January 2010

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 Topic

Security Dominates National Agenda After Foiled Airline Attack
In the wake of the attempted effort by an alleged terrorist to detonate an explosive device aboard Northwest Airlines Flight 253 on Christmas Day 2009, President Obama and top Administration officials undertook an immediate review of existing aviation security standards and procedures, leading the President to conclude the government had failed to connect the dots in a way that would have prevented a known terrorist from boarding an airplane for the United States. In sum, the U.S. government had the information scattered throughout the intelligence system to potentially have uncovered the plot and disrupt the attack, but failed to understand that information, the President acknowledged in public remarks made on January 7.

Screening technologies that might have detected the explosives carried aboard Flight 253 already are in use at the Amsterdam airport where the alleged terrorist boarded the flight, but not at the specific checkpoints through which the individual had passed, Obama said. As a consequence, the President called for a series of additional corrective steps across multiple agencies, including a directive that the Department of Homeland Security strengthen America's international partnerships in order to improve aviation screening and to make use of advanced explosive detection technologies such as body imaging technology. In addition, the President ordered the immediate strengthening of the criteria used to add individuals to the nation's terrorist watch lists, especially the “No Fly” list.

For her part, Homeland Security Secretary Janet Napolitano followed up on the President's remarks by outlining five recommendations that DHS has made for improving the technology and procedures used to protect air travel from acts of terrorism:

• Re-evaluate and modify the criteria and procedures used to create terrorist watch lists—including adjusting the process by which names are added to the “No-Fly” and “Selectee” lists;
• Establish a partnership on aviation security between DHS and the Department of Energy and its National Laboratories in order to develop new and more effective technologies to deter/disrupt known threats and to proactively anticipate/protect against new ways by which terrorists could seek to board an aircraft;
• Accelerate the deployment of advanced imaging technology to provide greater explosives detection capabilities—and encourage foreign aviation security authorities to do the same—in order to identify materials such as those used in the attempted Christmas Day attack (the Transportation Security Administration currently has 40 machines deployed throughout the United States, and plans to deploy at least 300 additional units in 2010);
• Strengthen the presence and capacity of aviation law enforcement by deploying law enforcement officers from across DHS to serve as Federal Air Marshals to increase security aboard U.S.-bound flights; and
• Work with international partners to strengthen international security measures and standards for aviation security.

No foolproof solution exists, the President cautioned, but asserted that his Administration would continue a sustained and intensive effort of analysis and assessment so that no stone is left unturned in seeking better ways to protect the American people. He said that he would hold his staff, federal agencies, and the people employed by them accountable when they fail to perform their responsibilities. Obama added that he also has directed agency heads to establish internal accountability reviews and instructed his national security staff to monitor their efforts in that regard. “[U]ltimately, the buck stops with me ... when the system fails, it is my responsibility,” the President said. Aviation Law Reports, Report Letter No. 1419 (IRN)—Report Letter No. 1419 (IntelliConnect), January 12, 2010.

Airline Passenger Protection Is Aim of New Standards
Air carriers will have to adopt contingency plans for lengthy tarmac delays and publish those plans on their Internet websites, under new Department of Transportation rules providing enhanced passenger protection. The initiative, which adds a new part 259 to Title 14 of the Code of Federal Regulations, requires airlines to respond to consumer problems in several ways, including by: (1) deeming continued delays on a flight that is chronically late to be unfair and deceptive in violation of federal law; (2) requiring air carriers to publish additional information on their websites; and (3) requiring the adoption, website publication, and self-audit of customer service plans.

Beginning in December 2006 and continuing through the early spring of 2007, weather problems had kept more than a few commercial aircraft sitting on airport tarmacs, causing the affected passengers undue discomfort and inconvenience, the Department acknowledged, adding that it also observed that passengers were being harmed by the high incidence of less extreme flight delays due to factors other than weather conditions such as capacity and operational constraints. In December 2008, DOT reissued an earlier proposal that sought public input on, among other things, airlines' responses to consumer problems such as those described above.

Over 200 comments were submitted in response to the original proposal, with consumers/consumer groups asserting that the action did not go far enough and carriers/industry associations characterizing it as unduly burdensome and unnecessary. For the most part, the initiatives espoused in the original proposal were reflected in the 2008 reiteration, with the exception of provisions that would have required carriers to publish complaint data and report on-time performance for international flights, both of which were abandoned under the rationale that comparable information is available to consumers on the Internet. The new standards are slated to take effect on April 29, 2010. Aviation Law Reports, Report Letter No. 1419 (IRN)—Report Letter No. 1419 (IntelliConnect), January 12, 2010.

Aviation News

Comair Pilots' Negligence Caused Kentucky Crash
Representatives of passengers who perished in the August 2006 crash of Comair Flight 5191 were granted partial summary judgment against the airline with respect to the negligence of the pilots in having taken off from the wrong runway prior to the crash, Senior U.S. District Judge Karl S. Forester ruled on December 17, 2009. Comair, which asserted that it had accepted responsibility for mistakes made by its crew on the day of the accident and acknowledged that the captain and first officer of the flight had breached the applicable duty of care, argued that proximate cause had not been shown and that other factors—such as inadequate signage on the taxiway and runway—might have contributed to the crash.

The carrier misstated the plaintiffs' burden, however, Judge Forester said, advising that the decedents' representatives did not have to show that the pilots' negligence had been the sole cause of the crash, only that it had been a substantial factor in causing the crash. The possibility that other factors also might have contributed to the crash did not preclude the conclusion that the pilots' negligence had been a substantial factor in causing the crash, Judge Forester instructed. Ergo, once Comair acknowledged that its pilots had been negligent by attempting to take off from the wrong runway, reasonable minds could not differ on the question of whether that negligence had been a substantial factor in causing the plane to crash after it ran off the end of that runway. In that respect, as the carrier did not present any specific facts showing that there was a genuine issue for trial, the plaintiffs' motion for summary judgment against the carrier on the issues of negligence and causation was granted. In re Air Crash at Lexington, Kentucky, August 27, 2006 (EDKy) 33 Avi. 18,446 (IRN)—33 Avi. 18,446 (IntelliConnect).

DOT Issues Another Proposal on Lithium Battery Transport
In an effort to further strengthen safeguards for air shipments of lithium batteries and cells—including when these items are packed with or contained in equipment—the Department of Transportation proposed additional regulations to ensure that lithium batteries are designed to withstand normal transportation conditions and that they are packaged to reduce the possibility of damage that could lead to an unsafe incident or catastrophic accident. Since 1991, more than 40 air transport-related incidents involving lithium batteries and devices powered by lithium batteries have been identified, the agency revealed.

Under the new initiative, DOT is proposing to:

• Eliminate regulatory exceptions for small lithium cells and batteries when included in air shipment, requiring their transportation as Class 9 materials (meaning that they could pose a hazard when transported);
• Subject packages of small lithium batteries to the well-recognized marking/labeling requirements for hazardous materials;
• Require that transport documentation accompany shipments of small lithium batteries, including notification to the pilot-in-command of the presence and location of lithium batteries being shipped on an aircraft;
• Mandate that manufacturers retain results of satisfactory completion of United Nations design-type tests for each lithium cell and battery type;
• Limit stowage of lithium cell and battery shipments aboard aircraft to cargo locations accessible to the crew or locations equipped with an FAA-approved fire suppression system (unless transported in a container approved by the Federal Aviation Administrator); and
• Apply appropriate safety measures for the transport of lithium cells or batteries identified as being defective for safety reasons, or those that have been damaged or otherwise are being returned to the manufacturer, as well as limit the transportation of defective/damaged cells or batteries to highway and rail carriage.

As proposed, the standards are largely consistent with changes made to the United Nations Recommendations on the Safe Transport of Dangerous Goods by Air (ICAO Technical Instructions), and they respond to recommendations issued by the National Transportation Safety Board. The initiative proposes a mandatory compliance date of 75 days after the date of publication of a final rule in the Federal Register, the feasibility of which is among the topics on which DOT is inviting public feedback. Aviation Law Reports, Report Letter No. 1420 (IRN)—Report Letter No. 1420 (IntelliConnect), January 28, 2010, and Federal Carriers Reports, Report Letter No. 1574, January 22, 2010.

ADA Preempts Claims Related to Mexican Tourism Tax
State-law claims against a Mexican air carrier by a Mexican citizen representing a class of similar individuals who had been charged a Mexico-levied tourism tax on a round-trip flight from California to Mexico were not excepted from the Airline Deregulation Act's preemption of state laws, regulations, or other provisions related to air carriers' prices, routes, or services, a federal appellate panel in California held. In so ruling, the court declared that the carrier had no contractual obligation to advise passengers about the tax on airline passengers traveling into that country on international flights or Mexican citizens' exemption from that tax and right to a refund. The passenger alleged that, based upon language on the airline's Internet website, the carrier had breached its contractual obligations to passengers by having improperly collected the tourism tax and by having failed to disclose that the tax was not due from exempt passengers and that exempt passengers were entitled to a refund.

Under relevant case precedent, if the carrier had made a contractual commitment to advise passengers about the tax, not to collect it from exempt passengers, and to refund that portion of their ticket prices attributable to the tax, the passenger's state-law claims could have proceeded, the appeals court instructed. However, there having been no contractual obligation, the passenger stated no viable claim on that theory, the appellate panel held, concluding that the trial court's grant of judgment in favor of the carrier and dismissal of the passenger's action was appropriate. Sanchez v. Aerovias De Mexico, S.A. De C.V. (9thCir) 33 Avi. 18,448 (IRN)—33 Avi. 18,448 (IntelliConnect).

Tips Law Not Preempted, Massachusetts Judge Rules
Inviting the further litigation/review that is likely to follow in its wake, U.S. District Judge William Young maintained his stance that the Airline Deregulation Act of 1978 does not expressly preempt an action alleging that an air carrier's imposition of a service charge on baggage checked at the airport curb violated a Massachusetts tips law by having diverted tip revenue from skycaps to the carrier. In one of at least three suits in that state against different carriers, the plaintiff skycaps in the case at bar claimed that passengers had stopped tipping for check-in service, believing that the $2 cash-only fee imposed by the carriers was being retained by the skycaps instead of the airlines.

Differing with two other federal judges' rulings within the same jurisdiction, Judge Young reiterated on reconsideration that the ADA expresses a broad preemptive purpose in displacing state rules that pertain or refer to airline prices, routes, or services. However, the scope of ADA preemption is not unlimited, and claims brought by airline employees generally escape preemption because the relationship of state employment laws to prices, routes, or services is too tenuous to support preemption, he opined, reasoning that the state tips law is a law of general applicability; it applies to all employers equally and does not prescribe compliance procedures to be followed by airlines. Rather, it imposes a ban on primary conduct, i.e., it forbids the appropriation of tips meant by customers to be retained by employees, he reasoned. In that respect, it affects airlines in their capacity as employers, and not as air carriers, he continued.

Applying the “significant effect” test articulated by prior case law, the carrier failed to prove that the tips law has a significant effect upon airline prices and services, Judge Young held, standing on his 2007 judgment awarding the skycaps damages for violation of the state tips law despite his colleagues' contrary conclusions. DiFiore v. Am. Airlines, Inc. (DMass) 33 Avi. 18,462 (IRN)—33 Avi. 18,462 (IntelliConnect).

INS Airline Fines Upheld on Appeal
In litigation challenging the Immigration and Naturalization Service's imposition of fines against airlines for transporting undocumented immigrant and non-immigrant aliens into the United States in violation of the so-called “Penalty Statute” (which prohibits transport of an undocumented alien), a federal trial court erred when it invalidated a long-standing rule of the Board of Immigration Appeals (BIA), a federal appellate panel determined. The rule conditioned the Penalty Statute's application upon whether INS regulations entirely exempt from visa requirements transported aliens who are in receipt of a waiver. The appeals court ruled that, because the Penalty Statute is ambiguous with respect to whether imposition of the fine is consistent with regulations exempting certain groups of aliens from the visa requirement based on a post-arrival waiver, the BIA's interpretation was entitled to deference.

While not compelled by the statutory and regulatory scheme, the Board's interpretation certainly was plausible and rational, the appellate panel held, noting that neither the government nor the challenging airlines had disputed that BIA had long interpreted the statute and corresponding INS regulations to exempt carriers from liability when an alien is granted certain post-arrival waivers. Therefore, the trial court's ruling in that regard was reversed and remanded.

Furthermore, the panel held that INS had acted reasonably by having paroled aliens into this country (instead of granting them post-arrival waivers) in order to preserve its ability to fine the airlines. The carriers' assertion that the agency had an improper motive for employing its parole power was unsupported, the court said, adding that the agency's shift in enforcement policy was not a legislative act that required notice to the carriers under the Administrative Procedure Act. When making parole decisions, INS exercises a broad discretionary power, the panel advised, concluding that the trial court's judgment in favor of INS on the grounds that the agency chose from among the various enforcement mechanisms available to it when paroling aliens into the United States rather than granting them visa waivers was appropriate. United Airlines, Inc. v. Brien (2dCir) 33 Avi. 18,371 (IRN)—33 Avi. 18,371 (IntelliConnect).

Additional Security Fee Assessment Was Not Arbitrary, Capricious
An air carrier that had been assessed over $1 million in additional passenger security fees failed to show that the Transportation Security Administration's determination had been arbitrary, capricious, an abuse of discretion, or contrary to law, a federal appeals court in the District of Columbia determined, ruling that a compliance audit of the carrier's records for a four-year period conducted on behalf of TSA had utilized a straightforward methodology. The auditors had picked twelve flights that, in their judgment, best represented the entire audit period, and had examined the tickets/records for those flights in order to determine whether the carrier had failed to impose, collect, or remit to TSA the statutorily required passenger security fee.

The carrier contended that the auditors' non-random selection of the flights to audit had been based upon the higher potential for passenger fee-collection errors in certain time periods and, as a consequence, had resulted in an overstated error rate. However, the court asserted that the carrier had failed to demonstrate that the audit methodology had been so flawed that the audit findings upon which the agency had relied bore no rational relationship to the characteristics of the data to which it had been applied. Under that standard, the carrier's technical objection to the use of non-random judgmental sampling was unfounded, as the use of such sampling is an accepted tool among auditors and is a recognized means of drawing an appropriately representative sample of the population under study, the court observed.

Also unsupported by evidence was the carrier's assertion that the audit sample had been skewed toward flights likely to have had a higher error rate, the court held, ruling that the record showed that TSA had engaged auditors who had expertise in the appropriate design of audit investigations and the evaluation of audit data. Finally, the carrier's objection to TSA's denial of a credit for passenger fees that had been paid but had not been collected from passengers also failed, as the agency's refund policy authorized refunds only for those fees that the carrier had been obligated to refund to passengers who never had used their purchased tickets, the court concluded. Alaska Airlines, Inc. v. Transp. Security Admin. (DCCir) 33 Avi. 18,418 (IRN)—33 Avi. 18,418 (IntelliConnect).

Surface Transportation News

Changes to Engineer Qualification/Certification Rules Adopted
Revisions to the rules governing the qualification and certification of locomotive engineers have been adopted by the Federal Railroad Administration (FRA). The amendments are intended to address unanticipated consequences arising from reclassifications and clarify the grounds upon which a railroad may revoke a locomotive engineer's certification.

Specifically, the final rule: (1) prohibits a railroad from reclassifying an individual's locomotive engineer certificate to that of a more restrictive class during the period in which the certificate is otherwise valid, while permitting the railroad to place restrictions on the locomotive engineer if appropriate; (2) clarifies that revocation of an engineer's certificate may only occur for the reasons specified in the regulation; and (3) requires railroads to identify the actions it will take in the event that a person fails a skills performance test or the railroad finds deficiencies with an engineer's performance during an operational monitoring observation or unannounced compliance test. Finally, FRA has adopted other minor editorial modifications that eliminate outdated references and promote consistency with other FRA regulations and guidance. The revised regulations take effect on February 22, 2010. Federal Carriers Reports, Report Letter No. 1573, January 13, 2010.

New Safety Standards for Freight and Passenger Trains Adopted
New regulations implementing a requirement of the Rail Safety Improvement Act of 2008 (RSIA) have been adopted by the Federal Railroad Administration (FRA) and are slated to take effect on March 16, 2010. The rulemaking requires the installation of Positive Train Control (PTC) technology on the nation's major rail lines as well as commuter and intercity passenger rail routes. PTC is an integrated set of technologies that will help avert train-to-train collisions, derailments caused by excessive speed, accidents caused by human error or misaligned switches, and harm to roadway workers. PTC sends and receives a continuous stream of data transmitted by wireless signals about the location, speed, and direction of trains. PTC systems utilize advanced technologies including digital radio links, global positioning systems, and wayside computer control systems that aid dispatchers and train crews in safely managing train movements.

The final rule addresses the required functionalities of PTC system technology and the means by which PTC systems will be certified. It also describes the contents of the PTC implementation plans, which are required by statute to be submitted to FRA by April 16, 2010, and explains the submission procedures for the review and approval of such plans. Finally, FRA is seeking additional comments on a few specific provisions of the final rule addressing whether clarity can be improved and whether further opportunities for cost savings, consistent with safety, are available. Federal Carriers Reports, Report Letter No. 1574, January 22, 2010.

Updated Passenger Equipment Safety Standards Adopted
Passenger equipment safety standards have been clarified and amended by the Federal Railroad Administration (FRA). The adopted amendments are intended to address concerns raised and issues discussed about cab car and multiple-unit locomotive front-end frame structures by the Railroad Safety Advisory Committee's Passenger Safety Working Group.

The modifications will enhance the structural strength requirements for the front end of cab cars and multiple-unit locomotives. The enhancements include the addition of deformation and energy absorption requirements contained in the revised American Public Transportation Association standards for front-end collision posts and corner posts for passenger equipment. Additionally, miscellaneous amendments to clarify current regulations for the structural strength of passenger equipment were adopted. The revised regulations take effect on March 9, 2010. Federal Carriers Reports, Report Letter No. 1573, January 13, 2010.

Carmack Covers Carrier's Liability for Failure to Collect C.O.D.
A shipper's state law claims arising from a carrier's failure to collect or remit cash on delivery (C.O.D.) payments as required by a bill of lading were preempted by the Carmack Amendment, a federal district court ruled. The shipper contracted with the carrier to transport goods in interstate commerce. In furtherance of the contract, the shipper prepared online waybills for each shipment that required the carrier to collect payment upon delivery. The carrier delivered the goods but failed to remit the C.O.D. payments to the shipper.

The shipper then filed suit in state court alleging breach of fiduciary duty, breach of contract, and conversion, along with a claim under the Texas Theft Liability Act. The shipper sought $21,999.72 in actual damages and between $75,375 and $80,775 in attorneys' fees. The carrier removed the action to federal court and filed a motion for summary judgment, asserting that the shipper's state law claims were preempted by Carmack, and that its liability under Carmack was limited to $100 per package. The shipper argued that while Carmack was applicable, its state law claims were not preempted because the Carmack Amendment was not intended to condone breach of fiduciary duty, breach of contract, conversion, or thievery. The U.S. Supreme Court has held that the Carmack Amendment embraces all damages resulting from any failure to discharge a carrier's duty with respect to any part of the transportation services provided, including the collection of C.O.D. payments. As such, the court rejected the shipper's argument, holding that the state law claims arising from the carrier's failure to remit C.O.D. payments were preempted by Carmack, as were the claims for attorneys' fees.

Moreover, the shipper argued that its damages should not have been limited to $100 per package because it had not been given an opportunity to choose between different levels of liability coverage. This argument was rejected because the shipper had been afforded an opportunity to request Shipment Value Protection in the online waybill that it had filled out. The shipper's failure to select the extended protection option was deemed evidence of its acceptance of the liability limitation. Accordingly, the carrier's liability was limited to $100 per package. Tran Enterprises, LLC v. DHL Express (USA), Inc. (SDTex) Federal Carriers Reporter ¶84,635.

State Law Claims Against Loader Not Preempted by Carmack
The Carmack Amendment did not preempt a shipper's state law claims against an entity that loaded goods in preparation for shipment in interstate transportation, a federal district court ruled. The shipper had filed negligence and breach of contract claims against the loader after the equipment that it had loaded onto a trailer for delivery by another carrier arrived at its final destination in a severely damaged state. The loader challenged the suit, alleging that the state law claims were preempted by the Carmack Amendment. The shipper asserted that Carmack preemption did not apply because the loading of goods was not a service related to the movement of cargo; therefore, the loader had not been acting as a motor carrier.

The Carmack Amendment governs a motor carrier's liability for damages arising from the interstate transportation of goods. However, in order to determine whether an entity is a motor carrier for purposes of Carmack applicability, a court must look at the role the entity plays in the movement at issue. Under federal statute, a “motor carrier” is defined as “a person providing motor vehicle transportation for compensation.” Transportation includes “services related to the movement of property, including arranging for, receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, handling, packing, unpacking, and interchange of passengers and property.” The statutory definition of transportation does not include “loading” as one of the related services. Thus, an entity that only loads cargo in anticipation of transportation does not provide a transportation-related service and is not a motor carrier for purposes of Carmack liability. Accordingly, the shipper's state law claims against the loader were not preempted by the Carmack Amendment. D.M. Best Co. Inc. v. Summit Worldwide, LLC (SDTex) Federal Carriers Reporter ¶84,636.

Final Agency Order Vacated Due to Defective Claim Notice
The Federal Motor Carrier Safety Administration vacated a notice of default and final agency order (NDFAO) issued against a motor carrier that failed to reply to a Notice of Claim (NOC) within 30 days of service. The carrier was issued a NOC charging it with four violations of the Federal Motor Carrier Safety Regulations, including operating as a household goods mover without the required operating authority. The carrier, who alleged that it had not received the Notice of Claim in a timely manner, sought reconsideration of the notice of default and final agency order. The Field Administrator (FA) opposed the carrier's request, asserting that the NOC had been properly served.

Whether the NOC had been properly served was irrelevant in this case because the notice itself was defective on its face. Under the applicable federal statute, the minimum penalty for providing interstate transportation of household goods without the proper operating authority is $25,000 for each violation. Here, the carrier was assessed a penalty of $1,520 for the violation, which is significantly below the minimum. Because the NOC failed to comply with one of the governing statutes, it was found to be defective, as was the final agency order based on the notice. As a result, the petition for reconsideration was granted and the default notice and the final agency order were vacated. J.L. White Moving & Storage, Inc. dba White Van Lines (FMCSA) Federal Carriers Reporter ¶51,432.