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My name is Drone Attorney Enrico Schaefer. Today, we are going to be talking about a press release that was issued today by the FAA, dated January 17, 2017. The headline is “FAA and SkyPan International Inc., Reach Agreement on Unmanned Aircraft Enforcement Cases.” Essentially, it is an announcement of a resolution of the very well-known and documented enforcement action against SkyPan International Inc. by the FAA about 1 1/2 – 2 years ago, I think. Which made a lot of headlines, because we were all under the Section 333 approach at that time? Of course, the common refrain from many pilots that the FAA didn’t have jurisdiction or that the FAA didn’t care about enforcement of the requirements of obtaining a Section 333 and some other information that was going on about the FAA’s enforcement attitude when it came to drones. Today is an interesting day, because it does mark the conclusion of the SkyPan saga.
So we are going to talk a little bit about the background and what happened in the SkyPan International case. The Civil Penalty letter that the FAA issued to SkyPan. We will talk a little bit about what you can do if you get violated for either not having a Remote Pilot’s Certificate or otherwise violating Part 107 as a commercial drone operator and some lessons we all should learn about the SkyPan case. That is really the main point here. SkyPan is a lesson for the drone industry and drone pilots both old and new.
Let’s jump into this. Who is SkyPan International? SkyPan was and is a company with decades of experience doing aerial photography from remote helicopters and manned helicopters doing big time projects for companies such as Durst, the Four Seasons, for our friend Mr. Trump, The Ritz Carleton’s, Mr. Silverstein, a big developer in New York, or many others.
SkyPan was a major company. SkyPan knew what it was doing when it comes to aerial photography. When drones come along they seek to integrate drones into their offering. In fact, they were using high end remote helicopters before that. They were really part of the evolution of the FAA’s movement towards drone regulations. We all know that there was a day when it was unclear whether or not the FAA was going to do much to integrate drones, whether or not commercial use of drones was unlawful, and how to go about being a drone service provider. Things have clarified in 2017. The path under Part 107 is clear. It wasn’t so clear back in the day.
So, SkyPan ended up having the FAA contacted well before it ultimately got to the subpoena and then the Civil Penalty letter they had a long engagement with the FAA. Originally, they had been cited for 65 unauthorized commercial UAS flights over New York and Chicago from March of 2012 to December of 2014. Many of those flights, 43, were in highly restricted Class B airspace in New York. The company itself had been engaged by the FAA over these flights. There had been discussion between the FAA and SkyPan. There had actually been an agreement between the FAA and SkyPan where SkyPan apparently agreed that it would not conduct anymore further commercial activities with UAV until it got a Section 333 exemption and then ultimately continued to fly. In 2013, the FAA asked a court to enforce a subpoena against SkyPan, about its New York operations, and many of those operations were actually listed right on SkyPan’s website. So it was really easy to find the base information. So the FAA sought to get the detailed information: the communication with customers, the documentation, and the invoices with the customers to see exactly what was happening. They actually obtained the evidence to establish a violation.
In 2013, the FAA gets the court involved to enforce a subpoena that SkyPan is refusing to comply with. That subpoena set forth the details that became a violation and essentially indicating that the violations had occurred a period of time. One thing that we should all understand is that FAA takes a long time to investigate an incident. Just because there is nothing in the press about FAA enforcement doesn’t mean that those actions are not going on by the 100’s or 1000’s, because it takes years to wind-up the investigation. The investigations do not become public until they are concluded. Many of the SkyPan violations were for failing to comply with the regulations. At that point, we are clear that you needed to have a Section 333 Exemption to fly for commercial purposes. They also noted that aircraft that they were using didn’t otherwise comply with the Federal Aviation regulations, so they couldn’t get under those regulations. They didn’t have their aircraft registered. They didn’t have a Certificate of Waiver of Authorization. They were charged with flying a drone in a careless and reckless manner. This is the kind of catch-all that the FAA uses when they want to cite someone. We will see what happens under Part 107 and whether or not they tend to get more specific. Under the Section 333 days, their careless and reckless operation was the primary thing that people were getting notice letters on and were getting cited for.
The FAA was really focused on the SkyPan’s flights within Class B and other sensitive and congested airspace in New York and Chicago. We certainly know from recent history that the FAA takes a risk based approach to enforcement. A minor violation is not likely to generate much more than a notice letter where as a serious violation is going to really going to get the attention of the FAA. Eventually, SkyPan did get a Civil Penalty Letter. SkyPan’s who were subpoenaed and those customers turned over the information which provided the evidence that in fact that these flights had occurred. That they were outside a Federal Aviation Regulation. The SkyPan letter was interesting. The penalty letter essentially set forth a number of violations: the failing to get ATC (Air Traffic Controller) clearance, failure to have a 2-way radio, the equipment did not have a transponder or altitude reporting equipment; the aircraft had not been registered with the FAA, didn’t have an Air Worthy Certificate, and didn’t have a COA. There were all of these things that really spun into the regulatory framework at that point, which were essentially Pre-Point Section 107 days.
SkyPan ended up with a total substantial penalty violation. I believe it was 1.9 million dollars was what was being sought by the FAA. We know that as of today that the penalty was negotiated down to $200,000 civil penalty and an agreement that SkyPan would pay an additional $150,000 if they violated any FAA regulations in the next 12 months and $150,000 more if they failed to comply with the settlement agreement. Which we do not have complete access to yet. SkyPan also agreed to work with the FAA to do some public service announcements for the next 12 months to educate drone Pilots about why the regulations are important. That in fact, the FAA does care about drone safety and enforcing the SUA Regulations under Part 107 and other Federal Aviation Regulations. SkyPan, in handling the matter was forced to deal with the FAA and probably a record penalty for drone use to date. Again, keeping in mind the drone flights dated back to 2012, 2013, and 2014 and here we are in 2017 and we are seeing a result. FAA enforcement actions take a lot of time.
What do you do if you get a Notice Letter from the FAA or worse a Civil Penalty letter from the FAA based on your drone operations? Keep in mind that a Civil Penalty is initiated and is essentially the FAA serving notice of a proposed Civil Penalty violation. It will contain all of the relevant facts that the FAA is aware of as a result of its investigation. It will cite the Regulations at issue, identify which regulations have been violated from the FAA’s point of view, and it will propose a Civil Penalty if in fact it’s a Civil Penalty letter. If it is a Notice Letter it will typically seek compliance moving forward and will ask you to follow up with the FAA.
There are several ways that you can deal with a Civil Penalty letter. You could simply pay the penalty proposed by the FAA. You could submit written information that demonstrates circumstances that hopefully mitigate the matter. You can request that the Civil Penalty in a specific amount be reduced as a result of mitigating circumstances. You could request a conference directly with the FAA attorney to present more evidence and information to them before they issue a final Civil Penalty. Finally, you can request a formal evidentiary hearing in the U.S. District Court. Typically a District Court Magistrate where the evidence will be taken a decision will be made by the District Court or the Magistrate Judge. If either of the parties in unhappy with the court decision of the District Court or the Magistrate Judge, then there could be a Notice of Appeal with the FAA Administrator. It is a written appeal. If anyone is dissatisfied with that you could try an Appeal up to the United States Court of Appeals. You, as a drone service provider, do not want to be involved with any of that. That is why complying with the rules is important.
Let’s talk a little bit about the lessons for the drone industry as a result of the SkyPan enforcement action and there are several. One, is that while the chance of getting caught for illegal drone operations is small the consequences, if you do get caught, are great. It is a risk reward analysis that you need to engage, so if you decide to fly without a particular airspace authorization or a particular waiver for commercial purposes. There is a bigger issue. You should not only be looking at it as a business, in terms of risk reward in getting of getting caught and penalty, you should be looking at it in terms of what is best for the UAS industry and what is best for drone industry is a willingness of the community to self-police and to enforce and comply with the regulations. You need to be viewed as professional drone service providers in order to differentiate yourself from the competition. You wanted to be thought of as professionals no different than doctors, accountants, lawyers, and airline pilots. Right? You want professionalism to be a watch word within the market, so that customers know that they do not want to deal with some “back alley” person who doesn’t have their permission to be a doctor. They didn’t graduate from med school and they do not have a medical license and they wanna do an operation on you. Who is going to do that? Not very many people. We want the drone industry to be same way. Where customers know only to go only to licensed and compliant drone operators.
Another lesson that we learned, unless there is serious injury or an accident you are typically going to get a chance to comply. You will get a Notice Letter from the FAA. They will engage you in a conversation in order to achieve compliance. The problem is that if you decide “I do not care if I get a Notice Letter” and you do not comply with Part 107, you are taking on a big additional risk. Once you get that Notice Letter now the stakes have gone up signifcantly. Now the next violation is going to more likely result in a civil penalty letter. You are going to lose your credibility with the FAA. You may lose your credibility in terms of getting Waivers and airspace authorizations. The consequences are much more significant than the paper upon which the Notice Letter is written. You want to avoid getting a Notice Letter at all costs and stay clean.
The third lesson is that the FAA does in fact care about compliance and safe drone flights. There is always this debate on Facebook and in other places, where you have folks saying that the FAA doesn’t care or I am never going to get caught. Those people need to be shot down and policed internally within the drone industry, because that kind of attitude is what is going to inhibit the growth of the UAV market. Do not encourage it. We need trust in the market and that trust has to come from customers. Customers will develop that trust over time as a result of professionalism.
The fourth lesson is that compliance is good for the industry. The SkyPan decision is going to get a lot of play in the press and the blogosphere and then social media. That is a good thing, because nothing scares a drone pilot more than a $200,000 fine paid by one of their competitors. Knowing that you can be fined substantially for an unlawful drone operation is important to the industry. The industry can use that on offense with those folks who do not want to comply or simply hate the FAA and therefore use that as an excuse to ignore Part 107.
That is all for today. My name is Drone Lawyer Attorney Enrico Schaefer and we will see you next time.
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