UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF HEARINGS

IN THE MATTER OF: PREMIER NAIL SOURCE, INC., Respondent

Thursday, February 16, 2017 FDMS No. FAA-2016-4266 1

The teleconference convened, pursuant to notice, at 1:30 p.m. BEFORE:

(202) 234-4433 THE HONORABLE J. E. SULLIVAN, U.S. Administrative Law Judge 

# RECEIVED MAR 032017 HEARING DOCKET

NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.comAPPEARANCES: On Behalf of the Complainant: CHRISTOPHER R. STEVENSON, ESQ. of: Federal Aviation Administration 1701 Columbia Avenue College Park, GA 30337 (404) 305-5208

ALSO PRESENT: CODY L. SMITH

NEALR. GROSS 2

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1 P-R-0-C-E-E-D-I-N-G-S 2 1:36 p.m. 3 JUDGE SULLIVAN: We're on the record 4 in the matter of Premier Nail Source, Inc. This 5 is Docket Number FAA-2016-4266. Today is 6 Thursday, February 16, 2017, and the parties have 7 convened for a litigation scheduling conference. 8 The Federal Aviation Administration, which I'll 9 herein after refer to by its initials, the FAA, 10 is represented by its attorney of record, Mr. 11 Christopher R. Stevenson. 12 The Respondent, Premier Nail Source, 13 Inc., is represented by its attorney of record-- 14 oh, I'm sorry, its representative of record, Mr. 15 Daniel Kerzner. Mr. Kerzner, by the Court' s 16 record, appears to be a lay representative, 17 appearing behalf of the company, Premier Nail 18 Source. 19 Mr. Kerzner is not present today, and, at 20 this moment, there is no explanation for his 21 absence. Also present at the Office of Hearings 22 is Mr. Cody L. Smith, an attorney advisor with

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1 this office, who is sitting in as an observer 2 only. 3 Good afternoon to you all. Simply 4 note that we had a order issued on November 15, 5 2016, that specifically was an order granting 6 joint motion to amend the litigation schedule. 7 And this telephone motion conference was set up 8 by the parties' joint motion, and the Court's 9 calendar availability to occur today, at this 10 time. 11 And it was for the purpose of hearing 12 arguments on summary judgment motion. So, my 13 initial assertion that this was a litigation 14 scheduling conference was in error, and I 15 apologize for that. This is, in fact, a motion 16 conference. 17 Since the November 15, 2016, order was 18 issued, there has been a motion for summary 19 judgment filed. Actually, prior to that time, 20 excuse me, on November 10, 2016, the FAA filed a 21 motion for summary judgment. The order granting 22 the joint motion to amend the litigation schedule

(202) 234-4433 NEALR. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com5 1 issued five days later, on November 15, 2016. 2 And a deadline for the Respondent to 3 file an answer to the FAA's summary judgment 4 motion was set for December 15, 2016, with a 5 reply due date by the FAA set for January 6, 6 2017. And I will note that the Court's record 7 shows that no answer has been filed by the 8 Respondent. 9 So, Mr. Stevenson, before we jump into 10 any particular argument, let's talk first about 11 whether you actually received an answer from 12 Premier Nail, to your motion for summary 13 judgment. 14 MR. STEVENSON: I did not receive an 15 answer from Premier Nail Source, to the motion 16 for summary judgment, Your Honor. 17 JUDGE SULLIVAN: Have you had any 18 contact with Mr. Kerzner, or someone else from 19 Premier Nail, that would explain why Mr. Kerzner, 20 or another representative of the company, has 21 failed to appear for today's conference? 22

(202) 234-4433 MR. STEVENSON: No, Your Honor.

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1 JUDGE SULLIVAN: Okay. Well then, why 2 don't we go forward with the particular oral 3 argument on the motion? And I'm going to ask you 4 I'll tell you that I've read all of your 5 materials, and I do have a couple questions for 6 you. 7 So, I can give you an opportunity to 8 make formal arguments, if you would like that, or 9 we can just jump right into the Court's inquiry. 10 What's your preference? 11 MR. STEVENSON: Given that the Court 12 has already read my submission and there is no 13 response for me to address, I think we can go 14 straight to your questions, Your Honor. 15 JUDGE SULLIVAN: Okay. Then, what 16 I'll first do 

### is, I'll deem admissible 17 Government's Exhibits A, as in apple, and 18 Government's Exhibit B, as in boy, so that it's 19 clear that the attached exhibits to the FAA's 20 November 10, 2016 motion have been deemed 21 admissible. 22 I'll note, however, that it appears

(202) 234-4433 NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 WW-N.nea!rgross.com7 1 that there is an important part of the motion 2 that may be missing, and I will specifically 3 state that, although the argument that the FAA 4 has made regarding the sanction that is sought, 5 is certainly well-argued, and it was very easy 6 for the Court to review, read, understand, and 7 cross-check, I cannot base a decision on summary 8 judgment on argument. 9 It has to be made on evidence that's 10 submitted, and deemed admissible by the Court. 11 And so, it would appear to me that there is a 12 testimonial statement missing, and I want to give 13 the FAA an opportunity to file that as a 14 supplement. 15 And I would specifically note that, 16 one of the cases that was cited by the FAA in 17 support of this motion, the matter of National 18 Power Corporation, which is FAA

-- in looking at 19 that docket number, it looks like FAA-2016-3. 20 It specifically talks about how the 21 burden of proof can be made by, not only 22 reference to the agency's sanction guidance, but

(202) 234-4433 NEAL R. GROSS COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLANDAVE., NW. WASHINGTON, D.C. 20005-3701 www.nealrgross.com8 1 with the testimony of an FAA inspector, or other 2 FAA employee. 3 So, as we talk about some of the 4 questions the Court has about this particular 5 case, I'm going to be asking some questions that 6 might be helpful to address in your supplemental 7 material. 8 Any questions about that so far, Mr. 9 Stevenson? 10 MR. STEVENSON: Well, my one question 11 would be, what the Court is looking for, in that 12 testimonial statement, but it sounds like that 13 will be apparent after you ask your questions. 14 JUDGE SULLIVAN: I think so. 15 Especially, first and foremost, there needs to be 16 someone who can testify that the argument that 17 has been provided in the motion for summary 18 judgment is, in fact, the testimonial statement 19 and position of the FAA. 20 And then, within that testimonial 21 statement, I think there will be a couple things 22 I would encourage you to address, if you can.

(202) 234-4433 NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com9 1 And that's where I want to focus our discussion, 2 at this point. 3 So, in looking at the case as a whole, 4 some of the things that may seem very simple to 5 you, were not evident to the Court. And one of 6 them is, your amended complaint, that was filed 7 on September 20, 2016, indicates that on November 8 28, 2014, there was a one-piece shipment, 9 submitted by the Respondent, for transportation 10 to Nassau, in the Bahamas. 11 But, I could not find anything in the 12 amended complaint to say where it was processed, 13 originally. Where it was submitted to? What 14 part of the country? It would be helpful if 15 there was some testimonial statement about where 16 the package was originally submitted for 17 transportation. 18 Secondly, in the amended complaint, as 19 well as in the original complaint, there's really 20 no statement about how many violations the 21 22 FAA is charging. And again, the Court is very reluctant to make an assumption about that. It

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1 would be helpful, even if you could tell me now. 2 I've looked at the material, and I 3 know that there is an argument to be made for 4 five different violations by the categories of 5 shipping, and labeling, and markings, and so 6 forth. 7 But, I don't know whether you're 8 charging one violation with five counts as part 9 of that violation, or five separate violations, 10 stemming from the one-piece shipment that was 11 made on November 28, 2014. 12 Can you clarify that now, or would you 13 prefer to wait? 14 MR. STEVENSON: I can clarify that 15 now. There's

-- the number of violations is not 16 is greater than five. The number of 17 violations, I will have to retrieve a copy of the 18 complaint from my file, here, to give the count, 19 but

-- I apologize, just a moment. 20 (Pause.) 21 MR. STEVENSON: Complaint alleged 27 22 different violations

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1 JUDGE SULLIVAN: Can I

-- I'm going to 2 stop you. I'm going to I have the amended 3 complaint, I'm looking at the amended complaint. 4 Where, where do you have that number, because I 5 must have missed it? 6 MR. STEVENSON: In the amended 7 complaint

-- in the amended complaint, the number 8 is 19, I believe. And those are the lettered 9 paragraph in Section 3. Section 3, paragraph 1 10 says, "By reason of the foregoing, the Respondent 11 violated," and then, subparagraphs A through 

### s, 12 lists all of the various regulations that were 13 violated by the Respondent's shipment of the 14 package. 15 And I guess, to clarify, those are all 16 the regulations that are alleged. It is entirely 17 likely, although I do not recall specifically, 18 that there are other regulations that were not 19 alleged. It is typically the case, in undeclared 20 hazardous materials shipments, that many, many, 21 very similar sections of regulations are 22 violated.

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1 JUDGE SULLIVAN: Okay. So, there's an 2 allegation of 19 regulations violated. And then, 3 in your summary judgment motion materials, you 4 indicate that there are five categories that 5 you're looking at, for the calculation of the 6 sanctions. 7 And those categories are -- I have it 8 written down here. Let me just double-check. 9 So, the categories are, shipping papers, Number 10 1. Number 2, label, Number 3, markings, Number 11 4, packaging, and Number 5, emergency response. 12 MR. STEVENSON: That is correct, Your 13 Honor. 14 JUDGE SULLIVAN: Okay. So, do you 15 have an identification of which regulations you 16 want to be attached to each of these? These 17 categories? You're saying, for example that, in 18 paragraphs A through s, of the amended complaint, 19 there are a total of 19 alleged regulatory 20 violations. 21 But, I don't have any information in 22 your summary judgment complaint

-- I mean, your

(202) 234-4433 NEAL R. GROSS COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com13 1 summary judgment motion, as to which category 2 each of those regulatory violations should land. 3 And I shouldn't be guessing for you. 4 MR. STEVENSON: I can tell you where 5 each of them falls, so they're not every 6 regulation covers every category. So I'm 7 sorry -- not every regulation is limited to one 8 category, in particular, the sort of central 9 allegation. 10 The central regulatory violation is 11 what is in Section 3, paragraph 1, subparagraph 12 A, which is 49CFR Section 171.2(e), which is a 13 global regulation that says, essentially, that 14 when a company is offering a hazardous material 15 for transportation, they have to follow all of 16 the other regulations that are laid out in the 17 hazardous materials regulations. 18 Because, to some extent, for most of 19 the regulations, the FAA could potentially charge 20 simply 171.2. (e), without mentioning the other 21 regulations, because they are all, potentially 22 incorporated through 171.2(e).

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1 I, usually, personally don't do that, 2 because it provides more information for the 3 Respondent, about what the particular issues 4 were. So, subparagraph A goes to all of the 5 categories. 6 It is a shipping paper violation, as 7 are subparagraphs c, D, E, F, and G. Those are 8 all violations of 172.200(a), and different 9 subparagraphs of 172.202(a). The various 10 subparagraphs describe what the shipping papers 11 have to include. Again, if this was a declared 12 shipment, you might only see one of those in 13 isolation but, usually, as here, when there's an 14 undeclared shipment, there's no shipping paper, 15 so none of the criteria are met. 16 JUDGE SULLIVAN: And would that be 17 true for subparagraph H, as in Henry, on page 6, 18 as well? 19 MR. STEVENSON: Yes, I believe that H 20 is a shipping paper violation, as well, along 21 with I and J. And I, J, K, L

-- yes, I believe 22 that through L, are shipping paper violations. M

(202) 234-4433 NEAL R. GROSS COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com15 1 is a marking violation. 2 JUDGE SULLIVAN: Okay. 3 MR. STEVENSON: N is a N is, I 4 believe, a labeling violation. It's about having 5 liquid hazards material without orientation 6 arrows on the outside. 7 

### o is a label violation. P is an 8 emergency response violation, as is Q. R is a 9 packaging violation, as is S. 10 JUDGE SULLIVAN: Okay. If you could, 11 in your additional testimonial statement, also 12 present that? That would be helpful. I have a 13 question then, a couple other questions for you. 14 After you filed your amended complaint 15 on September 20, 2016, there was no answer, that 16 I know of, that was filed to the amended 17 complaint. Did you receive any kind of answer, 18 after September 20, 2016? 19 MR. STEVENSON: I did not, Your Honor. 20 JUDGE SULLIVAN: Okay. But, it's part 21 of your argument that, the admissions that were 22 presented to you from the Respondent are

(202) 234-4433 NEAL R. GROSS COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com16 1 applicable to the amended complaint, as they 2 would have been, to the original complaint? 3 MR. STEVENSON: Yes, Your Honor. If 4 the FAA was aggressively arguing, I would argue 5 that, because the Respondent had failed to file 6 an answer to the amended complaint, everything in 7 the amended complaint was admitted, including the 8 allegations about the appropriateness of the 9 sanction. 10 However, I thought it was more 11 appropriate to take the admissions and denials 12 from the original answer as standing, because the 13 amended answer did not allege anything new. 14 JUDGE SULLIVAN: I think that's 15 probably a wise decision. I do have some 16 questions for you about the way that the 17 calculation is done, and I'm sure that you'll be 18 able to education me accordingly. 19 When I read FAA Order 2150.3B, and I 20 read some of the other cases that you've cited, 21 including National Power Corporation, it appears 22 to me that there's some discretion in what the

(202) 234-4433 NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 WW-N.nea!rgross.com17 1 FAA can do, in looking at a proposed sanction. 2 For example, it appears that there 3 could be a variety of different ways to deal with 4 a situation like this, where you have one 5 shipment, one box, and then, a variety of 6 different counts. 7 And as I read your material, in 8 2150.3B, it looked to me like there was a 9 possibility that there was also an option for the 10 FAA to consider this to be one shipment, and then 11 to apply aggravating factors to one violation, 12 for all these different shipping papers, labels, 13 markings, packaging, and emergency response 14 allegations. 15 Or, that the FAA could say, there 1s 16 two shipments in one box, because there 1s two 17 different types of hazardous material, the 18 bottled nail remover, and the bottled nail paint. 19 So, it was -- I was interested to see 20 how you particularly looked at it, and I wanted 21 to ask you, if I read Section

-- going to go to 22 page C6, in Appendix c, of FAA Order 2150.3B.

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1 And again, the guidance note, that's 2 at the bottom of that page. It talks about how, 3 and I'm going to quote, in case you don't have 4 this in front of you, ''A package means a 5 packaging plus its contents. There may be 6 multiple packages in one shipment, for over-pack. 7 Multiple packages often represent multiple 8 violations. Under the sanction guidance, this 9 fact is considered an aggravating circumstance, 10 rather than a direct multiplier of the sanction 11 for each violation. Each case, however, must be 12 evaluated on its particular facts." 13 So, is that a possibility in this 14 case, too? That, you're using your discretion in 15 how you look at this particular shipment. It's 16 either one shipment with, you know, these 17 different counts under it, or it gets one 18 shipment, but multiple violations. Because I'm, 19 as you know, still learning about all of this. 20 MR. STEVENSON: Okay. I'll in this 21 case, this was treated as simply one thing, I 22 would note.

(202) 234-4433 I would agree with the general

NEAL R. GROSS COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nea!rgross.com19 1 notions that, discriminating sanctions in a 2 HAZMAT case can be fact-specific, and that there 3 is the exercise of discretion and judgment 4 involved on the part of the FAA, in identifying 5 exactly which factors apply, and exactly which 6 weight goes to those factors, how much 7 aggravation or mitigation there is. 8 But, in this particular circumstance, 9 this is essentially something that, for a case 10 like this, could only be used to increase those 11 sanctions, because it was, as it stands, it was 12 treated as one shipment, one package. 13 Normally, multiple packages in one 14 shipment would not be a box with smaller boxes in 15 it. It would be going to, let's say, Federal 16 Express, with 12 boxes, with one master weigh 17 bill. And so you have, at that point, 12 18 packages in one shipment, under one master weigh 19 bill, with 12 different individual package 20 tracking numbers. 21 And so, that and so, I the 22 primary function of this, is that, normally,

(202) 234-4433 NEALR. GROSS COURT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com20 1 under those circumstances, where you have one 2 shipment with lots of different boxes, don't 3 treat that as 12

-- that's not the same thing as 4 12 individually-shipped packages. And so, the 5 aggravating does not blossom in quite the same 6 way. Let me know if that actually answered your 7 question. 8 JUDGE SULLIVAN: Well, that's helpful. 9 Thank you. So, in a situation like this, where 10 there's one box, and inside the box are several 11 different little bottles, that's considered one 12 violation, one primary shipping violation, but 13 you still look at each of the regulations, the 14 categories of regulations, as its own violation 15 for looking at maximum weight, and monies? 16 MR. STEVENSON: Well, typically, for 17 a given shipment, there is, especially when it's 18 undeclared, there is really only one analysis 19 where you determine the weight, and then what you 20 determine the weight, if it's maximum, moderate, 21 minimum, if it should go up or down. 22

(202} 234-4433 And then you determine that for the

NEALR. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com21 1 shipments, and then you determine how many 2 categories are implicated in that particular 3 shipment. 4 JUDGE SULLIVAN: How many regulatory 5 categories? 6 MR. STEVENSON: Yes, yes. How many 7 categories as identified in Figure C1, on page 8 C12, and as discussed in the accompanying text. 9 It is not necessarily there was not 10 necessarily a distinct regulation associated with 11 a category. 12 You could, for example, have, I think 13 it was 171.2, which we could, for the most part, 14 just fight that, but still cover everything. 15 But, in particular, I'm thinking something that's 16 not relevant in this case, but more broadly is, 17 is one of the categories is a release into the 18 environment of the hazardous material. 19 And that does not really have a 20 specific regulation. There is a regulation that 21

-- I mean, there is a regulation that requires 22 that it be packaged so that there not be a

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1 release, but that might be taken as more of a 2 packaging regulation. 3 There is not an analysis on a one-to4 one basis, I guess I'm saying, of this regulation 5 goes to this category, this regulation goes to 6 that category, in the usual course of things, for 7 an undeclared shipment. 8 I don't it is essentially not -- I 9 don't know if it is even possible to have an 10 undeclared shipment, its shipping papers, labels, 11 markings, packagings, and emergency response. I 12 guess you could have it, it could be properly 13 packaged. But, if it's got hazardous materials 14 labels on it, it's not an undeclared shipment, at 15 that point. 16 JUDGE SULLIVAN: Right. 17 MR. STEVENSON: So, the nuances often 18 only come up in declared shipment cases, which 19 are -- the Court is less likely to get, in part, 20 because they are much lower they're less 21 likely to be legal action, and much lower dollar 22 amounts.

(202) 234-4433 NEALR. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com23 1 JUDGE SULLIVAN: Okay. Let me ask you 2 a couple other questions. There were, in my 3 reading, it appears undisputed that the quantity 4 of the HAZMAT that was included in this one 5 shipment was almost two cups of flammable 6 material, but not quite two cups. 7 And it clearly was beyond the de 8 minimis amount that is identified in the HAZMAT 9 regulation. But, is that particular quantity 10 something that is large enough to actually result 11 in the kind of safety violation that is alleged? 12 Because I'm

-- I was looking at that, 13 and thinking, that doesn't seem like a very big 14 amount of liquid. And can it, in fact, be so 15 dangerous? 16 MR. STEVENSON: Well, yes. Myself, 17 personally, I'm an attorney. I'm not a materials 18 expert. I can't tell you about the chemical 19 composition of things. But, the hazardous 20 materials regulations have been promulgated, and 21 these materials in these quantities have been 22 identified as a hazardous material that would

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1 pose a threat to aviation safety. 2 Under exactly what circumstances do 3 these catch fire, and the damage would bring down 4 an aircraft, I personally can't tell you that. 5 But, I would also suggest that, the fact that 6 they have been identified under the regulations, 7 based on the reasoned determinations of 8 hazardous materials safety agency. 9 JUDGE SULLIVAN: Okay. I ask because, 10 you had indicated on page 4, of your motion, that 11 there were no aggravation factors that you looked 12 at, and no mitigating factors. 13 And I was wondering whether the amount 14 ever factored into a mitigating factor, if it was 15 so small. And it sounds to me like, in this 16 particular case, it does not. 17 MR. STEVENSON: In this particular 18 case, it does not. 19 JUDGE SULLIVAN: Okay. You indicated 20 on page 5, that a penalty in the upper third of 21 22 the maximum range was appropriate. appeared

(202) 234-4433 to me that that's

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WWoN.nealrgross.com25 1 discretionary, because category A materials are 2 automatically assigned maximum weight. 3 And there's a range for maximum 4 weight, as you properly noted, between 5,000 and 5 13,000 per violation. And if there's no 6 mitigating circumstances, and no aggravating 7 circumstances, and we're already within a maximum 8 weight range, of 5,000 to 13,000, why wouldn't 9 the FAA be recommending landing in the median of 10 that range, which is about 9,000, and staying 11 there, absent mitigating or aggravating 12 circumstances? 13 MR. STEVENSON: We are -- the FAA is 14 recommending landing somewhere that's actually 15 slightly less than the midpoint of the maximum 16 range. However, the maximum range is not 5,000 17 to 13,000. The

-- 18 JUDGE SULLIVAN: Well, explain that to 19 me, because I was looking at your materials, and 20 you have on page 6, at the top of the page, set 21 for each category of violation, the Respondent 22 would be subject to a penalty between 5,000 and

(202) 234-4433 NEALR. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com26 1 13,000. 2 MR. STEVENSON: Yes. That is before 3 considering the weight. So, if this in 4 looking at the figure Cl, on page 5 JUDGE SULLIVAN: Okay. And I'm on Cl. 6 MR. STEVENSON: All right. So, we 7 have, there in column D. 8 JUDGE SULLIVAN: Correct. 9 MR. STEVENSON: And then, we're in 10 category 2' an undeclared shipment within 11 quantity limitations. So, any violation by

-- 12 assuming the absence of some sort of extreme 13 aggravation or mitigation that would take us 14 outside of the range any violation by this 15 kind of business entity, and an undeclared 16 shipment within HAZMAT limitations is going to be 17 somewhere in the 5,000 to 13,000 range. 18 Where

-- the weight tells us is where 19 in that $8,000 range, we would be looking. And 20 as 21 22

(202) 234-4433 JUDGE SULLIVAN: I understand. MR. STEVENSON: I'm sorry?

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1 MR. STEVENSON: I understand. 2 MR. STEVENSON: Okay. And so, as 3 identified in Nation Power Corp., that means 4 that, we essentially take that $8,000 range, and 5 split it into thirds. If it's a minimum range 6 HAZMAT, it goes in the bottom third, if it's a 7 moderate range HAZMAT, it goes in the middle 8 third, and if it's a maximum weight HAZMAT, it 9 goes in the top third. 10 Here, because this was a maximum 11 weight violation, the top third would be $10,334 12 to $13,000. And the breakdown of how those 13 thirds would be, is the first full paragraph on 14 page 6, for your reference. 15 JUDGE SULLIVAN: Yes. And I've worked 16 through all of those numbers, and you're 17 absolutely correct. 18 MR. STEVENSON: Yes. So, I say that 19 we have identified something in the median here, 20 if we round down, and say that the range is 21 approximately $10,000 to $13,000. The midpoint 22 of that is $11,500, which is the penalty that was

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1 used here for category. That's, like I said, 2 that's technically slightly less than the 3 midpoint, because that's between $10,000 and 4 $13,000, rather than $10,333 to $13,000. 5 So, that's why it is in the median of 6 the applicable range. 7 JUDGE SULLIVAN: Okay. That's very 8 helpful. Let me see if there's anything else I 9 need to chat with you about. Oh, I did have a 10 question, and this probably doesn't go directly 11 to this particular case. In your motion, page 6, 12 footnote 2, bottom of the page. 13 You indicate that, if there had been 14 an intentional or deliberate shipping of HAZMAT 15 that was unmarked, that the proposed penalty 16 would be much higher. And you referenced the 17 Court to figure C1, page C12(v), D, as in David. 18 And I'm wondering if Cl2, the figure 19 C1 has been updated since 2007, because my figure 20 Cl doesn't contain the same information that your 21 figure Cl apparently has. I have some 22 information about fines that can go up to

(202) 234-4433 NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com29 1 $100,000, but you've indicated that the fine 2 should be potentially up to $250,000. 3 MR. STEVENSON: I'm sorry. The 4 $250,000 figure is that, on figure Cl, in 5 category 5, which is intentional or deliberate 6 violation 7 JUDGE SULLIVAN: Right. 8 MR. STEVENSON: It says, consult legal 9 up to $50,000 per offense category may be 10 assessed. 11 JUDGE SULLIVAN: Oh, I see. 12 MR. STEVENSON: Times five category. 13 JUDGE SULLIVAN: Times five. Okay. 14 Obviously, I'm getting close to the end of the 15 week, Mr. Stevenson. So, one or two other 16 questions. It appears that this particular 17 business might have been a small business. Was 18 that something that was considered? Or, do you 19 have no facts to support that kind of 20 consideration? 21 22 MR. STEVENSON: I believe that they
are a small business. The size of the business

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1 in hazardous materials cases is primarily 2 accounted for in ability to pay determinations, 3 unlike, in aviation safety cases, is an absolute 4 affirmative defense in hazardous materials cases. 5 You can prove, but you can't pay a 6 penalty of more than a third amount. And that 7 becomes the maximum penalty. There's no 8 possibility of saying, well, this is just so bad 9 that we're going to impose an amount and, if it 10 puts you out of business, so be it. 11 JUDGE SULLIVAN: Well, and I notice, 12 in Government Exhibit A, in the Respondent's 13 answers to your first discovery, Respondent was 14 not asserting an inability to pay. 15 MR. STEVENSON: Correct. Yes. Your 16 Honor had, if I recall correctly, during, I 17 believe, our original scheduling conference, or 18 perhaps the motion conference when I filed for a 19 motion for judgment on the pleadings, had raised 20 the possibility of an ability to pay defense. 21 And so, that is something I had 22 discussed with Mr. Kerzner before this litigation

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1 began, when it was still at the notice stage. 2 But, I had asked him that again, in discovery, 3 just to make sure that we had something in 4 writing, about the possibility of an ability to 5 pay. 6 And you indicated there, he responded 7 that they were not asserting an inability to pay. 8 JUDGE SULLIVAN: Okay. Those were the 9 questions that I had for you, and I do need to 10 ask you to submit a supplemental to your motion 11 for summary judgment, that provides some 12 testimonial evidence in support of the arguments 13 that you've made in the motion document itself. 14 And as I understand the rule, this may 15 be something that you can testify to yourself, 16 but you might want to double check on your own, 17 for that. But, if it's not something that you 18 can provide testimony about, as the charging 19 official, then please have someone else at the 20 FAA provide some testimonial statement about 21 that. 22 When do you think you would be able to

(202) 234-4433 NEAL R. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com32 1 supplement your motion so that the Court could 2 make a final ruling? 3 MR. STEVENSON: I guess, because I 4 want to assure you with a good answer to that, I 5 think I'm going to have to ask for clarification 6 on what the Court is looking for. 7 I know I identified two specific 8 things, one of which was, where did the package 9 originate, and then, possibly, a written 10 identification of what I was talking about 11 before, which is, which regulation supported each 12 category that we were imposing a sanction for. 13 JUDGE SULLIVAN: I would like to have 14 testimony, number one, where did the package 15 originate? How many violations you're actually 16 alleging. You've said to me, orally, today, that 17 there are 19 alleged violations. Which alleged 18 violations are you assigning, or would you like 19 the Court to assign to which category of 20 sanctions assessment? 21 And you talked about that a little 22 bit, today, in terms of violation A, as in apple,

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1 being a shipping paper violation, and so forth. 2 I would also ask you to have some testimonial 3 statement, either from yourself, or someone else, 4 who has read your motion and the argument that 5 you made. 6 And to state that this is testimonial 7 evidence that you could present in an admissible 8 form at a hearing. I must be able to render a 9 decision in summary judgment based on the 10 evidence. I cannot look at a motion argument and 11 consider it to be evidence. 12 So, you have, for example, you made a 13 very detailed argument from pages 3 to 6 of your 14 motion, about how you, as a charging officer with 15 discretion, would propose what the sanctions 16 should be, and why. 17 But presenting an argument is not 18 sufficient for summary judgment purposes. so, 19 anything that you argue has to relate to the 20 evidence that's adduced and admitted and 21 considered by the Court. 22 And typically, when you are making an

(202) 234-4433 NEAL R. GROSS COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com34 1 argument, it's based upon both your exhibits and 2 your testimonial statements. And because the 3 review of, and the application of the FAA 4 sanction guidance has various points of 5 discretion involved, there has to be some 6 testimony about what you did, why you did it, and 7 where you want the Court to land with you, in 8 terms of your motion. 9 Because you're the only person here, 10 and there appears to be no particular objection 11 from the other side. I'm simply saying to you 12 that, it would be very helpful if you could 13 present some testimonial evidence in support of 14 the arguments that you've made. 15 MR. STEVENSON: I will

-- I'm not sure 16 what, if any action will be taken on this point, 17 but I would respectfully disagree with the 18 Courts, that that is something that has to be put 19 into evidence. The facts that are considered by 20 the FAA, in reaching its sanction determination, 21 are absolutely things that have to be put into 22 evidence.

(202) 234-4433 NEAL R. GROSS COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com35 1 But the explanation for why the FAA 2 chose the sanction that it did, based on those 3 facts, and based on policies that are identified 4 for the Courts, is something that is properly 5 explained through argumentation by the agency 6 attorney. 7 I know, off the top of my head, we 8 have explicit case law in that point in the NTSB 9 context, which I know is not binding on this 10 Court. I'm not sure, off the top of my head, if 11 they have explicit case law on that point, in the 12 DOT context. 13 But I guess I respectfully disagree 14 that that is something that that that 15 explanation is something that needs to be, or 16 should be, adduced through testimony. 17 JUDGE SULLIVAN: Well, I appreciate 18 you difference of opinion, and so, what we will 19 do at this point is, I will ask you for a general 20 idea of when you can either produce for the Court 21 a supplemental testimonial statement or, a 22 memoranda of argument, citing to the authority

(202) 234-4433 NEALR. GROSS COURT REPORTERSANDTRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 WVWJ.nealrgross.com36 1 that says you don't have to. 2 Because my understanding of summary 3 judgment motion, and the authorities that I've 4 looked at, over and over and over again, indicate 5 to me that the Court cannot substitute argument 6 for evidence. 7 And cannot accept argument in lieu of 8 evidence on a summary judgment motion, that is 9 case positive. So, the choice is yours, but we 10 can agree upon a deadline of some sort, and you 11 can choose to do what you think is best for your 12 client. When would you like to submit something? 13 MR. STEVENSON: Well, I am currently 14 scheduled to be in hearing on the week of 15 February 26th, so I would ask for more time than 16 I usually would. Would March 17 JUDGE SULLIVAN: Sure, and it's your 18 choice because, obviously there's no objection at 19 this point. And I'm simply trying to make sure 20 that I'm able to do what you're asking me to do. 21 March, the week of March 6th, March 13th, what 22 would be convenient for you?

(202) 234-4433 NEALR. GROSS COURT REPORTERSAND TRANSCRIBERS 1323 RHODE ISLANDAVE., N.W. WASHINGTON, D.C. 20005-3701 www.nealrgross.com37 1 MR. STEVENSON: March lOth, Your 2 Honor, I would suggest. 3 JUDGE SULLIVAN: Okay. Let's say, 4 March lOth, which is a Friday, 2017, for the 5 filing of either a testimonial statement or a 6 memoranda of authority in support of your 7 assertion that none is needed. 8 And then, Mr. Stevenson, I do have 9 just a real quick question. You had told me, a 10 while back, that you were moving from Atlanta to 11 DC. Did that ever occur? 12 MR. STEVENSON: That has not yet 13 occurred, Your Honor. I am moving at the end of 14 the school year. 15 JUDGE SULLIVAN: Oh, okay. 16 MR. STEVENSON: Which, this year, 17 happens right at the end of May. 18 JUDGE SULLIVAN: Okay. All right. 19 So, I was looking, and seeing that your address 20 is still in Georgia, and I thought that maybe 21 something had changed. But it just has not 22 occurred yet.

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1 MR. STEVENSON: Yes. I didn't want to 2 do the move in the middle of the school year. 3 JUDGE SULLIVAN: Okay. All right. 4 Well then, with that, is there anything else that 5 you would like to address on behalf of your 6 client today? 7 MR. STEVENSON: No, Your Honor. 8 JUDGE SULLIVAN: Okay. I'm going to 9 thank you very much for your assistance with the 10 Court, and for the assistance that you provided 11 in talking about some of the material that's 12 before the Court. 13 I'll look forward to hearing from you 14 on or before March 10, 2017. And then, 15 subsequently, I' 11 issue an appropriate order. 16 With that, it appears our business is complete, 17 and we can go off the record. I wish you all a 18 good day. Thanks. 19 (Whereupon, the above-mentionedmatter 20 was concluded at 2:26p.m.) 21 22

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www.nealrgross.com46 C E R T I F I C A T E

This is to certify that the foregoing transcript

In the matter of: Premier Nail Source, Inc.

Before: U.S. Dept of Transportation Office of Hearings

Date: 02-16-17

Place: Teleconference

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

(202)234-4433 Court Reporter

NEAL R. GROSS COURTREPORTERSANDTRANSCRIBERS 1323RHODEISLANDAVE.• N.W. WASHINGTON.D.C. 20005-3701 www.nealrgross.com