Court Opinion

ID: 4700507
Source: CourtListenerOpinion
Date Created: 2021-07-01 17:00:53.338214+00
Date Added: 2024-06-11T08:06:10.875192
License: Public Domain

FOR PUBLICATION

   UNITED STATES COURT OF APPEALS
        FOR THE NINTH CIRCUIT

 REGENCY AIR, LLC,                                 No. 20-72084
                                Petitioner,
                                                   FAA No.
                     v.                          FAA-2017-0602

 STEPHEN M. DICKSON, Administrator
 of the FAA; FEDERAL AVIATION                        OPINION
 ADMINISTRATION,
                      Respondents.

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

             Argued and Submitted May 14, 2021
                    Pasadena, California

                          Filed July 1, 2021

   Before: Ryan D. Nelson and Kenneth K. Lee, Circuit
       Judges, and Sidney H. Stein, * District Judge.

                  Opinion by Judge R. Nelson

     *
       The Honorable Sidney H. Stein, United States District Judge for
the Southern District of New York, sitting by designation.
2                   REGENCY AIR V. DICKSON

                          SUMMARY **

              Federal Aviation Administration

   The panel denied a petition for review brought by
Regency Air, LLC challenging a decision by the Federal
Aviation     Administration     (“FAA”)       affirming   an
administrative law judge’s finding that Regency Air violated
regulations requiring air carriers to test each employee for
drug and alcohol misuse if performing a safety-sensitive
function like plane maintenance.

   The ALJ imposed civil penalties, and the FAA
Administrator increased the penalty pursuant to FAA
sanction guidance.

    The panel held that the FAA Administrator correctly
held that the FAA’s complaint did not violate due process
and that 14 C.F.R. §§ 120.35, 120.39, and 49 C.F.R § 40.25
were not unconstitutional. Specifically, first, the panel held
that although the FAA mistakenly but irrelevantly call
Regency Air worker Ernest Douglas Long a contractor, it did
not violate due process. Regency Air had adequate notice of
the dispositive allegations against it: Regency Air should
have enrolled Long in its testing program but failed to do so.
Second, 14 C.F.R §§ 120.35 and 120.39 were not
unconstitutionally vague as to whether Regency Air
employee Gary Geis need to be enrolled in Regency Air’s
program when already enrolled in SoCal Jet Service’s
program.       Third, 49 C.F.R. § 40.25 was not

    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
                 REGENCY AIR V. DICKSON                     3

unconstitutionally vague as whether Regency Air had to
request Geis’s past testing records as an employee. When an
employer hires and becomes obligated to test an employee,
it must request past testing records despite the employee’s
past work on the employer’s planes in the scope of other
employment.

   The panel held that the FAA Administrator also acted
within his discretion to modify the ALJ’s initial penalty.

                        COUNSEL

William J. Ingalsbe (argued), Monteleone & McCrory LLP,
Los Angeles, California, for Petitioner.

Brett D. Weingold (argued), Office of the Chief Counsel,
Federal Aviation Administration, Washington, D.C., for
Respondents.

                         OPINION

R. NELSON, Circuit Judge:

     The Federal Aviation Administration (“FAA”) requires
air carriers to test each employee for drug and alcohol misuse
if performing a safety-sensitive function like plane
maintenance. 14 C.F.R. §§ 120.35, 120.39, 120.105(e),
120.215(a)(5). An ALJ found that Regency Air, LLC had
violated these regulations and imposed civil penalties. The
FAA Administrator affirmed, increasing the penalty
consistent with FAA sanction guidance. We see no reason
to reverse, and we deny the petition.
4                  REGENCY AIR V. DICKSON

                                  I

                                 A

    To ensure safe air travel, Congress directed the FAA to
regulate drug and alcohol testing for air carrier employees.
49 U.S.C. § 45102(a)(1). Key to this appeal is who must be
enrolled in an employer’s testing program. Under these
regulations, an air carrier employer “shall test each of its
employees” for drug use if they perform safety-sensitive
functions like plane maintenance. 14 C.F.R. §§ 120.35(a),
120.105(e), 120.215(a)(5). Likewise, an employer cannot
“use any individual . . . to perform a safety-sensitive
function . . . unless that individual is subject to testing for
alcohol misuse.” Id. § 120.39(b). If an employer violates
these regulations, the FAA may impose civil penalties after
notice and an opportunity to be heard. 49 U.S.C.
§ 46301(d)(2), (7)(A).

    Both testing provisions turn on the definition of
“employee,” 1 which is defined broadly. This includes any
“individual who is hired, either directly or by contract, to
perform a safety-sensitive function for an employer.”
14 C.F.R. § 120.7(h). The definition of “hired” is equally
broad: any individual “retain[ed] . . . for a safety-sensitive
function as a paid employee, as a volunteer, or through barter
or other form of compensation.” Id. § 120.7(j). Thus,
“employees” include direct employees, independent
contractors, and volunteers. Ultimately, when an individual
is doing maintenance work on an air carrier’s plane, the
    1
       Section 120.35 references “employees” and § 120.39 references
“covered employee[s].” Because no regulatory difference exists
between these terms, both testing requirement provisions refer broadly
to the same type of employees. Compare 14 C.F.R. § 120.7(f) with id.
§ 120.7(h).
                 REGENCY AIR V. DICKSON                    5

individual will almost always be an “employee” subject to
drug and alcohol testing requirements.

    One exception applies. An air carrier need not test
someone who is working for another employer and enrolled
in that employer’s testing program. Id. § 120.7(i); see also
id. §§ 120.35(b), 120.39(b). This exception draws a clear
line: unless an individual meets § 120.7(i)’s two
requirements, an air carrier must enroll every employee in
its testing program who does maintenance work on its
planes.

    One other regulation is relevant. An employer must
request an employee’s past testing records from a previous
FAA-regulated employer when the employee begins doing
safety-sensitive work for the new employer. 49 C.F.R.
§ 40.25(a). Preferably, the employer obtains these records
before the employee begins safety-sensitive work. Id.
§ 40.25(d). But employers have a 30-day grace period
during which an employee can start working before the
employer obtains these records. Id. After 30 days, however,
the employee must stop safety-sensitive work unless the
employer has obtained, or made a good-faith effort to obtain,
the employee’s testing records. Id.

                             B

   Regency is a private charter company subject to FAA
drug and alcohol testing regulations.      Through its
employment of Ernest Douglas Long and Gary Geis,
Regency violated the testing and past record provisions
described above.

    Starting in 2015, Long performed safety-sensitive work
on Regency planes as a volunteer for over a year. During
this period, Long also worked for Paragon Airways and was
6                   REGENCY AIR V. DICKSON

enrolled in Paragon’s testing program. But Long’s work for
Regency was unrelated to his Paragon employment—he was
an independent volunteer, working as a friend of Regency’s
president. Regency did not enroll Long in its testing
program.

    Also in 2015, Regency contracted with SoCal Jet
Services to acquire a director of maintenance. For three
months, Geis filled this role and worked on Regency’s
planes. He was enrolled in SoCal’s testing program rather
than Regency’s, but this did not violate FAA regulations as
Geis was working on behalf of SoCal. See 14 C.F.R.
§ 120.7(i).

    That dynamic changed on January 4, 2016, when
Regency hired Geis as a direct employee. Though Geis still
worked for SoCal on other matters, he no longer worked for
SoCal on Regency planes after January 4. Still, Regency did
not immediately enroll Geis in its testing program. Geis
began safety-sensitive work on January 25 and was enrolled
in Regency’s testing program on February 2, under which
Geis was not subject to testing until mid-April.

    Regency also allowed Geis to continue safety-sensitive
work long after the 30-day grace period had ended. Because
Geis began work on January 25, Regency had until late
February to obtain or make a good faith effort to obtain
Geis’s past testing records. See 49 C.F.R. § 40.25(d). It
failed to do so. In fact, Regency allowed Geis to do safety-
sensitive work for over a year before properly requesting the
records in February 2017. 2

    2
     Regency requested drug testing documentation from SoCal in
October 2015 but failed to first obtain Geis’s consent and ultimately the
                    REGENCY AIR V. DICKSON                            7

     In April 2017, the FAA informed Regency that it had
violated the regulations discussed above. In its complaint,
the FAA alleged that Regency failed to enroll Long and Geis
in its testing program, see 14 C.F.R. §§ 120.35, 120.39, and
allowed Geis to do safety-sensitive work as a direct
employee without obtaining his past testing records, see
49 C.F.R. § 40.25. The FAA also proposed a $17,400 civil
penalty.

    After a hearing, the ALJ concluded that Regency had
violated FAA regulations but mitigated the penalties to
$11,900 since Geis and Long were enrolled in other
employers’ testing programs and Geis had passed his pre-
employment drug test. On administrative cross-appeal, the
FAA Administrator affirmed that Regency had violated the
drug and alcohol testing regulations. But the Administrator
increased civil penalties to $15,600 since the ALJ’s
mitigating factors were not cognizable under FAA sanction
guidance. Regency then petitioned this court to vacate the
Administrator’s order.

                                  II

    We review the Administrator’s sanction determination
under the Administrative Procedure Act’s (“APA”)
deferential arbitrary or capricious standard. 5 U.S.C.
§ 706(2)(A). When, as here, Congress has authorized the
agency to determine and impose sanctions, the agency’s
sanction determinations are “peculiarly a matter for
administrative competence.” Butz v. Glover Livestock
Comm’n Co., 411 U.S. 182, 185 (1973) (citation omitted).

records. See 49 C.F.R. § 40.25(a). The ALJ held that this was not a
good-faith effort to obtain records, and Regency does not challenge that
determination here.
8                REGENCY AIR V. DICKSON

Thus, a reviewing court cannot overturn the determination
unless “unwarranted in law or without justification in fact.”
Id. at 185–86 (alteration adopted) (citation omitted); Balice
v. U.S. Dep’t of Agric., 203 F.3d 684, 689 (9th Cir. 2000)
(same). The FAA’s findings of fact are also conclusive if
supported by substantial evidence. 49 U.S.C. § 46110(c).

    We review de novo whether an agency’s regulations are
unconstitutionally vague. Cal. Pac. Bank v. Fed. Deposit
Ins. Corp., 885 F.3d 560, 569 (9th Cir. 2018) (citation
omitted). Similarly, we review de novo whether an agency’s
complaint violates due process. Id. at 569–70 (citation
omitted).

                             III

                             A

    Regency argues it did not have fair notice of the claims
against it. The FAA’s complaint called Long a “contractor,”
and the ALJ found him to be an “employee” as defined by
FAA regulations. But this difference was regulatorily
irrelevant and thus did not violate due process.

    The APA requires an agency to timely inform persons
participating in a hearing of “the matters of fact and law
asserted.” 5 U.S.C. § 554(b)(3). FAA regulation similarly
requires the agency to “set forth the facts alleged, any
regulation allegedly violated by the respondent, and the
proposed civil penalty in sufficient detail.” 14 C.F.R.
§ 13.208(c). An agency’s complaint is construed liberally.
Donovan v. Royal Logging Co., 645 F.2d 822, 826 (9th Cir.
1981). But an agency violates due process if it “change[s]
theories in midstream without giving respondents reasonable
notice of the change.” Novartis AG v. Torrent Pharms. Ltd.,
853 F.3d 1316, 1324 (Fed. Cir. 2017) (citation omitted);
                 REGENCY AIR V. DICKSON                    9

Rodale Press, Inc. v. Fed. Trade Comm’n, 407 F.2d 1252,
1256 (D.C. Cir. 1968). Should an agency change theories,
the opposing party must have “the opportunity to present
argument under the new theory of violation,” even if the
outcome would be the same. Rodale Press, 407 F.2d
at 1257.

    Here, the FAA did not change theories midstream. Its
core allegations are simple: Long performed safety-sensitive
work, Regency did not enroll Long in its testing program,
and that failure violated 14 C.F.R. §§ 120.35 and 120.39.
The ALJ found exactly that.

    True, Long was a volunteer, not a contractor. But
contractor or not, Regency was still required to enroll Long
in its testing program. After all, air carriers must test
“employees” for drug and alcohol use, id. §§ 120.35, 120.39,
meaning any individual “hired, either directly or by
contract,” including volunteers, id. § 120.7(h), (j). Thus,
regardless of Long’s employment status, the FAA’s legal
theory remained the same: Regency had to enroll Long in its
testing program but failed to do so.

    At oral argument, Regency took a different tack, arguing
that FAA regulations do not require contractors to be tested.
Still, it still misreads the regulations. It argued that FAA
regulations do not require contractors to be tested, making
Long’s contractor status dispositive. Though the exception
in 14 C.F.R. § 120.7(i) obviates the need to test contract
employees, the FAA’s complaint did not allege facts
suggesting this narrow exception applied to Long. Nor does
the record support § 120.7(i)’s application. Regency
repeatedly argued that Long was an independent volunteer,
not a contract employee working on behalf of Paragon.
Given that the exception in § 120.7(i) was not alleged (nor
did it apply), the FAA’s legal theory relied on the general
10               REGENCY AIR V. DICKSON

rule for testing: Regency had to test Long regardless of his
contractor status. At any rate, if Regency had truly relied on
this narrow exception below, it is unclear why it argued that
Long was not a contractor.

     The record also shows that the parties did not understand
Long’s status to be dispositive. The ALJ characterized the
central issue as whether “Long [was] required to be in
[Regency]’s drug and alcohol testing pool when he
performed safety-sensitive functions” for Regency.
Regency’s counsel agreed that this statement captured the
main issue, though Long’s status went without mention.
Regency’s own opening statement also clarified that “the
evidence is going to show that Mr. Long was not contracted
for or an employee of Regency Air when he did that work.”
The FAA also noted that Long’s contractor status would not
matter. In actuality, the main issue seemed to be whether, as
the ALJ explained to Regency, “someone [could] perform
work without being paid and not tested”—i.e., whether a
volunteer performing safety-sensitive functions triggered an
air carrier’s testing obligations. And as the ALJ held, Long’s
status as a volunteer triggered Regency’s testing obligations.
Again, no change in theories.

   At the very least, a change in theory sufficient to violate
due process must turn on a dispositive allegation or claim.
Where, as here, the FAA mistakenly but irrelevantly called
Long a contractor, it did not violate due process. Instead,
Regency had adequate notice of the dispositive allegations
against it: Regency should have enrolled Long in its testing
program but failed to do so.

                              B

    Regency argues that 14 C.F.R §§ 120.35 and 120.39 are
unconstitutionally vague as to whether Geis needed to be
                    REGENCY AIR V. DICKSON                            11

enrolled in Regency’s program when already enrolled in
SoCal’s program. We disagree.

     For a regulation to survive a vagueness challenge, it
“must give a person of ordinary intelligence adequate notice
of the conduct it proscribes.” See Cal. Pac. Bank, 885 F.3d
at 571 (internal quotation mark and citation omitted). We
afford “greater tolerance” to statutes and regulations “with
civil rather than criminal penalties because the consequences
of imprecision are qualitatively less severe.” See Vill. of
Hoffman Ests. v. Flipside, Hoffman Ests., Inc., 455 U.S. 489,
498–99 (1982).

    The application of § 120.35 and § 120.39 to Geis’s
employment is clear. 3 For drug testing, § 120.35 requires an
employer to “test each of its employees who perform a
function listed in subpart E of this part in accordance with
that subpart.” 14 C.F.R. § 120.35(a). Subpart E reaffirms
this, requiring all employees doing safety-sensitive work to
“be subject to drug testing” and repeatedly placing the onus
on employers to perform that testing. Id. §§ 120.105,
120.107, 120.109. Aside from the contract employee
exception in § 120.7(i), an employer must test an employee.
And the parties do not dispute that Geis was, in fact, an
employee. Thus, Geis’s concurrent employment, while not
addressed in the regulations, unambiguously falls within the
regulations’ plain text.

    3
        When a regulation is challenged for vagueness, “the reviewing
court must assess it within the context of the particular conduct to which
it is being applied.” Cal. Pac. Bank, 885 F.3d at 571 (citation omitted).
Thus, we analyze Regency’s unconstitutional vagueness challenges to
14 C.F.R. §§ 120.35, 120.39, and 49 C.F.R. § 40.25 as applied to Geis’s
employment.
12                REGENCY AIR V. DICKSON

    Section 120.39 is worded slightly different but yields the
same conclusion. An employer cannot allow an individual
to perform a safety-sensitive function “unless that individual
is subject to testing for alcohol misuse in accordance with
the provisions of [subpart F].” Id. § 120.39(b). At first
glance, Geis seems to satisfy § 120.39—after all, he was
enrolled in SoCal’s testing program and thus “subject to
testing for alcohol misuse.” Id. The key, however, is subpart
F. Like subpart E, subpart F requires an employer to “select
and test” its employees. Id. § 120.217(c)(6); see also id.
§§ 120.203(b), 120.215(c)(7)–(8). Again, there is no
exception for concurrent employment.

     Sections 120.35 and 120.39 do not mention what to do
when an employee is concurrently employed. But this
silence does not doom the provisions as unconstitutionally
vague. Instead, the FAA chose to promulgate a general rule:
if an employee works on an air carrier’s planes, the air carrier
must enroll the employee in its testing program. The FAA
also identified only one narrow exception to this rule,
inapplicable here. Thus, Regency had to test Geis despite
his concurrent enrollment in SoCal’s program.

                               C

   Regency also argues that 49 C.F.R. § 40.25 is
unconstitutionally vague as to whether Regency had to
request Geis’s past testing records as an employee. We
again disagree.

    Section 40.25 forbids an employer from letting an
employee do safety-sensitive work for more than 30 days
unless the employer obtains or makes a good-faith effort to
obtain the employee’s records. 49 C.F.R. § 40.25(d). This
provision “applies only to employees seeking to begin
performing safety-sensitive duties for you for the first time.”
                REGENCY AIR V. DICKSON                   13

Id. § 40.25(a). The parties agree that Geis had worked on
Regency’s planes for three months before becoming a
Regency employee. So his work after January 4, 2016, was
not his “first time” working on Regency’s planes. That said,
the parties dispute when Geis began working “for” Regency.

    The circumstances of Geis’s employment show he did
not work “for” Regency until becoming a direct employee.
During the three-month period before Regency hired Geis,
he worked for SoCal. Regency contracted with SoCal for
director of maintenance services, SoCal provided those
services through Geis, Regency paid SoCal for the services,
and SoCal paid Geis. Geis did not need to be in Regency’s
program before being directly hired precisely because he
was working “on behalf of” SoCal. See 14 C.F.R. § 120.7(i).
Put differently, Geis worked for SoCal on Regency’s planes
before January 4, but Geis did not begin safety-sensitive
work for Regency until after January 4. Thus, after January
4, Regency needed to request and obtain Geis’s past testing
records. See 49 C.F.R. § 40.25.

    Relatedly, Regency contends that § 40.25’s reference to
“employee” is unconstitutionally vague. Not so. For this
chapter of the C.F.R., an “employee” is defined as “[a]ny
person who is designated in a DOT agency regulation as
subject to drug testing and/or alcohol testing.” 49 C.F.R.
§ 40.3. In other words, we are back to the FAA’s definition
of employee: someone “who is hired, either directly or by
contract” to perform safety-sensitive work. 14 C.F.R.
§ 120.7(h). Unquestionably, Geis was an “employee” of
Regency after January 4. And he was not a Regency
“employee” before that point. There was no employment
relationship between Regency and Geis before January 4; the
only contract before then was between Regency and SoCal
with no mention of Geis. Instead, Geis became an
14               REGENCY AIR V. DICKSON

“employee” for § 40.25 purposes only after Regency directly
hired him.

    In sum, § 40.25 is not unconstitutionally vague. When
an employer hires and becomes obligated to test an
employee, it must request past testing records despite the
employee’s past work on the employer’s planes in the scope
of other employment.

                             D

   Finally, Regency contends the Administrator erred by
modifying the ALJ’s penalty determination. We disagree
once again.

     The FAA has broad discretion “both to select sanctions
and to impose sanctions upon” air carriers. Roundtree v.
United States, 40 F.3d 1036, 1039 (9th Cir. 1994) (citation
omitted); see also 49 U.S.C. § 46301(d)(7)(A). The
Administrator may also “affirm, modify, or reverse the
initial decision.” 14 C.F.R. § 13.233(j); see also 49 U.S.C.
§ 46301(d)(7)(B). If the ALJ’s determination “does not
comply with Agency sanction policy,” the Administrator has
“both the authority and duty to impose the agency’s policy
on appeal” and “may reverse.” In re: Robert M. Riter, FAA
Order No. 2019-1, 2019 WL 3255008, at *3 (May 15, 2019).

    The Administrator acted within its discretion, and we see
no reason to reverse. The ALJ initially mitigated Regency’s
penalties because Geis and Long were enrolled in other
employers’ testing programs, Regency had subjected Geis to
pre-employment testing, and Geis was not part of the testing
pool for only a brief period. But as the Administrator
pointed out, these factors do not follow agency sanctions
guidance and policy. See generally FAA Compliance &
Enforcement Program, FAA Order No. 2150.3B (Oct. 1,
                 REGENCY AIR V. DICKSON                    15

2007) (as amended), superseded by FAA Order No. 2150.3C
(Sep. 18, 2018) (as amended). And Regency does not
identify any legal or factual basis for why this conclusion
was wrong. Instead, the Administrator acted well within his
discretion in modifying the ALJ’s initial determination. See
14 C.F.R. § 13.233(j); Riter, 2019 WL 3255008, at *3.

    Regency argues the FAA contradicted its own policies in
seeking sanctions in the first place or should have mitigated
them since Regency’s violations were not intentional or
reckless. But Regency does not cite or clarify what policies
it is referring to (other than citing the Administrator’s
decision, which in turn cites Regency’s administrative brief).
The FAA, however, provided its FAA Compliance and
Enforcement Program, which “articulates the FAA’s
philosophy for using various remedies” and includes
sanction guidance policies. FAA Order No. 2150.3B; see
also id. at 7-1 to 7-19.

     Under these policies, “[t]he FAA may assess civil
penalties after affording the alleged violator notice and an
opportunity for a hearing on the record before an
administrative law judge.” Id. at 6-18. The FAA retains
discretion to decide when to seek sanctions. Moreover,
recklessness and deliberateness are aggravating factors, not
prerequisites to seeking sanctions as Regency suggests. See
id. at 7-5 to 7-6; see also id. at 7-5 (“A good compliance
attitude is the norm and does not warrant a reduction in
sanction.”). Thus, the FAA acted within its discretion and
established policy in seeking and imposing sanctions against
Regency.

                             IV

   The FAA Administrator correctly held that the FAA’s
complaint did not violate due process and that 14 C.F.R.
16              REGENCY AIR V. DICKSON

§§ 120.35, 120.39, and 49 C.F.R. § 40.25 are not
unconstitutionally vague. The Administrator also acted
within his discretion to modify the ALJ’s initial penalty.

     PETITION DENIED.