February 2011

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 Pamela Maloney, Managing Editor, at pamela.maloney@wolterskluwer.com.

Hot Topics

FAA: One Billion Airline Passengers by 2021

Air travel will more than double in the next 20 years, according to the Federal Aviation Administration’s most recent annual forecast. The FAA Aerospace Forecast Fiscal Years 2011-2031 predicts that U.S. airlines will reach the one billion passengers-per-year mark by 2021; two years earlier than last year’s prediction of 2023. The aviation standard to measure air travel volume is Revenue Passenger Miles (RPM), i.e., one paying passenger traveling one mile. According to the latest forecast, RPMs are projected to more than double over the next two decades, from 787 billion in 2010, to 1.7 trillion in 2031.

In addition, the number of passengers traveling on U.S. airlines is predicted to increase by 3.5 percent from last year to 737.4 million passengers in 2011. That figure is projected to grow an average of 2.8 percent each year during the remaining forecast period to 1.3 billion by 2031. Total landings and takeoffs at FAA-towered airports are predicted to slightly decrease in 2011, and then grow at an average annual rate of 1.6 percent each year, reaching 69.4 million in 2031, the agency revealed. Aviation Law Reports, Letter No. 1446 (IntelliConnect)—No. 1446 (IRN), February 24, 2011.

DOT Initiates Review of Existing Regulations

In keeping with President Obama’s January 18 Executive Order directing federal agencies to propose or adopt regulations protecting public health, safety, and the environment, while promoting economic growth and job creation, the Department of Transportation is conducting a review of its existing regulations in order to evaluate their continued validity and determine whether they are crafted effectively to solve current problems.  E.O. 13563 mandates that federal agencies consider costs and benefits, as well as base regulations upon objective scientific evidence. As part of this review, DOT is inviting public participation in a comment process designed to help ensure that the agency has a plan for periodically analyzing existing significant rules to determine whether they should be modified, streamlined, expanded, or repealed, as well as identify specific rules that may be outmoded, ineffective, insufficient, or excessively burdensome.

At present, DOT follows a repeating 10-year plan for the review of existing regulations. In addition to the 10-year review plan, the Federal Aviation Administration undertakes a triennial process to comply with other review requirements. In keeping with the President’s initiative, DOT is seeking public input on how it should devise a preliminary plan—with a defined method and schedule—for identifying certain significant rules that may be obsolete, unnecessary, unjustified, excessively burdensome, or counterproductive. Comments might address how best to evaluate and analyze regulations in order to expand on those that work and to modify, improve, or rescind those that do not, DOT said, adding that it is particularly interested in the public's views about how well the agency’s current processes for reviewing regulations are functioning and how those processes might be expanded or otherwise adapted to meet the objectives of E.O. 13563. The Department is further interested in input about factors that should be considered in setting priorities and selecting rules for review.  Aviation Law Reports, Letter No. 1446 (IntelliConnect)—No. 1446 (IRN), February 24, 2011; Federal Carriers Reports, Letter No. 1600, February 28, 2011.

Aviation News

DBE Program Improvements Implemented

Changes to the Department of Transportation’s Disadvantaged Business Enterprise (DBE) program rules scheduled to take effect at month’s end will help economically and socially disadvantaged businesses take advantage of opportunities to participate in federally funded highway, transit, and airport projects, Transportation Secretary Ray LaHood explained, in a statement announcing the program’s expansion. The initiative also holds states and local agencies more accountable for including disadvantaged businesses in their transportation plans, according to Secretary LaHood. DOT’s DBE program helps small businesses owned and controlled by socially and economically disadvantaged individuals compete for government contracts, and necessitates that state and local transportation agencies establish goals for DBE participation.

Under the rule changes, greater accountability is required from state and local transportation agencies for including disadvantaged businesses in their spending plans, with those that fail to meet established goals for DBE participation now required to evaluate why those goals were not met and offer a plan to help meet them in the future. In addition, the final rule adjusts the personal net worth limit for DBE owners for inflation from $750,000 to $1.32 million (the previous limit was set in 1989 and had not been adjusted since).

Also added are provisions to ensure that prime contractors fulfill commitments to use DBE subcontractors, with state and local agencies required to monitor each contract to make sure that prime contractors are fulfilling their obligations and not dismissing DBE subcontractors without good cause. Further, the rule requires state and local agencies to create a plan for improving the use of small businesses, including DBEs. Another major change reduces burdens upon small businesses seeking DBE certification in more than one state, inasmuch as all states must accept DBE certifications obtained in other states, absent good cause for rejection. Finally, the rule establishes a process for resolving issues with respect to eligibility raised by states concerning out-of-state firms.

The Department indicated its intention to issue a proposed rulemaking in order to make changes in its regulation for airport concession DBEs paralleling those made in the initiative explained above. See the Filing Instructions page of this Report for the specific provisions affected by the changes. Aviation Law Reports, Letter No. 1446 (IntelliConnect)—No. 1446 (IRN), February 24, 2011.

Ops Standards Apply to Foreign Carriers, U.S. Planes Abroad

U.S. requirements governing applications by foreign air carriers and foreign individuals for operations specifications were clarified and standardized under a regulatory initiative finalized by the Federal Aviation Administration earlier this month. The action applies to foreign persons/entities operating U.S.-registered aircraft in common carriage solely outside the United States, FAA indicated, adding that the action is necessary in order to update the process for issuing operations specifications while at the same time setting a regulatory basis for current practices such as amending, terminating, or suspending operations specifications.

The rule amendments clarify and standardize the requirements for applications by foreign air carriers and foreign persons for part 129 operations specifications, and establish new standards for amendment, suspension, and termination of those operations specifications. The amendment also applies to foreign persons operating U.S.-registered aircraft in common carriage solely outside the United States. The rule changes take effect on April 11, 2011, with a compliance date of  February 10, 2012. Aviation Law Reports, Letter No. 1446 (IntelliConnect)—No. 1446 (IRN), February 24, 2011.

Improved Advanced Imaging Technology Software Debuts

As of the first of the month, the Transportation Security Administration began testing new software on its advanced imaging technology (AIT) machines that enhances privacy by eliminating passenger-specific images and instead auto-detects potential threat items and indicates their location on a generic outline of a person. The new software automatically detects potential threat items and indicates their location on a generic “human” form that will appear on a monitor attached to the AIT unit, TSA said, adding that the generic outline will be identical for all passengers. If no potential threat items are detected, an “OK” will appear on the monitor with no outline. As is the case with the current version of AIT, the areas identified as containing potential threats will require additional screening.

By eliminating the passenger-specific image associated with the current version of AIT, a separate TSA officer no longer will have to view the image in a remotely-located viewing room. Through removing this step of the process, AIT screening will become more efficient, expanding the throughput capability of the technology.

TSA worked with the Department of Homeland Security’s Science & Technology Directorate as well as private industry to develop the software, and began testing it at the TSA Systems Integration Facility in the fall of 2010. The new software is being tested at Las Vegas McCarran International Airport (LAS), and will be installed at Hartsfield-Jackson Atlanta International (ATL) and Ronald Reagan Washington National Airport (DCA) in the coming days, TSA indicated.

AIT safely screens passengers without physical contact for both metallic and non-metallic threats, including weapons and explosives. At the present time, there are nearly 500 imaging technology units at 78 airports nationwide, with additional units planned for deployment this year. The new software is being tested on millimeter wave AIT units currently in airports, with plans to test similar software on backscatter units in the future. Aviation Law Reports, Letter No. 1445 (IntelliConnect)—No. 1445 (IRN), February 10, 2011.

TSA Employees Can Vote on Union Representation

U.S. Transportation Security Administrator John Pistole issued a Determination on February 4 that provides a framework under which the agency’s ability to respond to evolving threats will be protected while at the same time allowing Transportation Security Officers (TSOs) to vote on whether or not they wish to be represented by a union for the purposes of engaging in limited, clearly defined collective bargaining on non-security employment issues only. If a union is chosen, each security officer will retain the right to choose whether or not to join the union.

According to TSA, the framework is unique in that it allows for bargaining at the national level only—while prohibiting local-level bargaining at individual airports—on certain employment issues such as shift bids, transfers, and awards. Pistole’s Determination prohibits bargaining on any topics that might affect security, such as: (1) security policies, procedures, or the deployment of security personnel/equipment; (2) pay, pensions, and any form of compensation; (3) proficiency testing; (4) job qualifications; and (5) disciplinary standards. The Determination strictly prohibits officers from striking or engaging in work slowdowns of any kind.

During TSA’s formative years, collective bargaining was prohibited, although membership in a union was not. More than 13,000 TSOs currently are paying dues to one or more labor unions, but those unions cannot bargain on behalf of the officers. Last November, the Federal Labor Relations Authority issued a decision that called for an election among TSOs to determine whether a majority of officers wished to have exclusive union representation for purposes other than collective bargaining. In that regard, Administrator Pistole’s Determination allows an election to move forward, consistent with TSA's security mission and conducted under a carefully defined framework. Aviation Law Reports, Letter No. 1445 (IntelliConnect)—No. 1445 (IRN), February 10, 2011.

No Lost Profits from Worker Deaths in WTC Property Damages

Cantor Fitzgerald & Company, a New York-based financial services firm that lost its principal office and 658 of approximately 1,000 officers/employees who worked at the firm’s World Trade Center Tower One location when the tower collapsed as a result of the September 11, 2001 terrorist attacks is not entitled to include in its sought-after property damages the lost profits resulting from the deaths of, and injuries to, the firm’s officers and employees, a New York federal court ruled.

U.S. District Judge Alvin K. Hellerstein, who has been overseeing much of the litigation stemming from the WTC collapse, found that Cantor Fitzgerald’s damages claim had been substantially inflated by the losses caused by the deaths of its employees, and had to be restated in order to eliminate damages caused thereby. The firm was entitled to claim damages that naturally and probably resulted from the losses it had sustained, which could include injuries to property and to lost profits naturally/probably flowing from the injury to its property. However, the firm could not bootstrap that entitlement into a wholesale claim of business-interruption damages not matching the corresponding duty of the alleged tortfeasor, Judge Hellerstein wrote, reasoning that, among other things, an employer cannot bring a wrongful-death action on behalf of an employee under New York law.

“No one can deny the emotional and financial hurt suffered by Cantor Fitzgerald and the families of its employees,” Judge Hellerstein said. Regardless of how artfully it pleaded its claims, however, the firm’s attempt to recover what substantively were damages flowing from the deaths of its employees was not permissible, he determined, granting Cantor Fitzgerald leave to file amended claims in order to eliminate the impermissible aspect of its asserted damages. In re September 11 Litig. (SDNY) 34 Avi. 15,749 (IntelliConnect)—34 Avi. 15,749 (IRN).

Punitive Damages Law Applies to Comair Crash Suit After All

On reconsideration, U.S. District Judge Karl S. Forester ruled that Kentucky’s punitive damages statute is applicable to a wrongful death action against Comair, Inc. arising from the August 2006 crash of Flight 5191, which ran off the runway during takeoff. Under the statute, in order to impose punitive damages upon an employer for the gross negligence of its employees, plaintiffs have to establish gross negligence by clear and convincing evidence, and prove that the employer “authorized or ratified or should have anticipated the conduct in question.”

In the circumstances at bar, the plaintiffs asserted that the carrier was liable for punitive damages under both vicarious liability for the pilots’ conduct as well as the gross negligence of carrier management, Judge Forester said. With regard to vicarious liability, the plaintiffs did not show by clear and convincing evidence that there had been similar incidents from which the carrier should have anticipated the pilots’ conduct that caused the crash at issue, he determined, adding that there also was no evidence that the carrier had authorized or ratified the pilots’ conduct. Similarly, the plaintiffs failed to present clear and convincing evidence of gross negligence on the part of carrier management such that it should be held liable for punitive damages for the conduct of its pilots. Accordingly, partial summary judgment was granted in favor of the carrier on the issue of punitive damages. In re Air Crash at Lexington, Kentucky, August 27, 2006 (EDKy) 34 Avi. 15,788 (IntelliConnect)—34 Avi. 15,788 (IRN).

Surface Transportation News

STB's Selection of Shipper's Rate Group Affirmed

The Surface Transportation Board's (STB's) selection of a comparison rate group submitted by a shipper was not arbitrary or capricious, according to a federal court of appeals. A rate reasonableness evaluation was undertaken after a shipper challenged the rates charged by a railroad for the transportation of chlorine. Under the three-benchmark method for evaluating rate reasonableness, the STB was required to select a comparison rate group. While neither comparison group put forth by the parties was a perfect fit, STB selected the shipper's group because it was more representative of the ideal comparison group.

The railroad challenged the selection, questioning the comparability of anhydrous ammonia traffic to chlorine traffic, and arguing that the heavy inclusion of anhydrous ammonia shipments skewed the demand characteristics of the comparison group. Upon review, the appellate court stated that, due to the complexity of the subject matter and the fact that the STB is the expert body designated by Congress to determine the proper method for assessing whether a rate is just and reasonable, any review of decisions related to this subject matter must be afforded substantial deference. Based on this standard, it was determined that the STB's explanations and reasonings supporting the adoption of the shipper’s comparison group were neither arbitrary nor capricious, but were an appropriate balance of the competing interests in accuracy and simplicity, which were well within its statutory authority. Thus, the petition for review was denied.  Union Pac. R.R. Co. v. STB (DCCir) Federal Carriers Cases ¶84,680.

Attorney’s Fees Limited to Claims Against HHG Carriers

A federal court of appeals affirmed a lower court’s decision holding that the recovery of attorney’s fees under the Carmack Amendment was limited to claims against household goods carriers. The shipper had sought attorney’s fees against a freight forwarder after the freight forwarder was found liable for damages to a decorative ceiling lamp incurred during interstate transportation arranged by the freight forwarder. The freight forwarder argued that it could not be liable for attorney’s fees because it was not a household goods carrier. The district court agreed with the freight forwarder, finding that the applicable provision of the statute only applied to household goods motor carriers.

The shipper appealed, arguing that the statute provided for the awarding of attorney’s fees "in a court action to resolve a dispute between a shipper of household goods and a carrier providing transportation." While the shipper was accurate in its reading of the provision, a related legislative note clearly states that any provisions related to the transportation of household goods applies only to household goods motor carriers. Based on this, the appellate panel concluded that the district court had properly held that the legislative note precluded attorney’s fees against carriers that do not meet the definition of "household goods motor carriers." Accordingly, the lower court’s decision was affirmed.  Osman v. Internat’l Freight Logistics, Ltd. (6thCir) Federal Carriers Cases ¶84,681.

PHMSA Incorporates Special Permits into Regulations

The Pipeline and Hazardous Materials Safety Administration (PHMSA) is incorporating into the existing Hazardous Materials Regulations (HMRs) certain widely used cargo tank special permits. Special permits allow a company or individual to package or ship a hazardous material in a manner that varies from the regulations as long as the level of safety achieved through the regulations is not compromised. Under the final rule, six special permits will be incorporated into the HMRs. The special permits to be included address moveable fuel storage tenders, liquid soil pesticide fumigants, non-DOT specification cargo tanks used for roadway stripes, LPG storage containers, and nurse tanks. The amendments are intended to provide wider access to the benefits of the special permits and eliminate the need for numerous renewal requests, thus reducing paperwork burdens.

The revisions take effect March 3, 2011. The regulation preamble appears at Federal Carriers Reporter ¶22,433. The updated regulations can be found at ¶7607, 8106, 8107, 8124, 8234, and 8256.

Rulemaking Would Improve Safety at Highway-Rail Crossings

The Federal Motor Carrier Safety Administration (FMCSA) and the Pipeline and Hazardous Materials Safety Administration (PHMSA) jointly have proposed to amend the Federal Motor Carrier Safety Regulations (FMCSRs) and the Hazardous Materials Regulations (HMRs) as they deal with highway-rail grade crossings. The proposal would prohibit a motor vehicle driver from entering into a highway-rail grade crossing unless there is sufficient space to drive completely through the grade crossing without stopping. This action was undertaken in response to section 112 of the Hazardous Materials Transportation Authorization Act of 1994, and is intended to reduce highway-rail crossing crashes.  Full text of the proposed rulemaking appears at Federal Carriers Reporter ¶20,222.

FRA Approves Use of Tank Cars Exceeding Weight Limits

The Federal Railroad Administration (FRA) has declared its approval of the operation of certain tank cars in hazardous materials service that exceed the gross weight on rail limitation of 263,000 pounds. The approval notice was issued pursuant to a provision of the final rule issued by the Pipeline and Hazardous Materials Safety Administration on May 14, 2010, which required the express consent of the FRA. According to the notice, railroad tank cars meeting certain specific conditions are approved by FRA to be loaded up to a gross rail load of 286,000 pounds. Full text of the notice appears at Federal Carriers Reporter ¶25,064.

Shipper's State Law Claims Preempted by Carmack

A shipper's state law claims for breach of contract and negligence were preempted by the Carmack Amendment, a federal district court in Ohio held. The carrier had been hired by the shipper to transport cargo from California to Ohio. While in transit, the goods were damaged. The shipper filed a complaint against the carrier, alleging state law claims for breach of contract and negligence. The carrier removed the action to federal court and filed a motion to dismiss the state claims, arguing that they were preempted by the Carmack Amendment. The goal of the Carmack Amendment is to implement uniform federal guidelines for the determination of a carrier's liability when damage occurs during interstate shipments. In furtherance of this goal, state laws that impose liability on carriers based on the loss of or damage to shipped goods are preempted. Since the shipper's state law claims stemmed from the movement of the goods, they were preempted by federal law. Thus, the carrier's motion to dismiss the state law claims was granted. Bally v. Freight & Shipping, Inc. (SDOhio) Federal Carriers Cases ¶84,679.