In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 16‐3770

NATIONAL POWER CORPORATION,

Petitioner,

v.

FEDERAL AVIATION ADMINISTRATION,

Respondent.

____________________

Petition for Review of an Order of  

the Federal Aviation Administration  

No. FAA ‐2013‐0620

____________________

ARGUED APRIL 20, 2017 — DECIDED JULY 20, 2017

____________________

Before MANION and ROVNER, Circuit Judges, and

COLEMAN, District Judge.*  

COLEMAN, District Judge. National Power Corporation

(“National Power”) seeks review of a Federal Aviation Ad‐

ministration Administrator’s (the “Administrator”) decision

finding that National Power knowingly violated multiple

                                                 

* The Honorable Sharon Johnson Coleman, of the United States District

Court for the Northern District of Illinois, sitting by designation.
2 No. 16‐3770

hazardous material regulations (“HMRs”), and assessing a

$66,000 civil penalty against it. Because the Administrator’s

conclusions are supported by substantial evidence and his

findings were not arbitrary and capricious or an abuse of

discretion, we deny National Power’s petition for review.

I.

National Power designs and manufactures custom bat‐

tery packs. At issue are two types of lithium battery packs

that National Power manufactured–the SM‐206 battery pack

(“SM‐206”) and the 520‐libat‐2 battery pack (“520‐libat‐2”)

(collectively, the “Batteries”). Both of the Batteries were reg‐

ulated as U.N. 3480, class IX hazardous materials.  

On May 17, 2010, Christopher Zawarus, an FAA special

agent, conducted an inspection at National Power’s facility

in Chicago, Illinois. Mr. Zawarus discovered that between

January 8 and March 25, 2010, National Power made 11

shipments, by air, of SM‐206s and 520‐libat‐2s to customers

in Santa Rosa, California and Burnaby, British Columbia,

Canada (the “battery shipments”). Based on his inspection,

Mr. Zawarus concluded that the battery shipments did not

comply with multiple HMRs and the FAA filed a complaint,

which was later amended, with the Department of Transpor‐

tation. The FAA alleged violations of the following HMRs:

49 C.F.R. §§ 171.2(e), 171.22(b)1, 171.22(g)(2), 172.604(a)(1),

172.702(a), and 173.185(f).

What follows is a summary of the evidence and testimo‐

ny presented at the hearing before the administrative law

judge. During his inspection, Mr. Zawarus asked for docu‐

mentation that the Batteries had been properly tested in ac‐

cordance with the United Nations Manual of Tests and Cri‐
No. 16‐3770 3

teria (“UN Manual of Tests”) or, if the Batteries had not been

tested, documentation showing that the Pipeline and Haz‐

ardous Materials Safety Administration (“PHMSA”) had au‐

thorized the battery shipments. National Power provided no

such documentation to Mr. Zawarus, nor did it provide any

at the hearing. According to Thomas Vrablik, the corporate

vice president and the only witness to testify on National

Power’s behalf, the Batteries had not been tested at the time

they were offered for shipment. Mr. Vrablik further testified

that he believed, without supporting evidence, the Batteries

were exempt from testing because they were similar to one

of National Power’s previously tested batteries.  

The shipping papers for each of the battery shipments

indicated that the shipments conformed to the standards set

forth in packaging instruction 965 of the International Civil

Aviation Organization’s Technical Instructions for the Safe

Transport of Dangerous Goods (“ICAO Technical Instruc‐

tions”). Maria Munoz, a National Power office manager, cer‐

tified each shipping paper. Mr. Zawarus’s review of compa‐

ny records, however, revealed that, at the time she certified

the shipments, Ms. Munoz’s hazardous materials training

was Department of Transportation specific and did not in‐

clude training on the ICAO Technical Instructions. The

shipping papers also listed National Power’s general office

number as the emergency contact number. The general office

number was only monitored from 6:00 AM until 6:00 PM.

Mr. Vrablik characterized the listing of the general office

number as a typographical error. He further explained that

the number on the shipping papers should have been

Chemtrac’s, one of National Power’s contractors and a

24‐hour responder hotline.  
4 No. 16‐3770

Mr. Zawarus testified that the battery shipments, which

were offered with fiberboard box outer packaging, had been

packaged according to the ICAO Technical Instructions

packing group II performance standards. Because the Batter‐

ies were untested lithium batteries, however, they should

have been packed according to the more stringent packing

group I performance standards. The Batteries should have

been shipped with metal, plastic, or plywood drums or box‐

es as the outer packaging.  

After reviewing the parties’ post‐hearing briefs, the ALJ

found that the FAA satisfied its burden of proof and demon‐

strated that National Power knowingly violated the HMRs

identified in the complaint, with the exception of 49 C.F.R.

§ 173.185(f), and therefore assessed a civil penalty of $12,000.

Both parties appealed the ALJ’s decision to the Administra‐

tor. The FAA argued that the ALJ erred by applying the

wrong version of section 173.185(f) and that the $12,000

sanction was inconsistent with applicable law, precedent,

and FAA policy. National Power argued that it did not

knowingly violate the HMRs because its violations were not

deliberate, and that the $12,000 fine was excessive.

On September 30, 2016, the Administrator issued the or‐

der that is the subject of this petition for review. The Admin‐

istrator rejected National Power’s argument that it could not

have knowingly violated the HMRs because it did not delib‐

erately violate them. He affirmed the ALJ’s finding of liabil‐

ity on all of the HMR violations and reversed the finding of

liability on 49 C.F.R. § 172.203(f).1 He also found that the ALJ

                                                 

1 The Administrator found that the FAA did not charge a violation of

section 172.203(f) in its amended complaint.
No. 16‐3770 5

erred by applying the 2014 version of section 173.185(f),

which regulated the shipment of damaged batteries, rather

than the 2010 version, which regulated to the shipment of

untested batteries. The Administrator found that National

Power did not satisfy its burden of proof to show that the

Batteries were exempt from testing, and reversed the ALJ’s

conclusion that National Power did not violate section

173.185(f) because National Power did not have special au‐

thorization from PHMSA to ship the untested batteries. Fi‐

nally, the Administrator increased the sanctions against Na‐

tional Power from $12,000 to $66,000 based on his applica‐

tion of the statutory factors governing sanctions in 49 U.S.C.

§ 5123(c) and the FAA penalty criteria and guidance set forth

in Appendix C of FAA Order 2150.3B (“Appendix C”).  

National Power asks this Court to review the Adminis‐

trator’s conclusion that National Power knowingly violated

the HMRs and the sanctions the Administrator assessed.

II.

In reviewing the Administrator’s order, we focus only on

whether his findings of fact are supported by substantial ev‐

idence, and whether his conclusions are “arbitrary, capri‐

cious, an abuse of discretion, or otherwise not in accordance

with the law.” See Yetman v. Garvey, 261 F.3d 664, 668–69 (7th

Cir. 2001) (discussing the administrative review standards

set forth in 5 U.S.C. § 706(2)(A) as applied to an FAA order);

see also Michael v. FDIC, 687 F3d 337, 348 (7th Cir. 2012). The

Administrator is entitled to discretion in imposing sanctions

against violators; he abuses that discretion only if the sanc‐

tions are unwarranted in law or without justification in fact.

Michael, 687 F.3d at 348 (citations omitted).  
6 No. 16‐3770

III.

We first turn to whether the Administrator’s interpreta‐

tion of “knowingly” as defined by the civil penalty statute–

49 U.S.C. § 5123(a)–is in accordance with the law. The Ad‐

ministrator found that section 5123(a) requires only

knowledge of the facts giving rise to the violation, and that

knowledge of the law is required for willful violations, as

defined by 49 U.S.C. § 5124(c). National Power contends that

a knowing violation requires the intent to violate the law.

The Administrator’s interpretation of “knowingly” is in

line with the plain language of the penalty statutes. On its

face, section 5123(a) does not require a deliberate or inten‐

tional violation of the law; it only requires that a “person has

actual knowledge of the facts giving rise to the [HMR] viola‐

tion” or that “a reasonable person acting in the circumstanc‐

es and exercising reasonable care would have that

knowledge.” 49 U.S.C. §§ 5123(a)(1)(A), (B) (2010).

Knowledge of the law, however, is necessary for a willful

violation of an HMR. 49 U.S.C. § 5124(c) (2010) (requiring

knowledge of the facts giving rise to a violation and

knowledge that the conduct was unlawful). The difference

between knowing and willful violations of regulations is al‐

so illustrated by the penalties proscribed by each subsection.

Compare 5123(a) (civil penalties) with 5124(c) (criminal penal‐

ties). The Administrator’s interpretation is also in line with

Seventh Circuit and FAA precedent discussing the differ‐

ence between knowing and willful standards of conduct. See,

e.g. United States v. Obiechie, 38 F.3d 309, 315 (7th Cir. 1994);

In the Matter of: Scott H. Smalling, FAA Order No. 94‐31, 1994

WL 899663, at *2‐3 (Sept. 30, 1994) (respondent was found

liable for transporting fireworks even though he did not
No. 16‐3770 7

know that they were hazardous materials and that what he

did violated the applicable HMRs); In the Matter of Riverdale

Mills Corp., FAA Order No. 2003‐10, 2003 WL 22480437, at *2

(Sept. 10, 2003) (noting that section 5123(a) only requires that

the violator have knowledge of the facts giving rise to a vio‐

lation and that knowledge of the law is unnecessary); see also

McLaughlin v. Richland Shoe Co., 468 U.S. 128, 133, 108 S. Ct.

1677, 100 L. Ed. 2d 115 (1988).  

We next consider whether the Administrator abused his

discretion in finding that National Power knowingly violat‐

ed the HMRs. At the time of Mr. Zawarus’s investigation,

any batteries offered for shipment must have been tested in

accordance with the UN Manual of Tests. 49 C.F.R.

§ 173.185(a)(1) (2010). Section 38.3 of the UN Manual of Tests

requires that only new lithium ion batteries be tested prior to

transport. A lithium ion battery is “new” if it differs from a

previously tested battery by “a change of more than 0.1g or

20% by mass ... to the cathode, to the anode, or to the elec‐

trolyte” or by “[a] change that would materially affect the

test results.” UN Manual of Tests §§ 38.3.2.1(a), (c). National

Power claimed that its batters were not “new” and therefore

exempt from UN testing requirements. The Administrator

determined that National Power did not satisfy its burden

on this affirmative defense, 14 C.F.R. § 13.224(c), because it

failed to show that the Batteries qualified for this exemption.

This conclusion is supported by the record. At the hearing,

Mr. Vrablik admitted that all of the Batteries were untested

prior to transport. He testified that he believed SM 206 was

exempt from testing because it was of a similar construction

to the SM 201‐6, one of National Power’s previously tested

batteries. National Power, however, did not introduce evi‐

dence supporting this contention. Further, National Power
8 No. 16‐3770

failed to offer any evidence or testimony comparing

520‐libat‐2 to SM 201‐6 or any other previously tested bat‐

tery. Accordingly, the Administrator found that National

Power violated 49 C.F.R. § 173.185(f) (2010) because National

Power was aware of the fact that Batteries were untested and

because Mr. Vrablik admitted that National Power did not

have special permission from PHMSA for the battery ship‐

ments. The Administrator’s finding of liability was not an

abuse of discretion.  

The Administrator correctly affirmed the ALJ’s finding of

liability for violations of section 171.2(e) and section

171.22(b)(1). These sections require that hazardous material

be shipped in accordance with the ICAO Technical Instruc‐

tions packaging standards. National Power was aware that

the Batteries were untested and that untested lithium‐ion

batteries must be packaged using packing group I perfor‐

mance standards. National Power, however, packed the Bat‐

teries using packing group II performance standards. The

ALJ found that National Power violated sections 171.22(g)(2)

and 172.702(a), and the Administrator appropriately af‐

firmed. Sections 171.22(g)(2) and 172.702(a) require that the

people involved in shipping hazardous materials be trained

in the international standards used. Here, Ms. Munoz certi‐

fied that the battery shipments complied with the ICAO

Technical Instructions. Ms. Munoz, however, had not been

trained on the ICAO Technical Instructions.  

The Administrator did not abuse his discretion in affirm‐

ing the ALJ’s finding of liability on section 172.604(a)(1),

which requires shippers to list an emergency response num‐

ber on shipping papers. The emergency number must be

monitored at all times while the hazardous material is in
No. 16‐3770 9

transit. National Power contends that it was not aware of the

fact that it had listed the incorrect number on the shipping

papers for the battery shipments, therefore it could not have

knowingly violated the HMR. Section 5123(a)(1)(B), howev‐

er, imputes knowledge of the facts giving rise to a violation

if “a reasonable person acting in the circumstances and exer‐

cising reasonable care would have that knowledge.” In the

Matter of Interstate Chem. Co., FAA Order. No. 2002‐29, 2002

WL 31957045, at *7 (Dec. 2, 2002). In other words, section

5123(a)(1)(B) “requires inquiry and treats a person as pos‐

sessing whatever knowledge inquiry would have pro‐

duced.” Id. (quoting Contract Courier Servs., Inc. v. Research &

Special Programs Admin., 924 F.2d 112, 114 (7th Cir. 1991)). A

reasonable person would have reviewed the number listed

on the shipping papers and discovered that it was incorrect.

National Power did not introduce any evidence that it per‐

formed even a cursory review. We find that a reasonable

person in National Power’s position would have been aware

that the emergency number was improper, therefore Na‐

tional Power was aware of the facts that gave rise to this vio‐

lation.  

Finally, we address whether the Administrator’s $66,000

sanction was an abuse of discretion. During this highly def‐

erential review, we must determine whether the Administra‐

tor’s sanction, which falls within statutory limitations, is ra‐

tionally related to National Power’s offenses. Monieson v.

CFTC, 996 F.2d 852, 858 (7th Cir. 1993); Michael, 687 F.3d at

348. National Power’s argument that the assessment of a

$66,000 penalty was arbitrary and capricious is fatally

flawed. National Power contends that the record clearly

shows that Mr. Zawarus arbitrarily determined the sanction

amount the FAA requested. National Power, however, ig‐
10 No. 16‐3770

nores the fact that the Administrator, not Mr. Zawarus, im‐

posed the penalty. We focus our review on the Administra‐

tor’s considerations,2 not Mr. Zawarus’s.

At the time of National Power’s violations, the FAA was

authorized to impose sanctions between $250 and $50,000

per HMR violation. 49 U.S.C. §§ 5123(a)(1), (3) (2010). In as‐

sessing sanctions, the Administrator was to consider factors

such as the nature, circumstances, and gravity of the viola‐

tion, the violator’s degree of culpability and history of viola‐

tions, and other matters that justice required. 49 U.S.C.

§ 5123(c) (2010). The Administrator was also to look to Ap‐

pendix C for guidance.  

Pursuant to Appendix C, the Administrator determined

that this case had a minimum to moderate “weight,” or se‐

verity, based on the material that was being shipped, Na‐

tional Power’s high degree of culpability as a battery manu‐

facturer, and National Power’s unintentional violations of

the HMRs. Next, the Administrator consulted the penalty

matrix in Appendix C for penalties related to declared ship‐

ments and determined that National Power was subject to

the penalties that applied to entities that regularly offered,

accepted, or transported hazardous materials. These penal‐

ties ranged between $1,000 and $5,500. The Administrator

                                                 

2 Prior to engaging in his analysis, the Administrator identified multiple

errors the ALJ made. The ALJ’s chief error was his decision to impose a

$2,000 fine encompassing all 11 violations of a single HMR. (i.e. ($2,000

per 11 violations of a single HMR) x (6 violated HMRs) = $12,000 penal‐

ty). The Administrator, in applying Appendix C and considering 49

U.S.C. § 5123(a)(4), determined that it was appropriate to apply a sanc‐

tion amount for each of the 11 battery shipments because they constitut‐

ed separate shipments as they all occurred under different airway bills.
No. 16‐3770 11

split the range into thirds, each representing a minimum,

moderate, or maximum severity. The ranges were $1,000‐

2,500, $2,501‐4,000, and $4,000‐5,500, respectively. Because

he applied a minimum to moderate weight to this case, he

determined that the penalty range for each of National Pow‐

er’s HMR violations was to be between $1,000 and $4,000.

The Administrator also categorized the six HMRs that Na‐

tional Power violated into four groups: packing, training,

emergency response, and “other.” The Administrator, based

on FAA precedent, further found that National Power’s cor‐

rective actions were not mitigating factors because they did

not exceed the minimum legal requirements. He also chose

not to reduce the penalty he assessed because National Pow‐

er failed to demonstrate an inability to pay a fine.  

The Administrator determined that the FAA’s request

that he impose a $66,000 fine would result in a $1,500 penal‐

ty per violation group, per shipment.3 He determined that

this average $1,500 penalty per violation group was reason‐

able based on his analysis of this case and FAA guidance.

The Administrator considered numerous factors when it de‐

termined the appropriate penalty. Accordingly, we find that

the penalty, which was within statutory limits, was rational‐

ly related to National Power’s multiple offenses and that the

penalty imposed was not arbitrary and capricious or an

abuse of discretion.4  

                                                 

3 ($1,500 per violation group) x (4 violation groups) x (11 shipments) =

$66,000.

4 National Power cites to a Wikipedia article about Judge Dredd to claim

that the penalty imposed was arbitrary and capricious and as if “a police

officer arrested a bank robber, summarily declared the robber’s guilt and

sentenced him to prison time ... .” Judge Dredd, both in the pages of
12 No. 16‐3770

For all of these reasons, we deny National Power’s peti‐

tion for review and affirm the Administrator’s order in all

respects.

                                                                                                             

comic books and on the screen, is a “street judge” in a dystopian future

who is empowered to summarily arrest, convict, sentence, and execute

offenders. See https://en.wikipedia.org/wiki/Judge_Dredd (visited July

18, 2017). It is obvious to us that the Administrator did not engage in the

type of justice Judge Dredd embodies. The Administrator did not arbi‐

trarily declare, “I am the law!” and hand down a penalty without con‐

sidering all of the relevant factors.