### SERVED: DECEMBER 13,2012

UNITED STATES DEPARTMENT OF TRANSPORTATION,Jil OFFICE OF HEARINGS

WASHINGTON, D.C.
) FEDERAL AVIATION ADMINISTRATION, ) ) Complainant, ) FAA DOCKETNO. CPllGLOOOO ) v. ) (Civil Penalty Action) ) D & M CUSTOM INJECTION MOLDING ) CORPORATION, ) ) Respondent. ) FDMS No. FAA-2011-0679 )



### INITIAL DECISION OF ADMINISTRATIVE LAWJUDGE RICHARD C. GOODWIN Found: Respondent is assessed a civil penalty of$110,000.
I. Background 

### l LJ 

### r::) 

## !:**l~l**

The only issue remaining inthis proceeding concerns the appropriate civil penalty amount. Respondent D & M Custom Injection Molding Corporation ("D & M" or "Respondent") is a manufacturing concern headquartered in Burlington, IL. It does business under the name D & M Plastics Corporation (Exh. C-3; Tr. 69). Complainant Federal Aviation Administration ("Complainant," "FAA," or "the agency") initiatedthis matterby its Complaint alleging thatD & M violated various hazardous material regulations ("HMRs"), 49C.F.R. §§ 171-177, by offering in air transportationundeclared and forbidden hazardous materials. D & M had tendered to Federal Express Corporation ("Federal Express") for airtransportation, the Complaintrecites, a 5-box package containing approximately 2,000 Ruyan Rapp E-Mystick products ("E-Mysticks"). E-Mysticks are cigarette-like smoking substitutes. 1 The aircraft, a

1Exh. C-5. E-Mysticks have been advertised as non-tobacco products which may be used in areas where traditional smoking is prohibited. Exh. C-2, pp. 4, 5; Exh. C-3, p. 4. Respondent described the product as an "inhaler device that has a dietary supplement in it." Tr. 61. The product hadbeen packaged in twenty cartons of50 ''regular" units and an equal amount of"menthol," totaling 1,000 regularE-Mysticks and l,000 menthol. Tr. 50.2

DC-10 freighter, took offfrom Indianapolis International Airport and was destined for the Minneapolis-St. Paul International Airport (''MSP"). The consignee was Ruyan AmericaInc. ("Ruyan") inMinneapolis. EachE-Mystick contained a primary lithium metal battery as well as 1.5 milliliters ("ml") ofa liquid containing, inpart, ethanol and lobelia. These items, as well as the liquid as mixed, are classed as hazardous materials ("hazmats") under the Department ofTransportation's HMRs. Offering hazardous materials inthe stream ofair transportation triggers certain requirements which shippers such as D & Mare obliged to follow. Such substances (assuming they are otherwise permitted to be shipped by air) must be transported with certain markings and labels in orderto facilitate proper handling and to alert first responders inthe event ofan incident. Ethanol and lobelia are listed as so-called Class 3 flammable liquids, Alcohols, n.o.s. [which means "nototherwise specified"], with the UnitedNations ("UN") number 1987. The batteries mustbe described as "lithiumbatteries, contained inequipment." They are denoted a Class 9 material, withthe UN number 3091. The liquid as mixedtogether also was considered a regulated material onaccount ofits 93-degree (for regularE-Mysticks) and 94-degree (for menthols) flashpoint. See Table following 49 CFR §172.101; Exhs. C-3 and C-4; Tr. 26,30-31, 70. The package should have been marked and labeled to so identify these dangerous goods. Otherpackaging and informational requirements, as well as training necessities, also attach to hazmats tendered in air transportation. 49 C.F

### .R. §172. The shipment had beenundeclared (Tr. 21-22). "Undeclared" means that it containedno warning ornotice ofthe hazardous nature ofits contents. Midtown Neon Sign Corporation, FAA OrderNo. 96-26 (August 13, 1996), p. 2. Additionally, the primary lithium batteries were not permitted totravel byair at all: the shipment had exceeded quantity limitations for such travel. See Table following 49 CFR §172.101 and §172.102, Code/SpecialProvision AlOl. Federal Express flew the items to MSP. During taxiing following landing, one ofthe cargo containers

-- known as Unit Load Devices ("ULDs")

-- caught fire. Atthat pointthe offending materials were discovered (Exhs. C-2 and C-3; Tr. 16-17). The Complaint, dated July 8, 2011, charged D 

### & M with thirteen HMRviolations: 49 C.F

### .R. 1) §171.2( e) (offering hazardous material for shipment not properly classed, described, marked, and labeled); 2) §172.200(a) (offering hazmats not described onthe shipping paper as required); 3) §172.204( a) (offeringhazmats lacking certificationthat the material was offered in accordance withregulations); 4) §172.301(a) (offering hazmats in a non-bulk package not marked withproper shipping name and identification number); 5) §172.400(a) (offering or transporting a hazardous material without specified labels); 6) §172.600(c)(2) (offering a hazmat when emergency response information was not immediately available to anyone responding to an incident or conducting a hazmat investigation); 7) §172.702(a) (requiring hazmat employers to ensure thathazmat employees are trained); 8) §172.101(h) (requiring adherence to the "special provisions" column ofthe Hazardous Materials Table when applicable); 9) §172.312( a)(2) (containing requirements relating to orientation markings); 10) §173.1(b) (prohibiting the

Complainant's exhibits are identifiedby the letter "C" followed by anumber; Respondent's begin with the letter "R."

### ------------------------------------.

3 offering ofhazmats not prepared in accordance withrequirements); 11) §173.21(c) (prohibiting the offering ofbatteries "likelyto create sparks or generate a dangerous evolution ofheat," unless packaged ina mannerprecluding such an occurrence); 12) §173.24(b)(1) (mandating that hazmatpackaging be designed to preclude the release ofhazmats under conditions normally incidentto transportation); and 13) §173.27(c)(1) (requiring thatpackaging for shipment aboard aircraft be designed to prevent leakage caused by changes in altitude and temperature). Pursuant to 49 U.S.C. §5123, the agency asked for a total civil penalty of$168,000 

### (see Tr. 8). It bears the burden ofproving the appropriateness ofthis amount by a preponderance of the evidence. Phillips BuildingSupply, FAA OrderNo. 2000-20 (August 11, 2000), p. 8. Respondent acknowledged the facts underlying the allegations. Itadmitted that it committed the violations with which it was charged. But it opposes the agency's.civil penalty request as too high and as unwarranted bythe facts. It stresses several factors it contends are mitigating 

### (see discussion below, pp. 6-7). D & M states that 

### it is willing to pay a penalty ofno more than $25,000 (Exh. R-2; Resp. Br., p. 5; 

### see Tr. 59). Against this background, I found that D & M had committed each ofthe violations set out inthe agency's Complaint, and limited this proceeding to the controverted issue ofthe appropriate civil penalty amount. 

### See Order Limiting Hearing to Sanction, served December 12, 2011. A hearing was held on August 9, 2012, in Chicago, IL. I determined that a written decision was reasonable and appropriate under the circumstances (Tr. 77-78). The parties each filed opening briefs, and Complainant, because it has the burden ofproof, was permitted to file a rebuttal briefand did so?**~** 

### II. Penalty Determination
I hold thatthe facts and circumstances ofthis case warrant an assessment against Respondent of$110,000. 

### A. Factors in the Determination Determination ofan appropriate civil penalty involves a number offactors. The decisionmaker must weigh ''the nature, circumstances, extent, and gravity ofthe violation[s]," and, withrespect to the violator, ''the degree ofculpability, any history ofprior violations, [and] the ability to pay" as well as "othermatters thatjusticerequires." These include mitigating and aggravating circumstances (49 U.S.C. §5123(c); 

### see also Tr. 35). The principal elements inthe analysis are the nature ofthe respondent's conduct and the totality ofthe circumstances. 

### Envirosolve, LLC, FAA OrderNo. 2006-2 (February 7,2006), p. 13. The Administrator has provided policy guidance for agency employees to follow when recommending an appropriate civil penalty in hazardous-materials cases. The guidance is found inthe agency's Penalty Guidelines (''the Guidelines"). The Guidelines have beenpublished as FAA Order 2150.3B and were marked (but not admitted) inthis proceeding as Exhibit C.,.6, of

2Complainant's Briefwill be designated as "Compl. Br.", the PostTrial BriefofRespondent as "Resp. Br.", and Complainant's Reply Briefas "Compl. Rebut. Br."4

which I tookjudicial notice (Tr. 34-35, 42-43). The Guidelines assess all relevant statutory criteria, including mitigating and aggravating circumstances. The Guidelines additionally aid Complainant'spenalty determinationthrough a Sanction Guidance Matrix ("the Matrix"). The Matrix sets out specific penalty ranges for each input, cross-referencing suchpertinent factors as the respondent's size, the quantity ofthe material offered, the extent ofthe respondent's usual dealings with hazmats, the relative risk ofharm posed bythe substances involved, and any adverse consequences associated with the hazmats' transport. The Guidelines are intended to indicate the Administrator's "general views" about the civil penalty ranges appropriate fordifferent types ofviolations. Folsom'sAirService, Inc., FAA OrderNo. 2008-11 (November 6, 2008), 2008 WL 4948488, p. 13. They are notbinding. Each situation, being dependent on so many variables, is unique. "Evaluation ofthe case," the FAA has emphasized, "is based onthe totality ofthe facts and circumstances." 3 Against this background, we turn to the events triggering this proceeding. 

### B. Circumstances ofthe Incident Two witnesses testified for the FAA, hazardous materials specialists Joseph Sanders and Christopher Zawarus. I found them both credible. 

### Mr. Sanders was Complainant's first witness. Hetestified that he was contacted soon afterthe fire had been extinguished. He traveled to the scene. The crew learned ofthe fire, Sanders stated, when a warning light flashed during taxiing. They then activated the fire suppression system. The MSP fire department was summoned. Firefighters put outthe fire after landing and removed the responsible ULD. Mr. Sanders learned that each ofthe five pieces inthe offending shipment contained eight smaller fiberboard boxes. Each ofthese smaller boxes contained the E-Mysticks. SomeEMysticks also were wrapped in individual lightweight cardboard boxes, one item perbox. Each E-Mystick itselfhadbeenpackaged inside sealed plastic bags. E-Mysticks are assembled from several parts. Sanders explained that the parts are: an air flow sensor; an atomizer; 1.5 ml ofa liquid consisting of, at least in part, the Class 3 flammable liquids ethanol and lobelia; an LED; a primary lithium battery; and a safety switch. Thebattery is used to vaporize the liquid. The fire had damaged the batteries as well as some ofthe cardboard boxesholdingthe EMysticks. Some E-Mysticks had come out oftheir boxes entirely; they were still glowing when Sanders arrived at the scene. Iteventually was determined that the liquid had leaked from the product and had dripped on the atomizer. The safety switchhad failed (Tr. 16-27, 47-48, 61; Exhs. C-1(D), C-1(H), C-1(X), C-2, and C-3).

3 FAA Policy on Enforcement ofthe Hazardous Materials Regulations: Penalty Guidelines, 64 Fed.Reg. 19443, 19444, 1999 WL 226610 (F.R.) (Apri121, 1999), also published on April14, 1999, as Change 26, Appendix 6, to FAA Order 2150.3A. Order2150.38, effective October 1, 2007, updated and supersededthe original guidelines. See 72 Fed.Reg. 55853. FAA Order2150.3B may also be found at www.airweb.faa.gov.5

Mr. Sanders and Complainant's second witness, Mr. Zawarus, also testified to the origins ofthe E-Mysticks. Ruyan, a manufacturer, and itsjoint-venture partner, Ruyan Group Holdings, a firm located in China, had contracted with D & M to assemble the product. More specifically, D 

### & M had mixed the solutions for the regular and the menthol product on..:site attheir Burlington, IL facility. Ithad placed the batteries into a component with the liquid solution. D & M

-- as it acknowledges

-- also had contracted to package and ship the product to Ruyan in Minneapolis (Tr. 24-25, 39-40,47-51, 59; Exh. C-7). As seen, two ofthe liquid components ofE-Mysticks were considered hazmats; additionally, the liquid as mixed was considered a hazmat on account ofits flashpoint as well as its ingredients. Separately, primary lithium batteries- because oftheir "propensityto generate dangerous quantities ofheat"

- also were determined to be hazardous materials. As noted as well, the number ofbatteries on the aircraft also exceeded the quantity limitations for transport by air**(Tr~** 47-50, 54, 59; 

### see Initial Decision ("J.D."), p. 2). 

### C. Decision
I have determined to assess a civil penalty against Respondent of$110,000. 

### 1. Complainant's arguments The agency seeks a civil penalty totaling $168,000. Its calculation is based initially on the tables in Order 2150.3B. Complainant explained that the materials involved are classified underthe HMRs as "CategoryA." CategoryA goods carry a maximum final aggregate weight. Key factors inthe agency's calculation also included the fact thatthe shipment was undeclared and was forbidden in air transport for exceeding quantity limitations. Complainant's determination additionally categorized Respondent as a business entity using orhandling hazardous materials inthe course ofits business. Seven violation groups - shippingpapers, labels, marking, packaging, training, release, and emergency response information

- were implicated. Melding these factors warrants a civil penalty ofbetween $10,000 and $32,500 per violation group (Exh. C-6, p. C-12, 

### atthe intersection ofOffense Category IV and Column C; Compl. Rebut. Br., p. 8). Complainant also pointed outthat several aspects ofthe incident properly are considered as aggravating circumstances. Itpointed to the following: each ofthe five large fiberboard boxes comprising the shipment had exceeded quantity limitations and thus were forbidden for air travel; the materials generated a "dangerous" quantity ofheat; the E-Mysticks had caused an on• board fire; and significant damage resulted from the fire (Tr. 9, 37, 53). Indeed, the estimate ofactual damage resulting from the fire also is a factor inthe calculus. Federal Express determined that it had incurred the following losses: material, $15,000; carrier damage, $10,000; otherproperty damage, $10,000; a response cost of$1,000; and remediation/cleanup cost of$1,000. No reasonto doubt these figures was raised, and they are accepted. The total costs incurred by the carrier, then, were estimated at $37,000 (Exh. C-3, p. 3; Tr. 33).6

The agency decided that the fair and appropriate assessment per violation group was $24,000. This amount is a bit higher than halfway between the Guidelines' range (as evaluated by Complainant) of$10,000-$32,500. $24,000 times the number ofviolation groups, seven, results in the agency's proposed civil penalty of$168,000.4


### 2. Respondent's arguments Respondent,.while acknowledging the violations, countered that nothing inthe goods it hadreceived from Ruyan indicated the presence ofhazardous materials. More specifically, no evidence suggested that D & M knewthat the batteries were primary lithium batteries. Ruyan, Respondent said, had labeled the contents ofthe cartridge in whichthe batteries were delivered as "flavoring."5 Nordid the company understand orhave reason to knowthat special requirements attached to shipping the goods. Moreover, it asserted that the batteries overheated because Ruyan had, unknown to D & M, modified the safety switch atomizing device (Tr. 61; Exh. R-2). D & M's primary argument against the proposed penalty amount is that it does not have the ability to pay. Itcontends that it experienced "extreme operating and financial difficulties" in the years priorto the incident. The penalty Complainant suggests, it continues, also would have a significant negative effect on its ability to operate at its current level and capacity, and even to continue inbusiness. In support, D & M submitted three years ofcorporate tax returns. Respondent added in support ofmitigation that it does not customarily ship hazmats, had never shipped them priorto this incident, and has no intention ofdoing so inthe future. Itpointed out that it has no history ofviolations (Tr. 56, 60-64; Exh. R-1 through R-7; Resp. Br., pp. 3-4). 

### 3. Ruling A penalty assessment in a case such as this must weigh a respondent's behavior and evaluate its effect. In that context, the circumstances ofthe incident warrant a substantial and impressionable sanction. D 

### & M assembled the E-Mysticks; itpackaged them; and it shipped them. They containedbatteries capable ofgenerating.dangerous levels ofheat as well as flammable liquids. Each ofthe five boxes in the shipment exceeded quantity limitations for air transport. Finally, and perhaps most dramatically, the materials caught fire during flight. The fire necessitated the deployment offirefighters to extinguish it and prevent further

- and perhaps catastrophic

- damage and/or injury.

4 Compl. Rebut. Br., pp. 8-10. Several times Complainant statedthat it could have assessed a civil penalty as high as $195,000. See Tr. 36, 53-54; Compl. Br., p. 10; Compl. Rebut. Br., p. 7. Itis not clearhow it arrived at this figure. The maximum civil penalty per violation group for abusiness using orhandling hazmats and found in violation for tendering an undeclared shipment exceeding quantity limitations is, as noted in the text, $32,500. Applying this figure to the number ofviolation groups, seven, results in atotal of$227,500. 5Tr. 59-61. Complainant maintains that its penalty recommendation accounted for the idea that Respondent had "reasonably relied on incorrect information" Ruyan had sent to it. Tr. 36. See also Tr. 56 (acknowledging that no evidence showed that D & Mknew the batteries were primary lithium batteries).7

The undeclared nature ofthe shipment also is a significantpenalty determinant. D 

### & M had provided no information or warnings (Tr. 22; see also, e.g., Exh. C-1(L)). As an unknown, the packages presented an indefinite

- and therefore inherentlyperilous

- risk. The agency has stated that suchhidden shipments are particularly worrisome. The Administrator has stressed that such circumstances "pose a special risk." Envirosolve, Inc. FAA OrderNo. 2006-2 (February 7, 2006), p. 14; Toyota Motor Sales, USA, Inc., FAA OrderNo. 94-28 (September 30, 1994), p. 13. Emergency response information also was lacking. Such information could have proven critically important. First responders could not know what awaited them (Exh. C-1(Y); Tr. 39-40). On the other hand, it is a mitigating factor that Respondent was unaware that the batteries specifically were ofthe primary lithium variety and thus constituted hazardous materials. Not all batteries, after all, have been determined to be hazardous materials. But some are. The mere presence ofbatteries in Ruyan's shipment, I find, putD & M onnotice ofthepossible presence ofdangerous goods. 6 It was then incumbent on Respondent to investigate further. Itis charged with the knowledge that a reasonable inspection would have produced. 49 U.S.C. §5123(a)(1); Contract Courier Services, Inc. v. US. Department ofTransportation, 924 F.2d 112, 114 (7 Cir. 1991). Moreover, Respondent knew, or should have known, that it was mixing liquids which were flammable and, thus, carried the risk ofdanger bytheir very nature. Itis no defense that Respondent had not dealt with hazardous materials inthe past. Those who deal with hazmats are charged with due care inhandling them regardless ofexperience. It could not be otherwise in view ofthe danger to the public inherent inthese materials. But mitigation, I find, is not warranted onthe basis ofRespondent's tax returns. D & M's plea for a reduction ofan otherwise reasonable andjustifiable assessment onthe basis ofan inabilityto payis an affirmative defense. That is, it is Respondent's burden to prove it. See, e.g., AmericanAirNetwork, FAA OrderNo. 2006-5 (February 10, 2006), p. 9 n. 19. Respondent has failed to carry its burden. I agree with Complainant that Respondent's failure to explain the connectionbetweenthe financial informationit submitted and the remedy it seeks dooms its proof(see Compl. Rebut. Br., pp. 10-11). D & M simply did not demonstrate why its tax returns compel mitigation. Respondent's additional contentionthat its violation-free historyjustifies mitigation also is rejected. A violation-free history is expected to be the norm. That fact does not lead to a reduction in an otherwise appropriate civil penalty. See, e.g., Tate andPartners, FAA OrderNo. 2010-7 (June 15, 2010), p. 13. Nor does D & M'spromise to refrain from shipping hazmats in the future constitute the type ofpositive, corrective actionjustifying a civil penalty reduction. TCI Corporation, FAA OrderNo. 92-77 (December 22, 1992), p. 22. Respondent's lack ofexperience in dealing with hazmats also fails to qualify as a mitigating circumstance. But it does warrant, I find, an adjustment in Complainant's

6 D & M disputes that it was aware that it had received batteries from Ruyan. It states that the batteries were hidden in the packaging. Tr. 75. Complainant counters that the batteries had been shipped in separate sleeves and were exposed at that point and, as such, D & M hadto know what they were. Tr. 73-76. Even ifD & M did notknow initially that it hadreceivedbatteries, as the assembler ofthe E-Mysticks I find that it cannot credibly contend that it lacked knowledge ofeach ofthe product's component parts.8 categorization ofD & M for penalty-recommendationpurposes as a business using orhandling hazardous materialsinthe course ofbusiness. Respondent is rather more like a "business entity"

- a Guidelines characterization calling for a lower range ofrecommended penalties

- although it is not altogether unfairto categorize it inthe manner Complainant suggests. This difficulty in precisely classifying Respondent's course ofdealing with hazmats helps demonstrate that a mechanistic calculation ofpenalties is misguided. Indeed, the agency has held as much. "Itis improper," the Administrator has said, ''totake the mathematical, formulaic approach of multiplying the number ofviolations by a set dollar amount." Interstate Chemical Company, Inc., FAA OrderNo. 2002-29 (December 6, 2002), p. 15. I decline, therefore, to perform such a calculation to arrive at an assessment which would be fair and congruent with all the circumstances. I find and conclude that a civil penalty of.$110,000 is appropriate. This assessment is warranted bythe totality ofthe circumstances inthe context ofthe statutory factors. The penalty is substantial for this entity without having an unduly punitive character. It suitably accounts for boththe aggravating and the mitigating factors involved inthis case. I think it will help Respondent, and similarly-situated entities, understand the risk- and the gravity

-- associated with the transport ofhazardous materials. The assessment suitably promotes the FAA'spolicies ofcompliance and deterrence. · I have considered all other arguments advanced by bothparties. Those not discussed are rejected aswithout merit. I hereby assess a civil penalty of$110,000 against Respondent D & M Custom Injection Molding Corporation for violations of: 49 C.P.R. §§171.2(e), 172.200(a), 172.204(a),l72.301(a), 172.400(a), 172.600(c)(2), 172.702(a), 172.101(h), 172.312(a)(2), 173.1(b), 1 73.21(c), 1 73.24(b)(1 ), and 173.27**·rasd~scrib** · is Initial Decision.7

ichard C. Goodwin U.S. Administrative LawJudge Attachment

- Service List

7 This decision may be appealed to the Administrator ofthe FAA. The notice ofappeal must conformto sections 13.210, 13.2ll(e)and 13.233 ofthe Rules ofPractice, which require that a notice ofappeal 1) be filed not later than 10 days (plus an additional five days ifmailed) from the service date ofthis decision, and 2) be perfected with a written brieformemorandum not later than 50 days (plus an additional five, ifmailed) from the service date ofthis decision. The notice ofappeal and brieformemorandum must eitherbe a) mailed tothe Federal Aviation Administration, 800 Independence Avenue, S.W., Washington, DC 20591, Attn: Hearing Docket Clerk, AGC-430, Wilbur Wright Building-Suite 2Wl000, orb) delivered personally orvia expedited courier service to the Federal Aviation Administration, 600 Independence Avenue, S.W., Wilbur Wright Building-Suite 2WIOOO, Washington, D.C. 20591, Attn: Hearing Docket Clerk, AGC-430. A copy ofthe notice ofappeal and briefor memorandum also must be sent to agency counsel. Service upon the presidingjudge is optional.9



### SERVICE LIST ORIGINAL'& ONE COPY Federal Aviation Administration

, 800 Independence Avenue, S.W.

Washington, DC 20591 Attention: Hearing DocketClerk, AGC-430 Wilbur Wright Building-Suite 2WI000 1 

### ONE COPY Michael Teofilovich, President D&M Custom Injec:tion Molding Corporation dba D&MPlastics Corporation 150 French Road Burlington, IL 60109 Kate Barber, 

### Complainant's Counsel Attorney, Office ofthe Regional Counsel GreatLakes Region, AGL-7B Federal Aviation Administration 2300 EastDevon Avenue Des Plaines, IL 60018 TEL: 847-294-7862 FAJ<: 847-294-7498 The Honorable Richard C. Goodwin, Administrative LawJudge 

### Office ofHearings, M-20 U.S. Department ofTransportation 1200 New Jersey Avenue, S.E. (E11-310) Washington, DC 20590 TEL: 202-366-2139 Attorney-Advisor ' 202-366-5121 StaffAssistant FAJ<: 202-366-7536 FDMS No. FAA-20il-0679 (Civil Penalty Action)

1 Service was by U.S. Mail. For serviceinperson orby expedited courier, use the following address: Federal Aviation Administration, 600 Independence Avenue, S.W., Wilbur Wright Building-Suite 2Wl000, Washington, DC 20591; Attention: Hearing Docket Clerk, AGC-430.