October 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

Air Cargo Security Initiative Finalized
New regulations fulfilling the statutory mandate that a system to screen 100 percent of cargo transported on passenger aircraft be established by August 2010 were issued by the Transportation Security Administration on September 16, implementing the Certified Cargo Screening Program (CCSP), a scheme under which TSA-certified cargo screening facilities located in the U.S. can volunteer to screen cargo before tendering it to aircraft operators for carriage on passenger aircraft. The initiative codifies a requirement of the Implementing Recommendations of the 9/11 Commission Act of 2007 [Pub. L. No. 110-53, 121 Stat. 266].

Under the rule, facilities upstream in the cargo supply chain—such as shippers, manufacturers, warehousing entities, distributors, third-party logistics companies, and indirect air carriers located in the U.S.—can apply to TSA to become a Certified Cargo Screening Facility (CCSF). Aircraft operators that screen cargo off-airport also must become approved CCSFs in order to screen cargo for transport on passenger aircraft. Recertification, including a new examination/security program assessment by so-called TSA-approved "validators," will be required of CCSFs every three years. Along those lines, the rule also establishes procedures under which firms may apply for agency approval to conduct validation assessments of CCSFs, including a mandate that the individuals conducting such assessments be U.S. citizens, nationals, or lawful permanent resident aliens.

Once certified, CCSFs must carry out a TSA-approved security program that utilizes TSA-approved screening methods and adheres to strict chain-of-custody requirements to secure cargo from the time it is screened until it is loaded onto passenger aircraft. According to the agency, approximately 12 million pounds of cargo are transported on passenger aircraft in the U.S. each day. Lauding the CCSP as a "common-sense solution that will greatly enhance air cargo security ... engaging thousands of stakeholders," TSA Assistant Administrator John Sammon characterized the program as a critical step toward meeting the 9/11 Act's mandate that cargo be screened in an efficient and effective manner that facilitates the flow of commerce.

The new scheme also requires that both CCSF personnel and CCSF validators successfully undergo a TSA-conducted security threat assessment (STA) for which they will have to pay a fee. TSA has proposed a fee designed to cover the government's costs of conducting such assessments, and is inviting public comments on both the fee itself and the methodology used to develop it. The initiative was implemented as an interim final rule slated to take effect on November 16, 2009. Aviation Law Reports, Report Letter No. 1413 (IRN)—Report Letter No. 1413 (IntelliConnect), October 1, 2009.

Emergency Response Telephone Number Requirements Updated
In order to preserve the effectiveness of the emergency response system for hazardous materials transportation, the Pipeline and Hazardous Materials Safety Administration (PHMSA) is amending the shipping paper requirements for certain hazardous materials shipments. Under existing regulations, hazardous materials shipments must be accompanied by shipping papers and other documentation in order to communicate to transport workers and emergency responders the hazards associated with a specific shipment. The information contained on shipping documents must include: the immediate hazards to health; risks of fire or explosion; immediate precautions to be taken in the event of an accident; initial methods of handling spills in the absence of fire; preliminary first aid measures; and an emergency response telephone number.

Problems with the existing rules have been uncovered as a result of a growing trend in the use of emergency response service providers. Under the old rules, a shipper was not required to indicate that the emergency number provided was for an emergency response service, nor was the shipper required to identify itself on the shipping paper. Without the name of the party that arranged for the emergency response service, the service provider may be unable to access specific information provided by the shipper or quickly gather information specific to the material involved in an accident. As a result of these issues, the agency is amending the regulations to require an offeror of hazardous materials that uses an emergency response service provider to include a notation to that effect on the shipping paper, and identify itself by name or contract number. This information will enable the service provider to quickly identify the shipment so that accurate and timely information about hazardous materials involved in transportation accidents or other emergencies can be communicated to transportation workers and emergency response personnel. The new requirements take effect November 18, 2009. Federal Carriers Reports, Report Letter No. 1568, October 30, 2009.

Aviation News

New Lithium Battery Safety Advisory Issued
In a continuing effort to promote the safe transportation of lithium batteries, the Department of Transportation—through its Pipeline and Hazardous Materials Safety Administration (PHMSA)—has published a safety advisory targeting shippers and carriers responsible for compliance with hazardous materials regulations (HMR) covering both passenger and cargo aircraft. Noting that more than 40 transport-related incidents involving lithium batteries/devices powered by lithium batteries have been identified since 1991, the agency asserted that many of those incidents were directly related to the lack of public awareness of the regulations, risks, and required safety measures applicable to such shipments.

In addition to highlighting recent aviation incidents involving lithium batteries, the safety advisory outlines the current regulatory requirements for the safe transportation of these devices, and announces that PHMSA and the Federal Aviation Administration will step up enforcement of the safety standards. "This advisory puts all shippers on notice that non-compliance with the safety regulations is not acceptable," Secretary of Transportation Ray LaHood said. Individuals who violate the HMR provisions may be subject to significant civil penalties as well as criminal fines and imprisonment, depending upon the nature, circumstances, extent, and gravity of the violation, DOT advised. Full text of the safety advisory appears at Aviation Law Reporter ¶23,981 (IRN)—¶23,981 (IntelliConnect).

FAA Launches New Accident Prevention Office
As part of an overall strategy to reduce emerging aviation risks through the use of national safety data, the Federal Aviation Administration's Office of Aviation Safety has launched a new Accident Investigation and Prevention Service that integrates the work of the Offices of Accident Investigation and Safety Analytical Services. The new organization consolidates resources so that FAA will be able to better understand current and emerging risks across the aviation community via the use of data from accident and incident investigations, historical accidents/incidents, and voluntarily submitted information from industry programs such as Aviation Safety Action (ASA) and Flight Operational Quality Assurance (FOQA) Programs.

Headed-up by Jay Pardee, the new Service will provide an independent review of agency recommendations from the Safety Issues Reporting System and FAA Safety Hotline, as well as safety recommendations from both FAA and the National Transportation Safety Board. As Service Director, Mr. Pardee will report to FAA's Chief Counsel, and will have direct access to the FAA Administrator. Pardee, who most recently was the Director of the agency's Office of Safety Analytical Services, is recognized as a leader in safety data analysis, and also is FAA's lead to assure that the Next Generation Air Transportation System provides enhanced levels of safety. Tony Fazio, who had been Director of FAA's Europe, Africa, and Middle East Office, will serve as the Accident Investigation and Prevention Service's Deputy. Aviation Law Reports, Report Letter No. 1413 (IRN)—Report Letter No. 1413 (IntelliConnect), October 1, 2009.

Baggage Check-in Fee Challenge Federally Preempted
On reconsideration in light of recent case precedent, a Massachusetts federal court ruled that the Airline Deregulation Act of 1978 preempted claims of tortious interference with advantageous relations and unjust enrichment by airport skycaps who had challenged the imposition of an air carrier's $2 curbside check-in fee for passengers' baggage. Earlier this year, a federal judge in the same district determined that the ADA preempted a similar challenge by JetBlue skycaps, ruling that the skycaps had been seeking to impose liability under state law for that carrier's action in setting and collecting a "price" for a "service" provided to its customers [see Travers v. JetBlue Airways Corp., previously reported at 33 Avi. 17,961 (IRN)—33 Avi. 17,961 (IntelliConnect)].

Disagreeing with the Travers ruling that the state laws at issue had a significant effect upon price because the skycaps in the case at bar sought only to change the manner in which the fee had been collected, the court nevertheless found that preemption was appropriate in the instant case because carrier liability under the laws would affect curbside check in—an airline "service." Finally, the skycaps' state employment law claims were preempted, as they met the traditional tests for preemption articulated in prior case law, the court concluded, dismissing the claims. Brown v. United Air Lines, Inc. (DMass) 33 Avi. 18,171 (IRN)—33 Avi. 18,171 (IntelliConnect).

Township's PHL Landing Tax Struck Down
A federal appeals court rejected a Pennsylvania township's attempt to impose a tax on flights landing at Philadelphia International Airport, siding with the Department of Transportation's ruling that the ordinance imposing the tax was invalid under federal transportation law's anti-head tax provision. The provision bans four categories of local taxes; i.e., those on: (1) an individual traveling in air commerce; (2) transportation of an individual traveling in air commerce; (3) the sale of air transportation; and (4) the gross receipts from that air commerce or transportation. The provision's prefatory language specifies that the ban operates "[e]xcept as provided in section (c)," with subsection (c) stating that a municipality "may levy or collect a tax on or related to a flight of a commercial aircraft or an activity or service on the aircraft only if the aircraft takes off or lands in the [taxing locale]."

Contrary to the township's assertion, the court ruled that the plain language unambiguously demonstrates that the provision's subsection (c) does not function as a savings clause. Rather, by invoking "only if," the subsection describes a necessary condition, and provides that a tax on a flight that lacks a ground nexus to the taxing jurisdiction cannot pass muster regardless of whether the tax falls within the categorical ban. The subsection says nothing about the fate of a tax on a flight that does have such a nexus, the court admonished. Read as a necessary condition (i.e., describing a prerequisite), the subsection provides an exception to the operation of the prohibitory regime enumerated above, and not as a savings clause for flight-related taxes, the court ruled, denying the township's petition for review of the DOT ruling. Township of Tinicum, Delaware County, Pennsylvania v. Dep't of Transp. (3dCir) 33 Avi. 18,138 (IRN)—33 Avi. 18,138 (IntelliConnect).

Flight Attendants' Challenge to AA Restructuring Agreement Fails
A federal trial court properly dismissed claims against American Airlines and its flight attendants' union that had been filed on behalf of a class of flight attendants who had challenged the validity of a restructuring agreement executed by the carrier and the union during the term of an existing collective bargaining agreement, a federal appellate panel concluded. According to the appeals court, the two Railway Labor Act provisions relied upon by the plaintiffs to support their challenge do not provide a private cause of action for an employee against an employer. Nothing in the RLA's text or structure suggests that Congress had intended to create a private remedy under the provisions at issue, the panel instructed, remarking that the appropriate remedy for injuries of the sort that had been alleged was a claim against the union for breach of the duty of fair representation.

The panel found no error in the trial court's grant of summary judgment for the union on the fair-representation breach claim, however. To demonstrate "bad faith" representation by a union, a challenger must show "improper intent, purpose, or motive," which the flight attendants here had failed to do, the appellate panel advised, noting that the record was replete with evidence that AA had been in dire economic straits at the time that the parties had entered into the negotiations that led to the restructuring agreement. Such circumstances precluded any reasonable factfinder from concluding that the union had entered into the challenged negotiations with the carrier irrationally, arbitrarily, or in bad faith, the panel held.

Nor did the evidence permit an inference of arbitrariness or bad faith in the voting procedures used by the union in seeking ratification of the restructuring agreement, the panel determined. Given the time-sensitive nature of the circumstances, the union's reliance upon telephonic balloting and its monitoring of the vote via an AA-established website was, by itself, insufficient to permit a finding of bad faith. Furthermore, the flight attendants had failed to adduce any admissible evidence supporting their conclusory assertion that union officials had known of a special retirement plan for AA executives when they had agreed to the voting schedule on the restructuring agreement, or that the union had acted arbitrarily or in bad faith by having finalized the acceptance of a modified restructuring agreement following the disclosure of the special retirement plan.

Finally, the flight attendants' state-law claims against the carrier and union were correctly dismissed by the trial court, the appellate panel said, upholding the lower court's finding that the claims were preempted by the RLA. The imposition of additional state liability upon the carrier/union for conduct during collective bargaining negotiations would upset the "balance of power" established by the Act and would frustrate effective implementation of the Act's processes, the panel reasoned. Moreover, even if application of state law would not conflict with the active assertion of federal authority, the state claim nevertheless was preempted because two law-making sources could not govern labor policy, the appeals court asserted, remarking that actual conflict between the federal and state schemes is not a prerequisite to finding a state claim preempted. Lindsay v. Ass'n of Prof'l Flight Attendants (2dCir) 33 Avi. 18,160 (IRN)—33 Avi. 18,160 (IntelliConnect).

U.S., Not T.S.A., Is Proper Defendant in FTCA Suit
Claims against the Transportation Security Administration under the Federal Tort Claims Act by two airline passengers whose suitcases had been lost and damaged were dismissed by a Kentucky federal court. According to the court, if a suit is cognizable under the FTCA, the remedy against the United States is exclusive, and a federal agency cannot be sued in its own name. Therefore, the proper party in the action was the United States, the court held, granting the passengers leave to amend their pro se complaint in order to name the United States as a defendant. Candelo v. T.S.A. (WDKy) 33 Avi. 18,159 (IRN)—33 Avi. 18,159 (IntelliConnect).

Surface Transportation News

Movement of Recyclable Materials Deemed Interstate Commerce
Drivers employed by a motor carrier engaged in the trash hauling and recycling business were exempt from the overtime provisions of the Fair Labor Standards Act (FLSA), a federal district court ruled. The drivers are responsible for transporting waste and recyclable materials from customer locations to transfer stations for sorting before the recyclable materials are sent on to the end recipients. More than fifty percent of the recyclable materials are shipped to out of state buyers. A group of drivers filed suit against the carrier, alleging that it had failed to pay overtime wages for hours worked in excess of forty in a workweek as required by the FLSA. The carrier/employer challenged the employees' claims, arguing that it was exempt from the overtime provision of the FLSA under the Motor Carrier Act.

Employees are covered by the MCA and exempted from the overtime requirements if they are employed by a motor carrier and engaged in activities affecting the safe operation of motor vehicles transporting passengers or property in interstate or foreign commerce. The employees argued that the exemption was not applicable because they had not operated in interstate commerce. The employer asserted that, even though the drivers did not transport the goods out of state, they were operating in interstate commerce because the shipments were part of a continuity of movement across state lines. The employees countered, arguing that the sorting of the recyclable material constituted an interruption in the continuity of the movement. Moreover, the employees asserted that the carrier did not have a fixed and persistent intent to ship the goods out of state. Based on the totality of the circumstances, the court found that the carrier had been operating in interstate commerce due to the fact that more than fifty percent of the recycled goods it transported routinely were sold to out-of-state buyers. Furthermore, the court ruled that the separating, sorting, and commingling of waste and recyclables did not constitute an interruption in the continuity of movement because those activities did not create a new product. Accordingly, the court concluded that the employees were not entitled to overtime wages under the FLSA. Craft v. Ray's, LLC (SDInd) Federal Carriers Reporter ¶84,627.

Carrier/Driver Responsible for Securement of Cargo
A shipper did not owe a commercial motor vehicle (CMV) driver a duty of care requiring it to ensure that the cargo it had loaded was adequately secured, a federal district court ruled. The CMV driver had been injured in a single-vehicle rollover accident while transporting goods that had been loaded by the shipper. The rollover was allegedly caused by the shifting of the cargo due to improper securement. The driver filed suit against the shipper alleging that the shipper had been negligent and had breached its duty of care because it had not properly secured the cargo when it was loaded. The shipper challenged the driver's claim, arguing that it did not owe a duty of care to the driver under federal or common law, because the driver, not the shipper, is responsible for ensuring that cargo is adequately secured once it has been loaded.

Under federal regulation, the duty to ensure that cargo is adequately secured rests squarely on the driver and carrier. Under common law, the primary duty as to the safe loading of property is on the carrier/driver, as well. However, if the shipper assumes the responsibility of loading the cargo, he/she will be liable for any defects that are latent and concealed and that cannot be discerned by ordinary observation. In this case, the driver asserted that the shipper's duty to safely load the cargo had been the breached duty. However, even if such a duty existed, the driver failed to present any evidence demonstrating that the shipper had improperly loaded the cargo. The testimony of the driver's own expert witness supported the shipper's claim that it had properly loaded the cargo. Based on the evidence presented, the driver had been unable to establish that the shipper: (1) owed him a duty to ensure that the goods had been properly secured; or (2) had not loaded the cargo properly. Thus, the court concluded that the shipper was entitled to summary judgment because, absent a duty on the part of the shipper, all of the driver's claims failed as a matter of law. Spence v. The ESAB Group, Inc. (MDPa) Federal Carriers Reporter ¶84,628.

Allowable Quantity of Chemical Oxygen Generators Increased
In response to petitions received and on its own initiative, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a direct final rule amending the quantity of chemical oxygen generators that may be transported aboard cargo-only aircraft. The existing regulations limit the transport of chemical oxygen generators to 25 kg gross mass per package. Under the amended requirements, the quantity will be expanded to 25 kg net mass per package for transport aboard cargo-only aircraft. The change was necessitated by the increased weight of the outer package resulting from the additional thermal resistance and flame penetration requirements adopted by the agency in 2007. Without the change, the amount of hazardous materials that could be transported would be significantly limited. The revised quantity limitation takes effect November 16, 2009, unless an adverse comment is filed before that date. Federal Carriers Reports, Report Letter No. 1568, October 30, 2009.

FRA Issues Advisory on Tank Cars with Bottom Outlet Valves
A safety advisory issued by the Federal Railroad Administration (FRA) recommends specific loading and unloading procedures for hazardous materials tank cars equipped with bottom outlet valves. Additionally, the advisory calls for the regular inspection and, as necessary, repair of these valves before a tank car is loaded and offered for transportation. Since 2004, FRA has documented approximately 390 service equipment failures of bottom outlet valves with 108 occurring in the year 2008 and 110 to date in 2009. The agency believes that the occurrences of bottom outlet valve failures could be significantly reduced by following certain loading and unloading procedures and by ensuring that preliminary examination of the valve assembly is performed after a tank car is cleaned and purged, and before the car is loaded and offered for transportation.

The recommendations made in the safety advisory are intended to ensure that tank cars with defective or inoperable bottom outlet valves are not loaded with hazardous materials and offered for transportation or, in the event that a bottom outlet valve becomes inoperable while in use, that adequate unloading procedures are followed to prevent the unintentional release of the car's contents. Furthermore, the safety advisory is intended to reduce the number and severity of incidents of bottom outlet valve failures and enhance the public's confidence in the safety of hazardous materials transportation by rail. Federal Carriers Reports, Report Letter No. 1568, October 30, 2009.

State CMV Identification Requirements Challenged
The Federal Motor Carrier Safety Administration (FMCSA) is seeking comments on three petitions seeking determinations that the Commercial Motor Vehicle (CMV) identification requirements imposed by the State of New Jersey, New York City, and Cook County, Illinois, are preempted by federal law. The American Trucking Associations (ATA) filed the petitions, which claimed that the challenged identification requirements were preempted by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). SAFETEA-LU prohibits states or their political subdivisions from requiring motor carriers to display in or on CMVs any form of identification other than the forms required by the Secretary of Transportation, with certain exceptions.

According to the agency, the exceptions are limited to two categories of requirements, including identification requirements related to motor vehicle license plates and any other identification display that the Secretary of Transportation approves. As such, FMCSA is soliciting comments on whether the challenged credential display requirements qualify for an exception. Federal Carriers Reports, Report Letter No. 1568, October 30, 2009.

Authority to Acquire Rail Line Not Enough for Rail Carrier Status
A petition for a declaratory order seeking a determination that an individual had become a rail carrier when he was authorized to acquire and operate a rail line in Allegany County, Maryland, and that his proposed operation of a 400-foot segment of track in Baltimore County constituted the operation of an “extended'' or “additional'' line of railroad under federal law was denied by the Surface Transportation Board (STB). The petitioner claimed that he became a rail carrier when the STB authorized him to purchase and operate the rail line. The STB disagreed, finding that, under federal law, a rail carrier is a person providing common carrier railroad transportation for compensation. Pursuant to this definition, in order to qualify as a rail carrier, an entity must: (1) hold itself out as a common carrier for hire; and (2) have the ability to carry for hire.

Based on the evidence submitted, the petitioner could not be a rail carrier because he lacked the ability to provide common carrier rail service for hire. He did not own the line he was authorized to operate, nor did he have any other suitable legal interest the line that would give him the ability to exercise the authority the STB had granted. Furthermore, since the petitioner was found not to be a rail carrier, his proposed operation of a spur track did not qualify as the operation of “extended'' or “additional'' rail line. Consequently, the petition for declaratory order was denied. James Riffin—-Petition for Declaratory Order (STB) Federal Carriers Reporter ¶37,323.