 a.m. 3 JUDGE SULLIVAN: We're on the record 4 in the Matter of FAA versus Paz Aviation, Inc. 5 This is Docket No. FAA-2014-0807. 6 Today is Thursday, April 9, 2015 and
7 the parties have convened by telephone for a 8 motion conference.
9 The FAA is representedby its attorney 10 of record, Mr. WilliamVine. The Respondent, PAZ
11 Aviation, Inc. is represented by its attorney of 12 record, Mr. David M. McDonald. Also present in 13 the Office of Hearings courtroom is Mr. Cody L. 14 Smith, an attorney advisor, who's sitting in as 15 an observer only. 16 Good morning to you all. I'll note 17 that prior to going on the record we have 18 convened by two different telephone conference 19 line. We have convened on the record 20 approximately 35 minutes after the start of the 21 motion conference because of the court's 22 conference line and problems ensuing with it

(202) 234-4433 NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE , N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com4 1 because of the large power outage that occurred 2 yesterday throughout parts of the D.C. area. And 3 when I say that, I'm making an assumption that 4 the power outage is somehow responsible for our 5 conference line problems in part because we've 6 had some other troubles with equipment since 7 power was restored late yesterday. 8 So we've run out of time to talk in 9 depth about this particular motion. Prior to 10 going on the record counsel looked at their 11 calendars and conferred with the Court and we've 12 agreed to reconvene in two weeks on Wednesday, 13 April 22nd, 2015 at 1:30 p.m. for continued 14 discussions about this particular case and the 15 motion before the Court. 16 In saying that, I'm going to take 17 about 10 minute to talk to counsel a little bit 18 about what I see in the motions that have been 19 brought before me and what I think might be 20 matters that counsel could look into prior to our 21 next motion conference, because I think that 22 there are some issues in this case that should be

(202) 234·4433 NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W WASHINGTON, D.C. 20005-3701 www.nealrgross.com5 1 addressed, but perhaps have not yet been fully 2 vetted by counsel. 3 So, let's start first and foremost 4 with the entire issue of laches. I've read all 5 the materials that the parties have submittedand 6 I've also read some additional materials beyond 7 that. And I think one of the problems that the 8 parties have been presented with in this case, 9 and of course that the Court has noticed as well, 10 is that there have been recent decisions issued 11 from this office making rulings on the issue of 12 laches and timeliness, which may be in error. 13 So, when I say that, I'm speaking 14 specificallyabout the three decisions that Judge 15 Benkin issued in 2005 and 2006, and those cases 16 being specifically-- I'm going to look them up 17 so that I say the names correctly

-- in the 18 Matter of Aerocomp, Inc., which was FAA-2005- 19 21064, in the Matter of Aviation Brake Service, 20 Inc., which is FAA-2005-22213, and in theMatter 21 of Joseph Steven**Kar~** FAA Docket 2005-22889. 22

(202) 234-4433 In all of those cases Judge Benkin

NEAL R. GROSS COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com6 1 found that 28 U.S.C. Section 2462 was the 2 appropriate statutory authority to look at in 3 terms of a motion to dismiss on the grounds of 4 untimeliness. In making that ruling Judge Benkin 5 found essentially that there was no statutory 6 authority that supported the regulation that the 7 FAA administrator had passed in 1990 asserting 8 that there was a two-year time period for these 9 proceedings instead of a five-year time period. 10 And in that ruling I believe that Judge Benkin 11 may have erred. 12 So, I'm going to talk just briefly 13 about the history of this particular type of 14 issues and I'm going to ask counsel to take a 15 look at some authorities between now and our next 16 conference. And then at our next conference we 17 can talk about whether counsel still want to 18 pursue and argue the arguments that have been 19 filed so far, or whether there may be some 20 additional honing of arguments that counsel would 21 like to do. 22

(202) 234-4433 So, in essence, as we all know, there

NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLANDAVE., N.W WASHINGTON, D.C. 20005-3701 www.nealrgross.com7 1 was an adoption by the FAA administrator in 1990 2 of the Federal Aviation Rules. There was a 3 lengthy discussion and comment about those 4 federal rules and why they were being adopted in 5 the Federal Register. And I'll give you the cite 6 to that before we close today. 7 Approximately one month after those 8 rules were adopted, the case of in theMatter of 9 John J. Carroll, Docket No. CP89NE0285, was 10 issued by the FAA administrator. And in that 11 particularcase the FAA administratorapplied, as 12 he should have done, five-year statute of 13 limitations because the incident that this 14 particular case disputed had occurred in 1989, 15 that preceded the adoption of the 1990 rules that 16 promulgated the two-year statute of limitations. 17 So, we have that. And then we have a 18 series of different cases that were issued by 19 this office that address both laches and the 1990 20 rules. And in most of those cases there's 21 discussion about the 1990 adoption of the two22 year limitation period, which as you all know is

(202) 234·4433 NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com8
1 found is 14 C.F.R. Section 13.208 Subsection (d). 2 But most of those cases didn't apply the two-year 3 period because the event or incident that was at 4 issue preceded the 1990 adoption of the rules and
5 the rules were supposed to be applied 6 prospectively only.
7 So, we have before us a regulation in 8 14 C.F.R. Section 13.208 Subsection (d) that says 9 that there can be a motion to dismiss by a 10 respondent if the Notice of Proposed Civil 11 Penalty is filed more than two years after the 12 incident alleged. Not the Letter of 13 Investigation, but the Notice of Proposed Civil 14 Penalty. There's an opportunity to move to 15 dismiss under that particular regulation. 16 In Judge Benkin's later cases, which 17 I've already cited, he found that that regulation 18 was not supported by any statutory authority and 19 as such could not stand alone or be utilized in 20 violation of the statute that we've talked about 21 a little earlier. 22

(202) 234-4433 The problem with Judge

NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE.• N.W. WASHINGTON, D.C. 20005-3701 Benkin's

www.nealrgross.com9 1 rulings is that there is statutory authority 2 specifically supporting the regulation and which
3 the regulation implements. And I'm going to give 4 you that citation. So, if you look at 49 U.S.C.
5 Section 46301, Subsection (d) (7) (C), it
6 specifically states that these kinds of cases 7 have a two-year statute of limitations. So, the 8 analysis that was providedby Judge Benkin, in my 9 opinion, may be simply erroneous. So if we 10 assume for the sake of argument that 14 C.F.R. 11 Section 13.208(d) is supported by legislative 12 enacted statutory authority, then we're looking 13 at a two-year period and not a five-year period. 14 In addition, we're looking at a period 15 of time that begins with the alleged incident and 16 then is tolled by the Notice of Proposed Civil 17 Penalty, not tolled by the Letter of 18 Investigation, nor it is tolled by the complaint. 19 It's the period of time between the incident and 20 the Notice of Proposed Civil Penalty. 21 If that is true, then what we have 22 before us in this particular case are 18 of the

(202) 234·4433 NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE

.. N.W. WASHINGTON. D.C. 20005·3701 www.nealrgross.com10 1 48 violations that fall outside that two-year 2 period. And carrying that a little bit further, 3 we also then have pursuant to the FAA 4 administrator's explanation of the rules in 1990 5 an assertion that it is the FAA's burden to go 6 forward with an explanation for why the Proposed 7 Notice of Civil Penalty is outside the two-year 8 period of time. And as I read the Federal 9 Register and the information contained in it, 10 there is a strong and narrow -- there are -- I 11 should say this: There are limited ways in which 12 good cause could be found for those delays. 13 There's also an open question about 14 what kind of laches defense should be raised and 15 when it should be raised. So, I see my time is 16 about ready to end, so I'm going to ask counsel 17 if you'll take a look at a couple things before 18 we reconvene. And the first and foremost is 49 19 U.S.C. Section 46301, Section (d), as in David, 20 (7) (C) 21 22 Judge.

(202) 234-4433 MR. VINES: What was the subsection,

NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLANDAVE. N.W. WASHINGTON. D.C. 20005-3701 www.nealrgross.com11

1 JUDGE SULLIVAN: (d) as in David, (7), 2 which is the number seven, (C) as in cat. 3 MR. VINES: Thank you. 4 JUDGE SULLIVAN: You're welcome. I 5 would ask the parties to take a look at the 6 Federal Register, and the citation would be 55 7 Federal Register 27553 through 27556.
8 MR. VINES: Two-seven-five-five-three 9 through two-seven-five-five-six? 10 JUDGE SULLIVAN: Correct.
11 MR. VINES: Thank you. 12 JUDGE SULLIVAN: You're welcome. And 13 then

-- 14 MR. McDONALD: And that was 65 FR, 15 right? 16 JUDGE SULLIVAN: It's 5-5, so fifty17 five, Federal Register 27553 through 27556. 18 MR. McDONALD: Okay. Thank you. 19 JUDGE SULLIVAN: You're welcome. 20 MR. McDONALD: It sounds like you're 21 phone, Judge, is a voice over Internet Protocol22 type phone.

(202) 234-4433 To me you're sort of warbly, but

NEAL R. GROSS COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLANDAVE

.. N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com12 1 maybe that's also because we're using the Judge's 2 cell phone to get to me. 3 JUDGE SULLIVAN: Okay. I'm so sorry, 4 and I will try and speak up and maybe that will 5 help.
6 In addition, I would recommend that 7 the parties re-read the 1995 United Parcel
8 Service case that Judge Mathias issued. And I 9 can give you that citation. Let's see if I can 10 find it. It's FAA Docket CP95WP0135. This was 11 cited in the Respondent's brief. So you have a 12 written statement of it. In this particular case 13 Judge Mathias asserted that there was a two-year 14 period for all cases after 1990. 15 MR. McDONALD: Excuse me, Judge. This 16 is David McDonald. I'm sorry to interrupt you, 17 but I didn't understand a single word you said 18 after UPS case. 19 JUDGE SULLIVAN: Okay. I'll try it 20 again. This is Judge Mathias' case. Can you 21 hear me, Mr. McDonald? 22

(202) 234·4433 MR. McDONALD: (No audible response)

NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com13

1 JUDGE SULLIVAN: I 'm hearing no 2 response from Mr. McDonald. 3 Mr. McDonald, have I lost you? 4 MR. McDONALD: I can -- you're very 5 warbly, Judge. May I ask a favor of Cody to 6 write down the citations and I will email him and
7 get them. That might be easier. 8 JUDGE SULLIVAN: Okay. What I will do 9 is I'll ask Mr. Smith to send both you and Mr. 10 Vines the three cases that I think would be 11 helpful to read in addition to the statutory code 12 and the Federal Register. And then I will simply 13 say it's the United Parcel Service case, the 14 Royal Avionics Case and the High Exposure case, 15 all of which talk about the two-year period and 16 what is involved in that. 17 And then we reconvene two weeks from 18 now, we can talk about whether or not either of 19 you believe that the five-year statutory laches 20 period is still applicable. And if it is, we'll 21 take argument. If it's not or you want to amend 22 your arguments to a certain degree and have a

(202) 234·4433 NEALR. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005·3701 www.nealrgross.com14

1 little more time to research and write 2 supplementalmaterials, we can talk about that as 3 well.
4 So, this is not in two weeks a 5 statement that you have to be fully prepared to 6 go forward on anything. It's another, I think, 7 advisory conference meeting to talk about what 8 should be addressed and how it should be 9 addressed in this particular case, because as I 10 say, if the Court's interpretation of the rules, 11 the statutes and the case law is correct, there 12 are still issues of merit that need to be 13 addressed by the parties. 14 So, it looks like my time is almost 15 up. Starting with you, Mr. Vines, is there 16 anything else that I can address on a very short17 term basis for you before we close today? 18 MR. VINES: No, Judge. 19 JUDGE SULLIVAN: Mr. McDonald, turning 20 to you, same question.
21 MR. McDONALD: No, I'm fine, Judge. 22 Thank you so much and I'm sorry we had so much

(202) 234-4433 NEAL R. GROSS COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com15 1 trouble with the phones. 2 JUDGE SULLIVAN: Yes. 3 MR. McDONALD: You're loud and clear 4 at the moment. 5 JUDGE SULLIVAN: Okay. I picked up 6 the cell phone, Mr. McDonald, so I'm talking with 7 my left hand on the cell phone and I'm sitting
8 right in front of the conference line. So, it's 9 multi-tasking at its best. 10 So, I will do this 11 MR. McDONALD: Thank you. 12 JUDGE SULLIVAN: You're welcome. I 13 will have Mr. Smith send each of you by email 14 today the case citations and names of United 15 Parcel Service, Royal Avionics and High Exposure. 16 I will also send out and an order probably 17 tomorrow about the new date of April 22nd, 2015 18 at 1:30 p.m. We'll try and fix our conference 19 line before then, but if we can't get it fixed, 20 we'll figure out a different way of convening and 21 let you know. 22 With that, we can go off the record.

(202) 234-4433 NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com16 1 I wish you all a good day and I'll look forward 2 to talking to you in two weeks. Thank you, all. 3 Bye-bye.
4 MR. VINES: Thank you, Judge. 5 JUDGE SULLIVAN: You're welcome.
6 MR. VINES: Bye-bye. 7 (Whereupon, the above-entitledmatter 8 went off the record at 10:54 a.m.)
9 10 11 12 13 14 15 16 17 18 19 20 21 22

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Neal R. Gross and Co

.. Inc. Washington DC 19

www.nealrgross.com20 C E R T I F I C A T E

This is to certify that the foregoing transcript

In the matter of: Paz Aviation, Inc.

Before: US DOT

Date: 04-09-15

Place: teleconference

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

Court Reporter

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