September 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

Powdered Substance Detection Added at Airports Nationwide
To further mitigate risk and keep the traveling public safe, the Transportation Safety Administration announced that it is bolstering its explosives detection capabilities by deploying additional tools to screen powdered substances at airport security checkpoints. Under the new initiative, TSA officers will use X-ray technology to determine which substances may require additional screening with a powder test kit, TSA said, noting that, in the event that additional screening is required, a small sample of the substance will be collected and a solution will be applied to test for traces of potential explosives. If a particular powder is determined to be a potential threat, it will not be permitted into the airport's secure area or in passengers' checked baggage.

According to TSA, passengers should know that, while common powders are not prohibited, a small percentage may require additional screening. The vast majority of commonly carried powders—such as most medication, infant formula, and makeup—are unlikely to require further screening, TSA said, adding that typical security checkpoint procedures will remain the same. Aviation Law Reports, Report Letter No. 1412 (IRN)—Report Letter No. 1412 (IntelliConnect), September 17, 2009.

Enhanced Public Reporting of Security Issues Proposed
New procedures by which members of the public could report to the Transportation Security Administration a problem, deficiency, or vulnerability regarding transportation security in any mode were proposed by the agency. In 2007, Congress required that the Secretary of Homeland Security establish—by regulation and including a proposed rule—a process by which anyone can submit a report to the Secretary regarding transportation security matters related to public transit, railroad, or motor carrier vehicle transportation [Implementing Recommendations of the 9/11 Commission Act of 2007, Pub. L. 110-53, 121 Stat. 266].

If promulgated, the initiative would expand the scope of security reporting by the public to all modes of transportation, provide a single point of contract, and establish a process by which such reports could be submitted by U.S. mail, e-mail, or telephone. If the report identifies the person submitting it, TSA will acknowledge its receipt. Once filed, TSA would review and consider the information filed in the report, and take appropriate steps to address any problems, deficiencies, or vulnerabilities identified therein.

Under the proposal, reports made voluntarily would not satisfy any separate legal obligation of any individual/entity to report to TSA (or any other government agency under any law), such as those reports already required from TSA-approved airport and aircraft operator security programs. Aviation Law Reports, Report Letter No. 1411 (IRN)—Report Letter No. 1411 (IntelliConnect), September 3, 2009; Federal Carriers Reports, Report Letter No. 1565, September 11, 2009.

Aviation News

Pilot, Instructor, School Certification Rules Overhauled
Federal Aviation Administration standards governing the training, qualification, certification, and operating requirements for pilots, flight instructors, ground instructors, and pilot schools were amended by the agency, in an effort to ensure that flight crewmembers have the training and qualifications to enable them to operate aircraft safely. The numerous changes, which incorporate international flight standards and respond to recent technological advances in aviation, update and clarify existing standards with the aim that their relationship to aircraft operations in the National Airspace System be better understood.

According to FAA, the instruction and training taking place in pilot schools is, for many, their first exposure to recent aviation, technological, and industry changes. For that reason, the agency determined that the regulations governing instructional schools—which had been in place for more than ten years—be further refined. Among the areas to which changes were made are standards detailing pilot and flight instructor training and qualifications for night vision goggle operations. Another significant revision enables the conversion of military flight instructor experience to civilian teaching.

Apart from the above final rule, several additional changes were proposed by FAA in a separate action, including: (1) a requirement for pilot-in-command (PIC) proficiency checks for pilots who act as PIC of single piloted, turbojet-powered airplanes; (2) allowing pilot applicants to apply for a private pilot certificate and an instrument rating concurrently; and (3) making an allowance in the rule to provide for the issuance of standard U.S. pilot certificates on the basis of an international licensing agreement between FAA and a foreign civil aviation authority (FAA recently entered into such an agreement with the civil aviation authority of Canada).

The proposal also would allow pilot schools to use Internet-based training programs without requiring schools to have a physical ground training facility, and would allow both pilot schools and provisional pilot schools to apply for a combined private pilot certification and instrument rating course. Finally, the definition of “complex airplane” would be revised. Aviation Law Reports, Report Letter No. 1411 (IRN)—Report Letter No. 1411 (IntelliConnect), September 3, 2009.

DHS Steps Up Border Searches of Electronic Media Devices
New directives aimed at enhancing and clarifying oversight for searches of computers and other electronic media devices at U.S. ports of entry were announced by the Department of Homeland Security on August 27. The directives address the circumstances under which DHS personnel can conduct border searches of these items, consistent with the agency's constitutional authority to search other sensitive, non-electronic materials such as briefcases, backpacks, and notebooks. Included within the initiative are new administrative procedures designed to reflect broad considerations of civil liberties and privacy protections such as measures intended to ensure that customs officers and agents understand their responsibilities to protect private information and that individuals understand their privacy rights. The directives also will allow DHS to develop automated, comprehensive data collection/analytic tools to facilitate accurate and thorough reporting on electronic media searched at the border, the outcomes of these searches, and the nature of the data searched.

DHS conducts border searches of computers and other electronic media devices on a small percentage of international travelers seeking to enter the United States—often as basic as asking a traveler to turn on a device in order to ensure that it is what it appears to be. Searches of electronic media are vital to detecting information that poses serious harm to this country, DHS asserted. In addition, the agency's Privacy Office issued a Privacy Impact Statement in connection with the new directives in order to increase public understanding of the authorities, policies, procedures, and controls employed during electronic media searches). Aviation Law Reports, Report Letter No. 1411 (IRN)—Report Letter No. 1411 (IntelliConnect), September 3, 2009.

NTSB: “Metabolite” Isn't “Drug” for Rule Violation Purposes
Revocation of an individual's airline transport pilot, commercial pilot, and flight instructor certificates for his allegedly having acted as pilot-in-command of a passenger-carrying flight soon after having submitted a urine sample for mandatory drug-testing purposes was unwarranted, the National Transportation Safety Board ruled, reversing a law judge's decision upholding the Federal Aviation Administrator's order revoking the pilot's certificates on the basis that no question had existed with regard to the sample's positive result for cocaine metabolites.

Although the certificate-holder had asserted that the positive result was attributable to his exposure to lidocaine during a surgical procedure two days before the drug test, the law judge concluded that the certificate-holder had failed to prove that the alleged exposure was a reasonable, medically legitimate explanation for the presence of any cocaine metabolites in the sample. And, while the Administrator sought affirmation of the interpretation that the presence of drug metabolites in an airman's urine prior to flight amounted to prima facie evidence that the airman was “using” a prohibited substance at the time of his/her operation of an aircraft, the Board said that the Administrator had presented no evidence of any actual prohibited substance in the certificate-holder's system at the time of the flight in question. Making a finding in support of the Administrator would first require evidence in the record that the metabolites likely had remained in place at the time of the flight, for which there had been limited evidence in the record, the Board asserted.

Even assuming that the evidence established that metabolites most likely had remained in the certificate-holder's system at the time of the flight, under the applicable regulation, the evidence also had to establish that the metabolite had affected the certificate-holder's faculties adversely, the Board instructed, noting that the record was devoid of any attempt to prove this element. And, as the regulation neither addresses nor defines “metabolites,” but merely references “any drug,” the Administrator's interpretation that “metabolite” is equivalent to “drug,” and that any metabolite level alone would suffice to prove a violation, was arbitrary and capricious in light of the plain language of the regulation, the Board concluded, urging the Administrator to revisit the provision under agency rulemaking powers and either modify it or reserve its application to circumstances where the plain language is clearly germane—specifically, that there is evidence to indicate that a proscribed drug was present in the person's system at the time of flight. Babbitt v. Holland (NTSB) Aviation Law Reporter ¶22,184 (IRN)—¶22,184 (IntelliConnect).

LAX Terminal Fee Reasonableness Ruling Remanded
The Department of Transportation erroneously concluded that the City of Los Angeles could assess LAX terminal space rental rates at a fee per square foot based upon the space's fair market value (FMV), rather than upon its historical cost (as had previously been the case), a federal appellate panel in the District of Columbia determined. According to the court, while it may be true that it is within the agency's discretion to allow an airport operator to consider opportunity cost when setting non-airfield fees, and that nothing precludes the use of FMV, neither of those rationales provided a reasoned basis for allowing the City of Los Angeles to use opportunity cost as a measure of FMV for one type of airport space (i.e., terminal rental space) and not another (i.e., airfield rental space). Therefore, the Department's determination was remanded to the agency to either justify or abandon its disparate treatment of airfield and non-airfield space.

Furthermore, because an airport operator does not cease to operate for aeronautical purposes because it also rents terminal space to a retailer, DOT's decision to limit the city's use of FMV to the consideration of lost aeronautical opportunities was arbitrary and capricious, the court added. As such, on remand, the agency also had to justify or abandon its objection to the city's consideration of non-aeronautical uses when setting terminal rates based upon FMV.

That portion of the terminal space rental fees that increased the charges for the airlines' share of the airport's maintenance and operation (M&O) costs was reasonable and non-discriminatory, however, the panel ruled, reasoning that, as of the date of DOT's final decision on the fees' reasonableness, all airlines operating out of LAX were paying the increased M&O rates; not just those airlines whose short-term leases had recently expired. Moreover, the fees' reasonableness was not altered by the fact that the City of Los Angeles and the other airlines with long-term leases had settled their own dispute over the M&O increase in such a manner that a lower M&O rate had resulted for the long-term lessees. DOT could not have foreseen the outcome of that litigation and did not act unreasonably in having refused to consider the range of potential outcomes between the airport operator and the long-term lessees, the panel observed. Similarly, the agency could not determine whether the airlines whose leases had expired were being unjustly discriminated against without knowing whether the other airlines had reached a favorable result, much less whether that result was so favorable as to constitute unjust discrimination. Accordingly, DOT's decision to base its ruling upon what it knew, rather than what it might have predicted, was neither arbitrary nor capricious, the appellate court said. Alaska Airlines, Inc. v. U.S. Dep't of Transp. (DCCir) 33 Avi. 18,002 (IRN)—33 Avi. 18,002 (IntelliConnect).

WTC Property Insurers' Subrogation Suits Can Proceed
New York's statutory provision eliminating the collateral source rule did not preclude the subrogation rights of insurers of property destroyed by the terrorist-related aircraft crashes into Towers One and Two of the World Trade Center (WTC) on September 11, 2001. Therefore, the insurers could advance those rights against the tortfeasors in the litigation, among which were the airlines, airport security companies, and other defendants sued by both the WTC property plaintiffs and their insurers, the New York federal court hearing the 9/11 suits ruled recently.

According to the court, the statutory provision prevents double recoveries; it is not intended to deprive insurers of their basic subrogation rights, provided by equity for fairness, and also by law through the assignment clauses of typical insurance contracts. The rule of law, as established in three decisions of New York's highest court, is that the statutory provision at issue does not affect the subrogation rights of the WTC plaintiffs' insurers, Judge Alvin K. Hellerstein instructed. The principle of subrogation is so embedded in the common law—and would be so radically affected—that a very clear legislative intent to disrupt it was required, the judge said, advancing that the statute contains absolutely no language effecting the disruption for which the aviation defendants had argued. Therefore, while the provision may bar the WTC plaintiffs from recovering damages for which they have been compensated by their insurers, it did not bar their insurers from asserting subrogation rights against the alleged tortfeasors, Judge Hellerstein concluded. In re September 11 Litig. (SDNY) 33 Avi. 18,040 (IRN)—33 Avi. 18,040 (IntelliConnect).

APA Can't Encourage AA Pilots to Decline Voluntary “Open Time”
With negotiations between American Airlines and its pilots' union at an impasse with respect to a furlough mitigation plan, a federal court in the District of Columbia has ruled that the Allied Pilots Association was not entitled to a declaratory judgment that the Railway Labor Act permitted the union to encourage its members to exercise their individual rights under the collective bargaining agreement not to fly voluntary “open time” (i.e., flights not manned by otherwise scheduled pilots) or that the provision of such advice did not disrupt the status quo between the parties. The RLA imposes upon the parties an obligation to make every reasonable effort to negotiate a settlement and to refrain from altering the status quo by resorting to self-help while the Act's remedies are being exhausted.

According to the court, the union—which bore the burden of proving that it was entitled to summary judgment—presented absolutely no evidence to show that its proposed actions would not interrupt commerce or American's operations. Instead, the crux of the union's argument was its reliance upon the carrier's ability and obligation to use other mechanisms to cover “open time” in the event that scheduled pilots opted not to fly those voluntary assignments, the court said, asserting that this amounted to nothing more than the carrier's recognition that it had a contractual duty to try to cover “open time” if scheduled pilots were unavailable; nothing in the union's assertion showed that the carrier's operations would not be disrupted if the union undertook the proposed action.

Rather, the record showed that American indeed would face significant cost burdens if the union undertook its proposed campaign, the court observed, remarking that AA also had presented affidavits showing that the proposed campaign likely would cause flight cancellations. As such, it could not be concluded that the union's proposed action was consistent with the RLA, the court held. Furthermore, as it could not be concluded from the parties' arguments and the evidence in the record that the carrier ever had acquiesced to the union's encouragement of its members not to fly voluntary “open time” assignments, the proposed action was not part of the status quo, the court added. Allied Pilots Ass'n v. Am. Airlines, Inc. (DDC) 33 Avi. 18,025 (IRN)—33 Avi. 18,025 (IntelliConnect).

Surface Transportation News

FRA Updates Nationwide Significant Risk Threshold
The Federal Railroad Administration (FRA) has updated the Nationwide Significant Risk Threshold (NSRT), an average of the risk indexes for all gated public crossings nationwide where train horns are sounded. When communities are determining whether a specific crossing corridor can qualify as a quiet zone, the NSRT is used for comparison to the Quiet Zone Risk Index calculated for the specific crossing corridor to determine if that crossing corridor's Quiet Zone Risk Index falls above or below the nationwide average. The revised threshold of 18,775 was calculated based on a formula identified in FRA regulations. Under the applicable regulations, the threshold is to be reviewed annually. The effective date for the new threshold was September 1, 2009. Federal Carriers Reports, Report Letter No. 1565, September 11, 2009.

FRA Initiates Direct Rulemaking for Grade Crossing Action Plans
A direct final rule intended to improve the safety of highway-rail grade crossings has been initiated by the Federal Railroad Administration (FRA). Under the final rule, the ten states with the highest number of highway-rail grade crossing collisions, on average, over the past three years, will be required to develop and implement highway-rail grade crossing action plans. The rulemaking mandates the contents of such plans and establishes time periods for plan implementation and coverage. Pursuant to the procedures governing the issuance of direct final rules, the revised regulations will take effect November 2, 2009, unless adverse comments or requests for oral hearings are submitted before October 2, 2009. The affected states will be notified by the FRA prior to the effective date of the rulemaking. Federal Carriers Reports, Report Letter No. 1565, September 11, 2009.

Rules Governing Use of Locomotive Horns Amended
The Federal Railroad Administration is amending the regulations governing the use of locomotive horns at public highway-rail grade crossings to permit the creation of federal quiet zones in an area not covered by the current regulations. Under the final rulemaking, FRA has established an excess risk estimate of 90.9 percent for public highway-rail grade crossings along the Florida East Coast Railway Company (FEC) line. By using this excess risk estimate, public authorities in the state of Florida will be permitted to establish New Quiet Zones along the FEC line.

Under existing regulations, the rules governing the establishment of federal quiet zones were not applicable to the FEC line and certain crossing in the Chicago Region. However, as a result of this rulemaking, governmental jurisdictions within the state of Florida will be permitted to establish federal quiet zones that include grade crossings located along the FEC line. While the final rule takes effect on November 9, 2009, public authorities are authorized to begin providing quiet zone-related documentation to FRA and other parties 30 days after September 9, 2009. Federal Carriers Reports, Report Letter No. 1566, September 25, 2009.

Insurer Had No Duty to Defend or Indemnify Driver
A motor carrier insurer did not have a duty to defend or indemnify an insured driver in an underlying negligence action arising from a motor vehicle accident resulting in the death of a fellow employee, a federal court of appeals ruled, overturning a decision by a federal district court. The driver of the vehicle was an independent contractor hired by the owner-operator as a co-driver for long-distance transports. The accident occurred while the independent contractor was driving and the owner-operator was in the rig's sleeper berth. The owner-operator was killed in the accident and his estate filed suit against the driver and the insurance company.

The insurer claimed that it did not have a duty to defend the driver because the “Fellow Employee” exclusion operated to preclude coverage under the policy. The district court rejected the insurer's claim, asserting that the exclusion was not applicable because it could not determine whether the driver and the owner-operator were “employees” of the motor carrier for purposes of the exclusion. The “Fellow Employee” exclusion bars coverage for “bodily injury” to any fellow “employee” of the “insured” arising out of and in the course of the fellow “employee's” employment or while performing duties related to the conduct of your business. Upon review, the appellate court concluded that the lower court had erred when it held that the “Fellow Employee” exclusion was not applicable. The appellate panel ruled that, under the policy, the driver was the “insured.” The court further found that both the driver and the victim were statutory “employees” under the Motor Carrier Safety Act. Accordingly, the “Fellow Employee” exclusion applied to deny coverage; therefore, the insurer had no duty to defend the “insured” driver.

As for the duty to indemnify, the insurer again asserted that no duty existed as to the driver of the vehicle. While the driver of the vehicle was deemed the insured under the insurance policy, the MCS-90 endorsement clearly defines the “insured” as the motor carrier named in the policy of insurance. Furthermore, according to the FMCSA's regulatory guidance, the MCS-90 endorsement is not intended to nor does it require a motor carrier's insurer or surety to satisfy a judgment against any party other than the carrier named in the endorsement. Moreover, the policy's MCS-90 endorsement explicitly states that it does not provide indemnity for “employees” of the named insured acting in the course of their employment. Consequently, the driver, a statutory “employee” of the carrier named on the policy, was not entitled to indemnity under the MCS-90 endorsement. Therefore, the district court's ruling in favor of the driver was reversed and summary judgment in favor of the insurer was granted. OOIDA Risk Retention Group, Inc. v. Williams (5thCir) Federal Carriers Reporter ¶84,622.

Denial of Claim Under STAA Affirmed
A petition for review of a decision by the Department of Labor's Administrative Review Board (ARB) rejecting an administrative law judge's (ALJ's) recommendation and finding that a motor carrier employer had not taken adverse employment action against an employee in violation of the Surface Transportation Assistance Act of 1982 (STAA) was denied by a federal court of appeals. The employee claimed that he had been disciplined and eventually terminated for engaging in STAA-protected activities. As a result, he filed an STAA claim against his employer. The carrier-employer asserted that the employee had not been terminated for engaging in any protected activities, but for insubordination, inability to improve start-work times, and failure to follow supervisors' instructions.

The employee filed a complaint with the Occupational Safety and Health Administration (OSHA), an agency within the Department of Labor (DOL), alleging that adverse employment actions had been taken against him as a result of conduct protected by the STAA. Following a hearing, an ALJ concluded that the employee had established a prima facie case of discriminatory action. However, the ARB rejected the ALJ's recommendations and dismissed the employee's complaint, ruling that the employee had failed to refute the carrier's legitimate, non-discriminatory justification for the adverse actions.

The employee then filed a petition for review with the appellate court. Based on the evidence presented, the court ruled that the conclusions reached by the ARB were supported by substantial evidence. Therefore, the petition for review was denied. Calhoun v. U.S. Dep't of Labor (4thCir) Federal Carriers Reporter ¶84,623.

Shipper's Fax Satisfied Notice Requirements
A fax containing price quotes for repairs to a machine damaged during interstate transportation was sufficient to satisfy the minimum claim filing requirements of the Carmack Amendment, a federal district court ruled in an unpublished opinion. The shipper had hired the carrier to transport goods from California to New Jersey. During the movement, the property was damaged. Between November 8, 2005, and August 8, 2006, the only written communication between the shipper, the carrier, and the carrier's cargo insurer was an eight-page fax containing price quotes for repairs to the damaged machines. At some point after August 8, 2006, the carrier and its insurer indicated to the shipper that they would not pay for the repairs. The shipper filed suit against the carrier under the Carmack Amendment. The carrier claimed it was entitled to judgment because the shipper had failed to file a proper claim in a timely manner.

The shipper contended that the fax containing the repair estimates had satisfied the notice requirements because it had been in writing and had supplied sufficient information upon which a prompt and complete investigation could be based. The court agreed, finding that the fax had provided the carrier with adequate notice of the claim against it. The carrier challenged this finding, arguing that the fax failed to assert liability against the carrier or demand payment of a specific amount of damages. The carrier's arguments were rejected because the fax clearly was seeking payment for the damages goods from the carrier and its insurer and the damage estimates provided sufficient evidence from which a specific demand for money damages could be inferred. Accordingly, the shipper's fax was found to have substantially complied with the notice requirements for claims under the Carmack Amendment. Foam Fair Ind., Inc. v. J.K. Hackl Transp. Servs., Inc. (DNJ) Federal Carriers Reporter ¶84,625.