Court Opinion

ID: 4548392
Source: CourtListenerOpinion
Date Created: 2020-07-15 17:00:29.43596+00
Date Added: 2024-06-11T08:29:47.215877
License: Public Domain

FOR PUBLICATION

   UNITED STATES COURT OF APPEALS
        FOR THE NINTH CIRCUIT

 SKY-MED, INC., DBA Pacific                       No. 18-70306
 International Skydiving Center,
                           Petitioner,               FAA No.
                                                    2014-1116
                     v.

 FEDERAL AVIATION                                   OPINION
 ADMINISTRATION; STEPHEN
 DICKSON, Administrator,
                       Respondents.

          On Petition for Review of an Order of the
              Federal Aviation Administration

           Argued and Submitted January 7, 2020
                 San Francisco, California

                       Filed July 15, 2020

  Before: J. Clifford Wallace and Michelle T. Friedland,
  Circuit Judges, and Timothy Hillman, * District Judge.

                      Per Curiam Opinion

    *
      The Honorable Timothy Hillman, United States District Judge for
the District of Massachusetts, sitting by designation.
2                       SKY-MED V. FAA

                          SUMMARY **

              Federal Aviation Administration

    The panel vacated a decision of the Administrator of the
Federal Aviation Administration (“FAA”), and remanded
with instructions to dismiss the case for lack of jurisdiction,
in a proceeding wherein the FAA sought to impose $55,000
in civil penalties on Sky-Med, Inc. dba Pacific International
Skydiving Center (“Pacific”) for allegedly conducting
unsafe parachute operations on several occasions.

    Congress created two tracks for civil penalty
proceedings initiated by the FAA for violations of air travel
laws and regulations. If the amount of the penalty sought is
relatively low, an administrative law judge (“ALJ”) in the
Department of Transportation can render a decision that is
appealed to the FAA Administrator, whose decision is then
subject to review by a federal court of appeals. If the amount
in controversy exceeds $50,000 for enforcement against
small businesses like Pacific, the penalty must be sought in
a case filed by the Government in federal district court. 49
U.S.C. § 46301(d)(4).

     The FAA brought this enforcement action against Pacific
before an ALJ, and it was then appealed to the
Administrator. The ALJ and Administrator held that they
had the power to adjudicate the action because the FAA
initially sent Pacific two separate notices alleging that

    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
                      SKY-MED V. FAA                          3

Pacific was liable for civil penalties for different violations,
with each notice seeking less than $50,000.

    The panel held that because the FAA ultimately pursued
penalties through a single Complaint seeking more than
$50,000, the only tribunal with jurisdiction to adjudicate the
Complaint was a federal district court. Specifically, the
panel held that the statute unambiguously establishes that
federal district courts have exclusive subject matter
jurisdiction over cases like this one. The panel further held
that the history of 49 U.S.C. § 46301(d)(4) cuts against the
FAA’s interpretation. In addition, the panel held that the
purpose of the exclusive district court jurisdiction provision
would be undermined if the FAA could guarantee an agency
adjudicator by simply starting out with a notice of a penalty
amount that comports with its preferred forum. The panel
concluded that the ALJ and FAA Administrator did not have
jurisdiction to resolve the merits of the FAA’s allegations.

                         COUNSEL

John T. Van Geffen (argued) and Michael L. Dworkin,
Avialex Law Group LLP, San Francisco, California, for
Petitioner.

Brett D. Weingold (argued), Office of the Chief Counsel,
Federal Aviation Administration, Washington, D.C., for
Respondents.
4                     SKY-MED V. FAA

                          OPINION

PER CURIAM:

    We must decide whether the Federal Aviation
Administration (“FAA”) proceeded in the correct forum
when it sought to impose $55,000 in civil penalties on Sky-
Med, Inc., which does business as Pacific International
Skydiving Center (“Pacific”), for allegedly conducting
unsafe parachute operations on several occasions. Congress
has created two tracks for civil penalty proceedings initiated
by the FAA for violations of air travel laws and regulations.
If the amount of penalty sought is relatively low, an
Administrative Law Judge (“ALJ”) in the Department of
Transportation, of which the FAA is a component, can
render a decision that can be appealed to the FAA
Administrator (the “Administrator”), whose decision is then
subject to review by a federal court of appeals. See
49 U.S.C. §§ 46301(d), 46110. If, however, the amount in
controversy exceeds a threshold—$50,000 for enforcement
against small businesses like Pacific—the penalty must be
sought through a case filed by the Government in federal
district court. See id. § 46301(d)(4).

    The FAA brought this enforcement action against Pacific
before an ALJ, and it was then appealed to the
Administrator. Pacific has now asked us to review the
Administrator’s decision. The ALJ and Administrator held
that they had the power to adjudicate the action because the
FAA initially sent Pacific two separate notices alleging that
Pacific was liable for civil penalties for different violations,
with each notice seeking less than $50,000. We disagree.
Because the FAA ultimately pursued those penalties through
a single Complaint seeking more than $50,000, we hold that
the only tribunal with jurisdiction to adjudicate the
Complaint was a federal district court. We therefore vacate
                     SKY-MED V. FAA                         5

the Administrator’s decision and remand with instructions to
dismiss.

                              I.

    Pacific provides skydiving services to the public,
including skydiving classes and tandem parachute jumps, in
Honolulu, Hawaii.

    In March 2014, the FAA sent Pacific a document titled
“Notice of Proposed Civil Penalty.” See 14 C.F.R.
§ 13.16(f). This notice stated that, based on an FAA
investigation, “it appear[ed] that” during one flight in late
2013 and another in early 2014 Pacific had “conducted
parachute operations from [its] aircraft into or through
clouds.” If proven, the notice continued, Pacific’s actions
would have violated two federal regulations: 14 C.F.R.
§ 105.17, which bars parachute operations “[i]nto or through
a cloud,” and 14 C.F.R. § 91.13(a), which bars “operat[ing]
an aircraft in a careless or reckless manner so as to endanger
the life or property of another.” The notice “propose[d] to
assess a civil penalty in the amount of $22,000,” which
reflected $11,000 each for the two alleged violations.
Pacific and the FAA discussed the possibility of settlement,
but they did not reach an agreement.

     Before any further action occurred in connection with
this March 2014 notice, in October 2014 the FAA sent
Pacific a second “Notice of Proposed Civil Penalty”
(collectively, along with the March 2014 notice, the “Initial
Notices”). This second notice stated that “it appear[ed] that”
Pacific had again violated the regulations referenced in the
first notice by conducting parachute operations into or
through clouds during six flights in March 2014. The FAA
proposed a total penalty of $33,000 for those six violations,
which reflected $5,500 for each violation.
6                     SKY-MED V. FAA

    After further settlement discussions between the parties
were unsuccessful, the FAA sent Pacific a “Final Notice of
Proposed Civil Penalty.” See 14 C.F.R. § 13.16(g). The
Final Notice explained that it was “combin[ing]” the two
Initial Notices. And its contents reflected just that: the Final
Notice referred to the eight flights described in the two
separate Initial Notices, stated that the FAA had
“determined” that Pacific had violated 14 C.F.R. §§ 105.17
and 91.13(a) during those flights, and contended that Pacific
was liable “for a total of $55,000” in civil penalties—
$22,000 for the “case” identified in the March 2014 Initial
Notice plus $33,000 for the “case” identified in the October
2014 Initial Notice.

    The Final Notice directed Pacific to either pay the
$55,000 penalty or request a hearing before an ALJ.
Because Pacific requested a hearing, the FAA filed a
Complaint in the Department of Transportation’s Office of
Hearings. See 14 C.F.R. §§ 13.16(i), 13.208. Like the Final
Notice, the Complaint alleged that Pacific should be required
to pay $55,000 in civil penalties for conducting parachute
operations into or through clouds during the eight flights—
$22,000 for the “case” identified in the March 2014 Initial
Notice plus $33,000 for the “case” identified in the October
2014 Initial Notice.

     The matter was assigned to an ALJ and given a single
FAA docket number. After the parties engaged in discovery,
an ALJ conducted a three-day hearing on the matter.
Toward the start of the hearing, Pacific’s counsel orally
moved to dismiss the case, contending—apparently for the
first time since the case had been filed—that the amount in
controversy “exceed[ed] the jurisdictional limit” for
proceeding in that forum and that the case was therefore
“void ab initio.” The ALJ decided to proceed with the merits
                      SKY-MED V. FAA                         7

hearing but ordered the parties to submit briefing on
jurisdiction after the hearing.

    After considering the parties’ briefing, the ALJ denied
Pacific’s motion to dismiss for lack of jurisdiction and issued
a ruling on the merits. The ALJ held that jurisdiction turns
on the amount in controversy when the FAA “initiates” a
civil penalty action. Because each of the two separate Initial
Notices had sought penalties of less than $50,000, the ALJ
concluded that “the rule conferring exclusive jurisdiction to
the United States district courts did not apply when each case
was initiated,” and that the cases were therefore in the
appropriate forum. On the merits, the ALJ concluded that
the FAA had demonstrated violations during only three of
the eight flights at issue. The ALJ imposed a penalty of
$1,375 per violation, resulting in a total penalty of $4,125.

    Pacific and the FAA cross-appealed to the
Administrator. See 49 U.S.C. § 46301(d)(7)(B); 14 C.F.R.
§ 13.16(j). Pacific reasserted, among other arguments, that
the amount in controversy had exceeded the jurisdictional
maximum for agency adjudication. The FAA contended that
the ALJ had awarded too low a penalty for the three
violations the FAA had proven.

    The Administrator ruled in favor of the FAA. As to
jurisdiction, the Administrator, like the ALJ, reasoned that
jurisdiction “depends on the amount in controversy when the
Administrator or FAA initiates the civil penalty action,”
which the Administrator viewed as having occurred when
the FAA sent the Initial Notices each seeking less than
$50,000. On the merits, the Administrator rejected various
defenses asserted by Pacific, and then agreed with the FAA
that the penalty per violation should be increased, imposing
a revised total penalty of $16,500.
8                        SKY-MED V. FAA

    Pacific petitioned this court for review under 49 U.S.C.
§ 46110, again contending that the agency lacked
jurisdiction. 1

                                   II.

    The question whether the ALJ and Administrator had
jurisdiction to resolve this case turns on the meaning of
49 U.S.C. § 46301(d)(4). The relevant portion of that statute
provides:

         the district courts of the United States have
         exclusive jurisdiction of a civil action
         involving a penalty the Secretary of
         Homeland Security or Administrator of the
         Federal Aviation Administration initiates if–

         (A) the amount in controversy is more than–

             (i) $50,000 if the violation was
             committed by any person before
             [December 12, 2003];

             (ii) $400,000 if the violation was
             committed by a person other than an
             individual or small business concern on
             or after that date; or

    1
      In the alternative, Pacific presents several challenges to the
Administrator’s reasoning on the merits. Because, as explained below,
we conclude that the agency lacked jurisdiction and that its decision must
be vacated, we do not address Pacific’s merits arguments.
                      SKY-MED V. FAA                          9

           (iii) $50,000 if the violation was
           committed by an individual or small
           business concern on or after that date[.]

49 U.S.C. § 46301(d)(4); see also 14 C.F.R. § 13.16(b)
(regulation implementing this statutory provision).
Subsection (A)(iii) is the portion relevant here, because the
alleged violations occurred in 2013 and 2014, and the parties
agree that Pacific is a “small business concern.”

     Chevron, USA, Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984), prescribes a two-step test
for judicial review of agency interpretations of federal
statutes. First, “employing traditional tools of statutory
construction,” we assess “whether Congress has directly
spoken to the precise question at issue.” Id. at 842–43, 843
n.9. If the statute speaks unambiguously to the question at
issue, “that is the end of the matter; for the court, as well as
the agency, must give effect to the unambiguously expressed
intent of Congress.” Id. at 842–43. If, however, “the statute
is silent or ambiguous with respect to the specific issue,” the
second step of Chevron directs us to defer to the agency’s
interpretation as long as it is “based on a permissible
construction of the statute.” Id. at 843. Applying the first
step of Chevron, see City of Arlington v. FCC, 569 U.S. 290,
307 (2013), we hold that the statute unambiguously
establishes that federal district courts have exclusive subject
matter jurisdiction over cases like this one.

    We start with the text. See Collins v. Gee W. Seattle
LLC, 631 F.3d 1001, 1004 (9th Cir. 2011). Again, the statute
provides that district courts “have exclusive jurisdiction of a
civil action . . . if . . . the amount in controversy is more
than” the relevant threshold. 49 U.S.C. § 46301(d)(4). The
key phrase is “a civil action.” We follow the ordinary legal
10                    SKY-MED V. FAA

understanding of the term “action”: a “judicial proceeding.”
Action, Black’s Law Dictionary (11th ed. 2019).

    Here, there was one such proceeding. There are several
indicia of this, including a single Complaint, a single docket
number, a single pre-hearing process, and a single hearing
before the ALJ, all culminating in a single ALJ decision
resolving the merits. And within the single proceeding at
issue here, the document setting forth the amount in
controversy, from the time the docket was opened to the time
the ALJ ruled on the merits, was the single Complaint
seeking $55,000 in penalties from Pacific. This was
therefore “a civil action” in which the amount in controversy
was $55,000—over which federal district courts had
exclusive jurisdiction.

    The FAA attempts to escape this conclusion by fixating
on a single word in the statute. According to the FAA,
because the statute refers to “a civil action involving a
penalty the . . . Administrator of the Federal Aviation
Administration initiates,” 49 U.S.C. § 46301(d)(4)
(emphasis added), the jurisdictional analysis turns on the
amount that was in controversy when the action was
“initiate[d].” The FAA contends that because the statute is
“silent” as to how the FAA initiates a civil penalty action,
we must defer, under Chevron, to an FAA regulation
providing that “[a] civil penalty action is initiated by sending
a notice of proposed civil penalty.” 14 C.F.R. § 13.16(f).
This regulation, in the FAA’s view, means that jurisdiction
must be determined based only on the contents of a notice of
proposed civil penalty, and that the agency had the power to
adjudicate this case because there were two separate Initial
Notices, each seeking less than $50,000.

    The word “initiates” cannot bear the weight the FAA
places on it. In this statute, the words “the . . . Administrator
                      SKY-MED V. FAA                          11

of the Federal Aviation Administration initiates” serve as an
adjective phrase modifying “a civil action.” 49 U.S.C.
§ 46301(d)(4) (referring to “a civil action involving a
penalty the . . . Administrator of the Federal Aviation
Administration initiates”). Thus, “initiates” simply helps
identify the type of proceeding at issue: one that has, as
relevant here, been initiated by the FAA. “Initiates” does
not mean that jurisdiction is cemented based on the amount
that was in controversy at the outset of an enforcement effort
by the FAA. If Congress had meant that the amount in
controversy for purposes of jurisdiction would be set in stone
at the time an enforcement action was initiated, we trust
Congress would have explicitly tied jurisdiction to what the
amount in controversy was or had been at that specific point
in time—rather than referring to what “the amount in
controversy is.” Id. § 46301(d)(4)(A) (emphasis added).

    This is not to say, however, that timing is irrelevant to
jurisdiction. We simply disagree with the FAA’s particular
way of considering timing. We conclude, based on the plain
text, that exclusive district court jurisdiction can be triggered
during a window of time, rather than only at a specific point
at the outset of an enforcement effort. The statute ties
jurisdiction to the amount in controversy in “a civil action,”
see id. § 46301(d)(4), so the window for assessing
jurisdiction is the period while that action is pending before
the adjudicatory body—which, for an action filed in the
Department of Transportation’s Office of Hearings, begins
with the filing of a complaint and runs through the issuance
of the ALJ’s final ruling. The relevant question is whether,
at any point during that window, the amount in controversy
exceeds the applicable threshold for exclusive federal
district court jurisdiction. That question can typically be
12                         SKY-MED V. FAA

answered by referring to the operative pleading, which in
this case was the single Complaint seeking $55,000. 2

     Our conclusion also follows from the meaning of
“amount in controversy.” “We have defined the amount in
controversy as the amount at stake in the underlying
litigation,” which includes “any result of the litigation,
excluding interests and costs, that entails a payment by the
defendant.” Gonzales v. CarMax Auto Superstores, LLC,
840 F.3d 644, 648 (9th Cir. 2016) (citations, quotation
marks, and alterations omitted). Thus, the amount in
controversy encompasses the total amount claimed in good
faith in a proceeding. See Chavez v. JPMorgan Chase &
Co., 888 F.3d 413, 416 (9th Cir. 2018). And we generally
calculate the amount in controversy by examining the face
of the well-pleaded complaint. See Horton v. Liberty Mut.
Ins. Co., 367 U.S. 348, 353 (1961) (“The general federal rule
has long been to decide what the amount in controversy is
from the complaint itself.”). The FAA’s interpretation,
requiring us to examine only the amount sought in each
initial notice of a civil penalty action even when multiple
infractions have been consolidated into a single complaint,

     2
       Because the jurisdictional provision at issue in this case does not
require us to identify a single point in time when a civil penalty action is
“initiated,” the regulation to which the FAA urges us to defer, 14 C.F.R.
§ 13.16(f), is beside the point. We need not and do not address the import
of 14 C.F.R. § 13.16(f) in other contexts in which it could be necessary
to identify a single event that “initiates” a civil penalty action. See, e.g.,
49 U.S.C. § 46301(d)(7)(C) (statute of limitations requiring that agency
adjudications generally “not be initiated later than 2 years after the
violation occurs”); see also Royal Avionics Sys., Inc., FAA Order No.
2002-6, 2002 WL 1042303, at *3 (Apr. 15, 2002) (FAA Administrator
concluding, in a matter that squarely presented the issue, that an action
is “initiated” for purposes of this statute of limitations once the FAA
issues a notice of proposed civil penalty).
                      SKY-MED V. FAA                         13

is accordingly contradicted by            the   most    natural
understanding of the statutory text.

    The history of 49 U.S.C. § 46301(d)(4) also cuts against
the FAA’s interpretation. Congress has on several occasions
reaffirmed a two-track system for adjudicating FAA civil
penalties, confirming its purpose to channel higher-stakes
disputes to federal district courts through a bright-line rule.
For decades after the enactment of the Federal Aviation Act
in 1958, “civil penalties for violations within the jurisdiction
of the FAA could be imposed only by United States District
Courts.” H.R. Rep. No. 102-671, at 4 (1992), reprinted in
1992 U.S.C.C.A.N. 792, 792 (emphasis added). It was not
until 1987 that Congress first authorized the FAA to assess
civil penalties for violations of the Federal Aviation Act
through agency adjudication. See Airport and Airway Safety
and Capacity Expansion Act of 1987, Pub. L. No. 100-223,
§ 204(g)–(i), 101 Stat. 1486, 1520–21. That program, which
was temporary, provided that the FAA could assess penalties
through administrative adjudication in some cases, but that
federal district courts would continue to “have exclusive
jurisdiction of any civil penalty action initiated by the
Administrator” if the action “involve[d] an amount in
controversy in excess of $50,000.” Id. § 204(g), 101 Stat. at
1520. In 1992, Congress enacted a permanent program,
which included the same language about exclusive
jurisdiction of federal district courts. See FAA Civil Penalty
Administrative Assessment Act of 1992, Pub. L. No. 102-
345, § 2(a), 106 Stat. 923, 923. Since 1992, Congress has
made only one substantive change to the amount in
controversy provision, when in 2003 it raised the threshold
to $400,000 for proceedings against “a person other than an
individual or small business concern,” while leaving in place
the $50,000 limit for individuals and small businesses. See
Vision 100—Century of Aviation Reauthorization Act, Pub.
14                    SKY-MED V. FAA

L. No. 108-176, § 503(b), 117 Stat. 2490, 2558 (2003). This
history confirms that the congressional grant of civil penalty
authority to the FAA was meant to be limited, and that the
$50,000 ceiling for agency adjudication of cases like this one
was designed to have meaningful force.

    The purpose of the exclusive district court jurisdiction
provision would also be undermined if the FAA could
guarantee an agency adjudicator by simply starting out with
a notice of a penalty amount that comports with its preferred
forum. Suppose, for example, the FAA were to issue a
notice of proposed civil penalty alleging forty-nine
violations and seeking a penalty of $1,000 per violation, for
a total penalty of $49,000. Under the FAA’s interpretation,
in such a case the FAA’s counsel could later request a
revised penalty of $10,000 per violation, for a total requested
penalty of $490,000, without divesting the agency
adjudicators of jurisdiction. Although the FAA’s request for
an increased penalty in such a hypothetical case might arise
because of information learned later rather than as a result of
purposeful jurisdictional manipulation, the better reading of
the statute forecloses the FAA from seeking such a large
penalty in a single administrative proceeding for any reason.

    Our interpretation of the jurisdictional statute at issue
here is reinforced when we consider the mechanics of a more
frequently litigated and thus well understood amount-in-
controversy requirement: the $75,000 threshold necessary
for diversity of citizenship jurisdiction in federal court. See
28 U.S.C. § 1332(a). In a case involving a single plaintiff
and a single defendant (like this one), we would aggregate
the value of all of the plaintiff’s claims to determine whether
the jurisdictional minimum was satisfied. See Snyder v.
Harris, 394 U.S. 332, 335 (1969). A defendant sued in state
court who wished to remove the case to federal court could
                     SKY-MED V. FAA                       15

therefore rely on the total value of the claims advanced—we
would not dissect a single complaint into its component
parts. See 14C Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 3725.3 (explaining that
when a case is filed in state court and a defendant seeks to
remove it to federal court, “[i]t is well-settled that two or
more claims asserted by a single plaintiff against a single
defendant may be aggregated for purposes of determining
whether the jurisdictional amount requirement has been
met”). We believe that here, by analogy, the penalties
sought in the separate Initial Notices but later pursued
through the single Complaint should be aggregated for
purposes of determining the forum for adjudicating the
dispute.

    Moreover, if a case is initiated in state court for a low
amount but it later becomes clear that the jurisdictional
threshold has been surpassed, defendants may generally
remove the case to federal court at that later time. See
28 U.S.C. § 1446(b)(3). We again believe 49 U.S.C.
§ 46301(d)(4) is analogous. If, during a single enforcement
proceeding pending before an ALJ, the FAA for the first
time seeks penalties totaling more than $50,000, the action
must be adjudicated in federal district court rather than
remaining in an administrative forum based on earlier
allegations that have since become outdated.
16                        SKY-MED V. FAA

    In sum, because this case involved a single proceeding
during which the operative Complaint sought $55,000, the
ALJ and Administrator did not have jurisdiction to resolve
the merits of the FAA’s allegations. 3 This conclusion is not
altered by the fact that the ALJ and Administrator ultimately
imposed a total penalty of less than $50,000, because a
higher amount was in controversy even though not
ultimately awarded. Cf. Rosado v. Wyman, 397 U.S. 397,
405 n.6 (1970) (stating the “well-settled rule that a federal
court does not lose jurisdiction over a diversity action”
merely because “the amount recovered falls short” of the
jurisdictional minimum).

     3
       We need not address two related issues that may arise in other
cases. First, suppose the FAA were to commence more than one agency
adjudication against the same party and litigate the adjudications in
separate proceedings, but around the same time. If the total amount in
controversy across the adjudications were above the threshold for
exclusive district court jurisdiction, a question might be raised about
whether the FAA had improperly split up the cases to evade the
jurisdictional provision. Cf. Cont’l Airlines, Inc., FAA Order No. 90-
0012, 1990 WL 656265, at *2 (Apr. 6, 1990) (rejecting an airline’s
contention that the FAA had improperly brought separate cases “to avoid
the jurisdictional limit of $50,000”). That is not the issue in this case
because this case proceeded as a single action in which the amount in
controversy did exceed the applicable threshold.

    Second, suppose the FAA were to start out the same way as in the
example just described—by commencing multiple agency adjudications
each of which seeks less than the applicable maximum penalty for
agency jurisdiction, but that in sum exceed it—and were to then seek
permission from an ALJ to consolidate the proceedings. Cf. FAA, Order
No. 2150.3C, FAA Compliance and Enforcement Program, ch. 8-11
(Sept. 18, 2018) (providing that the FAA’s counsel “may move to
consolidate” cases like those described in this hypothetical “for litigation
purposes”). We do not decide whether, if a consolidation like this were
to occur with an ALJ’s approval, the statute would permit continued
agency jurisdiction.
                     SKY-MED V. FAA                       17

                            III.

    For these reasons, we vacate the Administrator’s
decision and remand with instructions to dismiss the case for
lack of jurisdiction.

   VACATED    AND     REMANDED                       WITH
INSTRUCTIONS TO DISMISS.