INTRODUCTION

This Aviation Law Newsletter is designed to explain current issues and areas of practice to interested parties, who are involved with aviation accidents, incidents or business disputes. The Aviation Law Newsletter emphasizes Aviation Accident Law, FAA Regulatory Matters and Business Disputes, and also covers Mr. Kolczynski's other practice fields, such as Federal Litigation, Insurance, Product Liability, Admiralty and Military Mishaps. Please send proposed topics and comments by e-mail.(phil@aviationlawcorp.com). You can request to receive this quarterly Aviation Law Newsletter by e-mail. Simply type SUBSCRIBE NEWSLETTER in the body of your message.

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THE NEW FAA "TICKETING" PROCEDURE

 

The FAA recently issued Enforcement Bulletin Number 98-1 announcing a new enforcement procedure that will allow FSDO inspectors to issue "tickets" for flight violations. The FAA created a ticket (Form 2150-7) which they call an administrative action. I call their administrative action "a ticket" because they issue it to an airman on the spot and ask the recipient to sign acknowledging acceptance of the violation. The result is a Warning Notice or Letter of Correction which is placed in the airman's file for two years. As with all administrative actions, the airman has no right of appeal!

Enforcement 98.1 Bulletin as originally issued, allows inspectors to issue tickets even if they don't personally witness the violation. The inspector can dispense with the collection of evidence called "items of proof", which they were previously required to do to justify the action. If you refuse to sign the ticket and acknowledge the violation, the Inspector can treat your refusal as a "non-compliance" attitude and send the matter to FAA lawyers for "legal" enforcement.

The FAA has always had an administrative enforcement action program involving letters of correction or warning notices. These administrative actions have traditionally been used for less serious infractions of the FARs. The FAA has a separate type of enforcement action called a legal enforcement action, which is more serious. Under legal enforcement procedures, the FAA may suspend or revoke an airman's license, but the airman always has the right to appeal the suspension or revocation of a license.

I wrote an in-depth article analyzing that the new FAA ticketing procedure shortly after Bulletin Number 98-1 was promulgated by the FAA. My article entitled "Ramp Checks '98 - The Inspector as a Traffic Cop" was originally published by AVWEB, The Internet's Aviation Magazine. It can be downloaded for hard copy reading at <http://www.avweb.com/toc/avlaw.html>.

Shortly after the publication of my article criticizing the FAA's new ticketing program and as a result of the lobbying efforts of numerous alphabet groups, such a AOPA, the FAA announced it would temporarily suspend the implementation of the program. The FAA is currently restructuring the program in an attempt to respond to an outcry from the aviation community over some of its more questionable procedures. The FAA has promised to provide new guidelines for the implementation of the program by the end of July 1998.

Remarks:

• AVWEB has published FAA Enforcement Bulletin 98-1 in its original form as issued Feb. 6, 1998 on its website: <http://www.avweb.com/other/98-19826.html>.
• For a detailed news coverage of the controversy associated with this new FAA ticketing program. See <http://www.avweb.com/newswire/news 9826.html>.
• Check out Qs &As at the FAA's website where the FAA attempts to justify their program: <http://www.faa.gov/avr/ofs/saaphome.htm>.
• Monitor developments on this issue in AVWEB's weekly newsletter called AvFlash Get a free subscription at: <http:/www.avweb.com/signup/signup.cgi/signup/join1.html>.

CAN AIRCRAFT OWNERS AVOID PERSONAL LIABILITY FOR AIR CRASHES?

I often receive inquiries from prospective clients who wish to own and/or operate an aircraft and yet avoid personal liability in the event of an air crash. They want to form a corporation or Limited Liability Company (LLC) to shield them from millions of dollars of liability exposure in the event of a serious accident. Will this work?

First of all, recognize that under most states' laws, if an individual is negligent and that negligence causes injuries, the individual has personal liability exposure. Often, such individuals are not personally sued because their employer is held responsible for their negligence if it occurs in the scope of their employment. Typically, the employer has a deep pocket or adequate insurance, and the plaintiff sues the deep pocket. However, many small and middle-sized businesses do not have adequate assets to pay for all the damages resulting from serious aircraft accidents. While they may have insurance, it is often insufficient to cover the damages from a serious air crash. Thus, the victims and their lawyers are likely to investigate whether individuals behind the business have sufficient assets to be sued personally in order to collect money to pay for the victims' injuries.

Aircraft owners and operators face similar liability exposure in the event of an accident, even if they are not running an aviation business. Such liability arises if the owner/operator is responsible for negligent maintenance or negligent piloting, resulting in an air crash which injures, kills or causes property damage. What can owners and operators do to minimize their liability exposure?

"Operators", such as the Pilot in Command or an FAA certificate holder who employs pilots who fly aircraft under their operational control, usually cannot avoid legal liability for their negligence. Their best protection is to buy as much aviation insurance as they can afford.

A Non-Operator Owner may IN SOME STATES enjoy a certain degree of protection from aircraft liability as long as he is not in operational control of a flight. An aviation lawyer may help an individual structure ownership to "minimize" liability exposure.Beware, some state laws permit such protection while others specifically impose liability on owners when others are using their aircraft with their permission.

Partial list of issues that should be discussed by an individual owner with his lawyer when structuring aircraft ownership to minimize liability exposure:

A corporation or a Limited Liability Company to hold the aircraft as an asset and may provide a measure of protection if the owner keeps all corporate assets separate from personal assets and adequately capitalizes the corporation. Small closely-held corporations are particularly vulnerable to "piercing the corporate veil" or "alter ego" attacks to get at stockholders' assets. For the corporate entity to be a shield, the owner must scrupulously comply with the formalities of running a corporation. Under some laws the corporate owners must be able to convince a judge/jury that equity requires that victims be denied compensation from the people who own a corporation which was negligent in causing injury.

An owner, even one who is not acting as an operator, has responsibility under Part 91 of the Federal Aviation Regulations to maintain the aircraft in an airworthy condition. (FAR 91.403). In some states an owner of an aircraft operated under Part 91, may contract out the maintenance responsibility to an independent contractor skilled in performing aircraft maintenance and minimize his air crash liability. (The FAA may still consider the owner responsible.)

In some states an owner may enter in a long-term lease with an FBO and contractually negotiate for the FBO to assume all responsibility for the safe operation and maintenance of the aircraft.

Certain jurisdictions have laws which immunize or limit the liability of passive aircraft owners in the event of an air crash. However, such laws usually restrict such protection to owners who are not actively involved in the operation or maintenance of the aircraft and who do not control the operation or maintenance of the aircraft.

Individuals who are wealthy may be able to derive a certain degree of protection from aircraft liability through shrewd estate planning, which includes the creation of asset protection trusts. Asset protection trusts are permitted under the laws of many states, as long as the assets are not hidden in such trusts for the purpose of defrauding creditors.

Aircraft owners may be able to acquire primary and excess aviation insurance to cover a substantial portion of their risk. In addition, owners may be able to negotiate "additional insured" protection from entities with whom the owner has entered into a contractual relationship.

Some states allow owners and operators under Part 91 to have their passengers sign "Exculpatory Agreements" or "Disclaimers" whereby passenger give up their right to sue in an accident. Such "Disclaimers" may stand up in court only if carefully drafted by an experienced aviation attorney guided by recent Case Law.

Tip:

Remember, simply forming a corporation or Limited Liability Company for the ownership of an aircraft does not by itself guarantee that the owners of aircraft can avoid individual liability. There is much misinformation spread on this subject often as a result of book store guides encouraging the formation of corporations. The laws in most states allow plaintiffs to "pierce the corporate veil" if the stockholders have not adequately capitalized the corporation or kept personal and corporate assets separate.

AVIATION PRODUCT LIABILITY - MANUFACTURER IMMUNITY

 

In 1994 Congress passed a federal law called the General Aviation Revitalization Act (GARA), which gave general aviation manufacturers a certain degree of immunity from product liability lawsuits. GARA was designed to protect manufacturers of aircraft which carry less than twenty passengers and which are not being used in scheduled passenger carrying operations. Thus, GARA does not protect manufacturers of airliners.

How does GARA work? First of all, GARA is a Statute of Repose. A Statute of Repose is not a Statute of Limitations. A statute of limitation specifies how soon after an accident a victim must sue (usually 1, 2 or 3 years, depending on the state). A product liability Statute of Repose cuts off the plaintiff's opportunity to sue after a certain number of years from the sale of a product. The federal GARA statute has an 18 year Statute of Repose, with the 18 year "cut-off" measured from the date of delivery of the aircraft to the first purchaser.

The General Aviation Revitalization Act (GARA) was passed in response to the lobbying efforts of manufacturers who claim that product liability law suits were putting them out of business. It remains to be seen whether this federal law will enable such manufacturers to prosper, now that they enjoy such special protection not enjoyed by other manufacturers of other products. The ramifications of GARA are far ranging. It covers not only small airplanes, but also helicopters, sea planes and arguably even home built aircraft assuming they have received an FAA issued airworthiness certificate. GARA has been held to apply to accidents in the United States and accidents abroad. However, there are exceptions to the broad reach of GARA.

First, if a plaintiff can show that a manufacturer misrepresented the airworthiness of an aircraft or its components to the FAA, or concealed material information from the FAA, GARA will not apply. Secondly, GARA is not applicable to injuries suffered by passengers on aircraft involved in emergency or "life flight" type transport. Third, GARA was intended to provide manufacturers with immunity against lawsuits by "passengers" on small aircraft. GARA does not protect the manufacturer from lawsuits by people in other airplanes or people on the ground. Finally, a manufacturer may choose to provide a written warranty to a customer waiving the eighteen year Statute of Repose established by GARA.

Remark:

GARA applies not only to the completely assembled aircraft, but also to any new components, sub-assemblies or other new parts, which are added to the aircraft subsequent to its sale. The GARA Statute of Repose for new parts starts to run from the date of "completion" of the replacement or addition of the new part. An interesting issue, undecided by the courts, is whether GARA will cover a "zero-timed" overhaul or remanufactured part as a "new" part.

MEDIATION OF AVIATION LAWSUITS

 

1. The practice of law has changed substantially in the last decade. One positive change involves the use of alternative dispute resolution measures to settle disputes without trial. Mediation is an alternative dispute measure which involves the use of a professional "facilitator" who allows both sides to present their case in an informal setting. Unlike arbitration, a mediation does not result in a judgment or an award but should culminate with a settlement agreement. In air crash cases where people have been injured or killed and have suffered substantial damages, the victims usually cannot be forced into binding arbitration. However, many Judges encourage parties to engage in non-binding mediation.
2. Mediation is usually most effective in business disputes, where there are numerous trade-offs which can be implemented to achieve a compromise resolution of the dispute. In personal injury and wrongful death cases, the only usual remedy is the payment of money for the injury for the loss. The question is, how much? While parties can haggle over the dollar amount, there usually isn't much room for mediation. Most experienced plaintiffs' air crash lawyers swear by the jury system and downplay the value of mediation in personal injury and wrongful death lawsuits. They hope that a sympathetic jury will award generous compensation.
3. I would generally agree with the conventional wisdom regarding settlement dynamics. Recently, however, I have had success in mediating aviation injury cases and recommend that clients and their lawyers should consider mediation if many of the following factors are present in the case:
4. The plaintiffs must be willing to accept a compromise award of money without an expectation of retribution. The defendant must be willing to offer substantial percentage of the realistic damages suffered by the plaintiff early in the case. The defendant cannot expect to "low-ball" the plaintiff and achieve an early mediated settlement.
5. The existence of potentially dispositive legal issues adverse to the plaintiff may encourage a mediated result. The plaintiff must respect the risk that a successful motion by the defendant asserting an immunity or defense, could defeat or emasculate plaintiff's case.
6. The defense should consider mediation if they are plagued with particularly damaging evidence. They must deal with the risk that a jury may award particularly high compensatory damages or even punitive damages.
7. Mediation is desirable for the plaintiff where there are personal issues that make it undesirable for the plaintiff to engage in protracted litigation and a public trial involving depositions and public testimony. Similarly, defendants may wish to avoid further discovery and a reputation-damaging public trial.
8. Defendants and insurance companies can be particularly aggressive in requiring that their attorney prepare a "mediation plan" geared to orchestrating an early settlement. They may even agree to pay the cost of the mediator to bring the plaintiff to the bargaining table.

Remark:

The possibility of a mediated settlement should be discussed when the attorney-client relationship is formed. Plaintiffs may be able to negotiate a lower contingency fee if their attorney is able to negotiate a settlement by mediation prior to filing a lawsuit.

FOQA - LEGAL OBSTACLES TO SAFETY IMPROVEMENTS

 

Many airlines are in the process of implementing Flight Operational Quality Assurance programs (FOQA) to record and analyze flight parameters, such as hard landings or non-standard descent rates. The objective is to identify potential problems before accidents occur. The airlines and the FAA support the implementation of such programs but airline pilots are concerned about the legal ramifications associated with possible public access and use of FOQA data.

Pilots are also concerned that the FAA might try to use such data to prosecute pilots for flight violations. They are also concerned that members of the media and potential litigants will use The Freedom of Information Act to acquire FOQA results after they are turned over to the FAA. Finally, airlines and pilots are concerned that such data could be obtained by plaintiffs in litigation and used against them to prove unsafe practices existed before an air crash.

A FOQA program involves the use of a Quick Access Recorder (QAR) installed in an aircraft by an airline, which is programmed to record the flight parameters. A FOQA quick-access recorder can record more than four times as much data as a standard Flight Data Recorder (FDR). The beauty of a FOQA system is that it is a computerized and a strictly objective method for recording flight parameters to capture deviations from norms. The raw data can be analyzed for trends resulting from such flight deviations.

The administrator of the FAA has made public statements suggesting that she will support the creation of new regulations covering FOQA programs to protect pilots and carriers from enforcement actions.Those pilots who are protected by unions have been able to establish ground rules for the collection and interpretation of FOQA for their own protection. Union pilots have been placed in charge of collecting the data, which is then "de-identified" so that individual airmen are not jeopardized by the collection of this information.

Normally, one can obtain aviation safety data collected by the FAA through the Freedom of Information Act, unless such data (such as trade secrets) are covered by one of the exceptions to releasability under FOIA. Congress passed a new law in 1996 called the Federal Aviation Re-authorization Act which will allow the FAA to create Regulations to protect against the disclosure of safety data. However, the new rules still haven't been issued. It is expected that when the rules are issued members of the media and the public will not be able to gain access to FOQA information which the FAA considers confidential.

The discoverability of FOQA data in civil litigation is a much more complicated problem. The Federal Rules of Civil Procedure and most State Rules of Civil Procedure allow for broad discovery of information from a party in civil litigation. Thus, if an airline is in possession of data which shows unsafe practices prior to an accident, a civil litigant is usually permitted to obtain such data by discovery.

Airlines have had some success recently in obtaining Protective Orders or convincing judges that a Partial Immunity exists, which allows airlines to collect such data and turn it over to the FAA without having to divulge the potentially damaging information to civil litigants. The airlines have stressed the policy goal of encouraging the collection of safety data without exposing the collector to additional civil liability. Those injured in airline disasters, however, argue that they should be able to find out if an airline knew about safety problems before an accident and failed to correct them.

Comment:

The administrator of the FAA promised that a new Federal Aviation Rules on FOQA would be issued in December of 1997. As of this date, the Notice of Proposed Rule Making (NPRM), which is necessary before a final rule can be implemented hasn't even been promulgated.FAA rule making may resolve the first two legal issues, but it is unlikely that anything short of federal legislation will protect carriers against civil discovery of FOQA-type data in the aftermath of an air crash.

Newsletter Disclaimer: The issues and recommendations discussed in this Newsletter are based on hypothetical situations and do not constitute legal advice. My objective is to alert you to some common issues so that you can avoid or minimize legal trouble. Anyone with an aviation law problem should be guided by the advice of his or her lawyer, under applicable federal and state laws, after a full and confidential disclosure of all relevant facts.