March 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

Impact of Japan Quake on Air Travel As Yet Unclear

Reiterating its support of carriers’ efforts to maintain safe and efficient air links with Japan in the aftermath of the March 11 earthquake and tsunami, the International Air Transport Association issued its first assessment of the potential impact of the crisis on global air transport. According to IATA, although it is too early to assess the long-term impact of the Japanese tragedy on the global air transport industry, the structure of the Japanese air transport industry provides insight on the impact of a major slowdown in Japanese air travel expected in the short term. The $62.5 billion Japanese aviation market represents 6.5% of worldwide scheduled traffic and 10% of the industry’s revenues, IATA noted, predicting that the fortunes of the industry are not likely to improve until the effect of a reconstruction rebound is felt.

The extent to which these travel markets weaken largely will be shaped by what happens to the Japanese economy, IATA said, adding that many economists are suggesting that the economy will rebound once reconstruction begins. The length of the current downturn depends critically upon developments in the nuclear power situation, however, IATA cautioned. Japan also produces three to four percent of the global jet fuel supply and some of its refinery capacity was lost due to earthquake-caused damages. That supply restriction could lead to higher jet fuel prices, IATA said.

Meanwhile, at least as of March 18, international flight operations were continuing into and out of Japan’s major airports as normal, according to information maintained by the International Civil Aviation Organization and other United Nations-based agencies. On March 18, ICAO noted that there was no medical basis for imposing restrictions, although it said that various U.N. organizations were monitoring the situation closely and would advise of any environmental changes and their potential effects. Information available on March 18 indicated that increased levels of radiation had been detected in both passengers and cargo arriving from Japan at some airports, but they did not represent any increased health risk. CCH Aviation Law Reporter, Report Letter No. 1448 (IRN)—No. 1448 (IntelliConnect), March 24, 2011.

Aircraft Lavatory Oxygen Systems Ordered to Be Disabled

Having become aware of a security vulnerability with certain types of oxygen systems installed inside the lavatories of most transport-category airplanes, the Federal Aviation Administration issued an interim final rule temporarily authorizing variances from existing standards related to the provisioning of supplemental oxygen inside commercial aircraft lavatories. Specifically, the action mandates that certain lavatory oxygen systems be rendered inoperative, thereby creating a noncompliance with current airworthiness and operational standards. Consequently, FAA also issued a Special Federal Aviation Regulation so that affected airplanes can continue operating with the oxygen systems inoperative until the security issue is resolved.

Standing requirements necessitate that aircraft lavatories be equipped with two oxygen masks and, for airplanes flying above 30,000 feet, those masks must automatically be presented to lavatory occupants. Two masks are required inside a lavatory to address the situation where one person may be assisting another, such as an adult with a small child. Lavatory oxygen systems generally are very similar to the systems provided for passenger and flight attendant use in the main cabin.

A two- to four-year regulatory process to restore the affected oxygen systems installed inside the lavatories of most transport-category planes to their full operational capability is likely, FAA indicated. During this period, the slight increase in the safety risk to a small number of individuals from inoperable lavatory oxygen systems is outweighed by the elimination of the greater security risk that prompted the original requirement to disable the lavatory supplemental oxygen system, the agency indicated. Nonetheless, FAA said that it is aggressively pursuing design solutions that will eliminate the previously identified security concerns with lavatory oxygen systems and restore oxygen to the lavatories in an expeditious manner. Further rulemaking will consider the need for changes to type certification standards and incorporation into the U.S. commercial airliner fleet via changes to operating rules, FAA advised.

The interim rule took effect on March 8, 2011, and will remain in effect until further notice. Full text of the affected provisions appears at ¶4499, 6750z, and 7731s. CCH Aviation Law Reporter, Report Letter No. 1448 (IRN)—No. 1448 (IntelliConnect), March 24, 2011.

Aviation News

Aircraft Accident Rate Is Lowest in History, IATA Reveals

Last year’s accident rate for Western-built jet aircraft was the lowest in aviation history, according to aviation safety performance metrics gathered by the International Air Transport Association. The 2010 global accident rate (as measured in hull losses per million flights of Western-built jet aircraft) was 0.61, IATA said, noting that the figure essentially is equal to one accident for every 1.6 million flights: a significant improvement of the 0.71 (i.e., one accident for 1.4 million flights) rate recorded in 2009. The 2010 rate was just below 2006’s rate of 0.65 and, as compared to 10 years ago, the accident rate has been cut 42% from the rate recorded in 2001, IATA revealed.

In absolute numbers, 2010 saw the following results:

• 2.4 billion people flew safely on 36.8 million flights (28.4 million jet, 8.4 million turboprop);

• 17 hull-loss accidents involving Western-built jet aircraft, as compared to 19 in 2009;

• 94 accidents (all aircraft types, Eastern- and Western-built), as compared to 90 in 2009;

• 23 fatal accidents (all aircraft types), as compared to 18 in 2009;

• 786 fatalities, as compared to 685 in 2009.

IATA member airlines outperformed the industry average with a Western-built jet hull loss rate of 0.25, the Association said, noting that this rate is equal to one accident for every four million flights and largely is the result of the IATA Operational Safety Audit (IOSA), which became a condition of IATA membership as of April 1, 2009. All 234 IATA member airlines are now on the IOSA registry, which is open to all airlines and currently consists of over 350 carriers.

Significant regional differences are evident in the Western-built jet hull-loss accident rate, however, IATA found, emphasizing that there still is room for improvement. Specifically:

• North America (0.10), Europe (0.45), North Asia (0.34), and the Commonwealth of Independent States (0.0) performed better than the global average of 0.61;

• Asia-Pacific was higher than the global average at 0.80 in 2010 and about the same from the previous year (0.86);

• The Middle East and North Africa region saw its accident rate fall significantly to 0.72 (compared to 3.32 in 2009) with only one accident involving a carrier from the region;

• Latin America and the Caribbean reported a higher accident rate of 1.87 with four airlines from the region involved in accidents, as compared with an 0.0 accident rate in 2009; and

• Africa had an accident rate of 7.41, which was lower than the 2009 rate of 9.94.

While showing improvement, Africa once again has the worst rate in the world, IATA commented, noting that there were four Western-built jet hull losses with African carriers in 2010. African carriers are 2% of global traffic, but 23% of global western-built jet hull losses, the Association said. “Flying must be equally safe in all parts of the world,” IATA Director General and CEO Giovanni Bisignani asserted, adding that an accident rate in Africa that is over 12 times the global average is not acceptable. Observing that IATA’s African carriers had performed significantly better than non-IATA airlines in the region, Bisignani encouraged all governments in the region to make use of the IOSA tool to boost the region’s performance. CCH Aviation Law Reporter, Report Letter No. 1447 (IRN)—No. 1447 (IntelliConnect), March 10, 2011.

Crewmember Management Initiative Takes Effect Soon

A Federal Aviation Administration final rule requiring non-scheduled charter airlines and air taxis to train pilots and flight attendants in Crew Resource Management (CRM) takes effect soon. As previously reported [see CCH Aviation Law Reports No. 1444, January 27, 2011], CRM is a well-established concept that helps reduce human error in commercial aviation by teaching pilots, flight attendants, and other aviation workers to act as a team. Carriers affected by the new standards are required to establish initial and recurrent CRM training for crewmembers within two years of the rule's March 22, 2011 effective date. The training has to address the captain's authority; intra-crew communications; teamwork; managing workload, time, fatigue, and stress; and decision-making skills.

CRM training focuses on the interactions among personnel—including pilots, flight attendants, operations personnel, mechanics, air traffic controllers, and flight service stations. This training in communications and teamwork can help prevent errors such as runway incursions, misinterpreting information from air traffic controllers, crewmembers' loss of situational awareness, and failure to fully prepare for takeoff or landing. FAA has required CRM training for air carriers operating larger airplanes since December 1995. See ¶8129, 8130, and 8151.  CCH Aviation Law Reporter, Report Letter No. 1447 (IRN)—No. 1447 (IntelliConnect), March 10, 2011.

Love Field Gate Limits, Demolition Was “Taking,” Claims Court Holds

The Wright Amendment Reform Act of 2006 (WARA) effected a per se, physical taking of six passenger gates at Dallas Love Field Airport leased and subleased by two limited partnerships in contravention of the Fifth Amendment to the U.S. Constitution, for which the federal government was liable to pay just compensation, a federal claims court ruled. WARA, which repealed the Wright Amendment to the International Air Transportation Competition Act of 1979 after a period of eight years, also mandated that the city of Dallas reduce the number of gates available for passenger air service at Love Field Airport to no more than 20 and that the portion of the airport terminal containing the additional gates be demolished. Pursuant to WARA, the city of Dallas began proceedings to acquire the Love Field subleases, ultimately leading to the eviction of the partnerships and demolition of the affected portion of the terminal.

Contrary to the government’s assertion that no physical taking had occurred because the United States had not acquired the airport facilities and lease rights at issue, the court held that the partnerships had alleged a legally cognizable legislative taking arising from Congress’ prohibition of the sole economic use of their leasehold property and that WARA deprived them of the ability to exclude persons on the date that it was enacted. Ergo, as a threshold issue, the partnerships’ takings claim was ripe for adjudication at the time they filed their complaint, the court said.

In addition, the court found it abundantly clear that the partnerships possessed a valid property interest; at the time that WARA was enacted, they had the exclusive right to use, rent, alter, renovate, and lease space within the terminal building. Furthermore, the partnerships sufficiently alleged that the government had appropriated their ownership in the affected leaseholds, and that a physical taking had occurred because WARA required the physical demolition of the affected portion of the terminal. The fact that Congress chose Dallas as its agent to demolish the gates rather than assign the responsibility to the Federal Aviation Administration or any other federal entity did not relieve the government of its takings liability, the court reasoned, noting that the city of Dallas could not have instituted direct condemnation proceedings and demolished the gates without the authority granted to it under WARA. Thus, the partnerships sufficiently alleged that WARA extinguished their right to exclude Dallas, which was acting as an agent of the federal government, from demolishing the affected portion of the terminal. Accordingly, the partnerships were entitled to partial summary judgment based upon their physical takings theory, the court concluded.  Love Terminal Partners v. U.S. (FedCl) 34 Avi. 15,832 (IRN)—34 Avi. 15,832 (IntelliConnect).

Rastafarian Removed from Flight Failed to Establish Discrimination

A passenger who had been forcibly removed from an oversold flight from Tortola, British Virgin Islands, to Antigua, could not maintain a discrimination claim in U.S. court against the airline, a Caribbean air carrier, the federal court in the U.S. Virgin Islands ruled. The passenger, a dark-skinned West Indian who was a Rastafarian with dreadlocks, presented no evidence that he had been discriminated against by the carrier or its employees based upon his race, origin, or beliefs. Rather, it was apparent that carrier employees had applied neutral selection criteria to remove those passengers whose flights could most easily be rescheduled, the court held.

More importantly, even if the passenger had presented any evidence of discrimination, there was no legal basis by which he could recover in a U.S. court for discrimination suffered in another country by agents of a foreign airline. Recovery for personal injury suffered aboard an aircraft or in the course of any of the operations of embarking or disembarking in foreign territory is governed exclusively by the Montreal Convention and its predecessor, the Warsaw Convention, which preempts discrimination claims. Therefore, even if the passenger’s complaint were construed as having stated a cause of action under the Warsaw Convention, his discrimination claim still failed because he could not show that the alleged discrimination constituted an “accident” or that he had sustained “bodily injury” as a result of that accident.

In the case at bar, the passenger’s seat was not available to him because it was occupied by another individual. He was bumped from the flight and asked to take a later flight; neither of which qualified as “accidents” under the Warsaw Convention because neither occurrence was unusual or unexpected. Moreover, the passenger did not suffer a compensable injury because the bumping incident had not caused his injuries. Instead, his allegedly bruised and swollen wrists had been caused by having been handcuffed by an off-duty police officer on the tarmac at the airport where he was removed from the flight. Accordingly, the carrier was entitled to summary judgment on the passenger’s claim, the court concluded.  Sewer v. LIAT (1974) Ltd. (DVI) 34 Avi. 15,828 (IRN)—34 Avi. 15,828 (IntelliConnect).

Aircraft-Owning Firm Was Not “Air Transport Undertaking”

Claims under the Montreal Convention on behalf of passengers who had perished in the crash of an aircraft owned by a company were dismissed for lack of subject matter jurisdiction by a Puerto Rico federal court. The court deemed the Convention inapplicable to the company, which was not engaged in the business of transporting passengers for hire.

The decedents had not paid to be transported from the Dominican Republic to Puerto Rico, the court observed. Instead, they had been transported as a favor for a friend of one of the company’s owners, and the company/owner had paid for all of the flight’s costs and fees. In addition, the court found no dispute that the company had operated under Part 91 of the Federal Aviation Regulations, which governs flight operations conducted for personal use. Pursuant to the owner’s testimony, the company had been created to own two aircraft used for private flights to transport both him and his father to the Dominican Republic, where the latter owned or remodeled properties.

Moreover, the owner testified that the planes had not been used for commercial purposes; i.e., they only had transported friends and family, and not business-related individuals such as investors or bankers, the court stated, adding that the company was not certified under Part 135 at the time of the accident and had not charged any passengers for transportation. Therefore, at the time of the accident, the company was not operating as an “air transport undertaking” as specified in the Convention’s applicability provision, the court concluded.  Lavergne v. ATIS Corp. (DPR) 34 Avi. 15,894 (IRN)—34 Avi. 15,894 (IntelliConnect).

Surface Transportation News

PHMSA Adopts Texting Ban for Drivers Hauling Hazmat

Following the lead of the Federal Motor Carrier Safety Administration, the Pipeline and Hazardous Materials Safety Administration (PHMSA) amended its regulations to prohibit the use of electronic devices by interstate truck drivers operating commercial motor vehicles containing a quantity of hazardous materials requiring placarding or carrying any quantity of a select agent or toxin identified in the federal regulations. The final rule is intended to improve health and safety by reducing the prevalence of distracted driving-related crashes, fatalities, and injuries involving drivers of commercial motor vehicles.

The updated regulations take effect on March 30, 2011. The regulation preamble appears at ¶22,434.  CCH Federal Carriers Reporter, Report Letter No. 1601, March 11, 2011.

Rules to Improve Safety of Hazmat Shipments Issued

Under a final rule issued by the Pipeline and Hazardous Materials Safety Administration (PHMSA), safety inspectors will have greater authority to ensure the security of hazardous materials in the stream of commerce. The new rule, which implements authority granted by Congress, allows inspectors to investigate shipments of hazardous materials during transport and take tougher enforcement action against companies shipping hazmat in an unsafe manner.

The new authority allows Department inspectors to close down shipping companies with poor safety records. It also specifically authorizes inspectors to take immediate action when there is a significant safety problem with a package in transit. This includes ordering restrictions, bans, or immediate recalls of faulty packages. With these new provisions, inspectors will be able to temporarily detain and inspect packages that may pose a serious threat to life, property, or the environment.

Department inspectors also will be able to immediately open packages even if a request to open is refused. However, if a particular package is detained, the rest of the shipment may continue in transit. The new rules apply to U.S. Department of Transportation inspectors in PHMSA, as well as the Federal Aviation Administration, Federal Motor Carrier Safety Administration, and Federal Railroad Administration. The final rule will become effective on May 2, 2011. The regulation preamble appears at ¶22,435. CCH Federal Carriers Reporter, Report Letter No. 1601, March 11, 2011.

Notification Systems for Highway-Rail Crossings Proposed

The Federal Railroad Administration (FRA) published a proposed rulemaking that would make it easier for the public to report unsafe conditions at highway-rail grade crossings. The proposal would mandate that railroads establish toll-free telephone numbers to allow the public to report malfunctioning highway-rail grade crossing warning signals, disabled vehicles blocking crossings, or any other unsafe conditions at a crossing. The Emergency Notification Systems would require railroads to post a toll-free telephone number and the Department’s National Crossing Inventory identification number at every highway-rail crossing and explicitly authorized pathway grade crossing. Based on the National Crossing Inventory data from the end of December 2009, the proposed rule would affect 211,401 highway-rail and pathway grade crossings, as well as 594 railroads.

Under the proposed rule, once a report is received, the railroad would be required to warn all trains authorized to operate through the affected crossing, inform local law enforcement, and either investigate the report itself or request that the railroad with maintenance responsibility for the crossing investigate the report. If the report is substantiated, the railroad with maintenance responsibility for the crossing would be required to take certain actions to remedy the condition found. Full text of the proposal appears at ¶20,227. CCH Federal Carriers Reporter, Report Letter No. 1602, March 25, 2011.

FMCSA Proposes Establishment of New System of Records

The Federal Motor Carrier Safety Administration (FMCSA) has proposed to establish a new system of records under the Privacy Act of 1974. The new system is called the “Medical Exemption Program” and is intended to support the paper-based Federal Vision Exemption Program (FVEP), the paper-based Federal Diabetes Exemption Program (FDEP), and the web-based Med-Ex application. The new program will: (1) provide CMV drivers with the option of applying for a vision exemption electronically in order to expedite the process; (2) allow FMCSA to process and manage all vision and diabetes exemption applications sent electronically or via mail; and (3) archive all vision and diabetes exemption program records. The new system took effect on March 24, 2011. CCH Federal Carriers Reporter, Report Letter No. 1601, March 11, 2011.

Carrier Not Entitled to Judgment on Damage Claims

A motor carrier involved in the shipment of medical equipment that was damaged during transport was not entitled to summary judgment because genuine issues of material fact surrounding the carrier’s alleged limitation of liability existed, a federal district court determined. The shipper, Toshiba American Medical Systems (TAMS), hired Comtrans, Ltd. to coordinate the movement of its medical equipment from California to Illinois. Since Comtrans was not a licensed interstate motor carrier, its affiliate, Alternative Carrier Source, Inc. (ACS), arranged for Atlas Van Lines, Inc. (Atlas) to transport the goods. Atlas and ACS entered into a contract whereby Atlas’ liability would be limited to $0.60 per pound, unless the shipper specifically requested a different level of liability coverage. TAMS had no input in the selection of Atlas and had no contact with the carrier. The goods were damaged while in transit. As a result, the shipper’s insurer, acting as a subrogee, brought suit against Atlas.

The suit was based on Carmack liability and sought over $1 million in damages. The carrier filed a motion for summary judgment, claiming that its liability was limited under the transportation agreement to $0.60 per pound. The shipper challenged the carrier’s assertion, arguing that the transportation agreement between ACS and Atlas was not controlling. Furthermore, the shipper claimed that even if the agreement was applicable, it had not been given an opportunity to choose the level of liability coverage, nor had it agreed to the asserted limitation of liability. The carrier countered, arguing that the shipper was bound by the terms of the agreement entered into by the company it had hired to arrange for the transportation of the property. While this has been true in other cases where the shipper has agreed to a limitation of liability with the initial carrier and has given explicit authority to the initial carrier to enter into downstream limitation of liability agreements on its behalf, there is no evidence that either of these things occurred in this case. Thus, a genuine issue of material fact existed relative to whether the carrier had limited its liability in conformance with the Carmack Amendment. Consequently, summary judgment was not warranted. Nipponkoa Ins. Co., Ltd. v. Atlas Van Lines (SDInd) CCH Federal Carriers Cases ¶84,682.

Lease Did Not Violate Truth-in-Leasing Requirements

A motor carrier’s lease did not violate federal truth-in-leasing regulations by having failed to disclose actual carrier profits and costs associated with variable rate fees charged to lessors, a federal court of appeals concluded. A group of owner-operators who leased their equipment and driving services to a motor carrier that hauled freight in interstate commerce sued the carrier, alleging that its leases had violated the federal truth-in-leasing regulations because they had not disclosed the actual profits earned and costs related to fees charged against the lessors. A federal district court ruled in favor of the carrier, finding that the carrier only was required to disclose information and provide documentation sufficient to allow the lessor to determine in advance what its final costs would be.

Upon review, an appellate panel affirmed the lower court's decision regarding the disclosure of profits and costs. Moreover, it held that the settlement statement provided by the carrier to the owner-operators satisfied the documentation requirements contained in the regulations. As to the issue of damages, the appeals court agreed that the owner-operators had to prove actual damages, which they failed to do. Thus, the lower court’s decision was affirmed. OOIDA v. Swift Transp. Co., Inc. (9thCir) CCH Federal Carriers Cases ¶84,683.