UNITED STATES DEPARTMENT OF TRANSPORTATION FEDERAL AVIATION ADMINISTRATION WASHINGTON, DC
In the Matter of: SCHUMAN AVIATION COMPANY, LTD. 

### FAA OrderNo. 2016-2 FDMS No. FAA-2013-1080 1



### Served: August 24, 2016 DECISION AND ORDER 2 

### Complainant Federal Aviation Administration ("Complainant" or "FAA") has appealed the civil penalty assessed in the written initial decision ("Initial Decision") of Administrative Law Judge ("ALI") Richard C. Goodwin. 3 

### The Initial Decision found, based on the undisputed record, that Respondent Schuman Aviation Company, Ltd. ("Schuman") violated 14 C.F.R. § 

### 119.5(g)4 

### by operating 24 round-trip scheduled operations under 14 C.F.R. 

### Part 135 to KailuaKana International Airport, Kona, Hawaii ("KOA"). At the time, Respondent's operations specifications did not permit it to operate to KOA. In 

### addition, the ALI concluded, also based on

1 Generally, materials tiled in 

### the FAA Hearing 

### Docket (except for materials filed in security cases) are also available for viewing at http://www.reguiations.gov. 14 C,F.R. § 13.210(e)(l). 2 The Administrator's civil penalty decisions, along with indexes of the decisions, the rules of practice, and other information, are available on the Internet at the following address: www jaa.govl about/office_ org!headquartersoffices! age/pol_adjudication/AOC 400/Civil_Penalty/. See 14 C.F.R. § 13,210(e)(2), In addition, Thomson Reuters/West Publishing publishes Federal Aviation Decisions. The decisions also are available through LEXlS (TRANS library) and WestLaw (FTRANFAA database).
3 The ALJ's Initial Decision is attached. 4 HNo person may operate as adirect air carrier or ... commercial operator without, or in violation of. appropriate operations

**specifications.'~** cthe undisputed record, that Schuman violated 14 C.F.R. § 135.73 5by initially refusing to permit two FAA Aviation Safety Inspectors to inspect Schuman's records concerning the above operations. 6 The ALJ, however, rejected Complainant's proposed civil penalty of $28,000 and instead assessed civilpenalties of$5,000 each for the violation ofthe two regulations, 

### i.e., a total civil penalty of $10,000. For the reasons discussed herein, I reverse the Initial Decision in part and assess a civil penalty of$27,8007 

### I. Burden ofProofand Standard ofReview Complainant has the burden to prove the appropriateness of a civil penalty. 

### Wallaesa, FAA Order No. 2013-2 at n.30 (May 14, 2013); 

### Seven's Paint & 

### Wallpaper, FAA Order No. 2001-6 at 4-5 (May 16, 2001). Complainant may meetthis burden by, among other things, introducing the Agency's Sanction Guidance8 and the testimony ofanFAA Inspector. 

### Northwest Airlines, FAA Order No. 1990-37 at 6-9 (November 

### 7, 1990). A respondent must prove any affirmative defenses relating to the sanction, such as financial hardship or corrective action. 

### Seven's Paint & 

### Wallpaper, supra; Atlas Frontiers, LLC, FAA Order No. 2010-10 at 11 (June 16, 2010).

5 "Bach certificate holder and eachperson employed by the certificate holder shall allow the Administrator, at anytime or place, to make inspections ortests ... to determine the holder's compliance withtheFederal Aviation Act of 1958, applicable regulations, and the certificate holder's operating certificate, and operations specifications.n 6 Tr. 15. 7 Remanding this case to the ALJ is unnecessary. See Esau, FAA Order No. 1991-38 at 7 n.7 (September 4, 1991) (case would not be remanded to determine civil penalty because it was more efficient for the Administrator to make the determination). 8 FAAOrder No. 2150.3B, entitled "FAAEnforcement and Compliance Program" (October 1, 2007), containsthe Agency's Sanction Guidance. Id. at 2-4. The particularportions ofthe order that FAA personnel use to determine an appropriate sanction are Chapter 7 ("Sanction Guidance Policies"); AppendixB ("Table ofSanctions for All Enforcement Programs, ExceptHazardous Materials"); and Appendix C ("Sanction Guidance-Hazardous Materials Enforcement").

2

### In an appeal ofan initial decision, the FAA 

### decisionmaker considers whether: (1) 

### each finding offact is supported by a preponderance ofreliable, probative, and substantial evidence; (2) each conclusion of law is made in accordance with applicable law, precedent, and public policy; and (3) the administrative Jawjudge committed anyprejudicial errors.9 II. Discussion A. Unauthorized Scheduled Operations 

### Schuman holds a certificate authorizing it to conduct scheduled air carrier service under 14 C.F.R. Part 135. 10 

### Schuman's Operations Specification C070, entitled "Airports Authorized for Scheduled Operations," stated that Schuman was authorized to conduct scheduled passenger and cargo operations only at the airports listed11 

### At all relevant times, Schuman's Operations Specification C070-2 did not authorize it to conduct scheduled operations at KOA 12 

### Nevertheless, between September 8, 2012, and September 13, 2012, Sch\Ullan operated 

### 24 round-trip scheduled commuter operations 13

### to KOA for Mokulele Airlines, 14 

### using Cessna

9 14 C.F.R. § l3.233(b). Schuman argues thatthese considerations are rendered mootbythe Pilot's Bill of Rights, Pub. L. 112-153, 126 Stat 1159 (August 3, 2012). In this regard, Schuman cites to a decision of the National Transportation Safety Board ("NTSB") in Administrator v. Jones, NTSB Order No. EA5647, 2013 WL 316199 at *4 (January 16, 2013). The Pilot's Bill ofRights, however, applies to NTSB certificate cases, rather than to FAA civil penalty cases, such as the instant case. Schuman cites no authority Indicatingthat the Pilot's Bill ofRights applies in FAA civil penalty cases. Schuman also states that when itmade an offer to settle this case, Complainant's attorney did not respond. The Administrator does not, in an appeal, review an agency attorney's discretionary decision to settle or not settle a matter. See OffshoreAir, 

### FAA OrderNo. 2001-4 at 10 (May 16, 2001). 10 Initial Decision at3. n Id. 12 ComplaintII.3; Answer 2. 13 Tr. 24, 27-28, 143-46. 14 Tr. 24, 26; Complainant's Exhibit A-5.

3Caravan 208B aircraft. 15 The FAA Sanctions Guidance provides a range of penalties for operations that are contrary to a company's operations specifications. The sanction guidance indicates a minimumrange civil penalty for those unauthorized operations that involve 

### technical noncompliance. 16 Schuman is a Group III Operator17 and Small Business Concem. 18 To determine the appropriate civil penalty, one begins with the middle of the range. If there are aggravating factors, one increases that amount, andifthere are mitigating factors, one decreases that amount. FAA Order No. 2150.3B at 7-9. Complainant followed this approach, decreasing from the midpoints due to mitigating factors. For a Group 

### III operator, the minimum range civil penalty is $825 to $3,299, 19 andthe midpoint is $2,062. The record shows that two weeks after the flights, Complainant amended Schuman's operations specifications to include KOA as an authorized airport, showing that Schuman's operations into the airport likely did not affect safety. Due to this mitigating factor, Complainant selected the bottom ofthe prescribed minimum civil penalty range - $825. Imposing an $825 civil penalty for each ofthe 24 unauthorized flights amounted to a sanction of$19,800?0 B. The Refusal to Permit Records Inspection On or about September 17, 2012, two FAA Inspectors from the Honolulu Flight 15 Complainant'sExhibitA-3; Tr. 62. 16 FAA Order No. 2150.3B at B-12. 17 Schuman operates seven aircraft. Complainant's Exhibit A-1. The sanction guidance indicates that an operator with seven aircraft is a Group Ill Operator. FAA OrderNo. 21050.3B at B-3. 18 Itis not disputed that Schuman is a small business and was treated as such by Complainant. 19 Id. atB-4, B-12.
2

## °Complainant's Closing Argument at 10.

4

### Standards District Office (FSDO) visited the Schuman offices and asked Mr. Schuman, the President and owner of Schuman,21 

### to inspect the company's daily flight logs and maintenance logs. 22 

### Complainant was not required to provide Schuman with prior notice of a records request. 23 

### Mr. Schuman refused to provide the records and the FAA Inspectors left. 24 

### About 2 hours later, however, after consulting with his attorney, Mr. Schuman notified the FAA Inspectors that he would comply with the request. 25 

### Subsequently, Schuman delivered the records to the Inspectors atthe HonoluluFSDO26 

### The Sanction Guidance prescribes a maximum civil penalty for several types offailure to permit FAA inspection. The maximum civil penalty range for a Group Ill operator such as Schuman is $7,150 to $11,000,27 

### and the midpoint is $9,075. Due to the presence ofa mitigating factor, i.e., about 2 hours after the records request, Schuman agreed to the inspection of its records, Complainant selected a civil penalty of $8,000, which is near the bottom of the prescribed rangen

C. The ALJ's SanctionAnalysis 

### In imposing a lower civil penalty than had been proposed by Complainant, the ALJ
21 Tr. 84. 22 

### Tr. 15-16, 48.
23 

### Tr. 49; Footnote 5, supra. 24 

### Tr. 15, 69, 102-04. 25 Tr. 

### 17, 52, 54, 

### 70.
26 

### Tr. 16-17. 27 

### FAA OrderNo. 2150.3B at B-4. 28 

### Complainant's ClosingArgument at 10; Rebuttal to Respondent's Closing Argument at 

### 3.
5inaccurately stated that Complainant had failed to show how it used the sanction guidance to arrive at a figure of$28,000 for the civil penalty. 29 

### 1n fact, Complainant explained in its posthearing briefs30 how it used the Agency Sanction Guidance in FAA Order No. 2150.3B 31 to address the violations. Regarding the violation of its operations specifications (14 C.F.R. 

### § 119.5(g), Complainant's sanction analysis noted that: the proposed civil penalty of$19,800 for the violations of 14 C.F.R. 

### § 119.5(g), and $8,000 for the violation of 14 C.F.R. §135.7, equals $27,800.32 The ALJ, however, refused to impose the penalty requested for unauthorized operations, stating that Complainant had failed to prove how it arrived at $11,000 for each violation.33 The ALJ's conclusion, however, is based on a false premise. Complainant had not argued for imposing an $11,000 civil penalty for each violation. Rather, Complainant correctly stated inthe Complaint that 

### under 49 

### U.S. C. § 46301, Schuman was subject to a civil penalty 

### not to exceed $11,000 for each ofthe violations?4 And, as noted above, Complainant imposed the bottom of the minimumcivilpenalty amount 

### for eachunauthorized flight.

29 The ALJ aclmowledged that the parties filed post-hearing briefs (Initial Decision at 3), but he apparentlywas unaware ofComplainant's explanations in them regardingthe sanction.
3

## °Complainant's Closing Argument at 9-10; Complainant's Rebuttal to Respondent's Closing Argument at 3. 31 The ALJ tookjndicial notice ofFAA OrderNo. 2150.3B, which is Complainant's Exhibit 7. Tr. 3, 30- 31. The ALJ said he had checked to ensure thatthis version ofthe order was correct. Id. 32 Rmmded up, it totals $28,000, which is what Complainant sought. On appeal, however, Complainant does not round up and instead seeks $27,800. 33 Initial Decision at 13. The ALI wrote, "The FAA failed to prove bytestimony and/or evidence ofhow itarrived atthe figure of$11 ,000 for each violation. We are left to speculate how the figures of$11,000 and $28,000 were determined." ld. 34 Complaint IV. I.



### 6

### The ALJ also incorrectly found that Complainant did not show that it considered the nature, circumstances, extent, and gravity of the violations. These factors, however, are taken into account inthe Sanction Guidance itself, which Complainant appropriately used inarriving at its sanction recommendation: "[w]hen the FAA formulated [the] sanction ranges for different types ofviolations, the agency considered the nature, extent and gravity ofeach general type of violation
...." Ventura Air Services, FAA Order No. 2012-12 at 27 (November 1, 2012), citing Folsom'sAirService, Inc., FAA 

### Order No. 2008-11 at 12 (November 6, 2008) and Schultz, FAA Order No. 1989-5 at 12 (November 13, 1989). Moreover, Schuman has not disputed that Complainant used the Sanctions Guidance to arrive at the proposed civil penalty. Thus, by appropriately applying the Sanctions Guidance, Complainant necessarily took into account the nature, circumstances, extent, and gravity ofthe violations. The ALJ also incorrectly held that Complainant had failed to show how it used aggravating or mitigating factors to adjust the sanction. In 

### its post-hearing briefs, however, Complainant explained that it took into account two mitigating factors in determining the proposed civil penalty. First, Complainant ultimately approved Schuman's operations to KOA, indicating that the operations were not unsafe. Due to this mitigating factor, the Complainant sought a minimum civil penalty, i.e., $825, rather than a midpoint penalty. Second, Schuman agreed after about 2 hours to produce the records. In

### light ofthat fact, the Complainant sought a sanction of$8000 rather than a midpoint sanction of$9,075. Thus, Complainant appropriately consideredmitigating factors by selecting a civil penalty nearthe bottom oftheprescribed range. The ALJ further found that Complainant had failed to show whether its sanction analysis took into account Schuman's ability to pay. It is not, however, Complainant's burden to prove Respondent's inability to pay. "Financial hardship and inability to pay are affirmative defenses

7

### that the respondent has the burden ofproving
....

### "Atlas Frontiers, FAA 

### Order No. 2010-10 at 11 (June 16, 2010), citing 

### Giuffrida, FAA 

### Order No. 1992-72 at 2 (December 21, 1992). A respondent bears the burden ofproofbecause its financial records are 

### within its control. 

### Atlas Frontiers, FAA Order No. 2010-10 at 11-12, citing 

### Seven's Paint & 

### Wallpaper, FAA Order No. 2001-6 at 5 

### (May 16, 2001). To prove inability to pay, a respondent must introduce supporting financial documentation, such as tax records, which Schuman failed to provide. 

### Atlas Frontiers, supra at 12; 

### Giuffrida, supra at 5. Self-serving testimony ofa company's owner is insufficicnt.35 

### Thus, Shuman, not Complainant, failed to appropriately pmsue the "inability to pay" component ofdetermining the proper civil penalty amount. The ALJ 

### stated that he considered the following "corrective actions" justifying mitigation in setting a $10,000 civil penalty: (I) 

### Schuman immediately stopped operating when it was notified that it was violating its operations specifications; and (2) 

### Schuman permitted Complainantto inspect its records 2 

### hours after itrefused perrnission.36 

### However, the Sanction Guidance, which couldnot beclearer, states: The FAA considers corrective action a mitigating factor in determining sanction 

### provided the corrective action exceeds the minimum regulatory or statutory requirements.
.. . Corrective action
... 

### that simply brings that person into compliance with the statutory or regulatory requirements is not considered in mitigation of sanction. To mitigate a sanction based on such corrective action would put at an economic disadvantage competitors who have expended the

. . ]' 37 

### resomces necessary to mamtam comp mnce. Thus, as set forth above, the two actions cited by the ALJ 

### are not "corrective actions"

35 !d. Complainant points out that although itdid nothave the burden ofproving Schuman's ability to pay, it necessarily considered this by using the Sanction Guidance. UsingFAA Order No. 2150.3B, Appendix B, Complainantclassified Schuman as a Group III Operator and Small Business Concern. 36 Initial Decision at I3. 37 FAA OrderNo. 2150.38, chap!. 7, 1f4(m) at 7-8 and 7-9 (emphasis added).

8

### justifyingmitigation because they simply brought Schuman into compliance. Schuman's actions here were not comprehensive; nor was stopping its unauthorized operations a "positive" action warranting a reduction in the civil penalty. PinnacleAirlines, FAA 

### OrderNo. 2012-2 at 15 (May 22, 2012); Mole-Master, 

### FAA Order No. 2010-11 at 11 (June 16, 2010). As discussed above, Complainant appropriately considered Schuman's action to be a mitigating factor and lowered the proposed civil penalty accordingly to at or near the bottom of the minimum sanctions

In addition to the above-slated deficiencies, the ALJ's assessment does not comport with the Sanction Guidance, the Administrative Procedure Act ("APA"),39 

### and the FAA's 

### Rules of Practice.'0 

### It is well established that: "On matters of law and policy
. . . ALJ's 

### are entirely subject to the agency." NorthwestAirlines, FAA 

### Order No. 1990-37 at 8 

### (November 7, 1990), citing D'Amico 

### v. Schweiker, 

### 698 F.2d 903, 907 (7'h 

### Cir. 1983); see 

### Scalia, The AU- a Reprise, 

### 47 U Chi. L. 

### Rev. 

### 57, 62 (1980). Moreover, "[i]fthe 

### ALJ does not 

### follow agency policy, the agency may impose that 

### policy by reversing the ALJ's decision on appeal." Id.; Northwest Airlines, supra; Warbelow's Air Ventures, 

### FAA Order No. 2000-3 at 9 (February 

### 3, 2000). Thus, the ALJ 

### failed to follow the applicable law and policy on such matter.

38 Complainant's Closing Argument at 

### 9-10; Complainant's Rebuttal to Respondent's Closing Argument at 3. 39 The AP A required the ALJ to include inhis decision "a statement offmdings and conclusions, and the reasons or basis therefor, on all the material issues of fact, law, or discretion presented
...." 5 U.S.C. § 557(c)(3)(A). 40 The FAA's Rules of Practice required the ALJ, in each decision, to "include findings of fact and conclusions oflaw, and the grounds supporting those findings andconclusions, upon all material issues of fact, the credibility of witnesses, the applicable law, any exercise of the ALJ's discretion, [and] the amount ofany civil penaltyfound appropriate by the ALJ
...." 14 C.P.R. § 

### 13.232.

9

### Ill. Conclusion The ALI's reduction of the requested civil penalty was not supported by a preponderance of reliable, probative, and substantial evidence; was not 

### in accordance with applicable Jaw, precedent, and public policy; and was prejudicial. I therefore reverse the ALJ's sanction detennination inpart and assess a civilpenalty of$27,800. 41



# ~;iRATOR Federal Aviation Administration

41 This order shall be considered an order assessing civil penalty unless Respondent files a petition for review within 60 days of service of this decision with the U.S. Court of Appeals for the District of Columbia Circuit or the U.S. court ofappeals for the circuit in which the Respondent resides or bas its principal place ofbusiness. 14 C.F.R. §§ 13.16(d)(4), 13.233(j)(2), 13.235 (2009). See 71 Fed. Reg. 70460 (December 5, 2006) (regarding petitions for review of final agency decisions in civil penalty cases).
10I. Glossary AS! C.F.R FAA FAA# FAR FSDO Grace ITh'L KOA Monfort NPCP OGG OpSpecs 

### SERVED: August 31, 2015 U.S. DEPARTMENT Of' TRANSPORTATION OF'FICE OF HEARINGS

WASHINGTON, DC " IN THE'MATTER OF SCHUMAN AVIATION COMPANY, LTD.

FAA DOCKET NO. [TO BE ASSIGNED] (Civil Penalty Action) FDMSNO. FAA2013 -1080 

# RECEIVED**S~f'** 

## - 1 2015 HEARlNG DOCKET

INITIAL DECISION OF ADMINISTRATIVE LAW JUDGE Aviation Safety Inspector Code ofFederal Regulations Federal Aviation Administration FAA Exljibit
. •,;,. ' I
. Federal Aviation Regulation Flight Standards District Office Darryl Grace, Director ofOperations for Mokulele Airlines Honolulu, HI Kailua-Kana International Airpott, Kona, fll Joseph Monfort Notice ofProposed CivH Penalty Kahului, Maui Operations Specifications 1: ,.

### .L,• ,,, 'S# U,S,C. II. Introductory Comment Schuman Exhibit United States Code

Between September 8, 2012, and September 13,2008, Schuman Aviation Company, Ltd. (hereinafter "Schuman") operated out ofKailua-Kana International Airport, Kana, Hawaii (hereinafter "KOA"), an airport 

### it was not authorized for scheduled operationsby Schuman's OpSpccs C070-2. On or abo11t September 17,2012, the FAA requested to inspect Schuman's records regarding the above flights. :Schumaninitiallyrefufed to make anyrecords available, but infonnedthe FAA approximately two (2) honrs later that Schumanwould comply with the request lll. Procedural History The FederalAviation Administration (hereinafter "FAA") advised the Respondent, Schuman Aviation Company, Ltd. (hereinafter "Schuman"") through a Notice ofProposed Civil Penalty and Final Notice ofProposed Civil Penalty that the FAA proposedto assess acivil penalty inthe amount of$28,000.00. On February 5, 2014; SchtJIUan submitted awritten request for ahearing, The FAA filed its Complaint on February 12,2014. Schuman answered the FAA's

**Coniplaintp~'February** 26,2014. TV. Hearing Ahearing was held on December 4, 2014, in Honolulu, HI. The FAA was represented by Don Bobertz, Esq., FAA, Western·Pacific Region, Office ofRegional Counsel,

**Lo~** Angeles, CA.

2

### Schumanwas represented by Christopher D. Ferrara, Esq., Honolulu, HI. Post hearing briefs 

### were filed by both parties, The matter 

### is now ready for decision, V. Jurisdiction

**~',.C'l•** 

### Schumanwas atall times mentioned herein, 

### the holder ofAir Carrier Certificate No, MKHA108K, and authorized to conduct scheduled air carrier service under Part 135 ofthe Federal Aviation Regulations (hereinafter "FAR"s) and was subjectto those regulations. VI. Burden ofProof The FAA was the petitioning party with the initial burden ofproof(14 C.F.R. § 13.224). 

### VII. Allegations

1. Schuman was the holder ofAir Carrier Certificate No. MICHA108K, authorized to conduct scheduled air 

### carrier service under part 135 

### oftbe PARs. 2. Schuman's Operations Spccifications(liereitlatler "OpSpecs") C070, "Airports Authorized fot 

### Scheduled Operations" stated that Schuman was 

### "authorized to conduct scheduled passenger and cargo operations between the regular, refueling, and provisional airports" only 

### a\the airports listed on C070"2. 3. At allrelevant times, Kailua-Kana International Airport, Kona, Hawaii (hereinafter "KOA''), was no\ an airport authorized for scheduled operations by Schuman's OpSpecs C070-2. 4. Between September 8, 2012, and September 13, 2008, Schuman operated

**ch~l** 

### aircrafts N687M!\. andN865MA, both Cessmt 208B aircraft on approximately twenty"four 

### (24) roundtrip flights to KOA.

35. On or about September 17,2012, the FAArequested to inspect Schuman's records regarding the above

**flight~.** 6. Schumaninitially refused to make any records available, but informed the FAA approximately two (2) hours later that Schuman would comply with therequest. 7. On or aboutSeptember 21, 2012, Shuman providedthe requested records to. the FAA. The FAA alleged by reason ofthe foregoing facts and circumstances, Schuman violated the following Sections ofthe F ARs (Title 14, Code ofFederalRegulations (hereinafter "CFR"): 14 C. F.R. J19. 5(g), which states that "[n]o person may operate as a direct air carrier or as a commercial operator without, orin violation of, an appropriate certificate and appropriak operations specifications." 14 C. FR. 135,73, which slates:
..**"Each,q~rtiJ).C\'te** holder and each personemployedby the certificate holder 

### shall allow the Administrator, at any time or place, to make inspections or tests (including en route inspections) to detemline the holder's compliance with the Federal Aviation Act of 

### 1958, applicable regulations, and the certificateholder's operating certificate, and operations specifications." The FAA alleged, pursuant to Title 

### 49 U.S. C. Section 46301, Respondent was subjectto a civil penalty not to exceed $11,000.00 for each ofthe violations alleged. The FAA alleged, underthe facts and ciTcumstances ofthis case, a civilpenalty of $28,000.00 was approp1iate. B. SchUII)an's recitation offacts SchumanAnswered: FIRST DEFENSE 1. The Administrator's Complaint



## failed,tti~s*lWa cause ofaction upon which 

### reliefcould be granted. SECOND DEFENSE 2. Respondent admitted the allegations in paragraphs I; Il, 1, 2, 3, 4 and 7 ofthe FAA's Complaint. 43. Respondent averred itwas without knowledge ofthe actual date in the allegation contained in paragraph 

### ll, 5ofthe FAA's Complaint, and therefore denied the same. 4. Respondent denied the allegation contained inparagraph 

### ll, 6 oftheFAA's Complaint 5. Respondent deniedthe applicability

### Of•'par~~aph III, a and bandparagraphIV, l.and 2 ; .,, r ofthe FAA'> Complaint. THIRD DEFENSE 6. Schuman intended to rely on any and all Affirmative Defenses that were available, 

### the applicability ofwhich might be determined and/or disclosed byinvestigation and/or discovery. VIII. Issues Did Schuman violate 14 C.F.R. 119.5(g), and 14 C.F.R. 135.73 ofthe FARs. IfSchuman violated the above provisions ofthe C.F.Rs. was a fme of$28,000.00 appropriate under the circurustanccs. IX. Summary ofTestimony and

### Evid~hce All admitted testimonial and documentary evidence was reviewed and considered. Only brief**highlight~** are summarizedherein.
Joseph Monfort' Joseph Monfort (hereinafter "Monfort") was employed by the FAA atthe Honolulu (hereinafter "HNL") Flight Standards District Office (hereinafter "FSDO") as an Aviation Safety lm-pector (hereinafter "ASI") at the tin1e ofthe alleged violations. Hehad been employed approximately five {5) years. He had primary oversight ofgeneral aviation inthe islands.

1Tr. p. 9, 1. 11 top. 32, I. 20 

### 5He was the principal operations inspector tor Schnman and routinely conducted surveillance ofall Part 135 operations. He was notified in September2012 there were commuter operations conducted 

### by Schuman at Kana airport. He reviewed the files for Schuman, verified thathe did nothavethe operation specifications, "Charlie 070" (hereinafter''C070") to conduct commuter operations in to Kona, sohe and Bartler2 went over to Schuman's office to find outwhatwas going on. At the interv>ew, whenMonfort inquired about the operations, Schuman denied doing commuter operations. Schnman saidhe was doing "on-demand charter", and he could do as many as hewanted, as often as hewanted. Mcnlf'drtreviewed C070, whichwas issuedto Schuman as ofthe date ofSeptember 17,2012 (FAA# 1). Monfortpointed out thatunder operation specification C070, page two, there was alist ofairport cities where Schnman was authorized to conductcommuter operations and Kona Wli.'l not listed on thatpage. During the interview, whenMonfort and Bartlermentioned that Schuman couldnot condnct commuter operations into Kona, Schuman disagreed, so Monfort and Bartler asked to
see his maintenance logs, daily flight logs. At that point in time, Mr. Schuman said, no, I don't think so. Monforttestified he and Bartler said:

...are you sure that's whatyotl wantto do? He says: Yeah, I don't

### think so, and he backed away from his desk. At that pointintime, we got up and wewalkedout ofthe office. It was avery shot1 meeting
...

. ,·. ·;· '

**--~** Monfort testified Schumanwas under the impression he coulddo on-demand operations
or charter operations from Mokulele Airlines and he believed thathe could do that as often as he liked. Monfort testified, two hours later, Schuman called me, after contacting his lawyer, and he said the records would be made available to us. Schuman deliveredthe records to the FSDO

2 Kyle Bartler, see ID below. 6sometime later. Monfort reviewed FAA# 2 and 3. FAA# 2 was his statement, whichwas given limited weight because it was cumulative to the live testimony at the hearing
. 

### • FAA# 3was the daily flight logs or run sheets for the Cessna Caravan. The document showed the actual commuter flights thatwere conducted for Mokulole bySchuman

### with this aircraft. There were two (2) flights that day onthe page one ofeight, and ithadthe time periods, the actual aircraft hours, when they took off, when they landed, howmuch time was accumulated between each flight. These notations recurred onmultiple pages. On page three ofeight, it showed Kahului, Maui (hereinafter "OGG") , KOA, KOA, OOG. 000. The records indicated operations between Kona and Maui. There were two different aircraft used 687 Mike Alpha and 65 Mike Alpha. Once the FAA identified thatthe actual flights to Kona were done from Mokulele, the FAA requested records from Mokulele Airlines,3 to give the FAA their published schedule and which flights Schumanflew those published schedules for. The FAA received adocument Darryl Orace4 (hereinafter "Grace") showingthe actual commuter scheduled airline operations. FAA# 5 showedthe flights were scheduled operations, which was thebasis for a commuter airline. ln other words, aticket was sold for acertaintime, from acertain airport to a certain place,just like you would go to an ah·line. When this operation was conducted on these days, it
was a scheduled commuter operation. The fllghts that went between Kona and 000were preplanned flights by Mokulele, which were conducted by Schuman Aviation. On page four ofsix,
were the actual logs by the flight-locating system for Mokulele, and with the estimated time of departures and their estimated tin>e ofarrivals, andtheir actual times, inputtedby an individual,

3 FAA# 4, Ltr. to Darryl Grace 1Director ofOperations

### f~r Mokuleltl 'FAA#5. 71**~·**

when they landed and when they took off. The first two pages were the flights conducted

### by Schuman for Mokulek, andthe pilot's name that conducted those flights from Sch\Jman. Cross5 Monfort had not been involved in management in prior employment. He was a line pilot. Schuman told Monfort he had amended the OpSpecs aboutfour months prior to the inspection allowing Schuman to operate into Lahaina and Lanai. Schuman told Monfort he had been in the commuterbusiness for over ayear, a year and a halfat the time, andhe had previously amendedthe OpSpecs. Schumanprincipally operated from Mokulele into Lanai andLahaina. Kalaupapawas a very small airportthatwas difficult to fly in, butthe same requirements 

### ior the commuter operation exi&1ed at Kona as they did at Kalaupapa. 

### The weather at Lanaiwas pretty much island weather, the same as everywhere. Konawas a single, very longrunway airport. Monfort testified Schumanultimately applied

### tor and received OpSpecs allowing him to operate out ofKana. Schuman had asked to do on-demand operations for Mokulele in the past, and Monfort informed him that he had to have same operation specifications atMokulele to supportMokulele commuter operations. Had Schuman asked me for the Konaroute, Monfort would huve gone through the 

### ca!legori0<1lJ exclusion, requested an amendmentto his operation specifications, and would have gone through the properprocedure to authorizehim to conductKana operations,justlikewe did Lahaina andLanai

### City. Had Monfort.knawn that he was requesting to go to Kana, he wouldhave startedthe process to issue him and go tluaughthe requirements to issue C070 into Kona.

5 Tr, p. 34, l. 5tDp. 60, l. 7. 8

### Onthe date in question, whenMonfortrequested records, andhe was denied
access. Schuman immediately pulledthe aircraft out ofKonaand broughtit backto Honolulu. There was no requirement for the FAAto notify the operator priorto an ·inspection. 

## The FAA nonnally employed tWo inspectors when it Conducted 

## an investigation. In accordance with the 

### 135 rules and regulations, an inspector can inspect at any time and any place, and all therecordsthat arc available shouldbe made available tous. Monfort did not !mow Schuman was conducting Kona operations, Early in the moming ofthe 17th,Monfort was told there was apossibility that Schumanwas conducting commuter operations out ofKona. Monforttalked to his front-line manager, and thenhe and Bartlcrproceeded over to Schuman's office. Schumankept a copy of logs file in his maintenance records downstairs in his office. Plus hehad an All Pro System that identifiedwhere the aircraft go and come from, When Mr. Schuman called Monfort two, two and a halfhours later, there was no question thathe was going to deliverthe records. After his initial denial, he said he wanted to talk to his lawyer before he gave us the records. Had hetold us the records
were not there, this would be a non-issue, It's the initial-- that he denied it, that we were shocked. Rcdirect6

'Tr. p. 60, I. lOto p. 6l, I. 7. 

### 9To get an amendmentto OpSpecs, an operator normally provided the 

### FAA a letter sayingwhere he wanted to go - startfrom and go to
- and provided a list ofaltitudes that he'd be atwhere the single engine aircraft could make easy glide, or 

### in the event of engine failure, could land on land. 

### Itwas a seven page, eightpage document. That document 

### was signedby the operator and then finalized andissued by the 

### FAA Recross7 Because Schuman did nothave faci,lities; 1 to operate, orhandlepassengers out of Kana, except for the ones that Mokulele would provide,Monfortjustneededto 

### see the agreement. Eight (8) days later itwas issuedto him through the proper requests. Kyle Bartler8 Kyle Barller (hereinafter "Bartler") corroborated the testimony ofMonfort. Evidence The following FAA exhibits were admitted: FAA# 1, FAA# 2, FAA# 3, FAA# 4, FAA# 5, FAA# 6, FAA# 8, FAA# 9 We tookjudicial notice ofFAA# 7, FAA Order 2150.38, consistentwithpastpractices of this court. ;;_ :'.\r B. Schuman's

**Cas.~** Gustav R. Schuman9 Schumantestified he owned Schuman. Inthe summer of2012 Mokulele contacted Schuman about supporting Mokulele to withtheir connnuter scheduled operationsfrom

**Oa~u**to Molokai, Molokai to Maui that may include Lanai and Kapalua. Schumanbelieved atthattime,

7 Tr, p, 61, l. 13 top. 65, I. 22. 8 Tr. p. 65, l. li top. 74, I. 1. 9 Tr. p, 83,!. 9 top. 132, I. 6. 10thathe could comply with Mr. Grace's requests because they were an authorizedPart 135 on· demand carrier. Schuman attempted to contact the'J'IAA but was unsuccessful. Schuman believed the flights were legal. When the FAA informed Schuman he was not authorized to perform the missions, they immediately ceased the operations. Schuman admitted denying the FAA access to his records. 

### Schuman admitted thattwo hours later he called the FAA and offered to produce the records. C. Credibility detennil!!!lig!I§ All witnesses were found to be credible. X. Analysis ofEvidence and Testimony fAA's case A 14 C.FR. J19.5(g) provides: No personmay operate as a direct 

### air carrier or as 

### acommercial operator without, or in violation**of~** 

### an appropriate certificate and appropriate operations specifications. No person may operate as 

### a direct 

### air carrier or 

### as acommercial operator inviolation 

### ofany deviation or exemption authority, ifissued to that person or that person's representative. B. J4C.VR.l35.73provides: Each certificateholder and each person employed

### by the certificate holder shall allow the Administrator, at 

### any time or place, to make inspections or tests (including en route inspections) to determine the holder's compliance with the Federal Aviation Act of 1958, applicable regulations, and the certificate holder's operating certificate, and operations specifications. 

### XI. Law 

### A. The FAA has the burden ofproof, exceptfor affirmative defenses 14 C.F.R. §§ 13. 224(<l) and (c). The standard is**a'preponderm~ce** ofreliable, probative, and substantial evidence 14 C.F.R. § 13.223.

11B, 49 U.S C, 

### § § 46301 (a) and (d) (Transportation) provides for the imposition ofcivil penalties inFAA cases. A person is liable to theUnited States Govemmcntfor a civilpenalty ofnotmorethan $25,000 for violating
.. , (B) a regulation prescribedor orderissuedlmder any provision to which clause (A) ofthis paragraph applies." The authority for issuing Parts 119 and 121 of 14 C.F.R. includes 49 U.S.C. Chapters 401, 441, and 447- all ofwhich are covered by clause (A). 49 US.C.§ 4630l(a)(l)(A), 14 C.F.R. Parts IJ9 and 121 (Preamble). C. 14 CF.R Jl9.5(g) provides: Noperson mayoperate as a direct air carrier or as a commercial operatorwithout, or in violation of, an appropriate cert!ficate,'l.P4,\!PPropriate operations specifications. No personmay operate as a direct air carrier or as a commercial operator inviolation ofany deviation or exemptionauthority, ifissuedto that person or that person'srepresentative. D. 

### 14 C.F.R. 

### 135.73 provides: Each certificate holder and each person employed by the certificate holder shall allow the Administrator, at any time orplace, to make inspections or te;ts (including en route inspections) to determine the holder's compliancewith the Federal Aviation Act of 1958, applicable regulations, andthe certificate holder's operating cettificate, and operations specifications. XII. Findings ofFact We find that the evidentiary facts, by apreponderance ofthe evidence standard, do support a findings thatthe following violations occurred:

A. 14 C.F.R. 119.5(g) provides: Nopersonmay operate as a dir€ct



### ai;:6lirrj~gr as a commercial operatorwithout, or in violation of, an appropriate certi:ficate and appropriate operations specifications. No person may operate as a direct air carrier m· as a commercial operator inviolationofany deviation or exemption authority, ifissued to thatpersonorthat person's representative. B. 14 C.F.R. J35.73provides: Each certificate holder and each person employed bythe certi:ficate holder shall allowthe Administrator, at any \ime or place, to make inspections or tests (including en route inspections) to deteiilline the holder's compliance withthe Federal Aviation Act of'1958, applicable regulations, and the certificate holder's operating certificate, and operations specifications.
12XIII.

**Conclusion~** We find that the evidentiary facts, by apreponderance ofthe evidence standard, support a ·:1 1,.,·\'f'l'r-1/i'·->·.; findingthat Schuman violated 

### 14 C.F.R. 119: 5(g/'iuthat Schumanoperated as a direct 

### air catrier
or as a commercial operator in violation ofa deviation or exemption authority. We find thatthe evidentiary facts, by a preponderance ofthe evidence standard, support a findingthat Schumanviolated 14 

### C.F.R. 135,73 in that Schuman <lenied the Administrator to make inspections or te&is (including en route inspections) to determine the holder's compliance withthe Federal Aviation Act of 1958, applicable regulations, and the certificate holder's operating certificate, and operations specifications. XJV. Penalty and Mitigation Considerations Schuman subsequently allowed the FAA to inspect its records. Schumanimmediately ceased

**opcrations.,whq!~,infouned** it was in violation ofthe FARs. ·:1 r ·'·r'r-L:-·
.· We found the vielations alleged. Schumanwas notinitially cooperative and responsive to FAA concerns. Once notified ofthe discrepancies/violations, Schumantook swift, comprehensive corrective action. Schumanpresentedtestimony that the penalty requested would severe impact its operations, The FAAfailed to prove bytestimony and/or evidence ofhow it arrived at thefigure of $1],000 for each violation. We are len to speculate how the figures of$11,000 and $28,000
were determined. While apenalty calculated in



### ac~orctzlrrce

## y.;Jffi theFAA's policy guidance should stand, absent a showingofthe Schuman's inabilityto pay, the evidence and testimony did not support
13the penalty requested. While the FAAwas mtitledto substantial deference in establishing an appropriate civil penalty, we cannot ignore our role to evaluatethetestimony and evidence. A. Sanctions guidance FAA Order2150.3B Appendix C sets forth the penaltypolicy ofthe FAA. 10 As a general matter, a sanction shouldbe imposed thai is a sufficient deterrentbut not excessive, in orderto comply with the underlying purposes ofthe Federal hazardous material transportation law and 

## L ;,

**~~-~- t.~N~·** 

## ..' HMR. The FAA considers a variety offactors wheri determining an appropriate civil penalty, including: (1) the nature and cireumstances ofthe violation; (2) the extent and gravity ofthe violation; (3) the person's degree ofculpability; (4) tbe person's history ofprior violations, if any; (5) the person's ability to pay the civil penalty; (6) the effect on the person's ability to stay inbusiness; and (7) other matters asjustice mayrequire. 11 Any dete1mination ofpenalty should weigh whether the violation was inadvertent or deliberate, the private or public character ofthe violation, and the attitude ofthe violator. The agency should also consider therespondent's size, particularlyin determiningthe offender's ability to absorb the sanction. An appropriate civil penalty mustreflect the totality ofthe circumstances surrounding the vi.olatim)§, El!$tern Air Center, Inc., FAA OrderNo.

**~.** '' ,,_,;rt-

**'(~>''·**

**200!~-3** (January 28, 2008). ·Finally, tbe civil penalty shouldprovide sufficientincentive to deter the respondent and similarly-situatedentities from future violations. Folsom'sAir Service, Inc., Id, 

### p. 20. The FAA has the burden of justifyingthe amount ofcivil penalty sought. 12 TheFAA's

1

## °

Folsom'sAirService, Inc., FAA Order No. 2008-11,2008 WL 4948488 (November 6, 2008), 11 !d. See also EasternAir Center, Inc., FAA Order No. 2008-3, 2008 WL 345386 (2008). 12 In The

**Matc~r** oiPhyfitsJones Luxr:mburg, 1994 WL 899676 {1994)1 citing In the Matter ofNorthwesiAirlines, FAA Order No, 90-37 at 7 (Novotnber 7, 1990). 14proposed sanctionis no more than a proposal or a r9commendationto the ALJ. 13 The FAA must ,'/ :"**-~** l· ,.- \•::o.l 

### ' prove to the ALJ how

### itused the sanction guidance to anive at its proposal. 14 The FAAmust also prove the existence ofaggravating factors and must showhowit used aggravating or mitigating factors to adjustthe suggested sanction.**Evid~nce** ofswift comprehensive corrective

. action must be considered as a mitigating factor. Significant weighthas beengiven to

respondent's effortsto ensure that 

### a violation will notreoccur. 15 

### B. Analysis Schuman violated two (2) provisions oftho FARs as set forth above. The FAApresented no evidence that itconsideredthenature and circumstances ofthe violations; the extentin gravity related to the violatioru, any mitigating or aggravating circumstances, or whether Regent's abilityto**ll,~y,V;\as** taken into account The FAA failed to prove to the ALJ how itused the sanction guidance to arrive at its proposaL The FAA failed to prove the existence ofaggravating factors and failed to show howit used aggravating or mitigating factors to adjust the suggested sanction. Taking the totality ofthe facts and circumstances into account, we conclude a fine**~f** $5,000 for each ofthe two (2) violations is appropriate, for a total fine of$10,000. WHEREFORE, evidence and testimonyhavingbeenheard and considered itbe and is herebyORDERED as follows:
a. We find the FAAproved Schuman violated 14 C.P.R. ll9.5(g) and 14 C.P.R. 135. 73; and

13 In theMatter of EasternAir Center, Inc., FAA Order No. 2008-3, 2008 WL 345386 (2008). 14 In the Matter ofWarbelow'sAir Ventures, Inc., FAA Order 2000-3,2000 WL 298578 (2000). 15 In the Matter of AmericanAtrNetwork, Inc., FAA OrderNo. 2006-5, 2006 WL 465369 (2006). See also ln the Matter of AirtranAirways, Inc., Docke-t No, FAA- 2010-0193, Initial Decision (June 23, 2010). 15b. Schmnanbe and is hereby assessed fines of$5,000 for each ofthe two (2) violations for a total fine of$10,000.

Richard 

### C. Goodwin U.S. Administrative Law Judge Attachment- Service List

16