### SERVED December 13, 2012
U.S. DEPARTMENT OF TRANSPORTATION OFFICE OF HEARINGS WASHINGTON, DC

In The Matter Of: ) ) ) ) ) DocketNo. FAA-2011-0488 COVERMARKUSA Respondent CaseNo. 2010807000318

ORDERDENYING SUMMARYJUDGMENT, GRANTING JOINT MOTION FOR DECISION ON THE WRITTEN RECORD, AND GRANTING/DENYING OTHER RELIEF

On April 2, 2012, an Order Deeming Allegations ofSafety Violation Admitted and Granting/Denying Other Reliefwas filed. Among other things, this Order granted the FAA's Motionto DeemAllegations Admitted and Motion for Hearing on Sanction Only, and denied the Respondent's Motion for a Decision waiving the proposed $10,000 penalty. On April3, 2012, an Order Setting Rule 16 Litigation Scheduling Conference, and Directing Rule 26(f) Planning and Submission was filed. On May 31, 2012, the parties appeared bytelephone for a Rule 16 Litigation Scheduling Conference to discuss their calendar availability, hearing dates, and otherprocedural matters for scheduling a discovery schedule and a hearing onthe disputed issue ofthe proposed civil penalty. 

## ' OnJune 1, 2012, an Order Setting LitigationDates and Pro¢e'dures was filed. Among I" other things, this Order set October 26, 2012 as the deadline for filing dispositive motions, and November 9, 2012 as the deadline for filing any answer to dispositive motions. On October 26, 2012, the FAAfiled the Complainant's Motion for Decision, asserting thatthere was no genuine issue ofmaterial fact regarding the proposed $10,000 civil penalty, and requestingjudgment as a matter oflaw.On November 6, 2012, the Respondent filed its Answerto Motion for Decision, objecting to the FAA's motion for summary relief. On December 3, 2012 the FAA filed the Complainant's Reply to Respondent's Answer'to Motion for Decision. On December 11, 2012, the parties appeared bytelephone for a Motion Conference, and presented oral argument on the FAA's'October 26, 2012 Motion for Decision. This Order supplements and codifies the oral rulings made at the close ofthe December 11, 2012 Motion Conference.



### 1. Standard ofReview for SummaryJudgment Pursuant to 14 C.F.R. § 13.218, a party may file motions, including a motion for a decision onthe merits, in advance ofa hearing when aparty asserts that there are no disputed material issues offact to be heard. A motion for decision made pursuant to 14 C.F.R. 

### § 13.218(f)(5) is analogous to a motion for summaryjudgmentunder Rule 56 ofthe Federal Rules ofCivil Procedure. HorizonAirIndustries, Inc., FAA OrderNo. 96-24, n.3 (Aug. 13, 1996);· StebbinsAviation, Inc., DMS No. FAA-2000-7576-16 (Aug. 30, 2004) (Initial Decision). Pursuant to Civ. R. 56(a), the purpose ofsummaryjudgment is "to isolate, and then terminate, claims and defenses that are factually unsupported." Steven Baicker-McKee, et.al, Federal Civil Rules Handbook, 1120 (West Publishing, 19th ed. 2012). A summaryjudgment motion may be granted if"the movant shows that there is no genuine dispute as to any material fact and the movant is entitled tojudgmentas a matter oflaw." See,Andersonv. LibertyLobby Inc., 477 U.S. 242, 247-48 (1986);.Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Circuit 2006). A fact is "material" ifit is capable ofaffecting the substantial outcome ofthe litigation. Holcomb, 433 F.3d at 895; LibertyLobby, Inc., 477 U.S. at 248. A dispute is"genuine" ifthe evidence is such that a reasonable trier offact could returna verdict for the non-moving party. See, Scott v. Harris, 5550 US 372, 380**(2007)~** Liberty LobbyInc., 477 US at 248, Holcomb, 433 F.3d at 895. On a motion for summaryjudgment, all evidence and inferences are to be viewed in light most favorable to non-moving party. Beardv. Banks, 548 U.S. 521, 530-31 (2006). However, a non-moving party (e.g., the Respondent herein answering the FAA's Motion for Decision) may not rest upon mere denials or allegations in the pleadings.

Page 2 of7Pursuant to Civ. R. 56(c), (d), and (e), a non-moving party who wishes to proceed to trial mustrespond to the motion for summaryjudgment, and setforth specific facts sufficient to show there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 US 317, 324, 106 S. Ct. 2548, 91 L.Ed.2d 265 (1986). See generally, Stev:en Baicker-McKee, et.al, Federal CivilRules Hqndbook, 1134. (West Publishing,19th ed

.. 2012)(a non-moving party may produce materials,

I and/or cite to materials produced ornot produced by the movant in resisting the summary judgmentmotion). Specific facts alleged by eitherpartymay be asserted by submitting or citing to a variety ofadmissible documents and declarations. See 14 C.P.R.§ 13.218(f)(5) (2012); Civ. R. 56(c)(l)(A). Materials offered to support or oppose a fact during summaryjudgment proceedings must be capable ofbeing offered at trial in an admissible form. See Civ. R. 56(e). Once the moving party has established a prima facie case, the burden shifts to the non-moving

· party to show, by affidavit orotherwise, that a genuine dispute ofmaterial fact remains for the

fact-finder to resolve. Baiker-McKee et al., supra at 1134.



### 2. Standard ofReview for Admissibility ofEvidentiary Submissions Parties moving for, orresisting, summaryjudgmentreliefhave the burden offactually supporting theirpositions. Pursuant to Civ. R. 56(c)(1), (2) and (4), materials offered to support
oroppose a fact during summaryjudgmentproceedings must be capable ofbeing offered at trial in an admissible form. See, Steven Baicker-McKee, et.al, supra at 1135 ("Generally, this does not mean that the materials themselves mustbe presented in an admissible form during the summaryjudgmentbriefing, only that an admissible form exists by whichthose facts may be later introduced attrial.") The burden is onthe proponent to showthatthe material is admissible

as presented orto explain the admissible form that is anticipated.



### 3. Admissibility ofthe FAA's Evidenceand Documents The FAA submittedthe followingthree (3) exhibits inits Motion for Decision: 1. Respondent's Response to Complainant's First Request for Discovery (12 pages) including: (a) Response to Complainant's First Request for Discovery (pages 1-3); (b) Response to Complainant's Request for Production (page 3);
Page 3 of 7(c) Response to Complainant's for Admissions (pages 3-4); (d) Respondent's Balance Sheets for 2009, 2010, and 2011 (pages 5 arid 8); (e) Respondent's Profit and Loss Statements for 2010 and 2011 (pages 6-7 and 9-10); and 

### (f) E-mail correspondence asserting Respondent's cash on hand, accounts receivable, inventory, and accounts payable (pages 11-12).
2. An AprilS, 2011 certificate showing Rachele Rego's successful completion ofa HMTS30 Hazardous Materials Transportation training program (1 page). · 3. Various Documentary Evidence (13 pages), including: (a) An August 6, 2010 FAA Letterto Rachele Rego regarding the April23, 2010 shipment (pages 1-2); (b) Two copies ofsix (6) photographs (pages 3 and 9); (c)**~wo** copies ofthe handout "Does Your Hazmat Training Measure Up?" (pages 4-5 and 10-11); (d) A "Relay Report" (page 6);· (e) A June 22, 2010 FAA Letterto Rachele Rego regarding the April23, 2010 shipment (pages 7-8); 

### (f) An undated and unsigned copy ofa certifiedmail registration to.Rachele Rego for the June 22, 2012 FAA letter (pages 12-13).
TheRespondent did notobjectto the admissibility ofany ofthe FAA's proffered evidence. ·The FAA material was deemed admissible and considered.



### 4. Admissibility ofthe Respondent's Evidence and Documents The Respondent did not submit any additional evidence orexhibits in its Answer to Motion for DeCision. Instead, the Respondent utilized the exhibits filed by the FAA, and argued that there was an issue ofgenuine material fact in dispute regarding the calculation ofthe proposed civil penalty. (Answerto Mot. for Decision, 3-4, Nov. 9, 2012)



### 5. BriefDiscussion ofthe Parties' Primary Arguments
All ofthe parties' factual arguments, both.oral and written, were considered. This discussion focuses only onthe parties' primary arguments. The parties.disagreed on howthe civil penalty should be calculated. The FAArelied uponthe data inUnderstanding and Using Financial Data, AnEmest & Young Guide for Page 4 of7Attorneys (Ernst & Young, 1992) to support calculating its proposed $10,000penaltyby utilizing the Respondent's

### C~ent Ratio 1

, (1.74), instead ofthe Respondent's Quick Ratio2 (.33). (Mot. for Decision, 7, Oct. 31, 2012.) These liquidity ratios measure a company's ability to meet short-term obligations. The FAA asserted that a "currentratio ofless than 1.0 normally evidences aproblem" (/d.) and a quick ratio oflessthan 1.0 "maynot be cause for concern" 

### (!d. at 8). During oral argument, the FAA asserted that the combined use ofthe Respondent's Current and Quick Ratios also supported imposingitsproposed $10,000 penalty. The Respondent did not dispute the FAA's Current Ratio and Quick Ratio calculations. Indeed, the Respondent adoptedthem in its Answer to Motion for Decision (Answerto Mot. for Decision, 3). The Respondent argued, however, that the QuickRatio should be used to.review the Respondent's financial records and determine its abilityto pay a fine, inpartbecause the Respondent's inventory was brand specific and not marketable to any co:rnpetitor. The Quick Ratio showed the "precarious" nature ofits business. (Answer to Mot. for Decision, at4.) Using the Quick Ratio calculation demonstrated a more accurate reflection ofthe Respondent's inventory numbers, netprofits, and sales figures for calculating the civil penalty.The utilization ofthe Quick Ratio showed thatthe proposed $10,000 civil penalty was beyond Respondent's ability to pay and ability to continue in business. 

### (!d. at 3-4.) \ Additionally, in its written materials and during oral argument, the Respondent discussed its Profit and Loss Statements, and.asserted that its financial records demonstrated that the cost ofits inventory was a relatively small.percentage ofits expenses, and that net profits were the
more relevant figure for determining its ability to pay and ability to continue inbusiness. (!d. at 4). In essence, the Respondent argued itwould suffer financial hardship ifthe FAA's proposed $10,000 penalty was imposed. It recommended a lowerpenalty of$1000, inpartto avoid negatively impacting the firm's ability to continue to do business. In moving for summaryjudgmentdecision, the FAA is required to make a

### prima facia showing that no genuine issue ofmaterial.fact remained regarding the required factors ofnature,

.. circumstances, extent, gravity, degree ofculpability, history ofpast violations, the ability to pay, ability to continue to do business, and other matters asjustice may**require~** As noted 

### supra, in a

1 The FAA calculated the Current Ratio by dividing Respondent's current ass.ets py its current liabilities. 2 The FAA calculated the Quick Ratio by adding Respondent's cash, marketable securities, and accounts receivable and dividing by its current liabilities.**P~ge** 5 of7motion for summaryjudgment, all evidence and inferences are to be viewed in light most favorable to non-movingparty. 

### Beardv. Banks, 548 U.S. 521,530-31 (2006). In responding to FAA civil penaltyproceedings, a respondent asserting financial hardship

as an affirmative defense must prove by a preponderance ofthe substantial, reliable, and probative evidence that the proposedpenalty is excessive. 

### See TWA, FAA OrderNo. 1999-12 (Oct. 7, 1999); 14 C.F.R. §§ 13.223 and 13.224(c). A respondent asserting financial hardship must "make a showing sufficient to establish the existence ofan element essential to that party's case, and on which that party will bearthe burden ofproofat trial." 

### Celotex Corp. v. Catrett, 477 U.S. at 322. In the case herein, the Respondent has, through citation to the FAA's exhibits and discussion ofthe Quick Ratio data, rebutted the 

### FAA'sprimafacie case for summary reliefby showing that a genuine issue ofmaterial fact remains regarding its affirmative defense of financial hardship. While the numbers contained in the Respondent's financial data (FAA ExhibitNo. 1) are not in dispute, their relevance, applicability, and weight remain an issue in determining the civil penalty in this proceeding. The Respondent has also provided reasonable challenge to the FAA's assertion that the Respondent was dilatory intaking corrective action, and that no greater weight should be.given to the hazmat training completed by its executive, Rachele Rego, in calculating the penalty (FAA ExhibitNo.2; Answerto Mot. for Decision, at 5). In viewing the evidence in a light most favorable to the Respondent (the non-moving party) there is clearly a genuine issue ofdispute between the parties regarding the penalty calculation. A motion for summary decision must be denied where such dispute occurs and weighing ofthe evidence is required. 

### FindWhatInvestor Group v. FindWhat.com, 658 F.3d 1282, 1307 (11th Cir. 2011) (citing, 

### Hilburn v. Murata Elecs. N Am., Inc., 181 F.3d 1220, 1225 (11th Cir. 1999)).



### 6. JointMotion for Decision Based on the Written Record In its Answerto Motion for Decision, Respondent asserted that ifthe financial statements attached as Exhibits to the FAA's Motion for Decision were a part oftherecord, it "agrees to submit this matter to the court for decision based upon the record before it." (Answerto Mot. for Decision, 2). During oral argument, both the FAA and the Respondent agreed that no further
Page 6 of7evidence would need to be submitted, and that the FAA'sExhibits to its Motion for Decision could be admitted as the evidentiaryrecord for hearing and decision. The partiesagreedto strike the live hearing scheduled onJanuary 17, 2013, and appearbytelephone for oral argument on January 17, 2013 (1 :30- 2:30pm EST). Therefore, having reviewed the case file, all pleadings and motions, all relevant caselaw, statutes, regulations, rules, authority, and being fully advised;

IT IS HEREBY ORDERED:

1. The FAA's October 26, 2012 Motion for Decision is denied. There remain genuine issues ofmaterial fact regarding the proposed civil penalty; including Respondent's ability to pay and its ability to continue in business.
2. The parties' agreementthat the three FAAExhibits attached to the FAA's October 26, 2012 Motion for Decision should be admitted as the evidentiary record for decision in this matter is confirmed and adopted.
3. The parties' agreementthatthe disputed issue ofthe proposed civil penalty calculation may be decided on the admitted evidentiary record, without further testimonial evidence orin-personhearing, is confirmed and adopted.
4. The live hearing scheduled on January 17, 2013 in NewYork is hereby stricken.
5. The parties shall appear by telephone on January 17, 2013 (1:30pm-2:30pm EST) for final oral argument on the admitted evidence and the disputed issue.

Attachment: Service List

Page 7 of7SERVICE LIST ORIGINAL & ONE COPY 

### Federal Aviation Administration 800 Independence Avenue, S.W. Washington, DC 20591 Attention: Hearing Docket Clerk, AGC-430 Wilbur Wright Building-Suite2W1000 1



### Mr. Gerald A. 

### Ellis, Esq. 

### Complainant's Counsel Office ofthe Regional Counsel, AS0-7 ;Southern Region

Federal Aviation Administration P.O. Box 20636 Atlanta, GA 30320 TEL: 404-305-5200 FAX: 404-305-5223 Mr. Keith Roberts, Esq. 

### Respondent's Counsel President, Roberts Proprietaries, Inc. 180 West 80th St.' New York, NY 10024 TEL: 917-441-8642 FAX:
Judge 

### J. E. Sullivan 

### US. Administrative LawJudge Office ofHearings, M-20 U.S. Department ofTransportation 1200 NewJersey Avenue, S.E. Washington, DC 20590 TEL: 202-366-2132 FAX: 202-366-7536 ONE COPY 

### FDMS No. FAA-2011-0488 (Civil PenaltyAction)

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