October 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

New Document Assessment Technology to Aid TSA’s Efforts

The Transportation Security Administration announced earlier this month that it will purchase and pilot new technologies designed to provide the agency with a greater ability to identify altered or fraudulent passenger identification credentials and boarding passes in order to further enhance travel safety. Known as Credential Authentication Technology—Boarding Pass Scanning Systems (CAT-BPSS), the new technology will be tested at select airports early in 2012 and eventually will replace the current procedure used by security officers to verify fraudulent or altered documents. It will be incorporated into the agency’s risk-based pilot that is slated to begin at four airports in the near future, TSA said.

The initiative aligns with TSA’s latest efforts to enhance the passenger screening experience by moving toward a more risk-based, intelligence-driven counterterrorism agency. The approximately $3.2 million award includes the purchase of 30 systems from three different vendors, the agency said, indicating that it began testing travel document authentication technology at the TSA Systems Integration Facility (TSIF) in July 2011. CCH Aviation Law Reports, Report Letter No. 1462, October 21, 2011.

Drug Testing Custody and Control Rule Tweaked

In response to comments received on its September 2010 interim final rule authorizing the use of a new federal Drug Testing Custody and Control Form (CCF) in its drug testing program, the Department of Transportation has undertaken another rulemaking that finalizes the authorization and procedures for using the new CCF in DOT-required drug tests. The action also amends a provision that inadvertently had been omitted from the 2010 action.

The latest requirements took effect on September 27, 2011. For full text of the requirements in the Aviation Law Reporter, see ¶13,327, 13,345, 13,394, and 13,414. Those same requirements in the Federal Carriers Reporter appear at ¶6502, 6529, 6592, and 6621, while the regulation preamble appears at ¶22,452. CCH Aviation Law Reports, Report Letter No. 1461, October 7, 2011; CCH Federal Carriers Reports, Report Letter No. 1615, October 17, 2011.

Aviation News

IATA and ATA Oppose Potential Security Fee Hikes

The International Air Transport Association expressed its opposition to the Obama Administration’s proposal to double the 9/11 passenger security fee and raise it in successive years through 2017 as part of the Administration’s deficit reduction plan. Passengers traveling from U.S. airports currently pay a security fee of $2.50 per flight segment with a cap of $5 one-way and $10 per round trip. The proposal would raise the fee to $5 for all one-way trips and $10.00 per round trip. For the majority of passengers who do not connect or change flights during their journey, this represents a doubling of the charge. Further, the proposal also would increase the round trip charge by another $1 per year between 2013 and 2017. “This is absolutely the wrong approach,” IATA Director General and CEO Tony Tyler said, adding that “[a]viation is a catalyst for growth in the worldwide economy. The economic outlook is uncertain and confidence among both businesses and consumers is low. Making air travel progressively more expensive is not a sound economic strategy.”

For its part, the Airline Transport Association called on members of Congress to reject President Obama’s plan to impose $3.5 billion annually in new taxes on airlines and their passengers to help pay off the country’s budget deficit. If the airline industry is burdened with billions of dollars in new taxes, ATA warned that its members will have no choice but to raise fares or reduce service, which will mean fewer jobs. ATA CEO and President Nicholas E. Calio offered a global perspective and compared increasingly punitive U.S. government policies with other countries that view aviation as a strategic asset and work cooperatively with airlines to ensure successful growth. “Governments in China, Brazil, India and the Middle East understand the competitive necessity and opportunity a vibrant aviation system provides,” Calio said.

Rather than further taxing overburdened airline passengers, ATA urged Congress to focus its attention on supporting a National Airline Policy. “We are ready and willing to work collaboratively with the U.S. Government on our nation’s priorities for the future, using all the good work that has already been done. We need an airline policy that will treat our airlines like the global businesses they are, and enable them to operate as such,” Calio asserted. CCH Aviation Law Reports, Report Letter No. 1461, October 7, 2011.

Delta/US Airways Get Slot Waiver, But with Conditions

The Department of Transportation granted the request of Delta Air Lines and US Airways for a waiver from the prohibition on the purchasing of operating authorizations (i.e., takeoff/landing slots) at New York’s LaGuardia Airport, thus enabling the two carriers to consummate a slot-swap deal proposed in May. Under the transaction, US Airways will transfer to Delta 132 slot pairs (265 slots) at LaGuardia in exchange for Delta’s transfer to US Airways of 42 slot pairs (84 slots) at Ronald Reagan Washington National Airport (DCA). Delta also will convey route authority to operate certain flights to São Paulo, Brazil, and will make a cash payment to US Airways.

The waiver is subject to a number of conditions, including the mandate that the two carriers release 32 slots at LaGuardia and 16 slots at Reagan National to eligible new entrant and limited incumbent carriers pursuant to procedures set out by the government. The carriers also must achieve a mutually satisfactory agreement regarding gates and associated facilities with any such purchaser, according to the Federal Aviation Administration Notice granting the waiver petition, which was effective on October 13.

Conversely, the Department of Justice said on October 11 that its investigation of US Airways' acquisition of Delta's slots at Reagan National will continue despite the DOT go-ahead. The Antitrust Division’s investigation will focus upon the increase in US Airways' share and use of slots at DCA and the resulting decrease in Delta's share of operating authorizations at the slot-constrained airport, DOJ said, noting that passengers pay among the highest fares in the country for flights to and from that location. The Antitrust Division is dropping its investigation into the acquisition of slots at LaGuardia, however, having concluded that slot acquisition at LGA does not raise anti-competitive concerns. CCH Aviation Law Reports, Report Letter No. 1462, October 21, 2011.

Syria Deemed Accountable for Terrorist Hijackers

Insurers of a commercial airliner that was destroyed as the result of a terrorist hijacking/bombing in which three U.S. citizens and several others perished were entitled to damages and pre-judgment interest from the government of Syria for property losses arising from the event, a federal trial court in the District of Columbia determined. As a preliminary matter, the court found that the insurers had derivative standing. As each of the three U.S. victims of the hijacking and their immediate families at the time of the attack had proper standing to bring a suit against Syria under the Foreign Sovereign Immunities Act of 1976, the insurers had standing to bring a suit based upon reasonably foreseeable property loss and loss claims under life and property insurance policies, by reason of the same acts, the court held.

Pointing to the provision added to the FSIA in 2008 that both excepts from sovereign immunity state sponsors of terrorism and provides for the retroactive application of the provision for cases, such as the instant action, that were before the courts at the time of its enactment, the court said that the basis of Syria’s liability was its provision of material support and resources to the terrorist organization responsible for the hijacking. Testimony made clear that Syria, through its officials acting in their official capacity, knowingly had provided funding, training, safe havens, access, and a variety of other supports to the terrorist organization, the court advanced.

Moreover, given the testimony that the organization would not have been able to have accomplished the hijacking without Syrian aid, the elements of a civil conspiracy between Syria and the terrorist organization were satisfied, the court held. Finally, the total destruction of the aircraft was reasonably foreseeable given Syria’s sponsorship of a notoriously violent terrorist organization to conduct a mid-air hijacking. Accordingly, the court concluded that Syria was liable for the total destruction of the aircraft, as well as the associated costs related to the destroyed aircraft—including charges for storage of the remaining fuselage, attorneys’ fees for work performed in relation to the destruction of the aircraft, and costs for the claims survey process under which damage was assessed and payments distributed under the applicable policy(ies). Certain Underwriters at Lloyd’s London v. Great Socialist People’s Libyan Arab Jamahiriya (DDC) 34 Avi. 16,415.

ALPA’s Attempt to Halt Flight Ops Changes at UAL Fails

The pilot’s union at United Air Lines was not entitled to a temporary restraining order enjoining the carrier from the scheduled implementation of newly revised flight operation procedures pursuant to its complete operational merger with Continental Airlines, a federal court in New York determined late last month. In support of its motion, the union had alleged that: (1) the comprehensive nature of the changes far outstripped the actual training offered by United to its pilots; and (2) United’s plan to move forward on the scheduled implementation notwithstanding the union’s concerns about the adequacy of training amounted to a unilateral decision in violation of the parties’ collective bargaining agreement under the Railway Labor Act.

The court held that because the issue was a “minor dispute” under the RLA, the union was not entitled to an order preserving the status quo pending the dispute’s resolution by an arbitration panel absent a finding that the union would suffer irreparable harm from the denial of an injunction such that a later arbitrative ruling in the union’s favor would be rendered meaningless. In the instant circumstances, the union’s argument in support of irreparable harm involved the purported erosion of the System Board of Adjustment’s remedial authority and the alleged risk of diminished flight safety—both of which were too speculative and, as such, were insufficient under relevant case precedent instructing that irreparable harm justifying injunctive relief must be “actual and imminent.”

In light of the Federal Aviation Administration’s regulatory authority over airline safety and the agency’s ongoing oversight of all phases of the two carriers’ merger, the risk to safety asserted by the union was too remote and speculative to support the TRO application, the court held. Furthermore, the union’s inability to substitute FAA’s determination concerning the adequacy of the carrier’s pilot-training efforts with the union’s own assessment was not irreparable harm, the court added. Therefore, because the union’s failure to demonstrate irreparable harm was dispositive, its motion for a TRO was denied. Air Line Pilots Ass’n v. United Air Lines, Inc. (EDNY) 34 Avi. 16,494.

US Airways Pilots Enjoined from Engaging in Work Slowdown

US Airways was entitled to an injunction prohibiting the labor union representing the carrier’s pilots from engaging in a work slowdown in violation of the Railway Labor Act’s status quo provision in order to exert pressure upon the carrier in stalled contract negotiations, a North Carolina federal court determined. In so ruling, the court found that the evidence supported the carrier’s assertion that the union had encouraged pilots to engage in several slowdown tactics under the guise of a safety campaign, including dramatic increases in pilot maintenance write-ups, pilot fatigue calls, increased taxi time, and pilot-induced departure delays. The union also discouraged both voluntary flying and the completion of mandatory training. As a result, the carrier’s on-time performance experienced a significant decline that led to customer dissatisfaction which, in turn, harmed both the company’s bottom line and its reputation, the court added.

To be subject to injunctive relief under the Act’s status quo provision, it is not necessary that a union authorize or otherwise ratify a slowdown, the court emphasized. Rather, it is enough that the union fail to exert every reasonable effort to prevent or discourage a concerted work action. Thus, even if the union here had not instigated the slowdown, it still had an affirmative duty to exert every reasonable effort to stop it, the court advised. There was no evidence that the union had published anything that sincerely had been meant to discourage the conduct at issue, however. To the contrary, the union had continued to publish the sorts of communications and directives that were intended to encourage a slowdown campaign.

Moreover, an injunction was not barred by the “unclean hands” provision in federal labor law that prohibits such relief for complainants that themselves have committed status quo violations, the court added. Even if the carrier had violated RLA’s status quo or some other legal obligation, that did not form an absolute bar to injunctive relief. Rather, it dictated that the competing equities be weighed. As such, the balancing of hardships and the public interest weighed in favor of the issuance of an injunction, because: (1) the carrier demonstrated the heavy toll exacted by the slowdown actions upon the company and the flying public; (2) the union would not experience any legitimate hardship as the result of being enjoined from violating the law; (3) the carrier demonstrated a likelihood of success on the merits of its claim should the case proceed to trial; and (4) an injunction was in the public interest considering that the RLA’s central purpose is to protect the public from interruptions to transportation caused by labor disputes. US Airways, Inc. v. US Airline Pilots Ass’n (WDNC) 34 Avi. 16,469.

Passenger Can’t Blame TSA for Jewelry Stolen from Checked Bag

An airline passenger was unable to maintain a negligent supervision claim against the Transportation Security Administration arising from jewelry she alleged had been stolen by the TSA employee who had searched her checked bag prior to its transport aboard a commercial aircraft. A Pennsylvania federal court’s earlier ruling in the case at bar had dismissed the passenger’s negligence claim under the Federal Tort Claims Act, having found that her allegations were insufficient to demonstrate that the employee who allegedly had stolen her belongings had been working within the scope of his employment at the time of the alleged theft. Thereafter, the passenger amended her complaint to contend that the agency owed her a duty to screen her bags in a manner that reasonably would protect her from injury and that its failure to have introduced reasonable policies to secure baggage from theft had resulted in the loss of her jewelry. The actions at issue were rooted in the individuals’ positions as TSA employees, the passenger charged.

Citing relevant case precedent, the court held that negligent supervision claims rooted in supervisor-supervisee relationships at work that relate closely to the supervisees’ employment status are not permissible under the Federal Tort Claims Act. Rather, in order to survive, a claim had to allege truly independent negligence, which was not the case here, the court observed.

Also unsustainable was the passenger’s claim for bailment, the court ruled. The passenger alleged only that she had delivered the bag containing the allegedly missing items to the TSA “via the airline,” asserting that she had relinquished possession of the bag to the carrier at her departure airport and that, thereafter, the bag had been “in the possession of either the carrier or TSA” until she reclaimed it at her destination airport. To establish a prima facie case of bailment under the applicable state law, it is incumbent upon the bailor to prove both the existence of a bailment and that the bailed goods had been lost, destroyed, or damaged while in the bailee’s possession, the court explained, noting that the passenger had not alleged that TSA had sole possession of her luggage. Instead, she had alleged that either the agency or the airline had possession of her bag at the time of the alleged theft, and merely had speculated that only TSA employees would have had access to the bag during that time. As such, her allegations were insufficient to withstand a motion to dismiss both the bailment and negligent supervision claims.

Finally, given the dismissal of the above claims, the court ruled that the passenger’s request for punitive damages and attorneys’ fees was moot. According to the court, even if the passenger’s claims had withstood the agency’s motion to dismiss, she could not recover punitive damages or attorneys’ fees because: (1) the Federal Tort Claims Act clearly bars recovery of punitive damages against the United States; and (2) under the doctrine of sovereign immunity, the United States has no liability for the payment of attorneys’ fees absent express waiver, and the passenger cited no such applicable waiver in support of her claim. Amberg-Blyskal v. Transp. Security Admin. (EDPa) 34 Avi. 16,466.

Surface Transportation News

STB Initiates Review of Existing Regulations

In accordance with Executive Orders 13563 and 13579, the Surface Transportation Board is conducting a review of its existing regulations in order to evaluate their continued validity and to determine whether they are crafted effectively to solve current problems facing shippers and railroads. Executive Order 13563 mandates that executive agencies consider costs and benefits, as well as base regulations upon objective scientific evidence.

However, E.O. 13563 did not apply to independent agencies. As a result, on July 11, 2011, President Obama issued E.O. 13579, which requested that independent agencies comply with E.O. 13563 to the extent permissible by law.

Specifically, independent agencies were asked to retrospectively analyze existing regulations and produce a plan to periodically reassess and streamline their existing regulations. To facilitate this process, STB is soliciting public input on whether any of its regulations may be outmoded, ineffective, insufficient, or excessively burdensome, and is seeking suggestions on how to modify, streamline, expand, or repeal them, as necessary.

STB requests that those filing comments provide the following information:

• Identify which of the Board’s existing regulations or reporting requirements are outmoded, ineffective, insufficient, or excessively burdensome, and explain why:
• Propose which regulations should be modified, streamlined, expanded, or repealed;
• Provide evidentiary support to help the Board analyze the costs and benefits (both quantitative and qualitative) of any proposed changes; and
• Suggest an appropriate timeframe for conducting the next retrospective review of the agency’s regulations and reporting requirements.

CCH Federal Carriers Reports, Report Letter No. 1616, October 31, 2011.

FRA Advisory Covers Switching Operations Safety

The Federal Railroad Administration (FRA) issued a safety advisory aimed at reducing the number of injuries and fatalities arising from employees working between rail cars during switching operations and other dangerous or unsafe workplace behaviors. The advisory, which reminds railroads and rail employees of the importance of following procedures when moving or operating between rolling equipment, follows a series of fatal events involving rail employees who, in the course of their work, placed themselves between rolling equipment.

The advisory is intended to help the railroad industry refocus its attention on compliance by issuing recommendations addressing appropriate railroad operating policies and procedures. Highlights of the recommendations contained in the advisory include reviewing and revising existing switching operations safety rules as needed, ensuring the use of sound communication protocols to notify employees when going between two pieces of rolling equipment, emphasizing the shared obligation and responsibility of managers and employees in following established rules and procedures, and encouraging heightened situational awareness and vigilance.

Full text of the safety advisory appears at ¶25,074. CCH Federal Carriers Reports, Report Letter No. 1616, October 31, 2011.

EEOC Subject to FMCSR Exhaustion Requirements

A claim filed under the Americans with Disabilities Act (ADA) by the Equal Employment Opportunity Commission (EEOC) on behalf of a commercial motor vehicle driver was subject to the exhaustion requirements contained in the Federal Motor Carrier Safety Regulations (FMCSRs), a federal district court in Michigan ruled. The EEOC filed suit against a motor carrier employer on behalf of a driver who was prohibited from returning to work after the carrier’s physician determined, based on a review of the driver’s medical records, that he was not qualified to drive. The carrier sought dismissal of the claim, arguing that the EEOC improperly filed the unlawful separation action before the employee had exhausted his administrative remedies.

The EEOC unsuccessfully claimed that it was not bound by the exhaustion requirement, and further asserted that the employee’s claim did not involve an action subject to the appeal process contained in the FMCSRs because the driver had a valid medical certificate and he had not been physically examined by the carrier’s physician. The court rejected the EEOC’s arguments, reasoning that the plain language of the regulatory provision merely required a disagreement between the physician for the employee and the physician for the carrier, regardless of whether the carrier has a valid medical certificate. Furthermore, nothing in the regulations suggests that a dispute is disqualified from the appeal process if the carrier’s physician does not perform a physical examination of the driver. Thus, the unlawful separation claim was dismissed due to the fact that the employee had not exhausted his available administrative remedies.

Alternatively, an ADA claim based on impermissible inquiry was not subject to administrative remedies. The EEOC alleged that the employer had subjected the employee to disability-related inquiries in violation of the ADA. Again, the carrier sought dismissal, arguing that the EEOC improperly filed the action before the employee had exhausted his administrative remedies. The EEOC claimed that the impermissible inquiry claim was not subject to the exhaustion requirement because it did not involve a disagreement between physicians regarding driver qualifications. The court agreed, ruling the impermissible inquiry claim was properly before the court. Equal Employment Opportunity Comm’n v. P.A.M. Transport, Inc. (EDMich) CCH Federal Carriers Cases ¶84,704.

Trash “Throwers” Not Eligible for Overtime Pay

A federal district court in Missouri determined that the motor carrier exemption to the overtime provisions of the Fair Labor Standards Act (FLSA) was applicable to individuals employed as "throwers" or "loaders" by a motor carrier engaged in the collection and movement of trash. A group of employees filed suit against the employer, alleging that it had failed to pay them overtime wages. The employer argued that it was exempt from the overtime requirements of the FLSA under the motor carrier exemption of the Motor Carrier Act (MCA) because it was a motor carrier that transported goods in interstate commerce and the employees’ job-related duties directly affected the safe operation of motor vehicles in the transport of property in interstate commerce.

The court held that the employer was a motor carrier engaged in the interstate movement of property and the employees were acting as “loaders” within the meaning of the applicable federal regulations. For purposes of the FLSA, a "loader" is an employee of a carrier whose duties include, among other things, the proper loading of a motor vehicle so that they may be safely operated on the nation’s highways. Based on the facts presented, the court concluded that the employees were responsible for determining whether items left for pick-up were acceptable for loading into the trash collection trucks. Additionally, the evidence showed that the employees exercised their judgment and discretion in placing, distributing, or securing the trash in such a manner that the safe operation of the vehicles on the highways in interstate commerce would not be jeopardized.
Consequently, the court reasoned that the employees were properly adjudged to have been acting as loaders for purposes of determining FLSA applicability. As a result, the employees were not entitled to overtime pay. Graham v. Town & Country Disposal of Western Missouri, Inc. (WDMo) CCH Federal Carriers Cases ¶84,706.

Box Car Rail Traffic Exempt from ICA Regulation

A consignee was not liable under the Interstate Commerce Act (ICA) for unpaid rail freight charges arising from the shipment of rolled paper, a federal district court in New Jersey held. The rail carrier sought to collect from two separate consignees the unpaid freight charges for shipments of paper moved pursuant to a transportation contract with a bankrupt shipper. The ICA provides that a party named on the bill of lading as the sole consignee is presumptively liable for the associated freight charges, unless it accepted the freight as the agent of another and notified the carrier of its status in writing. While there had been no agency relationships in the case at bar, the consignees successfully argued that they were not liable under the ICA because the shipments had been moved by boxcars, and such movements were exempted from regulation. Accordingly, the consignees’ motion for summary judgment was granted. Canadian Nat’l Ry. v. Vertis, Inc. (DNJ) CCH Federal Carriers Cases ¶84,703.

Carmack Liability Extends to Lost Goods

A federal district court in Illinois held that a motor carrier was liable for the loss of a shipment of goods under the Carmack Amendment. A shipper had hired a freight forwarder to arrange for the transportation of two shipments of brass coils from the shipper's facility in East Alton, Illinois, to a purchaser's factory in Lewiston, Idaho. The freight forwarder hired an individual claiming to represent a motor carrier to provide the actual transportation services. In turn, that individual contracted with another carrier to transport the goods to a warehouse in Chicago. The delivering carrier had been instructed to ignore the destination listed on the bill of lading and deliver the goods to a warehouse in Chicago. The carrier sent two drivers to pick up the goods and deliver them to the warehouse. After being unloaded from the carrier's vehicles at the warehouse, the goods were never seen again. The shipper's insurance company reimbursed the shipper for the cost of raw materials and fabrication, and then brought suit against the freight forwarder, the initial carrier, and the delivering carrier, alleging negligence, breach of bailment, and Carmack violations. The insurer sought partial summary judgment on the question of Carmack liability against the delivering carrier.

The insurance company established a prima facie case for Carmack liability by showing that the goods had been delivered to the carrier in good condition and had not been received at their final destination, and by asserting a claim for a specific amount of damages. The carrier argued that the insurer could not show that the shipment was delivered in damaged condition because the goods had never been delivered. The court rejected the carrier’s argument, holding that the plain language of the Carmack Amendment establishes liability "for the actual loss or injury to" property. Thus, the fact that the goods were never delivered to their final destination was proof of loss or damage. Thus, the insurance company had satisfied its burden of proof.

Once the insurance company established a prima facie case, the burden shifted to the carrier to show that the damage to the shipment was a result of an excepted cause that relieved it from liability. The five exceptions to Carmack liability are: (1) an act of God; (2) the public enemy; (3) acts of the shipper; (4) public authority; or (5) inherent fault or character of the goods. The carrier claimed that the suspicious circumstances surrounding the disappearance of the shipment constituted a conspiracy or theft that qualified as an "act of the public enemy." The court found the carrier’s defense unavailing because, historically, acts of the public enemy have been limited to acts of war and did not generally include thefts or fraud. Consequently, the carrier was deemed to be liable for the lost shipments under the Carmack Amendment. Fireman’s Fund Ins. Co. v. Reckart Logistics, Inc. (NDIll) CCH Federal Carriers Cases ¶84,705.