On July 15, 2025, the U.S. Court of Appeals for the Third Circuit issued an opinion affirming the authority of the Federal Aviation Administration (FAA) to assess civil penalties for violations of the U.S. Hazardous Materials Regulations (HMRs).

Shippers of air cargo and airfreight forwarders are subject to FAA inspections and civil penalties by virtue of their role as “offerors” of shipments containing hazardous materials/dangerous goods (HM). Offerors of HM shipments who “knowingly” violate the HMRs can face steep civil penalties (currently $102,348.00 per violation). What’s more, the definition of “knowingly” includes not only actual knowledge but also knowledge that a “reasonable person acting in the circumstances and exercising reasonable care would have … .” 49 U.S.C. § 5123(a)(1). The FAA has long claimed authority to enforce the HMRs with respect to air shipments of HM that involve such violations. But a recent challenge has called that authority into question.

In Axalta Coating Systems, LLC v. FAA, No. 23-2376 (5th Cir. Jul. 15, 2025), a shipper of paint supplies challenged the FAA’s authority to assess civil penalties in administrative proceedings overseen by Administrative Law Judges (ALJs) that do not afford the respondent the right to a jury trial. Axalta’s argument relied chiefly on a 2024 opinion issued by U.S. Supreme Court that struck down as unconstitutional a similar (but distinct) enforcement regime for securities fraud administered by ALJs with the Securities and Exchange Commission (SEC). SEC v. Jarkesy, 603 U.S. 109 (2024).

Axalta had offered a shipment containing HM for air transportation. The shipment leaked during transit and was reported to the FAA, which assessed a civil penalty against the business. Following a series of appeals, the case made its way to the Third Circuit, which held that the FAA’s enforcement regime is sufficiently distinct from the securities-fraud enforcement regime struck down in Jarkesy and thus affirmed the civil penalty. However, one judge filed a concurrence noting that, while the panel’s opinion was correct under existing precedent (in particular, a case called Atlas Roofing Co. v. Occupational Safety & Health Review Commission, 430 U.S. 442 (1977), which the Supreme Court did not overturn in Jarkesy), the ongoing validity of that precedent has been fundamentally undermined by the reasoning in Jarkesy. The concurrence concludes with a request that the Supreme Court provide further clarity.

Thus, while the FAA’s administrative enforcement authority remains intact for now, there are several challenges to the administrative enforcement authority of various Executive-branch agencies making their way through the courts. The Supreme Court is likely to be presented with an opportunity to further clarify the impact of its holding in Jarkesy, whether for the FAA’s enforcement authority or for other federal agencies regulating transportation providers that similarly assess civil penalties without affording a right to a jury trial.