U.S. DEPARTMENT OF TRANSPORTATION 

OFFICE OF HEARINGS 

WASHINGTON, D.C. 

Federal A via 'ion Administration, 

Complainant. 

FAA Docket No. CPIOGL0212 

v. 

DMS No. FAA-2013-0620 

National Pov•er Corporation, 

RECEIVED 

JAN 2 1 2015 

HEARING DOCKET 

The Honorable Richard C. Goodwin 

Respondent. 

POST-HEARING BRIEF /CLOSING ARGUMENT OF RESPONDENT 

Now Comes the Respondent pursuant to 14 C.P.R. § 13.23l(c) by and through its attorney, 

Martin A. Blumenthal, and states as follows: 

A. Proposed J!.lindings of Fact and Conclusions of Law 

I. The Proposed Fine of$66,000.00 Has No Rational Basis and is Unconstitutional 

a. During dim~! examination by the Government, Mr. Zawarus testified on behalf of the FAA as 

how he determined the fine to be $66,000.00: 

BY MS . BARBER: 

Trial Transcript at Page 67 

Pagel of 28 
6 Q Mr. Zawarus, how does the FAA 

7 and/or yourself determine the sanction in a 

8 hazardc•.ls materials violation's case? 

9 A We follow our enforcement order, 

10 2150.3, currently B, FAA compliance and 

11 enforcement. 

12 Q And is that document a public 

13 document? 

14 A Yes. 

15 Q And what does that guidance tell 

16 you? 

17 A It provides the factors that are 

18 taken into account to determine 

19 recommendations for sanction. 

20 Q And in this case the sanctioned 

21 amount was $66,000. Is that the maximum 

22 amount that could have been alleged or seeked, 

Page 68 

1 sought from National Power Corporation? 

2 A No. It is not. 

3 Q And what would, if you know, what 

Page 2 of 28 
4 would be the maximum? 

5 A Under current compliance and 

6 enforcement guidelines, a penalty of hazardous 

7 materials regulations can be assessed up to 

8 $32,500 per violation. 

9 Q And so, in this case, where there 

10 four violations or six? 

11 A Four violations per shipment, I 

12 believe. 

13 Q So, essentially, it could have 

14 been much higher? 

15 A Correct. 

16 Q What considerations did you 

17 evaluate when determining the amount of the 

18 civil penalty assessed against the company? 

19 A Nature and circumstances of the 

20 shipme>nt, the extent in gravity related to the 

21 shipment. The, any mitigating or aggravating 

22 circumstances there, the company's ability to 

Page 69 

1 pay is taken into account. 

Page 3 of 28 
2 Q Was an inability to pay ever 

3 brought: up to you in or anyone in the FAA to 

4 your knowledge in regards to this case? 

5 A No. 

6 Q And is $66,000, is that an 

7 appropriate civil penalty for this type of 

8 case? 

9 A Yes. 

10 Q Do you take into consideration the 

11 nature of a business when looking at sanction? 

12 A It is factored in, yes. 

13 Q And what is ·i:he nature of National 

14 Power Corporation's business? 

15 A They're a battery manufacturer. 

16 Q And do they regularly ship 

17 batteries in their course of business? 

18 A Yes. 

19 Q What does that tell the FAA when 

20 looking at a sanction, why would you look at 

21 the nature of the business entity doing the 

22 shipping? 

Page 4 of 28 
Page 70 

1 A Generally, a company who is in the 

2 business of manufacturing a hazardous material 

3 has a, is expected to have a higher degree of 

4 responsibility relative to that shipment, or 

5 to those materials that they ship. 

Mr. Zawarus testified only as to the general factors considered in assessing a penalty. Based on 

his testimony .. \lone, a third party could not possibly independently calculate the dollar figure that 

Mr. Zawarus 1·roduced. On cross examination he admitted that the whole process of calculating 

the penalty is arbitrary-there are no calculations, criteria specified, references to charts or 

comparisons to fines levied in similar cases. 

Trial transcript at page 82: 

Q Now, your testimony regarding the 

Page 83 

1 amount of penalty in this case, the $66,000. 

2 That came from you? 

3 A Yes, it was my recommendation. 

4 Q Okay. FAA counsel had nothing to 

5 do with determining that amount? 

Page 5 of 28 
6 A Well, initially, when the case 

7 went up, it included other shipping 

8 documentation but, so it was a higher penalty. 

9 Q Okay. But the recommendation 

10 comes from you, not the FAA counsel? 

11 A Corract. 

12 Q Okay. You also said that there's 

13 a enforcement order 2150.3? 

14 A Yes. 

15 Q And that's a public document? 

16 A Yes. 

17 Q And there are factors in there for 

18 you tc cons ide"::? 

19 A Cor:rcect. 

20 Q Okay. What are the, what are 

21 those factors is, there are factors in 

22 mitigation? 

Page 84 

1 A Yes. 

2 Q Okay. Such as corrective action? 

3 A Correct. 

Page 6 of 28 
4 Q What other factors in mitigation 

5 are there? 

6 A Factors, what do you mean by 

7 mitigation? 

8 Q That mitigation, in other words, 

9 making the, that would make the penalty lower. 

10 A If a company had gone above, above 

11 the requirement of the regulation to ensure 

12 future: safety. Taking immediate and corrective 

13 action upon notification. Those types of 

14 things. 

15 Q Okay. And are one those factors 

16 of mitigation, the intent of the company? 

17 A Not necessarily, no. And a person 

18 acting with knowledge relative to the material 

19 that their [sic.they're] shipping, there's an exception 

that 

20 they'll prepare it and offer it properly. 

21 Q In the course of your 

22 investigation, did you make a determination as 

Page 85 

Page 7 of 28 
1 to whether the alleged violations were 

2 deliberate? 

3 A No. It wasn't. 

4 Q Okay. Did you, when you were 

5 coming up with the amount of the penalty, are 

6 there, and according to enforcement order 

7 2150.3, are there factors in aggregation [sic.aggravation] 

that 

8 you consider? 

9 A Yes. 

10 Q Okay. And what would be those 

11 factors in aggregation [sic.aggravation]? 

12 A Release of the hazardous material, 

13 shut down of transport artery, injury, death, 

14 things: like that. 

15 Q Were any of those factors here? 

16 A No, no. 

17 Q So, there were no factors in 

18 aggregation? [sic.aggravation] 

19 A No. 

20 Q Does enforcement order 2150.3 give 

Page 8 of 28 
21 you specific monetary amounts? 

22 A Provides ranges. 

Page 86 

1 Q And what is the range per single 

2 violation? 

3 A I believe the minimum is 250 and 

4 the maximum is $32,500, statutorily. 

5 Q So, you have a lot of digression [sic.discretion], 

6 isn't that true? 

7 A Corre,ct. 

8 Q Did you make a determination on a 

9 per viclation amount and multiply that by the 

10 number of alleged violations or was there 

11 another method you used? 

At this point counsel for the FAA objected on the grounds that the specific method of his 

determination is protected by attorney-client privilege. (Transcript p.86, lines 12-15). The court 

overruled this objection that the method of determination of the penalty is not protected. 

(Transcript p.[;6, lines 16-20). Mr. Zawarus already testified that FAA counsel had nothing to do 

with the penalty determination. (Transcript p.83, lines 9-11) Up until now, Mr. Zawarus testified 

that there were. several factors in mitigation present and none in aggravation. He also admitted 

Page 9 of 28 
that the Respondent did not have any intent to violate any of the regulation (P.85, lines 1-5) 

Black's Law Dictionary defines "arbitrary" as "fixed or done capriciously or at pleasure; without 

adequate determining principle; not rational; not done or acting according to reason or 

judgment". M. Zawarus admitted that his "determination" of tbe penalty of$66,000.00 was not 

only arbitrary but based solely on his own "judgment". 

At Page 87 of the Trial Transcript: 

A I can't really answer that 

2 question. 

Q Okay. Now, when you came up with 

9 a $66,000 number, was there a number you came 

10 up with per violation and multiple [sic. multiply] it by 

the 

11 number of alleged violations, or was there 

12 some other method? 

13 A Each transaction is provided a 

14 sanction recommendation. 

15 Q Okay. Now, what was your 

16 recommendation per sanction? 

17 A I don't recall. 

18 Q Okay. So you're telling us that 

Page 10 of 28 
19 we rea.lly can't get to the essence of the 

20 reasonableness of that sanction? 

Page 88 

1 A I can't really answer that 

2 question. 

Upon further inquiry by Respondent's counsel, Mr. Zawarus tried to deny that his decision was 

arbitrary: 

Trial Transcript at page 88: 

BY MR. BLUMENTHAL: 

8 Q How did you, when you had 

9 originally wanted to assess a higher penalty, 

10 was that on a per violation and multiplied by 

11 the number of alleged violations or was it 

12 just a number you came up with? 

13 A My initial sanction recommendation 

14 was based on additional instances. 

15 Q But you did not, so, would it be 

16 fair t:o say that the $66,000 number is totally 

Page 11 of 28 
17 arbitrary? 

18 A No. 

Further questioning seeking to get to the essence of exactly how Mr. Zawarus came up with the 

penalty amour'! of $66,000.00 fmally got him to admit that he has "latitude" in determining the 

penalty amount. 

Trial Transcript at page 88 

19 Q What basis did you use to come up 

20 with the $66,000? 

21 A The compliance and enforcement's 

22 guidance that we have in our compliance and 

Page 89 

1 enforcement order. 

2 Q Did that give you a specific 

3 amount per violation? 

4 

5 A No, it does not. 

6 Q So, it was arbitrary as to the 

7 number you came up with, isn't that correct? 

Page 12 of 28 
8 A I have latitude, yes. 

9 Q Latitude meaning it's arbitrary? 

10 A If :~~ou want to call it arbitrary, 

11 yes. 

12 Q What would you call it? Latitude? 

13 A Sure. 

14 Q Isn't that just another word for 

15 arbitrary? 

At that point counsel for the FAA objected, without stating grounds for the objection: 

MS. BARBER: Objec"tion, Your 

17 Honor. 

18 ADMIN. LAW JUDGE GOODWIN: Yes. 

19 Sustained. The Court gets the point. 

2. Conclusion of Law With Respect to the Fine 

In its complaint, the Government prays for a "reasonable" fine of $66,000.00. Black's Law 

Dictionary defines "reasonable" as "Just; proper; Having the faculty of reason; rational;". The 

U.S. Supreme Court stated "Elementary notions of fairness enshrined in this Court's 

constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that 

Page 13 of 28 
will subject him to punishment but also of the severity ofthe penalty that a State may impose. " 

BMW of North America Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) 

"The Due Process Clause of the Fourteenth Amendment prohibits a State from imposing a 

'"grossly excessive"' punishment on a tortfeasor. TXO Production Corp. v. Alliance Resources 

Corp., 509 U.S. 443,454 (1993) "Elementary notions of fairness enshrined in our constitutional 

jurisprudence dictate that a person receive fair notice not only of the conduct that will subject 

him to punishment but also ofthe severity of the penalty that a State may impose. BMW ofNorth 

America Inc. 1'. Gore, 517 ti.S. 559 at 574. Further," A statute is unconstitutionally vague as 

applied "if it fails to provide people of ordinary intelligence a reasonable opportunity to 

understand wLat conduct it prohibits" or "if it authorizes or even encourages arbitrary and 

discriminatory enforcement." Hill v. Colorado, 530 U.S. 703, 732, 120 S.Ct. 2480, 147 

L.Ed.2d 597 (2000); accord United States v. Rybicki, 354 F.3d 124, 132 (2d Cir.2003) (en bane), 

cert. denied, 543 U.S. 809, 125 S.Ct. 32, 160 L.Ed.2d 10 (2004). (emphasis added) Moreover, in 

Southwestern Telegraph & Telephone Co. v. Danaher, 238 U.S. 482 (1915), the Court actually 

set aside a penalty imposed on a telephone company on the t,>round that it was so "plainly 

arbitrary and oppressive" as to violate the Due Process Clause. Id., at 491. (emphasis added) 

The FAA imposed a fine against National Power that violated due process. Mr. Zawarus imposed 

the fine using arbitrary, irrational and unknown criteria to calculate the fine. He based the fine 

purely on his <. wn "latitude", a doublespeak term for "arbitrary". This denies National Power its 

due process or knowing the severity of a potential penalty since it is impossible to calculate or 

determine using readily accessible factors. 

Page 14 of 28 
The fine is unconstitutional and unenforceable and violates our traditional notions of fair play 

and substantial justice. 

2. The Respondent Did Not Have the Requisite Intent to Violate any Reb>u.lations 

a. The relevan. statute states "49 U.S.C. §5123 (a) Penalty.-(1) A person that knowingly 

violates this chapter or a regulation, order, special permit, or approval issued under this chapter is 

liable to the United States Government for a civil penalty of at least $250 but not more than 

$50,000 for each violation. A person acts knowingly when-

(A) the person has actual knowledge of the facts giving rise to the violation; or 

(B) a reasonal::le person acting in the circumstances and exercising reasonable care would have 

that knowledge." (Emphasis supplied) 

During his tescimony, Mr. Zawarus, admitted that National Power did not have the requisite 

intent to violate the regulations he testified about. 

Trial Transcript P. 84 

21 Q In the course of your 

22 investigation, did you make a determination as 

Page 15 of 28 
Page 85 

1 to whether the alleged violations were 

2 deliberate? 

3 A No. It wasn't. 

The question now is whether National Power was "reasonable" under the circumstances and 

exercised ''reasonable care". 

A corporation only acts and wills by virtue of its employees. As such, a corporation's knowledge 

is made up of all of the knowledge acquired by its employees in the scope of their duties. 

Restatement (Third) of Agency§ 5.03 (2006); Steere Tank Lines, Inc. v. United States, 330 F.2d 

719, 722 (5th Cir.l963). Similarly, corporate intent depends on the intent of specific employees. 

Saba v. Compagnie Nationale Air France, 78 F.3d 664, 670 (D.C. Cir. 1996); see also United 

States v. Philip Morris USA Inc., 566 F.3d 1095, 1118 (D.C. Cir. 2009) ("[c]orporations may be 

held liable for specific intent offenses based on the 1mowledge and intent' of their employees"). 

Regarding the batteries that were shipped, Thomas Vrablik, the vice-president of National Power 

testified: 

Trial Transcript at Page 110: 

Q So, wo,;,ld you say that this was a 

Page 16 of 28 
20 prototype of something that they may, in the 

21 future, order? 

22 A For them it was a prototype. For 

Page 111 

1 us, it's a finished product. 

2 Q Okay. So, what shipping standard 

3 would you use to send a tested battery? A 

4 tested lithium ion battery? 

5 A It would fall under class two, I'm 

6 sorry, Group II container of the regulations. 

7 Q Okay. 

8 A Packing instruction 965. 

9 Q Okay. And in fact, is that how 

10 you shipped it'? How National Power shipped 

11 it? 

12 A Yes. 

He also testified that: 

Trial Transcript at Page 112: 

Page 17 of 28 
Q Do you ever review the regulations 

Page 113 

1 and the shipping instructions from FedEx 

2 regarding how batteries should be shipped? 

3 A Counselor, that's kind of a tricky 

4 question. I'll tell you why. Because the 

5 common carrier's [sic], FedEx and UPS have been 

6 known to give us incorrect information. 

7 Q But a.s far as you're concerned, 

8 National Power <amployees are instructed as to 

9 how to properly ship batteries? 

10 A Yes. 

11 Q Okay and they've received training 

12 and how to ship batteries? 

13 A Absolutely. 

14 Q Especially lithium ion batteries? 

15 A Especially lithium ion batteries. 

16 Q Okay. And who typically provides 

17 that training? 

18 A A third party. 

19 Q And these third parties, do these 

Page 18 of 28 
20 third parties have credentials to provide that 

21 type of instruction? 

22 A Yes. 

Page 114 

1 Q So, for example, Maria Munoz's 

2 name appears on these typical, these airway 

3 bills that the Government has introduced, to 

4 the best of your knowledge, had she received 

5 proper training? 

6 A If she's involved in the shipment, 

7 she received proper training, yes. 

National Power reasonably believed it was shipping the batteries in the proper manner and that 

its shipping employees were properly trained. 

Mr. Vrablik aJ.so testified that the Canadian shipments were shipped as untested prototypes per 

the regulations as Class 9 Hazmat in Group II packaging. 

Trial Transcript at page 132: 

Q Okay. So, you shipped that 

Page 19 of 28 
3 batter)' according to the regulations using the 

4 untested prototype standard? 

5 A That's the way our shipping 

6 department offered it for shipment, yes. 

The other batteries in the shipments were all tested even though the SM 201 and SM 206 were in 

physically different packages and their electrical parameters differed innnaterially. Mr. Vrablik 

testified that the SM 201 and SM 206 did not differ per the UN standards.: 

Q Okay. Now, was this particular 

20 battery pack, the SM206 ever tested? 

21 A Yes. 

22 Q Okay. And what kind of tests did 

Page 106 

1 it undergo? 

2 A It went through UL's safety 

3 testing, UL2054 to be exact. And, but 

4 eventually the UN38.3 batteries, battery of 

5 tests. 

6 Q Okay. Now, is that, are there 

7 other battery packs that you ship that are 

Page 20 of 28 
8 similar to this one? 

9 A I, absolutely .... 

Page 107 

5 Q Okay. So, in terms of watt hours, 

6 it's the same as SM201? 

7 A Well, according to the UN38.3, it 

8 doesn't differ by more than 20 percent in the 

9 reg. But 20 percent or greater change in the 

10 anode, cathode or electro light in mass, which 

11 equates to actually, watt capacity. No it 

12 doesn't, it's similar in construction. 

This contradicts the testimony of Mr. Zawarus on pages 79-81 of the Trial Transcript. In Fact, 

Mr. Zawarus c,dmitted during his testimony that tested batteries did not even need the approval 

letter from PH MSA. : 

Page 81: 

10 Q Okay. But with, and I'll continue 

11 for the sake of completeness. But without the 

12 knowledge of that special approval buy [sic] PHMSA, 

Page 21 of 28 
13 it's 1''-H-M-S-A for the record, was needed? 

14 A Sir, I, if that's what it says. 

15 Q Okay. Now would special approval 

16 had be,en needed had these battery packs been 

17 tested? 

18 A No. 

19 Q Okay. So, if these battery packs 

20 were, in fact, not materially different from 

21 battery packs that had already been tested, no 

22 PHMSA letter would have been needed? 

Page 82 

1 A If they had met the requirements 

2 in the UN Manual of Tests and Criteria, 

3 correct. 

Therefore, for each of the shipments, there were no violations of the regulations since all 

batteries were sent either as tested or under virtually the same standard as international 

shipments, Tested or not tested, as Mr. Zawarus testified, there is no material difference between 

the international standard and the domestic standard: 

Page 73 of the Trial Transcript: 

Page 22 of 28 
14 Q Are the international standards 

15 stricter, the same or less strict than 

16 domestic? 

17 A They are, the international 

18 requirement, there are differences between 

19 them. But for the most part they are similar. 

Respondent's c1se of the wrong telephone number on the shipping documents was also not 

intentional. National Power had a contract in place with Chemtrec, a company that provides 

emergency information 24 hours a day. Chemtrec' s telephone number was correctly shown on 

the label on the boxes, Due to a clerical error, National Power's telephone number was printed on 

the shipping documents instead of Chemtrec' s 24-hour number. National Power corrected this 

immediately when Mr. Zawarus pointed it out during the audit. 

Mr. Vrablik testified: 

Trial Transcript Page 112 

Q Okay. What number appeared on the 

3 labels, on the boxes that were shipped on 

4 these airway bills? 

Page 23 of 28 
5 A The Chemtrec 24 hour hotline. 

6 Q Okay. Why was there a difference 

7 between the Chemtrec number on the labels and 

8 the nun;ber that appeared on the airway bill? 

9 A Because the labels were pre10 printed with the correct information. And the 

11 typographical error listed on this, these 

12 documents was propagated over time. It was 

13 never corrected. 

14 Q Okay. So no one ever noticed that 

15 it was National Power's number, not Chemtrec's 

16 number? 

17 A No, no. 

18 Q Had you known that it was the 

19 wrong number, what would you have done? 

20 A I would have not been happy. I 

21 would have corrected it. 

Mr. Zawarus dso testified : 

Page 56 

Page 24 of 28 
1 BY MS. BARBER: 

2 Q What did C-12 tell you? 

3 A The le·tter response indicated that 

4 the 24 hour telephone number that was in 

5 question, that was provided by National Power 

6 Corporation on the shipping papers, they, they 

7 agreed with the findings and agreed to correct 

8 them immediately and indicated that they had 

9 done so. National Power stated that they 

10 would provide the 24 hour number of Chemtrec 

11 as their emergency response telephone number 

12 in the future. 

B. Conclusion of Law 

In each instance of any alleged violation, National Power proved that it did not violate any of the 

shipping regulations for hazardous materials. It shipped the batteries believing in good faith that 

all batteries shpped were tested or the same as tested batteries. In any event, the difference 

between the shipping methods was trivial and immaterial. 

The incorrect celephone number on the shipping documents was a mere clerical error as the 

correct number appeared on the shipping labels. There was no intent to violate this regulation. 

Page 25 of 28 
Logically, why would the Respondent not put the correct number down since it already had an 

agreement wit'l Chemtrec to provide 24-hour emergency contact information and the Chemtrec 

number already appeared on the label? 

The evidence ;hows that none of National Power's employees intended to violate any of the 

regulations co; teeming shipping protocols or labeling. All batteries that were shipped were tested 

whether because they were actually tested or were exempt from testing because there was no 

material difference from those that were tested. Any untested prototypes were shipped per the 

same standards as National Power employees reasonably believed to be the correct standard. 

Therefore, since intent to violate any regulations was lacking, National Power was not liable for 

any violations. 

3. Conclusion 

The Respondeat, National Power Corporation, lacked the requisite intent to violate any of the 

regulations concerning the shipping of hazardous materials. The hazardous materials here were 

lithium-ion battery packs. At all times its employees followed the regulations that applied to the 

shipments in question. Those employees received the proper training in those regulations and the 

proper protocol to follow when shipping those batteries. The batteries were all tested properly or, 

according to the UN rules, since they were equivalent to tested batteries. The other prototypes 

were shipped per the standards that the shipping personnel reasonably believed to be the required 

Page 26 of 28 
ones nnder the circumstances. As it turns out, the method used did not differ materially from the 

international standard. 

The proposed fine or penalty that the FAA proposes is nnconstitutional. The FAA could not or 

would not reveal how it came up with the penalty amonnt. The FAA investigator admitted freely 

that it was all i1is idea without input from others. He also admitted that the amount was arbitrary 

but within the limits provided by statute. This violates due process as one should be able to 

calculate the amount of penalty within a predictable degree of certainty. The proposed penalty 

lacked any reasonableness, was arbitrary and violated due process that National Power is entitled 

to. 

Respectfully submitted: 

Martin A. Blumenthal 

Martin A. Blumenthal 

Attorney for Respondent 

I Northfield Plaza, Suite 300 

Northfield, IL 60093 

847-441-2687 

martv@blumenthallaw.com 

Page 27 of 28 
CERTIFICATE OF SERVICE 

I hereby certify that the foregoing Answer was sent via First-Class Mail to: 

Federal Aviation Administration 

800 Independence Avenue, S.W. Wilbur Wright Building, Suite 2WIOOO Washington, D.C. 

20591 

Attn: Hearing Docket Clerk, AGC-430 (Original and one copy) 

Federal Avia1•on Administration 

2300 E. Devo.1 Ave., AGL-7 

Des Plaines, I L 600 18 

Attn.: Kate Barber, Esq. 

The Honorable Richard C. Goodwin, ALJ 

Office of Hearings, M-20 

U.S. Department of Transportation 

1200 New Jersey Ave., S.E. (E-11-310) 

Washington, D.C. 20590 

Date: 4 January 2015 

Signed: 

Mart~~-m-c-nt_h_a_l ____ _ 

Page 28 of 28