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What You Need To Know About FAA Civil Penalty Actions


In recent months we have seen the Federal Aviation Administration ("FAA") aggressively pursuing civil penalty actions against various air carriers and maintenance facilities. In some instances the penalties proposed by the FAA have been millions of dollars. And although the media has a field day each time the FAA announces proposed civil penalties, we usually don't hear anything else about the case until it is resolved with a civil penalty actually assessed against the targeted air carrier or maintenance facility. If the proposed penalty is withdrawn or if the air carrier or maintenance facility beats the charges, we rarely hear anything at all.

In this article I would like to fill in that gap in time by providing you with an overview of the processes and procedures that occur from the time the FAA proposes a civil penalty until the case is resolved.

The Civil Penalty Action


When the FAA believes a certificate holder (whether an airman, air carrier, repair station or otherwise), it may pursue enforcement action against the offending party. The action can be against the party's certificate, also known as a "Certificate Action." In this situation the FAA seeks to suspend or revoke the party's certificate. Alternatively, the FAA could seek to impose a civil penalty or fine against the party, also known as a "Civil Penalty Action."

Civil Penalty Actions are typically used against companies or entities, as opposed to individuals, that hold FAA certificates. However, the FAA will often bring a civil penalty action against an individual to avoid the six month limitation of the NTSB's stale complaint rule in a certificate action, and benefit from the longer 2 year limitation applicable to civil penalty actions. Thus, if the FAA fails to initiate a certificate action within six months of discovering an alleged violation, it will resort to a civil penalty action which allows the FAA 2 years within which to initiate the action.

The FAA determines the amount of the civil penalty using the Sanction Guidance Table in FAA Order 2150.3B, Appendix B, which provides ranges for civil penalties based upon the type and size of the certificate holder, the type of alleged violation and the number of alleged violations. If the amount of the proposed civil penalty is less than $50,000, then the FAA handles the action. However, if the proposed civil penalty is more than $50,000, then the United States Attorney's office handles prosecution of the action. (For purposes of this article we will assume a case is being handled by the FAA).

A Civil Penalty Action is initiated when the FAA serves the certificate holder with a "Notice of Proposed Civil Penalty (the "Notice"). The Notice recites the relevant facts (usually discovered by the FAA during an investigation, inspection or audit), the regulations the FAA believes the certificate holder has violated and the proposed civil penalty.

Options for Responding to the Notice


The Notice is accompanied by an explanation of options for responding to the Notice. The certificate holder has the choice of the following seven options:

  1. Pay the penalty as proposed by the FAA;

  2. Submit written information and evidence demonstrating that a violation of the regulations was not committed or that; if it was, the facts and circumstances do not warrant the proposed civil penalty. The FAA will then consider this information in determining whether a civil penalty should be assessed and the amount of any such civil penalty;

  3. Submit written information and records indicating that the certificate holder is financially unable to pay the proposed civil penalty, or showing that payment of the proposed penalty would put the certificate holder out of business;

  4. Request that a civil penalty be assessed in a specific amount less than that proposed in the Notice, or that no civil penalty be assessed and provide the reasons and support for the requested reduction. The FAA will then consider this information when it determines whether the reduced amount should be assessed. If the FAA accepts the reduced amount that constitutes the certificate holder's agreement that an Order Assessing Civil Penalty in that amount may be issued and the certificate holder waives its right to a hearing regarding the civil penalty;

  5. Request an informal conference during which the certificate holder can discuss the matter with an FAA attorney and present any information the certificate holder might otherwise have wanted to provide under options 1-4;

  6. Request that the FAA impose a civil penalty without making findings of violations, providing reasons and any supporting documentation along with the request. If the FAA accepts the request, that constitutes the certificate holder's agreement that a Compromise Order in that amount may be issued and the certificate holder waives its rights to a hearing; or

  7. Request a formal evidentiary hearing before a Department of Transportation administrative law judge ("ALJ") at which the ALJ will decide issues of fact and law and will determine whether, and in what amount, a civil penalty will be assessed against the certificate holder.

The certificate holder must respond to the FAA with one of the seven options within 30 days after receiving the Notice. If the certificate holder selects any option other than option 7 and the case settles, either the case will be dismissed, which doesn't happen very often, or an order for a reduced civil penalty will be issued, which happens frequently. If the latter, then the certificate holder simply pays the penalty and the case is closed. If the case does not settle, or if the certificate holder elects option 7, then a hearing is held before an ALJ.

The Evidentiary Hearing


Prior to the hearing, the FAA issues a complaint that contains the same factual and regulatory allegations contained in the Notice. The certificate holder then submits an answer specifically admitting or denying the allegations contained in the FAA's complaint.

The certificate holder and FAA may also engage in discovery before the hearing. Discovery allows each party to ask the other to identify witnesses and produce evidence that will be introduced at the hearing and also provides an opportunity to depose witnesses. Through discovery, the certificate holder should be able to ascertain all of the facts and evidence upon which the FAA will be relying when it presents its case to the ALJ.

At the hearing, the FAA has the burden of proving its allegations by a preponderance of reliable, probative and substantial evidence. The FAA will present witness testimony and evidence and the certificate holder has the opportunity to cross-examine the FAA's witnesses and to present witnesses and evidence on its own behalf. At the end of the hearing, the ALJ will issue a decision regarding whether a civil penalty is supported by the facts and law, and if it is, the appropriate amount.

Appeal


If either the certificate holder or the FAA is unhappy with the ALJ's decision, that party may file a notice of appeal with the "FAA administrator." Yes, the same administrator responsible for the FAA. To make matters worse, the FAA Chief Counsel's office, which also prosecutes civil penalty cases, writes the decisions for the FAA administrator. If you are thinking this, at a minimum, appears unfair and biased, you are not alone. However, such is the system established by the current regulations.

The regulations require that the FAA administrator review the record, the briefs on appeal, and the oral argument, if any, and then issue the final decision and order of the FAA administrator on appeal. The FAA administrator may (1) affirm, modify, or reverse the initial decision of the ALJ; (2) make any necessary findings; or (3) remand the case for any proceedings that the FAA administrator determines may be necessary. If either party is unsatisfied with the FAA administrator's decision, that decision can be appealed to the United States Court of Appeals pursuant to a petition for review.

Conclusion


As you can see, a lot can happen after the FAA proposes a civil penalty against a certificate holder. Knowing the process and the options available, along with the assistance of an aviation attorney, can help you respond and successfully resolve an FAA civil penalty action.

FAA Suspends Its Expunction Policy



On February 11, 2011, the FAA published a Policy Statement in which it informs airman that the FAA is suspending its policy of expunging certain records of legal enforcement actions against individuals. Up until recently, the FAA would expunge an airman's personal information from the FAA's enforcement database 5 years after the FAA's action in civil penalty and certain certificate action cases (suspension cases, but not revocation cases). However, the FAA is now suspending that policy in order to ensure compliance with recent amendments to 49 U.S.C. 44703(h),the Pilot Records Improvement Act ("PRIA").

On August 1, 2010, the Airline Safety and Federal Aviation Administration Extension Act of 2010 (the "Act") amended PRIA to now require the FAA to create a pilot records database that, among other things, will include summaries of enforcement actions in which individuals were determined to have violated federal aviation regulations. Under the Act and PRIA, Part 121 and Part 135 air carriers will be required to use this database to perform background checks on pilots before hiring them. Rather than expunging individual information after 5 years as before, under the Act the FAA must now keep these records until it receives notice that the individual is deceased.

It is unclear exactly what impact this change in policy will have. Although PRIA requires the FAA to provide this information to air carriers making hiring decisions, as a practical matter, many, if not most, air carriers' employment applications also ask some variant of the question "have you ever been subject to an enforcement action in which you were found to have violated the Federal Aviation Regulations?" Of course, this amendment may, perhaps, deter airmen from providing a false answer, or, more likely, it will reveal an airman who has, in fact, provided a false answer to that question.

With respect to airmen who are not seeking employment with an air carrier, this amendment will likely have limited effect. It is possible that this could affect an airman involved in an aircraft property or casualty lawsuit in which the enforcement information that previously would have been expunged will now be available for use in the litigation. However, given that properly drafted discovery requests in such a case (e.g. "have you ever....") will ask for that same information, the impact of the Act may have the same effect as it might on air carrier applicants.

In any event, it appears that the amendment is another example of legislation resulting in, perhaps, unintended consequences. Fortunately, the FAA will continue to expunge records of administrative actions and cases with no enforcement action, since the FAA is not required to maintain that information under PRIA. However, for an airman who has had his or her airman certificate suspended or revoked, the phrase "till death do us part" now has a new, and unfortunate, meaning

For more information about expunction under PRIA, you can read the FAA's Pilots Records Expunction Policy Frequently Asked Questions or, for a general discussion of PRIA, you can read my article What Will The FAA Say About You?

FAA Relaxes, Slightly, The Prohibition On Company Reimbursement For Part 91 Flights By Certain Officers/Employees



As you may recall, back on July 8, 2010 the FAA published a Proposed Interpretation seeking public comment regarding a proposal to modify the FAA's broad prohibition on pro-rata reimbursement for the cost of owning, operating and maintaining a company aircraft when used for routine personal travel by senior company officials and employees. After receiving comments, and in response to the National Business Aviation Association's ("NBAA") request that the FAA modify its longstanding prohibition, on December 10, 2010 the FAA issued a Modified Interpretation in which it agreed that, under certain circumstances, it would allow "a company to be reimbursed for the personal travel by an individual whose position merits such a high level of interference into his or her travel plans."

What does that mean? Well, for those limited number of employees who are so important to a company that they can be called back to work at any time upon a moment's notice, even during personal travel, then the FAA will consider their travel on the company aircraft as "within the scope of and incidental to the business" of the company operating the aircraft. However, the Modified Interpretation warns that not all personal travel will meet the conditions for reimbursement, such as "when the high-level employee or official may have personal travel plans that are unlikely to be altered or cancelled, even for compelling business reasons." By way of example, and for purposes of guidance, the FAA cites travel for a significant event, such as a wedding or funeral of a close family member, or for necessary or urgent medical treatment, as instances of personal travel that would not likely qualify for reimbursement.

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It is important to note that this interpretation applies to reimbursement under FAR 91.501(b)5 which specifically regulates "large airplanes of U.S. registry, turbojet-powered multi-engine civil airplanes of U.S. registry, and fractional ownership program aircraft of U.S. registry that are operating under FAR 91 Subpart K in operations not involving common carriage." However, companies operating other aircraft may be able to take advantage of the regulation under the NBAA's Exemption 7897, as amended. Exemption 7897, or the "Small Aircraft Exemption" as it is called by NBAA, allows NBAA Members to operate small civil airplanes and helicopters of U.S. registry under the operating rules of FARs 91.503 through 91.535.

In order to take advantage of this interpretation, the company will need to make a written determination that the flight in question was of a routine personal nature. The FAA also advises that the company should maintain a list of individuals whose position with the company require him or her to routinely change travel plans within a short time period. The company must then provide that list to the FAA upon request.

With the proper documentation, companies will be able to provide their select few executives with personal travel on the company aircraft and receive reimbursement while still operating under Part 91. Not a big move by the FAA, but certainly a move in the right direction.

 

Find aircraft for sale listings and pilot resources for U.S. airports on GlobalAir.com.

GENERAL AVIATION NEEDS A ZIPCAR OF THE AIR

Where does the general aviation industry go from here? Well, this looks to be a year of transition, from the old economy that we knew prior to 2008 to the new economy that should start to really see growth in 2012. Growth will come with a different look than it has in the past, driven by technology innovation in the market and increased globalization. The United States will no longer be alone in the drivers seat. Traditional market general aviation growth will happen in China, India and other developing economies.

Growth here in the U.S. has to come from market innovation. We need to do more than get used to it. We need to adapt and embrace it, and determine where the opportunities are for those of us in general aviation in the U.S. and in Europe.

Our company finished 2010 with a strong run to the end of December, and the first few months of 2011 look strong in aircraft charter and FBO fuel sales. Is this a sustainable trend? I hope so. My major concern is the volatility of fuel prices. We don’t know if the economy, let alone the aviation industry, can stand oil prices 30% to 50% higher than they are today.

Setting concerns aside, when I look out to 2011 and beyond, I see opportunities for general aviation to capture the traveler in a new way. The number one reason more people don’t fly general aviation aircraft is price. I have written a lot about this over the past 18 months. I’ve thought about this problem (opportunity) for many years prior, as I talk with people who use or want to use our service almost every day for the past 28 years. There are some ideas worth considering in a good book I’m reading right now called “What’s Mine is Yours: The Rise of Collaborative Consumption” by Rachel Botsman and Roo Rogers.

Wikipedia says the following about this term I had not heard of until recently:

The term collaborative consumption is used to describe the cultural and economic force away from ‘hyper-consumption’ to re-invented economic models of sharing, swapping, bartering, trading or renting that have been enabled by advances in social media and peer-to-peer online platforms

The authors propose that in order for “Collaborative Consumption” to work, four underlying principles must be present:

* Critical Mass
* Idling Capacity
* Belief in the Commons
* Trust Between Strangers

Conditions one and two definitely exist in General Aviation and the subset of Business Aviation. We sit on a fleet of underutilized aircraft (idling capacity) , many parked and not flying at all, and even the active aircraft are not used anywhere near optimum levels. Critical mass is present but not properly managed and accounted for. In the U.S. there are 17,000 aircraft available for hire in charter service. Many more aircraft could be available if demand was sufficient to put them to work. Where are they and how do they work together as a synergistic fleet to serve the market? Today the fleet doesn’t work in a synergistic way.

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The charter industry is fragmented and not optimized, but technology companies like Charter X / Avinode are making strides in providing a global distribution system for supply of aircraft availability across the fleet. The bigger problem seems to be finding the customer.

That customer is currently being pushed and shoved around by the airlines in a system that seems to become profitable only at the expense of efficiency, comfort and happiness of the traveler (the customer).  If Zappos is in the business of delivering happiness I sometimes wonder if the airline system is in the business of delivering misery.

On conditions three and four, we don’t know if there is a belief in the commons and trust between strangers in General Aviation. Are we willing to share a ride or flight, and do we trust who we are sharing with to sit next to them? The defining technology that will push us through these hurdles will be social media. I can see a day when we share a flight with others to a destination of common interest and long before we board the aircraft we know who we are flying with because we know them online. We see their Facebook profile and we are connected to them on LinkedIn. We have tweeted and texted them and maybe even used email (outdated) to connect to them, to discuss our common travel intentions.

And so our belief in the commons and trust between strangers centers on sharing a flight in a private aircraft together to safely and efficiently travel. And more than that, it will be enjoyable travel because the travel itself will have a social component to it that we don’t get when we travel on the airlines today. Traveling with old and newfound friends and business associates and family will be the new order of travel.

This is not going to happen on a large scale in 2011, but it will begin this year. By 2015 it will absolutely change travel by air in ways that most people cannot even imagine today.

Early adopters from the supply side will be those charter companies (new and established) who are not afraid to adopt new technologies and business processes to meet the new economy. As the critical mass increases and more travelers find this way of air travel, more suppliers will fill the demand.

From the demand side, those who are fed up with the current system of air travel are hungry, maybe even begging for a better solution to meet their need to travel. Social technology may discover that demand for what we have to offer far outpaces our ability to meet it with the supply where it sits today.

Eventually the airlines will have to reorder their business model when they discover that travelers don’t want to go when and where they are being forced to through the current system. It will take them a while to realize what is happening and some airlines that do understand innovation will figure it out. Many will not, due to their inflexible business models.

The next few years will be an exciting time in our industry as disruptive technology changes the way we travel. I look forward to seeing it happen and hopefully being in the midst of it.

FAA Proposes More Restrictive Interpretation Of Part 135 Flight And Rest Time Regulations

In a Notice of Proposed Interpretation published on December 23, 2010, the FAA is proposing to interpret the application of FAR 135.263 and the rest requirements of FAR 135.267(d) to a situation where an operator plans a flight that is anticipated to be completed within a 13.5-hour duty day but, unanticipated delays (e.g. late passengers, late cargo etc.) occur before the last leg of the flight, and these delays would extend the flight beyond a 14-hour duty day if the last leg is completed.

The FAA's current interpretation of these regulations, based upon legal interpretations issued in the 1990's, permits flight crewmembers to take off on flights that were scheduled to be completed within a 14-hour duty period even though circumstances beyond the crewmembers' control extended the actual duty time beyond the permissible 14-hour period. However, this interpretation is inconsistent with its current interpretation of the near identical language in
FAR 121.471(g) which would not permit the crewmembers to take off on the last leg of the flight.

The FAA's interpretation of the language of
FAR 121.471(g), which was upheld by the U.S. Court of Appeals for the DC Circuit, created an exception to pilot flight time limitations, but did not provide an exception for pilot rest requirements. In the Court of Appeals decision, the Court also stated that "[t]he substance of the rules in FAR Parts 121 and 135 is essentially the same and the rules are likewise interpreted." The FAA's interpretations of FAR 121.471(g) along with the Court of Appeals case have been known as the "Whitlow Letter line of interpretations."

According to the proposed interpretation, "[t]he FAA has determined that it is illogical that the nearly-identical regulatory language in sections 121.471(g) and 135.263(d) is interpreted in two different ways" and "the Whitlow Letter line of interpretations best reflects the FAA's current understanding of the pertinent regulatory language." As a result, under the proposed interpretation, if a flight crewmember knows at the time of departure on the last leg of the flight that he or she has not had the required rest,
FAR 135.267(d) would prohibit him or her from departing on the last leg of the flight.

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Comments to the proposed interpretation are due on or before January 24, 2011. If you have any questions regarding the proposed interpretation or would like further information, you may contact Alex Zektser, Attorney, Regulations Division, Office of Chief Counsel, Federal Aviation Administration, 800 Independence Avenue, SW., Washington, DC 20591; telephone: (202) 267- 3073; e-mail: [email protected].

This proposed interpretation could have a potentially significant impact on the operations of Part 135 on-demand air carriers. I encourage all Part 135 operators and pilots who fly for those operators to submit comments to the proposed interpretation.  Your comments are most welcome as we all learn through open dialogue.

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