National Power Corp. v. Federal Aviation Administration
864 F.3d 529
7th Cir.2017Background
- National Power manufactured two types of lithium‑ion battery packs (SM‑206 and 520‑libat‑2) regulated as UN 3480, class 9 hazardous materials.
- An FAA special agent inspected National Power (May 17, 2010) and found 11 air shipments (Jan–Mar 2010) that lacked required UN Section 38.3 testing or PHMSA authorization and were accompanied by shipping papers certifying compliance with ICAO packaging.
- National Power’s witness (VP Thomas Vrablik) admitted the batteries were untested and provided no documentary evidence that they fell within the UN Manual’s exemption for non‑"new" batteries; an office manager certified ICAO compliance but lacked ICAO training.
- The ALJ found multiple HMR violations and assessed $12,000; the Administrator affirmed liability, changed the legal framing for 49 C.F.R. § 173.185(f) to the 2010 (untested battery) rule, and increased the penalty to $66,000 applying 49 U.S.C. § 5123(c) and FAA Appendix C.
- National Power petitioned for review, challenging (1) the Administrator’s interpretation of "knowingly," (2) the finding of knowing violations (testing, packaging, training, emergency contact), and (3) the size of the sanction.
Issues
| Issue | National Power’s Argument | FAA/Administrator’s Argument | Held |
|---|---|---|---|
| Meaning of "knowingly" under 49 U.S.C. § 5123(a) | "Knowingly" requires intent to violate the law | Only requires knowledge of the facts giving rise to the violation; knowledge of law is required for willful violations | "Knowingly" means knowledge of facts; intent to violate law not required (Administrator affirmed) |
| Liability for offering untested batteries (49 C.F.R. § 173.185(f)) | Batteries were exempt as not "new" (similar to previously tested model) | No evidence of similarity or testing; respondent admitted batteries untested and lacked PHMSA authorization | Liability affirmed: National Power knowingly offered untested batteries without authorization |
| Packaging, training, and emergency‑contact violations (ICAO packaging, training regs, and 172.604(a)(1)) | Violations were not knowing or deliberate; typographical error for emergency number | Company was aware or should have known (reasonable‑person/inquiry standard); lack of ICAO training undermines certifications | Liability affirmed for packaging, training, and incorrect emergency contact (knowledge imputed by reasonable care) |
| Appropriateness of $66,000 penalty | Penalty arbitrary and capricious; ALJ’s $12,000 was proper | Administrator applied statutory factors, Appendix C matrix, and considered culpability, number of shipments, and lack of mitigation; within statutory range | Penalty upheld as within statutory limits and not an abuse of discretion |
Key Cases Cited
- Yetman v. Garvey, 261 F.3d 664 (7th Cir.) (standard of review for FAA administrative orders)
- Michael v. FDIC, 687 F.3d 337 (7th Cir.) (deference to agency sanction decisions absent abuse of discretion)
- United States v. Obiechie, 38 F.3d 309 (7th Cir.) (distinguishing knowledge of facts from knowledge of law)
- McLaughlin v. Richland Shoe Co., 468 U.S. 128 (U.S. Supreme Court) (interpretation of statutory scienter requirements)
- Contract Courier Servs., Inc. v. Research & Special Programs Admin., 924 F.2d 112 (7th Cir.) (inquiry/imputed‑knowledge principle)
- Monieson v. CFTC, 996 F.2d 852 (7th Cir.) (sanction must be rationally related to violations)