March 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

Aviation Funding Extended for Six Months
President Barack Obama on March 30 signed into law the Federal Aviation Administration Extension Act of 2009 (Pub. L. 111-12), a six-month extension of aviation programs and taxes through September 30, 2009. The short-term funding law gives lawmakers more time to work on passage of a four-year, $70-billion authorization bill for the federal agency. The previous FAA authority expired on March 31, 2009.

The short-term reauthorization was sponsored by the bipartisan leadership of the House Ways and Means and House Transportation and Infrastructure Committees. Rep. James L. Oberstar (D-Minn.), who chairs the Transportation panel, noted that lawmakers on his Committee already have approved a four-year plan, the FAA Reauthorization Act of 2009 (H.R. 915). Oberstar said he believes the four-year measure will reach the House floor for a vote soon. The delay in passing long-term FAA funding rests with Senate negotiators, Oberstar said.

The aviation excise taxes extended under the new Extension Act support the Airport and Airway Trust Fund, which provides about 80 percent of FAA’s budget. In addition, the Act provides a total of $3.9 billion in contract authority for the Airport Improvement Program for fiscal 2009. It also authorizes short-term appropriations for FAA Operations, Facilities and Equipment, and Research, Engineering, and Development programs. Aviation Law Reports, Report Letter No. 1400, March 26, 2009.

Amtrak to Receive Recovery Act Funding
Amtrak is slated to receive $1.3 billion in grant funding from the recently enacted American Recovery and Reinvestment Act (ARRA) to expand passenger rail capacity. ARRA funding roughly doubles the size of Amtrak's capital investment program over a two-year period. It will be used to upgrade railroad assets and infrastructure and for capital projects that expand passenger rail capacity. Among the improvement projects that will be undertaken are replacement of a major drawbridge on the Northeast Corridor (NEC), repairs to Amtrak facilities nationwide, the repair and return to service of nearly 70 stored and damaged passenger cars, and the rehabilitation of major elements of the NEC electrification system. Repairs to passenger cars will be performed at Amtrak's facilities in Beech Grove, Indiana, and Bear, Delaware, where Amtrak plans to hire skilled workers laid off from jobs at recently shuttered manufacturing facilities located nearby.

In addition to helping Amtrak achieve a state of good repair for its critical infrastructure and assets, the projects to be funded through ARRA will result in tangible benefits to Amtrak's passengers, including increased capacity (with fewer sold-out trains), improved operational reliability, and increased passenger comfort and accessibility at stations. Refurnished rolling stock that is returned to service may also be available for use on new state-supported routes.

The economic recovery funds will be managed through a formal grant agreement between the Federal Railroad Administration and Amtrak, consistent with ARRA transparency and accountability requirements, including those related to job creation, assisting those areas most impacted by the recession, making investments that increase economic efficiency, and providing long-term economic benefits. The grant agreement will also ensure timely expenditure of the funding within two years and ensure that Amtrak complies with newly established financial, operational, and customer service standards. Federal Carriers Reports, Report Letter No. 1554, March 20, 2009.

Aviation News

NTSB Issues Urgent Recommendation for B-777 Engines
Following two engine thrust rollback events on Boeing 777 aircraft powered by Rolls-Royce engines, the National Transportation Safety Board issued an urgent safety recommendation calling for the redesign of an engine component. The recommendation is being issued in response to the findings in two investigations—an accident and an incident—involving engine thrust rollbacks on Boeing 777-200ER airplanes powered by Rolls-Royce RB211 Trent 800 Series engines. According to NTSB, in both cases, a build-up of ice (from water normally present in all jet fuel) on the fuel/oil heat exchanger (FOHE) restricted the flow of fuel to the engine, resulting in an uncommanded engine rollback.

The first event occurred on January 17, 2008, when a Boeing 777 experienced a dual engine rollback on final approach and crashed short of the runway at London's Heathrow International Airport. One passenger was seriously injured, eight passengers and four of the flight crew sustained minor injuries, and the airplane was substantially damaged, NTSB revealed. The second event occurred on November 26, 2008, when a Delta Air Lines Boeing 777 experienced a single engine rollback during cruise flight over Montana while en route from Shanghai to Atlanta. Normal operations resumed after the flight crew followed Boeing's published procedure to recover engine performance, and the airplane landed safely in Atlanta, NTSB said. “With two of these rollback events occurring within a year, we believe that there is a high probability of something similar happening again,” NTSB Acting Chairman Mark V. Rosenker contended, adding that the Board was confident that, with the Federal Aviation Administration and the European Aviation Safety Agency overseeing the process, this complex flight safety issue would be successfully and expeditiously resolved.

Along those lines, NTSB suggested that both the Federal Aviation Administration and the European Aviation Safety Agency:

• Require that Rolls-Royce redesign the RB211 Trent 800 series engine fuel/oil heat exchanger (FOHE) such that ice accumulation on the face of the FOHE will not restrict fuel flow to the extent that the ability to achieve commanded thrust is reduced; and
• Once the fuel/oil heat exchanger (FOHE) is redesigned and approved by certification authorities, require that operators of Boeing 777-200 airplanes powered by Rolls Royce RB211 Trent 800 series engines install the redesigned FOHE at the next scheduled maintenance opportunity or within six months after the revised FOHE design has been certificated, whichever comes first.

NTSB and the United Kingdom's Air Accidents Investigation Branch will continue to work together closely on both of the rollback events as each of the investigations move forward, the Board indicated. Aviation Law Reports, Report Letter No. 1400, March 26, 2009.

FAA Safety Actions Have Reduced Accidents, DOT Says
Steady and measurable increases in air safety by the Federal Aviation Administration have been made in recent years that make flying safer than ever before, the U.S. Department of Transportation recently asserted, noting that FAA's efforts have resulted in a 65-percent reduction in the aviation fatal accident rate between 1997 and 2006. Prior to last month's fatal accident near Buffalo, New York, there had been no fatal accidents involving commercial airliners for more than two years, DOT said, adding that the rate of runway incursions also has fallen.

The number of accidents caused by ice on aircraft has fallen as well, with FAA having issued more than 100 safety directives mandating specific actions, training, or procedures to help prevent icing-related accidents for more than 50 types of existing aircraft since the 1994 accident in Roselawn, Indiana. The last fatal commercial airline accident linked to icing occurred in 1997, while in the ten years before that, ten accidents—fatal and non-fatal—were attributable to icing. The agency also has worked on longer-term measures to improve the design of existing and future aircraft through rulemaking, according to DOT, which noted that a 2007 FAA rule set new standards for the performance and handling of commercial aircraft in icing conditions. In addition, rules currently under development will further strengthen aircraft ice-detection systems and address specific types of icing, DOT indicated.

As for runway incursions, FAA's safety efforts have reduced the number of serious incursions by 63 percent from fiscal year 2000 through 2008. According to DOT, there were 67 serious incursions in 2000 (including 34 involving commercial aircraft), as compared to a total of 25 incursions in 2008, of which only nine involved commercial aircraft. Between October and December 2008, there were no serious runway—an all-time low for a three-month period, DOT said, observing that FAA is continuing its efforts to further reduce runway accidents by installing runway status lights at more than 20 airports by 2011, and by considering the use of low-cost, commercially available ground radar systems at small and medium airports. FAA also has reached agreements with four U.S. airlines to fund in-cockpit runway safety systems in exchange for critical operational data, DOT disclosed. Aviation Law Reports, Report Letter No. 1399, March 12, 2009.

IATA: January Air Traffic Reflects Economic Slowdown
International scheduled air traffic results for January 2009 show a deepening year-on-year demand slump, according to the International Air Transport Association. International passenger demand fell by 5.6% in January, compared to January of last year, IATA revealed, noting that this January's figures also are a full percentage point worse than the 4.6% year-on-year drop recorded in December 2008. The January decrease in demand is the fifth consecutive month of contraction, IATA said.

Worse yet, the "alarming collapse" in cargo markets recorded in December (down 22.6%) worsened in January, with a 23.2% year-on-year demand drop, IATA revealed, adding that the January cargo figures represent the eighth consecutive month of contraction for freight traffic. "Alarm bells are ringing everywhere ... [t]he industry is in a global crisis and we have not yet seen the bottom," cautioned Giovanni Bisignani, IATA's Director General and CEO. "The only good news is that fuel prices remain well below last year's level. But the drop in demand is much more harmful. The industry is shrinking with revenues expected to fall by $35 billion [U.S. dollars] to $500 billion, delivering a loss of $2.5 billion this year," Bisignani said.

IATA is calling on the cargo supply chain to battle the current air cargo crisis by improving security, delivering a better product, and boosting efficiency. In a recorded message to 700 industry experts attending IATA's World Cargo Symposium in Bankok, Thailand, last week, Bisignani said that participants must look for opportunities that will build the future with a more efficient industry that is focused upon meeting customer needs. Exhorting that "change is required," Bisignani articulated three priorities for the supply chain: security, e-freight, and Cargo 2000.

In the security area, screening technology is not being optimized, IATA advanced, stating that definitions, requirements, and enforcement vary from country to country. Charging that the United States' plans to implement 100% cargo screening are misguided, IATA called for a strong industry effort to convince the U.S. to focus instead upon a globally coordinated, risk-based approach with shared responsibility throughout the supply chain. And, in the face of falling yields and demand, Bisignani stressed that the old, paper-based processes of air cargo should be replaced with e-freight, which has the capability of converting 12 of the 30 documents accompanying each international freight shipment into electronic documentation. Finally, Bisignani urged greater industry participation of the entire supply chain in Cargo 2000, an initiative established over a decade ago to simplify processes by reducing steps in the logistics chain and implementing effective quality standards. Aviation Law Reports, Report Letter No. 1399, March 12, 2009.

Injunction Against UAL Pilots' Job Actions Affirmed
A federal trial court did not err when it concluded that the union representing pilots at United Air Lines had not engaged in a good-faith effort to end a sick-out among the carrier's junior pilots by having sent them a letter purporting to discourage the effort, a federal appeals court in Illinois ruled, affirming the trial court's injunction against the Air Line Pilots Association's tactics aimed at encouraging an early reopening of contract negotiations with the Chicago-based carrier. Given the parties' labor history, the pilots would have understood the letter at issue to be an invitation to continue the unlawful job action rather than end it, the appellate panel said, adding that substantial deference was due to the trial court's findings in that regard. The appeals court also agreed with the trial court's conclusion that UAL's claims against ALPA were not barred by the Railway Labor Act's six-month statute of limitations, explaining that the union's actions were not discrete acts that occurred outside the period of limitations but, rather, had been a multi-faceted and ongoing slowdown campaign that violated the RLA outside of the limitations period and continued to occur and cause new harm during the limitations period.

Furthermore, the injunction was not prohibited by the Norris-LaGuardia Act, the appellate panel held, again agreeing with the trial court's determination. While the federal anti-injunction law generally strips courts of jurisdiction to enter injunctions against labor unions in cases growing out of labor disputes, U.S. Supreme Court precedent has carved out an exception for violations of specific provisions of the RLA, the panel advised. In that respect, although the union had entered into a so-called Standstill Agreement with United following the carrier's initiation of a lawsuit to halt the union's tactics, the trial court found that ALPA's subsequent actions and statements were not consistent with that pact. And, while voluntary cessation of wrongful conduct is a factor to be considered in determining whether an injunction is necessary, the trial court was within its discretion to have decided that an injunction was the only means of assuring compliance with the RLA's status quo provisions, the appeals court said.

United also prevailed under the NLGA's provision requiring clear proof that a union have participated in, authorized, or ratified the job actions for which injunctive relief is sought, the appellate panel said, citing the trial court's reliance upon statistical evidence regarding increases in the pilots' use of sick leave, refusals to accept junior/senior manning assignments, and flight delays and cancellations. More importantly, the panel noted, the trial court also relied upon the many messages that the union had conveyed to the pilots during the relevant time frame—including repeated directives to “fly the contract,” decline junior/senior manning assignments, and “work to rule.” Accordingly, the trial court did not err in concluding that the carrier clearly had proved that the union had authorized and/or ratified the unlawful job actions, the appeals court determined. United Air Lines, Inc. v. Air Line Pilots Ass'n, Int'l (7thCir) 33 Avi. 17,478.

“Bumped” Passengers' Tort Claim Preemption Upheld
A federal trial court correctly determined that the Airline Deregulation Act of 1978 preempted a common-law tort claim against an air carrier by two ticketed airline passengers who had been involuntarily denied boarding on an oversold flight and had been forced to wait in an airport terminal for two days before finally boarding a flight on another carrier, a federal appellate panel ruled in an unpublished opinion. Noting that the ADA provides that a state may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier and that a common-law tort action is a "law, regulation, or other provision having the force and effect of law" within the meaning of the statute, the appellate panel said that the only issue was whether the defendant carrier's treatment of the passengers related to its "service."

In that respect, the panel found that, although the passengers ultimately had not been seated on any of the defendant carrier's flights, under prior case law, the provision or anticipated provision of labor from the airline to its passengers constitutes a "service" under the ADA. Therefore, as the challenged actions in the case at bar related to the anticipated provision of labor by the defendant carrier, those actions related to its "service," thus rendering the passengers' tort claim preempted, the panel opined, further reflecting that, like an airline's failure to provide food or water to passengers stranded on a runway, the practice of "bumping" is a practice subject to competitive market forces, and such forces were within Congress' overarching goal in enacting the ADA. Weiss v. El Al Israel Airlines (2dCir) 33 Avi. 17,460.

Rejected Screener's Claims Against TSA Fail
A federal trial court lacked jurisdiction to review an Administrative Procedure Act claim against the Transportation Security Administration by an individual who had been unsuccessful in his attempt to obtain employment as an airport security screener during TSA's initial hiring for those positions, a federal appeals court determined. In so doing, the appellate court ruled that the TSA Administrator's decision not to utilize the FAA's personnel management system in deciding whom to employ or appoint as a security screener is committed to agency discretion by the Aviation and Transportation Security Act and is not reviewable under the APA.

ATSA, which created the TSA, states in one provision that the Federal Aviation Administration's personnel management system applies to the TSA and, with it, the federal transportation law's mandate that APA's provisions generally do not apply to FAA's personnel management system, the appellate panel observed, noting however that a different ATSA provision specifies that, “notwithstanding any other provision of law, the [TSA Administrator] may employ, appoint, discipline, terminate, and fix the compensation, terms, and conditions of employment of Federal service for such a number of individuals as the [TSA Administrator] determines to be necessary to carry out the screening functions [required by the Act].”

As such, the question of whether to utilize the FAA's personnel management system in employing or appointing security screeners is a matter for the TSA Administrator's discretion under ATSA, the panel said, remarking that the phrase “[n]otwithstanding any other provision of law” clearly signals the drafters' intention that the provisions of that section override conflicting provisions of any other section. In addition, the relevant provision speaks broadly to the Administrator's authority to “employ, appoint, discipline, terminate, and fix the compensation, terms, and conditions of employment” for security screeners, the panel articulated, asserting that this nearly comprehensive list of employment-related decisions brings within reach precisely the kinds of decisions on which the aggrieved individual's suit had focused.

Furthermore, the rejected applicant's constitutional claims failed as a matter of law, the appeals court ruled, observing that the individual's due process claim appeared to have been premised upon an assertion that he possessed a “property right” to the preferences afforded veterans under ATSA and federal transportation law, of which he could not be deprived without adequate procedures. However, the TSA Administrator was not obliged to provide veterans applying for security screener positions the preferences afforded under those provisions, as is necessary to have given rise to a colorable property interest, the court held. And, because the individual did not assert an employment-related equal protection claim arising out of his membership in any particular group, his equal protection claim could not survive the TSA Administrator's motion to dismiss, the panel concluded. Conyers v. Rossides (2dCir) 33 Avi. 17,505.

Re-Billed Shipping Charges Relate to Carrier Rates, Services
Claims by a gift card manufacturer that had sued a cargo carrier for allegedly having wrongfully re-billed certain charges were preempted by the Federal Aviation Administration Authorization Act of 1994 to the extent that they related to the cargo carrier's prices, routes, or services and derived from the enactment or enforcement of state law, a federal appeals court determined. The re-billing fee at issue was part of the cargo carrier's “operations,” and fell into both the “prices” and “services” categories defined under prior case law as triggering preemption, the appellate panel held.

Although shipping was the main component of the carrier's business and service, it was disingenuous to suggest that the carrier's billing procedures were not a necessary component of those business operations, the panel remarked. And, while the work to re-bill might have been de minimus, it still was part of the operations of the carrier's accounting department to do so, the panel said. In addition, the manufacturer's fraudulent and negligent misrepresentation claims—as well as a claim for money had and received and a claim that the re-billing charge was void as against public policy—were derived from the enforcement of state law, the panel found. However, to the extent that the manufacturer asserted that the re-billing fee had not been a part of its contract with the carrier, its contract claim that it had not agreed to the re-billing charge was not preempted, the panel determined. Data Mfg., Inc. v. United Parcel Serv., Inc. (8thCir) 33 Avi. 17,516.

Surface Transportation News

Route Designation Requirements Eliminated for Some Carriers
The Federal Motor Carrier Safety Administration (FMCSA) has delayed the effective date and reopened a comment period on a final rule that will eliminate the current route designation requirements for certain motor carriers transporting passengers over regular routes. The rule, which was to have taken effect on March 17, 2009, is being delayed in order to allow the new Administration the opportunity for further review and consideration of the final rule.

As currently adopted, the amendments eliminate the need to file and process multiple requests concerning routes, which the agency believes will decrease the paperwork burden on regular-route motor carriers seeking to expand or change their routes without compromising safety. Under current standards, motor carriers seeking authority to transport passengers over regular routes must submit a detailed description and a map of the route(s) over which they propose to operate. Additionally, once a carrier has obtained its operating authority, it must seek additional approval from FMCSA in order to change or add routes.

Under the revised regulations, FMCSA will be permitted to register certain motor passenger carriers as regular-route carriers without requiring the designation of specific regular routes and fixed endpoints. The elimination of the route designation requirement is intended to alleviate paperwork burdens on both the motor carriers and the agency. However, the amendments would not apply to carriers that are public recipients of governmental assistance; these carriers still would be required to designate specific routes when applying for regular-route authority. The final rule will now take effect on June 15, 2009. Federal Carriers Reports, Report Letter No. 1554, March 20, 2009.

STB Revises Cost of Capital Methodology
The Surface Transportation Board (STB) has revised its method for calculating the railroad industry's cost of capital. The Board has adopted a simple average of a Capital Asset Pricing model (CAPM) and a multi-stage Discounted Cash Flow (DCF) model to calculate the cost of equity-one component of the cost of capital. The STB has concluded that this methodology will produce a more precise determination than relying on CAPM alone.

The Board uses the cost-of-capital figure in evaluating the adequacy of individual railroads' revenues each year. The figure is also used in maximum rate cases, feeder-line applications, rail line abandonments, trackage rights cases, rail-merger reviews, and more generally in the Board's Uniform Rail Costing System. The Board will use this new approach to estimate the railroad industry's 2008 cost of capital. Federal Carriers Reports, Report Letter No. 1553, March 10, 2009.

State Mandate for Walkways Near Yard Tracks Enforceable
A federal court of appeals affirmed a district court's finding that an Illinois mandate that rail carriers provide walkways adjacent to yard tracks built or reconstructed after February 15, 2005, was not preempted by the Federal Railroad Safety Act (FRSA). The state regulation was adopted to address safety concerns in rail yards where switching activities occur. Under the regulation, a rail carrier must create walkways adjacent to those portions of yard tracks constructed or renovated after February 15, 2005, where rail carrier employees frequently work on the ground while performing switching activities.

A rail carrier operating a rail yard in Illinois challenged the walkway requirement, alleging that it was preempted by FRSA. The carrier sought an injunction barring enforcement of the state regulation, and a declaration that it was preempted by the FRSA. A federal district court concluded that the Federal Railroad Administration had not issued regulations specifically addressing the subject matter covered by the state regulation, nor did the state regulation conflict with or frustrate the goals of the FRSA. The lower court held that the federal regulations merely address the minimum safety standards related to track structure and roadbeds, and do not cover the entire gamut of materials, objects, or activities that may occur trackside. Thus, the state requirement was not preempted, the trial court held.

The railroad appealed the lower court's decision, arguing that the federal standards specifying how rail lines must be built cover walkways even though they do not specifically address them because walkways are bound to have an impact on the construction and maintenance of roadbeds, which are specifically covered by the federal rules. The appellate court disagreed, finding that the federal requirements for roadbed construction and maintenance do not “cover'' the subject of adjacent walkways. Furthermore, the appellate court concluded that the district court's determination that the federal regulations do not deal with the subject of walkways and its finding that the state's walkway requirement do not conflict with federal rules or objectives was reasonable and supported by the evidence. Thus, the state rule governing the placement of walkways adjacent to new or recently-rehabilitated yard tracks was not preempted, the appellate panel reiterated. Norfolk S. Ry. Co. v. Box (7thCir) Federal Carriers Reporter ¶84,579.

Insurance Charge-back Okay Under Truth-in-Leasing Requirements
A motor carrier was permitted to charge back to its owner-operators the cost of public liability and property damage (PL/PD) insurance it was required to maintain under federal statute, a federal court of appeals concluded, after ruling that the applicable statute of limitations on damage claims arising under the federal truth-in-leasing regulations was four years. A group of owner-operators who leased their equipment and driving services to a motor carrier that transported property in interstate commerce sued the carrier, alleging that it had violated the federal truth-in-leasing regulations by having charged back its insurance costs to them. A federal district court ruled in favor of the carrier, finding that, while the carrier was required to hold the PL/PD insurance, the federal statute did not specify who must pay for it. Thus, the carrier was permitted to pass on that cost to its owner-operators. Upon review, an appellate panel affirmed the lower court's decision and held that the carrier's charge-back of the insurance cost was allowable under the plain language of the applicable federal regulation.

Alternatively, the appeals court reversed the lower court's holding on the applicable statute of limitations for damage claims arising under a motor carrier's leasing agreement. The carrier had asserted, and the lower court had agreed, that the proper limitations period for damage claims was two years. The carrier asserted that that, but for an “editorial error,” the statutory provision authorizing the owner-operator's damage claim would have been subject to the two-year limitations period applicable to damage claims arising from overcharges. The appellate court rejected the carrier's claim, finding that, since the statute had not specify a specific statute of limitations on the claims at issue, the applicable limitations period was the general four-year federal limitations period. Thus, the damage claims asserted by the owner-operators for the period February 17, 2001, to February 16, 2003, should not have been dismissed as untimely. OOIDA v. Landstar Sys., Inc. (11thCir) Federal Carriers Reporter ¶84,580.

Carmack Applicable to Inland Leg of Intermodal Shipment
A forum selection clause in an intermodal through bill of lading was only enforceable if the parties to the agreement had complied with the applicable requirements for opting out of Carmack coverage, a federal court of appeals held. At issue had been which of the statutory frameworks should have governed the rail transportation at issue—the Carmack Amendment or the Carriage of Goods by Sea Act-and, if Carmack, which of the two statutory opt-out provisions applied to the contract for rail service in this case. The rail carrier had been hired by the ocean carrier to transport a shipment of goods from a port in Long Beach, California, to its final destination in Chicago, Illinois, under an intermodal through bill of lading that included a forum selection clause and a provision asserting that the Carriage of Goods by Sea Act governed carriers' responsibility. The goods were damaged when the train carrying them derailed. The purchaser filed a breach of contract suit against the carriers in state court. The rail carrier removed the case to federal court, and the ocean carrier and transportation broker filed a motion to dismiss based on the forum selection clause in the bill of lading, which specified that suits arising thereunder be litigated in Tokyo.

The trial court granted the motion to dismiss, determining that the parties had successfully avoided the strict venue limitations that would have applied to the rail portion of these shipments as a matter of federal law under the Carmack Amendment by having agreed in the contract that COGSA would govern the shipment. The appellate court disagreed, holding that, under prior case law, Carmack—not COGSA—must govern carrier liability for inland rail transportation unless the parties had effectively contracted out of Carmack coverage and its venue restrictions. The appeals court concluded that merely asserting in the bill of lading that COGSA was the applicable law was insufficient because, by its own terms, COGSA must yield to conflicting law, i.e., Carmack, on the question of venue. Thus, the venue selection clause contained in the bill of lading only would have been enforceable if the parties to the agreement had complied with the requirements to opt-out of Carmack coverage, the appellate court ruled.

There are two methods for opting-out of Carmack, the appellate panel instructed, noting that one covers exempt movements and the other covers non-exempt transportation. The court determined that the contract at issue concerned exempt transportation; therefore, the applicable statutory requirements to opt-out of Carmack required the carrier to offer Carmack protections to the shipper. Because the lower court's decision had been based on the alternative requirements found at 49 U.S.C. ¶10709(a), which did not require the offer of Carmack protections, the decision was reversed and remanded for further proceedings to determine whether the parties had complied with the appropriate statutory requirements. Regal-Beloit Corp. v. Kawasaki Kisen Kaisha Ltd. (9thCir) Federal Carriers Reporter ¶84,581.

Insurer Must Pay Default Judgment Under MCS-90 Endorsement
An individual injured in an accident with a commercial motor vehicle was not required to litigate the issue of negligence with an insurer in an action to enforce a default judgment under an MCS-90 endorsement, a federal district court ruled. The injured party had filed a negligence tort action against the carrier that had resulted in the issuance of a default judgment. The injured party then brought an action against the carrier's insurer to enforce the default judgment under the MCS-90 endorsement attached to the carrier's motor vehicle insurance policy. The insurer denied liability, claiming that it was not responsible for satisfying the judgment because it had not been given a chance to defend the liability action. Furthermore, it asserted that the policy may have been void ab initio as a result of the carrier's failure to have notified the insurer of the action against it. The injured party challenged the insurer's discovery request for information related to the accident and the injuries sustained as outside the scope of the case.

Under the MCS-90 endorsement, the insurer agreed to pay, within the limits of liability contained in its policy, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance, or use of an insured motor vehicle. As such, the insurer was obligated to satisfy a final judgment rendered against its insured for injuries resulting from carrier negligence. The court reasoned that, since the default judgment obtained by the plaintiff had been the result of a complaint that had repeatedly alleged negligence on the part of the carrier, it was a final judgment against the insured resulting from negligence. Thus, the insurer was obligated to satisfy the judgment under the MCS-90 endorsement and was not permitted to litigate the question of negligence. Therefore, discovery was limited to whether the plaintiff could establish the existence of a final judgment against the insured for public liability resulting from negligence. Hawthorne v. Lincoln General Ins. Co. (EDMich) Federal Carriers Reporter ¶84,582.