Elwell v. Bade

DAN ELWELL, Acting Administrator,Federal Aviation Administration Plaintiff, v. AASIF BADE, BRAD CABLE, TREVOR GRAY, BENJAMIN EVANS,FREDDIE MCCLURE, JOHN ROEHM, GARY SHERMAN, STEPHEN STERRETT,BRIAN TOUHY, AIRXL, LLC, EXCEL 2, LLC, EXCEL 3, LLC, EXCEL 4, LLC,CJ1, LLC, INDY BRAVO, LLC, and BRAVO II, LLC, Defendants.

Case No. 1:19-mc-00020-TWP-DLP

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

June 16, 2020

ORDER ADOPTING THE MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION AND GRANTING THE PETITION FOR ENFORCEMENT

This matter is before the Court on the Federal Aviation Administration's ("FAA") Petition for Enforcement of Administrative Subpoenas. (Filing No. 1.) Dan Elwell, Acting Administrator of the FAA, ("Elwell") filed a Petition for Enforcement of sixteen administrative subpoenas served on August 9, 2018 on Respondents Aasif Bade, Brad Cable, Trevor Gray, Benjamin Evans, Freddie McClure, John Roehm, Gary Sherman, Stephen Sterrett, Brian Tuohy, AirXL, LLC, Excel 2, LLC, Excel 3, LLC, Excel 4, LLC, CJ 1, LLC, Indy Bravo, LLC, and Bravo II, LLC (collectively, the "Respondents"). The Court referred the petition to the Magistrate Judge (Filing No. 20), who submitted a Report and Recommendation on June 28, 2019, recommending that the Court grant the FAA's Petition (Filing No. 21). Respondents timely filed an objection to the Report and Recommendation. (Filing No. 22.) For the reasons set forth below, the Court overrules the Respondents' Objection and adopts the Report and Recommendation, granting Enforcement of the Administrative Subpoenas.

I. BACKGROUND

The facts of this case are accurately described in the Magistrate Judge's Report and Recommendation, (Filing No. 21), and thus are repeated in this Entry. Since approximately 2008, Respondents have collectively operated AirXL, LLC (hereinafter "AirXL"), a private air carrier service that utilizes seven Cessna Citations jet aircrafts. In 2013, the FAA received complaints about AirXL's operations and began investigating the Respondents for potential past and continuing violations of FAA regulations. Specifically, the FAA believed that the Respondents had failed to obtain proper authorization for the air-carrier service and thereby avoided mandatory safety requirements. (Filing No. 4 at 2.)

On March 23, 2014, the FAA issued a set of administrative subpoenas to various individuals and limited liability companies ("LLCs") regarding AirXL's operations. (Filing No. 12 at 2.) The Respondents jointly responded to these subpoenas and ultimately produced over 2,000 pages of documents. (Filing No. 12 at 2-3.) On October 28, 2014, counsel for AirXL and the FAA held a meeting where the FAA raised its concerns and had a discussion with respect to AirXL's operations.

On July 26, 2017, AirXL's counsel and FAA attorney Brendan Kelly ("Kelly") met again. At the conclusion of this meeting, the FAA asked AirXL to prepare a "white paper" or memorandum addressing the inapplicability of Federal Aviation Regulation Parts 91K and 135 to AirXL's operations. (Filing No. 12.) AirXL delivered the white paper to the FAA on August 15, 2017. On October 17, 2017, the parties met again, and during this meeting attorney Kelly stated at the time the FAA could not shut AirXL down.

On December 14, 2017, the FAA issued another set of administrative subpoenas to various individuals and LLCs it believed might have information about AirXL's operations. (Filing No. 4 at 3.) Some recipients of the 2017 Subpoenas produced aircraft flight logs, flight summaries,aircraft lease agreements, pilot payrolls, and operating invoices in response. Id. The FAA took depositions of six individuals from late 2017 to early 2018, but deposed none of the Respondents.

On August 9, 2018, the FAA served a third set of administrative subpoenas to the Respondents (the "2018 Subpoenas"). The 2018 Subpoenas "required production of all documents, from January 1, 2015 to the present, in Respondents' possession related to their respective agreements associated with their use, ownership, and/or leasehold interest in the Cessna Citations under investigation." (Filing No. 4 at 5.) On August 31, 2018, the Respondents objected to the 2018 Subpoenas in their entirety and, to date, have not produced any documents in response.

The FAA, by its Acting Administrator Dan Elwell, filed a Petition for Enforcement of Administrative Subpoenas on February 27, 2019, requesting that this Court enforce the 2018 Subpoenas. (Filing No. 1.) On April 18, 2019, the Respondents filed a Motion to Quash Administrative Subpoenas, (Filing No. 12), asserting in the opening paragraph that their motion serves as a response in opposition to the FAA's Petition. Because the Motion to Quash was filed on the deadline for a response to the Petition for Enforcement, and the arguments are in direct response to the FAA's Petition, the Court will treat the Respondents' Motion as a response brief.¹ The Petitioner filed a reply brief on April 25, 2019. (Filing No. 13.)

The Respondents then attempted to file a reply brief in support of their Motion to Quash Administrative Subpoenas on May 2, 2019, (Filing No. 14); however, the Court deemed that the Motion to Quash, Filing No. 12, is a response brief, to which Elwell filed a Reply, (Filing No. 13), and therefore the Respondents' filing titled "Reply" is more appropriately considered a Surreply tothe FAA's Petition. Because the Respondents did not seek leave of court to file such a surreply, the Court will not consider it when ruling on the FAA's Petition.

Respondents' request for oral argument was referred to the Magistrate Judge and the parties presented oral argument before the Magistrate Judge on June 26, 2019. The Court also referred the Petition for Enforcement of Administrative Subpoenas to the Magistrate Judge for a Report and Recommendation. (Filing No. 20.) The Magistrate Judge filed her Report and Recommendation on June 28, 2019, recommending the Court grant the FAA's Petition for Enforcement of Administrative Subpoenas, (Filing No. 21). Thereafter, Respondents filed a timely Objection to the Report and Recommendation, asserting that the Magistrate Judge did not address the argument that the FAA's "irregular, six-year investigation is motivated by an improper purpose" and that the Magistrate Judge did not take into account the "burdensome and disruptive effect that the FAA'S abusive investigation has had on AirXL's business operations" when determining if the 2018 Subpoenas were unduly burdensome. (Filing No. 22 at 1-2.)

II. LEGAL STANDARD

A. Report and Recommendation

A district court may assign dispositive motions to a magistrate judge, in which case the magistrate judge may submit to the district judge only a report and recommended disposition, including any proposed findings of fact. Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 760 (7th Cir. 2009). See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b). "The magistrate judge's recommendation on a dispositive matter is not a final order, and the district judge makes the ultimate decision to adopt, reject, or modify it." Schur, 577 F.3d at 760. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(3). After a magistrate judge makes a report and recommendation, either party may object within fourteen days. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(2).

A motion to enforce a subpoena is generally viewed as a non-dispositive matter. E.E.O.C. v. Trinity Health Corp., 107 F. Supp. 3d 934, 936 (N.D. Ind. 2015). Where there is no pending underlying action before a court, however, the order on whether to enforce the subpoena would be dispositive of the entire matter. Id; E.E.O.C. v. Dolgencorp., No. 07 C 6672 (N.D. Ill. Apr. 15, 2008) (citing N.L.R.B. v. G. Rabine & Sons, Inc., No. 00 C 5965, 2001 WL 1772333, at *3 (N.D. Ill. Sept. 10, 2001). Therefore, the present motion is a dispositive matter, and this Court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1).

The court's review of a magistrate judge's report and recommendation on a dispositive motion is de novo. 28 U.S.C. § 363(b)(1)(B); Fed. R. Civ. P. 72(b)(3). "The court may, however, defer to those conclusions to which timely objections have not been raised by a party." Rackemann v. LISNR, Inc., No. 1:17-cv-00624-TWP-MJD, 2018 WL 4574342, at *3 (S.D. Ind. Sept. 24, 2018). "Under de novo review, the Court is free to accept, reject, or modify the recommended disposition." Directv, LLC v. Spina, No. 1:15-cv-00104-JMS-TAB, 2016 WL 3097212, at *1 (S.D. Ind. June 3, 2016). The "Court is essentially functioning as an appellate court in this context. Thus, even under de novo review, 'arguments not made before a magistrate judge are normally waived.'" Id. (quoting United States v. Melgar, 227 F.3d 1038, 1040 (7th Cir. 2000)).

B. Enforcement of Subpoenas

Subpoena enforcement proceedings are designed to be summary in nature. E.E.O.C. v. Aerotek, Inc., 815 F.3d 328, 333 (7th Cir. 2016); E.E.O.C. v. United Airlines, Inc., 287 F.3d 643, 649 (7th Cir. 2014). A district court must enforce an administrative subpoena if (a) the matter under investigation is within the authority of the issuing agency, (b) the information sought is reasonably relevant to that inquiry, and (c) the requests are not too indefinite. See United States v. Morton Salt Co., 338 U.S. 632, 652-53 (1950) (addressing a court's limited role in the enforcementof an administrative subpoena); Commodity Trend Serv., Inc. v. Commodity Futures Trading Comm'n, 233 F.3d 981, 986-87 (7th Cir. 2000) (discussing court's exercise of "only limited review" in deciding enforcement of agency subpoenas).

Under this formulation, known as the Morton Salt test, the Court may still restrict disclosure of information "where [disclosure] would impose an unreasonable or undue burden on the party from whom production is sought." Aerotek, 815 F.3d at 333. "[C]ourt assessments...