May 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

Changes Adopted for Airline Service Quality Reporting
Airline service quality performance reports will be expanded this fall to include additional data elements when flights are cancelled, diverted, or experience gate returns, under the terms of a new Department of Transportation final rule. According to DOT, the additional elements will fill in gaps in existing data, giving the Department, the industry, and the public a more accurate portrayal of on-ground delays after flights depart the gate but prior to the time they take off, and after flights land but before they reach the gate. Currently, air carriers do not provide information that would enable DOT to determine whether a flight that was ultimately canceled had earlier experienced a tarmac delay, and the extent of that delay. Similar data gaps exist for flights that are diverted to alternate airports, DOT noted. To fill in the information gaps, the new rule adds three new data elements to carriers' required data reporting for flight cancellations and gate/air returns. In addition, five new data elements would be required for diverted flights. Aviation Law Reports, Report Letter No. 1380, May 30, 2008.

Guidance Issued on Disclosure of Checked Bag Fees
Responding to recent moves by several air carriers to further limit, or eliminate altogether, passengers' free allowance for checked bags, the Department of Transportation on May 19 issued a Notice that provides guidance for carriers on disclosure of the new baggage policies. According to DOT, a carrier's failure to disclose significant conditions applicable to air fares is an unfair and deceptive trade practice, warranting enforcement action. The Department concluded that these conditions include limiting passengers to fewer than two free checked bags of the size and weight that generally had been free in the past, and assessing passengers a charge in addition to the air fare for such checked bags. The Notice includes guidelines for print advertisements and Internet displays to help carriers ensure their compliance with federal law. Full text of the Notice appears at Aviation Law Reporter ¶23,974.

DOT Increases Protections for Air Travelers with Disabilities
A new rule that strengthens and expands federal regulations barring discrimination against disabled air travelers will take effect in one year, the Department of Transportation announced. The rule amends the regulations that implement the Air Carrier Access Act of 1986 (ACAA), providing greater accommodation for passengers with hearing impairments and those who require medical oxygen. For the first time, coverage includes foreign airline flights that serve the U.S. Specifically, the new rule makes it easier for passengers to use medical oxygen during flights by requiring airlines to allow use in the passenger cabin of portable oxygen concentrators that meet applicable safety, security, and hazardous materials requirements for safe use aboard aircraft. The rule also requires airlines to include easy-to-read captions for the hearing-impaired in its safety and informational videos. In addition, airlines must promptly provide the same information to hearing- and vision-impaired passengers that it provides to other passengers in airport terminals or on the aircraft—such as information on boarding, flight delays, schedule changes, weather conditions, connecting gates, checking and claiming of baggage, and emergencies. The rule does not specify how carriers should make this information available to passengers who are deaf or hard of hearing. Aviation Law Reports, Report Letter No. 1379, May 9, 2008.

House Committee Okays Bill to Repeal Railroad Antitrust Exemptions
The House Judiciary Committee on April 30 approved a bill that would eliminate the antitrust exemptions under which freight railroads operate. The bill—the Railroad Antitrust Enforcement Act (H.R. 2007)—would repeal existing antitrust exemptions in the antitrust and transportation statutes, making mergers, acquisitions, and coordinated ratemaking subject to antitrust rules and enforcement by federal antitrust agencies. State attorneys general and private parties would be able to sue to block anticompetitive conduct and recover treble damages. The Senate Judiciary Committee last year approved companion legislation.

Critics of the antitrust exemptions say they have led to consolidation in freight railroad industry, which has unfairly increased prices without regard for service. ``This legislation is long overdue and absolutely necessary to begin to end the railroad monopolies that are driving consumer prices up and service down,'' commented Rep. Tammy Baldwin (D-Wis.), the sponsor of the bill. ``This virtual monopoly by the freight rail industry is unnecessary, unfair, and unacceptable.'' Federal Carriers Reports, Report Letter No. 1533, May 8, 2008.

Aviation News

Fuel Prices Impact “Very Nature of Air Travel,” ATA Warns
Based on skyrocketing oil prices, the Air Transport Association of America (ATA) is projecting that the industry's 2008 jet fuel bill will be 72 percent higher than last year's. Since ticket price increases aren't enough to overcome soaring fuel costs, major capacity cuts could be next, according to industry analysts. “What's clear is that, if high oil prices persist, then the very nature of air travel as we know it will be forced to change,” ATA warned, adding that passengers will see fewer daily flights to many cities, more crowded planes, and more inconvenience if air carriers cut service as much as some analysts have predicted. ATA President and CEO Jim May has said that soaring fuel prices are “the worst economic shock since 9/11, and, possibly, one that is worse.” ATA quoted Dave Emerson, head of Bain & Co's global airline consulting practice, as saying that “no U.S. airline...has a sustainable business model if $117-a-barrel oil prices endure.” Calyon Securities' Ray Neidl indicated that the industry is moving into “survival mode,” and has entered uncharted territory with fuel costs well above $100 a barrel, the Association reported. Aviation Law Reports, Report Letter No. 1379, May 9, 2008.

Aviation Security, Screening Enhancements Announced
The Department of Homeland Security has announced improvements aimed at strengthening aviation security while decreasing the “hassle factor” for travelers. Among the key improvements, DHS is providing airlines more flexibility to allow remote check-in for passengers who previously were unable to do so because they have a name similar to someone on a watch list. The department also unveiled the Checkpoint Evolution prototype, which began full operation at Baltimore-Washington International Airport (BWI) on April 28. Under the program, each airline can create a system to verify and securely store a passenger's date of birth to clear up watch-list misidentifications. By voluntarily providing this limited biographical data to an airline and verifying that information once at the ticket counter, travelers who previously had been inconvenienced on every trip now will be able to check-in online or at remote kiosks. Aviation Law Reports, Report Letter No. 1379, May 9, 2008.

Prejudgment Interest Available Under Montreal Convention
The Montreal Convention did not bar prejudgment interest claims against an air carrier by representatives of passengers who were killed in the crash of a commercial airliner, a federal court in Kentucky ruled. Although there were no cases to date interpreting the Convention's treatment of prejudgment interest, the carrier claimed that jurisprudence interpreting the Convention's predecessor treaty—the Warsaw Convention—demonstrated that prejudgment interest was not available based on the earlier agreement's purpose of establishing a fixed and uniform cap on damages. The court disagreed, noting that decisions interpreting amendments to the Warsaw Convention allowed the award of prejudgment interest because the amendments' purposes included allowing victims a more adequate recovery and fostering the speedy resolution of claims. Moreover, the Montreal Convention: (1) comports with the amendments' purposes; (2) removes all limits for passenger death or injury unless the carrier can prove the absence of negligence or wrongful act or omission on its part, or that the damage was solely caused by a third party; and (3) contains a provision enumerating interest as a litigation expense that a court may award, the court concluded. In re Air Crash at Lexington, Ky., Aug. 27, 2006 (EDKy) 32 Avi. 16,322.

Passenger's Ground Stop Claims Survive Preemption
The Federal Aviation Act of 1958 (FAA) did not preempt an airline passenger's state law claims against an air carrier arising from the weather-related diversion, extended ground stop, and delay of her flight, according to a federal district court. The carrier argued that the claims were preempted because they stemmed from the carrier's decision to re-route the flight due to safety concerns and the Federal Aviation Administration's decision to shut down an airport. However, the court found that the bulk of the claims related to the carrier's actions and decisionmaking after the flight had been diverted. As such, the claims survived preemption because they were not related to safety and were not the type regulated by federal safety regulations, the court said. Hanni v. American Airlines, Inc. (NDCal) 32 Avi. 16,325.

FAA Hazard Determinations Vacated
Hazard determinations issued by the Federal Aviation Administration approving 83 proposed wind turbines to be located on land near a planned airport did not satisfy the “reasoned decisionmaking” requirement of federal administrative procedure law, according to a federal appeals court. FAA's “Does Not Exceed” determination for each turbine stated that an aeronautical study had been performed and that the structure did not exceed obstruction standards and would not be a hazard to air navigation. However, the court found that the determinations had failed to address FAA reports demonstrating that the turbines would significantly penetrate the applicable runway slope for two airports. Furthermore, evidence showed that the FAA official who issued the determinations had dismissed a study submitted by the municipality to FAA, as well as staff objections from two offices within the agency, that had raised concerns over the turbines' effects on radar and air traffic control. Finally, FAA had provided no reasonable explanations addressing the runway slope reports or countering the concerns over the radar interference, the court concluded. Clark County v. FAA (DCCir) 32 Avi. 16,306.

Surface Transportation News

PHMSA Proposes to Increase HazMat Registration Fees
In order to fund the Hazardous Materials Emergency Preparedness Grants Fund, the Pipeline and Hazardous Materials Safety Administration (PHMSA) has issued a proposal that would increase the registration fee paid by large carriers and shippers who offer or transport hazardous materials. Under the proposed fee schedule, registrants that do not qualify as a small business or not-for-profit organization would be required to pay an annual registration fee of $2,475, plus a processing fee of $25, for registration years 2009-2010 and beyond. The registration fee for small businesses and not-for-profit organizations would remain at $250, plus a $25 processing fee.

Written comments on the proposal must be received on or before July 14, 2008, and should refer to Docket No. PHMSA-2008-0010 (HM-208G). Send comments to: Docket Operations, U.S. Department of Transportation, M-30, Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE, Washington, DC 20590-0001. For further information, contact: David Donaldson, telephone: (202) 366-4844; or Deborah Boothe, telephone: (202) 366-8553. (73 FR 24519, May 5, 2008). Federal Carriers Reports, Report Letter No. 1533, May 8, 2008.

Passenger Rail Bills Introduced in House
Members of the House Transportation and Infrastructure Committee have introduced two bills aimed at boosting passenger rail service in the U.S. The bills would provide Amtrak with a five-year reauthorization, and also support the development of high-speed rail.

Committee Chairman Rep. James L. Oberstar (D-Minn.) noted that ``today we are at the cusp of a renaissance for intercity passenger rail in this nation,'' adding that, last year, Amtrak set a ridership record for the fifth year in a row. ``This record of achievement is even more impressive if you consider that, for the past eight years, Amtrak has contended with an Administration committed to its bankruptcy,'' Oberstar said.

Ranking Committee Member Rep. John Mica (R-Fla.) said the legislation represents a historic opportunity to make high-speed rail and next generation rail service a reality in the U.S., along with long-needed reforms for Amtrak. Mica pointed out that, while the majority of the impact of high-speed rail will be seen initially in the Northeast Corridor, there must be continual improvement in rail infrastructure nationwide.

The Passenger Rail Investment and Improvement Act of 2008 authorizes more than $14.3 billion for Amtrak capital and operating grants, state intercity passenger grants, and high-speed rail over the next five years. Capital grants will help Amtrak bring the Northeast Corridor into a state of good repair, procure new rolling stock, rehabilitate existing bridges, and make additional capital improvements and maintenance over the entire network. Meanwhile, the Rail Infrastructure Development and Expansion Act for the 21st Century (RIDE 21) authorizes $12 billion of tax-credit bonds and $12 billion of tax-exempt bonds for high-speed rail corridors over the next ten years. Federal Carriers Reports, Report Letter No. 1534, May 22, 2008.

Carrier's Limitation of Liability Provision Enforceable
A federal district court held that a motor carrier was entitled to enforce a liability limitation provision contained in a bill of lading signed by a shipper. The shipper arranged to have the carrier transport her household and business goods from Florida to Illinois. During the movement, the trailer holding the shipper's goods was involved in a rollover accident. The shipper filed a claim with the carrier for the goods that were damaged. After the carrier informed the shipper that it could not process the claim until the shipper provided estimated weights of the shipped goods, the shipper file suit in state court to recover her damages. The carrier removed the action to federal court and filed a motion for partial summary judgment seeking a finding that its liability was limited pursuant to its bill of lading and tariff.

The transportation method selected by the shipper was the ``U-Pack Program,'' under which the carrier delivered a standard trailer to the shipper, who was responsible for loading and unloading the goods into the trailer. When the trailer was delivered, the bill of lading misstated the number of linear feet to be utilized and did not include the additional insurance coverage the shipper claimed to have requested. The shipper alleged that she had notified the carrier of the discrepancies and was assured that a corrected bill of lading would be provided when the trailer was picked up. When the driver arrived to pick up the trailer, he presented the same bill of lading with the inaccurate information. The shipper changed the reference to the number of linear feet from 12 to 28 feet, but failed to indicate that additional liability coverage was requested.

The carrier alleged that the shipper's damages were limited under the bill of lading to $0.10 per pound per lost or damaged package, unless excess liability coverage was requested. The shipper challenged the carrier's assertion, arguing that she had contracted for additional coverage prior to the actual movement of the goods. Based on the facts presented, the shipper's claim that she had requested additional liability coverage was unavailing. The bill of lading was an integrated, unambiguous contract that contained all the necessary provisions to legally bind the parties. According to the court, if the shipper had wanted to increase the protection on her goods she should have manually corrected the bill of lading by indicating in writing on the document at the time of shipment the dollar amount of excess coverage she had contracted for, as she did with the provision indicating the number of actual linear feet utilized. Because she failed to do so, the carrier's liability was limited pursuant to the bill of lading and its tariff. Hoover v. ABF Freight Sys., Inc. (CDIll) CAR ¶84,543.

STB Approval Not Required for Construction of Connecting Track
The Surface Transportation Board (STB) concluded that the construction of connecting rail lines did not require advanced authorization. The Canadian National Railway Company (CNR) petitioned to acquire control of EJ&E West Company (EJ&EW), a wholly owned noncarrier subsidiary of Elgin, Joliet & Eastern Railway Company (EJ&E). Along with their petition, CNR submitted operating plans that proposed and briefly described the construction of six connecting tracks.

Upon review, STB determined that one or more of the proposed connecting lines might require Board approval. As a result, STB instructed CNR to seek approval of the proposed projects or show why approval was not required. The railroad asserted that STB approval of the proposed construction projects was not necessary because the proposed tracks would not enable the applicant or the railroad being acquired to penetrate or enter new markets. The Board concurred, finding that the construction projects were in furtherance of operational efficiencies and would not permit the railroads to invade or penetrate new markets. Thus, STB approval was not required. Canadian Nat'l Ry. Co. and Grand Trunk Corp.-Control-EJ&E West Co. (STB) CAR ¶37,275.

60-Day Employee Notice Requirement Waived
The Surface Transportation Board (STB) approved a railroad holding company's request for a waiver from the 60-day employee notice requirements mandated by federal statute. The holding company had filed a verified notice of exemption to acquire and operate approximately 183 miles of rail lines currently owned by another railroad. Because the applicant's revenue exceeded $5 million, it was required to provide notice of the proposed transaction to employees on the affected line, unless a waiver of the notice requirement was granted by the STB. Under the applicable regulations, the carrier was required to certify to the STB that it had posted, at least 60 days prior to the effective date of the exemption, a notice of the proposed transaction at the workplace of the employees and had served a copy of the notice on the national offices of the labor unions having members employed on the affected line.

In support of its waiver request, the applicant asserted that it did not intend to make any significant changes to the operations on the acquired lines, the employees performing the work, or the terms and conditions of their employment. The applicant also submitted a letter from the union representing employees on the line that supported the proposed sale and waiver request, and certified that it had posted notice at the workplace of the affected employees and the national office of the labor union. The applicant claimed that if the waiver was not granted, it would not be able to close the deal before the agreed-upon ``drop-dead'' date, after which either party would be permitted to terminate, with certain exceptions, the purchase agreement. While the STB normally does not grant a waiver of the advance notice requirement, it was determined that the approximately 30-day notice provided to the affected employees and the labor union was adequate under the circumstances. Thus, the waiver request was granted. SSP R.R Holding LLC-Acquisition and Operation Exemption-Mittal Steel USA-Railways Inc. (STB) CAR ¶37,277.