FAA Settles Skypan Case
Landmark FAA UAS Enforcement Case
Literally minutes before the Obama Administration was completed the FAA issued a settlement of the landmark FAA UAS enforcement case against SkyPan. The initial demand for almost $2,000,000 was reduced to basically $200,000. That deflation of the civil penalty suggests that elements of the initial case (facts and/or law?) were not as strong as originally averred. The press release gives no hints as to the reason for the reduction; it does not even recite the standard line that the “respondent displayed great compliance disposition.” Perhaps most tellingly, the announcement does not include any quote from the Secretary or the Administrator.
Fourteen months ago, the FAA issued a clarion warning about illegal UAS operations. It was issued in the midst of, or because of, a blogosphere in which many “expert” commentators alleged that the Administrator had neither the authority nor the capability to enforce its drone “rules”. The chosen instrument for that message was a $1,900,000 proposed civil penalty against SkyPan International, Inc. of Chicago. The FAA press release said:
“Between March 21, 2012, and Dec. 15, 2014, SkyPan conducted 65 unauthorized operations in some of our most congested airspace and heavily populated cities, violating airspace regulations and various operating rules, the FAA alleges. These operations were illegal and not without risk.
The FAA alleges that the company conducted 65 unauthorized commercial UAS flights over various locations in New York City and Chicago between March 21, 2012 and Dec. 15, 2014. The flights involved aerial photography. Of those, 43 flew in the highly restricted New York Class B airspace.”
Today, that landmark, deterrent case was settled about 1/10th of the original demand . The FAA press release is written by the Administrator’s communications organization in very neutral terms.
The UAS community will likely disparage the settlement with its frequent claim that the FAA’s jurisdiction then was at best ephemeral. Some might even find fault with the Chicago company’s failure to contest the FAA’s inadequate legal basis and even the facts.
As with all compromises, the closure of the SkyPan case reflects a balancing and prioritization of the interests of both sides.
First and foremost, FAA Chief Counsel, Reginald C. Govan, did not put the agency’s legal basis at risk. His opposing counsel, Gregory S. Walden, occupied the same office at 800 Independence before, is a well-respected lawyer and has substantial resources at his law firm.
If SkyPan decided to take the sanction to court, there was the prospect of a federal judge finding the legal basis insufficient. Though Govan’s litigating team may have placed a low likelihood of such an outcome, an adverse decision would be devastating to the FAA’s nascent efforts to regulate this burgeoning industry. While federal judges are considered to be of a high level of legal ability, no one could place the possibility of a negative decision at zero. If SkyPan won, the consequences would have carried beyond this company.
Conversely, the company would have to pay Mr. Walden’s firm’s legal fees, not insubstantial, while Counsel Govan’s litigators, Department of Justice attorneys, are funded by tax dollars. Further, an adverse decision would result in a very large civil penalty, bad publicity and perhaps a finding of violation (could impact requests for future FAA authorities)–all of which would be most damaging to the company.
There is considerable significance to the compromise CP to be paid by SkyPan. The agency’s historic policy was premised on issuing and collecting these penalties as a means of incentivizing future compliant behavior by others subject to these rules. Here is that policy articulated in FAA Order 2150.3c, Ch. 2, ¶3 Compliance and Enforcement Policy f (2) stated
Purposes. FAA enforcement personnel take compliance and enforcement action to prevent future actions that would violate the regulations (for example, immediate corrective action after counseling or a letter of correction; cease and desist orders; injunctions). They also take enforcement actions for remedial purposes (for example, administrative remedial training; immediate corrective action and comprehensive fixes under the voluntary disclosure reporting programs; certificate suspension pending demonstration of qualifications; or revocation for lack of qualification or competency). They also take enforcement actions to deter future violations by the subject of the enforcement action and those similarly situated (for example, punitive certificate actions or civil penalties).
However, this “punishment” tactic is no longer the prime method of seeking compliance; the current philosophy seeks to reduce risks by working together through SMS and diminishing the preference for sanctions. The new safety management system has not yet been applied to UASs; so the settlement’s reduction of the CP is not grounded on the new Order 8300.373.
Consequently, the FAA’s substantial reduction of the proposed CP from almost $2M to $200,000 must reflect that SkyPan’s arguments have some merit.
In summary, the FAA avoids the potential of a devastating loss and SkyPan promises to comply without having to pay the King’s Ransom of $1,900,000!
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