March 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 Topic

High Court Affirms Preemption of State's Tobacco Delivery Law
The U.S. Supreme Court determined 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 agreed to fulfill certain consumer delivery and identification requirements, and charged carriers with knowledge that a package contained tobacco products if it was so marked or if the shipper appeared on the state's list of unlicensed tobacco retailers. A federal court of appeals had ruled that the state provisions were preempted because they expressly referenced carrier services, affected their timeliness and effectiveness, and required changes to the carrier's uniform package-processing procedures.

The state appealed the appellate panel's ruling, arguing that its statute constituted a legitimate use of its police power because the delivery of tobacco products to state residents via the mail or commercial carrier had complicated efforts to regulate tobacco sales to minors and had caused the state to lose tax revenues as a result of tax-free sales by unlicensed companies [see New Hampshire Motor Transp. Ass'n v. Rowe, CCH Federal Carriers Reporter ¶84,440].

The High Court agreed with the appellate court's conclusion that recognizing an exception for police power enactments, which the state had argued for, would swallow the rule of preemption because most state laws are enacted pursuant to this authority. The court reasoned that FAAAA's text and legislative history focused on the effect of a state's law on carriers, and not on the state's objective in passing the law. Thus, the imposition of a purpose-related limitation on FAAAA preemption would create an impermissible gap between the scope of preemption under FAAAA and the Airline Deregulation Act of 1978 that FAAAA's drafters had sought to avoid, the court said.

Pursuant to this analysis, the Court affirmed the lower court's decisions, finding that the statutory provisions were preempted because they expressly referenced carrier services and affected their timeliness and effectiveness, and because they dictated procedures for locating such packages in the delivery chain, requiring changes to the carrier's uniform package-processing procedures. Rowe v. New Hampshire Motor Transp. Ass'n (USSCt) ¶84,530.

Airman Certificate, Aircraft Registration Changes Coming . . .
Responding to concerns first raised in the FAA Drug Enforcement Assistance Act of 1988, the Federal Aviation Administration issued a final rule that institutes changes in both airman certification and aircraft registration requirements. The purpose of the amendments is to assist drug enforcement agencies by upgrading the quality of the data and documents to make them more difficult to counterfeit. Under the new rule, pilots wishing to exercise their airman certificate privileges must hold upgraded, counterfeit-resistant plastic certificates by March 31, 2010. Holders of other paper certificates —such as flight engineers and mechanics —will have until March 31, 2013, to obtain them. Student pilots are not affected. Aviation Law Reports No. 1375, March 10, 2008.

. . . as FAA Proposes Aircraft Registration Overhaul
Faced with the questionable registration status of nearly a third of the aircraft on its Civil Aviation Registry, the Federal Aviation Administration issued a notice of proposed rulemaking that would increase and maintain the accuracy of the data by assuring that aircraft owners periodically provide updated registration information. According to the agency, an estimated 104,000 of the more than 343,000 registered aircraft might no longer be eligible for registration due primarily to bad addresses, incomplete registration applications, and failure of many aircraft purchasers to apply for registration. The proposal, which responds to the concerns of law enforcement and government agencies, would provide more accurate, up-to-date aircraft registration information to all users of the Civil Aviation Registry database. Aviation Law Reports No. 1375, March 10, 2008.

Oversight of Parts Suppliers Inadequate, DOT IG Says
Neither aircraft manufacturers nor Federal Aviation Administration inspectors have provided effective oversight of suppliers, and this has allowed substandard parts to enter the aviation supply chain, according to a report released by the Department of Transportation's Inspector General (IG). The IG audit examined supplier oversight at Boeing, Bombardier/Learjet, General Electric Aircraft Engines, Rolls-Royce, Pratt & Whitney, and Airbus. “Concerns about supplier oversight are even more serious given the number of countries around the world that produce parts for U.S. aircraft manufacturers without a bilateral agreement with the United States,” the report states. Suppliers in some countries that do not hold bilateral agreements with the U.S. provide significant contributions to the production of U.S. aircraft, and “FAA has no assurance that these countries are providing adequate oversight of the operations of suppliers in their countries,” according to the report. Aviation Law Reports No. 1375, March 10, 2008.

Aviation News

FAA Issues Foreign Wet Lease Guidance
Conditions under which a foreign air carrier may provide a U.S.-certificated carrier with an aircraft and crew without running afoul of the federal regulations that generally bar such transactions are contained in a new regulatory guidance notice issued by the Federal Aviation Administration. According to the notice, such transactions are permissible if: (1) the foreign carrier has sole operational control of the flights; (2) legal and actual possession of aircraft remains with the foreign carrier; and (3) FAA and the Office of the Secretary of Transportation have determined that the operations would be in the public interest. Transactions that meet the three requirements are not leases subject to the foreign wet lease prohibition contained in the federal aviation regulations, regardless of whether the parties have characterized the transaction as a wet lease. Foreign air carriers wishing to conduct such operations are required to obtain a statement of authorization from the Department of Transportation. Aviation Law Reports No. 1375, March 10, 2008.

ADA Preempts New York Air Passenger Rights Law
The Airline Deregulation Act of 1978 expressly preempts New York State's “airline passenger bill of rights” law, a federal appeals court ruled this week. The state law requires the provision of fresh air, water, food, and bathroom access to airline passengers who have spent three hours or more aboard an aircraft confined on the ground at an airport. ADA preempts state laws and regulations related to an air carrier price, route, or service. As the appeals court noted, the U.S. Supreme Court repeatedly has emphasized the breadth of the Act's express preemption provision, and a majority of circuits that have construed air carrier “service” have held that the term encompasses matters such as boarding procedures, baggage handling, and food and drink, which are incidental to and distinct from the actual transportation of passengers. As such, requiring airlines to provide food, water, electricity, and restrooms to passengers during lengthy ground delays relates to the service of an air carrier and, therefore, falls within the express terms of ADA's preemption provision, the court reasoned. Substituting the state's commands for competitive market forces by requiring carriers to provide state-specified services would create a patchwork of state service-determining laws, rules, and regulations disfavored by the Supreme Court, the court said. Finally, because no exception may be read into ADA's preemption provision to preserve state laws protecting the public health, classification of the state law as a health and safety regulation did not shield it from ADA's preemptive force, the court concluded. Air Transp. Ass'n of Am., Inc. v. Cuomo (2dCir) 32 Avi. 16,143.

ADA Preempts State-Law False Advertising Claim
A deceptive advertising claim filed against an air carrier by a Puerto Rico government agency was expressly preempted by the Airline Deregulation Act of 1978, according to a federal district court. Noting that ADA preempts state enforcement actions having a connection with or reference to airline rates, routes, or services, the court further found that the Act has a broad preemptive effect and applies regardless of whether a state law specifically addresses the airline industry. The agency, which alleged that the carrier had deceived the public by advertising the availability of special holiday airfares, argued that it had not been attempting to regulate rates, routes, or services, but merely had been attempting to regulate the wording used in the carrier's advertising. However, the court found that ADA preempts any attempt by a state to regulate an airline's selection and design of marketing mechanisms. Thus, all state activity regarding airline advertising relates to airline rates, routes, or services and is completely preempted, the court reasoned. De Jesus v. American Airlines, Inc. (DPR) 32 Avi. 16,051.

Convention Allows Carrier's Claims Against Third-Party Defendants
In an action brought against an air carrier on behalf of certain internationally-ticketed passengers who had been killed in the crash of one of the carrier's flights, a federal court granted the carrier's motion to file an amended third-party complaint adding claims for apportionment and/or contribution against other defendants who had not been dismissed from the action. The plaintiffs argued that the amendment was futile because the Montreal Convention did not allow apportionment, and that the possibility of apportionment would prejudice settlement discussions. However, the court ruled that a carrier may not be held liable for more damages than the amount for which it is responsible, and that the Convention does not affect any right of recourse of a person liable for damages under the Convention against any other person. The court also concluded that the Convention provides that a carrier's liability may be reduced for the comparative fault of a passenger. In re Air Crash at Lexington, Ky., Aug. 27, 2006 (EDKy) 32 Avi. 16,059.

Airport's Fuel Monopoly Immune From Antitrust Action
A municipal airport commission was exempt from liability under a federal antitrust law's “state action immunity doctrine” from allegations that it had monopolized the sale of jet fuel at a public airport, a federal court ruled. In order to be entitled to immunity, the airport commission had to show that it acted pursuant to a clearly articulated and affirmatively expressed state policy to displace competition with regulation or monopoly public service, the court noted. A fixed-base operator (FBO) argued that the commission's policy barring FBOs from selling jet fuel had forced it to purchase fuel for its aircraft from the commission at a higher price than it would have paid in a truly competitive market. A state statute, which granted airport commissions general authority to operate, permitted the challenged conduct. Given the clear policy articulated in the state's enabling legislation, as well as the absence of any precedent supporting the application of a market participant exception to unilateral action, the state action immunity doctrine applied and the FBO's state and federal antitrust claims were dismissed, according to the court. Rectrix Aerodome Ctrs., Inc. v. Barnstable Mun. Airport Comm'n (DMass) 32 Avi. 16,064.

No Evidence of Carrier Negligence in Passenger's Jetway Fall
An air carrier was not negligent as asserted by a passenger who had sustained a personal injury as a result of a fall in an airport jetway, a federal court ruled. The passenger alleged that she tripped, fell, and twisted her ankle as a result of being nudged by another passenger while exiting her flight through the jetway. According to the court, the carrier owed the passenger a duty based upon the higher standard of care attendant a carrier-passenger relationship, because the passenger was in the act of disembarking the aircraft at the time of the incident, and had no choice but to exit in the manner prescribed by the carrier. However, the court found that the carrier did not breach its duty because the passenger: (1) admitted that she had not noticed anything about the condition of the jetway that she thought was dangerous or defective; (2) conceded that the carrier had displayed signs in the jetway warning of uneven surfaces; and (3) admitted that she fell only when nudged by the other passenger. As such, the passenger failed to raise a material factual issue as to whether the jetway was dangerous or defective, the court ruled. Raube v. American Airlines, Inc. (NDIll) 32 Avi. 16,138.

Surface Transportation News

Duty Under Cargo Securement Rule Applicable Only to Drivers
A negligence per se claim against a shipper arising from an alleged violation of cargo securement requirements contained in the Federal Motor Carrier Safety Regulations (FMCSRs) was dismissed by a federal district court. A commercial motor vehicle (CMV) driver, who was injured in a rollover accident resulting from improperly secured cargo shifting in a trailer, filed suit against the shipper who loaded the cargo, claiming negligence, negligence per se, and gross negligence. The shipper challenged the negligence per se claim, arguing that it was not subject to the cargo securement requirements. The court agreed, stating that the duty created under the applicable regulation applied only to the driver of the CMV, not the entity that loaded the cargo. Because the regulation was not applicable to the conduct of the shipper, the negligence per se claim could not stand. Thus, the claim was dismissed. Spence v. ESAB Group, Inc. (MDPenn) ¶84,533.

Graves Amendment Bars Claim Against Leasing Company
A motor vehicle leasing company that owned a vehicle involved in a fatal accident was exempt from liability under the Graves Amendment, according to a federal district court. The accident occurred when the driver of the leased tractor trailer failed to reduce speed to avoid a collision and rear-ended and overran a passenger vehicle. The driver and a passenger in the automobile were killed and another passenger was injured. The injured passenger and the representatives of the deceased victims filed personal injury, wrongful death, and negligence actions against the driver, his employer, the owner/lessor of the tractor trailer, and the lessee of the tractor trailer.

The owner/lessor of the tractor trailer filed a motion to dismiss, asserting that, under the Graves Amendment, it was exempt from liability. The court agreed, finding that the owner of the vehicle was in the business of leasing motor vehicles and had not engaged in any negligence or criminal wrongdoing. A claim had been made that the brakes on the vehicle had not been properly maintained, but the charge was discounted after the post-accident inspection found the brakes to be operating within acceptable limits. Under the facts presented, the claim against the lessor/owner of the tractor trailer was barred by the Amendment. Berkan v. Penske Truck Leasing Canada, Inc. (WDNY) ¶84,535.

Exemption Denied Due to Nature of Proposed Operations
The Surface Transportation Board denied a Class III rail carrier's request for an exemption to lease and operate a rail line owned by a shipper due to the nature of the carrier's intended operations. Normally, under the class exemption regulations, a Class III carrier would be exempted from the prior approval requirements if it were operating over rail property owned by a third party. However, due to a provision of the Consolidated Appropriations Act of 2008, which prohibits STB from taking any action that would allow for the collection, storage, or transfer of solid waste products outside of original shipping containers or the separation or processing of solid waste without first receiving written assurances from the Governor, or the Governor's designee, of the State in which the activity is proposed to occur, that the rail carrier has agreed to comply with state and local regulations that establish public health, safety, and environmental standards for the activity to be undertaken.

Upon review of the exemption application, it was determined that the carrier's operations would predominantly involve the transportation and transloading of solid waste in a manner not permitted under the law. Thus, pursuant to Congress' mandate, STB was required to reject the carrier's exemption request. JP Rail, Inc.-Lease and Operation Exemption-NAT Ind., Inc. (STB) ¶37,264.

Pattern of Violations Precluded Overall Satisfactory Rating
The Federal Motor Carrier Safety Administration (FMCSA) denied a motor carrier's petition for review of a conditional safety rating because the carrier failed to demonstrate that any error existed in the assignment of the overall safety rating. Initially, the carrier had been assigned an unsatisfactory safety rating following a compliance review that uncovered violations for false reports of records of duty status and for failing to conduct required random drug and alcohol tests. After a follow-up review, the safety rating was upgraded to conditional based on a determination that the carrier would meet the drug testing requirement in 2007.

In its request for review, the carrier claimed that its safety rating should have been upgraded to satisfactory but was not because the agency had focused on the carrier's hazardous materials operations during the follow-up review, rather than verifying its corrective actions in all areas. The carrier further claimed that it had requested a new compliance review without success. Based on the evidence presented, it was determined that the conditional safety rating was properly assigned. Notwithstanding the removal of the drug testing violations, the carrier still had an unsatisfactory rating, which prohibited the assignment of an overall satisfactory rating. Consequently, the carrier failed to establish any error in the assignment of its safety rating. As for the request for a new compliance review, it was within the discretion of the agency not to conduct another compliance review until enough time had passed to allow a sufficient record of operating under the new procedures to be compiled. Thus, the carrier's petition for a change in its safety fitness rating was denied. Carolina Southern, Inc. (FMCSA) ¶51,232.

TSA Adds E-2 Visa Holders to TWIC Eligibility List
The Department of Homeland Security's Transportation Security Administration (TSA) has issued a correction to a final rule implementing the Transportation Worker Identification Credential (TWIC) program. The TWIC program is intended to enhance port security by checking the backgrounds of workers before they are granted unescorted access to secure areas of vessels and maritime facilities. The rules establish guidelines for the enrollment process, usage procedures, fees, and other requirements for workers, port owners, and operators, and identify disqualifying activities. The guidelines are intended to assist the industry, government, and public to prepare for the full implementation of the TWIC program.

In the original rulemaking, TSA expanded the immigration standards to allow additional lawful nonimmigrations to apply for and hold a TWIC. In the preamble of the rule, TSA identified eight visa categories that were eligible to apply for a TWIC. However, due to an inadvertent omission, the E-2 Treaty Investor category was not included in the revised regulation as was the intent of the rulemaking. As a result, the agency has revised the affected regulation to include the missing category. The correction took effect March 12, 2008. 73 FR 13155, March 12, 2008.