May 2007

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.

Aviation News

In-Flight Ban on Cell Phone Use to Remain, FCC Decides
The Federal Communications Commission (FCC) has decided to maintain its existing in-flight ban on the use of cellular telephones, although it may revisit the issue at a later date, the agency announced on April 3. Under current rules, cellular phones must be turned off once an aircraft leaves the ground in order to avoid interfering with cellular network systems on the ground. The use of cellular phones and certain other portable electronic devices also is banned to prevent interference with aircraft navigation and communication systems. Although FCC issued a Notice of Proposed Rulemaking in December 2004, to examine the existing rules, comments filed in response to the proposal provided “insufficient technical information” on whether cellular phone use during flights may cause harmful interference to terrestrial networks, according to the agency. If “appropriate” technical data is available in the future, the issue may be reconsidered, FCC said.

Rosenker Calls for Action on Runway Incursions
National Transportation Safety Board Chairman Mark V. Rosenker told a gathering of airport executives that prompt action is needed to prevent potentially catastrophic accidents on the nation's runways. Speaking at a conference on new developments in airport technology, jointly hosted by the American Association of Airport Executives and the Federal Aviation Administration, in Atlantic City, NJ, Rosenker noted that the worst accident in aviation history was a runway collision that cost 583 lives, and that the number of serious runway incursions continues to climb. Several recent near-collisions were avoided only “through flight crew actions sometimes bordering on the heroic —along with a lot of luck. That is not good enough,” Rosenker said, adding that airport surface operations present some of the most challenging situations for pilots and controllers, and in many cases leave the least room for error.

DC-Area GA Provider Reimbursement Available Soon
Fixed-base general aviation operators and providers of general aviation ground support services at five metropolitan Washington, DC-area airports soon will be eligible for reimbursement of financial losses stemming from the airports' closures following the September 11, 2001 terrorist attacks. As reported earlier, $17 million has been made available to reimburse FBOs and certain other service providers for their direct and incremental financial losses due to federal government actions taken in the wake of 9/11. The five affected airports are Ronald Reagan Washington National Airport, College Park Airport, Potomac Airfield, Washington Executive/Hyde Field, and Washington South Capitol Street Heliport. The final rule, which adds a new Part 331 to Title 14, Code of Federal Regulations, takes effect on May 9. Various provisions establish eligibility requirements and application procedures for those who may qualify for assistance, and an Appendix provides a complete application form with instructions.

DOT IG: Consider Mandating Airlines' Customer Commitments
In light of problems customers continue to face with airline customer service, Congress may want to consider making existing voluntary customer service commitments mandatory for all carriers, Department of Transportation Inspector General Calvin L. Scovel III told the House Transportation Committee on April 20. While it is too early to tell what the summer months will hold, the picture in 2007 so far shows the number of delayed flights is on the rise and delays are somewhat longer in duration, Scovel said, adding that flight cancellations and extended ground delays also have increased. Scovel noted, however, that airports, DOT, and the Federal Aviation Administration can take certain actions immediately, without prompting by Congress. For example, airlines that have not done so should implement quality assurance and performance measurement systems and conduct internal audits of their compliance with the voluntary Airline Customer Service Commitment provisions.

Cargo Claim Properly Denied Where Loss Topped Value Limit
An air cargo carrier's liability for the loss of a shipment of valuable watches during interstate transportation was properly limited by the terms of the parties' contract of carriage, a federal appeals court ruled in an unpublished opinion. The shipment was insured for a declared value of the maximum insurance amount offered by the carrier, which was less than the watches' actual value. The carrier's tariff and rate/service guide bar shipments having a value that exceeds the maximum insurance amount, and therefore, the carrier refused the shipper's claim for the watches' actual value. Although the shipper argued that the carrier had waived its limitation on liability for the lost shipment, the court found no evidence of an agreement by the parties indicating an intent to waive. Furthermore, there was no evidence that the carrier knew that the shipment had been worth more than the maximum insurance amount at the time of shipment, since the shipper had declared only the maximum insurance amount. Consequently, the carrier's acceptance of the package and the insurance fee could not evince the intent necessary to waive the contractual provision barring the shipment, the court concluded. EIJ, Inc. v. United Parcel Serv., Inc. (9thCir) 31 Avi. 18,685.

FAA Preempts State Standards of Care, but Not Remedies
The Federal Aviation Act of 1958 (FAA) preempts common law negligence claims brought against an air carrier by individuals who had suffered personal injuries and property damage when one of the carrier's aircraft crashed into their homes, a federal court ruled. Consistent with its overall purpose of uniformly regulating air safety, the FAA and its corresponding regulations set out a general standard of care of the aviation industry, supplemented by an array of specific safety standards, the court noted, holding that the Act preempts common law negligence standards. However, the court added that the FAA's “savings clause” preserves plaintiffs' common law remedies for their injuries because the Act was intended only to add to existing common law remedies and not to supplant them. Thus, despite federal preemption of common law negligence standards, the plaintiffs would be entitled to pursue the breadth of common law remedies available under the applicable state law were they able to prove that the carrier's negligent conduct as measured by FAA standards had caused their injuries, the court concluded. Aldana v. Air East Airways, Inc. (DConn) 31 Avi. 18,645.

Convention Did Not Preempt Claims by Passenger Injured at Airport
The Warsaw Convention did not preempt state law claims against an air carrier by an international passenger who had been injured on an escalator while moving between gates at a U.S. airport, a federal court ruled. Although the Convention governs accidents that take place in the course of any of the operations of embarking or disembarking an international flight, there must be a tight tie between the accident and the physical activity of embarking or disembarking the aircraft, the court noted. Because the accident had occurred during the passenger's movement between gates, the activity was not sufficiently close in either space or time to the actual physical activity of getting on the aircraft to be considered part of the operations of embarking or disembarking for the purposes of the Convention, the court reasoned. Dick v. American Airlines, Inc. (DMass) 31 Avi. 18,636.

Ticket Counter Altercation Action Not Preempted
The Warsaw Convention did not preempt a claim for personal injuries allegedly suffered during an airport layover by a passenger who was traveling between Aruba and the U.S. Virgin Islands, a territorial court ruled. The passenger argued that she suffered emotional distress as a result of an altercation with an airport ticket agent who had placed her on standby when her connecting flight was cancelled. While an air carrier is liable under the Convention for a passenger's bodily injury in an accident that occurred while onboard, embarking, or disembarking an international flight, the court found that the entire sequence of events had taken place at a ticket counter located in the airport's common area, after the passenger had disembarked from one flight and prior to her embarkation on a second flight. In addition, the passenger had neither been seated nor checked in for the second flight, and no claim was made that she had been under the carrier's control at the time of the incident, the court noted, concluding that local law governed the claim. Maduro v. American Airlines, Inc. (VISuperCt) 31 Avi. 18,679.

Jury Correctly Instructed on Discrimination Standard
In a racial discrimination action stemming from the involuntary removal of a passenger from his airline flight, the trial court's failure to provide a jury instruction that evidence of intentional discrimination must satisfy an “arbitrary and capricious” standard was not prejudicial error, a federal court ruled. Although the Federal Aviation Act of 1958 makes no explicit mention of the standard a plaintiff must satisfy to overcome a carrier's authority to refuse transportation where it decides that a passenger is, or might be, inimical to safety, the weight of persuasive authority favors application of the “arbitrary and capricious” standard, the court said. In addition, the standard likely comports with the policy behind the statutory regime that provides air carriers with much discretion when they must determine whether to refuse service. Nevertheless, the court found that actions motivated by racial or religious animus are necessarily arbitrary and capricious and beyond the scope of discretion granted by the statute. Therefore, because the jury had been instructed that the carrier's liability depended upon a finding of intentional discrimination on account of race, the verdict necessarily satisfied the standard of “arbitrary and capricious,” the court concluded. Cerqueira v. American Airlines, Inc. (DMass) 31 Avi. 18,708.

Private Firm Denied Compensation for Federal Screening Takeover
The U.S. Court of Federal Claims has ruled that the federal government's alleged failure to provide a private security screening firm with just compensation for the termination of its contracts with air carriers following the federalization of U.S. airport security did not constitute a taking in violation of the U.S. Constitution because the firm did not possess a legally protected property interest at the time of the alleged taking. The firm argued that the relevant property interest taken was its “business assets, including its regularly renewed screening contracts, good will, and going concern value,” and its “entire screening business.” However, while the firm asserted that the government had interfered with its right to engage in the screening business, it never possessed such a right because its contracts with the carriers always were subject to government-imposed security regulations, the court said, concluding that the government's actions were, at most, a frustration of purpose rather than a taking. Huntleigh USA Corp. v. U.S. (FedCl) 31 Avi. 18,660.

No Preemption of Claims for Breach of Confidentiality Pacts
A federal district court has ruled that the Airline Deregulation Act of 1978 did not preempt an air carrier's action alleging that a competitor had breached the parties' confidentiality agreements executed in association with the disclosure of confidential information to the competitor for the purpose of evaluating the carrier as a potential investment. The competitor allegedly misused the confidential information to commence its own flights in an effort to drive the carrier out of business. Although ADA preempts state actions having a connection or reference to airline prices, routes, or services, the statute was not designed to monitor carriers' contractual undertakings and private, contractual disputes related to prices, routes, and services, the court said, adding that the claim was based upon express, contractual provisions that were only contractual in nature. In addition, the claim sought to promote the policies underlying airline deregulation because it rested predominantly upon the competitor's alleged theft of confidential information to provide a competitive edge and push the carrier out of the market, the court opined. Aloha Airlines, Inc. v. Mesa Air Group, Inc. (DHaw) 31 Avi. 18,666.

Surface Transportation News

Update Issued for Motor Carrier Liability Handbook
The annual update for the Motor Carrier Liability handbook was issued on April 24, 2007. The update includes an overview of the Board of Medical Examiners and the proposed rule affecting Intermodal Equipment Providers, a discussion of electronic discovery rules, liability issues related to driver use of marijuana, a revised discussion of Carmack Amendment applicability, and an expanded look at the MCS-90 endorsement including an in-depth discussion of recent developments in this area.

State Regulation of Solid Waste Transfer by Rail Preempted
A federal district court ruled in an unpublished opinion that a state law aimed at regulating the transfer of solid waste to and from rail cars was preempted by the Interstate Commerce Commission Termination Act (ICCTA). The railroad, which owned and operated five solid waste transfer stations within the State of New Jersey, challenged a state law under which a set of rules had been adopted to govern the transfer of solid waste to and from rail cars, arguing that it was preempted by the ICCTA. Under the ICCTA, a state law is preempted if it attempts to regulate transportation by a rail carrier and no exceptions to preemption are applicable.

The state argued that its law was not preempted because it was not intended to regulate transportation by rail carriers, but was adopted to protect the health and safety of its citizens. However, based on the evidence presented, the court determined that the rules issued by the state did, in fact, deal exclusively with transportation services performed by a rail carrier and were so extensive and specific that they exceeded the scope of the state's police powers. Thus, the state law was preempted by the ICCTA. N.Y., Susquehanna and Western Ry. Corp. v. Jackson (DNJ) ¶84,484.

State's Sales and Use Tax Discriminated Against Rail Carriers
A state's system for assessing sales and use taxes discriminated against railroads in violation of the Railroad Revitalization and Regulatory Reform Act of 1976 (the ``4-R Act''), a federal district court ruled. A railroad challenged the state's sales and use tax structure, arguing that it violated the 4-R Act by treating railroads differently than other competitive modes of transportation. The 4-R Act prohibits states from imposing taxes that discriminate against rail carriers providing interstate transportation. In order to determine if the state's tax was discriminatory against the railroad, the court conducted an analysis of competitive modes. The analysis revealed that two of the railroad's primary competitors were not subject to the same sales and use tax as the railroad. Based on the finding that competitive modes of transportation, specifically motor and water carriers, were exempt from the state's sales and use tax, it was determined that the taxing system violated the 4-R Act by discriminating against railroads. Thus, the railroad's motion for summary judgment was granted, while the state's motion was denied. Kansas City S. Ry. Co. v. Bridges (DLa) ¶84,486.

Railroad's Storage and Demurrage Charges Reasonable
A railroad's decision to impose storage and demurrage charges on empty private freight cars when held on railroad property beyond a ``free time'' period was not an unreasonable practice, according to the Surface Transportation Board (STB). A group of private freight car owners challenged a tariff provision adopted by a railroad that imposed fees on empty private freight cars left on railroad property for extended periods of time, arguing that the imposition of such charges was an unreasonable practice. The railroad contended that the demurrage and storage fees imposed on empty private freight cars furthered rail transportation policy by eliminating cross-subsidies and encouraging freight car owners to better utilize their equipment. The STB agreed with the railroad, finding that the demurrage and storage fees were proper and likely to improve efficiencies and compensate the railroad for the use of its tracks. Thus, the request to void the tariff provisions was denied. N. Am. Freight Car Assoc. v. BNSF Ry. Co. (STB) ¶37,230.

Improper Reply Resulted in Default Order
FMCSA entered a default judgment against a carrier that failed to properly reply to a Notice of Claim. The Notice of Claim cited the carrier with five violations of the Federal Motor Carrier Safety Regulations. The carrier replied to the Claim Notice, denying the allegations and requesting a hearing pending the review of all the documentary evidence. The regulations state that a reply must contain an admission or denial of each allegation of the claim and provide a concise statement of facts constituting each defense. The carrier did not comply with the regulatory requirements since it failed provide a statement of fact outlining its defenses. Because its response was not deemed a proper reply, the carrier was found to have defaulted. Thus, the motion for a default order was granted. Tony's Long Wharf Transport, Inc. (FMCSA) ¶51,178.

Violation Affirmed; Civil Penalty Denied
A final order affirming a charge that a commercial motor vehicle driver violated federal controlled substance regulations was granted by the Federal Motor Carrier Safety Administration, but the requested civil penalty was denied. The driver was cited for operating a commercial motor vehicle after failing a federal drug test and was assessed a $1,750 civil penalty. The driver filed a timely reply to the Notice of Claim admitting the violation. Because the driver admitted the violations, the agency was not required to establish a prima facie case. As such, the final order was granted as to the violations. The civil penalty request, however, was denied because the agency failed to submit a convincing argument supporting its departure from FMCSA's standard procedure of charging an employer for its employees' violations. Under the regulations, employers are responsible for the actions of their employees. As such, the employer bears the ultimate responsibility for ensuring that its employees comply with the regulations. Thus, no civil penalty was assessed against the driver. Charles F. Thran (FMCSA) ¶51,179; Eric Corbett (FMCSA) ¶51,180.

Surface Transportation Board Revises User Fee Schedule
The Surface Transportation Board (STB) issued a final rule revising its user fees to reflect changes in overhead factors. Under federal regulations, the STB is required to annually review and update its user fee schedules, taking into consideration salary increases and overhead costs affecting the agency. As a result of this review, the agency is updating its fee schedule to reflect the government's 2007 2.64 percent salary increase and changes in its overhead costs. The revised fee schedule takes effect on May 6, 2007.

The 2007 version maintains the same 127 fee or sub-fee items contained in the 2006 User Fee Update Schedule. The fee changes, for the most part, are the result of the mechanical application of an update formula that was established through a notice and comment process. However, the agency has increased the percentage for two fees that the STB continues to hold below full cost. Because the revised fees are based on an approved formula, the STB concluded that a notice and comment period was not required for this rulemaking. 72 FR 17032, April 6, 2007.

Emergency Relief Docket Interim Rule Adopted as Final
The Federal Railroad Administration (FRA) has adopted as final an interim final rule establishing procedures for the creation of Emergency Relief Dockets (ERD) and for obtaining waivers from safety rules, regulations, or standards during an emergency situation or event. The purpose behind the rulemaking is to expedite the process used by the FRA to address the needs of the public and the railroad industry during emergency situations or events. The final rule took effect April 9, 2007. 72 FR 17433, April 9, 2007.

PHMSA Proposes Changes to Existing HazMat Rules
A proposal to amend the Hazardous Materials Regulations applicable to the manufacture, maintenance, and use of DOT and MC specification cargo tank motor vehicles, DOT specification cylinders, and UN pressure receptacles has been issued by the Pipeline and Hazardous Materials Safety Administration (PHMSA). The revisions under consideration are based on petitions for rulemaking submitted by the regulated community. The amendments are intended to enhance the safe transportation of hazardous materials in commerce, clarify regulatory requirements, and reduce operating burdens on cargo tank and cylinder manufacturers, requalifiers, carriers, shippers, and users. 72 FR 18446, April 12, 2007.

Security Threat Assessment Fees Set for TWIC Program
The Department of Homeland Security's Transportation Security Administration (TSA) has established user fees for Transportation Workers Identification Credential (TWIC) applicants as required under federal statute. The fees are based on three components, the Enrollment Segment, the Full Card Production/Security Threat Assessment Segment, and the FBI Segment. For applicants who have not completed a prior comparable threat assessment, the total standard fee is $137.25. For applicants who have completed a prior threat assessment, such as for a hazardous materials endorsement on a commercial drivers license, the fee will be $105.25. This fee is reduced because applicants who have undergone a prior threat assessment are not required to pay the FBI Segment fee. The user fees are intended to cover TSA's costs related to the completion and issuance of the TWIC. The user fees took effect on March 20, 2007. 72 FR 13026, March 20, 2007.

Adjustment to Nationwide Significant Risk Threshold Adopted
The Federal Railroad Administration (FRA) has updated the Nationwide Significant Risk Threshold (NSRT). The NSRT is an average of the risk indexes for all gated crossings nationwide where horns are sounded. When communities are determining whether a specific crossing corridor can qualify as a quiet zone, the NSRT is used for comparison to the Quiet Zone Risk Index calculated for the specific crossing corridor to determine if that crossing corridor's Quiet Zone Risk Index falls above or below the nationwide average. The revised threshold of 19,047 was calculated based on a formula identified in FRA regulations. Under the applicable regulations, the threshold is to be reviewed annually. The effective date for the new threshold was March 29, 2007. 72 FR 14850, March 29, 2007.