Dennis Lauterbach, Sr. v. Michael Huerta

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 2, 2016 Decided March 22, 2016
No. 15-1163
DENNIS LAUTERBACH, SR.,
PETITIONER
v.
MICHAEL P. HUERTA, ADMINISTRATOR, FEDERAL AVIATION
ADMINISTRATION AND NATIONAL TRANSPORTATION SAFETY
BOARD,
RESPONDENTS
On Petition for Review of an Order of
the National Transportation Safety Board
Jeffrey L. Zimring argued the cause for petitioner. With
him on the briefs was Frederic E. Zimring.
Casey E. Gardner, Attorney, Federal Aviation
Administration, argued the cause and filed the brief for
respondent.
Before: BROWN, PILLARD and WILKINS, Circuit Judges.
Opinion for the Court filed by Circuit Judge PILLARD.
2
PILLARD, Circuit Judge: Federally certified aircraft
mechanic and pilot Dennis Lauterbach fraudulently sold
helicopter rotor blades with maintenance records he had
altered to hide the fact that another mechanic had deemed the
blades to be unrepairable scrap. In adjacent statutory
provisions, the Aviation Act requires the Federal Aviation
Administration (FAA) permanently to revoke the pilot and
mechanic certificates of: (A) anyone criminally convicted of
violating federal law related to airplane-parts fraud or
counterfeiting; or (B) anyone who the agency finds has
engaged in conduct punishable under a law described in the
preceding subsection, whether that person has or will be
prosecuted. See 49 U.S.C. § 44726(b)(1)(A)-(B). In 2006,
before any criminal prosecution, the FAA brought
administrative charges against Lauterbach under both
subsection (B), 49 U.S.C. § 44726(b)(1)(B), and a more
flexible and general statutory certificate-revocation authority,
49 U.S.C. § 44709. The parties settled that case under the
latter provision, with the FAA revoking Lauterbach’s
mechanic’s certificate only temporarily and leaving his pilot’s
certificate intact. Later, the United States Attorney
successfully criminally prosecuted Lauterbach under 18
U.S.C. § 38(a)(1)(C) for the same fraud. That conviction
required the FAA permanently to revoke both Lauterbach’s
pilot and mechanic’s certificates under subsection (A). 49
U.S.C. § 44726(b)(1)(A).
Lauterbach petitions for review of the final order of the
National Transportation Safety Board (NTSB or the Board)
that permanently revoked his certificates based on his
criminal conviction. He contends that the FAA’s earlier
administrative action bars the FAA’s permanent revocation
order by operation of various preclusion doctrines, double
jeopardy, and due process. We disagree. Subsection (A) of
the statute plainly authorizes revocation of any airman
3
certificate after a qualifying conviction, even if the FAA
unsuccessfully pursued a prior subsection (B) administrative
action based on the events underlying the conviction.
Revocation of airman certificates in those circumstances is a
civil, remedial measure aimed at protecting public safety that
does not offend principles of preclusion, double jeopardy, or
due process. We therefore deny Lauterbach’s petition for
review.
I.
A.
The FAA issues “airman” certificates to qualifying pilots
and aircraft mechanics, among others, without which pilots
and mechanics may not work on aircrafts in air commerce.
See 49 U.S.C. §§ 40102(8), 44702-44705, 44711(a)(2)(A); 14
C.F.R. § 43.3. To promote aviation safety, the FAA requires
that certified airmen follow specific maintenance procedures
and keep detailed records of any inspection, repair, or
maintenance of aircraft and parts. See 49 U.S.C. § 44701(a),
(c); 14 C.F.R. §§ 43.9, 43.11-43.17 & App. B, D. The FAA
relies on the accuracy of those records to determine aircrafts’
airworthiness. See 47 Fed. Reg. 41076, 41078 (Sep. 16,
1982).
Congress has made it a crime to “knowingly and with the
intent to defraud . . . make[] or use[] any materially false
writing, entry, certification, document, record, data plate,
label, or electronic communication concerning any aircraft . . .
part.” 18 U.S.C. § 38(a)(1)(C). Recognizing the threat to
public safety posed by counterfeit and fraudulently
represented parts, Congress also has imposed civil sanctions
for such conduct. See discussion infra note 1. As relevant
here, subsection (A) of 49 U.S.C. § 44726(b)(1) provides that
the FAA “shall” revoke an FAA airman certificate if the FAA
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Administrator finds that its holder “was convicted in a court
of law of a violation of a law of the United States relating to
the installation, production, repair, or sale of a counterfeit or
fraudulently-represented aviation part or material.” See also
49 U.S.C. § 44711(c) (barring certain aviation employment of
individuals convicted for violating laws relating to counterfeit
or fraudulently represented aviation parts). Subsection (B) of
the same statute requires the FAA to revoke a certificate if the
Administrator determines that its holder “knowingly, and with
the intent to defraud, carried out or facilitated an activity
punishable under a law described in” subsection (A). 49
U.S.C. § 44726(b)(1)(B). Revocation under either subsection
(A) or (B) is permanent unless the former certificate holder is
acquitted, id. § 44726(e)(1), (e)(2)(B)(i), his or her conviction
is reversed, id. § 44726(e)(2)(B)(ii), or if reissuance of a
certificate will facilitate law enforcement efforts, id.
§ 44726(a)(2), (f). The FAA also has the separate, more
general authority to amend, modify, suspend, or revoke an
airman certificate if the Administrator otherwise finds that
“safety in air commerce or air transportation and the public
interest require that action.” Id. § 44709(b)(1)(A).
B.
Dennis Lauterbach is the former holder of both a
commercial pilot certificate and an aircraft mechanic
certificate. On February 14, 2006, the FAA issued an
emergency order permanently revoking Lauterbach’s pilot
and mechanic certificates (2006 Order). In the 2006 Order,
the FAA determined that Lauterbach intentionally tampered
with maintenance records for two helicopter rotor blades.
According to the order, the FAA’s investigation revealed that,
in 2005 and 2006, Lauterbach had whited out inspection
entries labeling the blades unrepairable scrap, represented that
the blades were in good shape with thousands of hours of
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useful life remaining, and sold the blades for $42,000 to an
individual who installed them on his helicopter. The buyer
was unable to balance the blades for takeoff, and subsequent
inspection revealed Lauterbach’s fraudulent documentation.
The 2006 Order permanently revoked Lauterbach’s pilot and
mechanic certificates pursuant to both the FAA’s general
statutory authority, 49 U.S.C. § 44709, and 49 U.S.C
§ 44726(b)(1)(B), concluding that Lauterbach intentionally
sold aircraft parts using fraudulent records in violation of 18
U.S.C. § 38.
While Lauterbach’s administrative appeal was pending,
the parties settled. As part of the settlement, the FAA issued
an amended order under 49 U.S.C. § 44709, revoking only
Lauterbach’s mechanic certificate—not his pilot certificate—
for one year.
Nearly five years later, a jury convicted Lauterbach of
criminal fraud in violation of 18 U.S.C. § 38 for the 2005 and
2006 sales of the helicopter rotor blades. Prompted by that
conviction, the FAA issued the administrative order required
by subsection (A), permanently revoking both Lauterbach’s
pilot certificate and his mechanic certificate (2013 Order).
The 2013 Order rested on the FAA’s determination that a jury
had found Lauterbach guilty of a violation of 18 U.S.C.
§ 38(a)(1)(C), an offense relating to the sale of fraudulently
represented aviation parts within the meaning of subsection
(A).
Lauterbach appealed the 2013 Order to the NTSB,
conceding his conviction under 18 U.S.C § 38, but contending
that the FAA’s settlement of its subsection (B) administrative
case against him in 2006 precluded it from revoking his
certificates under subsection (A). The ALJ granted
Lauterbach’s summary judgment motion on res judicata
6
grounds, concluding that there is an “identity of the cause of
action” because the 2006 proceeding and 2013 proceeding
were based on the “same nucleus of fact”—Lauterbach’s sale
of fraudulently represented aircraft parts in 2005 and 2006.
J.A. 21. On appeal to the full board, the NTSB reversed the
ALJ’s decision and reinstated the 2013 Order. The Board
concluded that the FAA was not precluded, either by res
judicata or collateral estoppel, from issuing the 2013 Order
because it involved distinct claims and issues from those set
forth in the 2006 Order. The first—under subsection (B)—
arose from the fraudulent aircraft-part sales, and the second—
under subsection (A)—arose from Lauterbach’s later
conviction of a qualifying offense. Lauterbach timely
petitioned this Court for review of the NTSB order.
II.
We review questions of law on appeal from the NTSB de
novo and must uphold the Board’s order if it is not “arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706(2)(A); see Casino
Airlines, Inc. v. Nat’l Transp. Safety Bd., 439 F.3d 715, 717
(D.C. Cir. 2006); Kratt v. Garvey, 342 F.3d 475, 480 (6th Cir.
2003). We reject Lauterbach’s contention that principles of
preclusion, double jeopardy, or due process bar the FAA’s
2013 Order, and accordingly deny the petition for review.
Under 49 U.S.C. § 44726, the FAA is required
permanently to revoke FAA certificates if the Administrator
finds that the holder of the certificate:
(A) was convicted in a court of law of a violation of
a law of the United States relating to the
installation, production, repair, or sale of a
counterfeit or fraudulently-represented aviation
part or material; or
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(B) knowingly, and with the intent to defraud,
carried out or facilitated an activity punishable
under a law described in paragraph (1)(A).
49 U.S.C. § 44726(b)(1)(A)-(B). The typical section 44726
case works one of two ways. If a prosecutor acts first and
obtains a conviction, the FAA is obligated by subsection (A)
permanently to revoke any certificates. Id. § 44726(b)(1)(A).
Alternatively, if the agency acts first and makes an
administrative determination of certain criminally punishable
fraud, subsection (B) requires permanent revocation. Id.
§ 44726(b)(1)(B). After agency action, the individual may
still be prosecuted criminally but, ordinarily, no further
revocation action is needed because any earlier revocation
under subsection (B) will have already accomplished
permanent revocation.
This case is anomalous because an FAA enforcement
attorney, on the one hand, and a prosecutor and a jury, on the
other, differed in their respective assessments of the case.
Lauterbach’s sale of fraudulent parts thus prompted a
remedial response that proceeded in two administrative steps
rather than the usual single step: (1) an agency effort to
obtain permanent revocation under subsection (B) that it
agreed to settle for a temporary revocation (the 2006
settlement); and (2) another agency order requiring permanent
revocation, this time under subsection (A) in response to a
criminal conviction years later (the 2013 Order). Lauterbach
raises no challenge to the first administrative proceeding and
subsequent criminal action. Nor does he dispute that his
conviction under 18 U.S.C. § 38 qualifies as a violation
capable of triggering revocation under section
44726(b)(1)(A). He takes issue only with the second
administrative action, in 2013.
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There is some surface appeal to Lauterbach’s argument
that the 2013 administrative proceeding unfairly gave the
FAA a second chance to accomplish what it was unable or
unwilling to do the first time: revoke Lauterbach’s
certificates permanently. Indeed, claim preclusion ordinarily
bars successive proceedings by administrative as well as
judicial tribunals where, as here, the proceedings bear the
hallmarks of adjudication. See Alaska Dep’t of Envtl.
Conservation v. EPA, 540 U.S. 461, 490 n.14 (2004);
Restatement (Second) of Judgments § 83 (1982). In such
administrative settings, as in judicial proceedings, “a
judgment on the merits in a prior suit bars a second suit
involving the same parties or their privies based on the same
cause of action,” Drake v. FAA, 291 F.3d 59, 66 (D.C. Cir.
2002) (quoting Parklane Hosiery Co. v. Shore, 439 U.S. 322,
326 n.5 (1979)), i.e., where the two actions “share the same
‘nucleus of facts,’” id. (quoting Page v. United States, 729
F.2d 818, 820 (D.C. Cir. 1984)). Thus, res judicata generally
prevents parties “from relitigating issues that were or could
have been raised” in a prior action. Id. (quoting Allen v.
McCurry, 449 U.S. 90, 94 (1980)) (emphasis omitted). But
the presumption of administrative estoppel is “properly
accorded sway only upon legislative default, applying where
Congress has failed expressly or impliedly to evince any
intention on the issue.” Astoria Fed. Sav. & Loan Ass’n v.
Solimino, 501 U.S. 104, 110 (1991); see Restatement
(Second) of Judgments § 83 cmt. a (1982).
Claim preclusion poses no barrier to the FAA fulfilling
its subsection (A) revocation obligation based on specified
types of criminal conviction even after it has proceeded
administratively under subsection (B). In subsection (A),
Congress required revocation in response to a qualifying
conviction, without more. In subsection (B), Congress
required revocation upon agency investigation and proof of
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underlying facts. The authorizations under each subsection
are separated by the disjunctive “or”; each type of substantive
determination constitutes a separate basis for revocation, even
if the underlying misconduct is the same.
The statute nowhere suggests that a determination by the
agency under subsection (B) could have any preclusive effect
on post-conviction revocation under subsection (A). That
absence is especially notable insofar as Congress expressly
contemplated the interplay of the two provisions, specifying
that an acquittal bars an administrative revocation under
subsection (B), see 49 U.S.C. § 44726(e)(1), and that an
acquittal or a reversal of a conviction also permits the agency
to reissue revoked certificates, id. § 44726(e)(2)(B).
Congress further provided that, in the case of a conviction, the
agency may not revisit “whether a person violated a law
described in paragraph (1)(A).” Id. § 44726(b)(2). In
contrast to those directions about how the different provisions
interact, nothing in the statute prevents criminal prosecution
for fraud—with its corresponding certificate revocation under
subsection (A)—after an administrative determination of
fraud.
Section 44726’s automatic post-conviction revocation
requirement makes sense in light of the statute’s protective
purpose. Congress enacted the provisions at issue as part of
the Wendell H. Ford Aviation Investment and Reform Act for
the 21st Century, Pub. L. No. 106-181, § 505(a)(1), 114 Stat.
61, 134-35 (2000), to “safeguard United States aircraft,
workers and passengers from fraudulent, defective, and
counterfeit aircraft parts,” a problem that had “grown
dramatically in recent years” and that “could cause a horrific
airplane tragedy,” even where only small defective parts were
involved. 146 Cong. Rec. S1255-01 (Mar. 8, 2000)
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(statement of Sen. Leahy).1 If accepted, Lauterbach’s
argument would allow individuals convicted of trading in
counterfeit or fraudulently represented aircraft parts to reenter
the aviation industry as certified pilots and mechanics.
Lauterbach would have us read the statute to require the
agency to countenance that result, simply because the agency
had earlier, perhaps with less investigation, come to a
different conclusion from the convicting jury. We cannot
accept that reading, and principles of preclusion do not require
us to do so.
The FAA thus permissibly initiated successive
proceedings against Lauterbach in 2006 and, in light of
Lauterbach’s intervening criminal conviction, again in 2013.
While allegations detailing Lauterbach’s fraudulent actions in
2005 and 2006 supported the initial administrative action and
settlement, the operative fact underlying the 2013 subsection
(A) claim was Lauterbach’s 2011 conviction. That conviction
had not yet occurred when the FAA issued its initial order
against Lauterbach in 2006. Because the FAA could not have
brought a subsection (A) claim in 2006, dismissal of the 2006
Order did not preclude its 2013 Order. See Drake, 291 F.3d
at 66 (holding that res judicata was unavailable where “many
of the central events underlying” the second action had “not
even taken place” when the petitioner instigated the first
action); Page, 729 F.2d at 820 (holding that, because plaintiff
“could not have asserted claims based on facts that were not
yet in existence,” res judicata was inapplicable to conduct
postdating previous adjudication).
1
See also id. (explaining that bill’s civil remedies were designed
“to prevent repeat offenders from re-entering the aircraft parts
business”); 146 Cong. Rec. S1255-01, Ex. 1 (Mar. 8, 2000)
(statement of Sen. Hatch) (explaining that bill “authorizes . . . civil
remedies to stop offenders from re-entering the business”).
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Lauterbach’s other preclusion arguments fare no better.
Collateral estoppel, or issue preclusion, does not apply
because, among other things, settlements like the one
resolving the FAA’s 2006 order “ordinarily occasion no issue
preclusion . . . unless it is clear, as it is not here, that the
parties intend their agreement to have such an effect.”
Arizona v. California, 530 U.S. 392, 414, supplemented, 531
U.S. 1 (2000) (emphasis omitted). No issues were “actually
litigated” or “actually and necessarily determined by a court
of competent jurisdiction” in 2006 so as to bar their purported
relitigation in 2013. Otherson v. Dep’t of Justice, 711 F.2d
267, 273 (D.C. Cir. 1983) (quoting Montana v. United States,
440 U.S. 147, 153 (1979)). Likewise, “[a] settlement neither
requires nor implies any judicial endorsement of either party’s
claims or theories, and thus a settlement does not provide the
prior success necessary for judicial estoppel.” Konstantinidis
v. Chen, 626 F.2d 933, 939 (D.C. Cir. 1980); cf. id.(concluding that judicial estoppel was unavailable because
“[s]ettlement approval does not signify a [Maryland Worker’s
Compensation] Commission endorsement of either party’s
position”).
Finally, Lauterbach suggests the 2006 and 2013 FAA
orders imposed multiple punishments in violation of at least
the spirit of the Fifth Amendment’s Double Jeopardy and Due
Process Clauses. As Lauterbach appears to acknowledge,
however, the protection against double jeopardy ordinarily
does not apply to civil proceedings. That protection is
inapplicable here because permanent certificate revocation
under section 44726(b)(1)(A) is not a criminal sanction
designed to punish a certificate holder. See Hudson v. United
States, 522 U.S. 93, 99 (1997) (“The Clause protects only
against the imposition of multiple criminal punishments for
the same offense . . . in successive proceedings.” (internal
citations omitted)). Revocation under subsection (A) is a civil
12
administrative measure designed to protect aviation safety
from the significant threats posed by counterfeit and
fraudulently represented aircraft parts, separate and apart from
criminal sanctions meted out in punishment for handling such
parts. See, e.g., 18 U.S.C. § 38(b); cf. Zukas v. Hinson, 124
F.3d 1407, 1412-13 (11th Cir. 1997) (deeming non-punitive
for double jeopardy purposes the permanent revocation of an
airman certificate under 49 U.S.C. § 44170(b) for a
controlled-substance conviction, because the purpose of the
statute’s revocation provision, as confirmed by legislative
history, was “remedial,” designed to “ensure air safety by
removing an unqualified pilot from the ranks of those who
hold pilot certificates”).
Lauterbach’s due process argument “is nothing more than
his double-jeopardy claim in different clothing.” Sattazahn v.
Pennsylvania, 537 U.S. 101, 116 (2003). His various claims,
which individually lack merit, are no more persuasive in
combination. Congress authorized permanent, post-
conviction revocation of airman certificates to protect aviation
safety. There is nothing fundamentally unfair about that
result.
***
Accordingly, we deny the petition for review of the
NTSB order reinstating the FAA’s permanent revocation
order under 49 U.S.C. § 44726(b)(1)(A).
So ordered.