U.S. DEPARTMENTOFTRANSPORTATIONRECE- iVf= D 

OFFICE OF HEARINGS i ~.,_ 

WASHINGTON, DC 

************************************ 

Federal Aviation Administration 

Complainant 

v. 

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* 

* 

* 

JAN 2 0 2015 

HEARING DOCKET 

* FAA Docket No. CP10GL0212 

National Power Corporation, 

Respondent 

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* 

* 

* 

* 

************************************* 

Judge Richard C. Goodwin 

DMS No. FAA-2013-0620 

AGENCY'S RESPONSE TO RESPONDENT'S POST-HEARING BRIEF 

The Complainant, by and through the undersigned counsel, hereby files this Response to the 

Respondent's Post-Hearing Brief of Closing Argument. 

I. The Proposed Fine is Reasonable and Constitutional. 

The civil penalty was derived from the Agency's sanction guidelines and was reasonable 

under the circumstances and consistent with the Agency's policy. An Agency's action only is 

arbitrary if its actions were "unwarranted in law or without justification in fact." Lugo v. United 

States, 2009 WL 928136, *3 (S.D.N.Y. 2009). See also Cross v. United States, 512 F.2d 1212, 

1218 (2"d Cir. 1975); Goodman v. United States, 518 F.2d 505,511-12 (5th Cir. 1975). "A 

sanction is not arbitrary and capricious when a federal agency properly adheres to its own 

regulations and guidelines when imposing it." Young Jin Choi v. United States, 944 F.Supp. 

323, 325 (S.D.N.Y.1996). See also Lugo, 2009 WL 923136 at*3; Yafaie v. United States, 1995 

WL 422169, at *I (S.D.N.Y. July 18, 1995)("Ifthe penalty imposed is in accordance with the 

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settled policy of the FNS, it is not arbitrary or capricious."); Ai Hoa Supermarket, Inc. v. United 

States, 657 F .Supp. 1207, 1209 (S.D.N.Y.1987) (sustaining FNS's imposition of a particular 

sanction for a Program violation based on the regulations and the FNS Handbook); A/ira) 

Enterprises, Inc. v. US., 2013 WL 690530, *2 (W.D. Tex. Feb. 25, 2013)(citing Otto v. Block, 

693 F.2d 472,474 (5th Cir. 1982)). 

At the hearing, Zawarus testified that the proposed sanction was calculated using the 

Agency's enforcement order. (Tr. 67) The enforcement order is a tool used both to provide the 

public of the potential penalty for violations and to assist the Agency in determining the 

appropriate amount "in light of the statutorily defined penalty considerations." FAA Order No. 

2150.3B. The enforcement order sets the baseline for determining the civil penalty. It does not 

dictate the amount, but allows the Chief Counsel to "reduce penalties based on 'other matters as 

justice may require'". Novelty, Inc., RSPA No. 02-354-SB-EA (2005). "In general, as long as 

the assessed penalty falls into the range that should be used after consideration of all relevant 

factors, and no factors that would justify an assessment of a civil penalty above or below that 

range (i.e., inability to pay; willful violation; history of past violations) exist, then the amount 

assessed is not arbitrary under the guidance and constitutes a reasonable exercise of the 

Administrator's discretion to assess a civil penalty." In the Matter ofVillamor Tabula, FAA 

Order No. 2010-6, *6 (2010). 

Courts evaluating whether the civil penalty was arbitrary generally look to whether the 

penalty falls within the guidelines and whether the Agency considered all ofthe aggravating and 

mitigating circumstances. The guidelines call for the Agency to consider such factors as the 

nature, circumstances, extent, and gravity of the violation, the degree of culpability, any history 

of violations, the ability to pay, the volume of hazardous materials, any corrective action taken, 

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and other factors as justice may require. Courts have recognized that each case is unique and 

that the Agency "must analyze the statutory factors in each case independently." East Fork 

Enterprises, PHMSA No. 03-501-SB-SW (2005). Although the precise amount that may be 

imposed for each violation cannot be known prior to the violation, the proposed penalty is not 

arbitrary simply because there is discretion within the penalty range. Rather, this matrix puts the 

public on notice of the extent of the penalty that may be incurred and what the Agency considers 

in assessing that penalty. "If the agency's sanction conforms to federal regulations and internal 

agency guidelines, the reviewing court may not deem it arbitrary and capricious." Aliraj, 2013 

WL 690530, *2 (citing Otto, 693 F.2d at 474)). 

The proposed sanction fell within the penalty guidelines for the violations NPC 

committed. Zawarus testified at the hearing that the penalty matrix was used in his calculation. 

(Tr. 67) He first considered the nature of the business, the frequency in which NPC handles and 

ships hazardous materials, and the types of violations NPC committed to determine the 

appropriate sanction range. (Tr. 68-70) The shipments each contained violations that fell into 

the categories of packaging, emergency response, training, and other. See e.g., Tabula, FAA 

( 

Order No. 2010-6 (considering the categories the violations fell into). The penalty for each of 

the four violations could have been as high as $5,500 for each of the shipments. However, 

Zawarus recommended, and Regional Counsel's office agreed, that $66,000 for all of the 

violations was a reasonable amount in light of the circumstances. (Tr. 67-68, 80) To determine 

the appropriate sanction within the range proposed by the sanction guidelines, Zawarus 

explained that he considered the nature and circumstance ofthe shipment, the extent of gravity 

related to the shipment, the number of violations, NPC's violation history, and mitigating 

circumstances. (Tr. 67-70, 83-86) The penalty reflects the danger of the materials, which should 

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have been packaged according to the more protective packing group I standard. See East Fork, 

PHMSA No. 03-501-SB-SW, at *4 (explaining that improper shipping in a lower packing group 

poses a serious and immediate threat to danger that must be reflected in the penalty). The 

penalty also took into consideration that NPC manufactures the batteries that were shipped, 

imposing a higher degree of care, and that, despite its regular handling of batteries, it offered 

eleven shipments that were not prepared in accordance with the regulations in four different 

violation categories. (Tr. 69) See e.g. Tabula, FAA Order No. 2010-6 at *5 (considering the 

amount of hazardous materials offered for shipment). 

Zawarus' testimony established that the Agency considered all of the factors laid out in 

the 2150.3B, and NPC has not identified any mitigating factors that the Agency overlooked. See 

Tabula, FAA Order No. 2010-6 at *5 (explaining that respondent did not prove that 

circumstances existed to warrant a reduction of the penalty); Novelty, RPSA No. 02-354-SB-EA, 

at *4 (upholding the Agency's penalty because it used the penalty guidelines and considered the 

circumstances of the violation). The Agency has complied with its own regulations and 

guidelines and, therefore, "the reviewing court may not deem it arbitrary and capricious." Aliraj, 

2013 WL 690530, *2 (citing Otto, 693 F.2d at 474)). 

NPC also broadly alleged that the penalty is grossly excessive without any explanation of 

the basis of its argument. (Resp. Br. p. 14) It's failure to articulate its position alone is sufficient 

to deny its argument. In the Matter ofWTW Enterprises, FMCSA-2001-11084, *1 (Feb. 12, 

2004) (rejecting Respondent's argument that penalty was excessive because it failed to identify 

any reason for its broad allegation). Regardless, the penalty falls within the sanction guidelines 

and is not excessive. "The legislative history of HMTA indicates that the purpose of section 

1809(a) was to 'put some teeth in this new legislation by making civil and criminal penalties for 

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the violations of the regulations quite severe."' Pony Express Courier Corp., FAA Docket No. 

89-4 (Sept. 27, 1993) (citing United States v. Allied Chern. Corp., 431 F. Supp. 361,367 (quoting 

120 Cong.Rec. H12351 (daily ed. December 19, 1974)(remarks of Rep. Jarman)). According to 

the Agency's enforcement order, NPC could have received a fme of up to $5,500 for the 

violation of each of the four offense categories for each shipment for a total of$242,000. The 

civil penalty is far below the maximum penalty that the Agency could have sought and clearly 

within the authority of the Agency and the guidelines it has set. There is no evidence of record 

to show that the Agency varied in such a gross fashion as to render the assessment 

unconstitutional. Rather, the Agency assessed a penalty according to its guidelines and far below 

what it could have sought, taking all of the required factors into consideration. It's use of its own 

policy and guidelines "constitutes a reasonable exercise of the Administrator's discretion to 

assess a civil penalty." In the Matter ofVillamor Tabula, FAA Order No. 2010-6 at *6. NPC 

has not identified any mitigating circumstances that the Agency overlooked. Absent a clear and 

convincing reason, the penalty the Agency seeks should not be disturbed. FAA v. Gunn, Docket 

No. SE-12192, *2 (1992). See also Administrator v. Goei, NTSB Order No. EA-2380 (1986) 

(absent clear and compelling reasons, the sanction must not be disturbed.). 

II. The Respondent Knowingly Violated the Regulations. 

A. Testing and Packaging Requirements 

The Respondent argues that it lacked the requisite intent to violate the HMRs, relying on 

Zawarus' agreement that it did not act deliberately. (Resp. Br. p. 10, 15-16,23, 25-26) 

However, this is not a criminal matter in which specific intent must be shown. See FAA v. 

Smalling, FAA Docke No. CP93NM0260, 1994 WL 16054473, *9 (Jan. 27, 1994)(explaining 

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that specific intent to violate the HMRs need not be shown as in criminal matters). Rather, in 

this context, a civil case arising from the violation of a regulation, lack of knowledge of the law 

is irrelevant. Id The Agency has not alleged, nor does it need to, that NPC was aware of and 

deliberately violated the HMRs when it offered the untested batteries. "Congress intended to 

prevent individuals from relying on ignorance of the law as an excuse in civil hazardous 

materials cases." I d. The applicable standard is whether NPC acted knowingly as defined by the 

HMRs. 

In its analysis, the Respondent misconstrues the definition of knowingly as defined by the 

HMRs. (Resp. Br. p. 15-16) Title 49 U.S.C. § 5123(a)(l) states that a person acts knowingly 

when either he has actual knowledge of the facts giving rise to the violations or a reasonable 

person exercising reasonable care would have such knowledge. As explained above, the 

standard is not, as Respondent argues, whether it had actual knowledge of the law and knew that 

the batteries had not been offered in compliance with the HMRs, but whether it had actual 

knowledge of the facts giving rise to the violation. NPC's intent to deliberately violate the 

HMRs is not the dictating factor. 

In hazardous material matters such as this, an individual or entity is charged with having 

actual knowledge of the facts giving rise to the matter when it knew that it was both offering a 

shipment for transportation by air and that the shipment contained hazardous materials. 

Interstate Chemical Company, FAA Order No. 2002-29, *7 (Dec. 2, 2002) (explaining that 

respondent "knowingly offered" the shipment in question because in the exercise of reasonable 

care it would have known of the contents of the shipment) (Contract Courier Services, Inc. v. 

Research & Special Programs Administration, United States Department of Transportation, 924 

F.2d 112, 114 (7th Cir. 1991)). For example, in Smalling, the Respondent was accused of 

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knowingly offering a hazardous material for air transportation without completing the shipping 

papers, marking the package, labeling the package, and preparing the package. FAA Docket No. 

CP93NM0260, 1994 WL 16054473, *7. The Respondent claimed that he did not know that 

placing fireworks in his luggage violated any regulations. !d. at * 1. The court determined that 

the respondent had actual knowledge of the facts giving rise to the violation because he acted 

knowingly when he placed the hazardous material in his suitcase and checked his baggage. Id. at 

*8. 

Likewise, NPC had actual knowledge of the facts that gave rise to the violations. NPC 

knew that it was both offering packages for transportation by air and that the packages contained 

a hazardous material, lithium batteries. NPC argues that it believed that it was shipping the 

batteries in the manner its employees were trained and that the batteries were shipped in 

accordance with its understanding of what the HMRs required. Whether or not NPC believed the 

batteries were being offered in compliance with the HMRs is irrelevant to the inquiry because 

this speaks to NPC's knowledge of the law. This is not the dictating factor. Rather, the court 

must look only to whether NPC had actual knowledge of the facts that gave rise to the violations, 

and here it is undisputed that NPC had actual knowledge of the facts that gave rise to the 

violation- that it was offering a hazardous material for air transportation. Therefore, NPC had 

actual knowledge as defined by the HMRs. 

The Respondent urges that the applicable standard is whether it acted reasonably under 

the circumstances, but because it had actual knowledge of the facts giving rise to the violations, 

the Agency need not show that the Respondent acted in accordance with how a reasonable 

person under the circumstances would act if that person was exercising reasonable care. See 

Resp. Br. p. 16. Even so, this is not a burdensome standard. For example, in the Matter of Scott 

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Novak, FAA Order No. 2014-1,2014 WL 493035 (Jan. 2, 2014), the respondent offered to take 

some of his daughter's belongings to an Alaska Airlines cargo facility to ship by air. He did not 

pack any of the boxes and did not know what they contained, though he believed them to contain 

clothes, dishes, and furniture. !d. at *I. It was later discovered that the boxes contained 

hazardous materials, including a grill, charcoal lighter fluid, insect repellant, hairspray, and nail 

polish remover. Id. at *3. The court determined that Novak knowingly shipped the materials 

for purposes of the HMRs, because a reasonable person "'knows' whatever a reasonably inquiry 

would have turned up." !d. at *8. 

This case further illustrates that the relevant inquiry is whether the individual knew that 

the materials he was offering were hazardous, not whether he knew he was violating the HMRs. 

NPC's actions were far more egregious than Novak's because it did know that its shipment 

contained lithium batteries and that the HMRs required lithium batteries to be tested, as is 

evident by the fact that the SM206 batteries were tested. NPC had actual knowledge that the 

SM20 1 batteries themselves had not been tested, and admitted as much during the course of the 

investigation. Upon inquiry, NPC was unable to show that the batteries were tested and 

complied with the HMRs. In fact, NPC did not even purport during the investigation that the 

shipments conformed with the HMRs because they varied by less than 20% from the tested 

batteries and did not have to be tested. It was not until later that it acquired this defense. 

However, as explained more thoroughly in the Agency's opening brief, the record is without 

evidence that the batteries did in fact vary by less than 20% and complied with the HMRs and 

that the differences would not have materially changed the test results. 

The only evidence of record to show that the batteries varied by less than 20% was 

Vrablik's self-serving, unsupported testimony stating as much. As Zawarus explained, the only 

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way that this determination could be made was with evidence of the battery configuration, which 

was never provided. (Tr. 139) Vrablik admitted that the batteries were configured differently 

and that there were differences in the anode, cathode, electro light, or wattage, but he never 

identified what those differences were. (Tr. 127) And, even if the court accepted Vrablik's 

unsupported, unexplained testimony that the batteries did not vary by more than 20%, the record 

is without evidence that the differences he admitted to would not have materially altered the test 

results. Therefore, NPC offered the lithium batteries knowing that the HMRs required testing 

and that the batteries had not been tested, and, at best, without knowledge that the differences in 

the tested and untested batteries would not have materially altered the test results. Whether NPC 

acted reasonably is not relevant to the inquiry, but even if it was, NPC did not act reasonably 

under the circumstances because it had knowledge of the HMRs and did not make a reasonable 

inquiry to insure that it complied with the HMRs by checking the battery configurations to 

ensure both that the batteries varied by less than 20% and that the differences would not alter the 

test results. IfNPC had acted reasonably, it would have needed to make this inquiry prior to 

shipping the batteries. See Novak, FAA Order No. 2014-1, at *8; Interstate Chemical Company, 

FAA Order No. 2002-29, *7 (citing Contract Courier Services, 924 F.2d at 114) (explaining that 

the shipper is expected to know what a reasonably inquiry would reveal). 

B. Emergency Response Information 

NPC makes a similar argument that its failure to provide the correct phone number on the 

label of the packages was not intentional but was due to a clerical error. (Resp. Br. p. 23) 

Again, NPC's intent to violate the HMRs is irrelevant. Smalling, FAA Docke No. CP93NM0260 

at *9. Rather, the Court must consider whether NPC acted knowingly as defined by the HMRs. 

Even ifNPC did not have actual knowledge that the incorrect phone number was written on the 

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labels, the definition of "knowingly" holds the offeror to the standard of a reasonable person 

under similar circumstances who exercised reasonable care. Moreover, the offeror is charged 

with having knowledge of what a reasonable inquiry would reveal. Novak, 2002 WL 31957045 

at *8. It is irrelevant whether the offeror made that inquiry. 

IfNPC had exercised reasonable care, the clerical error would not have been made. Even 

so, if an inquiry had been made, it would have revealed that the number was incorrect. Although 

NPC may have acted in error, it did so knowingly as defined by the HMRs. It's intent to do so is 

irrelevant. 

CONCLUSION 

The HMRs state that an entity has actual knowledge when it is aware of the facts 

surrounding the violation. The record is clear that NPC had knowledge of the facts surrounding 

the violation. It knew both that the shipment contained hazardous materials and that the 

shipment was being offered for transportation by air. NPC' s intent to violate the HMRs and 

belief that the HMRs did not require for the batteries to be tested is irrelevant because this speaks 

to its knowledge of the law. Congress did not intend for ignorance of the law to serve as a 

defense to violations of the HMRs. 

When NPC knowingly offered the packages of hazardous materials, it violated several 

HMRs related to packaging, training, and emergency response. The record is clear that the 

batteries contained in the shipments had not been tested. NPC later acquired the defense that the 

batteries did not vary by more than 20% from batteries that were tested, eliminating the testing 

requirement and the requirement to get special authorization from the PHMSA to ship untested 

prototype lithium ion batteries. However, the record is devoid of evidence to show that the 

batteries did in fact vary by less than 20% or that those variations would not have altered the test 

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results. V rablik testified that the batteries did not vary by more than 20%, although he did admit 

to some variances in anode, cathode, electro light, or wattage without identifying what those 

variances were. The only way this determination could have been made was with the battery 

configuration, which was never provided. Even if his unsupported testimony was accepted, 

Vrablik did not state, nor is there any evidence of record to show, that the variances to which he 

admitted would not have altered the test results. NPC admitted that it did not receive special 

authorization from the PHMSA to ship the untested prototype lithium ion batteries. Therefore, 

the batteries were offered in violation of the HMRs. 

Moreover, it is undisputed that the employee who offered the shipments did not have the 

requisite training and that the emergency telephone number provided on the package labels did 

not contain a 24-hour phone number. Even ifNPC did not have actual knowledge that the phone 

number was incorrect, if it had exercised reasonable care, this error would have been avoided. 

Again, NPC' s intent to violate this regulation is irrelevant. 

The Agency assessed a civil penalty for the violations in the amount of $66,000 using its 

enforcement order. Zawarus testified that the Agency considered all of the requisite factors 

when determining the appropriate amount. Specifically, it considered the nature, circumstances, 

extent, and gravity of the violations, the volume of hazardous materials, the frequency in which 

NPC handles hazardous materials, NPC's violation history, the nature of the hazardous materials, 

and the remedial measures NPC took along with any other mitigating factors to calculate the 

amount. NPC has not identified any other mitigating factors that the Agency overlooked. 

Because the amount fell within the penalty range provided by the Agency's guidelines, it is not 

arbitrary and capricious. See Aliraj, 2013 WL 690530, *2 (citing Otto, 693 F.2d at 

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474)(explaining that the Court may not deem a penalty arbitrary and capricious when it falls 

within the Agency's guidelines). 

WHEREFORE, Complainant requests the Administrative Law Judge to fix the civil 

penalty at the requested amount of $66,000. 

Respectfully submitted this 15th day of January, 2015 

deuuru t6,~_ \(lf Kate Barber (} 

Attorney 

Office of the Regional Counsel 

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CERTIFICATE OF SERVICE 

I hereby certify that the foregoing Agency's Response to Respondent's Post-Hearing Brief has been 

mailed to the following: 

The Honorable Richard C. Goodwin 

Office of Hearings, M-20 

Administrative Law Judge 

U.S. Department of Transportation 

1200 New Jersey Avenue, S.E. (Ell-310) 

Washington, DC 20590 

FAX: (202) 366-7536 

And by CERTIFIED MAIL to: 

Attorney Martin A. Blumenthal 

One Northfield Plaza, Suite 300 

Chicago, IL 60093 

Hearing Docket Clerk 

FAA, AGC-430 

800 Independence Ave., SW 

Wilbur Wright Building, Suite 2W1000 

Washington, DC 20590 

FAX: (202) 493-5020 

TEL: (202) 385-8229 

~'-'-'Is-.,__ ___ _ Dated 

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