July 2009

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

Bipartisan Aviation Funding Bill Introduced in Senate
U.S. Senate Committee on Commerce, Science, and Transportation Chairman John D. Rockefeller (D-W.Va.) introduced new Federal Aviation Administration reauthorization legislation last week, calling for the bill to be a top Congressional priority because it would provide FAA with the necessary resources to improve air travel in the U.S. by accelerating modernization of the nation's air traffic control system, addressing critical safety concerns in the national airspace system, and improving rural community access to air service.

Among its key provisions, the two-year funding measure (S. 1451) would:

• Require FAA to develop a plan to provide runway incursion information to pilots in the cockpit, and initiate improved processes for tracking/investigating operational errors;
• Mandate that an independent study of the latest scientific research on pilot fatigue be applied to FAA's required rulemaking on flight-time limits and rest requirements for flight crews;
• Require enhanced safety oversight of foreign repair stations;
• Take steps to ensure "one level of safety" in commercial aircraft operations;
• Improve federal oversight of the NextGen initiative and accelerate the implementation of NextGen technologies;
• Require FAA to complete a comprehensive study of air traffic control realignment or consolidation in relation to airspace system modernization;
• Streamline the Passenger Facility Charge process (without changing or increasing current fees);
• Require air carriers to develop contingency plans to address situations in which the departure of a flight is substantially delayed while passengers are confined within an aircraft, and allow deplaning after a three-hour delay; and
• Mandate improved disclosure of flight information when tickets are purchased.

Lauding the measure's consumer protection and system modernization emphases, Senator Rockefeller called upon lawmakers to pass the legislation. Aviation Law Reports, Report Letter No. 1408, July 23, 2009.

STB's Simplified Rules for Rail Rate Challenges Affirmed
The Surface Transportation Board's (STB's) adoption of simplified methods for resolving rail rate disputes too small to bring under ordinary rate dispute procedures was not arbitrary or capricious, according to a federal court of appeals. Petitions for review were filed by both railroads and shippers. The shippers asserted that the STB had acted arbitrarily in setting the relief cap levels and in its adoption of the simplified stand-alone cost procedures. The railroad challenged the three benchmark system, arguing that the rulemaking had failed to provide notice of certain adopted provisions and the test itself failed to take into consideration regulatory lag. The railroads also challenged the STB's prohibition on evidence of movement-specific adjustments to the cost estimates and product or geographic competition.

Upon review, the appellate court stated that, due to the complexity of the subject matter and the fact that the STB is the expert body designated by Congress to determine the proper method for assessing whether a rate is just and reasonable, any review of decisions related to this subject matter must be afforded substantial deference. Based on this standard, it was concluded that the changes adopted by the STB were reasonable and satisfactorily explained in the rulemaking document. As such, the petitions for review were denied. CSX Transp., Inc., v. STB (DCCir) Federal Carriers Reporter ¶84,608.

Aviation News

Development of Alternative Jet Fuel Advances
An international panel of fuel experts has endorsed the advancement toward final approval of a new specification for alternative commercial jet fuel, the Federal Aviation Administration announced, commenting that the action represents a major milestone in the agency's efforts to support the aviation industry's endeavors to develop sustainable alternative fuels. Supported by the FAA- and industry-sponsored Commercial Aviation Alternative Fuels Initiative (CAAFI), the American Society for Testing and Materials' (ASTM) International Aviation Fuels Subcommittee approved the new specification, which details the properties and criteria necessary to control the manufacture and quality of alternative fuels for safe use in aviation. Once approved by the full ASTM committee, the new specification will enable the use of synthetic fuels from multiple feed stocks in combination with conventional jet fuel up to a 50-percent blend. Applauding the effort as a "watershed event," the Air Transport Association of America said that it sets the stage for the blended fuel to receive full approval by the end of this year.

Asserting that this important step could lead to approval of a number of alternative fuels in the next few years, FAA Acting Administrator for Policy, Planning and the Environment Nancy LoBue expressed confidence that these efforts will help lower aviation's carbon footprint as part of the Next Generation (NextGen) Air Transportation System Plan. Along those lines, ASTM is planning follow-up work that will build upon the new specification to enable the future approval of new jet fuel options, and FAA said that it will continue to participate actively in such efforts in order to ensure that any new fuel specification approved meets or exceeds current standards for safety and performance. Aviation Law Reports, Report Letter No. 1407, July 9, 2009.

McCarran Modified Departure Path Withstands Judicial Scrutiny
The Federal Aviation Administration did not act arbitrarily or capriciously when it issued a Finding of No Significant Impact/Record of Decision approving a modification of the departure path from one of the runways at Las Vegas McCarran International Airport, a federal appellate panel determined. Despite the contention by the City of Las Vegas that the agency had not adequately considered two subsequent modifications to the flight path that were implemented after the Draft Supplemental Environmental Assessment (DSEA) for the proposal had been issued, the court found that the record revealed that the agency had taken the requisite "hard look" at the safety of the proposed path as mandated under prior case law.

Before having sought a waiver of the design criteria for flight paths for the proposed path at issue, FAA had conducted a series of tests required to ensure that the proposed path maintained an equivalent level of safety, the court commented, ruling that, despite whatever justification the agency had for requesting a waiver, the tests found equivalent levels of safety for the proposed path.

Furthermore, the approval/disapproval of the waiver didn't impact noise or air quality, so FAA didn't need to analyze the waiver in those sections of the Final Supplemental Environmental Assessment (FSEA) dealing with noise or air quality impacts, the court added, stating that Las Vegas' argument that FAA's air quality and noise analyses had been arbitrary/capricious was without merit. Finally, the panel found no merit in the municipality's contention that FAA should have issued a Supplemental Environmental Assessment (SEA) that analyzed the impact of the waiver and post-DSEA modifications. FAA did not need to produce an SEA for those modifications because they were not significant, the court determined. City of Las Vegas, Nevada, v. Fed. Aviation Admin. (9thCir) 33 Avi. 17,833.

NTSB Got it Wrong on Pilot's Affirmative Defense
The National Transportation Safety Board's ruling that it lacked jurisdiction to entertain a pilot's affirmative defense of voluntary disclosure in an appeal of the pilot's certificate suspension for having failed to report/log certain in-flight mechanical problems he'd encountered while working for a commercial air cargo carrier was unreasonable and contrary to federal law, a federal appellate panel concluded, vacating and remanding the Board's decision. At both the initial hearing and appeal before the Board, the pilot asserted that his actions had fallen within the Federal Aviation Administration's voluntary disclosure program, which is outlined in an FAA Advisory Circular and covers individual employees of regulated parties under certain circumstances.

In exercising its jurisdiction to review FAA orders of suspension, NTSB is bound by all validly adopted interpretations of laws and regulations the Administrator carries out, and by written agency policy guidance available to the public related to sanctions unless the Board finds an interpretation arbitrary, capricious, or otherwise not according to law, the court instructed. Nevertheless, in this case, the Board concluded that the Advisory Circular upon which the pilot had based his affirmative defense was not "related to sanctions" even though the Circular provides that no sanctions will be imposed in cases of voluntary disclosure, the court remarked, asserting that the words "related to" are broader than the Board had interpreted them. A Circular that says no sanction will be imposed in a case of voluntary disclosure quite obviously is "related to sanctions," the appellate panel directed, adding that an independent basis for vacating the Board's order could be found in its inconsistent handling of a prior case in which an employee of an air carrier had been allowed to assert an affirmative defense based upon the same Circular. Moshea v. Nat'l Transp. Safety Bd. (DCCir) 33 Avi. 17,880.

Delta-Mesa Pact Cancellation Halt Affirmed
A Georgia federal court did not err when it ruled that Mesa Air Group, corporate parent of Freedom Airlines, was entitled to a preliminary injunction prohibiting Delta Air Lines from cancelling a regional operations agreement with Freedom Airlines, a federal appellate panel determined. The cancellation had been based upon Freedom Airlines' so-called "completion rate" (the ratio of scheduled flights to flights that actually reach their destination), which had declined after the regional carrier agreed to undertake operations at New York's John F. Kennedy Airport, whose air traffic conditions had the potential to affect completion rates.

Mesa alleged that it had received and relied upon assurances from Delta that coordinated cancellations—i.e., those in which lower priority flights are cancelled on a carrier's own initiative in order to increase the likelihood that higher priority flights will reach their destinations—would not be counted in calculating the completion rate after the move to JFK, arguing that Delta should be equitably estopped from counting coordinated cancellations in Freedom's completion rate once it undertook operations to New York.

The appeals court found that the trial court correctly held that Mesa had shown a substantial likelihood of success on its estoppel claim because: (1) there was a sufficient basis for the conclusion that Delta had made a false representation to the regional carrier; (2) Mesa's reliance upon those representations was not unreasonable notwithstanding the agreement's "no oral modifications" clause; and (3) but for Delta's assurances regarding coordinated cancellations, Freedom Airlines likely would have operated a number of flights that had been cancelled at Delta's request. Accordingly, the trial court did not abuse its discretion when it granted Mesa's motion for a preliminary injunction, the appellate panel said. Mesa Air Group, Inc. v. Delta Air Lines, Inc. (11thCir) 33 Avi. 17,884.

Carrier's IIA Signature Not Imputable to Regional Partner
The Warsaw Convention and its specified liability limitations applied to injuries allegedly sustained by a passenger on an international flight operated by a regional airline that had partnered with a major international carrier on certain routes, a Florida federal court determined. The passenger contended that the regional airline was bound by the IATA Intercarrier Agreement on Passenger Liability (IIA)—which increased the Convention's limit of liability for personal injury damages—because the major carrier had signed the Agreement and had acted as agent for the regional airline in the sale of the ticket for the flight at issue.

Pursuant to the plain language of the Convention, however, there must be a contract between the carrier and the passenger (i.e., the passenger ticket and any applicable tariffs) in order to waive the treaty's liability limitations, the court ruled, adding that the IIA expressly provides that signatories must implement its waiver of limitation on liability by incorporating it into their conditions of carriage and tariffs. Therefore, even if the major carrier had been acting as the regional carrier's agent for the sale of the passenger's ticket, it could not be determined that the agency relationship had resulted in the regional carrier's having been bound by the terms of the IIA, the court held, reasoning that the major carrier had signed the Agreement over ten years before the passenger had booked her flight.

Furthermore, the passenger presented no authority to support her position that the regional carrier should be bound by the major carrier's signatory status, nor did she present evidence of a contract between her and the regional carrier in which it had agreed to waive the Convention's liability limitations, the court held. Pemberton v. Executive Airlines, Inc. (SDFla) 33 Avi. 17,858.

ADA Preempts Consumer Fraud Claim Against Carrier
A state-law consumer fraud claim against an air carrier that had withdrawn service to a city after having executed a group service agreement to transport several members of a law firm to an annual business retreat in that city was expressly preempted by the Airline Deregulation Act of 1978, a federal court in New Jersey ruled. The court found that, even when read liberally, the claim involved policing of marketing practices and, as such, had the forbidden effect of impacting the airline's ability to determine and set rates, routes, and services.

The count specifically was directed at "the services [the carrier] agreed to perform" and "the manner ... that [the carrier] would be providing services" with respect to the "advertised price," the court said, adding that the facts upon which the firm had relied in order to elevate its charges to a cognizable state-law fraud claim directly affected rates, routes, and services. Rather than holding the carrier to its bargain, in effect, the claim represented an enlargement or enhancement of the bargain based upon state law; a possibility foreclosed by U.S. Supreme Court precedent interpreting ADA preemption, the court held, nevertheless sustaining the firm's breach-of-contract claim against the carrier under the rationale that it was the appropriate theory of recovery in the case. Flaster/Greenberg, P.C. v. Brendan Airways, LLC (DNJ) 33 Avi. 17,826.

"Shocked" Passenger Fails to Support Claim Against Carrier
An Oregon federal court ruled that an air carrier was entitled to summary judgment in a negligence action against it by a passenger who alleged that she had been injured when she received two 20,000-volt electric shocks to her forehead while on a flight. According to the court, to survive the summary judgment motion, the passenger had to present specific facts upon which a reasonable jury could find that the carrier had caused her injuries, which she failed to do. Moreover, as the passenger asserted that the electric shocks had resulted in trauma, loss of vision, headaches, and neurological damage, her claim was not a simple "cause and effect" correlation, and expert testimony was required, the court articulated.

Although it appeared that the passenger had the assistance of experts, at the time of filing, she did not provide their testimony to support her claim. And, while the passenger clearly went to great lengths to research the issues that she believed were involved --citing several federal aviation regulations and submitting airline squawk sheets, accident reports, and studies about the electrical wiring in airplanes --none of the submissions addressed the issue of causation necessary in order to allow her to proceed. Furthermore, although the passenger's medical records suggested that she was suffering from various medical symptoms, no doctor had confirmed or concluded that the alleged electric shocks had caused her injuries. Therefore, as the passenger offered no specific facts suggesting that the carrier had caused her injuries, she failed to show that there was a genuine issue for trial, the court concluded. Cook v. United Airlines, Inc. (DOr) 33 Avi. 17,839.

Surface Transportation News

FRA Removes Regulations for Which Authority Has Been Repealed
The Federal Railroad Administration (FRA) is removing a section of regulations covering Nondiscrimination in Federally Assisted Railroad Programs. The regulations were authorized by the Railroad Revitalization and Regulatory Reform Act of 1976. However, the authority upon which the regulations were adopted was repealed in 1983. As a result, the agency determined that the affected regulations found in part 265 of title 49 of the Code of Federal Regulations (CFR) can and should be removed from the CFR. FRA asserts that removal of part 265 will lower the administrative burden to government and industry, reduce government printing costs, and enhance the clarity and usefulness of the CFRs. The final rule takes effect August 13, 2009. Federal Carriers Reporter, Report Letter No. 1562, July 24, 2009.

STB Lacked Jurisdiction to Consider Declaratory Order Petition
A declaratory order by the Surface Transportation Board (STB), which held that a railroad was required to obtain prior agency authorization to abandon railroad trackage located in Jersey City, New Jersey, was vacated by a federal appellate court because the STB did not have the authority to determine what type of trackage was involved in the transaction. The petition for declaratory order had been filed after Consolidated Rail Corporation (Conrail) sold the rail property without first having obtained abandonment authority. The petitioners challenged the sale, asserting that abandonment authority was required because the affected track had been transferred to Conrail as a railroad line. Conrail argued that the track had been an ancillary spur track not subject to abandonment requirements. The STB agreed with the petitioners that the trackage in question was rail line.

Upon review, the appellate panel determined that the STB did not have jurisdiction to consider the declaratory order petition. The trackage in question had been transferred to Conrail by the Final System Plan (FSP) established under the authority of the Regional Rail Reorganization Act of 1973. Under the Act, the Special Court had been created to issue conveyance orders and deal with any actions seeking ``to interpret, alter, amend, modify, or implement any of the orders entered by the court pursuant to section 743(b) of this title in order to effect the purposes of this chapter or the goals of the final system plan.'' Upon the dissolution of the Special Court, all of its jurisdiction and other functions were assumed by the U.S. District Court for the District of Columbia. Because the outcome of the declaratory order petition hinged upon how the trackage was classified when it was conveyed to Conrail, an interpretation of the FSP and the conveyance order was required. As such, the petition clearly fell within the ``original and exclusive jurisdiction'' of the U.S. District Court for the District of Columbia as successor to the Special Court, the appellate panel ruled. Accordingly, the STB's decision was vacated. Consol. Rail Corp. v. STB (DCCir) Federal Carriers Reporter ¶84,613.

Shipper Bound by Terms of Its Own Bill of Lading
A motor carrier's liability was limited under a bill of lading prepared by a shipper that included a reference to the carrier's tariff, which contained a limitation of liability provision, a federal district court concluded. The shipper had used the carrier to transport electrical panels in interstate commerce for more than a decade, during which time the shipper used its own bills of lading rather than bills prepared by the carrier. The shipper's bill of lading included a reference to the carrier's tariff. During one shipment, the goods were severely damaged. The shipper submitted a claim to the carrier for $56,200. The carrier argued that, pursuant to the limitation of liability contained in the bill of lading, the shipper's damages were limited to $18,000.

The shipper challenged the carrier's claim, asserting that the limitation of liability was not applicable because the shipper had not been given an opportunity to choose between different levels of liability since it had not been made aware of the limiting provision in the tariff. By rejecting the shipper's argument, the court asserted that it would be unfair to allow the shipper that prepared the bill of lading to reap the benefits of the contract, in the form of lower rates in the event of no loss occurred and to disavow the contract in the event of loss. Thus, the shipper was bound by the terms of bill of lading it had prepared, including the liability limitation provision. F.M. Machine Co. v. R&L Carriers, Inc. (11thCir) Federal Carriers Reporter ¶84,610.

Employer Need Only Exercise Ordinary Care Under FELA
A federal court of appeals affirmed a district court's ruling finding that a railroad employer was not liable for injuries sustained by employees in the course of their employment under the Federal Employer's Liability Act (FELA). The employees had been injured when they were exposed to hydrochloric acid vapors emanating from a passing train. As a result of their injuries, the employees filed separate lawsuits against their employer under FELA, alleging that the employer had failed to provide a reasonably safe workplace. A federal district court ruled in favor of the employer, finding that the employer had not violated federal hazardous materials regulations or been negligent in its pre-trip inspection procedures. The employees appealed the decision.

Upon review, the appellate court held that, in order to survive the summary judgment motion, the employees had to prove that their employer had either violated a safety statute that established an absolute duty on the railroad or had been negligent. The employees asserted that the railroad had violated three federal regulations issued under the Hazardous Materials Transportation Act. Additionally, they alleged that the railroad had breached its duty to provide a reasonably safe workplace by having failed to conduct an adequate pre-trip inspection that would have uncovered the leak. Based on the evidence presented, the court concluded that the employer had not violated any safety statutes related to the transportation of hazardous materials and ruled that the pre-trip inspection conducted by the railroad had been reasonable and had satisfied established inspection requirements. Consequently, the decision granting the employer's summary judgment motion was affirmed. Borger v. CSX Transp., Inc. (6thCir) Federal Carriers Reporter ¶84,614.

Railroad Employee's FELA Claim Not Precluded by LIA
An action by a railroad employee against his employer under the Federal Employer's Liability Act (FELA) was not precluded by the Locomotive Inspection Act (LIA), a federal district court ruled. The employee, who had been injured when he slipped and fell from a platform while attempting to disembark from a locomotive in order to inspect a passing train, filed a FELA claim alleging that the required use of safety footwear during winter weather conditions had created an unsafe work environment. The employer challenged the FELA claim, asserting that it was precluded under the LIA because the railroad had been in compliance with the locomotive safety standards adopted by the Secretary of Transportation. The employee argued that LIA was not applicable because the statute only covered parts and appurtenances attached to a locomotive, not safety footwear required by the employer, which was the focus of the employee's claim.

In assessing whether and to what extent LIA precludes claims under FELA, the court held that the LIA is a supplement to FELA, in that a violation of the LIA is deemed negligence per se under FELA. The court further opined that where no LIA violation has occurred, a FELA claim involving issues directly covered by those regulations would be precluded. However, FELA claims involving issues not addressed by LIA-such as safety footwear-will not be precluded simply because the injury occurred in or on an LIA-compliant locomotive. Accordingly, based on the evidence submitted, it was determined that the employee's injury and subsequent claim arose as a result of the safety footwear and not the locomotive flooring. As such, the employee's FELA claim was not precluded. Becraft v. Norfolk S. Ry. Co. (NDInd) Federal Carriers Reporter ¶84,606.

HHG Driver/Loader Not Eligible for Overtime Pay
A federal district court determined that the motor carrier exemption to the overtime provisions of the Fair Labor Standards Act (FLSA) was applicable to an individual employed by a household goods mover as a loader and driver. The employee filed suit against the employer, alleging that it had failed to pay 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 employee's job-related duties directly affected the safe operation of motor vehicles in the transport of property in interstate commerce.

Based on the undisputed facts, the court concluded that the employer was a motor carrier engaged in the interstate movement of property and the employee was a ``loader'' and a ``driver'' within the meaning of the applicable federal regulations; therefore, his work activities directly affected the safe of operation of motor vehicles on public highways. Accordingly, the employee was not entitled to overtime wages. Ellis v. All My Sons Moving & Storage of Orlando, Inc. (NDIll) Federal Carriers Reporter ¶84,607.