SERVED December 13, 2012 

U.S. DEPARTMENT OF TRANSPORTATION 

OFFICE OF HEARINGS 

WASHINGTON, DC 

In The Matter Of: ) 

) 

) 

) 

) 

Docket No. FAA-2011-0488 

COVERMARK USA 

Respondent 

Case No. 2010807000318 

ORDER DENYING SUMMARY JUDGMENT, GRANTING 

JOINT MOTION FOR DECISION ON THE WRITTEN RECORD, 

AND GRANTING/DENYING OTHER RELIEF 

On April 2, 2012, an Order Deeming Allegations of Safety Violation Admitted and 

Granting/Denying Other Relief was filed. Among other things, this Order granted the FAA's 

Motion to Deem Allegations 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 by telephone for a Rule 16 Litigation Scheduling 

Conference to discuss their calendar availability, hearing dates, and other procedural matters for 

scheduling a discovery schedule and a hearing on the disputed issue of the proposed civil 

penalty. 

' On June 1, 2012, an Order Setting Litigation Dates 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 FAA filed the Complainant's Motion for Decision, asserting 

that there was no genuine issue of material fact regarding the proposed $10,000 civil penalty, and 

requesting judgment as a matter of law. 
On November 6, 2012, the Respondent filed its Answer to 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 by telephone 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 of the December 11, 2012 Motion 

Conference. 

1. Standard of Review for Summary Judgment 

Pursuant to 14 C.F.R. § 13.218, a party may file motions, including a motion for a 

decision on the merits, in advance of a hearing when a party asserts that there are no disputed 

material issues of fact to be heard. A motion for decision made pursuant to 14 C.F .R. § 

13.218(f)(5) is analogous to a motion for summary judgment under Rule 56 of the Federal Rules 

of Civil Procedure. Horizon Air Industries, Inc., FAA Order No. 96-24, n.3 (Aug. 13, 1996); · 

Stebbins Aviation, Inc., DMS No. FAA-2000-7576-16 (Aug. 30, 2004) (Initial Decision). 

Pursuant to Civ. R. 56( a), the purpose of summary judgment 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 summary judgment 

motion may be granted if "the movant shows that there is no genuine dispute as to any material 

fact and the movant is entitled to judgment as a matter of law." See, Anderson v. Liberty Lobby 

Inc., 477 U.S. 242, 247-48 (1986);.Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Circuit 2006). A 

fact is "material" if it is capable of affecting the substantial outcome of the litigation. Holcomb, 

433 F.3d at 895; Liberty Lobby, Inc., 477 U.S. at 248. A dispute is"genuine" if the evidence is 

such that a reasonable trier of fact could return a verdict for the non-moving party. See, Scott v. 

Harris, 5550 US 372, 380 (2007)~ Liberty Lobby Inc., 477 US at 248, Holcomb, 433 F.3d at 895. 

On a motion for summary judgment, 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. 

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Pursuant to Civ. R. 56( c), (d), and (e), a non-moving party who wishes to proceed to trial 

must respond to the motion for summary judgment, and set forth 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 Civil Rules 

Hqndbook, 1134. (West Publishing, 19th ed .. 20 12)( a non-moving party may produce materials, I 

and/or cite to materials produced or not produced by the movant in resisting the summary 

judgment motion). 

Specific facts alleged by either party may be asserted by submitting or citing to a variety 

of admissible 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 summary judgment 

proceedings must be capable of being 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 or otherwise, that a genuine dispute of material fact remains for the 

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

2. Standard of Review for Admissibility of Evidentiary Submissions 

Parties moving for, or resisting, summary judgment relief have the burden of factually 

supporting their positions. Pursuant to Civ. R. 56(c)(1), (2) and (4), materials offered to support 

or oppose a fact during summary judgment proceedings must be capable of being 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 must be presented in an admissible form during the 

summary judgment briefing, only that an admissible form exists by which those facts may be 

later introduced at trial.") The burden is on the proponent to show that the material is admissible 

as presented or to explain the admissible form that is anticipated. 

3. Admissibility of the FAA's Evidence and Documents 

The FAA submitted the followingthree (3) exhibits in its 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); 

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(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 of a HMTS30 Hazardous Materials Transportation training program (1 page). · 

3. Various Documentary Evidence (13 pages), including: 

(a) An August 6, 2010 FAA Letter to Rachele Rego regarding the April23, 2010 

shipment (pages 1-2); 

(b) Two copies of six ( 6) photographs (pages 3 and 9); 

(c) ~wo copies of the 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 Letter to Rachele Rego regarding the April23, 2010 shipment 

(pages 7-8); 

(f) An undated and unsigned copy of a certified mail registration to.Rachele Rego for the 

June 22, 2012 FAA letter (pages 12-13). 

The Respondent did not object to the admissibility of any of the FAA's proffered 

evidence. · The FAA material was deemed admissible and considered. 

4. Admissibility of the Respondent's Evidence and Documents 

The Respondent did not submit any additional evidence or exhibits in its Answer to 

Motion for DeCision. Instead, the Respondent utilized the exhibits filed by the FAA, and argued 

that there was an issue of genuine material fact in dispute regarding the calculation of the 

proposed civil penalty. (Answer to Mot. for Decision, 3-4, Nov. 9, 2012) 

5. Brief Discussion of the Parties' Primary Arguments 

All of the parties' factual arguments, both.oral and written, were considered. This 

discussion focuses only on the parties' primary arguments. 

The parties. disagreed on how the civil penalty should be calculated. The FAA relied 

upon the data in Understanding and Using Financial Data, AnEmest & Young Guide for 

Page 4 of7 
Attorneys (Ernst & Young, 1992) to support calculating its proposed $10,000penalty by 

utilizing the Respondent's C~ent Ratio 1, (1.74), instead of the 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 "current ratio of less than 1.0 normally 

evidences a problem" (/d.) and a quick ratio ofless than 1.0 "may not be cause for concern" (!d. 

at 8). During oral argument, the FAA asserted that the combined use of the Respondent's 

Current and Quick Ratios also supported imposing its proposed $10,000 penalty. 

The Respondent did not dispute the FAA's Current Ratio and Quick Ratio calculations. 

Indeed, the Respondent adopted them in its Answer to Motion for Decision (Answer to Mot. for 

Decision, 3). The Respondent argued, however, that the Quick Ratio should be used to .review 

the Respondent's financial records and determine its ability to pay a fine, in part because the 

Respondent's inventory was brand specific and not marketable to any co:rnpetitor. The Quick 

Ratio showed the "precarious" nature of its business. (Answer to Mot. for Decision, at 4.) Using 

the Quick Ratio calculation demonstrated a more accurate reflection of the Respondent's 

inventory numbers, net profits, and sales figures for calculating the civil penalty. The utilization 

of the Quick Ratio showed that the 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 

of its inventory was a relatively small. percentage of its expenses, and that net profits were the 

more relevant figure for determining its ability to pay and ability to continue in business. (!d. at 

4). In essence, the Respondent argued it would suffer financial hardship if the FAA's proposed 

$10,000 penalty was imposed. It recommended a lower penalty of$1000, in part to avoid 

negatively impacting the firm's ability to continue to do business. 

In moving for summary judgment decision, the FAA is required to make a prima facia 

showing that no genuine issue of material. fact remained regarding the required factors of nature, .. 

circumstances, extent, gravity, degree of culpability, history of past violations, the ability to pay, 

ability to continue to do business, and other matters as justice 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. 

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motion for summary judgment, 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). 

In responding to FAA civil penalty proceedings, a respondent asserting financial hardship 

as an affirmative defense must prove by a preponderance of the substantial, reliable, and 

probative evidence that the proposed penalty is excessive. See TWA, FAA Order No. 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 of an element essential to that party's 

case, and on which that party will bear the burden of proof at 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 of material fact remains regarding its affirmative defense of 

financial hardship. While the numbers contained in the Respondent's financial data (FAA 

Exhibit No. 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 in taking 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 Exhibit No.2; Answer to 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 of dispute between the parties regarding the penalty 

calculation. A motion for summary decision must be denied where such dispute occurs and 

weighing of the evidence is required. FindWhat Investor 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. Joint Motion for Decision Based on the Written Record 

In its Answer to Motion for Decision, Respondent asserted that if the financial statements 

attached as Exhibits to the FAA's Motion for Decision were a part ofthe record, it "agrees to 

submit this matter to the court for decision based upon the record before it." (Answer to Mot. for 

Decision, 2). During oral argument, both the FAA and the Respondent agreed that no further 

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evidence would need to be submitted, and that the FAA's Exhibits to its Motion for Decision 

could be admitted as the evidentiary record for hearing and decision. The parties agreed to strike 

the live hearing scheduled on January 17, 2013, and appear by telephone 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 of material fact regarding the proposed civil penalty; including Respondent's 

ability to pay and its ability to continue in business. 

2. The parties' agreement that the three FAA Exhibits 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' agreement that the disputed issue of the proposed civil penalty 

calculation may be decided on the admitted evidentiary record, without further 

testimonial evidence or in-person hearing, is confirmed and adopted. 

4. The live hearing scheduled on January 17, 2013 in New York 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 of7 
SERVICE LIST 

ORIGINAL & ONE COPY 

Federal Aviation Administration 

800 Independence Avenue, S.W. 

Washington, DC 20591 

Attention: Hearing Docket Clerk, AGC-430 

Wilbur Wright Building-Suite2W10001 

Mr. Gerald A. Ellis, Esq. 

Complainant's Counsel 

Office of the 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 Law Judge 

Office of Hearings, M-20 

U.S. Department of Transportation 

1200 New Jersey Avenue, S.E. 

Washington, DC 20590 

TEL: 202-366-2132 

FAX: 202-366-7536 

ONE COPY 

FDMS No. FAA-2011-0488 

(Civil Penalty Action) 

1 Service was by U.S. Mail. For service in person or by 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.