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.