September 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

Transportation Funding Extended Through January Next Year

President Obama signed into law another extension of funding for both the the Federal Aviation Administration and the nation’s surface transportation programs. The FAA extension was the twenty-second consecutive stop-gap reauthorization since the agency’s last long-term budget law expired in 2007. The latest measure [Pub. L. 112-30, 125 Stat. 342], which also reauthorized surface transportation spending, keeps FAA’s funding in place through January 31, 2012, while surface transportation programs are funded through March 31, 2012.  CCH Aviation Law Reports, Report Letter No. 1460, September 23, 2011; CCH Federal Carriers Reports, Report Letter No. 1614, September 30, 2011.

EOBR Rulemaking Vacated

A final rulemaking authorizing the Federal Motor Carrier Safety Administration (FMCSA) to mandate the use of electronic on-board recorders (EOBRs) for non-compliant motor carriers was deemed arbitrary and capricious by a federal court of appeals. Enacted in 2010, the regulations adopted a “1 x 10” remedial directive, calling for the installation of EOBRs in all commercial motor vehicles in a carrier’s fleet for two years if the carrier is found to have a greater than 10 percent rate of noncompliance with hours of service rules in any single compliance review.

An independent truckers’ association challenged the rulemaking, asserting that the agency had not followed Congress’ directive to ensure that the devices could not be used to harass vehicle operators. It also asserted that the cost-benefit analysis was arbitrary and capricious because it failed to establish the benefits of requiring EOBRs. Finally, the association claimed that mandating EOBRs was a violation of the Fourth Amendment. The court agreed with the association’s initial argument, finding that the agency had failed to adequately explain how it had considered whether the mandated use of EOBRs could be used to harass drivers.

The appellate panel concluded that the single sentence in the final rulemaking document stating that the agency had taken into consideration the statutory requirements did not satisfy the congressional directive. In order to adequately show that it had addressed the harassment issue, the agency needed to have articulated a reason for its action that demonstrated a “rational connection between the facts found and the choice made,” the court said. Because FMCSA had not done so, the final rulemaking was deemed arbitrary and capricious. Thus, the final rule was vacated and remanded to the agency for further consideration. OOIDA v. FMCSA (7thCir) CCH Federal Carriers Cases ¶84,697.

Aviation News

Boeing 787 Dreamliner Gets Production Go-Ahead

Federal Aviation Administration has approved production of the Boeing 787 Dreamliner, issuing the Chicago-based manufacturer two certificates for the design and production of the new aircraft: (1) a Type Certificate approving the plane’s design; and (2) a Production Certificate allowing Boeing to manufacture the 787 with Rolls Royce engines. The certificates were issued following a rigorous review by FAA inspectors of Boeing’s quality system, production tooling, manufacturing processes/controls, inspection methods, and supplier control procedures.

Boeing made its initial application to FAA on March 28, 2003, and the Dreamliner program was launched in April 2004. The first B787 rollout ceremony was held on July 8, 2007, at Boeing’s Everett, Washington assembly factory. The airplane made its initial flight on December 15, 2009, and the six flight-test airplanes since have accumulated more than 4,645 flight hours, with approximately 25 percent of those hours flown by FAA flight-test crews. More than 200,000 hours were logged by FAA technical experts involved in the type certification of the B787.

A medium-sized commercial transport airplane, the B787 is the world's first major airliner to use composite materials for most of its construction—more than 50 percent by weight. The airplane will use 20 percent less fuel and will produce less noise compared to similarly sized airplanes. It also incorporates many capabilities of NextGen, the nation’s Next Generation Air Transportation System. The European Safety Agency (EASA) also issued a same day validation of the FAA Type Certificate of the B787, FAA said. CCH Aviation Law Reports, Report Letter No. 1459, September 12, 2011.

Pilot-In-Command Proficiency Check Changes Implemented

The Federal Aviation Administration revised its regulations concerning pilot, flight instructor, and flight school certification in order to require pilot-in-command (PIC) proficiency checks for pilots who act as PICs of turbojet-powered aircraft. The amendments, which do not affect pilots of either single-seat experimental jets or experimental jets that do not carry passengers, allow pilot applicants to apply concurrently for a private pilot certificate and an instrument rating. Flight schools and provisional flight schools also may apply for a combined private pilot certification and instrument rating course.

In addition, the rule allows pilot schools to use Internet-based training programs without requiring schools to have a physical ground-training facility, revises the definition of “complex airplane,” and permits the use of airplanes with throwover control wheels for expanded flight training. Further, the initiative amends the requirements on pilot certificates in order to allow the conversion of a foreign pilot license to a U.S. pilot certificate under the provisions of a Bilateral Aviation Safety Agreement (BASA) and Implementing Procedures for Licensing (IPL). The revised standards become effective on October 31, 2011. CCH Aviation Law Reports, Report Letter No. 1459, September 12, 2011.

Air Traffic Control Tower Privatization Upheld

The Federal Aviation Administration’s privatization of its Level I air traffic control towers was permissible under the federal transportation law provision governing agreements for state and local operation of airport facilities, a federal appeals court ruled. The provision specifies that, “[t]he Secretary may make a contract with a qualified entity (as determined by the Secretary) or, on a sole source basis, with a State or political subdivision of a State to allow the entity, State, or subdivision to operate an air traffic control tower classified as a level I (Visual Flight Rules) tower if the Secretary decides that the entity, State, or subdivision has the capability to comply with the requirements of this paragraph.”

Under the provision’s plain meaning, because the term “VFR” appears in parentheses following the term “level I,” “VFR” would appear to limit the scope of the term “level I,” as if to say that FAA could not privatize all Level I towers but, rather, only those Level I towers handling exclusively VFR flights. The use of “VFR” elsewhere within the provision belies that interpretation, however, the court found. Rather than as a parenthetical modifier of the term “level I,” “VFR” clarifies the language preceding it, as if to say that FAA should continue to privatize low-activity ATC towers, for example, those handling VFR flights. As such, the court said that the term “level I (Visual Flight Rules) tower” includes the ATC towers in FAA’s privatization program, whether they handle exclusively VFR traffic or not.

Furthermore, the court held that the provision’s language demonstrates Congress’ intent that FAA may contract Level I ATC towers to private, non-governmental entities. Before the provision’s 2003 amendment, it already had authorized FAA to contract Level I ATC towers to “a State or a political subdivision of a State.” Separating its addition by the word “or,” Congress subsequently added the term “qualified entity” in 2003 as the first in the list of enumerated actors with which the agency could contract to operate Level I towers. As such, the court advised that “qualified entity” necessarily refers to something other than a state, county, or local government—for example, a private commercial contractor. To hold otherwise would render the term “qualified entity” superfluous, the court reasoned.

As a result, because the statutory provision applies to Level I ATC towers and permits FAA to contract with private, non-governmental entities for those towers’ operation, Congress effectively declared work in those towers not “inherently governmental” as that term is used in an Office of Management and Budget directive reserving inherently governmental functions for performance by government employees, the court said. Therefore, the federal trial court did not err in having ruled that work in Level I towers is not inherently governmental, the court concluded. Nat’l Air Traffic Controllers Ass’n v. Sec’y of Transp. (6thCir) 34 Avi. 16,346.

Environmental Impacts of New Runway Must Be Addressed

A federal appellate panel held that the Federal Aviation Administration order determining that the proposed construction of a new runway at Portland, Oregon’s Hillsboro Airport had no significant environmental impact was unreasonable under federal environmental protection law requiring the preparation of an environmental impact statement (EIS) in advance of a federal action that significantly affects environmental quality. As a threshold matter, the court found that the challengers had not waived their environmental law arguments by having failed to raise them during the public comment period on the proposed order.

A review of the record of the hearing conducted by the airport operator prior to its submission of a draft environmental impact statement on the project and written materials submitted by the challengers showed that the plaintiffs had addressed some, but not all, of the arguments raised in the instant case, the court observed, asserting that the challengers’ comments sufficiently had addressed the argument that the environmental assessment (EA) should have considered the indirect effects of the proposed airport expansion’s increased demand for aviation activities due to increased capacity. Furthermore, the EA’s failure to have addressed that argument was a flaw that was so obvious that the challengers need not have raised it in their comments in order to preserve it, the court advised.

Conversely, the court found that the challengers’ arguments that the EA did not consider a reasonable range of alternatives and the impacts of a new control tower were both waived and unpersuasive. However, the court said that the challengers had preserved their arguments that an EIS should have been prepared because the context and intensity of the project was significant and the cumulative impacts analysis was deficient in that it failed to address zoning changes related to the airport and neighboring properties. According to the court, adding a new runway would result in increased demand, and the EA failed to consider the indirect effects of that increased demand.

Even if the stated purpose of the project was to increase safety and efficiency, the impacts of increased demand attributable to the additional runway had to be analyzed as growth-inducing events falling under the purview of federal environmental protection regulations, the court stated. Accordingly, remand was necessary in order for FAA to consider the environmental impact of increased demand resulting from the expansion project, if any, the court determined. Barnes v. U.S. Dep’t of Transp. (9thCir) 34 Avi. 16,362.

“No-Fly List” Designee’s Viable Claims Belong in Appeals Court

An individual’s damage to reputation-based constitutional claims arising out of his placement in the U.S. government’s Terrorist Screening Database (TSDB) and on the Transportation Safety Administration’s “No-Fly List” were not sufficiently related to a TSA final order such that they were within the scope of the federal transportation law provision vesting jurisdiction to review the order in the U.S. Court of Appeals, according to a Virginia federal trial court. Moreover, in order for the claim to be cognizable in the trial court, the individual had to have alleged something more than his inclusion in the TSDB and “No-Fly List” in order to state a constitutional claim, the trial court judge advised.

The individual asserted that his listing in the TSDB constituted a defamatory statement that he was a terrorist or had been suspected of being a terrorist. More than a defamatory listing was necessary in order to state a claim, however, the court said, noting that the individual had not alleged that his name as someone specified in the TSDB or on the “No-Fly List” had been or would be disseminated/used for any purpose other than the implementation of the Secure Flight Program administered by TSA. Nor was there a purpose that reasonably could have been inferred, the court added.

The individual, who alleged that his inclusion on the “No-Fly List” had been “leaked” to a major newspaper, did not assert that this had been an official action authorized as part of the official program administered by the government defendants. Rather, the individual generally alleged that he had been injured because the government’s confirmation that he had been placed on the “No-Fly List” meant that it suspected that he was a terrorist, and that such a determination had encroached upon his reputational interests and had interfered with his future personal and professional relationships. Those types of vague, non-specific harms were not sufficient, the court found, dismissing the claims.

The constitutional claims based upon restrictions upon the individual’s right to travel arising out of his placement in the TSDB and “No-Fly List” sufficiently implicated a TSA final order such that the claims were within the scope of the federal transportation law provision vesting jurisdiction to review the TSA order in the U.S. Court of Appeals, however, the trial court said. An individual is personally affected in his ability to travel only after the issuance of the “boarding pass printing result” that instructs an air carrier not to issue a boarding pass to a traveler whose name is on the “No-Fly List.” That restriction on the traveler, communicated in the “boarding pass printing result,” is a TSA order because it imposes a legal obligation upon the carrier to deny a boarding pass to a putative passenger, the court reasoned, ruling that the issues raised by the individual with respect to his inability to fly were inescapably intertwined with TSA orders and transferring those claims to the appeals court. Mohamed v. Holder (EDVa) 34 Avi. 16,381.

Security Screening Protestor’s Claims Largely Meritless

A passenger who had been detained and arrested following his “silent protest” (he stripped to his bare chest, upon which he had written the Fourth Amendment to the U.S. Constitution in black marker) against the enhanced security screening procedure in place at his departure airport failed to state a cognizable constitutional claim against both airport commission members and airport police officers in their official and individual capacities, a Virginia federal court determined, finding that the passenger also had failed to state a cognizable constitutional claim against the Secretary of Homeland Security or the head of the Transportation Security Administration in their official capacities.

Other than having implemented the TSA directive mandating the enhanced screening, the passenger’s only other allegations concerning the two agency executives were mere conclusory assertions that they had failed or deliberately had been indifferent in their respective duties to train the TSA employees involved in the passenger’s screening and others. The passenger did not allege that either executive had been directly involved in any of the events at issue, nor did he allege any facts suggestive of deliberate indifference. Accordingly, the passenger’s claims against the two federal officials were dismissed.

As for the airport commissioners and police officers, the court said that the passenger did not sufficiently allege a commission policy, custom, or practice supporting a reasonable inference of municipal liability, nor could such liability be reasonably inferred from his allegations concerning the airport police chief. While the passenger’s allegations might have established that the police chief was a policymaker, they fell markedly short of suggesting that the chief had directed any action that had caused the alleged constitutional violations. Furthermore, the passenger did not allege any facts suggesting that protests in the form of passengers removing their clothes in the screening area would be recurring, or that the failure to have trained officers in some unidentified respect likely would have led to First Amendment violations. Accordingly, the passenger’s claims against the commissioners and police personnel were dismissed.

Similarly, the passenger failed to state a cognizable deprivation of civil rights claim against the Transportation Security Administration airport screening employees in their official capacities, the court stated, reasoning that the passenger did not plead any factual basis for his contention that the TSA employees had acted under color of state law. As to the passenger’s claims against the screeners in their individual capacities, however: (1) the passenger’s equal protection claim failed to set forth any allegations concerning similarly circumstanced individuals; (2) the passenger’s unreasonable search/seizure claim failed because his behavior (continuing to undress despite having been told not to) had been bizarre, thus justifying as reasonable the screeners’ summoning of the airport police for further inquiry.

Therefore, because the screeners had not violated the Fourth Amendment, they were entitled to qualified immunity on the individual claim that they had caused the passenger’s arrest without probable cause. As to the passenger’s allegation that the screeners had engaged in content and/or viewpoint discrimination because of his “silent protest” against TSA’s screening policies, the question of qualified immunity had to await further discovery because his unrebutted claim facially stated a cause of action. In that respect, the screeners’ motion to dismiss that count was denied. Tobey v. Napolitano (EDVa) 34 Avi. 16,393.

Surface Transportation News

FMCSA Revises Saddle-Mount Braking Rules

The Federal Motor Carrier Safety Administration (FMCSA) amended the Federal Motor Carrier Safety Regulations (FMCSRs) to eliminate the requirement for operational brakes on the last saddle-mounted truck or tractor in a triple saddle-mount combination, except when a full mount is present. The rulemaking was initiated in response to a petition from the Automobile Carriers Conference (ACC) of the American Trucking Associations. Existing rules require operational brakes on any wheel of a saddle-mounted vehicle that is in contact with the roadway.

The petition contended that the current requirement degrades the braking performance of these combinations because the lightly loaded axle of the last vehicle tend to lock up under heavy braking. Based on the comments received and its own analysis, FMCSA determined that the elimination of the braking requirements for triple saddle-mount combination was warranted. The final rule takes effect on October 13, 2011. CCH Federal Carriers Reports, Letter No. 1614, September 30, 2011.

NTSB Calls for Ban on Mobile Phone Use by CMV Drivers

Following an investigation into a fatal collision between a commercial motor vehicle (CMV) and a 15-passenger van, the National Transportation Safety Board (NTSB) issued safety recommendations to the Federal Motor Carrier Safety Administration (FMCSA) that, among other things, call for FMCSA to prohibit the use of both handheld and hands-free cellular telephones by all commercial driver’s license holders while driving in commercial operations, except in emergencies. The accident occurred when the CMV departed its lane, crossed a 60-foot-wide median, struck and overrode a cable barrier system, and entered the northboard travel lanes where it struck the van. The CMV driver and 10 of the 12 occupants of the van were killed in the accident.

The NTSB determined that the probable cause of the accident was distracted driving on the part of the CMV driver. Investigators determined that the driver had used his mobile phone for calls and text messages a total of 69 times while driving in the 24-hour period prior to the accident, including four calls in the minutes leading up to the crash. Contributing to the severity of the accident was the median barrier system, because it was not designed to redirect or contain a vehicle of the accident truck’s size.

As a result of the investigation, and in addition to the proposed cell phone ban, NTSB also recommended that FMCSA apply the vetting criteria of the New Applicant Screening Program to the information submitted by all new entrant motor carriers.
Additionally, NTSB reiterated, previously-issued recommendations that FMCSA:

• Seek statutory authority to deny or revoke operating authority for commercial interstate motor carriers found to have applications for operating authority in which the applicant failed to disclose any prior operating relationship with another motor carrier, operating as another motor carrier, or being previously assigned a U.S. Department of Transportation number.

• Develop an evaluation component to determine the effectiveness of its New Applicant Screening Program.

CCH Federal Carriers Reports, Letter No. 1614, September 30, 2011.

Security Requirements Did Not Affect Limitation of Liability

Security procedures agreed upon as part of a transportation contract did not affect a carrier’s ability to limit its liability under the Carmack Amendment, a federal district court in California held. The shipper and the carrier had entered into a transportation contract for the movement of seven shipments of mobile phones. The contract required the carrier to follow specific security procedures, including transporting each shipment separately. The carrier failed to abide by the security terms and consolidated the shipments into one truckload. The truck carrying the seven shipments was stolen from an unlocked truck yard and the phones were never recovered. As a result, the shipper filed suit against the carrier for the loss of the mobile phones valued at $7.7 million. The carrier admitted culpability but argued that its liability was limited to $35,000 per shipment.

Under the Carmack Amendment, carriers can limit their liability by satisfying certain regulatory requirements. The carrier asserted that it had given the shipper a reasonable opportunity to choose between different levels of liability, had obtained the shipper’s agreement as to the liability level, and had issued a bill of lading prior to shipment. The shipper challenged the carrier’s contention, arguing that compliance with the agreed-upon security procedures had been a condition precedent to the carrier’s ability to limit its liability. The shipper’s claim that the carrier was required to go beyond the statutory requirements of the Carmack Amendment in order to successfully limit its liability was rejected because it was unsupported by any cited authority. Thus, the carrier’s liability had been properly limited to $245,000. Personal Comm. Devices v. Platinum Cargo Logistics (CDCal) CCH Federal Carriers Cases ¶84,698.

Requirement of Proof of Non-Payment of Lumping Fees Upheld

A federal court of appeals affirmed a lower court decision holding that a receiver of goods was entitled to summary judgment on a claim that it had not compensated owner-operators forced to hire unloading services, also known as lumpers. A group of owner-operators had filed an action against the receiver, claiming that it had violated federal law by: (1) failing to compensate the owner-operators for the required use of unloading services; (2) requiring drivers to provide proof-of-insurance coverage in excess of the statutory minimum if a driver wished to unload his own trucks; and (3) choosing to receive its product as palletized freight and then neglecting to provide drivers with the equipment necessary to unload the freight. In granting summary judgment on the reimbursement issue, the lower court ruled that the owner-operators were required to establish in their prima facie case that they had not been reimbursed for the cost related to the hiring of the unloading services by either the receiver or the shipper as allowed under the applicable provision. The owner-operators appealed the ruling, arguing that the receiver was required to reimburse the drivers for the cost of the unloading service because it had required the hiring of the lumpers.

Upon review, the appellate panel agreed with the lower court, finding that the provision at issue mandates that a shipper or receiver of property that requires any person who owns or operates a motor vehicle transporting property in interstate commerce to be assisted in the loading or unloading of goods must provide such assistance or compensate the owner or operator for all associated expenses. In order to prove a violation of this statutory requirement, an affected driver must show that he was not compensated by either a receiver or a shipper for the cost of the unloading service. Because the drivers failed to provide more than a scintilla of evidence demonstrating that they had not been reimbursed by either the receiver or a shipper, the court determined that the owner-operators had not established a prima facie case. Therefore, the court concluded that summary judgment in favor of the receiver had been properly granted. Accordingly, the lower court’s decision was affirmed. OOIDA v. Supervalu, Inc. (8thCir) CCH Federal Carriers Cases ¶84,700.

Consignee Bound by Bill of Lading Issued by Shipper

A standard form bill of lading—incorporating a carrier's tariff and limiting the carrier's liability for loss or damage—was binding on a consignee of the goods being shipped, according to a federal district court in Wisconsin. The carrier had been hired by the shipper to transport the goods to the consignee. The goods were damaged during transportation, and the consignee filed a claim against the carrier to recover damages in the amount of $357,467. The carrier challenged the consignee's damage claim, contending that the claim had not been filed in a timely manner. Alternatively, the carrier asserted that if the claim was deemed to have been filed on time, then the carrier’s liability was limited by the bill of lading to $55,000. The consignee countered, alleging that the bill of lading did not apply to the shipment. The consignee also asserted that it had filed a timely claim.

The consignee’s argument regarding the viability of the bill of lading rested on the contention that it had not been issued by the carrier. The fact that the shipper prepared the bill of lading was immaterial to its validity or its applicability to the consignee's claim. Under federal transportation law, a bill of lading prepared by a shipper and accepted by the carrier has the same force and effect as a bill of lading issued by the carrier. As such, the consignee was bound by the terms of the bill of lading, including the time frame for filing a claim and the limitation of liability.

As to the timeliness of the consignee's claim, the court concluded that the e-mail sent to the carrier by the consignee's representative was sufficient to meet the claim filing requirements. The e-mail was sent to the carrier within nine months of delivery of the goods and provided the carrier with the information necessary to begin an investigation by clearly identifying the shipment and damaged goods, asserting liability against the carrier, and making a claim for money damages. Thus, the consignee’s claim was filed in a timely manner, the court held. Valerus Compression Servs., L.P. v. Lone Star Transp., LLC (EDWis) CCH Federal Carriers Cases ¶84,701.

Carrier Entitled to Judgment on Damage Claims

On reconsideration, a federal district court in Indiana reversed its position on a motion for summary judgment, ruling that a motor carrier involved in the shipment of medical equipment that had been damaged during transportation was entitled to judgment on the issue of the limitation of liability. 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, the shipper 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. The court stated in its opinion denying the carrier’s motion for summary judgment that while this has been true in other cases where the shipper had agreed to a limitation of liability with the initial carrier and had given explicit authority to the initial carrier to enter into downstream limitation of liability agreements on its behalf, there was no evidence that either of those things occurred in this case.

The carrier sought reconsideration, arguing that the court had misinterpreted the controlling case law. Upon review, the court agreed, finding that even if the contract between the carrier and the freight forwarder had not been controlling, the bill of lading, which identified TAMS as the shipper, had provided the shipper with an opportunity to declare a value for the shipment or accept the released rate of $.60 per pound. Consequently, the court reversed its initial decision and determined that the carrier had limited its liability in conformance with the Carmack Amendment. Consequently, the carrier’s motion for summary judgment was granted. Nipponkoa Ins. Co. Ltd. v. Atlas Van Lines, Inc. (SDInd) CCH Federal Carriers Cases ¶84,702.