### UNITED STATES DEPARTMENT OFTRANSPORTATION FEDERAL AVIATION ADMINISTRATION

In the Matter of: 

### EMPIREAIRLINES, INC.

Administrator, FederalAviation Administration: APPEAL BRIEFFAA DOCKET CP09NM0009 FAA Case No. 2007NM700155 DMS No. FAA-2009-0586

On March 28, 2011, the Administrative Law Judge served a written Initial Decision in the above-captioned case. OnApril 7, 2011, Empire Airlines, Inc. (hereinafter "Empire") filed a Notice ofAppeal pursuantto Section 13.233(a) ofthe Rules ofPractice in Federal Aviation Administration Civil Penalty Actions (14 C.F.R. § 13.233(a». Pursuant to 14 C.F.R. § 13.233(d), Empire, by and through undersigned counsel, hereby files this Appeal Brief requesting reversal ofthe Initial Decision as it relates to violations of49 C.F.R. §§ 175.3 and 175.30(a). I. 

### INTRODUCTION The Initial Decisionmustbe partially reversed. Material findings offact are not supported by substantial evidence and related conclusions oflaw ignore applicable law, precedent, andpolicy. The Administrative Law Judge failed to adequately consider the central independent contractorrelationships between Federal Express Corporation d/b/a FedEx Express (hereinafter "FedEx Express") and Empire withinthe chain ofcustody. As a result, the lawjudge failed to reach the appropriate legal conclusion that Empire was not liable for failures ofits independent contractor, FedEx Express. Moreover, the lawjudge did not evaluate the significant issue of whether Empire employed reasonable methods to ensure that the hazardous material complied with the requirements of

### § 175.30(a). One reasonable avenue is through reliance upon an initial carrier and independent contractor for accepting and loading hazardous materials. 1The lawjudgefailed to consider the unique circumstances ofthis case in relation to Part 175 and the HMR. Pastprecedent and the plainlanguage ofPart 175 expressly allows for an independent contractorrelationship for accepting hazardous material that limits the liability of the air operator. Here, Empirewas not responsible for its independent contractor when the latter improperly accepted cargo under 

### § 175.30(a). FedEx Express served as an independent contractor when accepting and loading the hazardous materials for Empire. FedEx Express had command overits employees, supplied the instlUmentalities and tools, and exercised dominion overthe work performed. Tofind that Empire controlled or directed the detailed physicalperformance ofloading and accepting ignores substrultial evidenceto the contrary. Empire was left supervising theresult ofFedExExpress's loading and acceptance process, not directing or controllingthe means; this is not agency. Empire is further shieldedfrom liabilitybased on the reasonable actions ittook to "ensure"pmsuantto 

### § 175.30(a). One reasonable avenue for an air operator serving as a feeder airline to satisfythe ensmingrequirement of

### § 175.30(a) is through reasonable reliance upon another airline that serves as the initial carrier and independent contractor for accepting and loading hazardous materials. Empire's reliance on FedEx Express was reasonable because FedEx Express was primarily responsible as the prior offeror ofhidden shipments; FedEx Express served as the initial air cruTier charged with the highest level ofsafety; and FedEx Express acted as anindependent contractorthat owed a specific duty ofcare when accepting and loading. Moreover, Empire took reasonabk steps to fulfill its "ensuring" mruldate such as supervising ormonitoring the acceptance process consistent with the FAA-approved General Operations Manual (GOM), and being aware ofperceptible facts under its control. The reasonableness ofEmpire's actions becomes more evident when comparing other instances where air carriers relied onthird parties, such as Part 145 repair stations or other air carriers providing security functions. In contrastto those cases, FedEx Express served a primary role

- cOl11mercially, legally, and physically

- inthe structure ofthe relationship and sequence of events involved here. In addition, this case involves a hidden shipment ofhazardous material


### 2where FedEx Express exclusively controlled the key decision-points and critical data in the chain ofcustody. In the end, Empire did nottransfer its responsibility to "ensure" under 

### § 175.30(a); instead, it tookreasonable and allowable methods to meet this obligation. 

### II. BACKGROUND The issues indispute and findings subject to appeal specifically relate to the sequence of events andrelationships ullderpitming Empire Flight 8677-22 and the transportation ofceltain hazardous materials. This case arose from the FAAinspection ofAugust 21-22, 2007 at a FedEx Express facility locatedin Medford, Oregon. (Tr. at 17-19; Tr. at 95.) Duringthe inspection, the FAA agents gatheredcertain "down-line" infonnation on what was expected to be onflights in-bound from Portland, Oregon, including Flight 8677-22. (Complainant's Brief, at 3.) The FAA agents sought to compare the available information in order to determine the consistency between what

was stated to be arriving at the airport and what was actually on-board the aircraft at an-ivaI. (Tr. at 19.) In orderto answer this question, the FAAagents first tumedto FedEx Express (not Empire), whichprovided an inbound dangerous good alert, produced through its exclusive AutoDG system, that indicated that no hazardous material was aboard flight 8677-22. (Tr. at41, 16-22; ExhibitC-5; see also Tr. at 144-146.) The FAAagents also accessed FedEx Express's website using FedEx Express tracking numbers to detennine whetherhazardous material was aboard Flight 8677-22. (Tr. at 45-46; Exhibit C-7.) Upon landing, the FAA also reviewed a FedEx Express AutoDG manifest carriedby Empire for Flight 8677-22, whichmerely verified the prior FedExExpress inbound dangers good alert. (Tr. at 44-45; Exhibit C-6.) As a result, tile Empire crewmember could notproduce any shipping papers indicating the presence ofhazardous material onboard Flight 8677-22. (Tr. at 53, Lines 12-20.) However, during off-loading operations conducted byFedEx Express, the FAA agents observed two packages marked ORM-D and this marking was located near the FedExExpress affixed shipping label. (Tr. at 49, lines 7-19; Tr. at 52, lines 12-17; Tr. at 95; and Exhibit C-8.) The ORM-D marking indicates the presence ofhazardous material, but does not signify
3authorization for transportation by air. (Tr. at 49; Tr. at 53; 49 e.F.R 

### § 173.27.) After FedEx Express personnel openedthepackages, an FAA agent detelmined thatthepackages included hazardous materials and, therefore, were improperly marked and lackedrequisite shipping papers. (Exhibit e-l;Exhibit e-8; Tr. 49-54.) Based on these observations and [mdings, the FAA initiated civilpenaltyproceedings against Empire for violations of §§ 175.3 and 175.30(a), among others. l Theseregulations relate to acceptance ofhazardous materials and specifically allowfor the role ofindependent contractors for accepting and loading purposes. See 49 C.F.R. Part 175. Empire disputed these allegations andrequested a hearing. (E.g., Answer.) On June 22, 2010, the Administrative Law Judge set the hearing inthis matterfor, and it was held on October 27-28,2010. (See generally, Tr. and Exhibits.) Dnring the administrative hearing under 14 C.F.R. Part 13, the record revealed a sequence ofevents and critical relationships within the chainofcustody leadingto Empire Flight 8677-22. First, Empire served as a supplemental or feeder airline for FedEx Express. (Tr. at 46, lines 4-7.) FedEx Expressused Empire to access rural markets, such as the Medford area, instead ofdedicating FedExExpress's trunk aircraft. (Tr. at 133-134.) Empire's commercial feeder operations were completely dependent upon and exclusiveto FedEx Express. (Tr. at 168.) In this case, for example, l'edExExpress had already accepted, processed, and transported the shipments, includingby air, scveral times. OnAugust, 21, 2007, a FedEx Express courier acceptcd the shipments and transported themto the FedEx Express sorting facility near Baltimore, Maryland. FedEx Express then flew the shipments from Baltimore, Maryland to Memphis, Telmessee, where they were sOlied again and the FedEx Express label affixed to this shipment was scanned again, and thereafter placed on another l'edEx Express

I TheFAA also initiated proceedings against FedEx Express in connected to the same underlying factual transactions at issue here and the lawjudgelbund violations for 49 C.F.R. §§ 175.3 and 175.30(a). See FAA Docket No. CP09NMOOIO, DMS No. FAA-2009-0721, FAA CaseNo. 2007NM700156. FedExExpress did not appeal. 4aircraft. These shipments then flew from Memphis, Tennesseeto Portland, Oregon. (See Exhibit C-7; see also Complainant's Brief, at 2.) Second, Empire entered into a contractualrelationship withFedEx Express, which includedhaving FedEx Express provide accepting and loading services. (Tr. at 132·134.) Empire never physically accepted orloaded cargo under this an-angement andrelied upon the instrumentalities, tools, facilities, and employees ofFedEx Express. (Tr. at 30,16-22;Tr. at 133- 136.) Accordingto the FAA agent's testimony, when a FedEx Expressmainflight lands at the Portland FedExExpress station, FedEx Express employees offload the cm'go using FedEx Express unit load devices andbring the cargo to a FedEx Express sorting facility. (Tr. at 51.) If the cargo is destined for anEmpire aircraft, then FedEx Express employees placethe cargo in FedEx Express cmts that are tuggedby FedExExpress employees to theEmpire aircraft. (Tr. at 51-52.) Once at the aircraft, the FedEx Express personnel load each aircraft byplacing boxes longitudinally on rollers leading to the aircraft and providing no apparent visual cues as to markings onthe ends ofeachpackage. 

### (Id.; Tr. at 175-176; Tr. at 181-182.) Third, under Empire's FAA-approved GOM, the Empire crewmember supervises the end result ofa FedEx Express accepting, processing, transporting, and loadingprocess. (Exhibit C11.) Empire's GOM, Appendix G, lists the "Fed-Ex" procedures for acceptance and loading that require FedEx Express employees to actually separate the hazm'dous material from other freight "so" that the Empire crewmember "may" accomplish thepre-load inspection. 

### (Id.; Tr. at 66; Tr. at 187-189; Tr. at 197

.. 198.) In executingthis separation task, the FedEx Express loading personnel utilize informationpreviously entered into the FedEx ExpressAutoDG system. (Tr. at 140-144.) Once the hazardous materials are separated from otller freight, FedEx Express employeespresentthe Empire crewmember with an AutoDG manifest so that the pilotmay survey the contents ofthe list against the separated packages. (Tr. at 173.) In the case ofa discrepancy, only FedEx Express persolUlel that were trained inthe use of AutoDG can access and update the system. (Tr. at 146, lines 13-22; Tl'. at 149, lines 7-17.) Empirehas no access to AutoDG. (Tr. at 156, lines 2-4.) Empiretrains mId employs its

5crewmembers while FedEx Express trains and controls its employees, including accepting and loading personnel. (Tr. at 136-138; Tr. at 169-170.) Fourth, there was no evidence offered that Empire failed to actually supervise the acceptance and loadingprocess, as prescribed underthe GOM and described in testimony. Despitethis record andregulatory context, the lawjudgefound violations under the Hazardous Materials Regulations (HMR), 49 C.F.R. Parts 171-180, including §§ 175.3 and 175.50(a). (Initial Decision, at 6-7.) The lawjudgereasoned that Empire could nottransfer or delegate the responsibility to accept packages that are not in compliance with the packaging, marking and shipping paper requirements ofthe HMR. (!d.) Central to this finding was the law judge's conclusion that FedEx Express served as an agent for Empirebecause the Empire crewmember supervisedthe acceptance and loading process pursuant to the GOM. 

### (Id at 7.) In additionto other deficits, the Initial Decision does not explore the precise mechanics ofthe GOM

or fully analyze the legal manifestations ofagency based on the evidence given. 

## m. ARGUMENT 

### A. The AdministrativeLaw Judge made material findings offact that are not supported by substantial evidence and conclusions oflaw thatignore applicable law, precedent, and policy. Whenreviewing an appeal, the FAA decisionmaker considers whether each finding of fact is supported by a preponderance ofreJiabJe, probative, and substantial evidence. 14 C.F.R. § 13.233(b). The specific facts underlying a situation mustbe detelmined before the legal standard may be correctly applied. Blakemore v. Coleman, 701 F.2d 967 (D.C. Cir. 1983). The FAA decisionmaker must examine the relevant data and articulate a satisfactory explanationfor its action including a rational connection betweenthe facts found and the choice made. City of Santa Monica v. FAA, 631 F.3d 550,554 (D.C. Cir. 2011) (citingMotor Vehicle Mfi's. Ass'n v. State Farm Mut. AUlD. Ins. Co., 463 U.S. 29, 43 (U.S. 1983) and49 U.S.c. 

### § 46110(c». FAA's factual determinations are conclusive ifthey are supportedby substantial evidence. 49 U.S.C. 

### §46110(c); see also 5 U.S.C. § 706(2)(E) (courts must set aside agency actions which are "unsupported by substantial evidence"). Substantial evidence is such relevant 6evidence as a reasonable mind might accept as adequate to support a conclusion taking into account whatever in the record fairly detracts from its weight. 

### Ickes v. 

### FAA, 299 F.3d 260, 264 (3d Cir. 2002) (citations and quotation marks omitted). The FAA decisionmaker will also consider whether each conclusion oflaw is made in accordance with applicable law, precedent, and publicpolicy. 14 C.F.R. 

### § 13.233(b). More generally, federal agency decisions must not be arbitrary, capricious, an abuse ofdiscretion, or otherwise not in accordance with law. 5U.S.c. 

### § 706(2)(A); see also Garveyv. NTSB, 190 FJd 571, 577 (D.C. CiI. 1999). This threshold is met when a federal agency decisionwas based on a consideration ofall relevant factors and there is no clear error of judgment. 

### Ritter Transp., 

### Inc. v, 

### Interstate Commerce Com" 684 F.2d86, 88 (D.c. Cir. 1982), However, a federal agency decision is arbitrary and capricious ifthe agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect oftheproblem, offered an explanation for its decision thatruns counter to the evidence before the agency, or is so implausiblethat itcould notbe ascribed to a difference inview or the product ofagency expertise. 

### Molar Vehicle Mfrs. Ass'n., 463 U.S. at 43, In this case, as further demonstrated below, the material findings offact are not supported by substantial evidence andthe conclusions oflawignore applicable law, precedent, and policy. The Administrative Law Judgc failed to adequately considerthe central independent contractor relationships between FedEx Express and Empire within the chain ofcustody. As a result, the lawjudgefailed to reach the appropriate legal conclusion that Empire was not liable for failures ofits independent contractor, FedEx Express. Moreover, the lawjudgefailed to evaluate the significant issue ofwhether Empire employed reasonable methods to ensure that the hazardous material complied with thc requirements of§ 175.30(a), Onereasonable avenue is through reliance upon an initial carrier in addition to contractingwith anindependent contractor for accepting and loading hazardous materials. The precedentused to support the Initial Decision does not speak to the applicable facts orregulatory contextinvolved here.

7B. Part 175 and the HMR specifically allow for an independent contractorrelationship thatlimits the liability ofthe air operator. The lawjudge failed to consider the unique circumstances ofthis case in relation to Part 175 andthe HMR. Past HMRprecedent and plain language ofPart 175 specifically allow for an independent contractor relationship for accepting hazardous material that limits the liability of the air operator. The analysis begins with Section 175.3, which states that a hazardous material that is not prepared for shipment in accordance with Subchapter A may not be offered or accepted for transportation ortransported aboard an aircraft. This regulation does not specifY which actors will bephysically accepting and loading. Instead, this broad standard is refined bythe application ofSubchapter A, which includes 

### § 175.30. Specifically, 

### § 175.1 notes that Snbchapter A ofPart 175 applies to air carriers andtheir contractpersonnel, including loadingpersonnel. Thus, Part 175 acknowledges that air carriers do not act alone in the chain ofcustody ofhazardous materials and may contract out accepting and loading services to independent contractors. The plain language of

### § 175.30(a) describes this relationship further and identifies different types ofactors involved during the inspection process. Section 175.30(a) stipulates: Noperson may accept a hazardous material for transportation aboard an aircraftunless the aircrqfi operator ensures the hazardous material is

... [emphasis added.] In other words, some "person"perfonns the act of"accepting" while the "air operator" is separately charged with the act of"ensuring" compliance. During the inspecting and loading of cargo, a person other thanthe air operator may be actually accepting the hazardous material. This person may be anindependentcontractor for acceptance and loading purposes. Anindependent contractor has a duty to his employer to act with a standard ofcare and withthe skill which is standaId in the locality for the kind ofwork which he is employed to pelform and, in addition, to exercise any special skill that he has. 

### E.g., Restatement (Second) of Agency 

### § 379 (1958). An independent contractor is a person who contracts with another to do something for him, but who is notcontrolled bythe other or subject to the other's right to control with respect to his physical conductin the perfolTnance ofthe undertaking. 

### Id. at 

### § 2(3). Ifa 

### 8person has the right to control only "the result ofthe work" by another person, and "notthe means"by which it is accomplished, an independent contractorrelationship exists. ]n the Matter of Aero Continente, SA., FAA Order No. 2003-8, 2003 FAA LEXIS 432, *23 (Sept. 12,2003), citingIn re Coupon ClearingService, ]I1C., 113 F.3d 1091,1099 (9th Or. 1997). In contrast, an agencyrelationship exists whentheprincipal has the authority to control the detailedphysical performance and day-to-day operations ofthe entity acting onits behalf. 

### Id. Employers are not responsible for their independent contractor's acts or omissions. Wilson v. GoodHumor, 757 F.2d 1293,1301 (D.C. Cir. 1985). This specifically includes when

an independent contractor improperly offers or accepts hazardous materials onbehalfofan air carrier. See In the Matter of FederalExpress, FAA Order No. 2002-20 (Aug. 5, 2002), reconsideration denied, FAA Order No. 2003-2, 2003 FAALEXIS 194 (May 6, 2003); see also ]n the Matter of Aero Continente, SA.,FAA OrderNo. 2003-8, 2003 FAA LEXIS 432, *22 (Sept. 12,2003). Therefore, an air operator is notresponsible for its independent contractor when the latterimproperly accepts cargo under 

### § 175.30(a). 

### C. FedExExpress served as anindependent contractor, not agent, for Empirewhen accepting and loading hazardous material. Withrespect to acceptance ofhazardous material, the Administl'ator has specifically considered an independent contractorrelationship between an air carrier and its contracted service provider. In the Matter of Federal Express, FAA OrderNo. 2002-20 (Aug. 5, 2002), reconsideration denied, FAA Order No. 2003-2, 2003 FAALEXIS 194 (May 6, 2003). In FederalExpress2

, the "key question" was whether the air catTier was responsible for the courier's improper otfer and acceptance ofhazardous materials in airtransportation. Id., at 5. Given that the courier was in fact an independent contractor, the Administrator heldthat liability could notbe transfctTed to the air carrier. Id., at 9.

2 Given the central issue in this case, it is interesting to note thatthe Complainant failed to cite the Federal Express precedent when claiming that an air carrier may nol be shielded from liability when utilizing an independent contractor in the acceptance ofhazardous materiaL (ComplainanfsRebuttal Brief, at 3.) Complainant does cite in a footnote the related Administrator's decision, FAA Order No. 2002-3, denying a petition for reconsideration, but that decision affums the conclusions ofFAA Order No. 2002-20. (Id., at 8.) 

### 9InFederal Express, the courier service failed to provide to the air carrier any information, including any shipping papers, thatthe shipmentinvolved hazardous materials. 

### ld at 

### 3. The Administrator, thus, determined that the packages were "hidden shipments" even thoughthere

were inconspicuous dangerous good (DG) labels onthe outside near the air carrier's affixed shipping labels. 

### ld Moreover, the Administratorheld that the courier was not an agent ofthe air carrier even though: (1) the air carrier obtained business through the courier; (2) thecourier's delivery services were limited to the air carrier; (3) the courier adveliised itselfas the air carrier, such as placing decals on its vehicles; and (4) the courierutilized the air carrier's air waybills and envelopes. 

### ld at 3-4. TheAdministrator instead found that the courier was an independent contractorbecause the courierhad command ofits employees (hired and fired its ownpersounel), supplied its own instrumentalities andtools (vehicles), exercised control over the work and space (determined its

own routes). 

### ld Theprincipal air calTier did nothave powerto control the "detailedphysical perf01mance" and "day-to-day operations" ofthe courier. ld. at7 (citing UnitedStates v. Orleans, 425 U.S. 807, 814 (1976) (quotation omitted»; see also Restatement (Second) of Agency 

### § 220(2) (1958). Inthis case, FedEx Express failed to provide any information, including any shipping papers, aleliingEmpire thatthe shipments involved hazardous materials. (Tr. at 182, lines 6-16; and see generally, Answer.) Like the packages inFederalExpress, the packages here were hidden shipments even though there were inconspicuous ORM-D marks nearthe FedEx Express affixed shipping label. (Exhibit C-8; Tr. at 181; Tr. at 53.) Similarto the courier, FedEx Express also served as an independentcontractor for accepting hazardous material for the air operator. This contracting arrangement was consistent no! only with Part 175 andthe HMR, as described above, but also withthe loading options under Empire's Operations Specifications. (Exhibit C, page 13.) Moreover, FedEx Express meets the test set forth in applicable precedent. 

### 111 the Matter of Federal Express, FAA Order No. 2002-20,

103-4 (Aug. 5, 2002), reconsideration denied, FAA OrderNo. 2003-2, 2003 FAA LEXIS 194 (May 6, 2003). First, Empire obtainedregional air transport business through FedExExpress. (Tr. at 133-134.) Second, Empire received accepting and loading service exclusively from FedEx Express. (Tr. at 168, lines 7-18.) Third, the aircraft operated by Empire had FedEx Express logos and was painted in FedEx Express colors. (Tr., at 150, line 4; Exhibit C-15.) Fourth, Empire utilized FedEx Express shipping labels, tracking numbers and documentation of AutoDG. (Tr. at 45-47; Exhibit C-7; Tr. at 130-131.) Like in Federal Express, such facts do not make FedEx Express an agent ofEmpire. Instead, FedEx Express served as an independent contractor ofEmpire for accepting and loading purposes. FedEx Express hired, fired and trained its ownpersonnel (command power); utilized AntoDG and its owntracking number system for cargo (instrumentalities and tools); and determined the method for accepting, processing, and loading packages (exercised control over details). (Tr. at45-47; Tr. at 51-52; Exhibit C-7; Tr. at 133-140; Tr. at 144-145; Tr. at 175-176; Tr. at 182, lines 6-16; and see generally, Answer.) Indeed, the sorting and acceptance process for feeder airlines occurred at the Portland International Air FedEx Express station utilizing FedEx Express sorting equipment, ULDs, carts, and rollers controlled byFedEx Express employees. (Tr. at 51-52; Tr. at 134-135.) There is no allegation implying orrecordevidencing that Empire, the feeder airline, oversaw the day-to-day operations ofFedEx Express, the principal airline. Although Empirehad the rightto "supervise"the accepting and loading process, nothing intlle record indicates that this right extended into directing me detailed physical perfolmance of FedEx Express personnel. Indeed, testimony indicates that Empirepilots "observed" or monitored the loading process. (Tr. at 51-52.) Empire's written procedures further reveal that FedEx Express personnel were in charge ofthe critical components ofthe operation. (Exhibit C11.) Empire's GOM, Appendix G, lists the "Fed-Ex"procedures for acceptance and loading as follows:

11Loading andunloading ofDGis handled by Fed-Ex ranked personnel. During the loading, the DG is separatedfrom other freight, so the crew member may accomplish the pre-load inspection

...A crew member must supervise the loading ofDG. (Exhibit 

### C-l1, page 

### 41; Tr. at 

### 66; Tr. at 

### 187-189; 1'r. at 

### 197-198.) In other words, Empire's supervision, under the FAA-approvedprocedme, was contingent upon and subsequentto FedEx Express personnel actually separating the hazardous material from other freight. FedEx Express personnel separate the hazardous material packages "so" that the Empire crewmember "may" accomplish the pre-load inspection. Empire relied on FedEx Express to carry its duties during the sorting and loading process at the FedEx Express station (in addition to upholding its other obligations as aprior offeror and initial air carrier). (Tr. at 

### 134-135; 1'1'. at 

### 139-140.) Inturn, the FedEx Express loading personnel at the FedExExpress station further relied on the accuracy ofinfonnation previously entered into the AutoDG system, which was completely controlled by FedEx ExpTess. (Tr. at 

### 140-144.) In the case ofa discrepancy, only FedEx ExpTess personnel that were trained in the use ofAutoDG could access and update the system. (Tr. at 

### 146, lines 

### 13-22; 1'r. at 

### 149, lines 7-17.) To find thatEmpire controlled or directed the detailed physical perfonnance ofloading and accepting ignores substantial evidence to the contrary.3 Empire was left supervising the result ofFedEx Express's loading and acceptance process, notdirecting or controlling the means; this is not agency. Since FedEx Express was an independent contractor, Empire cannot be held liable for its acts or omissions. See In the Matter of Federal Express, FAA OrderNo. 

### 2002-20 (Aug. 

### 5,2002), reconsideration denied, FAA OrderNo. 

### 2003-2,2003 FAALEXIS 

### 194 (May 6, 2003); see also In the Matter of Aero Contil1ente, S.A., FAAOrderNo. 

### 2003-8, 2003 FAA LEXIS 

### 432, *22 (Sept. 

### 12,2003). Eventhough the issue was notraised by Complainant, it shouldbe noted that Empire

never held outFedEx Express as its agent consistent with the theory ofapparent agency. 

### 1n the Matter of Federal Express, FAAOrder No. 

### 2002-20, at 8 (Aug. 5, 

### 2002), reconsideration

J The record also lacks any testimony from the actual Empire crewmember that "supervised" FedEx Express's acceptance and loading services or from the persOimeI ofthe independent contractor on site. Thus, there is no substantial evidence to prove that Empire's single pilot actually failed to carry his obligations under the GOM. 

### 12denied, FAA OrderNo. 2003-2, 2003 FAA LEXIS 194 (May 6, 2003). Courts may find an employer vicariously liable for the negligence ofits independent contractor ifthe employer has held out the independent contractor as an agent ofthe employer. Wilson, 757 F.2d at 1301-1303. Courts generally require a showing ofreasonable reliance by a third party on the business reputation or good name ofthe employer in doing business with the independent contractor. 

### Id. Given thatEmpire's feeder commercial service is dependent upon and exclusive to FedEx Express; thatFedEx Express provides the instrumentalities andtools (from ULDs to AutoDG); and that FedEx Express is a global brandfor express cargo service; it is doubtful that any third party relies on Empire's business reputationwhen shipping vis-a-vis FedExExpress. Moreover, there is no substantial evidence inthe recordto support such a finding. In the broader commercial relationship, Empire couldbe considered an agent for FedEx Express. This issue

was not explored. Ofcourse, agents are notresponsible for the acts or omissions oftheir known principals. 

### E.g., Restatement (Second) of Agency 

### § 328 (1958). 

### D. Empire also reasonably relied upon FcdEx Express as the initial carrier and its independent contractorfor accepting and loading hazardous materials. Even with the protectionprovided by the express language ofPart 175 and pastprecedent underthe HMR, Empire is further shielded from liability based onthe reasonable actions ittook to "ensure" pursuantto 

### § 175.30(a). The duty ofcare exercised by the air operator, tile reasonableness ofits effort, must be measured by the precise circumstances involved and withinthe applicableregulatory context. FAA v. FederalExpress CO/poration, FAA DocketNo. CP01NM0015, 2002 FAA LEXlS 570 (Oct. 31, 2002), at *10 (citingRaineyv. Paquet Cruises, Inc., 709 F.2d 169 (2 Cir. 1983); Prosser, 

### The Law of Torts 

### § 34, p. 181 (4th ed. 1971»). In this case, such a conclusion can only be reached following a thorough factual and legal review ofthe relationship ofthe actors in tile chain ofcustody andwithin the precise regulatory context ofthe HMR and Part 175. Such an analysis is lacking inthe Initial Decision. Section 171.2 notes that each offeror mayrely on infonnationprovidedby another (prior) offeror. Specific to carriers, an initial carrier remains an offeror when ittransfers a hazardous 13material to another carrier for continued transportation in commerce and when performing a pretransportation function such as acceptance. 49 C.F.R. § 171.8 (defining "person who offers or offeror" in relation to carriers.) Forexample, a feeder airline may rely onthe information providedby an initial air carrier ifthat prior air operator performs a pre-transportationfunction for the feeder airline. An air operator maynotrely on aninitial carrier ifthe operatorknows or, a reasonable person, acting inthe circumstances and exercising reasonable care, wouldhave knowledge that the infol1uation provided bythe other offeror is incorrect. 49 C.F.R. 

### § 171.2. Additionally, for a violation to occurthere must be substantial evidence ofactual knowledge ofthe issue or a lack of reasonable careby the subsequent air carrier (constlUctive knowledge). 49 U.S.C. 

### § 52l3(a). This reliance analysis must also be reviewed within the specific context ofPart 175, as detailed previously, which allows the air operator to contract outthe acceptance and loading function under 

### §175.30(a) to an independent contractor. The air operator must still enSlU"e that the hazardous material complies with the requirements of

### § 175.30(a) including proper shipping papers and markings. Withinthe reliance and relationships contemplatedunder the HMR and Part 175, the question therefore arises as to whatreasonable methods an air operatormay use to


### ensure that the hazardous material complies withthe requirements of

### § l7S.30(a). One reasonable avenue for an air operator serving 

### as a feeder airline to satisfy the ensuring requirement of

### § 175.30(a) is 111rough reasonable reliance upon another airline that

serves as an initial carrier and independent contractor for accepting and loadinghazardous materials. The air operator must still take reasonable steps to fulfill its "ensuring" mandate, such

as supervising or monitoring its independent contractor consistent with an FAA-GOM, and remain aware ofperceptible facts under its control. This was the case here. First, Empire was relying notjuston any**pl~or** offeror, bnt the primary and initial air canierthat failed to uncover a hidden shipment. Under the HMR offerors have "primary responsibility" for undisclosed hazardous material. 63 Fed. Reg. 30411 (Jun. 

### 4, 1998). The adjective "primary" means "being Of standing first in a list, series or sequence" and "fu·st in

14importance; chief; principal; main," AlaskaAirlines, Inc" FAA Order 2004-8,2004 FAALEXIS 905, at *12 (Oct. 4,2004) (citing Webester's Dictionary), This primary responsibility is coupled withthe requirement that 

### air carriers mustexercise the highest degree ofsafety. 49 U.S,C, § 44702(b)(I)(A), Thus, whenFedEx Express initially accepted, inspected, processed, and transported thepackages at issue, performingpre-transportationfunctions for the benefit ofa subsequent air carrier, it wasbeing held to an extraordinary and unique standard ofcare. Empire could reasonably rely onthe pathway tread by FedEx Express as a prior offeror and initial air croTler, Second, Empire tookreasonable steps to fulfill its "ensuring" mandate by supervising or monitoring its independent contractor consistent with its FAA-approved GOM, The written procedures first call for FedExExpresspersOlmel to conduct tbe actual acceptance and loading, which involved separating the hazardous materials from other freight. (Exhibit C-11, page 41; Tr. at 66; Tr. at 187-189; Tr. at 197-198.) FedExExpress-trainedloadingpersOlmelatthe FedEx Express station inPortlandidentify the hazardous material shipments based on information setforthin AutoDGusing FedEx Express tracking numbers enteredprior to the initial flight by FedEx Express to the feeder (mral) market. (Tr, at 130-131; Tr, at 136-138.) Prior tothe initial flight, FedEx Express couriers orotherpersol1l1el, specifically trained by FedEx Express in hazardous material awareness, must enter accurate infonnation about the shipment for the shipmentto be hroldled properly down-line, (Id.) 

### Ifthe packages are not declared as hazro'dous material, then the packages are processed by FedEx Express as regular cargo, (Tr. at 139-140.) In carrying outthese steps, FedEx Express, as an independent contractor, had a special duty to Empireto act with the standard ofcare and skill expected ofthe accepting and loadingpersOlmel ofthe world's leading airline for express delivery, 

### E.g., Restatement (Second) of Agency 

### § 379 (1958), All the critical decision-points within the chain ofcustody tookplace priorto the Empire crewmember actually fulfilling his supervisory fUllction, (Tr. at 66, lines 7-20; Exhibit C-ll.) The record shows that FedEx Express failed to provide any shipping papers or infonnation to
15Empirethat hazardous materials were being accepted and loaded onto Flight 8677-22. (Exhibit C-5; Tr. at 182, lines 6-16; and

### see generally, Answer.) Since FedEx Express failed to tmcover the hidden shipments as the prior offeror, initial operating carrier and thenloading independent contractor, thepackages with hazardous materials were notproperly separated from the other freight for review. (Tr. at 66, lines 7-20; Exhibit C-ll; Tr. at 130-131; Tr. at 136-137.) Once the dangerous good manifests produced by FedExExpress and packages segregatedby FedEx Express were presentedto Empire, the air operator was supervising a false universe of information. (Tr. at 173, lines 3-19.) Moreover, only trained FedEx Express personnel could actually fix theAutoDG data. (Tr. at 146, lines 13-22.) In lightofthe FAA-approved process involved, Empire tookreasonable and required

measures for "ensuring" the compliance ofhazardous material being accepted and loaded. However, the efficacy ofEmpire's supervision was contingent onFedEx Express personnel actually separatingthe hazardous material from otherfreight; and this step was dependent onthe

care and skill ofFedEx Express personnel (from initial couriers to prior-loaders to the pilot in command oftheinitial flight); theirperformance was contingent uponthe accuracy ofAutoDG; and Empire had no control overthis system orpriorprocess. Notably, there is no substantial evidence that Empire failed to actually supervise the loading and accepting process called for under its FAA-approved GaMto meet therequirements of

### § 175.30(a). In smn, Empire could only monitor the given facts mlder its control during its role as supervisor at a particular point in the chain ofcustody. Complainanthasnot alleged that Empire failed to "ensure" based on these specific factual circmnstances under 

### § 175.30(a), the lawjudge did not make such 

### a finding, and therecord does not SUppOit such a finding. There is simply no substantial evidence thatEmpire forfeited its reasonable reliance in this case. This conclusion becomes even clearer when comparing the particular factual relationships and the regulatory context ofthis case with pastprecedent involving air carrier reliance on third pmties.

16E. This case is substantially different from other instances where air operators relied on third parties, includingFAA certificate holders. Appellant acknowledges that an air carrier's duties, such as airworthiness, security and maintenance, involve an elevated standard ofcare. 49 U.S.c. 

### §44702; 49 U.S.C. 

### § 44701(d)(1)(A). As past precedent indicates, such duties are non-transferable. 

### See generallyIn the Matter o/USAir, Inc., FAA Order No. 92-70, 1992 FAA LEXIS 352 (Dec. 21, 1992) (airworthiness); 

### In the Matter o/WestAir Commuter, FAA OrderNo. 96-16, 1995 FAA LEXIS 342 (May 3,1995) (security); 

### In the Matter o/EmpireAirlines, FAA OrderNo. 2000-13, 2000 

### FAALEXIS 648 (June 8, 2000) (maintenance); and 

### In the Matter

## 0/ AlaskaAirlines, FAA Order 2004-8,2004 

### FAA LEXIS 905 (Oct. 4, 2004) (maintenance). However, this precedent, cited by Complainant, does not address issues ofacceptance by independent contractors WIder the HMR or speak to the reasonable methods by which an air operator may "ensure"pursuant to 

### § 175.30(a), including the particularfactual circumstances of this case involving an initial air carrier and independent contractor. First, the 

### USAircase involved an airline's improper reliance on a pushback operator's determination ofairworthiness. 

### In the Matter 

## 0/USAir, Inc., FAA Order No. 92-70, 1992 FAA LEXIS 352, *I (Dec. 21, 1992). The pushback operatorwas not an FAA-certificated expert in airwOlthiness, the airline trained and held the pushback operator under its immediate and day-today control (agency), the airline acknowledged responsibility for the pushback operator's actions, and the airline was put on notice by a loud noise during operations. 

### Id. at *2-*8. As a result, the Administrator confirmed violations under 14 C.F.R. § 12I.153(a)(2) (airWOlihiness) and 91.13 (recklessness operation). Second, in the 

### WestAir case, a commuter airline relied upon an associated airline 

### for the provision ofcertain security services. 

### In the Matter o/WestAir Commuter, FAA OrderNo. 96- 16,1995 FAA LEXIS 342 (May 3,1995). The associated airline failed to even provide a ground security coordinator for certain t1ights ofthe commuter airline as required by the latter's FAAapproved securityprogram and 14 C.F.R. §§ 108.5 and 108.IO(a)(I). 

### Id. at *1. The

17Administrator found that the commuter airline did not actually monitor the contracted services. 

### Id.at*IO. Third, the Empire Airlines case involved an air carrier contracting with a Part 145 repair station. In the Matter of EmpireAirlines,FAA OrderNo. 2000-13,2000 FAA LEXIS 648 (June 8,2000). The Administrator held that the air carrier violated 14 C.F.R. 

### §§ 43.\3(a) and 121.379(b) whenthe left engine mount ofthe catTier's aircraft was repaired in amatmer not specified by either the aircraft's Structural Repair Manual (SRM) or Overhaul Manual (OM). 

### Id. at *25. The Administratorreasoned that the deviant repair was described accurately in the maintenatlCe records and had the air catTier actually reviewed the recmd then the carrier would have been on notice ofthe violation. 

### Id. at *23. The Administrator acknowledged thatthere may be certaincircumstances inwhich an air carrier might not be held responsible for an independent contractor's failure in maintenatlCe aIld inspections. 

### Id. at *24. However, since the air carrier retainedprimaryresponsibility for maintenaIlce under the express language of

### § 121.379(b) anddid not in fact CatTY out its supervisory function, then the air carrier could not reasonably rely on its independent contractor. 

### Id. The case at hand involves substantially different factual circumstances and regulatory context. First, the role and relationship ofthe actors involved is materially dissimilar. In USAir, the air carrier relied upon a non-air carrier agentthat the catTier trained and retained day-to-day control over. The WestAir case involved a commuter airline that relied on a piece ofpaper, not

on another air catTier's prior operational actions or an actual person physically carrying out certain duties on site (the security coordinator never showed up). Similarly, in EmpireAirlines, the air carrier relied on a Part 145 repair station, not all air carrier serving as all initial air catTier and loading contractor. These cases say nothing about the chain ofcustody involved in hazardous material transportation. Here, Empire reasonably and literally walked inthe precise footsteps ofFedEx Express and then reasonably relied uponthe air carrier to cany out acceptance and loading functions under 

### § 175.30(a). FedEx Express served as the dominant commercial entity, the lead air

18operator, and an independent contractor with directly applicable FAA-certificated expertise. Empire was relying onFedEx Express's separate duties ofcare and skill as the offeror, the initial air carrier, and the independent contractor for accepting and loading purposes. Within the structure ofthis relationship and sequence ofevents, FedEx Express served a primary role

- commercially, legally, andphysically. In addition, the facts here involve a hidden shipment ofhazardous material as opposed to

an accurate record ofsignals and priorprocess leading to discovery ofthe violation. (Tr. at 41, lines 16-22; Tr. at 50, lines 4-14.) In contrastto the USAircase, Empire was not actually alerted by a "loudnoise" or engaged in communications with the independent contractor aboutthe problem (like the dialogue betweenthe pilot and the pushback operator in USAirfollowing the loud noise). In WeslAir, the commuter airline actually failed to monitor its independent contractor and ignored overthe course ofseveral flights the glaring absence ofthe security ground coordinator. And unlike in EmpireAirlines, the independent contractor did not provide

an accurate writtenrecord (maintenancepaper work and manuals) to the air carrier clearly identifying the violation. Instead, the record shows that FedEx Express failed to provide any shipping papers or information to Empire thathazardous materials werebeing accepted and loaded onto Flight 8677-22. (Exhibit C-5; Tr. at 50, lines 4-14; Tr. at 182, lines 6-16; and see generally, Answer.) Therecord further demonstrates that the efficacy ofEmpire's supervision was contingent on the FedEx Express personnel actually separating the hazardous material from other freight and the accuracy ofAutoDG, which ithad no control over. (Tr. at 66, lines 7-20; Exhibit C-11; Tr. at 133-140; Tr. at 146, lines 13-22; Tr. at 149, lines 11-22.) The packages in question had inconspicuous ORM-D markings on the outside nearthe FedEx Express shipping labels. However, this does not make it a declared shipment. See Inlhe Matter of Federal Express, FAA Order No. 2002-20, at 3 (Aug. 5,2002), reconsideration denied, FAA OrderNo. 2003-2, 2003 FAA LEXIS 194 (May 6, 2003). The markings themselves were not in plain site given the placement ofthe marks and naturc ofthe FcdEx

19Express loading process. (Ir. at 181-182.) Moreover, the Empire crewmember does not physically accept and load the packages. (Ir. at 30, lines 16-22; Ir. at 181-182.) In accordance with FAA-approvedprocedures, he surveys the product ofapriorprocess based onan information system beyond his contro\. (Exhibit C; Ir. at 100, lines 4-10; Ir. at 136-140; Ir. at 146-147; Ir. at 173, lines 3-19.) Ihese facts must also be viewed within the regulatory contextinvolved. Section 175.30(a) does notrequire Empire to separately accept and load eachpackage

- in addition to the actions ofits independent contractor. Part 175 expresslypermits the contracting outof acceptance and loading functions by the operating air carrier. Ihe HMR pelmitreasonable reliance. Ihus, a feeder airline may rely upon anindependent contractor for accepting and loading ofhazardous material so long as the feeder airline undertakes reasonable measures to



### ensure compliance. Ihereis no evidence in the record, Complainanthas not alleged, and the law judge did not find that Empirefailed to actually carry out its supervising role as written inthe GaM and envisioned by 

### § 175.30(a). Indeed, the ability ofan air carrierto undertalce reasonable reliance under the HMR and Part 175 is illuminatedby the stark contrast ofthe specific facts andregulatory violations ofthe 

### AlaskaAirlines. 4 IheAdministratorheld in

### AlaskaAirlinesthatthe ail' carrier was responsible for the maintenance deficiencies ofits independent contractors because: (1) 14 C.F.R. 

### § 121.363 provides that carriers are 

### "primarily responsible" for maintenance; (2) the FAAhad issued guidance emphasizing that carriers have 

### "unrestrictedandunconditionalresponsibility" for their independentmaintenance contractors; and (3) one ofthe air calTier's operations specifications required itto 

### "ensure" that its contractors performed all substantial maintenance 

### "without deviation" according to its maintenance program. 

### AlaskaAirlines, Inc., FAA Order 2004-8, 2004 FAA LEXIS 905, *2-*3 (Oct. 

### 4, 2004). In contrast withrespect to hazardous materials, the HMR, including the specific regulations involved in this case, expressly allow for reasonable reliance oninitial air c3niers

4 Itis importanttonote that the Alaska Airlines case is cited when evaluatingthe NOPIC allegation during the first flight notwith regard to the VIolations at issue in this appeaL Initial Decis_ion, at 4. 20and independent contractors in the chain ofcustody. Part 175 does not utilize the absolute latlguage and qualifiers that the Administrator found compelling when holding the ail' carrier responsible in

### AlaskaAirlines. Consistent withthis regulatory context, Empire's GaM simply acknowledges that the airline is "responsible" for HMR compliance, not "primarily"responsible. (Exhibjt 

### C-ll, at page 11-8.) Additionally, underthe HMRofferors (including initial air carriers also acting as offerors) have "primary responsibility" for undisclosed shipments. 63 Fed. Reg. 30411 (Jun. 4, 1998). The adjective "primary" means "being or standing first in a list, series or sequence" and "firstin importance; chief; principal; main." 

### AlaskaAirlines, Inc., FAA Order 2004-8, 2004 FAALEXIS 905, at 

## *12 (Oct. 4, 2004) 

### (citing Webester's Dictionary). TIlere is no question that FedEx Express, as initial air carrier and prior offeror, was first in the sequence ofaccepting, loading, andtransporting the hazardous material atissue and then served as the primary actor in accepting and loading the hazardous material. (Tr. at 133-140; Tr. at 175-176.) As noted in the record and explained inthe prior section, FedEx Express exclusively controlled the key decision-points and critical data in the loading and acceptance process. Underthe FAA-approved loading process for the feeder airline, Empire supervised the result ofFedExExpress's prior critical ctTors and unknown mistakes. Finally, unlike the

### AlaskaAirlines case, there are no express conditions orrestrictions on how an operating catTier may reasonably ensure wIder 

### § 175.30(a). Significantly, there is no listed reqnirement that an air operator must "ensure" that its independent contractor acts "without deviation" whenloading and accepting hazardous material. Here, Empire took reasonable and permissible measures to ensure that the hazardous materials compliedwiththe requirements of

### § 175.30(a), including contracting out acceptance and loading functions. There is also no substantial evidence, finding or allegation that Empire did not actually ca1'1'y out its duty to supervise its independent contractor. As a result the deviations that occurred fall squarely and reasonably at the feet ofFedEx Express.

21

### IV. CONCLUSION For the reasons set forth above, Empire Airlines, Inc. respectfully requests that the FAA decisiorunakerpartially reverse theInitial Decision such that violations of49 C.F.R §§ 175.3 and 175.3O(a) are dismissed.

Datedthis 22nd day ofJune, 2011. Respectfully Submitted,**~.Gre** 

# .Wicks

- Roncevert D. Almond

22 The Wicks Group, PLLC 1215 1

## i h Street, NW Sumner Annex, FourthFloor Washington, DC 20036 Tel: (202) 457-7790 Fax: (202) 457-7799 Courtney E. Felts Senior Attorney

- Regulatory Affairs Federal Express Corporation 3620 Hacks Cross Road Building B, 3rd Floor Memphis, TN 38125 Tel: (901) 434-8632 Fax: (901) 434-8283 Counsel for EmpireAirlines, Inc.CERTIFICATE OF SERVICE I hereby certify that the foregoing docrunent has been sent viafacsimile and expedited courier service to: Federal Aviation Administration 600 Independence Avenue, SW Wilbur Wright Building-Suite 2WI000 Washington, DC 20591 Attention: Hearing DocketClerk, AGC-430 Fax: (202) 493-5142 

### Mr. James A. Barry, Senior Attorney Enforcement Division, AGC-300 Office ofthe ChiefCounsel Federal Aviation Administration 800 Independence Avenue, SW Washington, DC 20591 Tel: (202) 267-8198 Fax: (202) 267-5106 Mr. Scott Morris, Attorney Federal Aviation Administration Office ofthe Regional Counsel (ANM-7) 1601 Lind Ave., S.W. Renton, W A 98057 Tel: (425) 227-1417 Fax: (425) 227-1107

Datedthis 22nd day ofJune, 2011.

23 Two (2) copies and original

One 

### (I) copy

One (1) copy

Ao evertD. Almond

The Wicks Group, PLLC 1215 17th Street, NW Sumner Annex, Fourth Floor Washington, DC 20036 Tel: (202) 457-7790 Fax: (202) 457-7799 

### Counsel for Empire Airlines, Inc.