February 2008

From the editors of CCH's Transportation products, here are summaries of the important recent developments in the area for the past month.  Complete coverage of these issues, and many more, appear in our print and electronic products, including: Aviation Law Reporter, Commercial Aircraft Transactions, Issues in Aviation Law and Policy, Federal Carriers Reporter, Federal Motor Carrier Safety Administration Decisions, and Motor Carrier Liability.

If you have comments or suggestions concerning the information provided or the format used, please feel free to contact me directly at aaron.broaddus@wolterskluwer.com.

Hot Topics

White House Proposes $68 Billion DOT Budget for FY 2009
Funding for safety programs, air traffic improvements, and road congestion relief are included in the White House's $68 billion Department of Transportation budget request for fiscal year 2009. Transportation Secretary Mary E. Peters said almost one-third of the budget will go toward safety programs to help make travel safer by focusing on problem areas like runway incursions and near misses in the air. The budget also provides funding to hire additional safety personnel, such as air traffic controllers. Elsewhere, the proposed budget provides $2.75 billion for the Airport Improvement Program (AIP), $1.15 billion less than the level authorized by H.R. 2881, the FAA Reauthorization Act of 2007 for FY 2009, and $765 million less than the FY 2008 enacted level of $3.515 billion. For FY 2009, the Administration slightly increased its aviation facilities and equipment program request to $2.72 billion, up from $2.46 billion in the FY 2008 request. The budget also cuts funding for the Essential Air Service (EAS) program to $50 million, a $77 million reduction from the level authorized by Congress. Approximately one-half of the 141 communities that receive EAS funding would have to be dropped from the program, according to Oberstar's Committee. On Capitol Hill, House Transportation and Infrastructure Committee Chairman James L. Oberstar (D-Minn.) reacted to the budget, saying “we got the same old, stale proposals, the same neglect of our nation's infrastructure needs.” “While this is a step in the right direction, it is not enough to meet the FAA's goal of technologically transforming the air traffic control system,” Oberstar said. The Administration's own preliminary cost estimate for NextGen is $3.246 billion, the funding level authorized by H.R. 2881, Oberstar added. Aviation Law Reports, Report Letter No. 1373, February 14, 2008.

U.S., Australia Ink Open Skies Pact
The U.S. and Australia have concluded a landmark Open Skies aviation agreement that will eliminate restrictions on U.S.-Australia air services for the carriers of both countries. Initialed on February 14, the agreement comes after three days of negotiations in Washington. Under the new agreement, air carriers from both countries will be allowed to select routes and destinations based on consumer demand, without limitations on the number of U.S. or Australian carriers that can fly between the two countries or the number of flights they can operate. The agreement also removes restrictions on capacity and pricing, and provides opportunities for cooperative marketing arrangements —including code-sharing —between U.S. and Australian carriers. Aviation Law Reports, Report Letter No. 1374, February 28, 2008.

Amtrak Implements New Security Inspection Procedures
Amtrak announced February 19 that it will begin deploying its new Amtrak Mobile Security Team to patrol stations and trains and randomly inspect passenger baggage. Amtrak noted that the new measures are not in response to any particular threat, and are being implemented in full coordination with the Department of Homeland Security.

``These new procedures will strengthen Amtrak's overall security, and they are vital in our efforts to deter, detect, and prevent a terrorist incident on the rail system,'' said Amtrak president and chief executive officer Alex Kummant.

The Mobile Security Team's squads may consist of armed specialized Amtrak police, explosives-detecting K-9 units, and armed counter-terrorism special agents in tactical uniforms. They will screen passengers, randomly inspect baggage, and patrol stations. They may also conduct sweeps through trains using the K-9 units. While passengers will have the right to refuse inspection, if they do so they will not be allowed to board the train and will be offered a ticket refund. Federal Carriers Reports, Report Letter No. 1528, February 22, 2008.

Aviation News

High Court Affirms Preemption of State Tobacco Delivery Law
The U.S. Supreme Court has held that the Federal Aviation Administration Authorization Act of 1994 (FAAAA) preempts two provisions of a Maine statute regulating and restricting the sale and delivery of tobacco products purchased via the Internet or other electronic means. The statute required licensed tobacco retailers to use only carriers that would fulfill certain consumer delivery and identification requirements, and charged carriers with the knowledge that a package contained tobacco products if it was so marked or if the shipper's name appeared on the state's list of unlicensed tobacco retailers. The High Court noted that Congress had enacted the FAAAA with preemption language copied from the Airline Deregulation Act of 1978, which bars state enforcement actions having a connection with, or reference to, carrier rates, routes, or services. By requiring carriers to offer a system of services that the market did not provide, and by freezing such services in place when carriers might wish to discontinue them, the Maine statute directly substituted its own governmental commands for competitive market forces, thereby producing the very effect that FAAAA had sought to avoid, the court said. Although the state had argued for an exception from preemption on the grounds that the statute had the public health objective of preventing underage smoking, the court held that the FAAAA does not contain a “public health” exception among its enumerated exceptions. Furthermore, the Act's legislative history did not suggest that Congress had made a firm judgment about, or even focused upon, the issue of such an exception, the court added. Finally, setting aside the statute would not seriously harm the state's efforts to prevent underage smoking because the state could act to bar all non face-to-face tobacco sales, enact other laws of general applicability, or seek appropriate federal regulation, the court concluded. Rowe v. N.H. Motor Transp. Ass'n (USSCt) 32 Avi. 16,046.

FAA Did Not Preempt Claim for Lack of “Transition Training”
The Federal Aviation Act of 1958 did not preempt a wrongful death claim involving an alleged lack of pilot “transition training,” a federal court in Minnesota ruled. The families of a pilot and passenger who were killed in the crash of a small aircraft brought a wrongful death action against the aircraft manufacturer, arguing that the manufacturer's failure to provide promised training made it responsible for the deaths. The families alleged that the manufacturer's training would have provided the pilot with procedures to engage the auto pilot, allowing the aircraft to safely pass through the weather conditions at the time of the crash. The manufacturer asserted that the families' state-law claims implicated significant federal issues and, therefore, the claims were preempted by the FAA. The court, however, found that field preemption did not exist because federal aviation regulations are intended to prevent accidents, and not to provide a remedial mechanism for individuals injured by a violation of aviation safety standards. The court also said that the FAA's savings clause, which states that federal remedies are “in addition to any other remedies provided by law,” provided additional support against a finding of field preemption. In addition, the court determined that the savings clause undermined the manufacturer's ability to demonstrate the “clear and manifest intent to preempt” necessary for a finding of conflict preemption. The court concluded that the families state tort claims remained viable despite the enactment of the FAA. Glorvigen v.Cirrus Design Corp. (DMinn) 32 Avi. 16,040.

Convention Time-Bars Third Party Indemnity, Contribution Claims
In an action for damage to an international air cargo shipment, a federal court ruled that claims by a freight forwarder against the air carrier for third-party indemnity and contribution were barred by the Montreal Convention's two-year statute of limitations. The forwarder argued that the limitations period did not apply its claims because a provision of the Convention governing “contracting carriers” subjects claims for indemnity and contribution to the time limitations of the forum in which the case is heard. However, while the provision allows a plaintiff to sue either the actual or the contracting carrier, it does not establish a separate body of rules for indemnification/contribution actions, the court ruled, adding that the provision explicitly incorporates the Convention's other provisions, including the two-year limitation period. Although the forwarder argued that application of the two-year limitations period to contribution/indemnification actions may lead to inequitable results where only one carrier is sued after or soon before the limitations period has expired, the court concluded that the intent of the drafters of the Convention and its predecessor was to promote uniformity over individual equity by creating an absolute time limitation not subject to the various tolling provisions of member states' laws. Chubb Ins. Co. of Europe S.A. v. Menlo Worldwide Forwarding, Inc. (CDCal) 32 Avi. 15,978.

Carrier's ASAP Reports Are Subject to Disclosure in Litigation
In an action brought on behalf of passengers who had been killed in the 2006 crash of Comair Flight 5191 at Lexington, Kentucky, a federal district court denied the carrier's motion for a protective order against disclosure of its Aviation Safety Action Program (ASAP) reports. According to the court, the plain language used by Congress and the Federal Aviation Administration in the relevant statute and federal aviation regulations reveals that the protection given ASAP reports is limited and simply precludes public disclosure of the information pursuant to requests made under the federal Freedom of Information Act. Disclosure in litigation was contemplated, as FAA had agreed to produce the reports pursuant to a court order, the court noted, adding that there is no provision to protect carriers from discovery requests where the information is relevant and any documents produced could be subject to a protective order. Therefore, the reports were not protected from discovery by any statutory or regulatory privilege, the court reasoned. In re Air Crash at Lexington, Ky., Aug. 27, 2006 (EDKy) 32 Avi. 15,982.

Instructor, DPE Were Not Federal Employees Under FTCA
In an action brought against the U.S. government pursuant to the Federal Tort Claims Act, a federal district court found that the representative of two passengers who had been killed in the crash of a small airplane had failed to establish that the flight instructor and the designated pilot examiner (DPE) who had certified the plane's pilot were federal employees. The plaintiff, who alleged that the instructor and DPE had been negligent in certifying the pilot, claimed that the government was responsible for the negligence. The FTCA waives the government's sovereign immunity for personal injury or death caused by the negligent or wrongful act or omission of any federal employee while acting within the scope of his office or employment. Under the FTCA, a determination of whether an individual may be considered a federal employee is the amount of control the federal government has over the individual's physical performance, the court noted. According to the evidence presented, a private firm employed the instructor, set her training schedule, assigned her students, set the fees charged for her services, and directly supervised her in the performance of her duties. The evidence also showed that the DPE was self-employed, did not have a contract with the Federal Aviation Administration to work as a DPE, set his own fees for DPE services which were paid by applicants, and did not pay a percentage of his fees to the FAA. Thus, the instructor and DPE were not federal employees and the plaintiff could not hold the federal government liable for any negligent acts they may have committed, the court concluded. Supinski v. U.S. (EDMo) 32 Avi. 15,990.

State Law Standard of Care Preempted, but Remedy Survives
In a negligence action brought against an airport and an air carrier by a student pilot who was struck and injured by the wing of a taxiing airplane while he was walking with his flight instructor, a state court ruled that the Federal Aviation Act of 1958 preempts the state law standard of care for negligence, but not the state law remedy of a negligence claim. According to the court, the FAA's comprehensive standard of care replaces state standards for pilots and flight crews because Congress recognized the need for a single, consistent means of regulating aviation safety. Nevertheless, a plaintiff may recover damages using state-law remedies, the court said. Diana v. NetJets Servs. (ConnSuperCt) 32 Avi. 16,024.

Overflights of Airport Neighbor Were Not a Compensable Taking
A change in the flight departure pattern for aircraft using a large public airport did not result in a compensable taking of an adjacent landowner's property as a result of increased overflights, according to a Connecticut trial court. The landowner argued that the overflights and their associated noise had interfered with his use, possession, and enjoyment of his property so as to constitute a taking without just compensation in violation of the U.S. and Connecticut constitutions. The court found that overflights may constitute a taking of real property, even in circumstances where aircraft overfly the property at an altitude that exceeds the federal threshold for navigable airspace in congested areas. However, the plaintiff had failed to demonstrate that his property had been economically harmed as a result of the pattern change because evidence from the defendant's appraisal of the property —which was shown to have been more credible than that presented by the plaintiff —showed that the property did not lose value as a result of any alleged taking, the court concluded. Giuliano v. State (ConnSuperCt) 32 Avi. 16,013.

Surface Transportation News

State Supreme Court Affirms Preemption of Local Rail Ordinance
The Illinois Supreme Court affirmed a ruling by a state appellate court, finding that the Federal Railroad Safety Authorization Act of 1994 (FRSA) preempted a municipal ordinance prohibiting the obstruction of a railroad-highway grade crossing by a train for more than 10 minutes, unless the train was continuously moving or unable to move due to circumstances beyond the rail carrier's control. The rail carrier was cited for violating the ordinance by blocking a highway grade crossing for 157 minutes. The carrier challenged the citation, arguing that it had not violated the ordinance because the train was stopped at the crossing for reasons beyond its control. Alternatively, the carrier argued that the ordinance was unenforceable because it was preempted by federal statute. The village asserted that the circumstances of the stop were within the control of the carrier and argued that the ordinance was not subject to preemption because the ordinance did not relate to rail safety. A state trial court agreed with the village, finding no preemption.

Upon review, the appellate court reversed the lower court's ruling, holding that the municipal ordinance was subject to federal preemption because the ordinance was an attempt by the municipality to regulate train speed and length, both of which are covered by federal safety regulations. Furthermore, it was decided that the exceptions to preemption only were available to the state, and not municipalities.

The Illinois Supreme Court agreed with the appellate court's reasonings on the preemption question, holding that the challenged ordinance constituted an unauthorized attempt by the state to regulate train speed and length. However, while it came to the same conclusion regarding the exceptions to preemption, its reasoning was different. The higher court declined to address whether the exceptions to preemption only applied to actions by a state and not a municipality, finding instead that the exceptions were not applicable because the local ordinance was incompatible with federal regulations on train speed and air brake testing, and was a burden on interstate commerce. Accordingly, the municipality's ordinance was deemed unenforceable. Village of Mundelein v. Wisconsin Central R.R. (IllSCt) CAR ¶84,529.

State Mandate for Walkways Near Yard Tracks Enforceable
An Illinois state requirement mandating that rail carriers provide walkways adjacent to yard tracks built or reconstructed after February 15, 2005, was not preempted by the Federal Railroad Safety Act (FRSA), a federal district court concluded. The state regulation was adopted to address safety concerns in rail yards where switching activities occur. Under the regulation, a rail carrier must create walkways adjacent to those portions of yard tracks constructed or reconstructed after February 15, 2005, where rail carrier employees frequently work on the ground performing switching activities.

A rail carrier operating a rail yard in Illinois challenged the walkway requirements, alleging that they were preempted by FRSA. The carrier sought an injunction barring enforcement of the law, and a declaration that the law was preempted by the FRSA. Upon review, it was determined that the Federal Railroad Administration had not issued regulations that specifically addressed the subject matter covered by the state regulation, nor did the state regulation conflict with or frustrate the goals of the FRSA. The federal regulations merely address the minimum safety standards related to track structure and roadbeds. They did not cover the entire gamut of materials, objects, or activities that may occur trackside. Since the federal regulation did not address the same subject matter, the state requirement mandating the placement of walkways adjacent to new or recently-rehabilitated yard tracks was not preempted. Norfolk S. Ry. Co. v. Box (NDIll) CAR ¶84,526.

Right of First Refusal Triggered by 100% Stock Transfer
An order issued by the Surface Transportation Board (STB), finding that the right of first refusal to repurchase a rail line acquired through a forced sale was applicable when ownership of the line was transferred through a stock sale, was affirmed by a federal court of appeals. The STB had issued a declaratory order, holding that the right of first refusal to repurchase a rail line acquired through a forced sale was applicable when ownership of the line was transferred through a sale of 100 percent of the corporation's stock in the line. The STB determined that the stock transfer was tantamount to a sale of the line in this case because the shareholders planned to fully divest their interest in the line.

The shareholders challenged the decision, arguing that the right of first refusal was not triggered because a stock transfer did not amount to a sale or abandonment of the line as required under the statute. Upon review, the appellate court ruled that the decision-finding the shareholders' transfer of 100 percent of the stock in an effort to divest themselves of their interest in the corporation's only rail asset constituted a sale of the line triggering the right of first refusal provision of the statute-was a permissible interpretation of the law. Consequently, the STB's decision was affirmed and the petition for review denied. Caddo Valley R.R. Co. v. STB (8thCir) CAR ¶84,527.

Expedited Review Not Guaranteed
A motor carrier that received a proposed conditional safety fitness rating was not entitled to a stay of the effectiveness of the rating or to an expedited review, the Federal Motor Carrier Safety Administration ruled. The carrier had been assessed a conditional safety fitness rating following a compliance review (CR) that uncovered a pattern of violations related to the filing of false duty status records. Within one day of the completion of the CR, the carrier filed a motion for an upgraded safety rating based on corrective actions taken. The agency denied the request, asserting that it could not evaluate the effectiveness of the corrective actions after only one day. The carrier challenged the denial, arguing that under the regulations it was entitled to a review within 45 days. Alternatively, the carrier requested a stay of the effectiveness of the proposed rating.

The carrier's argument relating to its claim for an expedited hearing was unsupported. The cited regulation provides that a carrier with an ``unsatisfactory'' safety rating that requests an upgrade based on corrective actions will be guaranteed an expedited review because such carriers are prohibited from operating commercial motor vehicles in interstate commerce. Carriers with conditional safety ratings do not face the same prohibition. As such, the carrier was not disadvantaged by having to wait longer than 45 days for a review of its safety rating. Furthermore, the carrier's request for a stay was declined because it was unable to show that it was likely to have prevailed on the merits of its petition, would suffer irreparable injury without the stay, the threatened injury outweighed whatever damage the stay may cause the opposing party, and the stay would not harm the public interest. Accordingly, the carrier's requests were denied. Western Express, Inc. (FMCSA) CAR ¶51,224.

Passenger Train Emergency System Rules Expanded
In an effort to improve the safety of passenger train occupants, the Federal Railroad Administration (FRA) is amending its requirements for passenger train emergency systems. The new rules will enhance existing requirements for emergency window exits and establish requirements for rescue access windows for passenger evacuation. The rulemaking also expands the application of emergency system requirements currently applicable only to passenger trains operating at speeds in excess of 125 mph (Tier II passenger trains), to passenger trains operating at speeds at or below 125 mph (Tier I passenger trains). Specifically, under the final rule, both Tier I and Tier II passenger trains must be equipped with public address and intercom systems for emergency communications, and emergency roof access for use by emergency responders. The final rule is effective April 1, 2008. Federal Carriers Reports, Report Letter No. 1527, February 12, 2008.

FRA Revises Railroad Operating Rules and Practices
A final rule addressing the human factors contributing to train accidents and railroad employee injuries has been released by the Federal Railroad Administration (FRA). The rule focuses primarily on the accountability of both railroad management and employees. Under the revised regulations, railroad management will be held to a higher degree of accountability for the administration of railroad programs related to operational tests and inspections, while supervisors and employees will be subject to greater accountability for compliance with those railroad operating rules that are responsible for approximately half of the train accidents attributed to human factors. Additionally, the requirements mandated by Emergency Order 24-which call for special handling, instruction, and testing of railroad operating rules pertaining to hand-operated main track switches in non-signaled territory-have been incorporated into the regulations. Finally, an appendix has been added to part 218 to provide guidance for remote control locomotive operations that utilize technology in aiding point protection. The revised regulations take effect April 14, 2008. Federal Carriers Reports, Report Letter No. 1528, February 22, 2008.

STB Adjusts its Procedures and Rules to Comply with Legislation
The recently-enacted Consolidated Appropriations Act, 2008, Pub. L. 110-161, 121 Stat 1844 (2007), adopted certain provisions affecting the operations of the Surface Transportation Board. The applicable provisions related to: (1) the authority of the STB to authorize certain activities associated with the operation of solid waste rail transfer facilities; and (2) filing fees for formal complaints filed under the coal rate guidelines and formal complaints involving rail maximum rates filed under the Simplified-Stand-Alone Cost methodology.

Under section 193 of the Act, STB is prohibited from authorizing certain activities at solid waste rail transfer facilities prior to receiving written assurances from the Governor, or the Governor's designee, of the State in which such activity will occur, stating that the railroad or entity operating the transfer facility has agreed to comply with State and local regulations that establish public health, safety, and environmental standards for the activities. In order to ensure compliance with this mandate, the STB said it intends to include in all pertinent agency decisions issued during the period covered by the legislation a statement substantially similar to the following:

Pursuant to the Consolidated Appropriations Act, 2008, Public Law No. 110-161, §193, 121 Stat. 1844 (2007), nothing in this decision authorizes the following activities at any solid waste rail transfer facility; Collecting, storing or transferring solid waste (including baling, crushing, compacting and shredding). The term `solid waste' is defined in section 1004 of the Solid Waste Disposal Act, 42 U.S.C. 6903.

In section 194 of the Act, a cap is set on the filing fees that the STB may collect for rate complaints proceedings. Under the provision, the filing fees for rate complaints may not exceed the amount authorized for district court civil suit filing fees under section 1914 of title 28, United States Code, which currently is set at $350. As a result of this mandate, STB has amended its user fee schedule for two types of rate complaints actions. The affected filing fees include the $178,200 fee for formal complaints filed under the coal rate guidelines and the $10,600 fee for formal complaints filed under the Simplified-Stand-Alone Cost methodology. Under the new legislation, the filing fees for both of these types of complaints are capped at $350. The revised filing fees took effect January 25, 2008. Federal Carriers Reports, Report Letter No. 1527, February 12, 2008.