Fundamentals of

Aviation Law
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 Fundamentals of
Aviation Law
Raymond C. Speciale, Esq., C.P.A.
Mount St. Mary’s University

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DOI: 10.1036/0071458670
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Contents

Table of Figures xi Basic rights of individuals and businesses 49

Table of Cases xiii Cases and Commentary 52
Reviewers xv Discussion Cases 59
About the Author xvii
Endnotes 64
Preface xix
Acknowledgments xxi
3 Impact of Criminal Law on
1 Fundamentals of the Airmen and Air Carriers 67
U.S. Legal System 1 Basics of Criminal Law 68
Classifications of criminal law 68
Introduction to the Law 2
Elements 69
Functions of the law 2
Criminal procedure 69
Sources of law 3
Constitutional protections for defendants 71
Classifications of law 6
Law, ethics, and morals 8 Criminal Laws Affecting Aviation Activities 74
Effective legal systems 9 Federal provisions 74
State provisions 76
Dispute Resolution 11
Court system 11 Cases and Commentary 76
Jurisdictional matters 13 Discussion Cases 83
Litigation process 17 Endnotes 89
Alternative methods of dispute resolution 25
Basics of Legal Research 26 4 Tort Liability and Air
Case law 26
Statutes and regulations 27
Commerce 91
Law review articles 27 Intentional Torts 93
Cases and Commentary 27 Intentional torts against persons 93
Discussion Cases 31 Intentional torts against property 95
Endnotes 36 Negligence 97
Elements of negligence 97
Defenses to negligence 102
2 The U.S. Constitution Wrongful Death 104
and Aviation 37 Strict Product Liability 104
Overview of the U.S. Constitution 38 Elements 104
Structure and organization of the federal Defenses to strict product liability 105
government 39 Cases and Commentary 108
Distribution of authority between the federal Discussion Cases 114
and state governments 41 Endnotes 117
vii
viii Contents

5 Administrative Agencies 7 Entity Choice for Aviation

and Aviation 119 Enterprises 191
Administrative Agencies 121 The Sole Proprietorship 192
Department of Transportation 122 Establishing a sole proprietorship 192
Federal Aviation Administration 122 Liability issues for sole proprietors 193
National Transportation Safety Board 123 Taxation of sole proprietorships 193
Functions of Administrative Agencies 123 Partnerships 194
Rulemaking 124 Establishing a partnership 194
Enforcement 126 Operation of a partnership 194
Adjudication 131 Liability issues for partnerships 195
Special considerations in FAA matters 133 Ownership of assets 196
Checks on Administrative Agencies 138 Taxation of partnerships 196
Oversight by traditional branches Termination of a partnership 197
of government 138 Limited Partnerships 197
Equal Access to Justice Act 140 Establishing a limited partnership 198
Freedom of Information Act 141 Liability of general and limited partners 198
Privacy Act 141 Taxation of limited partnerships 200
Sunshine Act 142 Limited Liability Company 200
Cases and Commentary 142 LLC formation 200
Discussion Cases 153 LLC operating agreement 200
Endnotes 156 Liability of LLC members 201
LLC taxation 202
Corporations 202
6 Commercial Law Applications Formation of a corporation 203
to Aviation-Related Operating the corporation 204
Duties of directors and officers 204
Transactions 159 Liability issues for corporations
Contracts 160 and shareholders 205
Mutual agreement 160 Taxation of corporations 206
Consideration 161 Cases and Commentary 208
Capacity 162 Discussion Cases 212
Lawfulness 162
Defenses to contracts 164
Rights, duties, and remedies for breach 167 8 Property Law Issues
Sales Law 170 for Aircraft Owners and
Sales law versus contract law 171 Airport Operators 217
Warranties 171
Transfer of title and risk of loss 173 Real Property 218
Debtor-Creditor Legal Issues 174 Ownership rights in real property 219
Credit—unsecured and secured 175 Multiple ownership 219
Bankruptcy 177 Transfers of real property 220
Cases and Commentary 179 Easements 221
Local zoning issues 221
Discussion Cases 187
Leasing 222
Endnotes 189
Airports 223
 Contents ix

Personal Property 224 10 International Aviation

Tangible property 224
Law 279
Intangible property 230
Insurance 230 Fundamentals of International Law 280
Hull insurance and liability insurance 231 Origins of international law 280
The insurance contract 232 Public International Aviation Law 281
Other types of insurance 234 The beginnings of public international
Cases and Commentary 236 aviation law 281
Discussion Cases 247 The Chicago Convention 282
Endnotes 251 Open skies agreements 283
Private International Aviation Law 283
The Warsaw Convention 284
9 Employment Law and the The Cape Town Convention 286
Aviation Industry 253 International Civil Aviation Organization 287
Agency Law 254 Cases and Commentary 287
Defining agency 254 Discussion Cases 295
Employee versus independent contractor 254 Endnotes 297
Creating and terminating agency
relationships 255
Duties of parties 257 Appendices
Contract liability 258 A Case Briefs 299
Tort liability 259 B The Constitution of the United States
Labor Unions and Employment 261 of America 303
Major federal labor union laws 261 C NAS ASRS Form 277B 321
Basics of collective bargaining 261
What if collective bargaining fails? 262
Strikes and related issues 263 Selected Bibliography 325
Employee Protection 263 Index 327
Employment discrimination 263
Employee safety and security 265
Cases and Commentary 269
Discussion Cases 276
Endnotes 278
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 Chapter Title Set Cap/Lower Case xi

Table of Figures

Figure No. Caption

1-1 Features of common and code law

1-2 Sources of the law
1-3 Comparison of civil and criminal law
1-4 Federal and state court systems
1-5 Complaint
1-6 Summons
1-7 Answer
1-8 Case citations
2-1 Constitutional checks and balances
3-1 Levels of fault in criminal cases
3-2 Summary of constitutional protections in criminal cases
4-1 Determining proximate cause
5-1 FAA Letter of Investigation
5-2 FAA Notice of Proposed Certificate Action
5-3 Appeal of FAA order
5-4 Flowchart of FAA enforcement actions (nonemergency cases)
5-5 Flowchart of FAA enforcement actions (emergency cases)
6-1 Illustration of contract assignment
6-2 Two-party secured transaction
6-3 Three-party secured transaction
7-1 Sole proprietorship liability
7-2 Sole proprietorship taxation
7-3 Partnership liability
7-4 Partnership taxation
7-5 Limited partnership liability
7-6 LLC liability
7-7 LLC taxation
7-8 Corporate management structure
7-9 Corporate taxation
8-1 FAA bill of sale
8-2 FAA aircraft registration application
8-3 Initiation of an aircraft escrow transaction
8-4 Closing an aircraft escrow transaction
9-1 Summary of employee protection provisions
xi

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Table of Cases

Case No. Case Name

1-1 Lucia v. Teledyne

1-2 Helicopteras Nacionales De Columbia, S.A. v. Hall et al.
2-1 United States v. Causby et ux.
2-2 City of Burbank et al. v. Lockheed Air Terminal, Inc. et al.
2-3 Braniff Airways, Inc. v. Nebraska State Board of Equalization and Assessments et al.
3-1 Robert David Ward v. State of Maryland
3-2 United States of America v. SabreTech
3-3 United States v. Evinger
3-4 California v. Ciraolo
4-1 Brockelsby v. United States of America and Jeppesen
4-2 Altseimer v. Bell
5-1 Air Transport Association of America v. DOT and FAA
5-2 Garvey v. NTSB and Merrell
5-3 NTSB Identification: NYC05FA001
6-1 Dallas Aerospace, Inc. v. CIS Air Corporation
6-2 Edward Miles, Richard V. Keenan and Kenneth L. “Dusty” Barrow, Appellants,
v. John F. Kavanaugh, Appellee
6-3 In re: UAL CORPORATION, et al., Debtors
7-1 Klinicki v. Lundgren
7-2 Nelsen v. Morris
8-1 Philko Aviation v. Shacket et ux.
8-2 James Bowman v. American Home Assurance Company
8-3 Western Food Products Company, Inc. v. United States Fire
Insurance Company
8-4 South Carolina Insurance Company v. Lois S. Collins
9-1 David E. Hollins v. Delta Airlines
9-2 Professional Pilots Federation, et al. v. FAA
10-1 Air France v. Saks
10-2 El Al Israel Airlines, Ltd. v. Tsui Yuan Tseng
10-3 Resham Jeet Singh, Gursharan Jeet Kaur, Individually and as
Guardians of Gurpreet Kaur v. Tarom Romanian Air Transport

xiii

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Reviewers

William V. Cheek, Esq.

Professor Bill Cheek is an associate professor and grants coordinator at Embry-Riddle
Aeronautical University (ERAU) in Prescott, Arizona. He earned his Juris Doctor degree
at the University of New Mexico. Professor Cheek has presented more than 30 papers on
law and aviation economics and published several papers on airline economics and law.
He is the managing partner of an aviation consulting firm, and has served in executive
capacities in several airlines, including general counsel of Alaska Airlines.

Judge John E. Faulk

In 1968, Judge Faulk was appointed as an administrative law judge with the Civil
Aeronautics Board and served in that position for approximately 6 years. On April 1,
1974, he joined the National Transportation Safety Board as an administrative law
judge where he served until his retirement in November 1990. From 1983 to June of
1992, Judge Faulk was a member of the faculty of the College of Aeronautics, Florida
Tech, where he served as a professor of aviation law and regulations. He is currently an
adjunct professor of aviation law at Florida Tech. Judge Faulk is associated with the law
firm of Jerry H. Trachtman, P.A., in Melbourne, Florida.

Ronald D. Golden, Esq.

Ron Golden graduated from West Point and Catholic University School of Law. He is
an active pilot and aircraft owner with commercial and instrument ratings. For nearly
30 years he has practiced law with Yodice Associates and served as associate general
counsel to the Aircraft Owners and Pilots Association (AOPA). Through his work with
AOPA, Mr. Golden has handled scores of airport-related cases throughout the United
States, and hundreds of FAA enforcement cases involving general aviation, corporate,
and air transport pilots. He has also assisted hundreds of aircraft owners in aircraft title
and taxation issues.

Joel K. Lyon, Esq.

Joel K. Lyon is currently working as a senior claims representative for AIG Aviation, Inc.,
in New York. He is a commercial pilot, flight instructor, CFII, and MEI. He earned his
Juris Doctor and B.S. in aeronautical science from the University of North Dakota. He
served as research editor on the North Dakota Law Review Board. Mr. Lyon served as
an associate for Yodice Associates (AOPA counsel). He also worked for a summer with
Jackson, Wade & Blanck, L.L.C., in Kansas City where he gained experience in aircraft
transactions as well as regulatory and tax matters. He has completed a flight operations
internship with Delta Air Lines and is a former flight instructor for the University of
North Dakota. xv

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xvi Reviewers

Richard Theokas, Esq.

Professor Richard Theokas is an associate professor of aeronautical science at Embry-
Riddle Aeronautical University (ERAU) at Daytona Beach Florida. Professor Theokas
earned his Juris Doctor from Mercer University School of Law after a nearly 30-year
career as an officer and pilot in the U.S. Air Force. During his Air Force career,
Prof. Theokas flew C-130 tactical airlift and KC-135 aerial refueling aircraft. He cur-
rently teaches aviation and business law classes at ERAU.

Brett D. Venhuizen, Esq.

Professor Brett Venhuizen received his bachelor of science and Juris Doctor degrees
from the University of South Dakota. He has been an active pilot and certified flight
instructor since 1990. Currently, Prof. Venhuizen is an assistant professor teaching
aviation law at the University of North Dakota’s John D. Odegard School of Aerospace
Sciences in Grand Forks, North Dakota. He also has a law practice representing pilots
in FAA enforcement actions.
About the Author

Raymond C. Speciale is a practicing attorney with Yodice Associates, counsel to the

Aircraft Owners and Pilots Association (AOPA) for over 40 years. During more than
15 years as an aviation attorney, he has provided legal services to hundreds of aircraft
owners and pilots. Mr. Speciale is an active pilot and flight instructor (CFII). Also a
certified public accountant, he has written several booklets and articles for the AOPA
related to aircraft ownership and taxation issues. He teaches law and accounting classes
at Mount St. Mary’s University, where he is an assistant professor. Mr. Speciale is a
member of the Lawyers-Pilots Bar Association and the National Transportation Safety
Board Bar Association. He lives in Frederick, Maryland.

xvii

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Preface

This book was primarily designed to serve students and instructors in aviation law classes
at the university, college, and community college levels. The Council on Aviation
Accreditation (CAA) Accreditation Standards Manual requires that most undergraduate
and graduate programs in aviation cover national and international aviation law and reg-
ulations. The content of this book was specifically selected to meet CAA’s accreditation
standards for the typical aviation law course.

In certain respects, the title of this book is misleading. There is no universal recognition
of “aviation law” as a distinct legal subject matter. Often, legal matters concerning air-
lines, aircraft, airports, and/or airmen involve issues that are more directly addressed in
traditional legal subject matter such as commercial law, tort law, employment law, and
property law. Therefore, when a reference is made to aviation law, it is often referring
to the legal environment of aviation.

It is important for all aviation professionals including pilots, executives, air traffic con-
trollers, and mechanics to have a fundamental understanding of the legal environment
in which they operate. The United States is a nation with a foundation built on the rule
of law. The world of aviation is no exception. Almost every facet of the aviation indus-
try is impacted by some body of law or another.

The purpose of this book is not to turn students into lawyers. However, it is intended to
bring legal context to many of the issues that aviation professionals will come in con-
tact with during their careers.

Each chapter begins with an overview of the subject matter to be discussed. For some
students who have already taken other law courses, these overviews will serve as a
review. For students who have never been exposed to a law class, the overviews are
meant to provide the legal basics of the subject addressed. An understanding of these
basics is necessary to get students to the point where they can apply the law to aviation-
related situations.

After the fundamentals are addressed, a “Cases and Commentary” section is available
for deeper study of how the law affects aviation-related activities and situations. The
cases are edited with most footnotes, citations, and some text omitted to allow students
to focus on the primary issue(s) of the cases. At first, students may find reading the
cases challenging. With a bit of time and practice, the hope is that students will come
to a greater appreciation of the complex issues faced by lawyers and judges when
arguing and deciding cases. Students are encouraged to read the full text of the cases to

xix

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xx Preface

evaluate dissenting opinions and other cases cited within the opinions. Based on time
available, instructors may wish to pick and choose the cases reviewed in class.

After the “Cases and Commentary” section students get an opportunity to tackle the
issues under “Discussion Cases.” The discussion cases are meant to prompt written
responses that can be reviewed during class time. Many of the discussion cases are
based on actual litigated cases. Students should not be frustrated by the fact that there
may not be clear yes or no responses to the questions put by the discussion cases. In
many respects, the cases selected were meant to prompt questions and debate—that is
what the law is all about. Beyond exposing students to the legal environment of avia-
tion, these cases are also meant to develop students’ critical thinking and writing skills.

As is true with any text, there are bound to be some errors or omissions—especially in
a first edition. Any comments, suggestions, or corrections are welcome. Students
and instructors are invited to write to the author directly at [email protected].
Acknowledgments

Putting a book together can sometimes be difficult and lonely work. I needed lots of
help to get this project completed.

First and foremost I want to thank my wife, Xiaoping. She sacrificed much to allow me
the time to write this book. Xiaoping also provided expert technical assistance with
manuscript preparation and the associated charts and figures in the book. She is my
greatest blessing.

My work was made a lot less lonely because I had such a great group of reviewers. They
provided much needed technical assistance and writing suggestions throughout the year
that I was preparing the manuscript for this book. Having these experienced and knowl-
edgeable colleagues available gave me confidence that I was headed in the right direc-
tion. The mix of professors, a former judge, practicing attorneys, aircraft owners, and
pilots in the reviewer group led to balanced and useful feedback.

I also want to thank all my supportive colleagues and friends at Mount St. Mary’s
University where I teach and at Yodice Associates (AOPA counsel) where I serve of
counsel. I am very fortunate to be engaged in the professional worlds of teaching and
practice. Sometimes it is difficult to switch back and forth between these two worlds,
but it regularly provides me a fresh perspective on both endeavors.

Last but not least, I want to thank my publisher, McGraw-Hill. I am very grateful for its
confidence in this book. I am particularly indebted to Steve Chapman, my editor, for his
patient and encouraging efforts to see this book through from beginning to end.

xxi

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Fundamentals of
Aviation Law
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1 Fundamentals of the U.S. Legal System

INTRODUCTION TO THE LAW 2

Functions of the law 2
Sources of law 3
Classifications of law 6
Law, ethics, and morals 8
Effective legal systems 9
DISPUTE RESOLUTION 11
Court system 11
Jurisdictional matters 13
Litigation process 17
Alternative methods of dispute resolution 25
BASICS OF LEGAL RESEARCH 26
Case law 26
Statutes and regulations 27
Law review articles 27
CASES AND COMMENTARY 27
DISCUSSION CASES 34
ENDNOTES 36

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2 Fundamentals of Aviation Law

We live in a world where virtually every aspect of our personal and work lives is
touched by the legal system. Aviation activities are no exception. From the moment a
pilot embarks on a flight, her every action is guided by a complex set of laws and reg-
ulations designed to enhance safety. Whenever aircraft or aviation equipment is sold,
there is a set of laws in place governing the rights and duties of the parties to the trans-
action.When airports are constructed or expanded, local, state, and federal codes must
be considered. When things go wrong and people and/or property is harmed due to an
aviation accident, there is a well-established body of law in place to identify those who
might be at fault and compensate the victims.

The purpose of this book is to provide you with a fundamental working knowledge of
how the law impacts aviation activities. The purpose of this chapter is to introduce you
to the law and the basics of the U.S. legal system.

INTRODUCTION TO THE LAW

The law has been defined as “that which is laid down, ordained, or established. A rule
or method according to which phenomena or actions co-exist or follow each other. Law,
in its generic sense, is a body of rules of action or conduct prescribed by controlling
authority, and having binding legal force.…”1 This widely accepted definition of the
law expresses the often prevailing view that the law is a series of related rules that gov-
ern the conduct of human behavior.

For centuries, philosophers have wrestled with a definition of the law. One fitting sum-
mary of the diverse perspectives on the law states:

We have been told by Plato that law is a form of social control, an instrument of the good
life, the way to discovery of reality, the true reality of the social structure; by Aristotle that
it is a rule of conduct, a contract, an ideal of reason, a rule of decision, a form of order; by
Cicero that it is the agreement of reason and nature, the distinction between the just and
the unjust, a command or prohibition; by Aquinas that it is an ordinance of reason for the
common good, made by him who has care of the community, and promulgated [thereby];
by Bacon that certainty is the prime necessity of law; by Hobbes that law is the command
of the sovereign; by Spinoza that it is a plan of life; by Leibniz that its character is deter-
mined by the structure of society; by Locke that it is a norm established by the common-
wealth; by Hume that it is a body of precepts; by Kant that it is a harmonizing of wills by
means of universal rules in the interests of freedom; by Fichte that it is a relation between
human beings; by Hegel that it is an unfolding or realizing of the idea of right.2

Functions As you can see, even among some of the world’s greatest thinkers, there is no universal
of the law agreement when it comes to defining the law. However, there are enough common
threads among these varying definitions to argue that the purpose of the law is, at least
in large part, to encourage or ensure certain standards of conduct in human behavior.

Despite the difficulty that people have had in pinning down a definition of the law, we
can generalize that the law accomplishes its purpose (in large part) by (1) providing for
 Fundamentals of the U.S. Legal System 3

orderly dispute resolution, (2) protecting property rights, and (3) preserving the struc-
ture and integrity of government.

As will be discussed a bit later in this chapter, it is inevitable that disputes will arise
between parties. Sometimes the disputes will involve criminal behavior. Other times the
disputes will involve noncriminal or civil matters, including aircraft accidents and safety
violations. Disputes always carry a potential threat to order. That is why a legal system
must have a well-developed and flexible dispute resolution system in place. For all
practical purposes, the legal system and its courts take the place of less desirable reme-
dies such as revenge or self-help.

Preservation of private property and rights to private property is another key function of
any worthy legal system. For an economy and commerce to thrive, participants must be
assured there are rules and procedures in place to protect their rights. For instance, air-
craft owners must be assured that if they follow the rules, the aircraft they purchase will
belong to them and cannot be taken by another. Contractors building new airport run-
ways need to be certain that the contracts they entered into with airport owners to build
the runways will be enforceable under the law. If basic property rights are unprotected,
people will be unwilling to engage in commerce, thus diminishing the growth of the
economy and the benefits that growth brings to individuals and communities.

A good legal system also protects the government put in place by the people. Our legal
system puts protections in place to ensure that leadership changes and changes to our laws
take place through a sanctioned (although often untidy) process. The U.S. legal system
accomplishes this objective through elections, lawmaking, referenda, and court decisions.
Less developed systems suffer change through revolution, rebellion, and sedition.

A well-established body of law has emerged in the United States over the last few cen- Sources of law
turies. To understand the U.S. legal system, it is important that you understand the pri-
mary sources of the law as we know it today. The following discussion provides a brief
overview of those sources and the hierarchy of those sources.

Constitutions
The primary source of law in the U.S. legal system is the U.S. Constitution. The
Constitution is often referred to as the supreme law of the land in the United States
because any law—even an otherwise validly adopted federal, state, or local law—that
conflicts with the Constitution is deemed to be illegal and unenforceable.

An essential function of the Constitution is the establishment of structure for the federal
government. The Constitution created the three branches of government: the legislative
(with the power to create and enact laws), the executive (with the power to enforce laws),
and the judicial (with the power to interpret and determine the validity of the law).

Any powers not included in the Constitution are said to be reserved to the states. Each state
has its own constitution. Most state constitutions are patterned after the federal Constitution
but may be more detailed and provide for even broader protections of individual liber-
ties (however, a state constitution cannot roll back federal Constitutional protections).
4 Fundamentals of Aviation Law

As indicated earlier, state constitutional provisions are valid unless they conflict with
the federal Constitution.

The role of the federal Constitution in aviation matters is pervasive. Chapter 2 will dis-
cuss the interaction of the federal Constitution and aviation activities in greater detail.

Treaties
The federal Constitution authorizes the President, with the advice and consent of the
U.S. Senate, to enter into treaties with foreign states. These treaties become part of the
supreme law of the United States. In today’s world with evergrowing international trade
and economic relationships, the role of treaties will continue to grow. In the world of
aviation, the ability to travel freely from one country to another necessitates strong
treaties between nations, in order to provide for the safe and efficient transport of per-
sons and property across international boundaries. A more detailed overview of how
international treaties impact the aviation community can be found in Chap. 10.

Common law
Common law generally means law that has developed from adjudicated cases. It is some-
times called case law in the United States; this common law may relate back to case law
originating in the ancient and unwritten laws of England. Essentially, common law is any
law that was not derived from legislative bodies. You may have heard the term legal prece-
dent. This means that a similar case was decided in a certain manner in the past. Although
a court in a particular case may not be held to the precedent of a previous case, typically
a court will feel obligated to follow the same rule in the case currently being decided. That
approach to deciding cases by using past cases is called the doctrine of stare decisis.

In most cases, trial courts will be bound by the mandatory authority of appellate courts
above them that have decided similar controversies in a certain manner. For example, a
Maryland trial court judge will usually be bound by the decision of the highest appeals
court in Maryland that decided a factually similar case. Sometimes the trial court judge
may be forced to observe the precedent of a higher court even if she vehemently dis-
agrees with the outcome it dictates in the case before her. On the other hand, if a judge
in Maryland is faced with a case that has no clear precedence in Maryland, he may be
able to turn to courts in other states for precedent. However, this type of precedent, from
another state, will only rise to the level of persuasive, not mandatory, authority. As you
will see, the doctrine of stare decisis can even influence the decisions of an adminis-
trative law judge from the National Transportation Safety Board (NTSB) dealing with
Federal Aviation Administration (FAA) enforcement matters.

We’ll explore the impact of common law on aviation-related matters in Chaps. 4 (“Tort
Liability and Air Commerce”), 6 (“Commercial Law Applications to Aviation-Related
Transactions”), and 8 (“Property Law Issues for Aircraft Owners and Airport Operators”).
However, throughout your studies, you will be regularly exposed to cases where courts
are faced with applying statutory law or treaties to specific circumstances.

Code law
If federal, state, or local lawmakers have enacted rules related to certain issues, those
rules become code or statutory law. Today, almost all federal and state laws are the
 Fundamentals of the U.S. Legal System 5

result of legislative enactments. Most aviation-related rules are an outgrowth of federal

statutes. Rules related to corporations (and other business entities), commercial law,
and criminal law are substantially all statutory in nature.

Legislative enactments often relate to the structure and day-to-day functions of gov-
ernment. For instance, it is imperative that legislators spell out the rules for operat-
ing aircraft. Leaving such matters to the courts for interpretation and guidance over
time could prove unwise and certainly unsafe. Concerns such as aviation safety
require fully developed and detailed laws and regulations in order to provide as
much certainty as possible to aircraft and airport professionals. Discussions related
to criminal law (see Chap. 3), business entities (see Chap. 7), and labor and employ-
ment (see Chap. 9) will deal largely with statutory law and its impact on the avia-
tion environment. For an overview of the differences between common law and code
law, see Fig. 1-1.

Administrative rules and regulations

The legislative and executive branches of federal and state governments are empow-
ered to create administrative agencies. These administrative agencies are usually
formed when the subject of legislation is so complex and/or enforcement of the laws
is such a substantial task that a specialized government entity is required to support
the legislature.

Administrative agencies are given the power to interpret the law. To do so, most
administrative agencies adopt rules or regulations that serve as interpretations of the
legislatively created law. Of course, the government agency with the biggest impact on
aviation activities is the Federal Aviation Administration. A fuller discussion of
administrative agencies and how they function can be found in Chap. 5 (“Government
Regulation of Aviation”).

Priority of laws
When you are sorting out the priority of laws in the U.S. legal system, the U.S. Constitution
ranks first. The second highest priority goes to ratified treaties. Federal statutes rank above

Figure 1-1
Features Common law Code law
Features of
Creation Created by judges ruling on Drafted by elected legislators common and
particular cases in formal lawmaking process
code law.
Form Common patterns found by Codes and statutes
lawyers and courts in similar
cases

Scope Narrowly limited to case at Throughout jurisdiction

hand affected

Political and other Depends on insulation of Typically a high level of

outside forces judges from societal and political and external pressure
political pressures
6 Fundamentals of Aviation Law

Figure 1-2 U.S. Constitution

Sources
of the law.
Treaties

State constitutions

Federal code State codes

State agency law

Federal
agency law

State case law

Federal
case law
Local codes
and ordinances

state statutes and take precedence over conflicting state statutes. State constitutions are the
highest state laws, followed by state statutes and state regulations. State statutes take prece-
dence over local laws. See Fig. 1-2 for an overview of the sources of law and priorities.

Classifications There are several ways to classify the law. While an attempt to classify the law is not
of law meant to ignore the interdependence of the various types of law, the classifications can
serve to break the law down into component parts, thus making it easier to study, ana-
lyze, and compare. The most traditional classifications of the law are as follows:
• Subject matter
• Federal and state law
• Civil and criminal law
• Public and private law

Subject matter
One of the most common ways to classify the law is by subject matter. In fact, this text
attempts to break down the study of the legal environment of aviation into various subject
matter classifications. Most law schools and legal textbooks attempt to view the law as a
collection of separate, but connected subjects including but not limited to
• Administrative law
• Agency
• Business entities
• Commercial law
 Fundamentals of the U.S. Legal System 7

• Contracts
• Criminal law and procedure
• Evidence
• Family law
• Negotiable instruments
• Real and personal property
• Sales
• Taxation
• Torts
• Wills and estates

Federal and state law

One other common approach to classifying the law is to look at where the law comes
from. In some cases the law may come from the federal legislature. There are several
important areas of federal law, not the least of which relates to aircraft and airport oper-
ations. However, there are far more areas of the law that are based on state statutes and/or
common law. Although it may seem as though state laws generate 50 completely different
sets of rules, this is not necessarily the case. In fact, most state laws parallel those existing
in other states.

Civil and criminal law

Civil laws are laws that govern how individuals, businesses, and government agencies
interact with one another. If someone breaches a contract or injures another due to neg-
ligence, civil laws may have been violated. If the parties involved in a civil action cannot
settle their dispute, the person claiming to have been harmed becomes the plaintiff and
the person who allegedly committed the civil wrong is the defendant.

The remedies sought in a civil case are typically monetary damages—with the idea that the
monetary damages sought will compensate the victim of a civil wrong for his or her dam-
ages. This kind of case is common when an aircraft accident causes someone harm. The vic-
tim will sue for the damages suffered as a result of the accident. Sometimes the remedy
sought may be an order called an injunction. An injunction is an order from the court
requiring a party to do something or to refrain from doing something. One example of a
plaintiff seeking an injunction is an aircraft owner who wants to stop an airport operator
from imposing a curfew that the aircraft owner believes to be contrary to law. If the aircraft
owner prevails on the injunction, the airport operator will be unable to enforce the curfew.

The usual standard of proof required in a civil case is “by a preponderance of the evi-
dence.” In most courts this means that the plaintiff will succeed if she or he proves that
it is more likely than not that the defendant committed a civil wrong. For those who prefer
to quantify this sort of thing, it might be fair to say that this standard implies greater than
50 percent probability that the plaintiff’s charges are correct.

Criminal actions are actions brought by a federal or state government against persons or
entities (corporations and other businesses) that have violated a criminal code. In most-
cases, a criminal case involves a wrong so serious that it could require the imposition of
large fines or imprisonment of the person or persons who violated the law.
8 Fundamentals of Aviation Law

In criminal cases, the usual standard of proof is “beyond a reasonable doubt.” Essentially
this means that a criminal defendant can be convicted only if the government has proved
its case to a near certainty. Sometimes lawyers will say that this means a jury or a judge
must be 99 percent sure that the defendant has committed the crime that he or she has
been accused of committing.

Serious crimes are called felonies. Lesser crimes are generally referred to as misde-
meanors. Typically, felonies carry penalties of jail time over 1 full year whereas mis-
demeanors carry smaller fines or shorter sentences.

You should note that sometimes a wrongful act can be a civil wrong and a criminal wrong
at the same time. For instance, someone who strikes another person with a weapon can be
sued in a civil action for monetary damages and at the same time can be prosecuted by
government authorities for a crime. See Fig. 1-3 for a summary comparison of criminal
and civil law.

Private and public law

Sometimes lawyers and legal scholars will refer to the distinctions between private and
public law. Usually, references to private law reflect legal issues between nongovernmen-
tal parties. For instance, a lawsuit by an airline passenger against an air carrier for lost bag-
gage would typically be classified as a private law issue. On the other hand, if the Federal
Aviation Administration were attempting to fine an airline for substandard maintenance
practices, it would be classified as a public law issue. As a general rule, criminal law and
administrative law matters are often viewed as being within the realm of public law.

Law, ethics, To be more effective in your study of the law, you should begin considering the distinc-
and morals tions between law, ethics, and morals. As indicated earlier, the law deals with standards
of conduct that society enforces to keep order. To some extent, the law can be looked

Figure 1-3
Key characteristics Civil law Criminal law
Comparison
Initiation of action Person alleging harm Federal or state government
of civil and
files a complaint with the files a complaint
criminal law. courts

Function Compensation Punishment

Reimbursement Deterrence
Deterrence Rehabilitation
Preservation of civil order

Burden of proof Preponderance of the Beyond a reasonable doubt—

evidence—more likely virtual certainty
than not

Sanctions Monetary damages Capital punishment

Injunctions Incarceration
Equitable relief Monetary fines
Community service
 Fundamentals of the U.S. Legal System 9

upon as a sort of bare minimum standard of behavior. We obey the law to stay out of
trouble.

The term ethics is often used to describe accepted professional standards of conduct.
These are typically codes of conduct created by communities of professionals to guide
them in their field of endeavor. For instance, although it might not be contrary to the
law for a physician to accept a referral fee from a specialist or a surgeon, accepting such
a referral fee might be a breach of ethical conduct. Therefore, ethics will often involve
standards of conduct that exceed legal standards.

Perhaps the highest standards of conduct are based on an individual’s determination of

what is right and wrong. These standards are often referred to as morality. Moral stan-
dards are often based on an individual’s family background, religion, community, and
a whole host of other factors. It would be a mistake to confuse moral and legal stan-
dards. They often intersect in areas of criminal law; for instance, it is both morally and
legally wrong to kill another person. However, these standards often part ways when it
comes to more difficult questions. For instance, should a person be legally responsible
to assist another who is in peril? As a general rule, our legal system does not require us
to assist someone who is in peril.3 However, many people would insist that it is a moral
imperative to come to the aid of another person who is in danger.

As you study the law and how it affects aviation-related activities, you should also reflect Effective legal
on whether the current system of laws benefits or hurts the aviation community and the systems
communities it serves. To fully understand the law, it is not enough to simply know the
rules. You must be able to see the purpose of the law and determine whether the law
meets its stated purposes. At times, even the purpose of the law may come into ques-
tion. Part of the joy (and challenge) of studying law and legal systems lies in critically
analyzing the law and its effectiveness.

Scholars who have studied different legal systems tend to believe that there are certain char-
acteristics of effective legal systems. As a general rule, the most important requisites for a
vibrant and resilient legal system appear to be (1) stability, (2) adaptability, (3) availability,
and (4) fairness. Legal systems that embody these qualities tend to be effective and long-
lived. A brief discussion of these attributes is found below. You should consider these
qualities as you critically review the laws you encounter in your studies.

Stability
For a legal system to be effective, it must create and operate within an environment of
stability. Many of our activities—aviation being just one—are based on the assumption
that the guiding principles of law will remain unchanged. For instance, it would be hard
to find an aircraft finance company willing to extend credit to airlines looking for aircraft
if the company were not certain that the law would require the airlines to meet their obli-
gations to pay the loans. The behavior of individuals and businesses is in large part guid-
ed by their faith in the stability of our legal system. If you take that stability out of the
mix, the legal system will fail and ultimately the community served by that legal system
will be harmed.
10 Fundamentals of Aviation Law

Adaptability
A legal system also needs a strong measure of adaptability to be effective. The emer-
gence of aviation in the early 1900s demonstrated the flexibility of our legal system.
Prior to the existence of aircraft, it was widely understood that a landowner owned rights
to everything that existed below and above her or his property. This would become an
obvious problem for aviators. Under the law as it existed, any aircraft flying above a
landowner’s property could be liable for trespassing. Our legal system had to adapt to the
new technology of aircraft—and it did, with the legal system permitting reasonable use
of airspace for the purpose of air navigation.

Of course, the evolution of aircraft technology, jet propulsion, satellite navigational sys-
tems, and countless other innovations forces the law to adapt constantly. Standards for
aircraft certification have to be revised, and new rules for air navigation and sharing air-
space must be developed. Our legal system needs the flexibility to adapt to these changes
to maintain its credibility and effectiveness.

Availability
No legal system can be effective unless the people and entities using it are able to avail
themselves of the law as needed. Practically speaking, this means that citizens must have
reasonable access to the law and the legal system.

The U.S. legal system is one of the most thoroughly evolved systems of law ever. People
seeking access to rules and regulations only need to go to the Internet to find many of the
rules pertinent to their questions. It is routine for federal, state, and local agencies to create
electronic web sites with links to code, cases, and regulations pertaining to their areas of reg-
ulation. For complex questions, it is always important for individuals and businesses to be
able to consult with experts on the law, typically lawyers. Again, the U.S. legal system makes
lawyers available—but some would argue at too high a cost—for advice and counsel.

When disputes arise, most courts and regulatory agencies must also be available to assist
in the dispute resolution process. A bit later in this chapter, we will examine the basics
of the U.S. dispute resolution system.

Fairness
Perhaps the most important characteristic of a viable legal system is fundamental fair-
ness. For a legal system to function, citizens and participants must respect the system
and abide by the rules—even if they don’t necessarily agree with the rules.

For a legal system to be fair, it generally must comport with the same sense of right and
wrong as those subject to the rule of law. If it does not, it may be viewed as irrelevant
and ultimately disregarded or replaced.

In the history of the U.S. legal system, perhaps the most poignant example of a law out
of touch with reality was the prohibition amendment which unequivocally outlawed the
sale and distribution of liquor throughout the United States. This law was so harsh that
it caused widespread and blatant noncompliance. The contempt and dissatisfaction gen-
erated by the law ultimately led to its repeal a few short years after its enactment.
 Fundamentals of the U.S. Legal System 11

DISPUTE RESOLUTION

For better or for worse, one of the primary functions of any legal system is dispute res-
olution. In the United States, there is a well-developed system of courts at the federal,
state, and local levels designed to manage disputes among the government, individuals,
and business entities. Increasingly, alternative means of dispute resolution such as arbi-
tration are becoming more popular due to the sometimes inefficient and costly process
of litigating cases in the public courts. This section will deal with the systems in place
for dispute resolution. It will be important for you to become well acquainted with var-
ious dispute resolution systems now. Your subsequent study of aviation-related matters
will include significant numbers of cases and rulings—most borne from disputes that
were resolved in the court system.

In the United States, courts are designed as neutral or impartial tribunals (judges). Courts Court system
are established and funded by government bodies to serve the function of resolving dis-
putes. The U.S. system is a dual court system. Each of the 50 states has its own court
system, and the federal government has a separate court system.

Federal court system

Article III of the U.S. Constitution states that the judicial branch of the United States
shall be vested in a Supreme Court with Congress having the power to establish inferior
(often referred to as lower) courts. Since the inception of the U.S. Constitution, Congress
has put in place a federal court system comprised of courts of appeal, district courts,
and special courts. Judges must be appointed to these courts by the President and con-
firmed by the Senate. Once a judge is confirmed to sit on a federal court, her or his
appointment to the court is for a lifetime. Presumably, this was designed to take the
dynamics of politics out of the judicial equation to the extent possible.

District courts serve as the general trial courts in the federal court system. Nearly all fed-
eral cases commence in district courts. The district courts decide matters of fact and law.
Usually only one judge presides over any given case at the district court level—in some
special cases up to three judges may preside. Appeals from district courts typically go
directly to circuit courts of appeal. In very rare instances, appeals from district courts
will go directly to the U.S. Supreme Court. Located in every state is at least one federal
district court, while some states, such as New York, have as many as four. To a large
extent, the number of district courts assigned to a state is based on population and need.

Our federal system also houses 12 judicial circuits (11 numbered circuits plus the
District of Columbia circuit). Each of these circuits has a court named the court of
appeals (also known as U.S. Circuit Court). A court of appeals will often hear appeals
from district courts located within its circuit. Additionally, a court of appeals will hear
appeals from the decisions of administrative agencies including, but not limited to, the
National Transportation Safety Board (see Chap. 5). Each court of appeals has nine
judges. Usually, a court of appeals hears cases by using a panel of three judges. In
unusual circumstances, it may agree to hear a case en banc, where all nine judges of the
circuit participate in deciding a case. The function of these appellate courts is to review
12 Fundamentals of Aviation Law

the record of a case on appeal and to decide whether the case was properly handled by
a lower court. If the court of appeals determines that the lower court committed error,
it may reverse or modify the lower court’s decision. If error was committed, the court
of appeals may also remand the case back to the lower court for further review in light
of the court of appeals decision. If the court of appeals determines that the lower court
did not commit error, it may simply affirm the decision of the lower court.

Our federal court system also includes some special courts (sometimes referred to as
courts of special jurisdiction). The highest of these special courts is the U.S. Court of
Appeals for the Federal Circuit. This special court of appeals hears appeals from the U.S.
Court of Federal Claims (a trial court specializing in claims against the federal govern-
ment), the U.S. Patent and Trademark Office, and the Court of International Trade. Other
special courts include the U.S. bankruptcy courts (federal courts with exclusive jurisdic-
tion over bankruptcy cases) and the U.S. tax court (federal courts with exclusive jurisdic-
tion over certain federal tax cases). To a large extent, these special courts were put in place
because of the need for special judicial expertise in certain areas of the law such as bank-
ruptcy, taxes, intellectual property, and other highly technical subjects.

Of course, the highest federal court is the Supreme Court. The Supreme Court has nine
justices (a Chief Justice and eight Associate Justices). These justices sit as a group at the
Supreme Court in Washington, D.C. As indicated in the Constitution, there are some
cases (e.g., cases involving admiralty matters) in which the Supreme Court has the right
to hear a case first (often referred to as original jurisdiction). Nonetheless, the vast major-
ity of cases reviewed by the Supreme Court involve appeals from U.S. Courts of Appeals
and the highest state courts. Most of the time, the Supreme Court gets to pick the cases
it wishes to review. To bring a case before the Supreme Court, a party seeking an appeal
must file a petition for a writ of certiori. Only a small percentage of the cases presented
to the Supreme Court for review are ever accepted. Typically, the Supreme Court will be
most interested in reviewing cases involving matters of great national importance or
cases that expose a rift in opinions between various courts of appeal.

State court systems

As indicated earlier, each of the 50 states (and the District of Columbia) has its own
unique court system. In most of these systems, judges are either politically appointed
or elected, or a combination of both is done. While it is impossible to generalize about
all 50 systems, it is possible to outline the common threads that run through the struc-
ture of most state court systems.

Most state court systems employ courts of limited or inferior jurisdiction to handle small civil
and/or criminal matters. Often, these courts are identified as small claims courts, traffic courts,
or justice of the peace courts. Usually these courts do not keep a written record of proceedings.
However, decisions of these lower courts can be appealed. The appeals are heard most likely
by the next court up the ladder, the trial court of general jurisdiction.

Every state has trial courts of general jurisdiction. These courts are often referred to as
superior courts, circuit courts, county courts, or courts of common pleas. There is no dollar
limitation on the judgments in the jurisdiction of these courts. Trials are more formal
 Fundamentals of the U.S. Legal System 13

at this level, and most often legal counsel is required. In addition to trial courts of gen-
eral jurisdiction, most states have special jurisdiction courts for matters such as probate
and estates, family law matters, and tax matters. Appeals from trial courts of general
jurisdiction and these special jurisdiction courts are usually heard by appeal courts with-
in the state system.

State appellate court systems typically include an intermediate court of appeals and the
state’s highest court, sometimes, but not always, known as the state’s supreme court. It
is important to note that a decision by a state’s highest court may be reviewed by only
the U.S. Supreme Court.

A flowchart illustrating the basic structure of the federal and state court systems can be
found in Fig. 1-4.

For a court to hear a case and make a decision, it must have legal authority to hear a case. Jurisdictional
The special term used in the law for the authority to hear and decide a case is jurisdiction. matters
Courts need two types of jurisdiction before they can properly assert authority over a case.
The first type of jurisdiction required is subject matter jurisdiction. In plain terms, the
court must have the legal authority to deal with the subject matter of the case presented.
If subject matter jurisdiction is lacking, the court’s decision will have no legal effect.

Figure 1-4
U.S. Supreme
court Federal and state
court systems.

U.S. courts Highest

of appeal state court

U.S. district Intermediate

courts state appeals
court

U.S.
administrative State trial Special
agencies courts state
courts

Limited-
jurisdiction
state trial
courts
14 Fundamentals of Aviation Law

The second type of jurisdiction necessary is jurisdiction over the parties. This is often
referred to as personal jurisdiction. Personal jurisdiction requires that the court be able
to exercise legal authority over the persons or entities involved in a case. Just as with
subject matter jurisdiction, a court lacking personal jurisdiction cannot render a legally
effective or binding ruling.

Subject matter jurisdiction

The U.S. Constitution gives federal courts exclusive jurisdiction over a limited, but sig-
nificant number of matters. All other cases are properly within the jurisdiction of state
court systems.

Federal jurisdiction Congress has provided the federal court system with exclusive
jurisdiction over the following types of cases:
• Admiralty
• Bankruptcy
• Federal criminal cases
• Antitrust
• Patents, trademarks, and copyrights
• Lawsuits against the United States
• Other cases specified by federal statute

As indicated above, any cases falling in these categories must be presented to the fed-
eral court system. They cannot be entertained by a state court under any circumstance.

However, under certain special circumstances both federal and state courts may prop-
erly exercise jurisdiction over cases. This shared jurisdiction is commonly referred to
as concurrent jurisdiction.

The first type of concurrent jurisdiction arises when there is a federal question that does
not give the federal courts exclusive jurisdiction. It is hard to pin down all cases in
which a federal question may be present, but as a general rule, questions related to the
U.S. Constitution, federal statutes, and federal treaties (that are not within the exclusive
jurisdiction of the federal courts) can create a situation in which federal and state courts
share jurisdiction concurrently. In essence, for a federal question to create concurrent
jurisdiction, the plaintiff’s complaint must contain substantial issues related to federal
or constitutional law. There is no minimum dollar amount for a federal question claim
to be considered for concurrent jurisdiction.

The second type of concurrent jurisdiction is exercised in cases in which the parties
involved are from different states or foreign countries. If the case involves diversity of
citizenship between the parties and the amount in controversy exceeds a good faith
claim of $75,000, the case may be brought before a federal or state court.

The rules for gaining access to the federal courts in cases involving diversity of citi-
zenship require that all plaintiffs be citizens from different states than the defendants.
 Fundamentals of the U.S. Legal System 15

Additionally, if either the plaintiffs or the defendants are U.S. citizens and the other
party is a foreign citizen, diversity of citizenship jurisdiction may be obtained.

If a federal court hears a case based on diversity of citizenship jurisdiction and no fed-
eral question is presented, the federal court will be required to apply the appropriate
state law in deciding the case. Sometimes this will create a question of which state law
should be applied. This issue is discussed below under the heading “State Jurisdiction.”

In any case involving concurrent jurisdiction, the plaintiff has the ability to bring the case to
either a federal or a state court. However, if the plaintiff brings the case to a state court, a
defendant may have the ability to have the case removed to a federal court within the district
serving the state. It is hard to generalize about when a plaintiff or defendant might prefer to
bring a case to state or federal court when there is a choice. Sometimes the decision may be
based on perceived bias in a local or state court or a preference regarding certain judges or
trial locations. Decisions regarding which court to use in a case of concurrent jurisdiction are
typically left to the lawyers involved in a case, and the decisions typically are based on expe-
rience and intuition regarding the most favorable court system for a particular case.

State jurisdiction In all cases where there is no exclusive federal jurisdiction or con-
current jurisdiction, parties wishing to resolve a matter before the courts must use state
courts. Typically, state courts hear matters related to state criminal law, contracts, prop-
erty matters, commercial transactions, and agency relationships.

Sometimes state courts may determine that it is appropriate to use the laws of a different
state in deciding a case. For example, let’s say that a Virginia resident sues a Maryland
resident in Maryland related to a minor aircraft accident that occurred in Delaware. It is
possible that the Maryland court will choose to apply the substantive law of Delaware in
the case because the accident took place in Delaware. Each state has its own conflict of
laws rules that it may apply in such a case. The rules vary from state to state.

Jurisdiction over the parties

The second test of jurisdiction that a court has to meet before it has authority over a case
is jurisdiction over the parties. This is often referred to as personal jurisdiction.

As a general rule, courts may obtain personal jurisdiction over the parties in any one of
the following three ways:
• In personam jurisdiction
• In rem jurisdiction
• Attachment jurisdiction

Each of these requisites for establishing jurisdiction over the parties is discussed
below.

In personam jurisdiction In personam jurisdiction is another way of saying jurisdic-

tion over the person. It is a way of distinguishing a court’s jurisdiction over persons as
opposed to its jurisdiction over property. A court will most commonly obtain in personam
16 Fundamentals of Aviation Law

jurisdiction by serving process (court papers summoning an appearance) within the same
state as it is located. Under this approach, a court may also obtain in personam jurisdic-
tion over a nonresident who happens to be temporarily located within a state but is served
while in the state. In personam jurisdiction may also be obtained by consent. This often
happens when the parties to a contract agree within the contract that any disputes will be
resolved by a particular state’s courts.

Sometimes, a defendant resides, and must be served, outside the state. The question
then becomes whether a state court can obtain jurisdiction over a nonresident defendant
by service of process outside the court’s state. In order to allow a court to take juris-
diction in this type of situation, most states have enacted “long-arm statutes” that allow
a court to extend its reach beyond state borders. To comport with due process consid-
erations in the U.S. Constitution (discussed in greater detail in Chap. 2), there are spe-
cific circumstances and limits attached to the exercise of long-arm jurisdiction. As a
general matter, the law does not want to offend traditional notions of fair play and jus-
tice. Therefore, most long-arm statutes require that, to obtain jurisdiction over an out-
of-state defendant, one or more of the following circumstances must exist:
• The defendant committed a tort (civil wrong) within the state.
• The defendant owns property within the state that is the subject of the lawsuit.
• The defendant entered into a contract within the state.
• The defendant transacted business that is the subject of the lawsuit within the state.

While these rules may seem cut and dry, they are sometimes difficult to apply. Examples
of how different courts have applied long-arm jurisdictional tests can be found in the
“Case Studies and Commentary” section of this chapter.

In rem jurisdiction If property is situated in a state, the courts in that state will gen-
erally have jurisdiction over any disputes or claims related to that property as long as the
plaintiff provides reasonable notice to those parties who may have an interest in the prop-
erty. In rem jurisdiction essentially gives a court power over a thing (property) and in turn
allows the court to preside over a case involving the property. As an example, assume
that Peters and Dean are involved in a dispute that relates to airport property that Dean
owns in Delaware. Even if Peters were from Maryland and Dean were from New Jersey,
a Delaware court would likely have in rem jurisdiction over their dispute as long as each
party was given reasonable notice and an opportunity to be heard in litigation.

Attachment jurisdiction Attachment jurisdiction is purely jurisdiction exercised over

property, not persons. It is sometimes referred to in legal circles as quasi in rem juris-
diction. It allows a court to take jurisdiction over property that is not related to a lawsuit.
As an example, let’s assume that plaintiff Petry, a citizen of Virginia, has obtained a judg-
ment against defendant Dent, a citizen of Pennsylvania, in a matter related to a comput-
er sales contract. Petry would be allowed to seize Dent’s aircraft located in Virginia to
satisfy his court judgment against Dent.

Venue issues Venue relates to the physical location of a court selected to hear a dispute,
not to the type of court selected. Most state court systems have specific rules related to
 Fundamentals of the U.S. Legal System 17

venue that serve to allow for a convenient forum for disputes. For instance, if an aircraft
accident involving Maryland residents occurs within Maryland, proper jurisdiction in a
negligence case against the pilot most likely resides in the trial court of general juris-
diction, the circuit court. However, there are more than 20 counties with circuit courts
located in each Maryland county. Venue rules will help determine which county circuit
court should be used to hear a case. In most situations, venue is appropriate where at
least one defendant resides, where an incident or accident occurred, or where property
subject to a dispute is located.

Our legal system is designed to permit citizens to settle disputes in a peaceful manner Litigation
and is facilitated by the litigation process in the U.S. court system. Typically, when we process
discuss litigation, we are referring to dispute resolution in a court system funded by the
government. Later in this chapter, we will take a look at alternative methods of dispute
resolution that are often paid for by the parties to the dispute.

Civil procedure
Civil procedure is the process applied by court systems to resolve noncriminal disputes.
The courts and legislators continuously refine civil procedure in efforts to make the
process fairer and more efficient. Although there are distinct differences between the var-
ious court systems in the United States, it is fair to say that most systems follow the basic
approach to civil procedure outlined in this section.

To enable you to better understand civil procedure, we will focus the discussion on an
example. Let’s assume that Doug Defendant, a resident of Delaware, is taxiing his air-
craft to depart an airport where he stopped for fuel on his way to a business destination.
While taxiing out of the ramp, he nearly collides with another aircraft being taxied by
Pete Plaintiff, a resident of Maryland. Doug’s aircraft suffers no noticeable damage, and
Doug walks away without injury. However, Pete’s aircraft is severely damaged when he
takes evasive action and taxies his aircraft into the side of a maintenance shed. Pete suf-
fers serious injuries requiring hospitalization for several weeks. It is estimated that
Pete’s medical expenses will be approximately $30,000, and damage to his aircraft is
estimated at $50,000 to repair. Pete hires a lawyer who sends a letter to Doug, claiming
monetary damages for Pete’s property damage and hospital bills. Doug hires a lawyer
and denies any fault in the matter. The parties attempt to settle the matter over the
course of several months. However, all attempts to settle the matter fail.

Pete decides that he will sue Doug in court, to settle this dispute once and for all.
Because of the diversity of citizenship and the amount of damages claimed, Pete decides
to sue Doug in federal court. We’ll follow the progress of this case through the civil pro-
cedure process in the discussion below.

Summons and complaint

The first step in litigation is typically the summons and complaint. The complaint in our
example will be drafted by Pete’s attorney. A well-drafted complaint lays out the rele-
vant facts and the basis of the plaintiff’s legal claim. The complaint must also specify
the amount of damages that the plaintiff is seeking. An illustration of a complaint that
might be filed by Pete’s attorney in our example can be found in Fig. 1-5.
18 Fundamentals of Aviation Law

Figure 1-5
Pete Plaintiff, ∗ IN THE
Complaint. Plaintiff ∗ UNITED STATES DISTRICT COURT
v. ∗ FOR
Doug Defendant, ∗ THE DISTRICT OF MARYLAND
Defendant ∗ CASE NO.: 030163-X
∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗

COMPLAINT

The plaintiff, through his undersigned attorney, states the following:

1. The plaintiff is a resident of the State of Maryland, the defendant is a resident of the State of
Delaware, and there is diversity of citizenship between the parties.
2. The amount in controversy exceeds $75,000, exclusive of interest and costs.
3. On July 1, 2004, plaintiff was exercising due care in taxiing his aircraft at Martin State Airport,
when defendant negligently taxied his aircraft into defendant’s aircraft.
4. As a result of defendant’s negligence, plaintiff has incurred medical expenses of $30,000
and property damage to his aircraft in the sum of $50,000.
WHEREFORE, plaintiff claims judgment in the amount of $80,000, interest at the maximum
legal rate, and costs of the action.
Respectfully submitted,

___________________
Joe Counsel, Esq.
Attorney for Plaintiff
1001 W. Lombard St.
Baltimore, Maryland

Students should note that the complaint in this example is extremely simple. Most com-
plaints are very detailed, and some run more than one hundred pages.

Once the complaint is filed with the court, the court will issue a summons. The sum-
mons is designed to notify the defendant that a complaint has been filed. The summons
also serves to place the defendant on notice that a written response to the complaint
must be filed within a specified period of time (usually around 30 days for in-state
defendants and 60 days for out-of-state defendants). A summons that might be issued
by the court in our example is depicted in Fig. 1-6. Typically the summons can be
served on the defendant by certified mail, delivery by a sheriff or sheriff’s deputy, or
delivery by private process server.

Answer
Assuming the summons and complaint reach the defendant in a timely manner, the
defendant will have to decide whether to respond. In some cases, a defendant will not
answer a complaint if he does not wish to defend his position. If this happens, the defen-
dant may have a default judgment entered against him for failure to respond to the
plaintiff’s claim. In our example, Doug decides to respond and his answer to Pete’s
complaint might look something like Fig. 1-7. Notice that it is important for each claim
contained in Pete’s complaint to be answered, paragraph by paragraph. Whenever Doug
denies a claim by Pete, Pete must prove his assertions at a trial. If Doug admits a
 Fundamentals of the U.S. Legal System 19

UNITED STATES DISTRICT COURT

Figure 1-6
FOR THE DISTRICT OF MARYLAND Summons.
WRIT OF SUMMONS

CASE NO. 030163-X

To: Doug Defendant

100 West End Avenue
Dorchester, Delaware

You are hereby summoned to file a written response by pleading or motion in this
court to the attached complaint filed by:

Pete Plaintiff
3617 North Main St.
Woodcrest, Maryland

within 30 days after the service of this summons against you.

WITNESS, the Honorable Chief Judge of the United States District Court for the
District of Maryland.
To the person Summoned:

1. Failure to respond within the time allowed may result in a default judgment or the
granting of the relief sought against you.

2. If you have been served by a scheduling order, your appearance is required pursuant
to the scheduling order, regardless of the date your response is due.
Date issued: November 23, 2004

_______________________________
Clerk, United States District Court
District of Maryland

claim by Pete, Pete does not have to prove the matter. There may even be occasions on
which an answer may contain affirmative defenses. An affirmative defense essentially
alleges that the plaintiff’s injuries or damages were caused by the plaintiff’s own wrong-
doing. For instance, in our example, Doug responded with an affirmative defense, alleging
that Pete’s injuries and damages were caused by his own negligence in taxiing his aircraft.

If appropriate, a defendant may also take the filing of an answer as an opportunity to

file a claim against the plaintiff in a case. This type of claim by a defendant is known
as a counterclaim. With a counterclaim in place, parties to litigation may be both
plaintiffs and defendants in the same action. If a counterclaim is filed by a defendant,
the plaintiff must respond with a timely reply. In our example, Doug might have
responded with a counterclaim by suing Pete if Doug’s aircraft had been damaged in
the accident. However, after consultation with counsel, Pete determined that a coun-
terclaim would not be appropriate in this action since he did not suffer any damages.

Before the trial

Once a complaint, an answer, and any counterclaims have been filed, the parties begin
preparation for trial. All throughout this pretrial process, the door is always open for the
parties to settle the case.
20 Fundamentals of Aviation Law

Figure 1-7 Pete Plaintiff, ∗ IN THE

Answer. Plaintiff ∗ UNITED STATES DISTRICT COURT
v. ∗ FOR
Doug Defendant, ∗ THE DISTRICT OF MARYLAND
Defendant ∗ CASE NO.: 030163-X
∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗ ∗

ANSWER

The defendant, through his undersigned attorney, responds to the numbered para-
graphs in plaintiff’s complaint as follows:
1. Admitted
2. Defendant has insufficient information to either admit or deny this charge
3. Denied
4. Denied

AFFIRMATIVE DEFENSE

Defendant avers that any damages suffered by plaintiff in this case are the direct
cause of plaintiff’s contributory negligence.
WHEREFORE, defendant requests dismissal of the plaintiff’s complaint with all court
costs of this action to be born by plaintiff.

Respectfully submitted,

___________________
Ann Lawyer, Esq.
Attorney for Defendant
2001 Charles Street
Baltimore, Maryland

The most common chain of events prior to a trial is often the following:
• A motion for a judgment on the pleadings
• Discovery
• Settlement and scheduling conferences
• Motions for summary judgment

We outline each of these possible pretrial events below.

Motion for judgment on the pleadings Once the complaint and answer are filed, one
or both of the parties may file a motion (a motion is a request to the court) for a judgment
on the pleadings. Essentially a judgment on the pleadings requests that the court analyze
the various complaints made to determine whether they are sufficient to be acted on in
accordance with the law. The party filing this type of motion is arguing that even if the
facts asserted by the complainant are true, they do not rise to the level of a legal wrong.
In our example, this type of motion might be filed by Doug if he and his counsel thought
that they could convince the judge that there is really no legally enforceable claim against
Doug for the airplane taxi incident. If this type of motion is granted by the court, some of
or all a plaintiff’s claims may be dismissed. For the purposes of our example, let’s assume
that a judgment on the pleadings was not filed and the case continued to progress.
 Fundamentals of the U.S. Legal System 21

Discovery Another very important step in pretrial proceedings is discovery. Many

students who are used to seeing television or movie trials in which surprise witnesses
turn up dramatically in the final moments of a trial are often surprised to find that
each party has the legal right to learn a great deal from the other party (including
potential witnesses) long before a trial is scheduled to begin. This process of extract-
ing relevant information regarding the case that your opponent plans to present is
known as discovery.

Discovery may include any of the following procedures:

• Written questions (interrogatories) that the opposing party or other witnesses must
reply to under oath
• Written requests for documents or other tangible evidence
• Court-ordered physical or mental examinations of the parties
• In-person questions of witnesses (usually referred to as depositions) in which
answers are given under oath
• Written requests for specific admissions by the opposing parties

In the end, the purpose of discovery is to allow the parties to learn as much as possible
about each other’s cases in order to avoid surprise and confusion at trial. Discovery can
be expensive because it forces the parties to incur significant amounts of attorney time.
However, it can save money in the long run by forcing the parties to face the evidence
and witnesses to be produced by the opposition. On many occasions things learned in
discovery encourage one or both parties to seek settlement before trial.

In Pete and Doug’s case, there would likely be discovery related to the chain of events
leading to the accident, the extent of damage and injury, and the discovery of potential
witnesses. If Pete and Doug still cannot reach a settlement after discovery, the next step
may be a pretrial or scheduling conference with the court.

Pretrial conferences Some courts routinely require the parties to attend a pretrial
conference. On other occasions, issues raised in a particular case may prompt a court to
request such a conference. Typically, the conference will include a discussion of trial
dates, completion of discovery (if it was not complete already), and jury selection. If
discovery has already been completed, the court will typically attempt to persuade the
parties to make admissions, stipulations of fact (agreements as to the facts of the case),
and any required amendments to pleadings, to make time at trial more efficient and to
focus on contested issues. For instance, prior to discovery, there may have been a ques-
tion as to the extent of damage done to Pete’s aircraft. If Pete has produced all his repair
bills in a complete and timely manner, the court may encourage Doug to stipulate that
the damages were the total amount of the bills produced by Pete. This would still leave
open the matter of Doug’s fault, but it would save the court valuable time in trying to
determine the extent of Pete’s damages. Depending on the results of discovery, the court
may also encourage a settlement between the parties. If the parties are reluctant to set-
tle, the court might require them to participate in mandatory mediation (see discussion
of mediation below). If the parties settle at this point, the court will ask them to prepare
an order documenting the settlement. If the court approves, the order will become the
judgment in the case. If the parties cannot settle, the case moves on through the system.
22 Fundamentals of Aviation Law

If the facts of the case are so well framed that they are not in dispute, one or both of the
parties may make a motion for summary judgment.

Motion for summary judgment If the facts of the case are not in dispute, the court
may entertain a motion for summary judgment. A motion for summary judgment essen-
tially argues that there is no need for a trial because the parties agree on all material
facts. Therefore, the court can make its decision based on the law. If one party files a
motion for summary judgment, the opposing party will be granted an opportunity to file
a motion in opposition to the motion for summary judgment, outlining why the party
thinks the motion is inappropriate.

When the court reviews a motion for summary judgment, it must review the facts in a light
most favorable to the party opposing the motion. Therefore, if there is any credible hint
that material facts remain in dispute, the motion must be denied. However, if it does appear
that all material facts are in agreement, the court may grant a motion for summary judg-
ment, and that ruling is binding on all parties just as if the case had gone to trial.

In the case between Pete and Doug we’ll assume that there are two very different versions
of the taxi collision emerging out of discovery—there is definitely no agreement on the
material facts of the case. Therefore, neither party files a motion for summary judgment.
Our case is now headed for trial.

The trial
In most cases, persons involved in litigation in the U.S. legal system are entitled to a jury
trial. However, that does not mean that a jury trial is mandatory. In a jury trial, the jury serves
as a fact finder, and the judge decides on issues of law. If the parties decide to waive a jury
trial, the trial will be conducted by a judge who will decide on issues of both fact and law.

When a jury trial is selected, the first step in the trial process is the selection of a jury.
Depending on the court selected for trial, prospective jurors will be questioned by coun-
sel for the parties or by a judge. This examination of the jurors is called a voir dire (pre-
liminary examination). The purpose of this examination is to allow the parties to exclude
jurors that they believe will not be fair or impartial. Each party typically has an unlimited
number of challenges for cause, which means that the party can exclude as many jurors
as the party wishes if cause for the exclusion can be established. Additionally, each party
may be permitted a set number of peremptory challenges. These peremptory challenges
generally allow the parties to exclude a juror without cause. Jury selection in the United
States has now become an art in and of itself. Sometimes lawyers hire jury consultants
(typically sociologists, psychologists, and other social scientists) to assist in selecting a
jury that will be most favorable to their case. These jury selection experts often create a
jury profile for the lawyers to use during the selection process.

Once the trial is underway, each party will be entitled to make an opening statement. This
will be an opportunity for each party to lay out the case she or he intends to present to the
court, a sort of introduction to lay the framework for the argument. In our case, Pete is the
plaintiff, and he will present his case first. His attorney will call whatever witnesses are
available and question each of the witnesses while they are under oath. After each of
 Fundamentals of the U.S. Legal System 23

Pete’s witnesses testifies, Doug’s attorney will have an opportunity to cross-examine

Pete’s witnesses to challenge their veracity and credibility. In our hypothetical example,
we can assume that Pete’s witnesses will support his claim that Doug negligently taxied
his aircraft into Pete’s aircraft, causing the damages suffered by Pete. After Doug’s attor-
ney cross-examines each of Pete’s witnesses, Pete’s attorney may have an opportunity to
conduct a redirect examination of the witnesses, to try to clear up any questions raised
during their cross-examinations. This will usually open up the door to additional or
recross- examination of Pete’s witnesses by Doug’s counsel. Throughout the proceedings,
the judge may be called upon to rule on the appropriateness of evidence being offered by
the parties including such things as testimony, documents, and physical evidence.

Once Pete’s attorney has completed his presentation of the case, he will rest his case.
At this point, Doug’s attorney may decide to present a motion for a directed verdict. A
directed verdict motion requests that the court view all the evidence presented by the
plaintiff and determine whether there is substantial enough evidence to support a find-
ing in favor of the plaintiff. Let’s assume in our example that the judge rules that Pete
has presented sufficient evidence to support a verdict in his favor and the judge wants
to proceed with the trial to hear Doug’s side of the story.

Doug’s attorney will present his witnesses to support Doug’s contention that he was not
negligent in taxiing his aircraft and that it was Pete whose negligence caused the collision
between the two aircraft. Just as before, each of Doug’s witnesses will be subject to cross-
examination, questions on redirect, and recross-examination.

At the close of all questioning, each party will have the opportunity to present closing
arguments. Closing arguments usually include a summary of the evidence presented at
trial and legal arguments supporting a verdict in favor of the party presenting the argu-
ments. Typically, Pete’s attorney will be allowed to make the first closing argument, fol-
lowed by Doug’s attorney, with an opportunity for a brief rebuttal by Pete’s attorney.
Now our case is ready for presentation to a jury or judge for a verdict.

In a jury trial, the lawyers and judge will hammer out instructions for the jury that will allow
the jury to decide the case in accordance with the law. In a case decided by a judge, there
will be no need for instructions, and the judge will issue a verdict in writing or orally. In Pete
and Doug’s case, the jury enters a ruling in favor of Pete for all damages sought.

Once a verdict is rendered, the losing party may make an immediate challenge to over-
turn the verdict. If this challenge fails, the losing party (in our example Doug) may decide
to bring the case to the appeals court level. In this example, the appeal would be filed with
the U.S. Circuit Court of Appeals.

Appeals
If Doug seeks an appeal, he will be referred to as the appellant. The prevailing party,
Pete, who is defending on appeal, is referred to as an appellee.

Once Doug’s attorney files a timely notice of appeal, Doug and his attorney will be provided
with a certified record of the trial proceedings. The record will usually consist of transcripts
24 Fundamentals of Aviation Law

of testimony, all the pleadings and motions proffered in the case, documentary and physical
exhibits, and any other relevant evidence presented and accepted in the case at trial.

With these materials in hand, Doug’s attorney will prepare a legal brief. A legal brief is a
formal document in which the appellant attempts to persuade the appeals court that the
decision reached by the trial court was in error. Appellate rules require that briefs contain
a summary of the procedural history of the case, a brief summary of the facts, a statement
outlining the issues on appeal, and argument. Doug can argue that the trial court was wrong
on the facts or the law or both. After Doug’s attorney files his brief, Pete’s attorney will
have an opportunity to file an answer to Doug’s brief. Many appellate courts will also give
Doug’s attorney an opportunity to reply to Pete’s answering brief.

After all the appellate briefs have been submitted, the parties will have an opportunity
to present their cases to the appeals judges during oral argument. Usually each party is
allotted only a short time (15 to 30 minutes) to make an oral presentation, and typical-
ly the oral argument sessions are loaded with questions from the judges to the lawyers.
Once the oral argument is concluded, the appellate judges will decide the case and issue
a written opinion.

In many cases, it will be difficult for an appellant to prevail on an argument that the trial
court was wrong on the facts. Remember that the appellate court does not have a chance
to actually see witnesses and evaluate their credibility. The appellate court has only tran-
scripts and other evidence previously presented at the trial to evaluate. It is unlikely that
an appellate court will overturn a judge’s or jury’s decision on the facts, because the trial
court judge or jury had a first-hand opportunity to view the witnesses and evaluate their
veracity. However, an appellate court will typically not hesitate to find that a trial court
made an error with respect to the law (e.g., permitting improper evidence to be intro-
duced at trial). These errors could result in the case being remanded (returned to the trial
court to be determined in accordance with the appellate court ruling) or the trial court’s
ruling being reversed. If the appeals court does not believe that the trial court made any
substantial errors, the trial court’s verdict will be affirmed. In Doug and Pete’s case, the
appeals court affirms the trial court’s verdict. Doug decides at this point that he does not
wish to appeal to the U.S. Supreme Court (where the chances of having this type of case
heard would be negligible), and so the judgment against Doug becomes final.

Enforcing judgments
After Pete wins his case, he will want to collect on his judgment. Doug may cooperate
and pay immediately. However, if Doug does not cooperate, Pete will usually be able
to enforce his judgment by several methods. The usual options available include
• Garnishing Doug’s wages or salary
• Garnishing Doug’s bank account(s)
• Seizing Doug’s personal property or real estate

To pursue any of these options, Pete will need to find the assets necessary to satisfy his
judgment against Doug. In many cases, Pete can get the information necessary through
written interrogatories or questions that Doug will have to answer under oath. If this
 Fundamentals of the U.S. Legal System 25

approach is unsuccessful, Pete may seek to have Doug ordered to court for an oral
examination under oath. When and if Pete is finally successful in obtaining his mone-
tary damages from Doug, he will be required to file a document with the court notify-
ing the court that the judgment has been satisfied.

Due to the expense and time-consuming nature of litigation in the courts, many businesses Alternative
and individuals are turning to alternative means to resolve disputes. As these alternative methods of
means become increasingly popular, it is important that aviation professionals become dispute
familiar with the various options available.
resolution
Arbitration
One widely used alternative to the litigation in the courts is arbitration. In arbitration, a
neutral third party is selected to hear a case brought by the persons involved in a dispute.
Usually, the arbitrator selected is an attorney who specializes in the area or areas of law
touching on the dispute. The rules of procedure in arbitration are relatively relaxed when
compared to the formal rules of civil procedure and evidence applied by the courts.
Therefore, arbitration usually takes less time and money than court litigation.

There are different routes to arbitrations. In some cases the parties agree ahead of time
(often in a contract) to submit any disputes to an arbiter. In other cases, the parties
involved in a dispute mutually agree to submit their dispute to an arbiter. Both situations
are examples of consensual arbitration (where the parties agree to arbitration as a means
of dispute resolution).

In some instances, the law requires that the parties submit their dispute to arbitration.
In these cases, federal or state law requires that the parties submit any disputes to arbi-
tration. Usually labor disputes involving public employees, transportation workers
(including pilots and air traffic controllers), police, teachers, or firefighters are subject
to compulsory arbitration.

Agreements to arbitrate are enforceable by both federal and state law. The federal gov-
ernment has enacted the Federal Arbitration Act, and most states have adopted a uni-
form arbitration act.

As a general rule, the decision of an arbiter will be binding on the parties. However, the
decision may be subject to review on very narrow grounds including the following:
• The decision was tainted by corruption, fraud, or other illegal means.
• There was bias on the part of the arbiter.
• The arbiter committed errors that prejudiced a party.
• The arbiter exceeded the scope of his or her authority.

With these very narrow grounds for appeal, most decisions by arbiters are upheld and
are indeed binding.

Conciliation and mediation

Conciliation and mediation are processes that employ third parties to act as facilitators
in an effort to bring the disputing parties to a settlement agreement. Many court systems
26 Fundamentals of Aviation Law

now mandate that parties participate in a conciliation or mediation process before they
get to the courtroom. Conciliators will typically explain issues, coordinate meetings, and
act as intermediaries between the parties when the parties cannot or will not communi-
cate directly. Mediators do the same work as conciliators. However, in addition, media-
tors will offer suggestions for resolving disputes between the parties. Because neither a
conciliator nor a mediator renders a decision or an opinion in a matter, there is nothing
binding in this process unless the parties agree to be bound by a settlement agreement.

Minitrials and summary jury trials

Minitrials and summary jury trials are attempts to present evidence to third parties in a less
formal manner than would be seen in the courts. The third party (often a retired judge,
lawyer, or group of privately selected jurors) then renders an opinion on the case. The opin-
ion is nonbinding, and either party has the right to move the case to a court for a full trial.

BASICS OF LEGAL RESEARCH

Although your course work in aviation law is not designed to transform you into a
lawyer, you may be exposed to research projects or cases that will require legal research.
The purpose of this discussion is to acquaint you with some basic research tools that you
might find helpful in your legal studies.

Case law If you are looking for federal or state cases, there are a number of sources you can use
to locate a case. When you are fortunate enough to have a law library available, there will
be volumes of books (called reporters) for federal cases. Supreme Court, Federal Court
of Appeals, and district court cases can be found in these reporters. The reporters for
Supreme Court cases are typically found in the United States Reports. These volumes use
the citation “U.S.” There are other reporters for Supreme Court decisions including the
Supreme Court Reporter (citation “S.Ct.”) and Lawyer’s Edition (citations “L.Ed.” and
“L.Ed.2d”). For Federal Court of Appeals (circuit court) decisions, the citation will usu-
ally be “F.2d.” or “F.3d.” For U.S. district court cases the citation will read “F.Supp.” for
the Federal Supplement reporter. When you analyze a case citation, you can use the rep-
resentative citation found in Fig. 1-8 for guidance.

If you are looking at a citation for a case decided by a federal court of appeals, the cita-
tion will also include the deciding circuit court (e.g., Second Circuit). The same is true

Figure 1-8 Reporter First page

Versus volume number of case
Case citations.

SMITH V. JONES, 44 U.S. 3617 (1998)

First party Second party Reporter Decision date

abbreviation
(U.S. Reports)
 Fundamentals of the U.S. Legal System 27

for U.S. district courts where the citation will include the location of the court (e.g.,
S.D.N.Y. for the U.S. District Court for the Southern District of New York).

If you are looking for state case law, you will have to find the specific state reporter you
need. Each state has its own sets of official reporters. For instance, if you were looking
for an Arizona case decided by the Arizona Supreme Court, you would look to Arizona
Reports “Ariz.” You could also find this case in the Pacific Reporter (“P.2d”). A Rhode
Island Supreme Court decision can be found in the Rhode Island Reports (“R.I.”) or the
Atlantic Reporter (“A.2d”).

If a law library is not readily available, there are still plenty of ways to get to fed-
eral cases via electronic means. Your college or university may subscribe to
Lexis/Nexis or Westlaw or some other proprietary legal research engines. If so,
your instructor can lead you through the various electronic tools available. Most of
these electronic search engines are based on keyword searches. Even if these pro-
prietary search engines are not available, you can still use the free legal research
tools available at www.findlaw.com.

When you get to Chap. 5 and start looking at National Transportation Safety Board
cases involving airman enforcement actions, you may find the NTSB web site (www.
ntsb.gov) handy for locating cases. The NTSB web site catalogues cases dating back to
January 1, 1992.

At times your research may require you to analyze a statute or regulation. Just as with-cases, Statutes and
you can find federal and state statutes through proprietary research engines such as Westlaw regulations
or Lexis/Nexis. The web site www.findlaw.com also has a full complement of federal and
state statutes available online. For regulations, you can typically go straight to the web site
of the applicable regulatory agency. The FAA’s web site at www.faa.gov contains all the
FAA regulations and Federal Register pronouncements related to aviation matters.

Another research tool that you mind find helpful is the law review article. Law reviews Law review
are typically published by law schools. They contain articles on topical subjects by articles
lawyers, law professors, and judges, and case summaries by law school students. Law
review articles are heavily footnoted, and often the footnotes will lead you to primary
sources such as statutes or cases. The footnotes may also lead you to other relevant arti-
cles. One of the most widely referred to law reviews in the aviation industry is the
Southern Methodist University (SMU) Journal of Air Law and Commerce. You can log
onto the SMU web site at www.smu.edu to review a listing of articles available. These
articles can usually be accessed in full text by using a law library or a proprietary legal
research engine such as Westlaw or Lexis/Nexis.

CASES AND COMMENTARY

Author’s Note: Toward the end of each chapter, you will be presented with edited versions of
actual cases with aviation-related applications of the subject matter tackled in the chapter. It
is important for you to gain some exposure to the actual language and analysis used
28 Fundamentals of Aviation Law

by judges when they decide a case. The judge’s opinions will also give you a sense of the
interplay between the attorneys arguing the case and the judges who must make a decision
on the cases. In the end, it is the attorneys who lay out the arguments that must be weighed
by the judges, and ultimately those arguments find their way into court opinions.

Most of the cases selected will be cases before appellate courts. However, from time to
time you will review cases that have been decided by trial court judges. On occasion
your instructor may request that you “brief” a case. Guidance on how to prepare a case
briefing is provided in App. A of this textbook.

For the two cases presented in this chapter, the facts have been laid out in summary
form. In later chapters, you can gain some experience “unpacking” some complex fact
patterns directly from the cases.

Case 1-1 deals with a question of federal jurisdiction. See if you agree with the court’s
determination on the issue of whether this case can be properly submitted to federal court
jurisdiction.

CASE 1-1
LUCIA V. TELEDYNE
173 F. Supp. 2d 1253 (2001)

JUDGE: Richard W. Vollmer, Jr. under 49 U.S.C. Section 44701. The AD mandated
ultrasonic inspections of the covered crankshafts
FACTS: The Plaintiff in this case owns and oper- and approved the technical contents of Teledyne’s
ates two piston engine aircraft that use crankshafts CSB.
manufactured by Defendant Teledyne Continental
One day after the issuance of the AD, Plaintiff
Motors Division (“Teledyne”). On April 19, 9999,
Lucia filed a claim against Teledyne in the Circuit
Teledyne issued a “Critical Service Bulletin”
Court of Mobile County, Alabama requesting
(“CSB”) noted cracks found in two of eight engine
injunctive relief in the form of “magnaflux testing”
crankshafts it manufactured or reworked in 1998.
of the crankshafts in question and compensatory
Teledyne’s CSB detailed an inspection process in damages “not in excess of $70,000 per class mem-
which eligible crankshafts would be examined in ber, attorneys’ fees from the common fund, interests
field inspections by Teledyne representatives. The and costs.” The four causes of action asserted in the
inspections call for ultrasound testing of the crank- Plaintiff’s complaint are (1) Misrepresentation, (2)
shafts. If problems were revealed, the engine would Negligence, (3) Strict Liability, and (4) Breach of
be removed and sent to Teledyne’s facilities in Express Warranty.
Mobile, Alabama.
On May 16, 1999, Teledyne filed its Notice of
On April 22, 1999, the Federal Aviation Adminis- Removal, claiming that this case should be
tration (“FAA”) issued a “Priority Letter Airwor- removed to federal court based on grounds of sub-
thiness Directive” (“AD”) pursuant to its authority ject matter jurisdiction over a federal question, or
 Fundamentals of the U.S. Legal System 29

in the alternative, on the existence of complete since any of the claims of this hypothetical class
diversity between the parties. In turn, the Plaintiff would arise from those class members’ separate
filed a Motion to Remand this case back to the and individual agreements with Teledyne. [Cita-
state court where it was filed. The federal court tion.] Though the point is somewhat moot as only
now examines whether this case can be properly Plaintiff Lucia’s claims are before this Court, such
removed to a federal court. claims as would arise from various class members
could not be aggregated for amount in controversy
OPINION purposes. [Citation.]
A) Diversity Jurisdiction: The foundation for
The allegations by Teledyne that the aviation com-
federal court diversity jurisdiction — the power to
ponents are part of a single and distinct product line
decide cases between citizens of different states —
does not change the separate and distinct nature of
is Article III of the United States Constitution. U.S.
the rights that could be asserted in this matter,
Const. art. III, § 2 [Citation]. However, when Con-
assuming arguendo that a class could eventually be
gress created the lower federal courts, it limited their
certified in this matter. [Citation.] (“Federal Rule of
diversity jurisdiction to cases in which there was a
Civil Procedure, Rule 20 allows the joinder of par-
minimum monetary amount in controversy between
ties plaintiff when there is a common question of
the parties. [Citation.] Today, the threshold amount
law or fact and the claims of all plaintiffs arose out
in controversy for diversity jurisdiction, excluding
of the same transaction or occurrence. However, this
interests and costs, is $75,000. [Citation.]
joinder for convenience of the court affects in no
In [Citation] (“Cohen II”), the Eleventh Circuit held way the entirely separate question of aggregation of
that a prior panel decision by the Former Fifth Cir- claims to satisfy the jurisdictional amount.”).
cuit, [Citation], precluded aggregating punitive dam- Accordingly … the Court finds that Teledyne has
ages to establish diversity jurisdiction over a class failed to demonstrate the amount in controversy for
action. See Cohen II, [Citation]. Though not address- purposes of establishing diversity jurisdiction in this
ing precisely the set of facts at issue, the holding is in matter.
accord with the rule that, generally speaking, when a
B) Federal Question Jurisdiction: Defendant
set of plaintiffs join in one lawsuit, the value of their
also asserts that the Court has original subject mat-
claims may not be added together, or “aggregated,”
ter jurisdiction over this case, pursuant to [Cita-
to satisfy the amount in controversy requirement for
tion], because of the presence of a federal question.
diversity jurisdiction. [Citations.]
Teledyne argues that, since this lawsuit seeks com-
In this matter the compensatory, or actual damages pensatory and actual damages in an area of law
of Plaintiff (or any other hypothetical class member) which, according to Defendant, has been super-
appear to be relatively small. According to Plaintiff, preempted by virtue of Congress’ delegation to the
the alleged damages suffered include those costs Federal Aviation Administration, the Court there-
incident to the proper inspection and repair of the fore has proper jurisdiction. Defendant’s field pre-
allegedly faulty crankshafts, as well as those costs emption argument operates on the assumption that
attaching to the loss of use of Plaintiff’s aircraft. any and all judicial intervention into actions even
These costs Plaintiff values to be not in excess of tenuously affecting issues involving the proper
$70,000. See Complaint, supra. In any event, maintenance, repair and/or general safety regula-
assuming arguendo that a class could eventually be tion of aviation hardware must necessarily be of
certified in this matter, the compensatory (or puni- the federal type. This assumption fails to recog-
tive if pled) damages claims could not be aggregated nize, however, that the statutory grant to the FAA
to form the basis for federal diversity jurisdiction, of exclusive federal regulatory power in the field
30 Fundamentals of Aviation Law

extends only to those matters having the force and preemptive effect of the FAA’s regulatory activity on
effect of law related to a price, route, or service of Plaintiff’s request for injunctive relief. As the mere
an air carrier that may provide air transportation existence of a federal defense, even one involving
under this subpart.” [Citation.] The Court will federal (ordinary) preemption, cannot serve as the
address this argument more fully below. Alterna- basis for federal subject matter jurisdiction, it follows
tively, Defendant argues that by seeking injunctive that Defendant has improperly removed this matter
relief to be issued by a state court in order to com- to federal court. [Citation.]
pel Teledyne to enact safety and inspection meas-
Likewise, there is simply no foundation to support
ures beyond the scope of those specifically
Teledyne’s claims that the preemption provision of
approved in the FAA’s AD of April 22, 1999,
the Aviation Act, [Citation], indicates that Congress
Plaintiff has bestowed federal question jurisdiction
has chosen to occupy the field “so thoroughly … as
on the Court by operation of ordinary preemption.
to make reasonable the inference that Congress left
no room for the states to supplement federal law.”
CONCLUSION [Citation.] As noted above, the preemption provi-
Plaintiff’s Complaint relies exclusively on state sion in this context merely creates a potential fed-
law causes of action. It does not on its face allege eral defense to Plaintiff’s claims under state law,
any basis for federal jurisdiction. Accordingly, which the state court is more than capable of
under the well-pleaded complaint rule, the sub- resolving under the doctrine of ordinary preemp-
stance of the Complaint does not permit removal tion. Further, the fact that the Aviation Act contains
to federal court. As the Court has determined, the a provision preempting claims under state law
amount in controversy sufficient to establish which would affect airlines’ rates, routes or serv-
diversity jurisdiction has not been met in this ices, [Citation], does not under the principles of
case. Therefore, Teledyne could have properly complete preemption described above “create”
removed this case only if Plaintiff’s state law removal jurisdiction. To the contrary, the Aviation
claims are rendered federal in nature under either Act does not contain the extraordinary preemptive
the doctrines of complete or ordinary preemption. force necessary to render Plaintiff’s state claims
As demonstrated above, neither doctrine is appli- federal in nature and removal proper.
cable to the matter at hand.
Plaintiff, as the master of his claim, has success-
In addition to the state law claims for negligence, fully pleaded state law claims and is entitled to liti-
misrepresentation and breach of warranty, Plaintiff’s gate his claims in state court, the forum of his
Complaint in this case seeks injunctive relief against choice. While his claim for injunctive relief may
Defendant Teledyne in the form of a mandatory ultimately prove to be preempted by section 41713
request for the detailed inspection of select aircraft of Title 49, the ordinary preemption issue is most
components manufactured by Defendant. Plaintiff appropriately decided by the state court and is not
does not request that the state court either review or addressed here. [Citations.] For the foregoing rea-
alter the regulatory decision of the FAA as mani- sons, the Court concludes that it lacks subject mat-
fested in its Advisory Directive, contrary to Defen- ter jurisdiction over this action. The court therefore
dant’s attempts to characterize Plaintiff’s pleadings REMANDS this matter to the Circuit Court of
as such. Rather, any question concerning the FAA’s Mobile County, Alabama. The clerk is DIRECTED
regulatory authority in this area of law arose only to take all steps necessary to effectuate this remand,
from Teledyne’s defensive assertion of the purported each party to bear its own costs.
 Fundamentals of the U.S. Legal System 31

Notice that in this case the defendant, Teledyne, was seeking to have the case moved
from a state trial court to a federal trial court (the U.S. district court). Why, do you
think, Teledyne would spend so much time and money to attempt to have the case
moved to a federal court?

Teledyne raises an interesting argument that this case should be heard before a federal
court because it has a potential defense based on preemption (we will discuss the issue
of preemption in greater detail in Chap. 2). However, the court rejects this argument.
Why does the court reject the argument? Do you think the court made the right decision?

You are encouraged to find and read the full text of this case. The full text contains a
rich and full discussion of the law relating to federal jurisdiction.

The next case, Case 1-2, involves a question of personal jurisdiction. This case was
deemed to be so significant that the U.S. Supreme Court elected to review the case. Just
how much contact must a foreign helicopter transportation company have with the state
of Texas to be subject to the jurisdiction of the Texas court system? See what the
Supreme Court thinks in Case 1-2.

CASE 1-2
HELICOPTEROS NACIONALES DE COLOMBIA, S.A. V. HALL ET AL.

466 U.S. 408 (1984)

FACTS: “Helicol”, the Petitioner, a Colombian United States citizens who were employed by the
corporation, entered into a contract to provide consortium—respondents instituted wrongful-death
helicopter transportation for a Consorcio/WSH, actions in a Texas state court against the consor-
a Peruvian company closely related to a joint tium, the Texas manufacturer, and petitioner. Deny-
venture that had its headquarters in Houston, ing petitioner’s motion to dismiss the actions for
Tex., during the consortium’s construction of a lack of in personam jurisdiction over it, the trial
pipeline in Peru for a Peruvian state-owned oil court entered judgment against petitioner on a jury
company. Petitioner has no place of business in verdict in favor of respondents. The Texas Court of
Texas and never has been licensed to do business Civil Appeals reversed, holding that in personam
there. Its contacts with Texas consisted of send- jurisdiction over petitioner was lacking, but in turn
ing its chief executive officer to Houston to nego- was reversed by the Texas Supreme Court.
tiate the contract with the consortium, accepting
into its New York bank account checks drawn by OPINION: JUSTICE BLACKMUN delivered
the consortium on a Texas bank, purchasing heli- the opinion of the Court.
copters, equipment, and training services from a
Texas manufacturer, and sending personnel to In ruling that the Texas courts had in personam
that manufacturer’s facilities for training. After a jurisdiction, the Texas Supreme Court first held that
helicopter owned by petitioner crashed in Peru, the State’s long-arm statute reaches as far as the
resulting in the death of respondents’ decedents— Due Process Clause of the Fourteenth Amendment
32 Fundamentals of Aviation Law

permits. Thus, the only question remaining for the All parties to the present case concede that respon-
court to decide was whether it was consistent with dents’ claims against Helicol did not “arise out of,”
the Due Process Clause for Texas courts to assert in and are not related to, Helicol’s activities within
personam jurisdiction over Helicol. Texas. We thus must explore the nature of Heli-
col’s contacts with the State of Texas to determine
The Due Process Clause of the Fourteenth Amend- whether they constitute the kind of continuous and
ment operates to limit the power of a State to assert systematic general business contacts the Court
in personam jurisdiction over a nonresident defen- found to exist in Perkins. We hold that they do not.
dant. Due process requirements are satisfied when
in personam jurisdiction is asserted over a nonresi- It is undisputed that Helicol does not have a place
dent corporate defendant that has “certain minimum of business in Texas and never has been licensed to
contacts with [the forum] such that the maintenance do business in the State. Basically, Helicol’s con-
of the suit does not offend ‘traditional notions of fair tacts with Texas consisted of sending its chief exec-
play and substantial justice.’” [Citation.] utive officer to Houston for a contract-negotiation
session; accepting into its New York bank account
When a controversy is related to or “arises out of” checks drawn on a Houston bank; purchasing heli-
a defendant’s contacts with the forum, the Court copters, equipment, and training services from Bell
has said that a “relationship among the defendant, Helicopter for substantial sums; and sending per-
the forum, and the litigation” is the essential foun- sonnel to Bell’s facilities in Fort Worth for training.
dation of in in personam jurisdiction. [Citation.]
The one trip to Houston by Helicol’s chief execu-
Even when the cause of action does not arise out of tive officer for the purpose of negotiating the trans-
or relate to the foreign corporation’s activities in the portation-services contract with Consorcio/WSH
forum State, due process is not offended by a State’s cannot be described or regarded as a contact of a
subjecting the corporation to its in personam juris- “continuous and systematic” nature, as Perkins
diction when there are sufficient contacts between described it, [Citation], and thus cannot support an
the State and the foreign corporation. [Citations.] In assertion of in personam jurisdiction over Helicol
Perkins, the Court addressed a situation in which by a Texas court. Similarly, Helicol’s acceptance
state courts had asserted general jurisdiction over a from Consorcio/WSH of checks drawn on a Texas
defendant foreign corporation. During the Japanese bank is of negligible significance for purposes of
occupation of the Philippine Islands, the president determining whether Helicol had sufficient con-
and general manager of a Philippine mining corpo- tacts in Texas. There is no indication that Helicol
ration maintained an office in Ohio from which he ever requested that the checks be drawn on a Texas
conducted activities on behalf of the company. He bank or that there was any negotiation between
kept company files and held directors’ meetings in Helicol and Consorcio/WSH with respect to the
the office, carried on correspondence relating to the location or identity of the bank on which checks
business, distributed salary checks drawn on two would be drawn. Common sense and everyday
active Ohio bank accounts, engaged an Ohio bank to experience suggest that, absent unusual circum-
act as transfer agent, and supervised policies dealing stances, the bank on which a check is drawn is
with the rehabilitation of the corporation’s properties generally of little consequence to the payee and is
in the Philippines. In short, the foreign corporation, a matter left to the discretion of the drawer. Such
through its president, “[had] been carrying on in unilateral activity of another party or a third person
Ohio a continuous and systematic, but limited, part is not an appropriate consideration when determin-
of its general business,” and the exercise of general ing whether a defendant has sufficient contacts
jurisdiction over the Philippine corporation by an with a forum State to justify an assertion of juris-
Ohio court was “reasonable and just.” [Citation.] diction. [Citations.]
 Fundamentals of the U.S. Legal System 33

The Texas Supreme Court focused on the purchases This Court in International Shoe acknowledged and
and the related training trips in finding contacts suf- did not repudiate its holding in Rosenberg. [Cita-
ficient to support an assertion of jurisdiction. We do tion.] In accordance with Rosenberg, we hold that
not agree with that assessment, for the Court’s mere purchases, even if occurring at regular inter-
opinion in [Citation] makes clear that purchases vals, are not enough to warrant a State’s assertion of
and related trips, standing alone, are not a sufficient in personam jurisdiction over a nonresident corpora-
basis for a State’s assertion of jurisdiction. tion in a cause of action not related to those purchase
transactions. Nor can we conclude that the fact that
The defendant in Rosenberg was a small retailer in
Helicol sent personnel into Texas for training in con-
Tulsa, Okla., who dealt in men’s clothing and fur-
nection with the purchase of helicopters and equip-
nishings. It never had applied for a license to do
ment in that State in any way enhanced the nature
business in New York, nor had it at any time author-
of Helicol’s contacts with Texas. The training was
ized suit to be brought against it there. It never had
a part of the package of goods and services pur-
an established place of business in New York and
chased by Helicol from Bell Helicopter. The brief
never regularly carried on business in that State. Its
presence of Helicol employees in Texas for the
only connection with New York was that it pur-
purpose of attending the training sessions is no
chased from New York wholesalers a large portion
more a significant contact than were the trips to
of the merchandise sold in its Tulsa store. The pur-
New York made by the buyer for the retail store in
chases sometimes were made by correspondence
[Citation].
and sometimes through visits to New York by an
officer of the defendant. The Court concluded: We hold that Helicol’s contacts with the State of
“Visits on such business, even if occurring at regu- Texas were insufficient to satisfy the requirements
lar intervals, would not warrant the inference that of the Due Process Clause of the Fourteenth
the corporation was present within the jurisdiction Amendment. Accordingly, we reverse the judgment
of [New York].” [Citation.] of the Supreme Court of Texas. It is so ordered .

Students should note that in this case the U.S. Supreme Court determined that the Texas
Supreme Court incorrectly ruled that the contacts of Helicol were sufficient to assert
jurisdiction over the corporation. This case was not easily decided (as evidenced by the
disagreement between the Texas Supreme Court and the U.S. Supreme Court). In fact,
there was a dissenting (minority) opinion published by Justice Brennan in this case. In
his dissenting opinion, Justice Brennan states: “… I believe that the undisputed contacts
in this case between … Helicol … and the State of Texas are sufficiently important, and
sufficiently related to the underlying cause of action, to make it fair and reasonable for
the State to assert personal jurisdiction over Helicol.…” Justice Brennan goes on to
state that “… maintenance of this suit in Texas courts ‘does not offend traditional
notions of fair play and substantial justice,’” citing International Shoe Co v. Washington4
as the basis for his dissent.

The International Shoe case is a landmark case on the issue of personal jurisdiction.
Find the case and read the opinion. After reading the opinion, do you still agree with
the opinion of the majority in this case or do you side with Justice Brennan and the
Texas Supreme Court?
34 Fundamentals of Aviation Law

DISCUSSION CASES

1. Captain Smith was a pilot for Windswept Airlines (“Windswept”). In 2003, Smith
was forced to resign by the airline. Smith sued Windswept, alleging that his employment
was terminated due to his pro-union activities, and not because of substandard job per-
formance as claimed by the airline. During discovery, a memo written by a Windswept
manager was produced that stated: “More than a few crew members claimed that Smith
professed to being a leftist-activist. His over-activity in the local pilots’ union, coupled
with inquiries regarding company files to our secretary, led to the conclusion that poten-
tial trouble could be avoided by the acceptance of Smith’s resignation.” Smith claimed
that the report is evidence of the true reason for his discharge. Windswept files a motion
for summary judgment with the trial court. Should the motion for summary judgment be
granted? Why or why not?
2. The plaintiff corporation, incorporated in Michigan, hired a defendant from Florida
to operate a helicopter to spray agricultural chemicals on fields in Ohio. In a contract
written and signed by the plaintiff in Michigan and later signed by the defendant in
Florida, the defendant agreed that if he left the employment of the plaintiff, he would
not create or become employed by a competing business. After two years, the defendant
left the plaintiff’s employ and immediately began a competing business in Ohio. The
plaintiff sued in Ohio to enforce the covenant not to compete. Such a covenant was void
under Michigan law but valid and enforceable if reasonable under the laws of Florida
and Ohio. Which state’s law should be applied in the Ohio court? Discuss.

3. While taxiing his aircraft in Virginia, Dodd, a resident of North Carolina, struck Paul,
a resident of Alaska. As a result of the accident, Paul incurred more than $80,000 in med-
ical expenses. Paul would like to know, if he personally serves the proper papers to Dodd,
whether he can obtain jurisdiction against Dodd for damages in the following courts:
(a) Alaska state trial court
(b) Federal Circuit Court of Appeals for the Ninth Circuit (includes Alaska)
(c) Virginia state trial court
(d) Virginia federal district court
(e) Federal Circuit Court of Appeals for the Fourth Circuit (includes Virginia and
North Carolina)
( f ) Virginia equity court
(g) North Carolina state trial court

4. Gus Gullible, a resident of Kansas, and Ned Naïve, a resident of Missouri, each pur-
chased an $85,000 used aircraft in their home states from Slick Sam, Inc.(“Slick Sam”),
an aircraft broker incorporated in Delaware with a principal place of business in
Kansas.Both Gullible and Naïve believe they were cheated by Slick Sam on the aircraft
sales, and they would like to sue Slick Sam for fraud. Assuming that there is no federal
question at issue, assess the accuracy of the following statements.
(a) Gullible can sue Slick Sam in a Kansas state trial court.
(b) Gullible can sue Slick Sam in a federal district court in Kansas.
(c) Naïve can sue Slick Sam in a Missouri state trial court.
(d) Naïve can sue Slick Sam in a federal district court in Missouri.
 Fundamentals of the U.S. Legal System 35

5. Peter Plaintiff brought an action in an Illinois trial court to recover damages for
breach of warranty against Digital Defendant, Inc. (“Digital Defendant”). (A warranty
is a duty assumed by a seller of goods that relates to the quality of the goods.) Digital
Defendant manufactures weather radar devices for light aircraft. Digital Defendant is
an Indiana corporation with a primary place of business in Decatur, Indiana. Digital
Defendant has no office in Illinois and no agent authorized to do business on its behalf
in Illinois. Peter Plaintiff saw Digital Defendant’s weather radar equipment on display
at the Chicago Aviation Exposition. In addition, promotional literature related to Digital
Defendant’s equipment was circulated at the exposition. Several aviation trade magazines,
delivered to Peter Plaintiff in Illinois, contained advertisements for Digital Defendant’s
equipment. Eventually, Peter Plaintiff purchased a Digital Defendant weather radar
device at Fly-By-Night Aviation, Inc., a fixed-base operator located at an airport in
Illinois. A written warranty was issued by Digital Defendant and delivered to Peter
Plaintiff in Illinois. Digital Defendant seeks to have Peter Plaintiff’s suit dismissed on
the grounds that Digital Defendant should not be subject to the jurisdiction of the
Illinois courts. Will Digital Defendant’s argument succeed? Explain.

6. Joe Pilot brought a lawsuit in a California trial court against his former employee
Pacific Skyways in a dispute over whether certain overtime pay was due to Pilot. When
he applied for employment at Pacific Skyways, Pilot signed a form that contained an
arbitration agreement clause. When Pacific Skyways sought to open arbitration pro-
ceedings, Pilot refused to arbitrate, citing Section 229 of California law that states that
actions commenced for the collection of wages may be maintained “without regard to
the existence of any private agreement to arbitrate.” Pacific Skyways files a petition
with the California trial court to compel arbitration under the Federal Arbitration Act.
Who will win on the issue of arbitration? Discuss.

7. The defendant, Design Maintenance, Ltd., rebuilt an aircraft engine for the plain-
tiff, Perfect Landings, Inc., sometime in July 2004. On January 15, 2005, the defendant’s
president was served with a summons and complaint in a lawsuit filed by Perfect
Landings. Perfect Landings claimed that Design Maintenance’s defective work on the
engine forced Perfect Landings to spend in excess of $25,000 in repairs. Under court
rules, an answer was due from the defendant on February 16, 2005. Design Maintenance
attempted to answer on February 18, 2005, but the court refused to accept the filing
because it was untimely. The court entered a default judgment against the defendant and
set a hearing to establish damages. Design Maintenance filed a motion to set aside the
default judgment on the grounds of “excusable neglect,” pointing out that its president
had received two summonses in the same week and believed that Perfect Landings had
been served at the same time as the other summons on January 18, 2005. Should the
court set aside the default judgment? Why or why not?

8. Plaintiff Parsons & Company filed suit against defendant Destinations Unlimited, an
air freight company, claiming $100,000 in damages from the alleged mishandling of frag-
ile cargo by Destinations. The lawsuit was filed in a New York state court. As part of the
discovery process in the lawsuit, Parsons sought to take the deposition of Destinations’
president. An attorney for Destinations told the court that Destinations’ president lived in
California, was 75 years old, and was in bad health (as supported by affidavits by physi-
cians). Must Destinations’ president travel to New York for the deposition? Explain.
36 Fundamentals of Aviation Law

ENDNOTES

1. Black s Law Dictionary, 5th ed. (St. Paul: West Publishing Co., 1979).
2. Huntington, Cairns, Legal Philosophy from Plato to Hegel (Baltimore, Md.: Johns Hopkins
University Press, 1949).
3. For an interesting discussion of how the law deals with the question of whether an affirmative
duty to assist another in peril exists, see Soldano v. O’Daniels, 141 Cal. App. 3d 443 (1983).
4. 326 U.S. 310 (1945).
2 The U.S. Constitution and Aviation

OVERVIEW OF THE U.S. CONSTITUTION 38

Structure and organization of the federal government 39
Distribution of authority between the federal and state governments 41
Basic rights of individuals and businesses 49
CASES AND COMMENTARY 52
DISCUSSION CASES 62
ENDNOTES 64

37

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38 Fundamentals of Aviation Law

When the United States first gained its independence, it was faced with a difficult chore of
establishing a federal government. The Continental Congress took on this chore in 1778 by
adopting the Articles of Confederation. With the passage of time, there was a sense that the
Articles of Confederation were not adequate in creating an effective federal government—
the United States was really never “united” by the articles. The Articles of Confederation
tended to perpetuate the sense that the United States was a collection of individual states
without a strong central government. A clear example of this is found in Article III of the
Articles of Confederation where it states that the individual states would form a “firm
league of friendship … for their common defense.” It is now hard to imagine the U.S. mil-
itary as a collection of individual state militias.

In response to the weaknesses inherent in the Articles of Confederation, a Constitutional

Convention was convened in Philadelphia, Pennsylvania, in 1787. At the convention
there was great debate over just how strong the federal government of the United States
should be—and how the power of the individual states would interplay with a stronger
central government. The delegates at the Constitutional Convention eventually agreed
that a new constitution was necessary for the United States. After months of debate a new
Constitution was presented to the U.S. Congress in 1787. All the individual states in the
United States ratified the new U.S. Constitution by the end of 1788.

It is a testament to the wisdom of those who drafted the U.S. Constitution that the document,
as the supreme law of the land, has been able to evolve and grow to meet the ever-changing
demands of our legal system and society. Through amendments and court interpretations,
the U.S. Constitution remains as relevant today as it was the day it was written.

Note that every state in the United States has its own state constitution. In many cases these
documents contain provisions that are very similar in nature to the U.S. Constitution. An
individual state’s constitution is the supreme law of that state. However, if an individual
state’s constitutional provisions are in conflict with the U.S. Constitution, those provisions
will fail.

It is quite remarkable that a document written long before the airplane was ever invented
could have such a significant influence on aviation in the United States. But that is
indeed the case—the U.S. Constitution has a powerful impact on how aviation has
developed in this country.

In the first part of this chapter we will explore the basics of the U.S. Constitution. Some of
the topics addressed will have aviation-related applications that are discussed later in this
chapter. Other topics discussed will surface again in aviation contexts throughout this book.

OVERVIEW OF THE U.S. CONSTITUTION

Before going any further in this chapter, you should take some time to review the U.S.
Constitution. A copy of the Constitution is found in App. B of this textbook. A careful
reading of the U.S. Constitution reveals that the document addresses three very signif-
icant issues in the law:
 The U.S. Constitution and Aviation 39

• The organization of the federal government into legislative, executive, and judicial
branches
• How authority will be distributed between the federal and state governments
• The protection of basic individual and business rights through limitations on feder-
al and state government authority

It is also very important to note that the very first line of the U.S. Constitution unam-
biguously states that the authority for the Constitution comes from people of the United
States. The fact that the Constitution comes from the people gives it the unquestioned
authority to serve as the basis for our rule of law.

In the Constitution, Article I deals with the legislative authority granted to the U.S. Structure and
Congress; Article II outlines the executive authority granted to the President of the organization
United States; and Article III addresses the workings of the Supreme Court and lower of the federal
federal courts in the United States. To a large extent, the separation of powers between
government
the various branches of the federal government reflects the desire of the constitutional
framers to strengthen the federal government—but not to allow any one group or per-
son to dominate the others. In fact, this system of creating legislative, executive, and
judicial branches of the federal government was designed in large part to create a sys-
tem of checks and balances among the various branches.

Some prominent examples of how our system of checks and balances works include the
following:
• The legislative branch creates laws, and the executive branch has veto power over
those laws.
• The executive branch appoints federal judges (including Supreme Court judges);
however, the judicial branch has the power to interpret the law and review the con-
stitutionality of any actions taken by the Congress or executive branch.
• The legislative branch confirms appointments to both the judicial branch and the
executive branch of the federal government.

While most of these checks and balances are easily discernible within the text of the U.S.
Constitution, one that is not so readily apparent is the power of the courts to review the
constitutionality of laws passed by the legislative branch and the enforcement of those
laws by the executive branch. There is no express language in the Constitution that grants
the power to determine what is constitutional and what is not to the judicial branch. In the
early days of the United States, the question of which branch of the federal government
had the power to determine constitutionality was unsettled. However, for all practical pur-
poses, that question was answered when U.S. Supreme Court assumed (some would say
seized) the power of judicial review in the case of Marbury v. Madison.1 Interestingly, the
Supreme Court’s assumption of this very important function has never been challenged
by the other branches of our federal government. To some extent, the lack of challenge
may be because there is, arguably, a certain logic to leaving questions of constitutionality
within the courts. Federal judges are typically tenured for life, and therefore they are less
likely to be influenced or pressured by the politics of the day. This allows for a more sta-
ble platform upon which questions of constitutionality can be addressed. Therefore, it
40 Fundamentals of Aviation Law

is fair to say that the federal courts, and especially the U.S. Supreme Court, as final authority,
serve as stewards of the U.S. Constitution. Also note that federal courts have authority to
review the action of state and local courts, legislatures, and executives to determine whether
they have created and enforced laws in a manner consistent with the U.S. Constitution.

A graphic overview of some of the checks and balances established in the U.S. Constitution
is illustrated in Fig. 2-1.

Although the Constitution seeks to maintain a system of checks and balances that sep-
arate power, it would be a mistake to infer that this separation is absolute. On many
occasions it is necessary and practical for the various branches of government to engage
in reasonably overlapping functions.

An example of these overlapping functions includes the occasions on which Congress

confers quasi-judicial powers on government agencies. For instance, Congress has granted
power to the National Transportation Safety Board (NTSB), an independent government
agency, to adjudicate cases involving alleged airman violations and questions of qualifi-
cation. Another example would be the delegation of judicial like functions to the Social
Security Administration (SSA), an executive branch agency, in determining the eligibil-
ity of claimants for disability benefits. On other occasions, Congress takes on certain
executive functions when it conducts investigations. Many also argue that the courts
engage in lawmaking—a constitutionally delegated legislative power—when they inter-
pret laws and the judicial interpretations become ingrained in the law as precedent.

Sometimes this overlap of government functions has been referred to as borrowing.

Engaging in such borrowing has generally been tolerated as long as (1) it is deemed to
be reasonably necessary and incidental to the primary function of the branch of gov-
ernment doing the borrowing and (2) the borrowing does not inappropriately enlarge
one branch of government over any other(s).

Figure 2-1
Judiciary
Constitutional
checks and
balances.

Appoints Judicial Judicial Confirms

judges review review judges

Veto legislation
Executive Legislature
Confirm appointments
 The U.S. Constitution and Aviation 41

However, they are limits to how far any borrowing or overlap of functions may go. For
example, in Clinton v. City of New York,2 the U.S. Supreme Court tackled the question
of the Line-Item Veto Act. This act gave the President of the United States the authority
to eliminate or cancel certain tax and spending legislation after the President had signed
such measures into law. After reviewing the case, the Supreme Court decided that grant-
ing such authority to the executive branch violated Article I, Section 7, clause 2 of the
U.S. Constitution (often referred to as the presentment clause) and the doctrine of sep-
aration of powers. Specifically, the Supreme Court held that if the Line-Item Veto Act
were held to be valid, it would allow the executive branch to effectively create a statute
that was not voted on by either house of Congress.

Another example of where the lines may blur between the various branches of govern-
ment is illustrated in cases where Congress expressly delegates legislative authority to
the executive and/or judicial branches. For instance, Congress expressly delegates rule-
making power to the Federal Aviation Administration (FAA), an executive branch
agency. A further discussion of this type of delegation to an administrative agency will
be found in Chap. 5. However, suffice it to say that such express delegations of legisla-
tive authority will be deemed constitutionally valid as long as Congress clearly indi-
cates its basic policy objectives and provides reasonable guidance as to how the agency
is to exercise the delegated powers.

As indicated earlier in this chapter, state governments held a significant share of the Distribution
authority when the United States first came into being. This tilting of authority to state
of authority
governments was manifest in the Articles of the Confederacy. Even when it was decided between
that a stronger federal government was necessary, there was still a significant question
of just how much power the federal government should have.
the federal
and state
In drafting the U.S. Constitution, this difficult chore was taken on. When the original governments
13 states (formerly colonies) agreed to the framework of the U.S. Constitution, they
also agreed to cede significant sovereign powers to the U.S. federal government. It is
easy nowadays to take this for granted. However, this transfer of substantial powers by
the states was a significant step and an extraordinary risk, as seen in those times. Every
state that has joined the union since the creation of the U.S. Constitution has been
required to transfer those same powers to the U.S. federal government.

Under our system of federalism, the federal government holds only those powers that
have been delegated to it by the states through the U.S. Constitution. These powers are
often referred to as delegated powers or enumerated powers. The powers that have not
been granted to the federal government through the U.S. Constitution remain reserved
to the states. These powers of the states are often referred to as reserved powers.

Perhaps the most significant delegated powers are found in Article 1, Section 8 of the
U.S. Constitution. In this section, the U.S. Congress is granted, among others, the following
authority:
• To impose and collect taxes
• To borrow money
• To regulate interstate commerce
42 Fundamentals of Aviation Law

• To declare war
• To establish a post office
• To coin money

As you review these delegated powers, it should become clear that what the framers of
the Constitution were seeking to do is to identify those powers that are best left at the
federal government level. Printing money, declaring war, and establishing a system for
the delivery of mail required a strong federal government—that’s why these types of
powers were delegated to the federal government.

While the powers delegated to the federal government were far-reaching, the powers
reserved to the states were equally broad. Keep in mind that if the federal government was
not specifically delegated a power, that power was meant to remain with state governments.

The specific delegation of authority to the federal government still left the states with
significant authority to regulate the health, safety, morality, and general welfare of their
citizens. Laws related to property rights, crime and punishment, operation of motor vehi-
cles, education, and a plethora of other activities are all regulated primarily by the states.
This broad general power of the states is often referred to as the state police power.

While it is often clear as to whether a power is delegated to the federal government or

reserved to a state, sometimes the lines are blurred and conflicts arise. The remainder
of this section will focus on three significant constitutional concepts that are often
called in to play when there is a question as to whether federal or state law should apply.

In reviewing the interplay between federal and state laws, first we will take a look at the
concept of federal preemption. Next, we will review the history and impact of the com-
merce clause. Last, we will look at the Constitution’s full faith and credit clause. These
three constitutional provisions, particularly federal preemption and the commerce clause,
have a significant impact on aviation activities in the United States.

Federal preemption
Review Article VI of the Constitution. Notice that the second paragraph and clause
clearly indicate that the Constitution and the laws of the federal government, including
any U.S. treaties, are the supreme law of the land, binding on all judges in every state.
This clause of the U.S. Constitution is often referred to as the supremacy clause.

Over time, it has been recognized that the supremacy clause can come into play in three
situations:
• Where federal law expressly prohibits any state legislation with regard to a particu-
lar subject. This is often referred to as express preemption.
• Where federal law fails to expressly prohibit state law involvement but the nature of
the subject area regulated clearly lends itself solely to federal authority. This is often
referred to as implied preemption.
• Where federal and state law come into direct conflict with each other.
 The U.S. Constitution and Aviation 43

Express preemption Express preemption is rather uncommon. It would require that

Congress specifically state that no state or local government can adopt a law similar to
the federal law being passed. Even though Congress has the power of express preemp-
tion, it rarely makes use of the power. Indeed, Congress often expressly opens the door
for similar or related state or local legislation as long as such lawmaking does not come
into direct conflict with the federal law.

Implied preemption In most cases federal lawmakers will regulate activity but won’t
indicate whether similar or related state or local laws are permissible. In these cases,
anyone who wishes to challenge state or local law on the grounds that such law is pre-
empted must typically provide convincing evidence that
• Federal regulation of the activity or activities in question is comprehensive. This
means a challenger will have to establish the federal regulation of the activity is so
pervasive in nature that it forecloses any state or local regulation.
• A strong need exists for uniform federal regulation of the activity in question. Most
likely this means demonstrating that state or local laws regulating the activity are
likely to interfere in an adverse manner.

In most instances, both of these tests will have to be met to convince a court that state
or local regulations are preempted by federal legislation.

Questions of implied preemption frequently arise in the context of aviation activities.

One landmark case exploring the ability of local government to regulate aircraft noise
is found in Case 2-2 below (City of Burbank v. Lockheed Air Terminal3).

Direct conflict While preemption by direct conflict is often viewed on as a separate

category of preemption, it can also be looked upon as just a narrower form of implied
preemption. This type of preemption will apply to a specific state or local law, not to an
entire field of activity. It is generally recognized that on two occasions preemption by
direct conflict may be recognized:
• It is impossible to comply with both federal and state laws.
• A state law materially interferes with the purpose of a federal law.

In the realm of aviation, an example of a state law that might directly conflict with a
federal law or regulation is a state statute that requires all employers to refrain from
mandatory retirement of any employee younger than age 65. This sort of state require-
ment would come into direct conflict with federal regulations requiring that air carriers
retire any pilot in command on reaching age 60. In such a case, the state law would be
preempted by federal regulations.

An example of material interference might be a state law that permits a governor to step
in and put a halt to a labor strike when state economic interests are threatened. This state
law might be looked upon as interfering with a federal law that allows the President to
step in and halt a strike only in very narrowly defined situations where national defense
or national interests are at stake.
44 Fundamentals of Aviation Law

In the end note that with the exception of express preemption, there is generally a pre-
sumption against federal preemption in the U.S. legal system. Therefore, if there is no
express preemption (and there rarely is), it is up to a challenger to prove that there is
implied preemption or direct conflict.

Commerce clause
As indicated earlier, Article I, Section 8 of the Constitution grants Congress broad
authority to “regulate commerce with foreign nations, and among the several states.”
This provision in the Constitution is often referred to as the commerce clause.

As you might guess, this provision was drafted—at least in part—as an attempt to
address the problems created by the Articles of Confederation. Under the Articles of
Confederation, a collection of essentially sovereign states made it very difficult for the
United States to benefit from the advantages of free trade among and between the var-
ious states. This Balkanization (fragmentation) of the U.S. economy also made it very
difficult for the United States to operate in the international community with one voice
when it came to issues of trade.

Despite the seeming simplicity of the commerce clause, it has generated more than its fair
share of legal controversy since the drafting of the Constitution. Typically, legal questions
involving the commerce clause fall into one (or more) of the following categories:
• The scope of federal power over commerce
• Discrimination against interstate commerce
• Undue burdening of interstate commerce

We’ll approach our study of the commerce clause by reviewing each of these three sub-
ject areas as they developed within the context of the commerce clause.

Scope of federal commerce power As is often the case, the Constitution leaves room
for interpretation. What exactly was meant when the framers gave Congress the right to
regulate commerce among the several states? This question has been debated since the
inception of the Constitution, and the debate continues in modern-day cases.

In reviewing the history of the commerce clause, it becomes apparent that until the late
1930s the Supreme Court applied a very strict interpretation of what constituted com-
merce among the several states. In case after case the Supreme Court struck down fed-
eral laws that were applied to businesses or industries that were engaged in strictly
intrastate commerce. The strict Supreme Court interpretations made it difficult, if not
impossible, for Congress to regulate working conditions (including hours and wages)
for manufacturing employees—at a time when many employers were exploiting chil-
dren and others in the labor force by forcing them to work long hours in dangerous con-
ditions for low pay.

The pendulum began to sway in the opposite direction in 1942 with the Supreme Court
case of Wickard v. Filburn.4 The Wickard case involved a farmer in Ohio named Filburn
who planted 23 acres of wheat, disregarding a federal limit of approximately 11 acres of
 The U.S. Constitution and Aviation 45

wheat. The federal government assessed a penalty against Filburn for failure to comply
with the federal limits. Filburn fought the penalty by arguing that since he used almost
all the wheat for his own farm and sold the rest at a local grain elevator within Ohio, he
was in no way engaged in interstate commerce. Filburn’s argument noted that since he
was not engaged in interstate commerce he should not be subject to any federal restric-
tion on the amount of wheat that he could plant.

Prior to the Wickard case, there would be little doubt that Filburn’s argument would pre-
vail before the Supreme Court. However, the Court took a 180-degree turn and ruled
against Filburn. The Court first noted that the federal limitations were put in place to
regulate pricing—the intent being to support the price of wheat by limiting the supply
of wheat. With this being the purpose of the federal regulation, the Court was able to
take the next step. The Court could now argue that if all small farmers such as Filburn
were to disregard the federal limitations, their actions would have a sort of ripple effect
that would bring wheat prices down throughout the United States.

Armed with this rationale, the Supreme Court continued to promulgate an expansive
view of the commerce clause. This allowed the federal government to enact workplace
safety rules, minimum wage standards, antitrust laws, securities laws, environmental
protection rules, and laws prohibiting employment discrimination.

Despite the sense that the commerce clause (after Wickard) had virtually no limits, the pen-
dulum may have started to turn back a bit to a pre-Wickard understanding of the commerce
clause. Two relatively recent cases that have lawyers, judges, and academics discussing the
commerce clause again are United States v. Lopez5 and United States v. Morrison.6

In the Lopez case, the federal government attempted to prosecute a 12th-grade student,
charging the student was knowingly possessing a firearm in a “school zone.” The
United States charged that this violated the Gun Free School Zone Act of 1990.
The accused argued that the act exceeded the power of the federal government to leg-
islate such activities. The federal government relied upon the commerce clause to vali-
date the law and pursue a conviction. In a close 5-to-4 vote the Supreme Court held that
the Gun Free School Zone Act of 1990 was an unconstitutional overreach by Congress
to regulate an area in which it had no constitutional authority.

In the Morrison case, a woman university student filed a civil suit in federal court, alleg-
ing that she had been raped by two fellow students—and that the attack violated federal
law which provided a civil remedy for victims of gender-motivated violence. The
United States intervened in this case to defend the federal statute’s validity under the
Constitution. In another close 5-to-4 vote the Supreme Court rule held that the federal
government had overreached its authority under the Constitution with this law.

The Lopez and Morrison cases taken together leave us with some questions as to where
the commerce clause is headed. Is the power to regulate “commerce … among the sev-
eral states” as it appears in Article I, Section 8 to be interpreted narrowly so as to restrict
the ability of Congress to pass sweeping national legislation? Or is it wiser to allow for
a broader interpretation of this clause to allow Congress to pass regulations that create
46 Fundamentals of Aviation Law

national uniformity? It appears that the current Supreme Court will be less likely to
give the federal government an easy pass on legislation simply on a claim of com-
merce clause power. Only time and additional cases will help determine which direc-
tion the Supreme Court will take when it comes to determining the scope of federal
authority under the commerce clause.

Discrimination against interstate commerce The commerce clause gives primary

authority to the federal government when it comes to regulating interstate commerce.
Therefore, any state action that might expressly or effectively discriminate against
interstate commerce might be deemed unconstitutional. This means that a state may be
prohibited from passing laws that will give industry or citizenry within its borders an
unfair advantage over out-of-state competitors.

Sometimes states pass laws that expressly discriminate against commerce from out of
state. Such is the case in the 1992 Supreme Court decision Fort Gratiot Sanitary Landfill,
Inc. v. Michigan Department of Natural Resources,7 a case involving a Michigan law
that prohibited privately owned landfills within the state of Michigan from accepting
solid waste from any source outside the county in which the landfill was located (with
the exception of those cases in which a county government granted express permission
to do so). Fort Gratiot, a landfill operator, was denied an application to allow it to accept
out-of-state solid waste. The landfill operator sued the county involved and the state of
Michigan. Fort Gatriot argued that the Michigan law in question violated the commerce
clause of the Constitution. The Supreme Court ultimately agreed with Fort Gatriot that
the Michigan law discriminated against interstate commerce and was therefore uncon-
stitutional. In making its ruling, the Court rejected the state and county government’s
argument that solid waste is not an article of interstate commerce. The Court stated in
its ruling that “the restrictions enacted by Michigan authorized each of its 83 counties
to isolate itself from the national economy. The Court has consistently found parochial
legislation of this kind to be constitutionally invalid.”

In other cases a law may not specifically or expressly discriminate against interstate
commerce. However, the circumstances and effect of the law may very clearly indicate
discrimination against interstate commerce. An example of this type of case is Hunt v.
Washington State Apple Advertising Commission.8 This case involved a North Carolina
law requiring all apples sold in North Carolina to have the U.S. Department of
Agriculture grade stamped on the apple crates. The law also specifically prohibited any
state grades from being stamped on the crates. This law was unique to North Carolina.
For years before this law was enacted, the state of Washington had been stamping its
apple crates with its special state grade. The state of Washington had spent many years
developing a reputation for its special state grade. During the course of the legal pro-
ceedings, it became apparent that the North Carolina law was specifically designed to
protect North Carolina growers from competition with growers from the state of
Washington. The Court concluded that this type of intentional discrimination against
interstate commerce was unconstitutional. Therefore the North Carolina law was invalid.

Undue burdening of interstate commerce Sometimes state regulators may not

intend to discriminate against interstate commerce. However, the results or impact of
 The U.S. Constitution and Aviation 47

their legislation or regulations may create an undue burdening of interstate commerce.

A review of Supreme Court cases clearly demonstrates that state laws may be invali-
dated if they have the effect of impeding the free flow of commerce between the states.

In many cases where the state laws are challenged based on an undue burdening of inter-
state commerce, the courts will need to apply a balancing test or analysis. There is no
easily quantifiable formula indicating how this balancing test and supporting analysis are
executed. Nonetheless, there are some common threads that run through the court cases.

As a general rule, the courts will weigh the state or local interest supported by the law
in question against the amount or degree of burden the law would place on the free flow
of commerce among the states. If the state’s interest is very high, there is a possibility
that the court will allow for some measure of burden on interstate commerce to permit
the law to remain effective.

In cases where a state’s economic interests are the driving force behind the law in ques-
tion, the courts may scrutinize the law more carefully. If the law reflects a state interest
in the protection of its citizens’ health, safety, or welfare, the courts may be more likely
to defer on the side of the state law. However, this does not mean that the courts will
roll over and accept a state law simply because the state asserts that the law is designed
to protect the health, safety, or welfare of its citizens.

In the landmark case of Kassell v. Consolidated Freightways, Corp.9 the state of Iowa
passed a law that prohibited the use of 65-foot double trailers on its highways. At the
same time 55-foot single trailers and 60-foot double trailers were allowed. The states
surrounding Iowa all allowed for 65-foot double trailers on their highways. The state of
Iowa asserted that the law was a safety measure. Contrary to this assertion, evidence
showed that there was no relationship between truck length and accident rates. In fact,
statistics indicated that the law could create a situation in which increased numbers of
smaller trucks would be required to deliver the same goods and cargo. In turn, this
would increase the accident rate—a result quite contrary to Iowa’s stated intent. In the
end, the Supreme Court found that this law was unconstitutional because it would unduly
burden interstate commerce by requiring the 65-foot double trailers to either go around
the state of Iowa or unload into smaller trucks prior to entering the state.

More than a fair share of the “undue burden” cases involve taxation. Most of these cases
involve state or local property and/or sales and use taxes. In the typical case, the state
asserts that it has the right to tax the value of property located within its borders or prop-
erty that is purchased or used within its borders. The underlying assumption is that it is
fair for the owner of the property to pay a tax to the state to contribute to the cost of
infrastructure needed to protect and preserve that property (i.e., police and fire protec-
tion, roads, etc.).

One of the most widely cited cases on the issue of undue burden in taxation is the case of
Complete Auto Transit, Inc. v. Brady.10 In the Complete Auto Transit case, the Supreme
Court reviewed whether a Mississippi tax on the privilege of doing business within the
state created an undue burden on interstate commerce. The case involved Complete Auto
48 Fundamentals of Aviation Law

Transit, a company that transported motor vehicles from out-of-state manufacturers

between points in the state of Mississippi. More important than the case itself was the
test created by the Supreme Court in deciding the Complete Auto Transit case. In the
end, the court held that the state tax could withstand a commerce clause challenge of
undue burden if it
1. Is applied to an activity with a substantial nexus to the taxing state
2. Is fairly apportioned
3. Does not discriminate against interstate commerce
4. Is fairly related to the services provided by the state

The “nexus” test is concerned with whether or not property that is being taxed has
enough of a connection with the state that is taxing the property. For instance, under this
test, a state could not pursue property tax on an aircraft that had only stopped for a brief
refueling within the state. However, if the aircraft was based and used primarily within
that state, the aircraft could be subject to taxation.

The apportionment test is often the subject of litigation. Normally it requires a formula
that allows the state to tax only the degree of connection that property may have within that
state. This may mean the property owners will be required to carefully record and report
the number of days an item of property was in a particular state. Apportionment questions
often arise in the context of transportation equipment such as aircraft and railroad cars.

Whether a tax discriminates against interstate commerce is essentially the same ques-
tion that was addressed above. A tax cannot be greater for items used in interstate com-
merce than for items that are used only within the taxing state.

The test of whether a tax is fairly related to the services provided by the state is seldom
invoked by the courts. However, this test would likely arise in the context of a question
as to whether the tax applies a fair rate or amount to the property being taxed.

Full faith and credit clause

Article IV, Section 1 of the Constitution is often referred to as the full faith and credit
clause. It states (in pertinent part) that “… full faith and credit shall be given in each
State to the public acts, records, and judicial proceedings of every other State.” This
clause of the Constitution has the impact of requiring every state court to recognize and
honor the court rulings and public laws of every other state.

This clause can have a significant impact in the world of aviation because quite often
the subject of a claim may be an aircraft—personal property that can be moved at a
moment’s notice. This section will allow a creditor who obtains a valid judgment
against a debtor in New York and who is able to locate the debtor’s property in
Maryland (including an aircraft) to enforce the creditor’s judgment in Maryland.

While the full faith and credit clause functions within the various states of the United States,
it does not give validity to U.S. judgments in foreign courts or foreign court judgments in
 The U.S. Constitution and Aviation 49

the United States. However, there is a concept in international law known as the doctrine of
comity that calls for nations to respect and enforce the court judgments of other nations.

The third prong of our review of constitutional law includes a look at the protection of Basic rights of
fundamental individual and business rights built into the Constitution. The Constitution individuals and
contains numerous provisions designed to limit the authority of federal and state govern- businesses
ments from interfering with the affairs of individuals and businesses. Some of these pro-
visions are found in the body of the Constitution. Most are found in the amendments to
the Constitution. The first 10 amendments to the Constitution are most commonly known
as the Bill of Rights. At this point you should take another look at the Constitution to
familiarize yourself with the Bill of Rights.

In reviewing the basic rights provided by the Constitution, it is important to note two
points from the beginning. First, you need to recognize that the Bill of Rights as it was
initially drafted and understood applied to actions of only the federal government. It did
not apply to state or local government actions. Interestingly, in 1791 when the Bill of
Rights was drafted, there was no intention of holding states accountable for rights such
as freedom of religion or freedom of the press. However, all this changed after 1868
(shortly after the Civil War) and the adoption of the Fourteenth Amendment to the U.S.
Constitution. In Section 1 of the Fourteenth Amendment, the well-known language was
drafted that says that no state shall deprive any person of life, liberty, or property with-
out due process of law or deny to any person within its jurisdiction the equal protection
of the laws. The Supreme Court has consistently held that the Fourteenth Amendment
requires that all states respect the protections built into the Bill of Rights.

Second, all the basic rights protected under the Constitution involve protections against
government actions. These basic rights do not apply to protection against individuals or
private businesses. Therefore, while the Bill of Rights will protect individuals against
government intrusions on their right to free speech, these same protections did not pro-
hibit a private employer from imposing restrictions on the free-speech rights of his or
her employees while they were on business premises.

It is beyond the scope of this book to review all the basic rights protected in the U.S.
Constitution. Therefore, we will focus on some of the provisions that come into play for
the aviation industry and aviation activities.

Fifth Amendment takings clause

The Fifth Amendment clearly indicates that the government may not take private property
for public use without just compensation being provided to the property owner. As indi-
cated earlier in this chapter, this provision originally applied to only the federal govern-
ment. However, after ratification of the Fourteenth Amendment, the Fifth Amendment
became applicable to states as well as to the federal government.

Most readings of the cases involving the Fifth Amendment seem to indicate that the
courts rely on a very broad definition of what constitutes property for purposes of the
takings clause. Property clearly includes land and buildings. However it has also been
50 Fundamentals of Aviation Law

interpreted to mean mineral rights below the surface, air rights above the surface of the
land, and intangible personal property such as equipment, aircraft, and automobiles.

As clearly indicated in the Fifth Amendment, if the government wants to take private
property, the government must do so for a public purpose. However, over the years, this
public purpose has not been rigorously questioned by the courts. Just about any purpose
will do for the purposes of the Fifth Amendment. To a large extent this deference to the
government’s taking goes back to the long recognized principle that the government
may take private property for public use. This power has often been referred to as the
power of eminent domain. When the government takes property, especially real prop-
erty, it is often said that the government has condemned the property.

Often it is obvious if a government taking has occurred. For instance, a state or local
government may decide it needs to condemn certain farmland to make use of the land
for purposes of waste disposal. Sometimes it is not so obvious that a taking has
occurred. Suppose, for instance, that a state or local government extends an airport run-
way so that takeoffs and landings now occur at a very low altitude over a private resi-
dence. If the owner of the private residence feels that the value of his or her property
has been diminished and rendered unusable by the government’s taking, the owner may
decide to sue the government for taking property and violating her or his Fifth
Amendment rights by failing to compensate. This sort of action is often referred to as
inverse condemnation. Case 2-1 addresses this very issue.

Very recently, the Supreme Court tackled a controversial case involving the Fifth Amendment
takings clause. The case, Kelo v. City of New London, Connecticut,11 involved the ques-
tion of whether a local government could take private property earmarked for development
by private developers. The owners of the property to be taken argued that the City of New
London could not take their homes because the property was not being taken by the gov-
ernment for a public use. The City of New London argued that its plan of economic reju-
venation for the community in question justified the taking. In a close 5-to-4 vote, the
Supreme Court held that although the city could not take a private home simply to con-
fer a benefit on a private developer, the city could take property under the Fifth
Amendment taking clause if the taking were part of a carefully considered development
plan designed to meet public needs.

Due process
The Fifth and Fourteenth Amendments of the Constitution protect individuals and busi-
nesses by prohibiting the federal government and state government from depriving any-
one of life, liberty, or property without the due process of law. Due process embodies
both substantive due process and procedural due process.

Procedural due process can best be viewed as the method(s) or process employed by the
courts and the government to apply substantive laws. The requirements of procedural
due process will be met if the government can establish that it provided for a fair
process that allowed a person to state his or her case before the government could
deprive the person of life, liberty, or property. Therefore, before the government can
 The U.S. Constitution and Aviation 51

exercise eminent domain over property, it must provide the property owner with a fair
hearing to determine the validity of the government’s taking and, if necessary, the val-
uation of the property. Likewise, a fair hearing with appropriate protections must be
provided to a defendant in a criminal case where his or her life or liberty is in jeopardy.
The intricacies of due process as it applies to criminal cases will be dealt with in greater
detail in Chap. 3. Keep in mind throughout all this, however, that procedural due
process is not a requirement unless the person involved faces deprivation of life, liberty,
or property. If government action might adversely affect the person, but doesn’t deprive
her or him of life, liberty, or property, then due process is not required.

Substantive due process does not involve the methods or process of the law. Instead, sub-
stantive due process is concerned with the question of whether a law, in and of itself,
passes constitutional muster. Is the law arbitrary or capricious? Is the law so vague or
difficult to enforce as to render it unconstitutional? When determining whether a law
meets the requirements of substantive due process, the courts have devised two tests. The
first test asks whether the law in question has a rational relationship to legitimate gov-
ernment interests. If so, the law will be deemed constitutional. This rational relationship
test is typically applied in cases that involve economic and/or social legislation.

A tougher, second test will be applied when the government is attempting to legislate
restrictions on individuals’ fundamental rights under the Constitution. Under the so-
called strict scrutiny test, the government needs to demonstrate that there is some over-
riding or compelling state interest that it wishes to promote if its legislation will have an
impact on basic constitutional rights (e.g., freedom of speech, religion, the press, etc.).

Equal protection
The equal protection clause is found in the Fourteenth Amendment to the Constitution.
It states: “nor shall any State … deny to any person within its jurisdiction the equal pro-
tection of the laws.” Even though the wording of this amendment applies to only the indi-
vidual states, it has been interpreted to apply to the federal government as well. The
essence of the equal protection clause is a guarantee that the government will provide
equal treatment for similarly situated persons.

Under government laws either directly or indirectly having the result of classifying per-
sons, there is the potential for the equal protection clause to come into play. When the
courts review an equal protection challenge to the law, three possible tests might be
employed.

The first possible test is the rational relationship test. This test typically applies to eco-
nomic regulation or legislation. It is the least rigorous of all three tests. For this test to
be successfully overcome, the government merely needs to show that the classification
of persons bears some rational relationship to a legitimate government interest. Because
this test is so difficult to overcome for challengers of government action, it is very rare
to see a court overturn a government action based on this test.

The second equal protection test is often referred to as the intermediate scrutiny test.
This test is typically applied when government actions or loss classified individuals
52 Fundamentals of Aviation Law

based on gender. This test requires that the government show that the classification has
some substantial relationship to an important government interest. This test has been
used to strike down laws that prohibited courts from awarding alimony to men but not to
women (Orr v. Orr12). In a landmark 1996 case, the Supreme Court invalidated a state
university’s admission policies that prohibited women (United States v. Virginia13).

The third test applied in equal protection cases is known as the strict scrutiny test. When
this test is applied, the courts do not defer to the government. This test is typically
applied when government action or laws affect individuals’ basic rights or appear to
involve suspect classifications (e.g., classifications based on race or ethnicity). Probably
the most famous case applying the strict scrutiny test was Brown v. Board of Education
of Topeka14 in which the Supreme Court ruled that the equal protection clause was vio-
lated by segregated school systems.

Freedom of speech and the press

Take a look at the First Amendment to the Constitution in App. B. The First Amendment
clearly states that the government cannot abridge the freedom of speech or of the press.

Despite the fact that the protection of speech and press granted by the First Amendment
appears to be absolute, it is not. There are a few forms of speech such as obscenity that
receive no protection under the Constitution.

As a general matter, application of the First Amendment is relatively straightforward—

the protections benefit the speaker. However, this is not always the case.

Defamation involves speech intended to discredit another .This sort of speech is typi-
cally unprotected by the First Amendment. However, there is one important exception
to the usual rule when it comes to defamation. In the case of New York Times Co. v.
Sullivan,15 the Supreme Court held that if a public figure is defamed, he or she could
recover only if it were proved that the defamatory statements were made with malice.

Another type of speech that is not wholly protected by the First Amendment is com-
mercial speech. Commercial speech is speech related to the economic interests of the
person speaking to her or his audience. Usually, commercial speech comes in the form
of advertisements or promotions. This sort of speech will be protected under the First
Amendment as long as it does not relate to illegal activity and is not misleading.
Because of this interpretation, the government may regulate and/or prohibit false or
misleading advertisements.

CASES AND COMMENTARY

The first case for review (Case 2-1) is a Supreme Court case from 1946. This case is a
landmark case in the aviation industry because it was the first to tackle the question of
whether airport operations can result in a “taking” of property within the meaning of
the Fifth Amendment.
 The U.S. Constitution and Aviation 53

CASE 2-1
UNITED STATES V. CAUSBY ET UX.

328 U.S. 256 (1946)

OPINION: MR. JUSTICE DOUGLAS delivered close enough at times to appear barely to miss the
the opinion of the Court. tops of the trees and at times so close to the tops
of the trees as to blow the old leaves off. The
This is a case of first impression. The problem pre-
noise is startling. And at night the glare from the
sented is whether respondents’ property was taken,
planes brightly lights up the place. As a result of
within the meaning of the Fifth Amendment, by
the noise, respondents had to give up their chicken
frequent and regular flights of army and navy air-
business. As many as six to ten of their chickens
craft over respondents’ land at low altitudes.
were killed in one day by flying into the walls
Respondents own 2.8 acres near an airport out- from fright. The total chickens lost in that manner
side of Greensboro, North Carolina. It has on it a was about 150. Production also fell off. The result
dwelling house, and also various outbuildings was the destruction of the use of the property as a
which were mainly used for raising chickens. The commercial chicken farm. Respondents are fre-
end of the airport’s northwest-southeast runway is quently deprived of their sleep and the family has
2,220 feet from respondents’ barn and 2,275 feet become nervous and frightened. Although there
from their house. The path of glide to this runway have been no airplane accidents on respondents’
passes directly over the property—which is 100 feet property, there have been several accidents near
wide and 1,200 feet long. The 30 to 1 safe glide the airport and close to respondents’ place. These
angle approved by the Civil Aeronautics Author- are the essential facts found by the Court of
ity passes over this property at 83 feet, which Claims. On the basis of these facts, it found that
is 67 feet above the house, 63 feet above the barn respondents’ property had depreciated in value. It
and 18 feet above the highest tree. The use by the held that the United States had taken an easement
United States of this airport is pursuant to a lease over the property on June 1, 1942, and that the
executed in May, 1942, for a term commencing value of the property destroyed and the easement
June 1, 1942 and ending June 30, 1942, with a taken was $2,000.
provision for renewals until June 30, 1967, or six
I. The United States relies on the Air Commerce
months after the end of the national emergency,
Act. Under [the Air Commerce Act] the United
whichever is the earlier.
States has “complete and exclusive national sover-
Various aircraft of the United States use this air- eignty in the air space” over this country. [The Air
port—bombers, transports and fighters. The direc- Commerce Act] grant[s] any citizen of the United
tion of the prevailing wind determines when a States “a public right of freedom of transit in air
particular runway is used. The northwest-south- commerce through the navigable air space of the
east runway in question is used about four per cent United States.” And “navigable air space” is
of the time in taking off and about seven per cent defined as “airspace above the minimum safe alti-
of the time in landing. Since the United States tudes of flight prescribed by the Civil Aeronautics
began operations in May, 1942, its four-motored Authority.” And it is provided that “such navigable
heavy bombers, other planes of the heavier type, airspace shall be subject to a public right of free-
and its fighter planes have frequently passed over dom of interstate and foreign air navigation.” It is,
respondents’ land and buildings in considerable therefore, argued that since these flights were
numbers and rather close together. They come within the minimum safe altitudes of flight which
54 Fundamentals of Aviation Law

had been prescribed, they were an exercise of the loss would be complete. It would be as complete as
declared right of travel through the airspace. The if the United States had entered upon the surface of
United States concludes that when flights are the land and taken exclusive possession of it.
made within the navigable airspace without any
We agree that in those circumstances there would
physical invasion of the property of the landowners,
be a taking. Though it would be only an easement
there has been no taking of property. It says that at
of flight which was taken, that easement, if perma-
most there was merely incidental damage occur-
nent and not merely temporary, normally would be
ring as a consequence of authorized air naviga-
the equivalent of a fee interest. It would be a defi-
tion. It also argues that the landowner does not
nite exercise of complete dominion and control
own superadjacent airspace which he has not sub-
over the surface of the land. The fact that the
jected to possession by the erection of structures
planes never touched the surface would be as
or other occupancy. Moreover, it is argued that
irrelevant as the absence in this day of the feudal
even if the United States took airspace owned by
livery of seisin on the transfer of real estate. The
respondents, no compensable damage was shown.
owner’s right to possess and exploit the land—at
Any damages are said to be merely consequential
is to say, his beneficial ownership of it—would be
for which no compensation may be obtained
destroyed.
under the Fifth Amendment.
There is no material difference between the sup-
It is ancient doctrine that at common law owner-
posed case and the present one, except that here
ship of the land extended to the periphery of the
enjoyment and use of the land are not completely
universe—Cujus est solum ejus est usque ad
destroyed. But that does not seem to us to be con-
coelum. But that doctrine has no place in the mod-
trolling. The path of glide for airplanes might
ern world. The air is a public highway, as Con-
reduce a valuable factory site to grazing land, an
gress has declared. Were that not true, every
orchard to a vegetable patch, a residential section
transcontinental flight would subject the operator
to a wheat field. Some value would remain. But
to countless trespass suits. Common sense revolts
the use of the airspace immediately above the
at the idea. To recognize such private claims to the
land would limit the utility of the land and cause a
airspace would clog these highways, seriously
diminution in its value.
interfere with their control and development in the
public interest, and transfer into private ownership The fact that the path of glide taken by the planes
that to which only the public has a just claim. was that approved by the Civil Aeronautics Author-
ity does not change the result. The navigable air-
But that general principle does not control the
space which Congress has placed in the public
present case. For the United States conceded on
domain is “airspace above the minimum safe alti-
oral argument that if the flights over respondents’
tudes of flight prescribed by the Civil Aeronautics
property rendered it uninhabitable, there would
Authority.” If that agency prescribed 83 feet as
be a taking compensable under the Fifth Amend-
the minimum safe altitude, then we would have
ment. It is the owner’s loss, not the taker’s gain,
presented the question of the validity of the regu-
which is the measure of the value of the property
lation. But nothing of the sort has been done. The
taken. Market value fairly determined is the normal
path of glide governs the method of operating—
measure of the recovery. And that value may
of landing or taking off. The altitude required for
reflect the use to which the land could readily be
that operation is not the minimum safe altitude of
converted, as well as the existing use. If, by reason
flight which is the downward reach of the naviga-
of the frequency and altitude of the flights, respon-
ble airspace. The minimum prescribed by the
dents could not use this land for any purpose, their
 The U.S. Constitution and Aviation 55

Authority is 500 feet during the day and 1,000 feet rested on the land. The reason is that there would
at night for air carriers, and from 300 feet to be an intrusion so immediate and direct as to sub-
1,000 feet for other aircraft, depending on the tract from the owner’s full enjoyment of the prop-
type of plane and the character of the terrain. erty and to limit his exploitation of it. While the
Hence, the flights in question were not within the owner does not in any physical manner occupy
navigable airspace which Congress placed within that stratum of airspace or make use of it in the
the public domain. If any airspace needed for conventional sense, he does use it in somewhat
landing or taking off were included, flights which the same sense that space left between buildings
were so close to the land as to render it uninhabit- for the purpose of light and air is used. The super-
able would be immune. But the United States adjacent airspace at this low altitude is so close to
concedes, as we have said, that in that event there the land that continuous invasions of it affect the
would be a taking. Thus, it is apparent that the use of the surface of the land itself. We think that
path of glide is not the minimum safe altitude of the landowner, as an incident to his ownership,
flight within the meaning of the statute. The Civil has a claim to it and that invasions of it are in the
Aeronautics Authority has, of course, the power same category as invasions of the surface.
to prescribe air traffic rules. But Congress has
In this case, the damages were not merely conse-
defined navigable airspace only in terms of one of
quential. They were the product of a direct inva-
them—the minimum safe altitudes of flight.
sion of respondents’ domain. As stated in [a previ-
We have said that the airspace is a public high- ous Supreme Court case] “… it is the character of
way. Yet it is obvious that if the landowner is to the invasion, not the amount of damage resulting
have full enjoyment of the land, he must have from it, so long as the damage is substantial, that
exclusive control of the immediate reaches of the determines the question whether it is a taking.”
enveloping atmosphere. Otherwise buildings could
The airplane is part of the modern environment of
not be erected, trees could not be planted, and
life, and the inconveniences which it causes are
even fences could not be run. The principle is rec-
normally not compensable under the Fifth Amend-
ognized when the law gives a remedy in case
ment. The airspace, apart from the immediate
overhanging structures are erected on adjoining
reaches above the land, is part of the public domain.
land. The landowner owns at least as much of the
We need not determine at this time what those
space above the ground as he can occupy or use
precise limits are. Flights over private land are not
in connection with the land. The fact that he does
a taking, unless they are so low and so frequent as
not occupy it in a physical sense—by the erection
to be a direct and immediate interference with the
of buildings and the like—is not material. As we
enjoyment and use of the land. We need not spec-
have said, the flight of airplanes, which skim the
ulate on that phase of the present case. For the
surface but do not touch it, is as much an appro-
findings of the Court of Claims plainly establish
priation of the use of the land as a more conven-
that there was a diminution in value of the prop-
tional entry upon it. We would not doubt that, if
erty and that the frequent, low-level flights were
the United States erected an elevated railway over
the direct and immediate cause. We agree with
respondents’ land at the precise altitude where its
the Court of Claims that a servitude has been
planes now fly, there would be a partial taking,
imposed upon the land.
even though none of the supports of the structure
56 Fundamentals of Aviation Law

Notice that the Supreme Court’s holding in the Causby case made the United States, the
owner and operator of the aircraft involved, liable for the taking under the Fifth
Amendment. The question of who is responsible for the taking arrives at the Supreme
Court once again in 1962 in the case of Griggs v. Allegheny County.16

In the Griggs case, Allegheny County owned and operated the Greater Pittsburgh Airport.
The county planned and constructed the airport in accordance with the standards
approved by the Civil Aeronautics Board (CAA) [precursor to the Federal Aviation
Administration (FAA)]. As in the Causby case, one of the approach/departure zones
took aircraft very low over an adjacent residential property, forcing the owner and his
family to move. The Supreme Court held, consistent with Causby, that a taking within
the meaning of the Fifth Amendment had occurred. However, the issue that came to the
forefront in this case was the determination of who was liable for the taking.

In the end, the Supreme Court ruled that Allegheny County, the airport proprietor, was
liable for the taking. In making this ruling, the Court rejected arguments that the taking
was done by someone other than Allegheny County. In rejecting the county’s arguments
that the airlines or the CAA was responsible for the taking, the Court reasoned that it
was Allegheny County that decided where the airport would be located, what runways
would be needed, and their direction and length. Two of the Supreme Court’s Justices
(Black and Frankfurter) dissented from the majority opinion in the Griggs case. Both
agreed that a Fifth Amendment taking had occurred. However, both Black and Frankfurter
argued that the U.S. government was responsible for the taking because the airport had
to be designed, constructed, and approved by the federal government.

What’s your reaction to the Causby and Griggs cases? Should the courts find a taking
when property has not been physically taken by an airport? If a Fifth Amendment taking
has occurred, who should be responsible?

Another interesting constitutional question that arises in the aviation environment

relates to aircraft noise regulation. How much authority does a state or local govern-
ment possess when it comes to regulating aircraft noise? In the following landmark case
(Case 2-2), the Supreme Court tackled this issue in 1972.

CASE 2-2
CITY OF BURBANK ET AL. V. LOCKHEED AIR TERMINAL, INC. ET AL.

411 U.S. 624 (1973)

OPINION: MR. JUSTICE DOUGLAS delivered unlawful for a so-called pure jet aircraft to take
the opinion of the Court. off from the Hollywood-Burbank Airport between
11 p.m. of one day and 7 a.m. the next day, and
This suit asked for an injunction against the making it unlawful for the operator of that airport
enforcement of an ordinance adopted by the City to allow any such aircraft to take off from that air-
Council of Burbank, California, which made it port during such periods. The only regularly
 The U.S. Constitution and Aviation 57

scheduled flight affected by the ordinance was an basis would cause a serious loss of efficiency in
intrastate flight of Pacific Southwest Airlines the use of the navigable airspace.”
originating in Oakland, California, and departing
Curfews such as Burbank has imposed would,
from Hollywood-Burbank Airport for San Diego
according to the testimony at the trial and the District
every Sunday night at 11:30.
Court’s findings, increase congestion, cause a loss
The District Court found the ordinance to be of efficiency, and aggravate the noise problem.
unconstitutional on both Supremacy Clause and FAA has occasionally enforced curfews. But the
Commerce Clause grounds. The Court of Appeals record shows that FAA has consistently opposed
affirmed on the grounds of the Supremacy Clause curfews, unless managed by it, in the interests of its
both as respects pre-emption and as respects management of the “navigable airspace.”
conflict. The case is here on appeal. We noted
As stated by Judge Dooling in [Citation]: “The
probable jurisdiction. We affirm the Court of
aircraft and its noise are indivisible; the noise of
Appeals.
the aircraft extends outward from it with the same
The Federal Aviation Act of 1958, and the regulations inseparability as its wings and tail assembly; to
under it, are central to the question of pre-emption. exclude the aircraft noise from the Town is to
exclude the aircraft; to set a ground level decibel
Section 1108 [Citation to the Federal Aviation
limit for the aircraft is directly to exclude it from
Act], provides in part, “The United States of
the lower air that it cannot use without exceeding
America is declared to possess and exercise com-
the decibel limit.”
plete exclusive national sovereignty in the air-
space of the United States.…” By Sections [Cita- There is, to be sure, no express provision of pre-
tions to the Federal Aviation Act] the Administrator emption in the 1972 Act. That, however, is not
of the Federal Aviation Administration (FAA) has decisive.
been given broad authority to regulate the use of
It is the pervasive nature of the scheme of federal
the navigable airspace, “in order to insure the
regulation of aircraft noise that leads us to conclude
safety of aircraft and the efficient utilization of
that there is pre-emption. As Mr. Justice Jackson
such airspace …” and “for the protection of per-
stated, concurring in [Citation]: “Federal control is
sons and property on the ground.…”
intensive and exclusive. Planes do not wander about
The Solicitor General, though arguing against pre- in the sky like vagrant clouds. They move only by
emption, concedes that as respects “airspace man- federal permission, subject to federal inspection, in
agement” there is pre-emption. That, however, is a the hands of federally certified personnel and under
fatal concession, for as the District Court found: an intricate system of federal commands. The
“The imposition of curfew ordinances on a nation- moment a ship taxis onto a runway it is caught up in
wide basis would result in a bunching of flights in an elaborate and detailed system of controls.”
those hours immediately preceding the curfew.
If we were to uphold the Burbank ordinance and a
This bunching of flights during these hours would
significant number of municipalities followed suit, it
have the twofold effect of increasing an already
is obvious that fractionalized control of the timing of
serious congestion problem and actually increas-
takeoffs and landings would severely limit the flexi-
ing, rather than relieving, the noise problem by
bility of FAA in controlling air traffic flow. The diffi-
increasing flights in the period of greatest annoy-
culties of scheduling flights to avoid congestion and
ance to surrounding communities. Such a result is
the concomitant decrease in safety would be com-
totally inconsistent with the objectives of the federal
pounded. In 1960 FAA rejected a proposed restriction
statutory and regulatory scheme.” It also found “the
on jet operations at the Los Angeles airport between
imposition of curfew ordinances on a nationwide
58 Fundamentals of Aviation Law

10 p.m. and 7 a.m. because such restrictions could aviation in the nation’s economy are accomplish-
“create critically serious problems to all air trans- ments which cannot be inhibited if the best interest
portation patterns.” The complete FAA statement of the public is to be served. It was concluded
said: “The proposed restriction on the use of the air- therefore that the extent of relief from the noise
port by jet aircraft between the hours of 10 p.m. and 7 problem which this provision might have achieved
a.m. under certain surface wind conditions has also would not have compensated the degree of restric-
been reevaluated and this provision has been omit- tion it would have imposed on domestic and for-
ted from the rule. The practice of prohibiting the eign Air Commerce.”
use of various airports during certain specific hours
This decision, announced in 1960, remains pecu-
could create critically serious problems to all air
liarly within the competence of FAA, supplemented
transportation patterns. The network of airports
now by the input of EPA. We are not at liberty to dif-
throughout the United States and the constant
fuse the powers given by Congress to FAA and EPA
availability of these airports are essential to the
by letting the States or municipalities in on the plan-
maintenance of a sound air transportation system.
ning. If that change is to be made, Congress alone
The continuing growth of public acceptance of avi-
must do it.
ation as a major force in passenger transportation
and the increasingly significant role of commercial

The Burbank case requires careful analysis. It is easy to walk away from the case with
the impression that the Supreme Court intends to preempt any state or local action that
might tend to regulate aircraft noise. However, a careful review of the Burbank decision
indicates that while the Court clearly indicates that the federal government preempts
state and local regulations over aircraft noise, the decision does not prohibit all types of
noise regulation that might be imposed by state or local government. Indeed, the Court
more narrowly held that the federal government, most notably through the Federal
Aviation Administration and the Environmental Protection Agency (EPA), has full con-
trol over aircraft noise by preempting state and local control under a state’s police
power. The Supreme Court expressly left open the question as to how much authority
state or local government would have over noise regulation if the state or local govern-
ment were an airport proprietor (see footnote 14 in the full text of the case).

Subsequent to Burbank, other courts have recognized what is often referred to as the airport
proprietor exception to the Burbank case. This exception allows an airport proprietor to
impose reasonable, nonarbitrary, and nondiscriminatory regulations relating to noise at an
airport and its immediate surroundings (see British Airways Board v. Port Authority of
New York17). The logic in permitting this airport proprietor exception relates to the liabil-
ity that an airport owner or proprietor might have for aircraft noise. Essentially, the excep-
tion allows an owner of an airport to mitigate or decrease his or her exposure to damages
over aircraft noise by permitting the airport proprietor to issue and enforce reasonable
noise regulations. In some measure, this exception may have been rendered necessary by
the Supreme Court’s earlier decisions in Causby and Griggs, where it was held that air-
port owners were liable for Fifth Amendment takings when airport noise impeded the use
of neighboring properties. In effect, airport owners and proprietors needed some tool to
limit their exposure to liability that had been created by Griggs.
 The U.S. Constitution and Aviation 59

Of course, the requirement of reasonableness will often raise questions. There have been
several cases in which airport proprietor regulation of aircraft noise has been reviewed
by the courts. Consider the following situations. How do you think a court would hold if
it were evaluating the following noise regulations by an airport proprietor?
• A curfew on all-night flight operations regardless of the noise level emitted (see
United States v. State of New York18)
• A ban on all-night touch-and-go aircraft traffic (see Santa Monica Airport Association,
et al. v. City of Santa Monica19)
• A ban on all helicopter flight training (see Santa Monica)
• A ban on low approaches during weekends (see Santa Monica)
• A ban on all jet aircraft (see Santa Monica)
• A ban on supersonic air transport aircraft (see British Airways Board v. New York
Port Authority20)

The next case for review (Case 2-3) is a 1954 Supreme Court decision addressing a thorny
issue of taxation. Is it a violation of the interstate commerce clause when a state taxes flight
equipment owned by an airline that does not have a permanent situs in that state? The case
also questions whether the federal government’s preemption of air commerce prohibits a
state from regulating an interstate air carrier through taxation of its flight equipment.

CASE 2-3
BRANIFF AIRWAYS, INC. V. NEBRASKA STATE BOARD OF EQUALIZATION AND
ASSESSMENTS ET AL.
347 U.S. 590 (1954)

OPINION: MR. JUSTICE REED delivered the Appellant does not challenge the reasonableness
opinion of the Court. of the apportionment prescribed by the taxing
statute or the application of such apportionment to
The question presented by this appeal from the its property. It contends only that its flight equip-
Supreme Court of Nebraska is whether the Consti- ment used in interstate commerce is immune
tution bars the State of Nebraska from levying an from taxation by Nebraska because without situs
apportioned ad valorem tax [a tax imposed on the in that state and because regulation of air naviga-
value of property] on the flight equipment of appel- tion by the Federal Government precludes such
lant, an interstate air carrier. Appellant is not incor- state taxation.
porated in Nebraska and does not have its princi-
The home port registered with the Civil Aeronau-
pal place of business or home port registered in that
tics Authority and the overhaul base for the aircraft
state. Such flight equipment is employed as a part
in question is the Minneapolis-St. Paul Airport,
of a system of interstate air commerce operating
Minnesota. All of the aircraft not undergoing over-
over fixed routes and landing on and departing from
haul fly regular schedules upon a circuit ranging
airports within Nebraska on regular schedules.
60 Fundamentals of Aviation Law

from Minot, North Dakota, to New Orleans, in a tax of $4,280.44. Since Mid-Continent filed
Louisiana, with stops in fourteen states including no return for 1951 the same valuation was used
Minnesota, Nebraska and Oklahoma. and an increased rate resulted in assessment of
$4,518.29. The Supreme Court of Nebraska held
No stops were made in Delaware [the state where
the statute not violative of the Commerce Clause
Braniff was incorporated]. The Nebraska stops are
and dismissed appellant’s petition.
of short duration since utilized only for the dis-
charge and loading of passengers, mail, express, and [Braniff] argues that federal statutes governing air
freight, and sometimes for refueling. Appellant commerce enacted under the commerce power
neither owns nor maintains facilities for repair- pre-empt the field of regulation of such air com-
ing, reconditioning, or storing its flight equip- merce and preclude this tax. Congress, by the Civil
ment in Nebraska, but rents depot space and hires Aeronautics Act of 1938, enacted: “The United
other services as required. States of America is declared to possess and exer-
cise complete and exclusive national sovereignty
It is stipulated that the tax in question is assessed
in the air space above the United States, including
only against regularly scheduled air carriers and is
the air space above all inland waters and the air
not applied to carriers who operate only intermit-
space above those portions of the adjacent mar-
tently in the state. The statute defines “flight
ginal high seas, bays, and lakes, over which by
equipment” as “aircraft fully equipped for flight,”
international law or treaty or convention the United
and provides that “any tax upon or measured by
States exercises national jurisdiction.”
the value of flight equipment of air carriers incor-
porated or doing business in this state shall be This provision originated in the Air Commerce
assessed and collected by the Tax Commissioner.” Act of 1926. The 1938 Act also declares “a public
A formula is prescribed for arriving at the propor- right of freedom of transit” for air commerce in
tion of a carrier’s flight equipment to be allocated the navigable air space to exist for any citizen of
to the state. the United States.
The statute uses the allocation formula of the The provision pertinent to sovereignty over the
“proposed uniform statute to provide for an equi- navigable air space in the Air Commerce Act of
table method of state taxation of air carriers” 1926 was an assertion of exclusive national sover-
adopted by the Council of State Governments upon eignty. The convention between the United States
the recommendation of the National Association and other nations respecting international civil avi-
of Tax Administrators in 1947. Use of a uniform ation accords. The Act, however, did not expressly
allocation formula to apportion air-carrier taxes exclude the sovereign powers of the states. The
among the states follows the recommendation of Civil Aeronautics Act of 1938 gives no support to
the Civil Aeronautics Board in its report to Con- a different view. After the enactment of the Air
gress. The Nebraska statute provides for reports, Commerce Act, more than twenty states adopted
levy, and rate of tax by state average. the Uniform Aeronautics Act. It had three provi-
sions indicating that the states did not consider
Required reports filed [by Braniff] for 1950 show
their sovereignty affected by the National Act
that about 9% of its revenue and 11 1/2% of the
except to the extent that the states had ceded that
total system tonnage originated in Nebraska and
sovereignty by constitutional grant. The recom-
about 9% of its total stops were made in that
mendation of the National Conference of Com-
state. From these figures, using the statutory for-
missioners on Uniform State Laws to the states to
mula, the Tax Commissioner arrived at a valua-
enact this Act was withdrawn in 1943. Where
tion of $118,901 allocable to Nebraska, resulting
 The U.S. Constitution and Aviation 61

adopted, however, it continues in effect. Recog- on interstate commerce. We have frequently reiter-
nizing this “exclusive national sovereignty” and ated that the Commerce Clause does not immunize
right of freedom in air transit, this Court in United interstate instrumentalities from all state taxation,
States v. Causby, [Citation], nevertheless held but that such commerce may be required to pay a
that the owner of land might recover for a taking nondiscriminatory share of the tax burden. And
by national use of navigable air space, resulting appellant does not allege that this Nebraska statute
in destruction in whole or in part of the usefulness discriminates against it nor, as noted above, does
of the land property. it challenge the reasonableness of the apportion-
ment prescribed by the statute.
These Federal Acts regulating air commerce are
bottomed on the commerce power of Congress, not The argument upon which appellant depends ulti-
on national ownership of the navigable air space, mately, however, is that its aircraft never “attained
as distinguished from sovereignty. In reporting the a taxable situs within Nebraska” from which it
bill which became the Air Commerce Act, it was argues that the Nebraska tax imposes a burden on
said: interstate commerce. In relying upon the Com-
merce Clause on this issue and in not specifically
“The declaration of what constitutes navigable air
claiming protection under the Due Process Clause of
space is an exercise of the same source of power,
the Fourteenth Amendment, appellant names the
the interstate commerce clause, as that under which
wrong constitutional clause to support its position.
Congress has long declared in many acts what con-
While the question of whether a commodity en
stitutes navigable or nonnavigable waters. The
route to market is sufficiently settled in a state for
public right of flight in the navigable air space owes
purpose of subjection to a property tax has been
its source to the same constitutional basis which,
determined by this Court as a Commerce Clause
under decisions of the Supreme Court, has given
question, the bare question whether an instrumen-
rise to a public easement of navigation in the navi-
tality of commerce has tax situs in a state for the
gable waters of the United States, regardless of the
purpose of subjection to a property tax is one of
ownership of the adjacent or subjacent soil.”
due process. However, appellant timely raised and
The commerce power has comprehended naviga- preserved its contention that its property was not
tion of streams. Its breadth covers all commercial taxable because such property had attained no
intercourse. But the federal commerce power over taxable situs in Nebraska. Though inexplicit, we
navigable streams does not prevent state action con- consider the due process issue within the clear
sistent with that power. Since, over streams, Con- intendment of such contention and hold such issue
gress acts by virtue of the commerce power, the sufficiently presented.
sovereignty of the state is not impaired. The title to
[The] situs issue devolves into the question of
the beds and the banks are in the states and the
whether eighteen stops per day by appellant’s air-
riparian owners, subject to the federal power over
craft is sufficient contact with Nebraska to sustain
navigation. Federal regulation of interstate land
that state’s power to levy an apportioned ad val-
and water carriers under the commerce power has
orem tax on such aircraft. We think such regular
not been deemed to deny all state power to tax the
contact is sufficient to establish Nebraska’s power
property of such carriers. We conclude that existent
to tax even though the same aircraft do not land
federal air-carrier regulation does not preclude the
every day and even though none of the aircraft is
Nebraska tax challenged here.
continuously within the state. “The basis of the
Nor has appellant demonstrated that the Com- jurisdiction is the habitual employment of the prop-
merce Clause otherwise bars this tax as a burden erty within the State.” Appellant rents its ground
62 Fundamentals of Aviation Law

facilities and pays for fuel it purchases in Nebraska. pickup and discharge of Nebraska freight and
This leaves it in the position of other carriers such passengers. Nebraska certainly affords protection
as rails, boats and motors that pay for the use of during such stops and these regular landings are
local facilities so as to have the opportunity to clearly a benefit to appellant.
exploit the commerce, traffic, and trade that origi-
Affirmed.
nates in or reaches Nebraska. Approximately one-
tenth of appellant’s revenue is produced by the

The Braniff Airways case serves as a reminder that unless there is express preemption
of a specific area of the law by the federal government, there is generally a presump-
tion against preemption.

Notice also that the Braniff Airways case came before the Supreme Court’s articulation
of a more detailed test for state and local taxation in the Complete Auto Transit (see dis-
cussion above) case in 1977. Would the Nebraska state law examined in Braniff Airways
have passed muster under the Complete Auto Transit test?

For aircraft owners and operators, questions of state and local taxation typically arise in
the context of personal property taxes and sales and use taxes. Many states impose per-
sonal property taxes on tangible personal property. Aircraft are typically considered to
be tangible personal property due to their obvious physical presence and ability to be
moved. Tangible personal property is also subject to state sales and use taxes. Sales
taxes are taxes on the sale of goods (such as an aircraft) within a state. Use taxes are
taxes on the use of goods (such as an aircraft) within a state.

While it is plainly recognized that states have the authority to impose personal property
taxes and sales and use taxes on aircraft, it must be kept in mind that the states impos-
ing the tax are held accountable to the standards articulated in Complete Auto Transit.

DISCUSSION CASES

1. Forgang County owns and maintains the Greater Smith Airport. The airport is located
on land that the county purchased to provide air transportation services and air transport
facilities. The airport was designed for public use and conformed to all federal statutes
and regulations related to airport development. Ned Neighbor owns a home not far from
the approach end of a runway at the Greater Forgang Airport Regular and continuous
daily flights, often several minutes apart, were made by aircraft directly over and near
Neighbor’s home. During these overflights, the noise level in the home reached such
high levels that it was often impossible to converse or use the telephone. Windows
would rattle, and plaster often fell from walls and ceilings. Neighbor brings a case to his
state supreme court against Forgang County, and the state supreme court rules that if there
 The U.S. Constitution and Aviation 63

was a taking of Neighbor’s property, it was not a taking by Forgang County. In making its
ruling, the state supreme court clearly implied that although a taking of Neighbor’s prop-
erty may have occurred, it was the United States that had taken the property by approv-
ing the design and location of the airport and its runways, not Forgang County. The case
has now been appealed to the U.S. Supreme Court. Who wins? Explain.

2. Stanton Airport, located in Davidson County, New York, is a general aviation airport
designated as a “reliever airport.” In this capacity, Stanton Airport relieves New York’s
major commercial airports, JFK International Airport, LaGuardia, and Newark, from
excessive use by noncommercial aircraft. The airport is one of only three New York City
area reliever airports capable of all-weather operations. New York State owns the airport
and enacts a curfew that extends to all aircraft operating in or out of Stanton Airport. The
curfew prohibits aircraft operations at Stanton Airport between the hours of 11:00 p.m.
and 7:00 a.m. regardless of the amount of noise a particular aircraft may emit during
takeoff or landing. The federal government brings a lawsuit against New York State,
claiming that New York’s curfew is unlawful. The State of New York argues that as air-
port proprietor, it has the right to enact the curfew to directly control the sources of air-
craft noise. Who will win this lawsuit? Why?

3. The City of Ryan, California, owns and operates Ryan Municipal Airport. Ryan
Municipal is a general aviation airport with significant training and corporate opera-
tions. Residents of Ryan have begun complaining about aircraft noise. The residents
seem particularly concerned about noise coming from helicopter training operations.
Ryan City aldermen are considering an ordinance banning all helicopter flight training.
As part of their deliberations, they turn to the Ryan City Attorney’s Office for legal
guidance. One of the aldermen has read about the Burbank and Causby cases, and he
wants to determine whether a ban on helicopter training will be legally defensible. He
turns to you as the new Ryan City Attorney for guidance. Can you develop any argu-
ments that will support a ban on all helicopter training operations at Ryan City Airport?
Please draft a brief memo, outlining your arguments and citing relevant legal precedent.

4. Robinson Manufacturing, Inc., produces automobile parts at its plant in Zeek Falls,
Indiana. To meet the demands of customers scattered throughout the United States,
Robinson purchases a business jet that can be used to transport its executives to cus-
tomers and vendors for meetings and sales conferences. The business jet is purchased
in Florida. Robinson paid the 6 percent Florida sales tax at the time the aircraft was pur-
chased in Florida. After some minor repairs and discrepancies were ironed out in
Florida, the aircraft was flown to its home base in Indiana. A few months later,
Robinson was contacted by the Indiana sales and use tax authorities, who demanded
that Robinson pay an Indiana use tax of 5 percent. Robinson protested the assessment
of the 5 percent Indiana sales and use tax and argued that it should be credited with hav-
ing paid a 6 percent sales tax to Florida. Robinson points to an Indiana statute requir-
ing the state to provide a credit against use taxes for sales taxes paid to another state.
Indiana responds to this argument by pointing out that the same statute also provides
that the credit for sales taxes paid to other states “does not apply to the use tax on boats,
automobiles, and aircraft” (emphasis added). This case is now at a hearing before your
court. You are the judge. How will you decide? Explain your reasoning.
64 Fundamentals of Aviation Law

5. Fox City, Utah, opened a new terminal in 2005 at its growing municipal airport.
The upper level has a secure concourse area for passengers boarding and leaving air-
planes as well as a “preconcourse” area that includes a gift shop, restaurant, bar, rest
rooms, and public telephones. The lower level of the terminal houses rental car vendors,
baggage claim areas, and taxi services. Horace Horst publishes a magazine for singles.
His typical method of distributing his magazines is through news racks. After the new
terminal opened, Horst placed a new rack with his magazines in the public area of the
terminal without the approval of the airport or Fox City administrators. The Fox City
airport administrator removed the news rack with Horst’s magazines and sent him a let-
ter suggesting that he sell his magazines through the gift shop. Horst refused this
request and filed a lawsuit against Fox City and the airport administrator. In his lawsuit,
Fox argues that the airport is a public forum. Therefore, his First Amendment rights
have been violated by the removal of the news rack containing his magazines. A trial
court grants a judgment in favor of Horst. The case has now been appealed, and you are
the appeals judge deciding the case. How will you decide? Explain.

6. Podonk Airfield is a small, privately owned, general aviation airfield with a short
grass strip located in the center of Nebraska. The airport occasionally has visitors from
out of state, but virtually all its air traffic is from local pilots with aircraft based at the
airfield or pilots from nearby who want to train on grass fields. Podonk Airport typi-
cally has two to three employees who deal with the administration and maintenance of
the airfield. The owner of Podonk Airfield is being sued for discrimination based on
race and color by a former employee who was fired from his position as an airfield
maintenance technician. The lawsuit is based on the Federal Civil Rights Act of 1964.
Podonk’s owner claims that the federal statute cannot be applied because he is not
engaged in interstate commerce. You are the U.S. district court judge assigned to this
case. Can the U.S. government regulate Podonk Airfield under the interstate commerce
clause? Why or why not?

7. Brocato Entertainment, Inc., wishes to lease space at a city-owned airport terminal

so it can operate an amusement machine parlor. A city ordinance required that opera-
tors of coin-operated amusement machines be licensed and provided that the police
chief was to determine whether an applicant had “any connections with criminal ele-
ments.” The city manager, after receiving the report of the chief of police and reports
from the building inspector and the city planner, would then decide whether to issue the
license. If the application were denied, the applicant could then petition the city coun-
cil for a license. What defenses could you think of for a rejected applicant? Do you
think they would succeed? Why or why not?

ENDNOTES

1. 5 U.S. 137 (1803).

2. 524 U.S. 417 (1998).
3. 411 U.S. 624 (1973).
4. 317 U.S. 111 (1942).
5. 514 U.S. 549 (1995).
 The U.S. Constitution and Aviation 65

6. 529 U.S. 598 (2000).

7. 504 U.S. 353 (1992).
8. 432 U.S. 333 (1977).
9. 450 U.S. 662 (1981).
10. 430 U.S. 274 (1977).
11. 125 S.Ct. 2655 (2005).
12. 440 U.S. 268 (1979).
13. 518 U.S. 515 (1996).
14. 347 U.S. 483 (1954).
15. 376 U.S. 254 (1964).
16. 369 U.S. 84 (1962).
17. 558 F.2d 75 (2nd Cir. 1977).
18. 552 F. Supp. 255 (N.D.N.Y. 1982).
19. 659 F. 2d. 100 (9th Cir. 1981).
20. 437 F. Supp. 804 (S.D.N.Y. 1977).
This page intentionally left blank
3 Impact of Criminal Law on Airmen
and Air Carriers

BASICS OF CRIMINAL LAW 68

Classifications of criminal law 68
Elements 69
Criminal procedure 69
Constitutional protections for defendants 71
CRIMINAL LAWS AFFECTING AVIATION ACTIVITIES 74
Federal provisions 74
State provisions 76
CASES AND COMMENTARY 76
DISCUSSION CASES 88
ENDNOTES 89

67

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68 Fundamentals of Aviation Law

In the United States we live by the rule of law. One of the primary functions of the law
is to ensure that citizens conform to fundamental social norms. Criminal law is often
the first legal line of defense for a civilized society against behavior and actions that
might threaten civilized society.

Crimes are wrongs committed against society in general. When someone is accused of
a criminal offense, the “plaintiff” or complainant is the federal, state, or local govern-
ment (representing society in general). As a general rule, the government is seeking to
punish the wrongdoer.

In criminal cases, the burden on the government to prove its case is substantial. For a
person or entity to be found guilty of a crime, the evidence produced by the government
must establish beyond a reasonable doubt that the person accused committed the
alleged crime. While it is not easy to explain what beyond a reasonable doubt might
mean to different individuals, it might be fairly looked upon as a standard requiring a
juror to be 99 percent certain that the defendant committed a crime before a conviction
can be made. This being the case, there may be occasions on which a jury or judge
might strongly believe that it is more likely than not that a defendant committed a
crime. However, the government may not have proved its case to the point that guilt is
established beyond a reasonable doubt. Therefore, the jury or judge would be duty-
bound to acquit the accused. It might be fair to say that our legal and court system is
designed in such a way that if an error occurs, the system prefers a guilty person to be
set free than an innocent person to be deprived of life, liberty, or property.

In this chapter first we will review the basics of criminal law, including the different
classes of crimes, general elements of crimes, basics of criminal procedure, and consti-
tutional protections granted to individuals accused of crimes. Then we’ll explore the
various criminal law statutes and regulations related to airmen and aviation businesses
and industry. Finally, we will expose you to some cases that shed light on how criminal
law affects the aviation environment.

BASICS OF CRIMINAL LAW

All states and the federal government have criminal statutes or codes that detail the
crimes and the penalties for crimes within their respective jurisdictions. A violator of
the criminal law can be faced with punishment including imprisonment or death, fines,
restitution payments, probation, community service, and a host of other remedies
allowed by the law.

Classifications The most serious crimes are typically classified as felonies. Felonies are usually crimes that
of criminal law involve inherently bad acts—lawyers sometimes refer to this type of act as malum in se, which
means inherently evil. Examples of felonies include murder, rape, armed robbery, embez-
zlement, and bribery. Within the classification of felony, there may be further subclassifica-
tions such as first, second, or third degree. Usually these subclassifications indicate dif-
ferent levels of severity and often correspond to the range of penalties for a guilty party.
 Impact of Criminal Law on Airmen and Air Carriers 69

Crimes that are less serious than felonies are often referred to as misdemeanors. Often
crimes solely against property may be classified as misdemeanors. In some jurisdic-
tions, misdemeanors carry penalties such as fines or imprisonment that do not exceed
1 year and/or $1000.

On the lowest end of the criminal law classifications are violations. Violations often
involve traffic infractions, jaywalking, and other similar crimes. Usually, violations are
punished solely by fines and/or a short jail term.

For a person to be convicted of a crime, two elements must be proved by the government. Elements
First, there must be a criminal act. Second, there must be criminal intent.

Lawyers and judges often refer to the criminal act as actus reas (the guilty act). It is
important that a criminal act be proved because in our society we do not convict some-
one of a crime merely for thinking about the commission of the crime. Sometimes the
act that must be established is an actual act—shooting a gun that harms or injures another.
Other times the criminal act might be an act of omission—failure to file a required
report to the government.

Criminal intent, or mens reas, is required to establish that a person accused of a crime had
the necessary criminal evil intent at the time the criminal act occurred. Sometimes a crim-
inal act must be accompanied by specific intent. Specific intent exists when the defendant
intentionally and knowingly committed the act prohibited by criminal law. In other situa-
tions, the criminal act need only be accompanied by general intent. General intent is found
when the defendant’s reckless or indifferent conduct leads to the commission of a crime
(e.g., driving a car while intoxicated and killing or injuring another person).

Although most crimes require both a criminal act and criminal intent, some crimes do
not require criminal intent. These crimes are often referred to as strict or absolute lia-
bility crimes. In these cases, a crime can be committed where there is no intent, only an
act. One example of this type of strict liability crime might be a violation of a state’s
environmental laws in which an underground fuel tank at an airport leaks jet fuel. The
state may impose criminal sanctions on the persons responsible for the tank even
though the persons involved did not have any intention of committing a crime.

In the Model Penal Code, drafted by the American Law Institute, several standards of
fault are recognized and organized to match associated crimes. Figure 3-1 provides an
outline of the standards of fault applied in many U.S. jurisdictions.

Criminal procedure is a very intricate set of rules and processes designed to ensure that Criminal
a criminal defendant gets the due process required by the U.S. Constitution. Criminal procedure
procedure involves activities that occur before, during, and after a trial. A very brief outline
of these procedures is provided below.
70 Fundamentals of Aviation Law

Figure 3-1 Classification of fault Possible levels of fault Applicable crimes

Levels of fault
in criminal cases. Subjective Knowing, purposeful, reckless • Assault
• Theft
• Falsification/fraud

Objective Careless, negligent • Careless operations

of motor vehicles
or aircraft
• Writing bad checks

No fault (strict liability) None • Environmentally

hazardous
spills/activities
• Alcohol sales to
minors

Arrest
In most cases, prior to an arrest, police must obtain an arrest warrant from the courts.
This requirement is meant to protect individuals from unjustifiable detentions by police.
To obtain an arrest warrant, police officers must be able to persuade a judge or magis-
trate that they have probable cause to believe that the person they seek to arrest either
committed a crime or intends to commit a crime. In some cases, an arrest warrant is
unnecessary. For instance, the police may be in pursuit of someone who is fleeing a
crime scene. Police officers may also be able to avoid the need for a warrant if they are
legitimately concerned that significant evidence might be destroyed if they are forced
to take the time to obtain an arrest warrant.

Once an arrest has been made, the person arrested is taken into the custody of the
police. This process is often referred to as booking and involves paperwork recording
the arrest, fingerprinting, photographing, etc.

Indictment
For serious crimes, a person must be indicted before he or she can be brought to a trial.
This process involves a grand jury hearing in which the prosecution presents its side of the
story to a group of citizens (usually from 6 up to 24). The grand jury decides whether
there is enough evidence to take the person accused to a trial. If an indictment is issued,
the defendant is brought to trial. If the grand jury does not believe enough evidence
exists to bring a defendant to trial, the case will be dismissed.

In cases of lesser crimes, a grand jury indictment is usually not necessary. In these
instances, a defendant may be brought to trial on a magistrate’s information statement.
Similar to the procedure for an indictment, if a magistrate does not believe the evidence
is sufficient to go to trial, the case against the defendant will be dismissed.

It is important to note that the right to an indictment by a grand jury is not absolute.
States have not been required to meet the requirements of a grand jury through the
application of the Fourteenth Amendment.
 Impact of Criminal Law on Airmen and Air Carriers 71

Arraignment
After an indictment or information is issued, an arraignment takes place at the trial
court. At the arraignment, first the person accused is informed of the charges being
made against her or him. Next, the court requests that the defendant enter a plea. In
most cases, the plea can be guilty, not guilty, or no contest (otherwise referred to as nolo
contendere). With a nolo contendere plea, a defendant is not admitting to guilt; instead
the defendant is saying that he or she will agree to a penalty or punishment but will not
admit to any guilt (this plea can come in handy because it will prevent the criminal pro-
ceedings from being used in a civil case against the defendant later).

Plea bargains
Often prior to a trial, intense bargaining and negotiation between the prosecutors and
defense can take place in an effort to settle a case. Sometimes, this negotiation takes the
form of plea bargaining in which a prosecutor may be willing to accept a lesser charge
and/or penalty in exchange for a guilty plea. This process may appear to be a bit
unseemly. However, plea bargaining does address the practical problems of prison over-
crowding, the limited resources of prosecutors and defendants, and the ever-present risk
and uncertainty involved in litigating a case.

Trial
The trial of a criminal case is run in much the same way as a trial is described in Chap. 1.
One of the unique features of a criminal trial is that for a criminal conviction to occur,
all the jurors must agree. If any juror (or all the jurors) does not agree that the defendant
is guilty (the juror has reasonable doubt), the defendant will be acquitted. In some
instances, if some of the jurors do not find the defendant guilty, the verdict is character-
ized as “not guilty.” If all the jurors agree that the defendant should not be convicted, the
verdict is referred to as innocent.

The defendant who is found guilty will still have an opportunity to file an appeal with
the appropriate appeals court. However, if the government does not prevail at a trial, it
may not appeal the verdict. If the jury encounters differences in opinion that do not
allow for reconciliation, this may result in a hung jury. With a hung jury, the govern-
ment may retry the case.

As indicated earlier, the U.S. Constitution was drafted with great thought given to Constitutional
protecting the rights of the accused in criminal proceedings. Sir William Blackstone, protections
in Commentaries on the Laws of England (1809), wrote: “It is better that ten guilty for defendants
persons escape, than that one innocent suffer.” Similarly, our legal system builds in
many important safeguards that might allow guilty parties to go free. As Chief Justice
Cardozo writes in People v. DeFore,1 “The criminal is to go free because the constable
has blundered.”

Some of the provisions of the U.S. Constitution designed to protect citizens’ rights in
criminal matters are outlined below.

Fourth Amendment
The applicable portions of the Fourth Amendment indicate that citizens are to be pro-
tected from: “… unreasonable searches and seizures.” The Fourth Amendment goes on
72 Fundamentals of Aviation Law

to mandate that any search warrant issued be based upon “probable cause … and par-
ticularly describing the place to be searched, and the persons or things to be seized.”

Over centuries of court decisions, it is now established that some searches without war-
rants may be valid. Some of the more notable exceptions to the general rule requiring a
warrant are as follows:
• The search is incident to an arrest.
• The evidence sought is in plain sight of the police.
• There is a high probability that the evidence may be destroyed or damaged if action
is not taken immediately.
• The search involves items that are in “plain sight” or held out to the public.
• Searches performed by drug dogs.
• Inventory searches are made of an arrested person’s personal belongings.

If evidence is obtained in a manner contrary to the Fourth Amendment’s requirements,

the evidence may be excluded at a trial or hearing to which the person searched is a
party. This rule is often referred to as the exclusionary rule. The rule has very few
exceptions, but one notable exception occurs when police were operating on a good
faith belief that an appropriate search warrant had been issued. Importantly, highly reg-
ulated businesses such as airlines, charter operations, and repair shops may be subject
to searches without warrants if applicable regulatory or statutory requirements are met.

Fifth Amendment
There are two significant protections in the Fifth Amendment that relate to criminal cases.
The first protection noted is the privilege of every citizen against self-incrimination. The sec-
ond is the protection against double jeopardy. Each of these protections is discussed below.

The language in the Fifth Amendment related to self-incrimination states that no person
“shall be compelled in any criminal case to be a witness against himself.” Judicial inter-
pretations of this clause indicate that this means a person may not be required to provide
testimonial evidence while in the custody of police or in the midst of a criminal judicial
proceeding. However, this privilege does not extend to evidence that is not testimonial in
nature, for instance, DNA samples, fingerprints, bloodstains, and other physical evidence.
Fifth Amendment privileges may also be waived in exchange for a prosecutor’s grant of
immunity. Of course, the Fifth Amendment is the foundation of the famous Miranda
rights that must be read to any criminal suspect whom the police take into custody.

The double-jeopardy language in the Fifth Amendment provides that no person shall
“… be subject for the same offense to be twice put in jeopardy of life or limb.”
Essentially, this provision prohibits the government from putting someone on trial twice
for the same crime. Therefore, if an airline is tried for the crime of mail fraud and
acquitted, the government cannot try to bring the case again. Nonetheless, if the alleged
mail fraud involved several different crimes, the accused can be tried for each separate
crime without violating the spirit or intent of the double-jeopardy provisions. The Fifth
Amendment prohibition against doublejeopardy would not be violated if a defendant
were granted a new trial as a result of his or her successful appeal.
 Impact of Criminal Law on Airmen and Air Carriers 73

Sixth Amendment
The Sixth Amendment requires the following rights and protections for the accused in
a criminal case:
• Speedy, impartial, and public trial
• Jury trial
• Information as to the nature and cause of the crime charged
• Right to confront and cross-examine witnesses testifying against the accused
• Ability to compel favorable witnesses to attend and testify at trial
• Assistance of counsel
Most of the Sixth Amendment rights relate to criminal procedure and the conduct of
criminal trials. The clause requiring assistance of counsel in criminal proceedings was
initially interpreted to require counsel for defendants only in cases involving capital
offenses, in Betts v. Brady.2 However, in the landmark case of Gideon v. Wainwright,3
the U.S. Supreme Court overturned the Betts case and held that the Sixth Amendment
right to assistance of counsel applied to all criminal prosecutions.

While there is no specific mention of the time required for a “speedy trial” in the U.S.
Constitution, federal statutory law requires that a trial begin no more than 70 days after
a defendant is indicted.4

Eighth Amendment
The Eighth Amendment to the U.S. Constitution provides that no “cruel or unusual pun-
ishments” may be inflicted on criminal defendants. The understanding of what consti-
tutes cruel and unusual punishment has been modified from time to time. It has always
served as a prohibition against torture. However, the death penalty has been a source of
great debate by legal scholars and politicians for decades. Currently, the Supreme Court
holds that the Eighth Amendment does not prohibit capital punishment.5

A summary of the primary constitutional protections for defendants is found in Fig. 3-2.

Figure 3-2
Constitutional
amendment Rights/protections granted Summary of
constitutional
Fourth • No unreasonable searches or seizures
protections in
Fifth • Right to due process criminal cases.
• No double-jeopardy
• Freedom from self-incrimination
• Federal right to indictment for capital crimes

Sixth • Public trial

• Speedy trial
• Right to confront and present witnesses
• Right to competent counsel

Eighth • No excessive bail

• No cruel or unusual punishment
74 Fundamentals of Aviation Law

CRIMINAL LAWS AFFECTING AVIATION ACTIVITIES

There are myriad criminal statutes to which aviation professionals and businesses are
subject. Some of these laws are based on federal statutes, and others originate from state
statutes. We will take some time now to explore how the more significant criminal pro-
visions in federal and state law impact the aviation community.

Federal Federal criminal law is wide-reaching, and all aviation professionals should be aware
provisions of the following provisions. All these criminal statutes are found in the United States
Code (abbreviated U.S.C.).

Document falsification
Compliance with the complex web of regulations that all aviation activities are subject
to is often evidenced primarily by documents and statements and assertions in those
documents. Questions related to the airworthiness of an aircraft typically begin with an
inspection of aircraft maintenance logbooks. Determinations regarding a pilot’s med-
ical fitness to fly are dependent on truthful responses to an application for a medical
certificate. To determine whether a pilot is in compliance with flight currency regula-
tions prior to a flight requires reference to that pilot’s entries in a logbook.

This reliance on documentary evidence for safety places a premium on honesty and
accuracy in aviation-related documentation. Failure to properly comply with docu-
ment requirements can invite problems with the Federal Aviation Administration
(FAA). However, falsification of documentary requirements can also lead to crimi-
nal prosecution. 18 U.S.C. § 1001 prohibits knowingly and willfully making a mate-
rially false statement regarding facts within the purview of a federal regulatory
agency. Penalties for violation of the statute call for fines and terms of imprisonment
up to 5 years.

It is important to note that although the statute only prohibits “knowingly and willfully”
making false statements, in some cases the courts have held that someone may have
acted willfully or knowingly if she or he acted with a reckless disregard for the truth
tied to a conscious effort to avoid the truth.6

Government authorities regularly prosecute individuals for violation of 18 U.S.C. § 1001.

Cases typically involve falsification of certificates and logbooks and false statements or
omissions in applications for medical or airman certificates. The importance of accurate
and honest paperwork and statements in the aviation environment should never be under-
estimated by aviation professionals and businesses.

Mail and wire fraud

The United States has two statutes (18 U.S.C. §§ 1341 and 1343) that provide for crim-
inal penalties for anyone involved in a fraudulent behavior using the United States mail
or wire communications. Wire communications include contacts by telephone, fac-
simile, Internet, and television (among others). Sections 1341 and 1343 call for fines,
restitution, and prison sentences for up to 5 years.
 Impact of Criminal Law on Airmen and Air Carriers 75

In one case, the government indicted Eastern Airlines in 1991 for wire fraud. The gov-
ernment charged that Eastern and its employees made several false maintenance entries
in computers that were meant to establish that regularly scheduled maintenance had
been performed when in fact it had not been. The wire fraud came into play because the
government alleged that the airline (through marketing and other outlets) led potential
customers and passengers to believe that it was faithful to a rigorous maintenance pro-
gram for its aircraft. Eastern pled guilty to the charges and paid a $3.5 million fine.7

Hazardous Materials Transportation Act

The Hazardous Materials Transportation Act is found at 49 U.S.C. § 5101 et seq. This
provision prohibits persons from willfully violating the act and its detailed require-
ments for packaging, storing, and labeling hazardous materials. The case of United
States v. SabreTech, Inc.8 illustrates a government prosecution of such a case. For an
edited version of the case and commentary, please see Case 3-2 later in the chapter.

Resource Conservation and Recovery Act

United States Code § 6928 imposes fines and/or prison terms for anyone who know-
ingly violates the provisions of the Resource Conservation and Recovery Act (RCRA)
related to the disposal, treatment, transportation, and/or storage of hazardous waste
products. Fines can reach up to $50,000 per day with prison terms up to 5 years for vio-
lations of this law.

The RCRA has a great impact on the aviation industry. For better or for worse, aviation
businesses deal regularly in hazardous waste such as petroleum products, hydraulic
fluid, and paints. Anyone operating in the aviation industry should be aware of the
necessity for careful compliance with the RCRA’s provisions.

Terrorism
Federal law prohibits certain acts such as willfully damaging an aircraft or aviation
facility (see 18 U.S.C. § 32). A violation of this code section can result in fines, resti-
tution, and/or up to 20 years in prison. If the violation results in a death, the death penalty
is possible.

This provision in the law was clearly designed to deter international or domestic terror-
ism targeting aircraft or airports. However, it has been used in circumstances that might
not be so apparent from a plain reading of the statute. Notice that in the SabreTech case
presented later in this chapter, the government charged SabreTech with violation of this
section; however, the jury at the trial court level acquitted SabreTech of the charge.

Miscellaneous criminal provisions

There are several miscellaneous, but important, criminal provisions related to aviation
activities in Title 49 of the United States Code. Some of the more significant infractions
and related code sections are listed here:
• Certificate forgery, operating an unregistered aircraft, unauthorized fuel tank modi-
fications9
• Failure to comply with an NTSB or Department of Transportation (DOT) subpoena
to testify10
76 Fundamentals of Aviation Law

• Willful violations of security provisions of the Federal Aviation Program11

• Knowing and willful violations of certain air commerce safety and statutes and
regulations12

State Although it does not happen often, states sometimes assert their police power by crim-
provisions inalizing certain aviation-related conduct. To date, approximately 35 states have criminal
laws prohibiting the operation of aircraft in a careless or reckless manner or while under
the influence of alcohol or drugs. Some state laws go beyond the general prohibitions
of careless or reckless operations and become very specific. For instance, a law in Texas
prohibits taking off or landing an aircraft on a road or highway except in an emergency.

CASES AND COMMENTARY

The question often raised by state and local regulation of aviation activities is, Just how
far can a state or local government go without being preempted by federal regulation of
aviation? This is the question that arises in Case 3-1.

CASE 3-1
ROBERT DAVID WARD V. STATE OF MARYLAND
374 A. 2d 1118 (1977)

OPINION BY: ORTH doubt the corpus delicti of the offense and his
criminal agency. And he offers no claim that the
OPINION: For over a quarter of a century it has penalties imposed were in any way at variance
been a crime under the laws of Maryland “to oper- with the sanctions authorized. The issue he raises
ate an aircraft in the air, or on the ground or is that Maryland was precluded from prosecuting
water, while under the influence of intoxicating him because the statute proscribing the conduct
liquor, narcotics, or other habit-forming drug, or, … was preempted by federal law. He, therefore,
in a careless or reckless manner so as to endanger claims error in the denial by the trial court of his
the life or property of another.” [Citations.] The motion to dismiss the charges.
statute has never been before the appellate courts
The issue for decision is narrow in lineation but
of this State. Robert David Ward presents it to us
sweeping in implication. The great majority of the
in this appeal. In challenging the judgment entered
states have enacted legislation similar to the Mary-
against him upon being found guilty of operating
land statute, some in identical language, making it
an aircraft in a reckless manner, he does not dis-
a crime to operate an aircraft so as to endanger the
pute the accuracy of the facts and circumstances
person or property of another. If Ward’s view that
resulting in his arrest and prosecution by the State.
the state statutes are preempted prevails there
Nor does he present any question as to the suffi-
ciency of the evidence to prove beyond a reasonable
 Impact of Criminal Law on Airmen and Air Carriers 77

could be no criminal prosecution, under existing over Greenbelt, Maryland, and in an apparent
laws, by any state, or, as we shall see, by the federal burst of euphoria he “buzzed” nearby apartments.
government, for operating an aircraft in a careless His activities were observed by a Maryland State
or reckless manner or while under the influence of Police officer in a helicopter who followed the
intoxicating liquor, narcotics, or other habit-forming plane back to the airport. Ward was arrested upon
drug, no matter how flagrant the conduct pro- landing.
scribed and regardless of the seriousness of the dan-
Ward was tried in the District Court of Maryland
ger to life and property occasioned by that conduct.
in Prince George’s County on a charge of operat-
We have not been referred to a decision of another
ing an aircraft in a reckless manner, convicted, and
jurisdiction, state or federal, which addresses the
appealed from the judgment entered to the Circuit
matter of preemption of a statute prohibiting such
Court for Prince George’s County. Tried de novo
operation of an aircraft. There being no decision
by the judge in the circuit court, he was again
precisely on point to bind or persuade us, we shall
found guilty. He was fined $500 and costs and
follow the path laid out by the decisions of the
sentenced to imprisonment for a term of 90 days.
Supreme Court of the United States concerning
The prison sentence was suspended “upon special
the doctrine of preemption to determine whether
condition that he not operate an aircraft within the
the Maryland statute is enforceable.
State for a period of one year from September 17,
I. [Facts]: To put the issue for decision in per- 1975.” Upon Ward’s petition we issued a writ of
spective we recount what Ward did and what hap- certiorari to review the judgment of the Circuit
pened as a result. Ward was the holder of a valid Court for Prince George’s County.
student aircraft pilot license and medical certifi-
In a civil proceeding, the Federal Aviation Admin-
cate issued by the Federal Aviation Administra-
istration determined that Ward had violated seven
tion (FAA), pursuant to the applicable Federal
Federal Aviation Regulations in his operation of
Aviation Regulations (FAR). On the late after-
the aircraft on 19 May 1975, including FAR 91.9,
noon of 18 May 1975 he made an instructional
prohibiting the careless or reckless operation of
flight from Hyde’s Airfield in Clinton, Prince
an aircraft so as to endanger the life or property of
George’s County, Maryland. Thereafter, he and
another. It ordered that his airman certificate be
his instructor pilot enjoyed a quiet dinner com-
revoked. Subsequently, however, “after a thor-
plete with pre- and postprandial liquid refresh-
ough investigation of Mr. Ward, his instructor, his
ment in an amount sufficient, when Ward was
level of aeronautical knowledge and the flight
examined some hours later, to show a blood alco-
leading to his prosecution, FAA granted permis-
hol level of 0.17 percent. Later that evening, after
sion to reissue his license six (6) months after
a visit with Ward’s parents, Ward and his instruc-
surrender to it.”
tor returned to the airport. Ward slept in his car
for some hours. On awakening in the early morn- ***
ing he decided to practice some “touch and
We have no difficulty whatever in deciding that
gos”—taking off and landing without leaving the
Congress has not occupied the entire field of
airport pattern. Inadvertently entering clouds, he
aeronautics by the Federal Aviation Act of 1958.
climbed above the cloud layer and circled what
There is no such command explicitly stated in the
he assumed to be the Chesapeake Bay area, until
language of the Act, and we do not find it implic-
breaks were visible in the overcast. It was about
itly contained in the statute’s structure and pur-
6:00 A.M. when he descended through a hole in
pose. Generally accepted, for example, is that in
the clouds. He established that his position was
78 Fundamentals of Aviation Law

the economic area of aeronautics all state legisla- in fields where the Federal Government has
tion is not excluded. [Citations.] The Supreme responsibilities.
Court has held that the Federal Aviation Admin- We wish to emphasize that it is not our intent to
istrator in conjunction with the Environmental divest the States of any jurisdiction they now have.
Protection Agency “has full control over aircraft This legislation merely seeks to give the Federal
noise, preempting state and local control.” [Citing Government concurrent jurisdiction with the States
City of Burbank v. Lockheed]. But that conclusion in certain areas where it is felt that concurrent juris-
was not because Congress had “unmistakably diction will contribute to the administration of justice
ordained” that its enactments alone were to regu- and protect air commerce.
late air commerce in its entirety, but because the The Report asserted: This, we want to make clear,
1968 amendment [Citation] and the 1972 amend- does not preempt any State jurisdiction but would
ment (The Noise Control Act, 86 Stat. 1234) to only supplement it. [Citation.]
the 1958 Act established “the pervasive nature of
the scheme of federal regulation of aircraft We reject Ward’s suggestion that “the entire
noise.” We construe the holding as limited to that [Maryland Aviation] Act should be struck down.”
aspect of aeronautics. [Citation.] Having determined that Congress has not excluded
Maryland has expressly retained its police powers all state action in the field of aeronautics or even
with respect to crimes related to aeronautics. It in the more limited field of air safety, we center
declared in its Aviation Act, § 3-307 that “[a]ll on § 10-1002 of the Maryland Aviation Act to
crimes … committed by or against an airman or ascertain whether it conflicts with the federal law
passenger while in flight over this State shall be in the field. Although the Maryland statute and
governed by the laws of this State.…” Congress the federal regulation proscribe identical conduct
has recognized the right of a state to do so. In with respect to the careless or reckless operation
1961 the Federal Aviation Act of 1958 was of an aircraft, the two laws are not coterminous
amended by designating criminal penalties for because of the sanctions prescribed. When the
specific crimes. [Citation.] House Report 958 on relationship between the Maryland and federal
the proposed legislation observed that “in the laws as they are written, as they are interpreted
case of crimes committed in the airspace over and as they are applied, is considered, it is mani-
States of the United States, most of the acts with fest that the Maryland law does not stand as an
which this legislation deals would be violations obstacle to the accomplishment and execution of
of the laws of one or more of such States.” [Cita- the full purposes and objectives of Congress,
tion.] It declared: “The offenses punishable under namely, “to provide for the regulation and promo-
this legislation would not replace any State juris- tion of civil aviation in such manner as to best
diction but would, where both Federal and State foster its development and safety, and to provide
law provided for punishment for the same act, be for the safe and efficient use of the airspace by
in addition to the State criminal law.” [Citation.] both civil and military aircraft.” [Citation.] On the
In discussing the need for the legislation, the contrary, the Maryland law enhances the Con-
report stated, [Citation]: gressional purposes and objectives by deterring
through criminal sanctions the operation of an
As is well known, the Federal Government does not aircraft in such manner as to endanger the life and
provide a general criminal code for all crimes com-
property of others. It would be incongruous indeed,
mitted in the United States. That is the province of
the various States. However, criminal codes of the
in light of the federal purposes and objectives, if
States are at times supplemented by Federal Law Maryland were to be constitutionally precluded
 Impact of Criminal Law on Airmen and Air Carriers 79

from the criminal prosecution of a person for such Maryland by a person who has been found guilty
conduct because a federal regulation authorized civil in a court of law of operating an aircraft in a
penalties. careless or reckless manner so as to endanger the
life or property of another could be said to stand
We are not persuaded that there is a conflict of
as an obstacle to the Congressional purposes and
constitutional dimension simply because the State
objectives.
court may prohibit a violator of its statute from
operating an aircraft within Maryland for up to In short, it was the clear intent of Congress that
one year even though the violator holds a federal criminal prosecution of the proscribed conduct be
airman certificate which would permit him to left with the states, and there is no conflict within
operate an aircraft. Section 10-1003 of the State the contemplation of the doctrine of preemption
Statute expressly provides: between the State and federal laws.
In no event shall this subsection be construed as war- ***
rant for the court or any other agency or person to
take away, impound, hold or mark any federal airman We hold, therefore, that the Circuit Court for
or aircraft certificate, permit, rating or license.… Prince George’s County did not err in denying the
motion to dismiss the charges.
In any event, we do not see how prohibiting, for
a limited time, the operation of an aircraft within

Note that the Ward case was appealed to the U.S. Supreme Court on a writ of certiori.
However, the Supreme Court denied the writ and refused to hear the case. This left the
Ward case as the prevailing law in Maryland and a source of persuasive authority in
other states.

One of the more curious aspects of the Ward case is the court’s restriction that prohib-
ited the pilot from flying in the state of Maryland for 1 year—even though the pilot
would have had his certificate back from the FAA enforcement proceeding before the
1-year period expired.

The Maryland Court of Appeals decision effectively barred the pilot from Maryland
airspace for the 1-year period. Note that two of the seven judges on the Maryland Court
of Appeals panel wrote dissenting opinions on this point. The dissenting judges argued
that while Maryland’s criminal penalties may not have been preempted by federal law,
the provision in the Maryland law that prohibited a convicted person from operations in
Maryland crossed the line and should be subject to preemption. What do you think?

Whether a regulatory violation crosses the line into the realm of criminal violations is a
difficult question to answer at times. In Case 3-2, the court must wrestle with whether
a maintenance supplier can be held criminally liable for acts and omissions that led to
a terrible air tragedy in the early 1990s.
80 Fundamentals of Aviation Law

CASE 3-2
UNITED STATES OF AMERICA V. SABRETECH
271 F. 3d 1018 (2001)

OPINION: DUBINA, Circuit Judge. work orders listed steps for SabreTech’s mechan-
ics to follow when replacing the old oxygen gen-
On May 11, 1996, a ValuJet commercial airliner
erators with new ones. The work orders contained
crashed in the Florida Everglades and all persons
a warning that unexpended oxygen generators
on board perished. It was a tragic accident that
could generate extremely high temperatures.
could have been avoided. Following an investiga-
tion, the government, for the first time, indicted an In the process of removing the old oxygen gener-
aviation repair station, SabreTech (“SabreTech”), ators, mechanic John Taber (“Taber”) noticed the
and several of its employees for various violations absence of shipping caps. Taber asked his super-
related to the transportation of hazardous materials. visor David Wiles (“Wiles”) about the shipping
The record reflects that these aviation repair sta- caps, and Wiles told him to set the old generators
tion personnel committed mistakes, but they did aside and continue working. Taber, along with
not commit crimes. The jury found SabreTech not fellow mechanics Robert Rodriguez (“Rodriguez”)
guilty of willful violations of the Hazardous Mate- and Eugene Florence (“Florence”), then proceeded
rials Transportation Act (“HMTA”). [Citation.] The to wrap the lanyards tightly around the firing pins
jury did, however, find SabreTech guilty of reck- of the generators and tape the ends of the lanyards
lessly causing the transportation of hazardous to the body of the generators to prevent the release
material in air commerce. [Citation.] We hold that of the trigger mechanism. In March 1996, new gen-
the government and the district court improperly erators, bearing yellow, diamond-shaped stickers,
relied upon hazardous materials regulations that arrived at the SabreTech facility. The mechanics
had not been authorized by the Federal Aviation installed the new generators and tagged the old
Act (“FAA”) , as required by 49 U.S.C. § 46312, to generators with green “unserviceable” tags on
support the reckless counts. As will be discussed which they wrote “out-of-date” as the reason for
infra, these counts are a legal nullity. Accordingly, removal. The mechanics boxed the generators and
we affirm in part, vacate and remand in part. stored them in the hangar where they remained
for six weeks.
I. BACKGROUND
On May 10, 1996, SabreTech shipping clerk Andy
From July 1995 until June 1999, SabreTech Salas (“Salas”) re-packed the generators with bub-
engaged in the repair, modification, and mainte- ble wrap and placed them in boxes that he sealed
nance of commercial aircraft. In January 1996, with tape. He placed ValuJet “COMAT” labels on
ValuJet Airlines delivered three used McDonnell the boxes, indicating that the boxes contained Val-
Douglas MD-80 aircraft to SabreTech’s facility in uJet “company materials.” The shipping ticket
Miami, Florida, for major modification and main- described the contents as “5 boxes” of “Oxy Canis-
tenance prior to their introduction into the ValuJet ters Empty.” The next day, a SabreTech driver
fleet. In the course of overhauling these aircraft, took the boxes to the ValuJet ramp area where
SabreTech’s mechanics determined that many of Flight 592 was scheduled to depart for Atlanta.
the oxygen generators had exceeded their 12 year ValuJet personnel placed the boxes in the forward
service life. ValuJet personnel issued written work section of the aircraft’s cargo compartment.
orders instructing the mechanics to remove the Shortly after take-off, a fire erupted on the plane.
old oxygen generators and install new ones. The
 Impact of Criminal Law on Airmen and Air Carriers 81

Flight 592 crashed into the Everglades and killed 1. Statutory Overview
all 110 persons on board. * * *
Shortly after the passage of the HMTA, the Secre-
On July 13, 1991, a grand jury returned a 24-count
tary of Transportation created the Materials
indictment against SabreTech and employees
Transportation Bureau (“MTB”) to implement the
Daniel Gonzalez (“Gonzalez”), Florence, and
new law. The MTB amended and reissued the
Mario Valenzuela (“Valenzuela”). * * *
authority citations for the hazardous materials reg-
ulations. The MTB deleted each of the previous
II. ISSUES authority citations for the hazardous materials reg-
1. Whether the district court erred in denying ulations and replaced them with references to the
SabreTech’s motion to dismiss the 49 regulatory authority for the new HMTA, 49 U.S.C.
U.S.C. § 46312 counts. §§ 1803, 1804, 1808. Thus, by January 1977,
2. Whether the evidence was sufficient to con- Congress had eliminated any authority for the
vict SabreTech on the reckless counts and regulations which may have existed under the
the failure to train count. FAA, and placed that authority under the HMTA.
*** * * * [I]n 1994 … Congress modified this section
[Section 46312] to read as follows:
IV. DISCUSSION A person shall be fined under title 18, imprisoned
A. Validity of Reckless Counts for not more than 5 years, or both, if the person,
SabreTech argues that the statutory and regula- in violation of a regulation or requirement related
tory history creates a dichotomy between the to the transportation of hazardous material pre-
HMTA and the FAA that cannot support as a scribed by the Secretary of Transportation under
crime the reckless violations of the hazardous this part —
materials regulations. It contends that the reckless
counts are a legal nullity. In these counts, the gov- 1. willfully delivers, or causes to be delivered,
ernment alleged that SabreTech should be pun- property containing hazardous material to an
ished pursuant to 49 U.S.C. § 46312—the crimi- air carrier or to an operator of a civil aircraft
nal penalty provision of the former FAA—for for transportation in air commerce; or
violation of certain hazardous materials regula- 2. recklessly causes the transportation in air com-
tions. Section 46312(a)(2) makes it a crime to merce of the property.
recklessly cause to be transported hazardous * * *
material in violation of any regulation or require- Thus, at the time of the ValuJet crash, criminal
ment prescribed under the FAA. SabreTech posits liability existed for willful violations of the haz-
that the regulations it was convicted of recklessly ardous materials regulations promulgated pur-
violating were not enacted under the FAA. These suant to the HMTA. Criminal liability also existed
regulations were promulgated under a different for reckless violation of regulations authorized by
statutory authority—the HMTA. That statute penalizes Part A—Air Commerce and Safety, Subtitle VII,
only willful violations of its regulations. 49 U.S.C. § an entirely separate subtitle. The criminal penal-
5124. Therefore, SabreTech contends that the ties were distinct. Therefore, only regulations
government improperly charged it with a crime. adopted under the authority of the FAA in Part A
We agree. could provide the predicate for prosecuting a
82 Fundamentals of Aviation Law

reckless violation. See 49 U.S.C. § 46312. How- support SabreTech’s conviction for willfully failing
ever, the government charged SabreTech with to train its employees in accordance with the haz-
recklessly violating regulations promulgated pur- ardous materials regulations. The evidence demon-
suant to the HMTA. That Act contains no crimi- strates that SabreTech had a manual instructing
nal liability for recklessly violating the hazardous personnel with regard to the handling and pack-
materials regulations. aging of hazardous material. Thus, the jury could
infer that SabreTech knew about the regulations
dealing with the handling and packaging of haz-
2. Regulatory Overview
ardous material and knew that it should inform its
The Department of Transportation’s Research and
employees of these regulations. Moreover, several
Special Programs Administration (“RSPA”), the
SabreTech employees testified that they received
successor agency to the MTB, administered a com-
no hazardous materials training while employed
prehensive scheme for the regulation of hazardous
with SabreTech. In light of this evidence, we
materials transportation. These hazardous materials
affirm SabreTech’s conviction on Count XXIII.
regulations are contained in 49 C.F.R. §§ 171–180.
[Citation.] (All reasonable inferences and credibil-
At the beginning of each of these parts, the RSPA
ity choices must be made in favor of the verdict.)
cites 49 U.S.C. §§ 5101–5127 as the only authority
for promulgating each part. The RSPA does not cite
any statutory authority found in Part A—Air Com-
V. CONCLUSION
merce and Safety. Thus, during the pertinent time-
frame involved here, none of the regulations cited As stated previously, this was a tragic accident that
in the reckless counts were issued pursuant to the needlessly claimed the lives of over 100 people.
statutory authority contained in Part A—Air Com- That loss is irreplaceable. However, the record is
merce and Safety. clear that SabreTech and its employees did not
intend to kill these people when it packed the old
The statutory and regulatory history demonstrate oxygen canisters and transported them to the Valu-
that at the time of the crash, the HMTA was the Jet aircraft. Furthermore, the statutory and regula-
only authority for the hazardous materials regula- tory history demonstrates that the regulations cited
tions under which the government indicted as predicates for the alleged criminal activity were
SabreTech. That Act punishes willful violations, invalid. Because the district court improperly relied
not reckless ones. In sum, none of the hazardous on the hazardous materials regulations as predi-
materials regulations in existence in May 1996, cates for the alleged criminal activity, we vacate
and relied upon in the indictment, were based upon SabreTech’s convictions on the reckless counts.
statutory authority contained within Part A—Air Because there was sufficient evidence presented to
Commerce and Safety. Therefore, the reckless the jury on the willful failure to train count, we
counts are invalid, and the district court erred in affirm that conviction. Finally, we remand this case
denying SabreTech’s motion to dismiss them. to the district court for re-sentencing.

B. Sufficiency of the Evidence

Based on our review of the record, we conclude
there was sufficient evidence presented at trial to
 Impact of Criminal Law on Airmen and Air Carriers 83

As discussed in this chapter, the elements of a crime include an act and intent. The ele-
ment of intent can often be established by evidence that points to a reckless indiffer-
ence. One of the difficult problems addressed in the SabreTech case is the distinction
between negligence and recklessness. How would you define a test to help with this dis-
tinction? Can such a test be developed?

Case 3-3 addresses the following questions: (1) Is a medical certificate an airman cer-
tificate, and (2) for criminal law purposes is a private pilot certificate with a single-
engine rating the same as a private pilot certificate with a multiengine rating? The
statute in the spotlight in this case (49 U.S.C. § 1472) is the predecessor to current-day
49 U.S.C. § 46306. The statute in question makes it an offense to “knowingly and will-
fully serve, or attempt to serve, in any capacity as an airman without a valid airman’s
certificate authorizing such person to serve in such capacity.…”

CASE 3-3
UNITED STATES V. EVINGER
919 F. 2d 381 (1990)

OPINION BY: PER CURIAM cate, authorizing Evinger to exercise the privileges
of a private pilot, has been neither revoked nor
OPINION: Defendant-Appellee, John Lee Evinger, suspended since its issuance. The rating on the
holder of an airman certificate authorizing him to certificate authorizes operation of “airplane sin-
act as a private pilot of a single-engine aircraft, gle-engine land.” Evinger’s most recent medical
was charged in a three-count indictment with one certificate was obtained in September of 1986, but
count of serving as a pilot of a single-engine air- expired in September of 1988. The alleged
craft without a valid airman’s certificate, 49 U.S.C. offenses occurred in 1989.
App. § 1472(b)(1)(E), because his medical cer-
tificate had expired, and two counts of serving as II. [Procedural History]
a pilot of a twin-engine aircraft without a valid air- Defendant was charged by grand jury indictment
man’s certificate in connection with the trans- filed November 21, 1989, three separate violations.
portation of marijuana, 49 U.S.C. App. § 1472(b) The specific acts complained of in the indictment
(1)(E), (b)(2)(B), in connection with incidents alleged were that Evinger operated aircraft “without a
to have occurred in July and November of 1989, after valid airman’s certificate authorizing him to oper-
the medical certificate had expired. Following a hear- ate such aircraft.” On March 15, 1990, Evinger
ing, the district court granted Evinger’s motion to dis- submitted a motion to dismiss the charges against
miss and the government timely filed its notice of him, claiming that, as a matter of law, he held a
appeal. Finding no reversible error, we affirm. valid airman’s certificate at the time of the alleged
offenses and that the district court had no author-
I. [Facts] ity to enforce a term, condition or limitation of an
An airman’s certificate was issued to Evinger in airman’s certificate unless requested to do so by
1982, after he complied with all requirements the Federal Aviation Authority in accordance with
imposed by statute and regulation. That certifi- 49 U.S.C. App. § 1487. Evinger’s motion was
84 Fundamentals of Aviation Law

heard by the district court on April 9, 1990. Fol- for a single-engine aircraft and flying without a
lowing argument of counsel and submission of valid medical certificate, are violations of the
exhibits, the court took the matter under advise- Subchapter VI safety regulations. [Citations.]
ment and, on May 22, 1990, granted Evinger’s Congress has provided civil penalties for the
motion. The district court held that § 1472 pro- safety violations alleged, and therefore the dis-
vides criminal penalties for forged or fraudulent trict court correctly determined that § 1472 was
airmen’s certificates, and that operating a twin- inapplicable.
engine aircraft while holding a single-engine
The government argues that the medical certifi-
rating, and flying an aircraft without a medical
cate is an airman certificate, relying on the defini-
certificate, were safety violations subject to civil
tion of airman certificate in 49 C.F.R. § 821.1.
penalties under 49 U.S.C. App. §§ 1430 and
This definition, however, is specifically limited to
1471(a). The government appealed only the dis-
that part of the regulations (Practice and Proce-
missal of counts II and III, piloting a twin-
dure before the National Transportation Safety
engine aircraft without a valid airman’s certifi-
Board) and is not relevant to this discussion.
cate in connection with the transportation of
marijuana. The government’s reliance on Bullwinkel v. U.S.
Dep’t of Transp., FAA, 787 F. 2d 254 (7th Cir.
III. [Analysis] 1986) and King v. National Transp. Safety Bd.,
The government argues that fraud and forgery are 766 F. 2d 200 (5th Cir. 1985) is also misplaced.
not elements of a violation under 49 U.S.C. App. Bullwinkel holds only that a medical certificate is
§ 1472(b)(1)(E). It also argues that the medical a license within the meaning of the Equal Access
certificate is an “airman certificate” and therefore to Justice Act. Bullwinkel, at 256–57.
flying without one establishes all of the elements King likewise does not support the government’s
of the offense. position. In King the Federal Aviation Administra-
Resolution of the issue depends on the proper tion had suspended proceedings to revoke King’s
interpretation of §§ 1471 and 1472. “In ascertain- pilot license for knowingly carrying marijuana on
ing the plain meaning of the statute, the court an aircraft in violation of 49 C.F.R. § 91.12(a)
must look to the particular statutory language at (1985) pending the outcome of his appeal of a
issue, as well as the language and design of the state court conviction for possession of mari-
statute as a whole.” [Citations.] If the statute is juana. This court merely held that the delay in
unambiguous, the court does not look beyond its bringing the proceedings was not unreasonable
express terms. [Citation.] “‘We must take the under the circumstances.
intent of Congress … to be that which its lan- Under the statutory scheme set forth by Congress,
guage clearly sets forth.’” [Citation.] Evinger is subject to the civil penalties under §
Section 1471(a)(1) provides civil penalties for 1471 for his violations of the safety regulations.
violation of the safety regulations in Subchapter He had a valid airman certificate that permitted
VI; section 1472(a) specifically excludes viola- him to act in the capacity of private pilot and
tions of Subchapter VI from the criminal penal- therefore he did not violate § 1472(b)(1)(E). The
ties in that section. The violations the government district court’s order dismissing the indictment
alleges, flying a twin-engine aircraft when rated for lack of jurisdiction is AFFIRMED.
 Impact of Criminal Law on Airmen and Air Carriers 85

Do you agree with the court’s analysis and conclusion in this case? Did the court han-
dle the single-engine/multiengine certificate the same as it handled the medical certifi-
cate issue? If not, what differences in argument can you identify? Are the differences
legitimate, in your opinion?

The final case for this chapter, Case 3-4, addresses an intriguing Fourth Amendment
question: Should evidence obtained by law enforcement officers flying over private
property be admissible as evidence in a criminal case? The Supreme Court tackles that
question in Case 3-4.

CASE 3-4
CALIFORNIA V. CIRAOLO
476 U.S. 207 (1986)

OPINION BY: BURGER On September 8, 1982, Officer Shutz obtained a

search warrant on the basis of an affidavit describ-
OPINION: CHIEF JUSTICE BURGER deliv- ing the anonymous tip and their observations; a
ered the opinion of the Court. photograph depicting respondent’s house, the back-
yard, and neighboring homes was attached to the
We granted certiorari to determine whether the affidavit as an exhibit. The warrant was executed
Fourth Amendment is violated by aerial observa- the next day and 73 plants were seized; it is not
tion without a warrant from an altitude of 1,000 disputed that these were marijuana.
feet of a fenced-in backyard within the curtilage
of a home. After the trial court denied respondent’s motion
to suppress the evidence of the search, respondent
I pleaded guilty to a charge of cultivation of mari-
juana. The California Court of Appeal reversed,
On September 2, 1982, Santa Clara Police received
however, on the ground that the warrantless aerial
an anonymous telephone tip that marijuana was
observation of respondent’s yard which led to the
growing in respondent’s backyard. Police were
issuance of the warrant violated the Fourth Amend-
unable to observe the contents of respondent’s yard
ment. [Citation.] That court held first that respon-
from ground level because of a 6-foot outer fence
dent’s backyard marijuana garden was within the
and a 10-foot inner fence completely enclosing the
“curtilage” of his home, under Oliver v. United
yard. Later that day, Officer Shutz, who was
States, 466 U.S. 170 (1984). The court emphasized
assigned to investigate, secured a private plane and
that the height and existence of the two fences con-
flew over respondent’s house at an altitude of
stituted “objective criteria from which we may con-
1,000 feet, within navigable airspace; he was
clude he manifested a reasonable expectation of
accompanied by Officer Rodriguez. Both officers
privacy by any standard.” [Citation.]
were trained in marijuana identification. From the
overflight, the officers readily identified marijuana Examining the particular method of surveillance
plants 8 feet to 10 feet in height growing in a 15- undertaken, the court then found it “significant”
by 25-foot plot in respondent’s yard; they pho- that the flyover “was not the result of a routine
tographed the area with a standard 35mm camera. patrol conducted for any other legitimate law
86 Fundamentals of Aviation Law

enforcement or public safety objective, but was agricultural pursuits. However, we need not address
undertaken for the specific purpose of observing that issue, for the State has not challenged the
this particular enclosure within [respondent’s] cur- finding of the California Court of Appeal that
tilage.” [Citation.] It held this focused observation respondent had such an expectation. It can reason-
was “a direct and unauthorized intrusion into the ably be assumed that the 10-foot fence was placed
sanctity of the home” which violated respondent’s to conceal the marijuana crop from at least street-
reasonable expectation of privacy. [Citation.] The level views. So far as the normal sidewalk traffic
California Supreme Court denied the State’s peti- was concerned, this fence served that purpose,
tion for review. because respondent “took normal precautions to
maintain his privacy.” [Citation.]
We granted the State’s petition for certiorari,
[Citation]. We reverse. Yet a 10-foot fence might not shield these plants
from the eyes of a citizen or a policeman perched
The State argues that respondent has “knowingly
on the top of a truck or a two-level bus. Whether
exposed” his backyard to aerial observation, because
respondent therefore manifested a subjective expec-
all that was seen was visible to the naked eye from
tation of privacy from all observations of his back-
any aircraft flying overhead. The State analogizes
yard, or whether instead he manifested merely a
its mode of observation to a knothole or opening in
hope that no one would observe his unlawful
a fence: if there is an opening, the police may look.
gardening pursuits, is not entirely clear in these
The California Court of Appeal, as we noted ear- circumstances. Respondent appears to challenge
lier, accepted the analysis that unlike the casual the authority of government to observe his activ-
observation of a private person flying overhead, ity from any vantage point or place if the viewing
this flight was focused specifically on a small sub- is motivated by a law enforcement purpose, and
urban yard, and was not the result of any routine not the result of a casual, accidental observation.
patrol overflight. Respondent contends he has
We turn, therefore, to the second inquiry under
done all that can reasonably be expected to tell the
Katz, i.e., whether that expectation is reasonable. In
world he wishes to maintain the privacy of his gar-
pursuing this inquiry, we must keep in mind that
den within the curtilage without covering his yard.
“[the] test of legitimacy is not whether the individ-
Such covering, he argues, would defeat its pur-
ual chooses to conceal assertedly ‘private’ activity,”
pose as an outside living area; he asserts he has
but instead “whether the government’s intrusion
not “knowingly” exposed himself to aerial views.
infringes upon the personal and societal values pro-
tected by the Fourth Amendment.” [Citation.]
II
The touchstone of Fourth Amendment analysis is Respondent argues that because his yard was in
whether a person has a “constitutionally protected the curtilage of his home, no governmental aerial
reasonable expectation of privacy.” Katz v. United observation is permissible under the Fourth Amend-
States, 389 U.S. 347, 360 (1967).… Katz posits a ment without a warrant. The history and genesis
two-part inquiry: first, has the individual mani- of the curtilage doctrine are instructive. “At com-
fested a subjective expectation of privacy in the mon law, the curtilage is the area to which
object of the challenged search? Second, is soci- extends the intimate activity associated with the
ety willing to recognize that expectation as rea- ‘sanctity of a man’s home and the privacies of
sonable? [Citation.] life.’” [Citations.] The protection afforded the
curtilage is essentially a protection of families
Clearly—and understandably—respondent has met and personal privacy in an area intimately linked
the test of manifesting his own subjective intent to the home, both physically and psychologically,
and desire to maintain privacy as to his unlawful
 Impact of Criminal Law on Airmen and Air Carriers 87

where privacy expectations are most heightened. Fourth Amendment should not be limited to
The claimed area here was immediately adjacent proscribing only physical intrusions onto pri-
to a suburban home, surrounded by high double vate property. [Citation.] But Justice Harlan’s
fences. This close nexus to the home would observations about future electronic develop-
appear to encompass this small area within the ments and the potential for electronic interfer-
curtilage. Accepting, as the State does, that this ence with private communications, see Katz,
yard and its crop fall within the curtilage, the supra, at 362, were plainly not aimed at simple
question remains whether naked-eye observation visual observations from a public place. Indeed,
of the curtilage by police from an aircraft law- since Katz the Court has required warrants for
fully operating at an altitude of 1,000 feet violates electronic surveillance aimed at intercepting pri-
an expectation of privacy that is reasonable. vate conversations. [Citation.]
That the area is within the curtilage does not itself Justice Harlan made it crystal clear that he was
bar all police observation. The Fourth Amendment resting on the reality that one who enters a tele-
protection of the home has never been extended to phone booth is entitled to assume that his conver-
require law enforcement officers to shield their eyes sation is not being intercepted. This does not
when passing by a home on public thoroughfares. translate readily into a rule of constitutional
Nor does the mere fact that an individual has taken dimensions that one who grows illicit drugs in his
measures to restrict some views of his activities backyard is “entitled to assume” his unlawful con-
preclude an officer’s observations from a public duct will not be observed by a passing aircraft—
vantage point where he has a right to be and which or by a power company repair mechanic on a pole
renders the activities clearly visible. [Citations.] overlooking the yard. As Justice Harlan empha-
“What a person knowingly exposes to the public, sized, “a man’s home is, for most purposes, a
even in his own home or office, is not a subject of place where he expects privacy, but objects, activ-
Fourth Amendment protection.” [Citation.] ities, or statements that he exposes to the ‘plain
view’ of outsiders are not ‘protected’ because no
The observations by Officers Shutz and Rodriguez
intention to keep them to himself has been exhib-
in this case took place within public navigable air-
ited. On the other hand, conversations in the open
space, [Citation], in a physically nonintrusive man-
would not be protected against being overheard,
ner; from this point they were able to observe plants
for the expectation of privacy under the circum-
readily discernible to the naked eye as marijuana.
stances would be unreasonable.” [Citation.]
That the observation from aircraft was directed at
identifying the plants and the officers were One can reasonably doubt that in 1967 Justice
trained to recognize marijuana is irrelevant. Such Harlan considered an aircraft within the category
observation is precisely what a judicial officer of future “electronic” developments that could
needs to provide a basis for a warrant. Any mem- stealthily intrude upon an individual’s privacy. In
ber of the public flying in this airspace who an age where private and commercial flight in the
glanced down could have seen everything that public airways is routine, it is unreasonable for
these officers observed. On this record, we read- respondent to expect that his marijuana plants
ily conclude that respondent’s expectation that his were constitutionally protected from being
garden was protected from such observation is observed with the naked eye from an altitude of
unreasonable and is not an expectation that soci- 1,000 feet. The Fourth Amendment simply does
ety is prepared to honor. not require the police traveling in the public air-
ways at this altitude to obtain a warrant in order
The dissent contends that the Court ignores Jus-
to observe what is visible to the naked eye.
tice Harlan’s warning in his concurrence in Katz
v. United States, 389 U.S., at 361–362, that the Reversed.
88 Fundamentals of Aviation Law

Do you agree or disagree with the Supreme Court’s determination in this case? If you
disagree, you are in good company. The Court was split in a 5-to-4 decision. Strong dis-
sents were published in this case, and you may wish to read the dissenting opinions to
get a comprehensive feeling for all the arguments presented in this very difficult case.

DISCUSSION CASES

1. Could increasing the threat of criminal penalties targeting aviation professionals and
businesses have a negative impact on aviation safety? Why or why not? Consider the
following issues as you consider the question.
(a) Will criminal penalties for certain types of violations create a stronger deterrent?
(b) How will potential criminal penalties impact the cooperation of airmen and avi-
ation businesses in safety investigations?
(c) Would it be appropriate for the government to emphasize the use of criminal
action only in highly publicized cases?

2. A captain and first officer for a National Airways flight were pushing back from the
gate at LaGuardia International when the flight was recalled to the gate. It turns out that
officials at a security checkpoint smelled alcohol on the pilots’ breath and immediately
filed a report with New York transit police. The police contacted the Transportation
Security Administration, and air traffic controllers recalled the flight. Upon disembark-
ing, the pilots were given a breathalyzer test. Both pilots failed the test with blood alco-
hol levels exceeding the FAR § 91.17 limit of 0.04 and the New York State criminal law
limit of 0.08. However, the pilots did not exceed the federal criminal standard of 0.10
that applies to transportation workers in the rail industry, airlines, water, and bus trans-
portation. The pilots were fired, and the FAA revoked their airman certificates. Later the
State of New York filed criminal charges for violation of New York’s law related to the
operation of an aircraft while under the influence of alcohol. The pilots filed a motion
to dismiss the New York criminal charges on the grounds that the New York criminal
statute is preempted by federal law in the area of pilot qualifications and ability to oper-
ate aircraft in interstate commerce. How would you decide on the motion to dismiss?
Explain.

3. Brandy is the pilot in command of a Maule when an aircraft crash causes the death
of his passenger. The State of Florida charges Brandy with murder (the charge is later
reduced to manslaughter before trial). Florida supports its efforts to convict Brandy of
manslaughter by citing witnesses’ statements that prior to the crash Brandy (1) was fly-
ing so close to the ground that he had to pull up to avoid palm trees and antennas and
(2) buzzed a crowded motel at an altitude of 40 or 50 feet. Brandy claimed that the acci-
dent was caused by a mechanical defect in the aircraft. Brandy’s claim regarding the
mechanical difficulty was later thrown out by the courts as being false. The Florida
statute in question defines manslaughter as an act demonstrating a “careless disregard of
safety and welfare of the public” involving “reckless indifference to the rights of others
which is equivalent to an intention of violation of [those rights].” Should Brandy be
convicted of manslaughter for the death of his passenger? Explain.
 Impact of Criminal Law on Airmen and Air Carriers 89

4. Karl, a German citizen, applies for a first-class medical certificate from the FAA in
preparation for his U.S. Airline Transport Pilot (ATP) certificate and a job interview
with a major airline. On the FAA medical application a question asks, “Have you ever …
been convicted of any offense involving drugs or alcohol?” More than 12 years ago,
Karl was convicted in Germany for driving while intoxicated. As a first-time offender,
he was fined and committed to a rehabilitation center for one month. Under German
law, Karl’s conviction for the charge of driving while intoxicated was expunged from
his criminal record, and he was no longer required to ever reference the conviction. Karl
decides that he does not need to report the German conviction on his medical applica-
tion. The FAA and U.S. District Attorney later learn about Karl’s prior conviction and
his failure to report it in his application for a medical certificate. Karl’s medical certifi-
cate is revoked by the FAA, and the U.S. District Attorney’s office charges Karl with a
violation of 18 U.S.C. § 1001, which makes it a crime to “knowingly and willfully …
make any materially false … representation.” Should Karl be convicted of making a
false statement under 18 U.S.C. § 1001? Why or why not?

5. Freddie is a used-aircraft distributor. To boost profits, he purchased used aircraft,

rolled back the Hobbs meter, and subsequently sold the aircraft to dealers and fixed
based operators (FBOs) for resale. The dealers and FBOs were not aware of Freddie’s
tampering with the aircraft engine Hobbs meters. The dealers, in turn, sold the aircraft
at inflated prices based on lower indicated hours for engine time. To complete the resale
of each aircraft, the dealer or FBO would submit, by mail, a bill of sale to the FAA in
Oklahoma City on behalf of the ultimate purchaser of the aircraft. The receipt of the bill
of sale was required for transferring title and obtaining aircraft registration from the
FAA. Law enforcement authorities became aware of Freddie’s fraud, and he was con-
victed on 15 counts of mail fraud. Freddie appealed and argued that the mailings that
were relied on for the indictment—the mailings to the FAA—were not in furtherance
of his fraudulent scheme. You are the appeals court judge drafting the decision for this
case. Is Freddie guilty of mail fraud? Why or why not?

ENDNOTES

1. 242 N.Y. 13, 15 N.E. 585 (1926).

2. See Betts v. Brady, 316 U.S. 455 (1942).
3. 37 U.S. 335 (1963).
4. 18 U.S.C. § 316(d)(1).
5. See Baldwin v. Alabama, 472 U.S. 372 (1985).
6. See United States v. Tamargo, 637 F. 2d 346 (5th Cir. 1981).
7. See NTSB Bar Association, Select Comm. On Aviation Public Policy, “Aviation
Professionals and the Threat of Criminal Liability—How Do We Maximize Aviation
Safety?” 67 J. Air L. & Com 3 (Summer 2002).
8. 271 F. 3d 1018 (11th Cir. 2001).
9. 49 U.S.C. § 46306.
10. 49 U.S.C. § 46313.
11. 46 U.S.C. § 46307.
12. 46 U.S.C. § 46316.
This page intentionally left blank
4 Tort Liability and Air Commerce

INTENTIONAL TORTS 93
Intentional torts against persons 93
Intentional torts against property 95
NEGLIGENCE 97
Elements of negligence 97
Defenses to negligence 102
WRONGFUL DEATH 104
STRICT PRODUCT LIABILITY 104
Elements 104
Defenses to strict product liability 105
CASES AND COMMENTARY 108
DISCUSSION CASES 114
ENDNOTES 116

91

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92 Fundamentals of Aviation Law

As you learned in Chap. 3, criminal law involves wrongs committed against society that
must be redressed by the wrongdoers. Tort law takes a different perspective and allows
individuals redress for wrongs committed that caused them damage. Unlike criminal
cases in which the plaintiff is the government, in tort cases the plaintiff (or complainant)
is typically an individual or a business. Another important distinction between criminal
and tort law is the type of redress sought. In criminal cases, the typical redress may be
incarceration or fines paid to the government. In tort cases, the remedy sought is most
often monetary damages. Sometimes the monetary damages are intended to compen-
sate the injured party for any harm done (e.g., medical expenses, lost wages, property
damage). In certain situations the monetary damages are also designed to punish the
wrongdoer and set an example to prevent future bad acts. This type of monetary award
is often referred to as punitive damages.

From an evidentiary standpoint, perhaps the most critical difference between criminal
and tort cases is the burden of proof placed on the plaintiff or complainant. In a crimi-
nal case, the government must prove its case beyond a reasonable doubt. In tort cases,
the plaintiff has a lesser burden of proof. The plaintiff in a tort case must meet the bur-
den of proving her case by a preponderance of the evidence. This standard of proof for
tort cases requires that a plaintiff prove that it is more likely than not that the wrong was
committed.

Many times criminal law and tort law overlap, and the same act can be subject to
both criminal and tort law actions. One very public case in recent history was the
O. J. Simpson murder case. Note that in that case, Simpson was acquitted of criminal
charges where the burden of proof required proof beyond a reasonable doubt. However,
in a subsequent tort case brought by the victims’ families, Simpson was found to be liable
for the deaths of the victims under the lesser standard of proof requiring a preponder-
ance of evidence. He was consequently ordered by the courts to pay civil damages to
the victims’ families.

As a general matter, tort law has the following objectives:

• To compensate persons who are injured by another’s misconduct
• To require those who caused harm to pay for the injuries
• To prevent future injury

It is fair to generalize that the elements of a tort include the following: (1) there is a breach
of a duty that one person owes to another, (2) the breach is the proximate cause of injury,
and (3) there is injury or damage to a person with an interest that is legally protected.

Tort law has a pervasive effect on the aviation industry. Aviation has evolved into a
very safe activity. However, when accidents occur, the potential for significant damages
is high.

In this chapter, we will focus attention on tort law issues that directly affect aviation
commerce and the aviation industry as a whole. Specifically, we will address the
following topics:
 Tort Liability and Air Commerce 93

• Intentional torts
• Negligence
• Wrongful death
• Strict product liability

Toward the end of the chapter, you will review selected cases that address tort law in the
aviation environment. Commentary following some of the cases addresses efforts at tort
reform in the aviation industry. Note that throughout this chapter, there will be various
references to the Restatement of Torts. Because the body of tort law is primarily driven
by case or common law, the sources of tort law are as scattered and diverse as courts
throughout the United States. The American Law Institute (an organization consisting
of legal scholars, judges, and lawyers) has developed a summary of sorts that discusses
and dissects the prevailing current law of torts. For the purposes of this discussion, we
will refer to the most current Restatement of Torts as the Restatement.

INTENTIONAL TORTS

The first category of torts we will review is intentional torts. Intentional torts are torts in
which the wrongdoer intends to do harm. Within this category of torts, first we will study
intentional torts against persons. Next we will review intentional torts against property.

The law attempts to protect all persons from uninvited and unauthorized touching or Intentional
contact (including restraint). Within the context of aviation, we will take a look at five torts against
possible intentional torts against persons: persons
• Assault
• Battery
• False imprisonment
• Intentional infliction of emotional distress
• Defamation

Each of these torts must be established by proving that certain “elements” were present
at the time the alleged wrong was committed. A review and a brief explanation of the
elements for intentional torts against persons are found below:

Assault
The elements of assault are relatively straightforward. A person has been assaulted if he
has been subject to (1) the threat of immediate harm or offensive contact or (2) any threat
or action that causes him to be reasonably fearful or apprehensive of imminent harm.

Notice that there is no requirement for physical contact with assault. Also, the threat of
future harm does not rise to the level of assault.

For example, if a passenger checking in for a flight has an altercation with an airline
ticketing agent over the weight or size of baggage, there is no assault if the passenger
94 Fundamentals of Aviation Law

threatens the agent by stating that “you should watch over your shoulder in the future—
because I may be there....” However, if the agent is a 5-foot, 105-pound woman and the
passenger is a 6-foot 5-inch, 250-pound man menacing her with a closed fist, there is
likely an assault. Conversely, if the ticketing agent is a 6-foot 5-inch, 250-pound man
and a frail 85-year-old woman passenger is threatening him with a closed fist, there may
not be an assault because it could be found that he would not be reasonably apprehensive
of imminent harm.

Battery
Battery occurs when a person intentionally makes unauthorized and harmful or offen-
sive contact with another. Quite commonly, battery will be found when someone inten-
tionally strikes another with a fist or an object. A battery can also occur when someone
injures another by throwing a rock or firing a gun that causes the other to be struck by
the rock or bullet.

Interestingly, for battery to exist, the victim does not need to be aware of the harmful
or offensive contact. For instance, an airline passenger can be found guilty of battery if
he or she intentionally and offensively touches a fellow passenger who is sleeping.

Assault and battery often occur at the same time. However, that is not always the case.
For instance, an aircraft passenger can intentionally hit another passenger on the back
of the head. The victim in this case was not assaulted because she or he did not “see it
coming.” Nonetheless, a battery occurred.

Another interesting facet of battery is the doctrine of transferred intent. Suppose Sam
and Dave are airline passengers engaged in a dispute and Sam throws a cup full of water
and ice at Dave. If Dave ducks and the water and ice strike Betty, Sam’s intent to strike
Dave is transferred to Betty and a battery has occurred against Betty.

False imprisonment
False imprisonment involves the intentional confinement or restraint of another person
without authority or justification and without that person’s consent. The confinement or
restraint created by this tort can be achieved through physical barriers, threats of harm,
physical force, or any other means that would reasonably lead someone to believe he or
she had been confined.

If a flight school manager confines a student to a training room and contacts law enforce-
ment authorities because of a suspicion that the student is a terrorist, the flight school (and
manager) may be subject to damages for false imprisonment if it turns out the school had
no justification to believe that the student was a terrorist. If the student stayed, but could
have walked out to the parking lot via a clearly marked back door, he or she would not be
as likely to succeed on a claim of false imprisonment—unless the student reasonably
believed his or her safety would be threatened if he or she exited the back door.

Intentional infliction of emotional distress

This tort requires (1) extreme and outrageous conduct that (2) is intended to cause
severe emotional distress and (3) causes such severe distress.1 In some jurisdictions, the
 Tort Liability and Air Commerce 95

severe emotional distress must be physically manifest (e.g., headaches, ulcers). In other
jurisdictions, shame, humiliation, and similar conditions are sufficient damages to jus-
tify a finding of intentional infliction of emotional distress.

A finding of intentional infliction of emotional distress does not require any physical
contact with the defendant. It is also important to note that the use of foul or rude lan-
guage will typically not be sufficient to establish this tort.

Intentional infliction of emotional distress has often been associated with debt collec-
tion agencies using “over the top” methods to collect bills. Telephone calls in the mid-
dle of the night and threats against jobs or the jobs of relatives are all techniques that
have been found to constitute intentional infliction of emotional distress.

Defamation
If someone tries to harm another’s reputation by stating falsehoods in either written or
verbal form, that person may be liable for defamation. Defamation in writing is known
as libel. Verbal defamation is known as slander.2

In a defamation case, a plaintiff must prove (1) that a defamatory statement regarding
the plaintiff (2) was untrue and (3) was communicated to others by the defendant, and
(4) that the untrue statements caused harm to the plaintiff.3

Merely noting an opinion or an idea about another is not defamation. For instance, a
person might say, “I hate flying right seat with Captain Smith, he’s such a jerk.” However,
if that same person made a false statement to airline management that Captain Smith
reported to duty with alcohol on his breath, and this false statement caused Captain Smith
to be disciplined or discharged, then an action for defamation would likely have merit.

There are several defenses to defamation. However, truth is considered to be a com-

plete defense. Therefore, regardless of the purpose or intent of the person who makes a
defamatory statement, if the statement is true, the person has not committed the tort of
defamation.

In the context of aviation law, there are several torts that involve intentional wrongs Intentional
against the property of others. We will take a closer look at the following intentional torts against
torts in the discussion below: property
• Trespass to land
• Trespass to personal property
• Conversion of personal property

Trespass to land
A landowner has the exclusive legal right to title, possession, and use of his or her property.
If another person enters or uses the land without authorization, a tort has been committed.

Trespass to land requires (1) some affirmative action by the defendant, (2) with intention
to enter the real property of another that (3) results in the actual entry to the property.4
96 Fundamentals of Aviation Law

For instance, Eddie is flying over some farm fields when he begins to experience low oil
pressure in his Cessna Cardinal. He spots a wheat field below and decides to make an
emergency landing at the field. When he lands in the wheat field, he has committed tres-
pass on that farmer’s property. First, he made the affirmative decision to land on the wheat
field (as opposed to being in a car that is bumped off the road by a truck and winds up in
the wheat field). Second, Eddie intended to land in the field (it is important to remember
in this regard that Eddie does not have to demonstrate any hostile intent or intent to do
harm). Third, Eddie’s decision resulted in the actual entry of the farmer’s property.

Although a trespass to land might have occurred, there are often no real damages if no
property has been found to be injured. In Eddie’s case, if he lands and no damage is
done, he may have trespassed, but the farmer will be unable to collect damages because
there was no physical harm done to the land.

With respect to aircraft, it is noteworthy that a trespass to real property can be committed
on, above, or below the surface of the land. However, the law generally regards the
altitudes at which aircraft operate above minimum prescribed altitudes for safe flight as
being public areas. Therefore, no trespass can be committed by an aircraft operator
unless her aircraft enters the airspace below minimum prescribed altitudes and inter-
feres with the landowner’s right to the enjoyment and use of his property.

Trespass to personal property

Personal property or “chattel” (as it is sometimes referred to by lawyers) is property other
than real property. In the world of aviation, most personal property, such as aircraft and
associated equipment, is both tangible and movable, thus making the property susceptible
to trespass in the form of intentional dispossession or unauthorized use by others.

Liability for trespass to personal property occurs when a person: 5

• Dispossesses another of her or his property
• Substantially impairs the condition, quality, or value of that property
• Deprives the possessor of property of its use for a substantial time
• Causes harm to the possessor or to some person or thing in which the possessor has
a legally protected interest

Notice that any one of the conditions stated above will suffice for a finding of trespass
to personal property. For instance, suppose Amanda flies her Cessna Cardinal to Joy City
Airport and parks the airplane at a tie-down location after making arrangements with
Lyon FBO. Amanda leaves the airport. Later that day, another aircraft owner, Billy, has
Amanda’s plane towed to a different parking spot on the other side of the field because
Billy typically uses the tie-down location that Amanda had taken. When Amanda returns
late that evening, she subsequently looks for her airplane but cannot locate it for several
hours. Billy is liable to Amanda for trespass to his personal property.

Conversion of personal property

Conversion occurs when a party (1) intentionally exercises dominion or control (2) over
another’s personal property (3) such that it substantially interferes with the other’s right
 Tort Liability and Air Commerce 97

of control over the personal property and (4) requires payment of the full value of the
property.6 Based on this interpretation of conversion, all conversions are trespasses, but
not all trespasses rise to the level of conversion.

As indicated above, conversion can occur if someone either destroys another’s property
or uses it without authorization. For instance, if Jimmy leaves his aircraft with Sam’s
FBO for storage in a hangar, and Sam uses the aircraft for 250 hours of flight time while
Jimmy is away, Sam is liable to Jimmy for conversion. Further, if Sam intentionally
destroys or damages the aircraft by scavenging parts while Jimmy is away, he is also
liable to Jimmy for conversion.

NEGLIGENCE

Generally speaking, negligence is an unintentional tort involving carelessness that causes

harm. The tort of negligence allows persons to have their interests in safety and eco-
nomic security protected from the carelessness of others. This also means that each of
us has a duty to conduct ourselves in a responsible manner that reflects a concern for
others and their interests. As professionals in the aviation environment, you should be
particularly sensitive to the fact that lives and expensive equipment are at risk. This sec-
tion of our chapter on torts will provide an overview of (1) the elements of negligence
and (2) legal defenses against negligence.

The following elements are required for a plaintiff to establish the tort of negligence: 7 Elements
1. The defendant owes a duty of care to the plaintiff. of negligence
2. The defendant breaches this duty.
3. The defendant’s breach is the proximate cause of the plaintiff’s injury.
4. The plaintiff suffers injury that is protected under the law.

Note that all four of these criteria must be met for a defendant to be held liable for neg-
ligence. A review of each of these elements follows.

Duty of care
It is sometimes difficult to assess whether a person has a legal duty of care in any given
situation. Most courts and legal scholars tend to indicate that the duty of care can be
interpreted as a duty that is owed to every person who can be reasonably foreseen to
be potentially harmed by that carelessness. For instance, an aircraft pilot would clearly
be expected to foresee that her negligence could cause harm to her passengers and
persons and/or property on the ground below the aircraft’s path of flight. However, how
far does this duty extend? Could the pilot be reasonably expected to foresee that her air-
craft crash could cause an automobile accident 2 miles from the aircraft crash scene
because a speeding ambulance runs a red light on the way to respond to the crash site?

One case illustrating the issue of duty of care involves the tragic collision of two
Boeing 747 aircraft in the Canary Islands. In Burke v. Pan World Airways, Inc.,8 the
plaintiff sued Pan World Airways for damages she claimed resulted from the crash in
98 Fundamentals of Aviation Law

the Canary Islands. The interesting twist in this case is that the defendant was in
California at the time of the crash. However, her identical twin sister was killed onboard
one of the aircraft destroyed in the collision. Burke claimed that at the instant the acci-
dent occurred, she felt as though she were “split in two.” In support of her claim, Burke
was prepared to present evidence that there is a certain “extrasensory empathy”
between certain sets of identical twins. The court dismissed her claim, indicating that
even if Burke could establish such a phenomenon as extrasensory empathy existed, it
was too unusual a theory to allow the court to determine that the defendant had any kind
of reasonably foreseeable duty to the plaintiff.

Breach of duty
If a duty to the plaintiff is established, the next element that must be established in a
negligence case is the element of breach. The plaintiff must convince a court that the
defendant breached a duty owed to the plaintiff.

The test developed by the courts to tackle this question has been dubbed the reasonable
person test. This test asks whether a defendant failed to exercise the same care as a rea-
sonable person under similar circumstances would have exercised. Just how a reason-
able person would react in various circumstances is literally impossible to pin down.
Suffice it to say that juries have significant latitude to apply this standard as they deem
fit on a case-by-case basis.

Although there is no way to pin down exactly when a duty to others has been breached,
certain guidelines have evolved in case law. A review of the reasonable person test
reveals that the following factors are typically considered in determining whether a rea-
sonable person would have conducted himself or herself in a certain manner:
• Surrounding circumstances
• Violations of a statute or regulation (negligence per se)
• Special skills or knowledge

Each of these considerations is briefly discussed below.

Surrounding circumstances In determining whether a defendant acted as a reason-

able person, the courts will typically be required to consider the facts and surrounding
circumstances. In the context of aviation, it might ordinarily be considered negligent to
land your aircraft and run off the paved surface, damaging other aircraft tied down at an
adjacent ramp. However, if the cause of the problem was a defective nosewheel steer-
ing mechanism that made it impossible for you to maintain directional control, you
might not be found to have been negligent.

Violations of a statute or regulation (negligence per se) Sometimes minimum stan-

dards of conduct for the reasonable person can be established by statute or regulation.9
If a court finds that an applicable statute or regulation was violated by a defendant, it
will likely find that the defendant’s conduct was negligence per se. In effect, the doc-
trine of negligence per se creates an inference that a violation of the law indicates a lack
of reasonable care.
 Tort Liability and Air Commerce 99

For instance, a safety regulation requires an aircraft paint shop to operate a certain num-
ber of exhaust fans per square foot of floor space. If the shop fails to comply with the
regulation and an employee sues for damages caused by the inhalation of paint fumes,
the shop (in most jurisdictions) will be found negligent by virtue of the negligence per
se doctrine.

Note that the fact that the shop might have met the requirements of the regulations
regarding exhaust fans does not mean the shop will not be found negligent. The stan-
dards that are set by statute or regulation are typically looked upon as minimum stan-
dards, and they do not preclude a finding that a reasonable person would have exercised
greater caution than required by statute or regulation under the circumstances.

Special skills or knowledge A person who has special training or skills may be held to
a higher standard of conduct than the reasonable person. Physicians, lawyers, certified
public accountants, airline pilots, plumbers, electricians, and other licensed or skilled
professionals are expected to perform their duties to the standards of their profession.

In the aviation environment, pilots, aircraft maintenance professionals, and air traffic
controllers are held to very high standards of conduct. Almost every task in aviation is
subject to one regulation or another. Adherence to the standards is necessary for regu-
latory compliance and to avoid civil liability.

Res ipsa loquitur Sometimes, the mere occurrence of an accident or event that causes
personal injury or property damage is enough to create a presumption that a duty has
been breached. This legal doctrine is known as res ipsa loquitur, which means “the
thing speaks for itself.”

The Restatements indicate the following with respect to this doctrine: 10

1. It may be inferred that the harm suffered by the plaintiff is caused by the negligence of
the defendant when:
a. the event is a kind which ordinarily does not occur in the absence of negligence;
b. other responsible causes, including the conduct of the plaintiff and third persons,
are sufficiently eliminated by the evidence; and
c. the negligence indicated is within the scope of the defendant’s duty to the plaintiff.

This doctrine would apply if a person were injured in an air terminal owing to falling
pieces of ceiling tile. If there were no other cause that could reasonably explain the
falling ceiling tile (and the defendant were permitted to introduce such evidence), a
court could infer that the airport authority was negligent in allowing the condition to
exist. As you might imagine, res ipsa loquitur is frequently invoked in aircraft accidents
where the defendant is unable to cite weather or other reasonable causes to explain a
crash. Since aircraft do not routinely just fall from the sky, the only explanation barring
weather or mechanical malfunctions is often pilot error or negligence.

Proximate cause
If the plaintiff can prove that the defendant owed her a duty and the duty was breached, the
next element that must be established is proximate cause. In its simplest interpretation, this
100 Fundamentals of Aviation Law

element requires that a plaintiff prove that the defendant’s breach of duty was the direct
cause of the plaintiff’s injury. However, because the courts have faced infinite varieties of
facts and circumstances in centuries of building a body of law in this area, the tests that are
used to establish proximate cause are a bit more complex.

There is general agreement that two tests must be met to establish proximate cause. The
two tests are as follows:
1. Was the defendant’s negligence the cause in fact or the actual cause of the plaintiff’s
injury?
2. Was the harm done to the plaintiff reasonably foreseeable by the defendant?

Each of these tests is discussed below.

Causation in fact The causation in fact or actual cause test asks if the defendant’s
carelessness caused the plaintiff’s injury. Courts often apply a rule known as the but for
rule to test for causation in fact. The but for rule inquires as to whether an event would
have happened but for a defendant’s negligent conduct. In applying this rule, a defendant’s
breach of duty would not be deemed negligence if the harm caused to the plaintiff would
have happened anyway.

For example, an airframe and powerplant (A&P) mechanic is careless and fails to prop-
erly install a new autopilot in Jack’s aircraft. The installation is signed off and approved
in the logbook. Jack takes his aircraft on a cross-country flight and encounters instru-
ment meteorological conditions. Jack is instrument-rated so he is able to press on with
his flight. If Jack activates the defective autopilot for an approach and the autopilot fail-
ure leads to an accident, the A&P mechanic is likely to be liable for any damage or
injury if it is determined that but for the failure of the autopilot, Jack’s aircraft would
not have crashed. On the other hand, if Jack never activated the defective autopilot,
manually flew the approach, and the aircraft crashed, there would not be any liability
attributable to the A&P mechanic because the harm to Jack would have occurred
regardless of the A&P mechanic’s defective autopilot installation.

Foreseeability The test of foreseeability asks whether the harm done by a defendant’s
breach of duty could have reasonably been foreseen by the defendant. This question
has caused vexing problems to the courts. This test can often be broken down into the
following two parts:
• Were the consequences of the defendant’s actions foreseeable?
• Was there any superseding cause to the plaintiff’s injury?

Each of these inquiries is discussed below.

Foreseeable consequences In 1928, one of the most well-known tort cases addressed
the issue of foreseeable consequences. In Palsgraf v. Long Island Railroad.11 the New
York Court of Appeals (New York’s highest court) heard a case involving employees
of the Long Island Railroad who negligently pushed a passenger who was attempting
to board a train. After being pushed, the passenger dropped a package that contained
 Tort Liability and Air Commerce 101

fireworks. The fireworks subsequently exploded under the wheels of the train, and the
shock waves from the explosion knocked over a scale at the far end of the train station,
injuring the plaintiff, Mrs. Palsgraf. The New York Court of Appeals found that the defen-
dant railroad owed a duty to the passenger and that the subsequent harm done to the
passenger’s person and property was a foreseeable breach of the railroad’s duty of care.
However, the court stopped short there. It further ruled that the injury to Mrs. Palsgraf
due to the falling scale was unforeseeable, and therefore the railroad’s negligence was not
the proximate cause of Mrs. Palsgraf’s injury. Therefore, the railroad was not liable to
Mrs. Palsgraf. The test employed in this case was whether Mrs. Palsgraf was within the
reasonably foreseeable zone of danger. The court ruled that she was not.

To illustrate this issue, let’s look at the following example. Sam is flying a Cessna P-210
from Denver to Colorado Springs. The flight is made largely in instrument conditions, and
Sam is instrument-rated and current. Sam makes a navigational error resulting from the
erroneous input of a Global Positioning Systems (GPS) coordinate. Regrettably, this
causes Sam to fly into the side of a mountain, and he is killed. The aircraft ignites and can
be seen from a small town below. The local fire department is dispatched to go to the acci-
dent and put out the fire due to drought conditions and the fear of a massive forest fire.
Forty minutes later, on the way up the mountainous roads, a fire truck inadvertently runs
a passenger car off the road, and the driver of the car, Joe, is killed in the ensuing crash.
Joe’s widow brings an action against Sam’s estate, claiming that it was Sam’s negligence
that caused Joe’s death. In this case it is most likely that Sam’s estate will prevail. It is
hard to imagine the courts determining that at the time of the crash Joe was within a rea-
sonably foreseeable zone of danger. However, this is the sort of subjective inquiry that is
undertaken in determining whether someone is within the requisite zone of danger. Like
so much in the law, making a proper determination is often more art than science.

Superseding cause Another possible issue in determining proximate cause is whether

a superseding cause relieves the defendant of liability. An intervening cause is a hap-
pening or event that occurs after the defendant’s negligent conduct and that, when
combined with the defendant’s breach of duty, causes harm to the plaintiff. A mere
intervening cause is not enough to relieve a defendant of liability for negligence.
However, a superseding cause is an intervening cause that is not a normal consequence
of the defendant’s negligence.

For instance, an airport fails to properly mark an excavation site that it is digging to lay
new sewer lines across the airfield for a terminal area on the opposite side. Late one
night, a small general aviation aircraft suffers a propeller strike when it runs into
unmarked excavated hole. While the low visibility at night may have been an interven-
ing cause, it would be hard to argue that such an accident could be considered unfore-
seeable. Therefore, this would not qualify as a superseding cause.

However, if Pete and Dave, the airport line workers, were horsing around near the
excavation site and Dave purposely threw Pete into the excavated hole, injuring Pete, it
is possible that a court would rule that Dave’s action was not foreseeable and, therefore,
a superseding cause. Therefore, the airport would not be liable to Pete for its failure to
mark the excavation site.
102 Fundamentals of Aviation Law

Figure 4-1 Was defendant’s

Determining action the cause
proximate cause. in fact? No

No proximate
Yes cause

No
Was the harm
foreseeable?

Yes

Proximate cause

See Fig. 4-1 for a flowchart describing the analysis required to determine probable
cause.

Injury
The final element that must be established for a finding of negligence is injury. The court
will not find negligence unless it is proved that a legally protected interest of the plaintiff
has been harmed. This is relatively easy to establish if someone has suffered serious phys-
ical injuries as a result of an airplane accident caused by negligence. However, the issue
of injury might become a bit more difficult to sort out if someone were harmed by an
offensive touching or accident, but not physically. Typically, recovery of damages in neg-
ligence cases is allowed for injury to person or property damage. Recovery of damages
that are not manifest physically has not traditionally been embraced by the courts.

Nonetheless, there has been an evolving willingness by the courts to allow damages for
negligently inflicted emotional distress. Courts are now willing to find injury when a
person suffers bodily harm from emotional distress caused by another’s negligence.12
An example of this situation would be a person who suffered a heart attack during an
aircraft crash caused by the defendant pilot’s negligence, even if the crash did no direct
physical harm to the plaintiff.

Still, in most courts, there is no award of damages when the sole injury is emotional dis-
tress.13 Recently, some courts have allowed damages for negligently inflicted emotional
distress with no finding of physical harm to the plaintiff. To recover under this theory,
these courts often require that the plaintiff have witnessed injury to a close relative that
was caused by the negligence of another.

Defenses Even if a plaintiff is able to successfully establish all the elements of negligence, he or she
to negligence may still be stymied if the defendant is able to counter with one of the recognized defenses
to negligence. The three most likely defenses used by defendants in negligence cases are
 Tort Liability and Air Commerce 103

• Contributory negligence
• Comparative negligence
• Assumption of risk

Each of these defenses is examined below.

Contributory negligence
Contributory negligence exists when a plaintiff is found to have contributed to her or
his own injury. Contributory negligence has been defined as “conduct on the part of the
plaintiff which falls below the standard to which he should conform for his own pro-
tection, and which is a legally contributing cause co-operating with the negligence of
the defendant in bringing about the plaintiff’s harm.” 14 Interestingly, in the states that
recognize contributory negligence as a valid defense (and the number of these states
continues to shrink), any level of contributory negligence, whether large or small, is
enough to prevent a plaintiff from recovering any damages from the defendant. To illus-
trate the defense of contributory negligence, let’s use the following example.

Ralph’s Airpark is a small, private, public use airport in a rural, wooded area. Ralph has
been making improvements to the airport’s taxiway and ramp, using his backhoe.
Toward the end of the day, as night approaches, Ralph shuts down the backhoe and
leaves it at the intersection of a taxiway and ramp. He does nothing to mark the pres-
ence of the backhoe, believing that it is unlikely that anyone will be using the airport
that evening. A bit after nightfall, Anna, an experienced airline transport pilot (ATP)
with extensive knowledge of the airport and its ramps and taxiways, lands at Ralph’s
Airpark and immediately turns off on the same taxiway where Ralph’s backhoe was left
standing. Anna is so comfortable with the airport layout that she just follows the lights
of the nearby houses and tie-down area and decides to forgo the use of her taxi lights.
Anna runs into the darkness-hidden backhoe, causing substantial damage to her aircraft.
Anna sues Ralph for negligence in leaving the backhoe at the intersection of the ramp
and taxiway with no marking. If the court finds that Anna was negligent in failing to
utilize her taxi lights, she will not be able to recover damages against Ralph for negli-
gence because her negligence contributed to the accident.

Comparative negligence
Because of the “all or nothing” harshness that comes with a contributory negligence
approach, many states have opted for a comparative negligence defense. This approach
is sometimes referred to as comparative fault or comparative responsibility depending
on the state in which it is adopted.

States that have adopted a pure comparative negligence approach allocate damages
according to a determination of the percentage of blame or fault of each party. In Anna’s
case, if the court determined that Ralph was 60 percent negligent and Anna was 40 percent
negligent, the court would award Anna 60 percent of the damages Anna sustained.

However, in a state that takes a modified comparative negligence approach, the plaintiff
can recover based on a comparison of fault. However, if it is shown that the plaintiff was
104 Fundamentals of Aviation Law

“more” negligent than the defendant, the plaintiff cannot recover. To apply this to the
example above, if the court finds that Anna was 60 percent negligent for failing to turn
on her taxi lights, she will not recover any damages from Ralph.

Assumption of risk
Restatement § 496A indicates that person who knowingly and voluntarily assumes the
risk of the negligent or reckless harm from another person may be barred from later
making a claim of damages due to a defendant’s negligent conduct. Typically, a poten-
tial plaintiff might agree to such an assumption of risk in a contract. These types of
agreements are explored in greater detail in Chap. 6.

Not too long ago, the law also used to recognize a theory of implied assumption of risk.
Under this theory, a person could impliedly assume the risk of harm by engaging in cer-
tain conduct. For instance, a person might be deemed to have voluntarily assumed the
risk of injury or harm by taking a sightseeing flight in a hot air balloon. However, in
recent years, this theory of implied assumption of risk has been abandoned.

WRONGFUL DEATH

You will often hear of wrongful death actions in the context of aviation accidents.
A wrongful death action gives close relatives of a deceased the legal authority to sue any
person who may have wrongfully caused the death. Under old common law, someone
could be held liable for intentionally or negligently causing injury to another. However,
someone could escape tort liability if he or she killed another person. To remedy this
anomaly, most states have passed wrongful death statutes. These statutes allow for a
cause of action when a wrongdoer commits a tort (intentionally or negligently) that
causes another person’s death.

STRICT PRODUCT LIABILITY

The theory of damage recovery based on strict product liability has had a profound
impact on the aviation industry. A review of the basics follows.

Elements Restatement § 402A lays out strict product liability theory. Section 402A states as
follows:

1. One who sells any product in a defective condition unreasonably dangerous to the user
or consumer or to his property is subject to liability for physical harm thereby caused
to the ultimate user or consumer, or to his property, if (a) the seller is engaged in the
business of selling such a product, and (b) it is expected to and does reach the user or
consumer without substantial change in the condition in which it is sold.
2. The rule stated in Subsection (1) applies although (a) the seller has exercised all possi-
ble care in the preparation and sale of his product, and (b) the user or consumer has not
bought the product from or entered into any contractual relation with the seller.
 Tort Liability and Air Commerce 105

Notice that the liability attaches to a seller or manufacturer even though the seller or man-
ufacturer has exercised all possible care in the preparation and sale of the product and even
though the seller may not have any relationship with the consumer who ultimately pur-
chases the goods. As indicated, the term strict in strict product liability is very fitting—
even though a manufacturer makes and sells goods with all due care, that manufacturer can
be found strictly liable in tort if the product it sold contains a fault or defect that harms a
buyer. Therefore, a plaintiff need not show negligence on the part of the manufacturer. The
mere fact that the product was defective and caused injury is sufficient to allow for a claim.

The doctrine of strict liability demonstrates how the law can evolve with the times. Up
until modern times, the familiar caveat was “let the buyer beware.” In contrast, many
have argued that with the emergence of the strict liability doctrine, the new caveat is “let
the seller beware.”

The philosophy behind this change appears to reflect a desire to shift the burden of
injuries from products to the makers or manufacturers of the products. For better or for
worse, the thinking is that a manufacturer is in the best position to ensure the safety of
products and to absorb the costs of harm to consumers. Therefore, the manufacturer
should be ultimately responsible for harm caused by its products.

To better understand the law of strict product liability, we can break down Restatement
§ 402A into four elements. Each of these elements must be established to successfully
pursue a product liability claim.
1. Defendant must be a merchant. The term merchant as used in this context means
someone who regularly deals in goods of the kind in question. Traditionally, this
requirement for strict liability has applied only to sellers of newly manufactured
goods. However, in some states, the concept has expanded to include merchants selling
used goods.
2. Product is defective at the time it is sold by the defendant. This element requires only
that the plaintiff prove that the product was defective. There is no need to establish
why the product is defective. The defect could have been caused during manufacturing
or during design—it makes no difference in the ultimate determination of liability.
However, it is important that the defect be present at the time the product was sold
by defendant.
3. Product is unreasonably dangerous. As a general rule, a product is deemed to be
unreasonably dangerous if it causes a danger that is beyond what an ordinary purchaser
would contemplate.
4. Plaintiff suffers personal injury or property damage caused by the defective property.
The plaintiff’s injuries or property damage must result from the use of the defective
property. It must also be established that the plaintiff’s injuries were proximately
caused by the defective product.

There is no question that it is very difficult for a defendant to establish a defense that Defenses to
will create an obstacle to recovery for a plaintiff in a strict product liability case. The strict product
following discussion outlines some possible obstacles that a defendant may place liability
before a plaintiff in a strict product liability case.
106 Fundamentals of Aviation Law

Plaintiff misconduct
The first line of defenses that might be raised relate to the plaintiff’s conduct. These
defenses are as follows:
• Product misuse
• Assumption of risk
• Contributory negligence
• Comparative negligence

Product misuse Misuse of a product is a defense available to a defendant if it is

established that the plaintiff knew or should have known that she or he was using the
product for an inappropriate purpose. For instance, it would clearly be a misuse of an
aircraft to tow heavy equipment on the ground. If the aircraft caused property damage
because it tipped forward or backward during such an operation, the manufacturer
could raise the defense that the product was being misused by the plaintiff—an aircraft
is designed and manufactured to transport persons or property in flight, not to tow
heavy equipment on the ground.

Assumption of risk The law attempts to protect a manufacturer when a user volun-
tarily makes use of the goods in an inappropriate manner. To establish this defense, the
defendant must show all three of the following:
• The plaintiff knew and appreciated the risk created by his or her inappropriate use of
the product (this is a distinguishing feature from product misuse in which the plain-
tiff might know that he or she is misusing the product but does not appreciate the
risk).
• The plaintiff voluntarily engaged in the risky use of the product, knowing the risk.
• The plaintiff’s actions/decisions were unreasonable based on the facts and circum-
stances.

An example of assumption of risk would be the use of normal category aircraft for
aerobatic or spin training with knowledge (and notice from the manufacturer) that the
aircraft was not certificated for such use.

Contributory negligence As discussed above, contributory negligence is a defense

against a plaintiff in a case of ordinary negligence. The defense may be established if
the plaintiff’s negligent conduct causes, in whole, or in part, his or her injuries. While
this defense may be used in certain jurisdictions to defend against ordinary negligence,
it cannot be used in the case of strict product liability.

Comparative negligence Comparative negligence is an available defense in a strict

liability case. The comparative negligence defense works in precisely the same manner
as it would for a negligence case: A comparison of plaintiff and defendant fault is meas-
ured by the court, and the percentage of fault attributed to each party sets the amount of
damages to be allocated in the case. Pure comparative negligence permits recovery up to
the amount of fault assessed against the defendant—however small that percentage of
 Tort Liability and Air Commerce 107

culpability may be. On the other hand, modified comparative negligence permits a
successful defense only if the defendant can prove that the plaintiff is responsible for
50 percent or more of the damages incurred.

Notices and disclaimers

An action in strict liability in tort is not subject to the laws of contract.15 Therefore,
notices or disclaimers regarding the potential hazards involved in a product will not
always absolve the maker from liability. Nonetheless, some courts will permit notices
and/or disclaimers as a defense if the parties involved have roughly equal bargaining
powers.

Privity
Typically, to establish privity, a person would be able to pursue an action based on prod-
uct liability only if he or she used or purchased a product. However, under the doctrine
of strict product liability, even an injured third-party bystander can recover.

Therefore, if a bystander is harmed when an aircraft makes a forced landing due to a

defective fuel pump, the bystander has the ability to successfully sue the aircraft man-
ufacturer and/or fuel pump manufacturer. The only limit to this “bystander” liability is
foreseeability.

There is also no need for a connection between the buyer and seller of a defective product.
Again, common law generally required that before you could sue someone because of
damages caused by a defective product, you had to have purchased the defective goods
from the seller. With strict product liability, the injured party can sue any seller whether
the seller is a retailer, wholesaler, or manufacturer. The maker or seller of a defective
part can also be held liable as long as the part was incorporated into the whole without
alteration.

For example, if an altimeter manufacturer sells a defective altimeter to an aircraft man-

ufacturer, a pilot injured in a crash due to the defective altimeter will have a right to sue
both the altimeter manufacturer and the aircraft manufacturer.

Statute of repose
One of the problems faced by manufacturers is the seemingly infinite period of time
that they might be exposed to liability for a product. For instance, a manufacturer of an
aircraft propeller may have manufactured it to state-of-the-art standards 30 years ago.
However, over many years, the propeller may prove defective. Just how long should a
manufacturer be on the hook for strict product liability? In certain instances, states have
legislated limitations on the period of time for which a manufacturer can be held liable
for a defective product. The statute of repose in place for aviation manufacturers is
discussed more fully below in conjunction with Case 4-2.

Limits on punitive damages

Punitive damages are damages that are meant to punish the wrongdoer in a tort lawsuit.
In recent years, many states have attempted to limit punitive damage awards. To do this,
states have used several of the following approaches:
108 Fundamentals of Aviation Law

• Placing caps on damage awards

• Specifying ratios that apportion compensation damages with punitive damages
(this avoids a finding of very small compensatory damages with very large punitive
damages)
• Permitting states to take a portion or a “cut” of punitive damages (this dissuades
plaintiffs from seeking large punitive awards)
• Requiring separate hearings to establish liability and then to determine damages
• Increasing the burden of proof from preponderance of the evidence (more likely than
not) to “clear and convincing” evidence

All these methods are being employed in the spirit of what is being touted in most
states as tort reform. The reforms have been deemed necessary by some in industry to
reduce high liability insurance and malpractice insurance premiums. Of course, the
aviation industry is not immune to these pressures. See the cases below for a discus-
sion of this issue.

CASES AND COMMENTARY

Case 4-1 tackles the issue of strict liability. As you read the case, think about the defi-
nition of strict product liability.

CASE 4-1
BROCKELSBY V. UNITED STATES OF AMERICA AND JEPPESEN
767 F.2d 1288 (1985)

OPINION BY: BEEZER I. BACKGROUND

On September 8, 1973, an aircraft owned by World
Barbara Brocklesby, Nancy Evans, Frank Evans, Airways crashed into a mountain near Cold Bay,
Katherine Evans, Norma Chapman, and World Air- Alaska, killing all six crew members and destroy-
ways, Inc. (collectively “the plaintiffs”) brought this ing the aircraft and its contents. World Airways and
action against the United States of America (“the the survivors of the deceased crew members
Government”) and Jeppesen and Company (“Jeppe- brought separate actions against the Government
sen”), seeking damages for wrongful deaths and and Jeppesen, alleging, inter alia, that the accident
property damage arising from an airplane crash was caused by defects in an instrument approach
near Cold Bay, Alaska. In a bifurcated trial, the procedure developed by the Government and pub-
jury returned a verdict against Jeppesen. Before the lished by Jeppesen. The actions were consolidated
district court disposed of claims against the Govern- for trial.
ment, the Government settled with the plaintiffs. An
order dismissing the Government was entered. The Federal Aviation Administration (“FAA”)
Jeppesen appeals from the jury verdict and seeks designs and publishes standard instrument appro-
indemnification from the Government. We affirm. ach procedures. See 14 C.F.R. Pt. 97. The FAA’s
 Tort Liability and Air Commerce 109

instrument approach procedures are essentially such as directional heading, distances, minimum
compilations of data, which are set forth in tabular altitudes, turns, radio frequencies and procedures
form. Jeppesen uses the FAA’s data to portray the to be followed if an approach is missed. The spec-
instrument approach procedures in graphic form. ifications prescribed are set forth by the FAA in
One of Jeppesen’s charts depicts the instrument tabular form. Jeppesen acquires this FAA form
approach procedure to the Cold Bay, Alaska airport. and portrays the information therein on a graphic
On the flight at issue in this case, World Airways’ approach chart. This is Jeppesen’s “product.”
pilot was using that chart.
[Citation.] (“Though a ‘product’ may not include
The…district court entered a final judgment for mere provision of architectural design plans or any
$12,785,580.81 in favor of the plaintiffs and against similar form of data supplied under individually-
Jeppesen. tailored service arrangements,…the mass produc-
tion and marketing of these charts requires Jeppesen
II. ANALYSIS to bear the costs of accidents that are proximately
[B]. Liability caused by defects in the charts”) (applying Colorado
The case was submitted to the jury on three theo- law). We agree with the plaintiffs’ position that
ries of liability: strict liability, breach of warranty, Jeppesen’s chart was a defective product for pur-
and negligence. The jury returned a general ver- poses of analysis under section 402A.
dict against Jeppesen. Accordingly, the judgment
b. Liability for Defects in the Government’s
must be reversed if any of the three theories is
Procedure
legally defective. [Citations]. Jeppesen argues
This case is distinguishable from [citations.]
(1) that this case does not involve a defective
because the Jeppesen chart involved in this case
“product” for purposes of strict liability, (2) that
accurately portrayed the instrument approach pro-
the defects in the Government’s instrument
cedure provided by the Government. All of the
approach procedure will not support a finding
defects in the Jeppesen chart stem from the Govern-
of strict liability against Jeppesen, (3) that the
ment’s alleged failure to establish a safe instrument
evidence produced at trial does not establish
approach procedure. The district court instructed
negligence, and (4) that various policy considera-
the jury as follows:
tions bar any tort liability in this case.
Now, the fact that Jeppesen’s instrument approach
1. Strict Products Liability charts are based on information which is supplied by
a. The Existence of a “Product” the F.A.A. and which Jeppesen cannot deviate from or
Jeppesen argues that the Government’s instrument modify does not relieve Jeppesen from liability if a
approach procedure is not a “product” within the defect in the Jeppesen chart was a proximate cause of
meaning of Restatement (Second) of Torts § 402A the accident. The manufacturer of a product is strictly
(1965). While that may be true, it misses the point. liable for defects in that product even though the
The issue is whether Jeppesen’s chart is a product, defect can be traced to a component part supplied by
not whether the instrument approach procedure is another. Thus if you find that Jeppesen’s instrument
a product. In [citation], we analyzed the problem approach chart is defective and that the defect was a
as follows: proximate cause of the accident, you must find
Jeppesen liable even if the defect exists only because
Jeppesen approach charts depict graphically the you find that the F.A.A. designed an approach proce-
instrument approach procedure for the particular dure that you find is itself defective. The issue is: was
airport as that procedure has been promulgated by the Jeppesen chart defective?
the Federal Aviation Administration (FAA) after The validity of that instruction presents a case of
testing and administrative approval. The proce- first impression.
dure includes all pertinent aspects of the approach
110 Fundamentals of Aviation Law

Jeppesen contends that strict liability is inappro- The concept of fault has persisted in substantive
priate because the Government’s procedure was products liability law primarily in determining
beyond its control. In essence, Jeppesen is arguing whether a defective product is “unreasonably
that it should not be held strictly liable because it dangerous.” [Citation.] We note that the California
is without fault in this case. It is beyond doubt that courts have sought to purge the concept of fault
the concept of fault continues to have a role in from strict liability law by focusing on the exis-
strict liability law. [Citation.] Nevertheless, Jeppe- tence of a defect, rather than inquiring whether
sen’s position is untenable. the product is unreasonably dangerous. [Citations.]
To the extent that Jeppesen’s product was defec-
Initially, we note that Jeppesen had at least
tive, the case law does not support an attempt to
some ability to prevent injuries to users of its
relieve Jeppesen of liability on the ground that the
charts. Jeppesen’s production specifications manual
defect was not Jeppesen’s fault. Comment c to
required its employees to research any procedure
section 402A of the Restatement (Second) of
thoroughly “to determine its validity and complete-
Torts states the policies underlying strict products
ness.” Jeppesen’s president, Wayne Rosenkrans,
liability as follows:
testified that this requirement applied to the con-
struction and composition of charts such as the one The justification for strict liability has been said to
involved in this case. Jeppesen’s manual requires its be that the seller, by marketing his product for use
employees to contact official sources to resolve and consumption, has undertaken and assumed a
apparent discrepancies in information. Jeppesen special responsibility toward any member of the
maintained an office in Washington, D.C. with liai- consuming public who may be injured by it; that the
public has the right to and does expect, in the case
son to the FAA. Rosenkrans testified that Jeppesen’s
of products which it needs and for which it is forced
actions had led to changes in Government proce- to rely upon the seller, that reputable sellers will
dures. Accordingly, Jeppesen had both the ability stand behind their goods; that public policy
to detect an error and a mechanism for seeking demands that the burden of accidental injuries
corrections. Under these circumstances, we reject caused by products intended for consumption be
Jeppesen’s argument that the Government’s proce- placed upon those who market them, and be treated
dure was completely beyond Jeppesen’s control. as a cost of production against which liability insur-
ance can be obtained; and that the consumer of such
More fundamentally, however, existing products products is entitled to the maximum of protection at
liability law is contrary to Jeppesen’s position. the hands of someone, and the proper person to
Assuming that the Government’s instrument afford it are those who market the product.
approach procedure was defective, the literal
requirements of section 402A are met. Jeppesen’s [Citation.] All of those policies apply to the plain-
chart was a “product in a defective condition tiffs’ claim in this case. To the extent that Jeppesen
unreasonably dangerous to the user” within the is held liable for the Government’s misfeasance,
meaning of section 402A(1). Section 402A(2)(a) Jeppesen had a right to seek tort law indemnifica-
provides that strict liability is appropriate even tion. The fact that Jeppesen failed to seek tort law
though “the seller has exercised all possible care indemnification has no bearing on the plaintiffs’
in the preparation and sale of his product.” A substantive rights.
seller is strictly liable for injuries caused by a c. Sufficiency of the Evidence
defective product even though the defect originated Jeppesen contends that the evidence presented at
from a component part manufactured by another trial did not prove that the chart was defective.
party. [Citations.] Accordingly, the appropriate The plaintiffs produced evidence regarding sev-
focus of inquiry is not whether Jeppesen caused eral alleged defects. One of the alleged defects
the product to be defective, but whether the prod- was the absence of a transition arc. Jeppesen’s
uct was in fact defective. [Citation.]
 Tort Liability and Air Commerce 111

only response to that allegation is that it had no miss the point. The negligence theory was submitted
power to alter the Government’s procedure. As to the jury on a “duty to test/duty to warn” theory,
noted above, that is not a valid defense. Accord- rather than on a “duty to control the Government”
ingly, we conclude that the plaintiffs introduced theory. Jeppesen can be held liable for negli-
sufficient evidence to support a finding that the gently failing to detect the defect in the product
chart was defective. that it marketed. If it had discovered the defect,
Jeppesen would have been required either to warn
2. Negligence the users of the chart or to refrain from selling the
Jeppesen contends that it cannot be held liable for product.
negligence on the facts presented at trial. The dis-
trict court instructed the jury as follows: 3. Public Policy Defenses
Jeppesen argues that it is unfair to hold a chart
Now, one who supplies a product, either directly manufacturer strictly liable for accurately repub-
or through a third person, for another to use, lishing a government regulation. We agree. If, for
which the supplier knows or has reason to know example, a trade journal had accurately published
is dangerous or is likely to be dangerous for the the government’s instrument approach procedure
use for which it is supplied, has a duty to use rea- in text form and a pilot had used the procedure as
sonable care to give warning of the dangerous printed in the journal, the journal would be immune
condition of the product or of facts which make it from strict liability. This case, however, does not
likely to be dangerous to those whom he should present that situation. Jeppesen’s charts are more
expect to use the product or be endangered by its than just a republication of the text of the govern-
probable use if the supplier has reason to believe ment’s procedures. Jeppesen converts a govern-
that they will not realize its dangerous condition. ment procedure from text into graphic form and
A failure to fulfill that duty is negligence. This represents that the chart contains all necessary
rule applies to a producer of a product. information. For example, Jeppesen’s catalog con-
The producer of a product that is reasonably cer- tains the following statements:
tain to be dangerous if negligently made, has a When pilots compare approach plates…for infor-
duty to exercise reasonable care in the design, mation, for readability…they choose Jeppesen.
production, testing and inspection of the product Why? Because the format of Jeppesen charts was
and in the testing and inspection of any compo- designed by pilots, for pilots, and has been time-tested
nent parts made by another so that the product and proven by instrument pilots throughout the
may be safely used in a manner and for a purpose world. Every necessary detail is clearly indicated.…
for which it was made. Jeppesen approach plates include…EVERYTHING
you need for a smooth transition from en route to
A failure to fulfill that duty is negligence. approach segment of your flight.
The district court’s instructions correctly stated the It is true that the government’s procedures are
law. In light of Jeppesen’s internal operating proce- significant components of Jeppesen’s charts. It is
dures, which required testing for completeness, apparent, however, that Jeppesen’s charts are
and its failure to detect the defects in the instrument more than a mere republication of the govern-
approach procedure, the jury could reasonably have ment’s procedures. Indeed, Jeppesen’s charts are
found that Jeppesen was negligent in failing to distinct products. As the manufacturer and mar-
warn users of the latent defects in the chart. keter of those products, Jeppesen assumed the
responsibility for insuring that the charts are not
Jeppesen argues that it had no ability to change
unreasonably dangerous in their intended use.
the procedure and that it had no duty to control
the actions of the Government. Both arguments The judgment of the district court is AFFIRMED.
112 Fundamentals of Aviation Law

Do you think the court properly applied strict product liability in this case? Do you
think the results are just? Is strict liability an appropriate legal tool to spread the risk of
defective products? What suggestions would you make to improve the tort system in the
United States?

In response to calls for tort reform, in 1994 the United States passed the General
Aviation Revitalization Act (otherwise known as GARA). GARA established a statute
of repose that barred all lawsuits against aircraft manufacturers that involved any gen-
eral aviation aircraft or component part that is more than 18 years old. Case 4-2 was one
of the first cases in which a manufacturer invoked the GARA statute of repose.

CASE 4-2
ALTSEIMER V. BELL
919 F. Supp. 340 (1996)

OPINION BY: WILLIAM B. SHUBB craft manufacturers arising out of the crash of an
aircraft more that 18 years old, and (2) the
Before the court is defendant Bell Helicopter destruction and rebuild of the “Bell” helicopter,
Textron’s motion for summary judgment on all on at least two occasions by unrelated entities,
the claims in plaintiffs’ complaint. terminated any liability of Bell as manufacturer
of the accident aircraft.
BACKGROUND
On May 23, 1995, plaintiffs John Altseimer, STANDARD OF REVIEW
Horizon Helicopters, Dennis Westerberg, and Summary judgment is appropriate if the record,
Sloane Westerberg filed this action for personal read in the light most favorable to the non-moving
injuries, property damage, and economic losses party, demonstrates no genuine issue of material
allegedly arising out of a helicopter accident. Bell fact. [Citation.] Material facts are those necessary to
Helicopter Textron Inc. (“Bell”) is the only named the proof or defense of a claim, and are determined
defendant. The complaint alleges that Bell by reference to the substantive law. [Citation.]
designed, manufactured, assembled, tested, fabri- At the summary judgment stage the question before
cated, produced, sold, or otherwise placed in the the court is whether there are genuine issues for
stream of commerce a defective helicopter and a trial. The court does not weigh evidence or assess
defective 42 degree gearbox, one of the component credibility.
parts of the helicopter. The complaint further
alleges that Bell failed to provide proper warnings DISCUSSION
with respect to the negligent and defective design The General Aviation Revitalization Act of
of the helicopter and the 42 degree gearbox. 1994, Pub.L. 103-298, 108 Stat. 1552 (49 U.S.C.
Bell argues that it is entitled to summary judg- § 40101 Note) (1994) (“GARA”) is a statute of
ment on the grounds that (1) the General Aviation repose which prohibits all lawsuits against aircraft
Revitalization Act prohibits lawsuits against air- manufacturers arising out of accidents involving
 Tort Liability and Air Commerce 113

any general aviation aircraft or component part were more than 18 years old at the time of the
that is more than 18 years old. Section 2(a) of crash. [Reference to record.] Bell has also pro-
GARA, which sets forth the legislation’s basic duced undisputed evidence that the pinion gear, a
limitation on civil actions, provides: component of the gear box, and purportedly the
cause of the crash, was more than 18 years old at
(a) Except as provided in subsection (b) no civil
the time of the crash. [Reference to record.].
action for damages for death or injury to persons
Therefore, GARA effectively preempts plaintiffs’
or damage to property arising out of an accident
action. Although harsh, such a result is consistent
involving a general aviation aircraft may be brought
with the purpose of GARA to: establish a Federal
against the manufacturer of the aircraft or the
statute of repose to protect general aviation manu-
manufacturer of any new component, system, sub-
facturers from long-term liability in those instances
assembly, or other part of the aircraft, in its capacity
where a particular aircraft has been in operation for
as a manufacturer if the accident occurred —
a considerable number of years. A statute of repose
(1) After the applicable limitation period beginning
is a legal recognition that, after an extended period
on —
of time, a product has demonstrated its safety
(A) The date of delivery of the aircraft to its
and quality, and that it is not reasonable to hold a
first purchaser or lessee, if delivered directly
manufacturer legally responsible for an accident
from the manufacturer; or
or injury occurring after that much time has
(B) The date of first delivery of the aircraft to a elapsed. [Citation.]
person engaged in the business of selling
Plaintiffs argue that GARA should not be applied
or leasing such aircraft; or
to this action because their claims accrued prior to
(2) With respect to any new component, system, the enactment of GARA. This contention is with-
subassembly, or other part which replaced another out merit. GARA was enacted on August 17,
component, system, subassembly, or other part 1994, and plaintiffs did not file their complaint
originally in, or which was added to, the aircraft, until May 23, 1995. Section 4 of GARA expressly
and which is alleged to have caused such death, states that “this act shall not apply with respect to
injury, or damage, after the applicable limitation civil actions commenced before the date of the
period beginning on the date of completion of the enactment of this act.” Both Federal and state law
replacement or addition. provide that a civil action “is commenced by fil-
ing a complaint with the court.” [Citation.]. Since,
49 U.S.C. § 40101, Note Section 2(a)(1)-(2).
plaintiffs’ complaint was filed after the enactment
Section 3 defines the “limitation period” as 18 years,
of GARA, their claims are unambiguously sub-
and section 2(d) provides that GARA supersedes
jected to GARA’s preemptive provisions. Accord-
any State law which permits civil actions such as
ingly, Bell is entitled to summary judgment.
those described in subsection (a) brought after the
applicable 18 year limitation period. IT IS THEREFORE ORDERED that Bell’s motion
for summary judgment be, and the same is, hereby
Bell has provided undisputed evidence that the
GRANTED.
helicopter and 42 degree gearbox in question
114 Fundamentals of Aviation Law

Notice that in this case, the accident occurred before GARA became law. However, the
court noted that the law itself expressly indicates that any claims filed prior to the enact-
ment of GARA on August 17, 1994, could not be prohibited by GARA. The court also
noted that Section 4 of GARA clearly indicated that GARA was applicable to any
claims filed after August 17, 1994, and this action was filed on May 23, 1995.

In more recent years, GARA has been challenged on constitutional grounds. In one
recent case,16 a plaintiff filed a lawsuit against Cessna Aircraft Company, Teledyne
Continental Motors (engine manufacturer), and Lear Romec (fuel pump manufacturer).
The lawsuit arose out of a 1995 fatal accident involving a Cessna 421B aircraft in which
the plaintiff’s husband died. The plaintiff alleged various defects including fuel pump
failure and inadequate single-engine performance. However, the aircraft in question
was 22 years old, and the fuel pump was 26 years old. Nonetheless, the plaintiff argued
that GARA was unconstitutional, citing the following four arguments:
1. GARA is not a constitutional exercise of Congress’ authority under the commerce
clause of the U.S. Constitution.
2. GARA offends the Tenth Amendment by foreclosing a plaintiff’s ability to pursue a
case under state law.
3. The equal protection clause of the U.S. Constitution is violated by GARA because
it would deprive her of a case against a manufacturer but would not deprive a
claimant when commercial aircraft were involved.
4. GARA violates the due process clause of the U.S. Constitution by depriving the
plaintiff of her claim against a general aviation aircraft or part manufacturer.

The court ultimately rejected all four of the arguments above. Do you agree with the
court’s rejection of the plaintiff’s constitutional challenges to GARA? Review the
basics of constitutional law as you consider the arguments.

GARA has now been in place since 1994. Do you think this type of statute of repose is
good for the aviation industry? Why or why not? If you had the authority, would you
repeal GARA, leave it as is, or strengthen the statute of repose?

DISCUSSION CASES

1. The ace of the Base Flight School, nicknamed “Ace,” purchases five Acme fire
detectors to place in its flight simulator area. The detectors are designed to be powered
by alternating current (ac). Four months after purchase of the fire detectors, a fire breaks
out in the flight simulator training area. All four of Ace’s full-motion simulators are
destroyed, and Ace has no insurance for the equipment. The fire detectors did not send an
alarm signal when the fire began because the fire was started by a short circuit in one of
the flight simulators. The fire detectors were connected to the circuit that had shorted out
and that cut off the ac power. Ace sued Acme on the theory that Acme had a duty to warn
Ace that the same electrical malfunction that could start a fire in the flight simulator train-
ing area might also disable the fire detectors. Will Ace’s theory prevail? Discuss.
 Tort Liability and Air Commerce 115

2. McGoo is a crop duster who became confused while flying over similar-looking
farm fields. She flew over Pete’s land and sprayed chemicals that killed Pete’s crop.
McGoo believed that she was spraying the land she had been hired to spray, which was
across the street from Pete’s land. Pete sues McGoo for trespass. Is Pete’s claim likely
to prevail? Why or why not?

3. Nina closes the deal on a new XR2 aircraft. After getting the requisite simulator
training at the factory, she does a thorough preflight inspection of her new aircraft and
departs for her home airport. Approximately halfway through the flight, Nina felt a
burning sensation coming from her right arm. She shook her arm and a spider fell to the
ground. Nina made it back to her home base safely, but her arm grew redder and the
pain got worse. Nina was eventually incapacitated, and it took her 40 days in the hos-
pital to recover. According to Nina’s physician, her injury was caused by the bite of a
brown recluse spider. Nina seeks to sue the XR2 manufacturer on a theory of negligence
and/or strict product liability. Will she succeed in her lawsuit? Why or why not?

4. Late in the evening, a Beech Baron 58P aircraft piloted by Paul crashed shortly
after takeoff from Manassas Airport in Virginia, killing Paul, the sole occupant of the
aircraft. The Beech Baron 58P is a six-passenger, twin-engine aircraft designed and
manufactured by Beech Aircraft. Paul purchased the aircraft from its original owner
1 year earlier. On the evening of the fatal crash, the aircraft was on its first flight fol-
lowing the repair and reinstallation of the actuator trim tabs by a mechanic at Manassas
Airport. National Transportation Safety Board (NTSB) investigators determined that
the trim tab actuators (an essential component of the aircraft’s flight control systems)
had been reversed, thus causing the crash. Paul’s widow files a lawsuit against Beech
Aircraft on a theory of wrongful death. The lawsuit is based, in part, on grounds of neg-
ligent design. Evidence during the trial of the case established that the mechanic who
did the work on the trim tab actuators failed to follow FAA-mandated compliance with
Beech manuals and his training. Paul’s widow argued that the trim tab actuators could
and should have been designed to prevent the possibility that they could be reversed.
Who will prevail in this case? Why?

5. Stan was injured while attempting to take off from the Middle Town Airport in a
Piper Super Cub model PA-18-150. The plane was towing a glider that was attached by
a tow rope to the tail of the Super Cub. Stan is a cinematographer, and he was planning
to film the glider’s flight for a television commercial. Prior to the flight, Stan had an
FAA-certified mechanic remove the front seat and install a camera that would be used
to film the commercial. Stan planned to pilot the Super Cub from the rear seat (which
was approved by the Piper Cub manual). A few days before the commercial was to be
filmed, the owner of Middle Town Airport learned of the plans for the flight. He closed
the airport specifically to prevent the flight. When the airport owner noticed activity at
the airport, he parked in van in the runway to prevent takeoffs and landings. A bit later,
Stan attempted to take off, and he struck the airport owner’s van. Stan’s head struck the
camera mounted at the front of the aircraft, and he suffered serious head and brain
injuries. Stan’s family brought an action against Piper Aircraft Company, the manufac-
turer of the Super Cub. The family argued that Piper negligently designed the aircraft
without adequate forward vision from the rear seat of the aircraft and negligently failed
116 Fundamentals of Aviation Law

to provide for a rear-seat shoulder harness. What arguments would you make if you
were representing Piper? Will those arguments prevail?

6. Dean owns an aircraft paint shop. Dean sends one of his employees, Ricardo, into
an industrial tank to clean and inspect the tank. Ricardo (with Dean’s knowledge) does
not wear the protective gear required by regulation, and he is overcome by the gas. He
becomes incoherent and hallucinates. Ricardo is transported to a nearby emergency
room where Paula, a nurse, is assigned to his case. While in a state of delirium, Dean
strikes Paula, causing her serious injury. Paula sues Dean, charging him with negligence
in failing to properly ensure that Ricardo followed required safety procedures when he
entered the tank. Will Paula recover? Explain.

7. Collinge takes out a loan on an aircraft from Barracuda Bank. Collinge defaults on
the loan, and Barracuda has been unsuccessfully pursuing Collinge for the money
owed. Barracuda makes a bogus call to Collinge’s mother, Stephanie, telling Stephanie
that her grandson (Collinge’s son) had been injured and that they needed Collinge’s
address. When it was learned that the call was falsely made, Stephanie sued Barracuda
on a claim of intentional infliction of emotional distress. Will Stephanie prevail? Why
or why not?

8. Landy was the pilot in command and sole occupant of a Cessna 210 on a return trip
from a business meeting. Landy was a bit tired, and his approach and landing were
made in bad weather with lots of rain and high winds. While focusing on weather and
communications, Landy did not fasten his shoulder harness during the approach to
landing. The aircraft landed normally, but during the landing rollout one of the land-
ing gears experienced a mechanical failure and was sheared off the aircraft. Landy
was tossed violently to one side of the aircraft, and he suffered serious injuries. Landy
sues Cessna because of the defective landing gear. Will Landy succeed? Discuss the
issues presented.

9. National Aircraft Finance Bank sent two of its employees to repossess Charlie’s
aircraft owing to Charlie’s failure to repay his aircraft loan. The two repossessors had a
tow bar attached to a tug, and their plan was to tow the aircraft to a secured hangar on
the airport. When they arrived at the airport, they spotted the aircraft arriving. After
Charlie exited the airplane, the repossessors approached the aircraft with the tug and
tow bar. Charlie was concerned and got back into his aircraft. The repossessors request-
ed that Charlie exit the aircraft. However, Charlie refused to leave the aircraft. The
repossessors continued their work and towed the aircraft about 350 feet to a hangar.
Charlie finally exited the aircraft, but later sued National Aircraft Finance Bank for
false imprisonment. Will Charlie prevail? Why or why not?

ENDNOTES
1. Restatement (Second) of Torts, § 46.
2. Id. at §§ 568 and 568A.
3. Id. at § 558.
 Tort Liability and Air Commerce 117

4. Id. at §1158.
5. Id. at § 218.
6. Id. at § 222A.
7. Id. at § 282.
8. 484 F. Supp. 850 (S.D.N.Y. 1980).
9. Restatement (Second) of Torts, § 285.
10. Id. at § 328D.
11. 162 N.E. 99 (N.Y. 1928).
12. Restatement (Second) of Torts, § 436.
13. Id. at § 436A.
14. Id. at § 463.
15. See comments to Restatement Section 402 A.
16. Hinkle v. Cessna Aircraft Co., et al., 2004 Mich. App. LEXIS 2894, 2004 WL 2413768
(Mich. App. Oct. 28, 2004).
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5 Administrative Agencies and Aviation

ADMINISTRATIVE AGENCIES 121

Department of Transportation 122
Federal Aviation Administration 122
National Transportation Safety Board 123
FUNCTIONS OF ADMINISTRATIVE AGENCIES 123
Rulemaking 124
Enforcement 126
Adjudication 131
Special considerations in FAA matters 133
CHECKS ON ADMINISTRATIVE AGENCIES 138
Oversight by traditional branches of government 138
Equal Access to Justice Act 140
Freedom of Information Act 141
Privacy Act 141
Sunshine Act 142
CASES AND COMMENTARY 142
DISCUSSION CASES 153
ENDNOTES 156

119

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120 Fundamentals of Aviation Law

Administrative agencies play an increasingly growing role in the modern world.

Administrative law is public law created by government agencies that takes the form of
rules, regulations, orders, and opinions. Among all the activities regulated by govern-
ment, aviation is arguably the most profoundly impacted by agency regulation.

In the aviation environment, the administrative agencies having the most direct impact on
aviation professionals and the aviation industry are the Federal Aviation Administration
(FAA), Department of Transportation (DOT), and the National Transportation Safety
Board (NTSB). Other agencies affecting the legal environment of aviation include the
National Mediation Board (NMB), Securities and Exchange Commission (SEC), Federal
Trade Commission (FTC), Environmental Protection Agency (EPA), and the Department
of Labor (DOL).

The increasingly complex nature of our nation’s economic and social order has only
served to increase the importance of administrative agencies in the United States. In the
1952 case of FTC v. Ruberoid Co., Justice Jackson observes:

The rise of administrative bodies probably has been the most significant legal trend of the
last century and perhaps more values today are affected by their decisions than by those of
all the courts.… They also have begun to have important consequences on personal
rights.… They have become a veritable fourth branch of the Government which has
deranged our three-branch legal theories as much as the concept of a fourth dimension
unsettles our three-dimensional thinking.1

Beyond the impact of federal agencies, there are also myriad state agencies that impact
our daily lives and aviation in particular. State agencies operate airports, provide for
workers’ compensation benefit rules, regulate pollution control, and oversee the taxa-
tion of income and transfers of property.

If you think about it, hardly a move can be made in the world of aviation that is not
impacted by one of the many federal and state agencies that make up the “fourth
branch” of government cited by Justice Jackson in the Ruberoid case. An airline pilot’s
every move in the cockpit is regulated in one way or another by the FAA. Her employer’s
routes and economic approval for certification as an air carrier are approved by the
DOT. Every paycheck received by the airline pilot is impacted by the Internal Revenue
Service (IRS), state and local taxing authorities, and the Social Security Administration.
Safety features installed on her aircraft have likely been the result of recommendations
from the NTSB. The relationship between the pilot, her union, and her employer is gov-
erned by the rules of the DOL and the National Labor Relations Board (NLRB). Her
employer’s financial statements and ability to solicit credit and shareholder contribu-
tions to equity are carefully regulated by the SEC.

There are numerous reasons cited for the emergence of administrative agencies in the
United States. However, two reasons tend to be cited most often. The first is the change
in the attitude of government toward regulation of business. In the early years of the U.S.
history, a more “hands off” approach toward government regulation existed. The pre-
vailing belief was that commerce would thrive as long as government kept its distance
and let the marketplace create its own equilibrium. However, abuses of child labor,
 Administrative Agencies and Aviation 121

the emergence of monopolies, and unchecked environmental damage by industry

caused a rethinking of the hands-off approach. Citizens and their elected leaders started
to believe that there might be a place for at least limited government intervention to pro-
tect workers, the environment, and basic levels of competition.

A second reason that is often cited for the emergence of administrative agencies is the
inability of traditional government bodies (executives, courts, and legislatures) to deal
with the sophisticated problems spawned by new technology and economic complexity.
It is not realistic to expect that ordinary legislators and courts can deal with specialized
problems in constantly evolving industries such as aviation, telecommunications, and
taxation. To regulate these types of activities, traditional government bodies needed to
turn to specialized agencies that employed skilled personnel with the ability to under-
stand and develop regulations for targeted industries and activities.

It is important to note that some of the agencies that will be reviewed are part of the
executive branch and others are independent of the executive branch. The DOT and
FAA are part of the executive branch. The President appoints the head of these agen-
cies and has direct control over the way the agencies are operated. On the other hand,
the NTSB is an independent agency. Although the President nominates members of the
NTSB, the board members do not answer to the President.

This chapter will focus on the ways that administrative agencies impact the world of
aviation. First we will focus on how administrative agencies are created and function.
Later we will take an overview of some of the protections built into our legal system to
ensure that administrative agencies function as intended. Finally, we will take a look at
some aviation-related cases and materials related to administrative law.

ADMINISTRATIVE AGENCIES

As discussed above, one of the primary functions of administrative agencies is to relieve leg-
islators of the seemingly impossible burden of developing laws that will address all the nec-
essary details of particular industries or issues. For example, this allows legislators to pass a
law that promotes safety in air transportation without having to address the necessary steps
to achieving such safety. Instead, lawmakers can put in place an enabling statute that creates
an administrative agency (e.g., the FAA) that will be responsible for tending to the details and
promulgating necessary rules for aviation safety. Of course, this also means that the law-
makers must delegate the authority to enact and enforce any necessary rules.

The separate agencies created by an enabling statute can then be staffed by persons with
specialized skills and expertise in the industry or environment to be regulated. With this
in-house specialization, the agency can devote the necessary time and resources to keep
abreast of changes in its field of regulation.

The three agencies that impact aviation activities most directly are the DOT, FAA, and
NTSB. Let’s turn to a brief overview of the history and laws creating each of these
agencies, starting with the DOT.
122 Fundamentals of Aviation Law

Department of The Department of Transportation was formed when President Lyndon Johnson signed the
Transportation DOT Act on October 15, 1966. The purpose of the DOT is articulated in 49 U.S.C. §§ 101(a)
and (b). That law states that “… development of transportation policies and programs …” is
necessary to meet national “… objectives of general welfare, economic growth and stability,
and security of the United States.…” The law further specifies that the policies and programs
of the DOT should contribute to “… providing fast, safe, efficient, and convenient trans-
portation at the lowest cost consistent with those and other national objectives, including the
efficient use and conservation of the resources of the United States.”

The head of the DOT is the Secretary of Transportation. The secretary is a member of the
President’s Cabinet and reports directly to the President. The DOT houses several large
agencies including the Federal Highway Administration, Federal Motor Carrier Safety
Administration, Federal Railway Administration, Federal Transit Administration, Maritime
Administration, National Highway Traffic Safety Administration, and the FAA.

An overview of the FAA follows.

Federal The official birth of aviation regulation in the United States came on May 20, 1926,
Aviation with the passage of the Air Commerce Act of 1926. By 1926 the handwriting was on
Administration the wall—commercial aviation was likely to become a major force in national com-
merce. Under the Air Commerce Act of 1926, the oversight of aviation activities
through air traffic rules, airman certification, certification of aircraft, and maintenance
of air navigation aids was placed within the purview of the Department of Commerce.
The branch within the Department of Commerce that was charged with oversight of avi-
ation was named the Aeronautics Branch.

By 1934, commercial aviation was beginning to play a significant role in the economy
of the nation. To reflect its elevated status within the Department of Commerce, the
Aeronautics Branch was renamed as the Bureau of Air Commerce. This ushered in a
new era of air traffic control and a viable air traffic control system.

The Civil Aeronautics Act of 1938 mandated the transfer of civil aviation responsibili-
ties from the Commerce Department to a newly formed independent agency, the Civil
Aeronautics Authority. This legislation also opened the door to government regulation
of airfares and routes for air carriers.

The Civil Aeronautics Authority was split into two agencies shortly thereafter in 1940. The
first offshoot was the Civil Aeronautics Administration (CAA). The CAA was placed in
charge of air traffic control, airman and aircraft certification, enforcement of safety rules,
and development of a system of airways. The second offshoot of the Civil Aeronautics
Administration was the Civil Aeronautics Board (CAB). The CAB was tasked with safety-
related rulemaking, investigating accidents, and economic regulation of air carriers. Both
the CAA and the CAB were formally agencies within the Department of Commerce.
However, the CAB functioned independently of the Secretary of Commerce.

With greater demand for civil air travel and the advent of civilian jetliners, Congress
passed the Federal Aviation Act of 1958. The 1958 act transferred all the CAA’s functions
 Administrative Agencies and Aviation 123

to a new Federal Aviation Agency. Further, all the safety rulemaking functions of the
CAB were transferred to the new Federal Aviation Agency.

The final step in the evolution of the FAA came when, as noted above, the DOT Act was
passed in 1966. Once the DOT came into being, the FAA was placed under the umbrel-
la of the DOT. The FAA’s name was also changed at that time from the Federal Aviation
Agency to the Federal Aviation Administration. At the same time, the CAB’s accident
investigation function was transferred to the newly formed National Transportation
Safety Board (NTSB).

A discussion of the NTSB follows below.

In April 1967, the NTSB became a functioning government agency as mandated by the National
DOT Act in 1966. In its earlier years, the NTSB was funded by the DOT. However, that Transportation
changed in 1975 with the Independent Safety Board Act. As a result of that law, all Safety Board
NTSB ties with DOT were severed, and the NTSB became a totally independent federal
agency with no affiliation to DOT or any of the agencies housed under DOT.

The NTSB’s function is to investigate every civil aviation accident in the United States.
It is also responsible for investigating significant accidents related to railway, marine,
highway, and pipeline transportation. The NTSB (also commonly referred to as the
“Board”) is required to determine probable cause for accidents and to make safety rec-
ommendations based on its study and investigation of accidents.

The NTSB also serves as an adjudicative body for cases involving FAA certificate
actions or civil penalty actions against airmen. The Board also hears appeals in actions
by the U.S. Coast Guard against mariners.

FUNCTIONS OF ADMINISTRATIVE AGENCIES

Administrative agencies perform three functions:

• Rulemaking
• Enforcement
• Adjudication

Some administrative bodies perform one or two of these functions. However, many per-
form all three. When you reflect on these functions, you might consider the parallels
between these functions and the constitutional functions performed by the various
branches of government. Rulemaking is very much like the legislative process performed
by Congress. Enforcement is the same sort of process performed by the executive branch
of government. Adjudication is essentially the function performed by the judiciary.

Although the basic functions of administrative agencies track the functions of our con-
stitutional structure of government, the big difference is the lack of separation between
the functions in administrative agencies. If an administrative agency makes the rules,
124 Fundamentals of Aviation Law

enforces the rules, and adjudicates disputes related to the rules, how can the process
be fair? There is no easy answer to this question. However, in 1946 Congress passed the
Administrative Procedure Act (APA) to address issues of constitutionality within the
workings of administrative agencies. All administrative agencies are subject to the APA.
As a result, there are great similarities in the way that all administrative agencies make
rules, enforce rules, and adjudicate disputes. A review of these processes follows.

Rulemaking The APA outlines the general requirements that an agency must adhere to when it
makes or changes rules.2 A rule is defined as “the whole or part of an agency statement
of general or particular applicability and future effect designed to implement, interpret,
or process law or policy.”3 One of the major thrusts of the APA is the need to put every-
one on notice of the new regulations or changes in regulations.4 This notice requirement
is particularly important since rules created or modified apply to everyone in the United
States. The rulemaking process may be best understood when it is broken down into
three categories of rulemaking recognized by the APA: (1) regulations, (2) interpreta-
tions, and (3) procedural rules.

Regulations
Regulations are often called legislative rules. This is so because they are designed to
implement legislators’ more comprehensive laws. Regulations must be issued by an
administrative agency that has the appropriate authority delegated to it by legislators.
As long as a regulation does not violate the Constitution or exceed the agency’s dele-
gation of authority, it will become law.

For pilots, mechanics, and many others engaged in the aviation industry, the FAA’s regu-
lations as found in Title 14 of the Code of Federal Regulations (CFR) carry the force of
law. Pilots know that they must adhere to the general operating and flight rules established
by 14 CFR Part 91 [otherwise known as Federal Aviation Regulation (FAR) Part 91].
Mechanics must perform their duties in compliance with FAR Part 43, which describes the
proper procedures for aircraft maintenance, preventive maintenance, rebuilding, and alter-
ation. These are precisely the type of detailed rules that it would be unrealistic to expect a
legislative body such as Congress to promulgate. It is the expectation of the legislators in
Congress that the FAA will have the expertise and the experience to put together a coher-
ent set of regulations that implement its desire for safe aircraft and aircraft operations. The
details of how that gets accomplished through regulation are delegated to the FAA.

How are regulations created? Section 553 of the APA lays out the framework for most
of the rulemaking that goes on at agencies such as the FAA and DOT. This process is
generally referred to as informal rulemaking. With informal rulemaking, the APA
requires the following:
1. Notice of the proposed regulation must be published—usually in the Federal
Register (the Federal Register5 is a daily publication of the federal government);
2. All interested parties must have an opportunity to comment and participate in the
proposed regulation.
3. Publication of the final regulation must occur at least 30 days before the regulation
takes effect, along with a statement of the regulation’s necessity and purpose.
 Administrative Agencies and Aviation 125

If an agency is required by an enabling statute, it may need to develop regulations

through the formal rulemaking process. The formal rulemaking process is complex and
parallels the APA provisions regarding adjudications.6 The agency must conduct a tri-
allike hearing with a formal record and introduction of evidence. It must also include a
statement of findings and conclusions and reasons for the conclusions reached.

In cases in which informal rulemaking is not permitted, but the rigid process of formal
rulemaking is not required, a process of hybrid rulemaking may take place. Hybrid rule-
making is a sort of middle ground, and where applicable, this approach is usually out-
lined in the agencies’ enabling statutes. In some instances, a formal hearing might be
required (a necessity for formal rulemaking) while cross-examination is not authorized
(much as in informal rulemaking).
Interpretations
Many administrative agencies publish interpretations of their regulations and statutory
mandates to assist the public in complying with the law. These interpretations are
exempt from the APA’s notice and comment requirements.7

Interpretations are sometimes necessary and useful to assist affected persons who are
attempting to comply with regulations that can often become very technical and com-
plex. One very poignant example of where interpretations can be helpful relates to crew
member flight time and duty period limitations.8 These regulations often generate more
questions than answers—this creates a real need for additional agency guidance in
explaining how the regulations need to be implemented.

Although agency interpretations are not binding on private parties, they are typically
accorded substantial weight. In one early case relating to agency interpretations, the
Supreme Court ruled: “The weight of such [an interpretation] in a particular case will
depend upon the thoroughness evident in its consideration, the validity of its reasoning,
its consistency with earlier and later pronouncement, and all those factors which give it
power to persuade …” Skidmore v. Swift & Co.9

FAA has a well-established inventory of published interpretations. For instance, the

FAA publishes detailed information for pilots in its Aeronautical Information Manual
(AIM). Maintenance personnel, pilots, and aircraft owners are provided guidance with
FAA’s series of Advisory Circulars (otherwise known as ACs). FAA also publishes a
multitude of handbooks and opinions from its Office of Chief Counsel. Again, these
regulatory interpretations might not be binding on the aviation community; however,
they are part of such a comprehensive and well-established scheme of pronouncements
that they will often be granted recognition and deference by courts.
Procedural rules
When an agency creates or modifies procedural rules, it does not need to comply with
the notice and comment requirements of the APA.10

Procedural rules will typically address matters such as qualifications to appear before
an agency or commission hearing, business hours and notice of proceedings or hear-
ings, and matters of agency organization.
126 Fundamentals of Aviation Law

Enforcement All administrative agencies have the authority to investigate whether certain conduct
has violated statutory or regulations under the jurisdiction of the agency. An agency also
needs the authority to gather information and then prosecute violations that it may dis-
cover in its investigations. In our discussion of enforcement by administrative agencies,
we will use a simplified illustration of an FAA enforcement action to demonstrate how
administrative agency enforcement works. We will start with the facts underlying the
illustration and then work through how an agency gathers information and then prose-
cutes once it believes that regulations have been violated.

Facts
Captain Davidson was the nonflying, pilot-in-command of an Arctic Airlines Boeing 747
passenger-carrying flight from Tundra, Alaska, to Capitol International Airport in the
Washington, DC, area. Because the runway at Tundra was short and the aircraft was close
to maximum takeoff weight, Captain Davidson ordered a static takeoff to be performed in
which the brakes are not released until all four engines are producing maximum thrust
(this was a routine measure with a fully loaded 747 departing Tundra’s airport). As a result
of severe frozen weather conditions and the high thrust being created by the 747’s
engines, considerable portions of the runway behind the 747 started to break apart.

The takeoff proceeded uneventfully, and the experienced cockpit crew and Captain
Davidson did not notice anything unusual about the aircraft’s handling. However, shortly
after takeoff, the airport tower advised Captain Davidson and his crew: “You blew up
the asphalt layer in the very south end of the runway, and there was debris coming after
you.” At least three flight attendants saw the asphalt pieces of the runway being blown
up around the back of the aircraft. One reported hearing a “loud bang as the asphalt hit
the fuselage.” The in-flight manager (IFM) onboard the flight notified the cockpit by
intercom that there was considerable dust, stones, and other debris generated behind the
aircraft during the static takeoff procedure.

The tower then went on to focus on the question of whether there was any tire damage
to the aircraft. Captain Davidson indicated that all the tires appeared to be functioning
properly and cockpit indications confirmed that all the tires were intact. However, he
did request that the tower check the runway for rubber or tire debris. The tower
checked the runway and could not find any sign of tire damage. At that point the tower
wished the aircraft a good flight, and the flight proceeded safely to its destination.
Throughout the flight, the aircraft showed normal readings and performance appeared
to be normal.

However, upon arrival at its destination, it was very apparent that the aircraft had sus-
tained serious damage to its tail section. Asphalt chunks that blew up into the aircraft
created three holes in the elevator over 10 inches in diameter and numerous large dents
and scratches near the tail section of the aircraft. By any standard, the damage incurred
rendered the aircraft unairworthy.

The FAA now begins a process of investigating this incident to determine if Captain
Davidson or any of his flight crew violated the FARs. The investigation begins with
information gathering.
 Administrative Agencies and Aviation 127

Gathering information
In pursuing an investigation, agencies have typically been afforded substantial authority
in their ability to require disclosure of information by subpoena as long as the follow-
ing requirements are met:
1. The investigation is related to a legitimate agency purpose.
2. The inquiry is relevant to the legitimate agency purpose.
3. Information requested is not already possessed by the agency.
4. The agency has complied with the administrative steps required by the law.11

It is important to note that unlike in a criminal case, an agency does not need to establish
that it has “probable cause” to pursue information by subpoena power. Once an agency
has established an apparently valid purpose for its investigation, it is very difficult for the
target of the investigation to establish that the agency’s purpose is not legitimate.

Agencies may also conduct on-site inspections and searches when they are investigating
matters within their purview. Health inspectors regularly visit restaurant kitchens on
unannounced inspections. Occupational Safety and Health Administration (OSHA) per-
sonnel routinely stop by construction sites to ensure compliance with safety standards.

Much of the FAA’s investigatory clout is exercised through reviews and inspections of
aircraft and airmen. The primary tool utilized by the FAA is inspection of certificates,
documents, and logbooks. The FARs require that persons “… must present their pilot
certificate, medical certificate, logbook, or any other record required by this part for
inspection upon a reasonable request by …” the administrator, the NTSB, or a federal,
state, or local law enforcement officer.12 The FAA also has the power to subpoena doc-
uments that are not covered by the regulations.

Interestingly, another technique used most frequently (and quite successfully) to gath-
er information from airmen is the purely voluntary response to the FAA’s letter of inves-
tigation (commonly referred to as an LOI). This is often an innocent-looking letter that
requests information from an airman related to an incident that the FAA is investigat-
ing as a potential violation. For the purposes of our illustration, let’s assume that the
FAA has photographs of the aircraft damage and now wishes to elicit information
directly from Captain Davidson. The inspector in charge of the investigation sends the
letter depicted in Fig. 5-1.

Let’s assume that Captain Davidson receives the LOI four weeks after the flight in ques-
tion. His first impulse is to draft a full reply, describing his recollection of the flight in
detail. He drafts a letter and is prepared to send it when a colleague suggests that he retain
a lawyer to review the letter before sending it to the FAA. Captain Davidson finds a lawyer
with some experience in FAA matters and arranges a meeting. The lawyer reviews the sit-
uation with him, and by the end of their meeting it is decided that it will be best not to
respond to the LOI. The lawyer explains to Captain Davidson that anything he states in the
LOI could be used against him if the FAA decided to pursue an enforcement case. The
lawyer cites two cases in which the FAA made use of information provided by airmen in
LOIs to prove facts against the airmen’s interest.13 The lawyer explains that even though
128 Fundamentals of Aviation Law

Figure 5-1
FEDERAL AVIATION ADMINISTRATION
FAA letter FLIGHT STANDARDS DISTRICT OFFICE
of investigation. 1 AIRPORT DRIVE
SMITHTOWN, ALASKA 99532

CERTIFIED MAIL, RETURN RECEIPT REQUESTED

April 1, 2006

Captain K. Davidson
555 N. Platte Street
Bethesda, MD 12456

Dear Captain Davidson:

Personnel of this office are investigating an incident which involved the operation of a Boeing
747 aircraft, N321PJ, on March 1, 2006, in the vicinity of Tundra, Alaska.

Information indicates that you operated this aircraft while the aircraft was unairworthy due to
damage sustained to the aircraft during takeoff. Operations of this type are contrary to
Federal Aviation Regulations.

This letter is to inform you that this matter is under investigation by the Federal Aviation
Administration (FAA). We would appreciate receiving any evidence or statements you might
care to make regarding this matter within 10 days of receipt of this letter. Any discussion or
written statements furnished by you will be given consideration in our investigation. If we do
not hear from you within the specified time, our report will be processed without the benefit of
your statement.

Sincerely,

I. M. Kluso
Aviation Safety Inspector

Captain Davidson does not think he did anything wrong, it is not known which direction
the FAA will take in this case. The lawyer therefore suggests that it might be prudent to
refrain from any statements until the full nature of the investigation is better understood.
The lawyer does, however, send the FAA a polite note declining further comment until he
can review the FAA’s investigation report in Captain Davidson’s matter.

About four months later Captain Davidson receives correspondence in the mail with a
Notice of Proposed Certificate Action (NPCA) from the FAA. The FAA is charging
Captain Davidson with a violation of FAR §§ 91.7(a) and (b) (operating an unairworthy
aircraft and failure to discontinue the flight once unairworthy conditions occur) and
FAR § 91.13(a) (careless or reckless operations). The NPCA calls for a 60-day suspen-
sion of Captain Davidson’s ATP certificate. Captain Davidson calls his lawyer and asks
whether the FAA could still pursue the matter so many months after the flight in ques-
tion. His lawyer explains that under the Rules of Practice in NTSB hearings, the FAA
 Administrative Agencies and Aviation 129

has up to 6 months from the date of the alleged offense to notify an airman of any alle-
gations.14 Even then, the lawyer explains, the FAA can still proceed with charges if it
can establish good cause for the delay. (For a good discussion of what does and does
not represent good cause, see Administrator v. Ramaprakash.15)

A copy of Captain Davidson’s NPCA is found in Fig. 5-2.

Figure 5-2
FEDERAL AVIATION ADMINISTRATION
OFFICE OF REGIONAL COUNSEL FAA Notice
ALASKAN REGION of Proposed
ANCHORAGE, ALASKA 99513 Certificate Action.
August 2, 2006

Case No. 2006EA125609

CERTIFIED MAIL, RETURN RECEIPT REQUESTED

Captain K. Davidson
555 N. Platte Street
Bethesda, MD 12456

NOTICE OF PROPOSED CERTIFICATE ACTION

Take notice that upon consideration of a report of investigation, it appears that:

1. You are now, and at all times mentioned herein you were, the holder of Airline Transport
Pilot Certificate No. 123456789.
2. On or about March 1, 2006, you served as the pilot in command of civil aircraft N321PJ,
a Boeing 747, on a flight in air commerce from Tundra, Alaska, to Capitol Airport in
Washington, DC.
3. During its takeoff, N321PJ incurred substantial airframe damage, and the aircraft was ren-
dered unairworthy.
4. Despite the unairworthy condition of the aircraft, you continued the flight to its destination.
5. Your operation of civil aircraft N321PJ was careless or reckless so as to endanger the life
or property of others.

Based on the foregoing facts and circumstances, you violated the following Federal Aviation
Regulations:

(a) Section 91.7(a) in that you operated a civil aircraft while it was in an unairworthy condition.
(b) Section 91.7(b) in that you failed to discontinue the flight when unairworthy structural con-
ditions occurred.
(c) Section 91.13(a) in that you operated an aircraft in a careless or reckless manner so as to
endanger the life or property of another.
Now, therefore, please take notice that by reason of the foregoing facts and circumstances
and pursuant to the authority vested in the Administrator by 49 U.S.C. Section 44709(b), we
propose to suspend your Airline Transport Pilot Certificate No. 123456789 with all privileges
and ratings for a period of sixty (60) days.

(Continued)
130 Fundamentals of Aviation Law

Figure 5-2
Unless we receive, in writing, your choice of alternatives listed below within fifteen (15) days
FAA Notice after the date you receive this notice, we will issue an order suspending your certificate and
of Proposed all privileges and ratings as proposed above. This notice does not suspend your certificate;
Certificate Action. however, if you wish to make the suspension effective immediately, you must physically sur-
render your certificate to this office as provided in Option 1 below.
(Continued )
------------------------------------------------------------------

ABLE LAWYER
Regional Counsel

Airman’s Reply Form

I elect to proceed as follows:

1. I hereby transmit my certificate. I understand that an Order will be issued as proposed in

the Notice of Proposed Certificate Action (NPCA). The Order will be effective on the date
I mail this reply. I also understand that I am waiving my right to appeal the Order to the
National Transportation Safety Board (NTSB).
2. I request that an order be issued so that I may appeal directly to the NTSB.
3. I hereby submit my answer to this NPCA Action and request that my answer be considered
in connection with the allegations set forth in the NPCA.
4. I hereby request an informal conference to discuss this matter with an FAA attorney.
5. I hereby claim entitlement to a waiver of penalty under the NASA ASRS and enclose
evidence that a timely report was filed.

__________________________
Airman Signature

Captain Davidson’s lawyer reviews the options offered in the NPCA and explains that
the offer of an informal conference is required by law.16 He adds that it is often a good
idea to accept the offer of a meeting with the FAA to see if the matter can be settled
without a formal hearing. The lawyer suggests that they prepare for an informal con-
ference with the FAA attorney handling the case. Captain Davidson also learns from his
counsel that while awaiting the informal conference he can continue to exercise the
privileges of his certificate.

At this point, the lawyer also suggests that it would be a good idea to get a copy of the
FAA’s enforcement investigative report (otherwise known as the EIR) for this case. This
report will include documentation of all the FAA’s evidence that is being relied on to
charge Captain Davidson with the violations in the NPCA, including tapes of conver-
sations with the air traffic control tower in Norway. Upon receipt of the request, the
FAA attorney sends the EIR. Captain Davidson and his lawyer attend an informal con-
ference with the FAA attorney and the inspector in charge of the investigation.
Unfortunately for Captain Davidson, the meeting results in the FAA expressing a will-
ingness to reduce sanction, but not drop the charges. Captain Davidson is unwilling to
accept any compromise at this point. He instructs his lawyer to tell the FAA that he
wants to bring this case to a hearing before an NTSB administrative law judge (ALJ).

Captain Davidson’s lawyer informs the FAA’s attorney that a compromise cannot be
reached based on the settlement offer presented by the FAA at the informal conference.
 Administrative Agencies and Aviation 131

In view of this, the FAA issues an Order of Suspension, ordering Captain Davidson to sur-
render his ATP certificate for 60 days as sanction for the violations alleged by FAA. The
Order of Suspension looks very much like the NPCA except that it offers the opportuni-
ty to stay or put off the suspension of Captain Davidson’s ATP certificate if he appeals the
FAA’s order to the NTSB. Within the required time frame, Captain Davidson’s attorney
files an appeal with the FAA. A copy of the notice of appeal is found in Fig. 5-3.

The case is now before the NTSB, and the more formal adjudication phase of this mat- Adjudication
ter begins. Once the notice of an appeal is received by the Board, the case will move
along very much as in any other hearing or trial before a civil court.

Captain Davidson’s lawyer and the FAA’s attorney will most likely engage in prehear-
ing discovery. The FAA attorney may want to take depositions of the flight crew, IFM,
passengers, and/or flight attendants to get a fuller picture of what occurred during the
takeoff. Captain Davidson’s lawyer may want to depose or send written interrogatories
to the FAA regarding the conversations between Captain Davidson and the tower in
Tundra. Both sides will probably request a list of possible witnesses, expert witnesses,

Figure 5-3
UNITED STATES OF AMERICA
NATIONAL TRANSPORTATION SAFETY BOARD Appeal of FAA
WASHINGTON, D.C.
order.

___________________________________
)
Marion C. Blakey, )
Administrator, )
Federal Aviation Administration, ) NTSB Docket No. SE-______
)
Complainant, )
v. )
)
Captain K. Davidson, )
)
Respondent. )
___________________________________)

APPEAL

Captain K. Davidson, Respondent, by his undersigned counsel, pursuant to Section

821.30 of the Board’s Rules of Practice (49 C.F.R. 821), hereby appeals the Administrator’s
Order of Suspension dated August 2, 2006, FAA Docket No. 2006EA125609, suspending for
sixty (60) days Respondent’s Airman Certificate Number 123456789. Respondent denies the
violations alleged in the Administrator’s Order and prays that it be reversed.
Respondent requests that the hearing for this matter be held in Washington, D.C.

Respectfully submitted,

___________________________ Dated: _________

Pitt and Bull, Attorneys at Law
132 Fundamentals of Aviation Law

and documents that might be presented at a hearing. As discussed in Chap. 1, the primary
purpose of this discovery is to allow the parties to properly prepare for the hearing. A
secondary purpose is to encourage settlement as the prospects for success or failure at
trial become more apparent.

The lawyers for both sides will also do legal research to find previous cases before the
NTSB that might have raised similar issues. In doing the research for this case, the par-
ties learn that the central question at hand is whether a reasonable and prudent pilot
would have concluded from the information available that there was a possibility that
the aircraft was unairworthy. Both parties have noted that the controlling precedent is
found in Administrator v. Dailey and Administrator v. Parker.17

Once the trial gets underway, the FAA attempts to prove Captain Davidson should have
known about the damage done to his aircraft during the static takeoff run-up of the
engines. The FAA brings forward the IFM for the flight, who testifies that he called the
cockpit and informed them of the dust, debris, and stones that he observed near the back
of the aircraft. However, Captain Davidson’s lawyer attempts to establish that Captain
Davidson did not have enough information presented to him to know about the damage.
The lawyer repeatedly points out that none of the cockpit crew heard the debris strike the
aircraft (due to the distance between the cockpit and the separation between the cockpit
and back of the plane by four huge engines running at full power); he further points out
that the communication from the IFM never indicated that the aircraft had been struck.
Finally, Captain Davidson’s lawyer emphasizes that all communications with the tower
focused on the possibility of damage to the 747’s tires. Once the search on the runway for
rubber uncovered nothing, Captain Davidson was led to believe that everything was okay.

The ALJ presiding over the hearing makes routine rulings during the course of the pro-
ceeding regarding the admissibility of evidence. At the conclusion of the hearing, the
ALJ renders a ruling as an Oral Initial Decision.18 In this case, the ALJ rules in Captain
Davidson’s favor. Based on the evidence presented, the ALJ concludes that the aircraft
was rendered unairworthy after the damage done during the static run-up of the engines.
However, the ALJ further concludes that Captain Davidson did not have information put
before him that would indicate the aircraft had been damaged. Applying the tests in
Dailey and Parker, the ALJ concludes that Captain Davidson did not violate FAR §§
91.7(a) and (b) or § 91.13(a).

The FAA reviews the ALJ’s opinion and decides that it wishes to appeal the ALJ’s deci-
sion by filing an appeal to the full five-member NTSB. Once the appeal is filed, a full
transcript of the hearing and the evidence presented at the hearing are forwarded to the
Board. The Board will not examine witnesses or receive new evidence; therefore, it
must rely on the record of the hearing in its review. The FAA files an appeal brief detail-
ing its arguments in an effort to get the Board to reject the ALJ’s decision. Captain
Davidson’s lawyer then files his reply brief in an effort to get the Board to deny the
FAA’s appeal and sustain the ALJ’s decision.

After several months of review and deliberation, the Board issues an Opinion and Order
in Captain Davidson’s case. This time, the airman prevails. The Board defers to the
 Administrative Agencies and Aviation 133

findings of the ALJ and determines that Captain Davidson did not know and could not
have reasonably known about the condition of his aircraft. The Board takes special note
that the only communication of any possible problem came from the IFM and that his
testimony revealed that he did not speak directly to Captain Davidson and had not
relayed to the crew that a flight attendant heard the “loud bang.”

After the Board has rendered a decision, an airman who loses can submit a petition for
judicial review (an appeal) to the U.S. Court of Appeals. In our case, Captain Davidson
was the prevailing party at the Board level, so he will not file an appeal. The FAA can
also file a petition with the U.S. Court of Appeals, but only if the FAA decides that the
Board’s order will have a significant adverse impact on its ability to carry out its regu-
latory mission.19 In this case, the FAA decides that it will not appeal because the
Board’s decision was limited to the facts of Captain Davidson’s case. With no appeal
from the FAA, the case is closed.

The flowchart in Fig. 5-4 depicts the steps in the course of a typical (nonemergency)
enforcement case and appeal to the NTSB. Although our discussion has been limited to
the FAA/NTSB process, this model is in many ways similar to the process employed by
other agencies.

Beyond the basics of administrative law presented above, there are some unique aspects Special
to FAA matters that warrant further discussion. The four areas that will be addressed considerations
here are (1) FAA emergency actions, (2) NASA’s Aviation Safety Reporting Program in FAA matters
(NASA ASRP), (3) FAA administrative actions, and (4) FAA reinspections and reex-
aminations of aircraft and airmen.

FAA emergency actions

As discussed above, it can take several months and sometimes more than a year for an
FAA enforcement action to be concluded. On occasion the FAA takes the position that
an airman’s actions indicate that an emergency exists, requiring immediate action by the
agency. In those cases, the FAA will issue an emergency order of suspension or revo-
cation (virtually every emergency case involves a revocation action). The emergency
order requires immediate surrender of the airman’s certificate with no stay of the sus-
pension while the airman might appeal the emergency order.

If the airman who receives an emergency order does not agree with the FAA’s determi-
nation that an emergency exists, the airman can, within 48 hours of receiving the emer-
gency order, petition the Board for a determination of the existence of an emergency. The
Board has 5 days to review the question of whether an emergency exists. If the Board
finds that no emergency exists, then the emergency nature of the action is stayed (put off)
and the airman can keep his or her certificate(s) throughout the NTSB proceedings.
However, if the Board upholds the FAA’s determination of an emergency, the airman
must surrender his or her certificate to the FAA throughout the NTSB proceedings.

Notice that the big difference between the “normal” and emergency FAA cases is the
lack of a notice of proposed certificate action and the option of an informal conference.
With an emergency action, an airman who wants to challenge the FAA’s findings must
134 Fundamentals of Aviation Law

Figure 5-4 FAA enforcement actions

nonemergency cases
Flowchart of FAA
enforcement Event
actions,
nonemergency
cases. Inspector issues
letter of
investigation

Case Request for Enforcement Administrative

withdrawn reexamination action action

Notice of Notice of
proposed proposed
certificate civil
action penalty

Appeal to
NTSB

Hearing
before ALJ

Appeal to
full NTSB board

Appeal to
U.S. Court
of Appeals

head straight to a hearing before the NTSB (although there is no legal impediment to
the airman and the FAA reaching a settlement in the matter prior to the NTSB hearing).

If an airman challenges the FAA’s emergency order and the case goes to a hearing, nor-
mally the hearing is scheduled just a few weeks after the emergency order has been
received. Therefore, the time for the parties to engage in discovery and research is
severely limited. The hearing date is set early in the process because if the airman or
FAA appeals the findings of the ALJ who presided at the hearing, the case must move
quickly to the Board on appeal. In total the NTSB has 60 days to make a determination
on an emergency case, starting from the date the airman files a notice of appeal.

If an airman is concerned about the “rushed” nature of the emergency proceedings, she
or he may waive the emergency nature of the case. If the airman elects to waive the
 Administrative Agencies and Aviation 135

emergency proceedings, the case will be placed on the regular calendar of the NTSB
ALJ. This may mean a wait of several months (without a certificate) before the accused
gets to a hearing. Depending on the circumstances of the case, this may or may not be
a viable option for an airman faced with an emergency action by the FAA.

Figure 5-5 depicts the steps in an FAA emergency case.

NASA’s Aviation Safety Reporting Program

One unique aspect of FAA enforcement matters is the NASA ASRP. This is a program
in which the FAA uses the services of the National Aeronautic and Space Administration
(NASA) to act as a neutral thirdparty in receiving Aviation Safety Reports from pilots,
controllers, flight attendants, mechanics, and others who use the nation’s airspace system.
The program permits these users to anonymously report unsafe or potentially unsafe
conditions as they become aware of such conditions. The reports are often used to report
discrepancies and deficiencies, including departures from ATC instructions, near mid-
air collisions, maintenance defects, etc. The system was meant to provide the FAA with
honest input from system users while providing the users with a way of noting deficien-
cies without fear of retaliation or punishment by the FAA. Now we will describe how the
NASA ASRP works.

FAA enforcement actions Figure 5-5

emergency cases
Flowchart of FAA
Event
enforcement
actions,
emergency
cases.
Emergency order of
revocation

Airman challenges
Appeal to NTSB emergency
designation

Hearing before ALJ rules on

NTSB ALJ emergency
designation

Appeal to full
NTSB board

Appeal to U.S.
Court of Appeals
136 Fundamentals of Aviation Law

First, a user of the national airspace system files an Aviation Safety Report. There are
four types of reports prepared for users. All the forms are labeled as part of the NASA
ARC 277 series. The four types of forms are as follows:
1. ARC 277A for air traffic use
2. ARC 277B for general use including pilots
3. ARC 277C for flight attendants
4. ARC 277D for maintenance personnel

A copy of an ARC Form 277B can be found in App. C.

As you can see on Form 277B, the Aviation Safety Report form has a tear-off portion
that is the only place where the reporter is identified. This part of the form is torn off
by NASA, date- and time-stamped, and returned to the submitter as a receipt. Except in
cases involving accidents or criminal activities, the reporter’s identity is not retained in
any manner by NASA or the FAA. To further protect anyone submitting a NASA
Aviation Safety Report, 14 CFR § 91.25 prohibits the use of any reports submitted to
NASA under the program to be used in any action taken against the reporter (with the
exception of reporters who submit information regarding accidents and criminal activ-
ities). Further ensuring anonymity, NASA will de-identify any reporter names or infor-
mation that might lead to identification in an Aviation Safety Report within 72hours
after NASA receives the report. (See FAA AC No. 00-46D.)

What is the incentive to file a NASA ASRP? Typically, the reporter is involved in an
incident that might lead to an FAA enforcement action. By filing a NASA Aviation
Safety Report the reporter may be able to avoid FAA sanction. The relevant excerpts
from FAA AC No. 00-46D state as follows:

The filing of a report with NASA concerning an incident or occurrence involving a viola-
tion of [law or the FARs] is considered by FAA to be indicative of a constructive attitude.
Such an attitude will tend to prevent future violations. Accordingly, although a finding of
violation may be made, neither a civil penalty nor certificate suspension will be imposed if:
1. The violation was inadvertent and not deliberate;
2. The violation did not involve a criminal offense, or accident, or action under 49 U.S.C.
§ 44709 which discloses a lack of qualification or competency, which is wholly exclud-
ed from this policy.
3. The person has not been found in any prior FAA enforcement action to have commit-
ted a violation of [aviation related law or FARs] for a period of 5 years prior to the date
of the occurrence; and
4. The person proves that within 10 days after the violation, he or she completed and
delivered or mailed a written report of the incident or occurrence to NASA under
ASRS.

To ensure that there is absolute proof of a timely filed NASA Aviation Safety Report,
many lawyers will counsel clients to send the form to NASA via certified mail, return
receipt requested, or overnight mail. NASA ASRP has proved to be a very useful tool for
many airmen and the FAA in improving the system and avoiding penalties for airmen
who have made inadvertent errors while attempting to perform their duties in good faith.
 Administrative Agencies and Aviation 137

ASAP program
Besides the NASA ASRP, the FAA has also enacted a special program known as the
Aviation Safety Action Program (ASAP). ASAP is a voluntary reporting program in
which employees of Part 121 air carriers and Part 145 repair stations can report inad-
vertent safety violations “… without fear that the FAA will use reports to take legal
enforcement action or that the companies will use such information to take disciplinary
action.” The program requires that a participating company and the FAA document their
participation in ASAP with a memorandum of understanding (MOU).20

Administrative actions
If the FAA believes a violation is minor enough, it might decide to forgo formal enforce-
ment action. Just what constitutes a minor violation is often difficult to assess. However,
the FAA’s internal enforcement guidance indicates that three criteria must be met:
1. The violation must not be deliberate.
2. There was no significantly unsafe condition created by the violation.
3. The violation does not evidence a lack of competency or qualification.21

Determining whether a violation will be subject to administrative action is a subjective

decision (what is a significantly unsafe condition?) ordinarily made by the FAA inspec-
tor investigating an incident.

If the FAA determines that administrative action is the appropriate way to proceed with
a case, it has two choices—either a Warning Notice or a Letter of Correction. The
Warning Notice takes the form of a letter to the alleged violator. The letter typically
recites the facts (as known to the FAA) and indicates that the conduct of the airman was
in violation of the FARs. A Warning Notice usually concludes with a statement indi-
cating that the matter does not warrant legal enforcement action but will be made a mat-
ter of record in the airman’s files for 2 years.

A Letter of Correction is very similar to a Warning Notice. The only difference between
the two is that a Letter of Correction will indicate that the alleged violator has taken
steps to correct the underlying violation or deficiency that led to the violation. Letters
of Correction are usually the end result when an airman is recommended for remedial
training by the FAA. Similar to a Warning Letter, a Letter of Correction remains on an
airman’s file for 2 years.

Although Warning Letters and Letters of Correction are not considered to be violations
on an airman’s record, many airmen are concerned that the letters remain in their file for
a 2-year period.22 If an airman believes that the FAA was wrong in alleging a violation,
can the airman challenge the FAA’s administrative action? In Machado v. Administrator,
the NTSB determined that a Warning Letter cannot be appealed to the Board.23 In view
of this decision, the best thing an airman can do if she or he believes the FAA’s admin-
istrative action is unwarranted is to respond to the administrative action in writing and to
request that the letter be made a part of her or his file while the Warning Letter or Letter
of Correction remains in the records. Usually, the FAA’s Warning Notice or Letter of
Correction will invite the airman to add any explanatory information to the files.
138 Fundamentals of Aviation Law

Reexamination
One very important tool available to the FAA to ensure regulatory compliance is the
ability to reinspect and reexamine. Applicable law states, “The Administrator of the
Federal Aviation Administration may reinspect at any time a civil aircraft, aircraft
engine, propeller, appliance, air navigation facility, or air agency, or reexamine an air-
man holding a certificate issued under section 44703 of this title.”24 As indicated, this
law permits the FAA to examine aircraft and airmen at any time.

Despite the literal wording of the law allowing the FAA to examine an airman “at any
time,” there are several NTSB decisions that shed light on what an airman can expect if the
FAA requests a reexamination. First, the request for the reexamination must be reasonable,
and it must be limited to those areas in which a lack of knowledge or skill may have been
demonstrated by the airman.25 Second, a refusal to submit to a reexamination will get the
airman in a situation in which the FAA takes emergency action to suspend or revoke his or
her certificate.26 Third, a successfully completed reexamination does not stop the FAA
from pursuing enforcement through a certificate action.27 Finally, the NTSB has held that
the burdens placed on an airman by a reexamination (time, cost, etc.) cannot supercede the
FAA’s need to ensure competency, and a reexamination may be warranted even though the
airman may not have demonstrated any fault in the underlying incident.28

As a practical matter, a vast majority of the time, reexaminations are fairly adminis-
tered, and they are usually passed on the first try. In very few instances has the FAA
appeared to have abused its statutory right to reexamine airmen.

CHECKS ON ADMINISTRATIVE AGENCIES

Because administrative agencies are staffed by unelected officials, there has always
been concern that the agencies could act without need for accountability to the public.
Traditional branches of government have a duty to oversee the workings of administra-
tive agencies to ensure that they are faithfully performing their statutory duties. Over
time, the law has also evolved to create a system that forces administrative agencies to
disclose information, open meetings, and generally be accountable to the public whose
welfare the agencies were designed to protect. Some of the more significant protections
built into the legal system are discussed below.

Oversight The first line of defense against agency abuse of power is the checks and balances provided
by traditional by the traditional branches of government—the judicial, executive, and legislative branches.
branches With the exception of the judicial branch (which is checked and balanced by the executive
and legislative branches), the legislative and executive branches are led by elected officials.
of government
This is designed to create an environment of accountability to the public. We will briefly
explore the way the traditional branches of government can limit administrative agencies.

Judiciary
As discussed above, a person adversely affected by an action of an administrative
agency has the right to appeal the decision of the agency to the courts. In the federal
 Administrative Agencies and Aviation 139

system, appeals go to the U.S. Court of Appeals. The ability to review rules and orders
of administrative agencies serves as a check on the agency.29

Judicial review is generally available only when there has been a final agency action.30
This means a party must exhaust all available attempts to adjudicate a matter within
agency rules before turning to the courts for relief.

The standards utilized by the courts when examining an agency action vary depending
on the agency action being reviewed. If courts are reviewing informal rulemaking, they
will ordinarily apply what is known as the “arbitrary or capricious” test. This means that
the agency’s action will stand as long as it was not arbitrary or capricious. Stated dif-
ferently, it means that the agency must merely have a rational basis for its action to
stand the court’s scrutiny.

When an agency (such as the NTSB in FAA enforcement cases) holds a formal hear-
ing, the test applied is the substantial evidence test. This essentially means that the
courts will uphold the agency’s determination as long as it was supported reasonably by
adequate evidence. This standard does not allow the court very broad review powers
over agency actions. In the case of NTSB proceedings, the Board’s power to review is
further diminished by federal law which states:

When conducting a hearing under this subsection, the Board is not bound by findings of
fact of the Administrator but is bound by all validly adopted interpretations of laws and
regulations the Administrator carries out and of written agency policy guidance available
to the public related to sanctions to be imposed under this section unless the Board finds
an interpretation is arbitrary, capricious, or otherwise not in accordance to law.31

This statutory language requires the Board to exercise deference to the FAA’s interpre-
tations of its own regulations. The courts have not fully fleshed out what is meant by the
phrase validly adopted interpretations. However, from preliminary cases, it appears that
the FAA has a relatively low threshold to clear to maintain that its interpretations are
validly adopted.

In unusual instances, a reviewing court may be required to apply a standard known as

unwarranted by the facts. This standard essentially allows the courts to retry the case
(sometimes referred to by lawyers as a de novo review). This very strict standard of
review is put in place only when an enabling statute requires its use.

Executive
The President has substantial ability to exercise control over administrative agencies.
Obviously, the President’s power is greatest when the agency is part of the executive
branch of government. However, even with respect to independent agencies, the President
still gets to nominate agency chairs and fill vacancies as they arise. Budgetary control
also enables the President to influence agency policies. Finally, the President can signifi-
cantly alter, combine, or terminate agencies housed within the executive branch unless
opposed by Congress. This very potent authority of the President was recently on display
with the reorganization of government agencies in the creation of the Homeland Security
Department.
140 Fundamentals of Aviation Law

Legislative
Congress has the ability to exercise significant control over administrative agencies.
The first tool available to Congress is the fundamental tool of modifying an agency’s
enabling statute. This tool allows Congress to make minor changes to the way an
agency does business or to eliminate an agency altogether.

Congress may also exercise control over agencies by enacting guidelines for agency
action. In essence, the enactment of the APA was a way for the legislative branch to set
standards for all administrative agencies. Congress also creates and maintains oversight
committees that regularly review the workings of administrative agencies. To further
add to control over agency action, in 1996 Congress enacted the Congressional Review
Act. This act gives Congress the ability to review any new rules created by agencies that
have significant impact on the economy or on industries. If the new rule is disapproved
by Congress, the rule is treated as if it never existed.

Finally, because it holds primary budgetary authority, Congress may withhold or

decrease funding to an agency. There may be no more potent tool available than fund-
ing to shape an agency’s size and scope.

Equal Access The Equal Access to Justice Act (EAJA) permits eligible individuals and entities to recov-
to Justice Act er attorney fees and related expenses from government agencies.32 As a general rule, there
are four requirements for anyone seeking a recovery of attorney fees under the EAJA:
1. The individual must have been a party to an adversarial adjudication against a gov-
ernment agency.
2. The individual or entity seeking recovery must have been a prevailing party in the
adjudication against the government.
3. The government agency’s position in the adversarial adjudication must not have
been substantially justified (government bears the burden of proof on this issue).
4. Individuals or entities seeking an award under EAJA must establish that they meet
certain financial eligibility requirements.

The purpose of the EAJA is an attempt to level the playing field in agency adversarial
proceedings. There has always been concern that when an ordinary citizen is faced with
government action, she or he starts at a substantial disadvantage. The full weight of
government resources and expertise is being faced. In the meantime, retaining counsel
and required experts is a substantial expense—often an expense that the person chal-
lenged by a government agency cannot afford.

The EAJA can be looked upon as a check on government agencies. The agencies must
be mindful of the fact that while they have a duty to enforce agency rules, the position
they take must be substantially justified or the agency may be required to pay for the
counsel fees and costs of the person it has challenged.

The NTSB has implemented rules for the EAJA.33 The NTSB rules track the EAJA and
clarify what the NTSB requires in an application for an EAJA award related to a case
adjudicated before the NTSB.
 Administrative Agencies and Aviation 141

The Freedom of Information Act (FOIA) was first enacted in 1967 with substantial Freedom of
amendments made in 1974. It requires that the public be given access to most of the Information Act
records held by administrative agencies. The purpose behind the FOIA is to make the
workings of administrative agencies more transparent, therefore making the agencies
more accountable to the public.

The FOIA works in a relatively straightforward manner. Once a request for agency
records is received, the agency must notify the individual making the request within 10
working days whether it will comply with the request. If so, the agency must provide
the requested records in a reasonable time. An agency can always charge reasonable
fees for copying or reproducing records requested.

Nine important categories of records are excluded from the FOIA requirements for dis-
closure. The nine exceptions to the general rule of disclosure are as follows:
1. Records that have been specifically authorized to be kept secret in the interest of
national defense or foreign policy
2. Records relating to solely internal personnel rules and agency practices
3. Records specifically exempted by statute from disclosure
4. Trade secrets and commercial or financial information that are considered confidential
5. Memoranda that are intra- or interagency
6. Personnel and medical information which, if disclosed, would result in a clearly
unwarranted invasion of the right of privacy
7. Investigatory records compiled for law enforcement policies
8. Records relating to the regulation of financial institutions
9. Certain geological and geophysical information

If an agency gets a request for information that arguably fits into one of the exclusions
written above, the agency must deny disclosure under the FOIA. The requesting party
who disputes the agency’s denial can always bring a separate action (in court) com-
pelling disclosure of the requested records under FOIA.

In the context of aviation matters, the FOIA comes in handy for airmen who might be
involved in an FAA enforcement action. An FOIA request will allow the airmen to
request voice tapes or documents related to an alleged violation.

At the same time the FOIA was being amended in 1974, Congress passed the flip side Privacy Act
of the FOIA when it enacted the Privacy Act of 1974.34 Agencies collect extensive data
on individuals to perform their missions (e.g., consider the sheer volume and sensitiv-
ity of data collected on every pilot by the FAA’s Aeromedical Branch). However, there
has always been concern that this information could be misused. The Privacy Act basi-
cally prohibits the government from disclosing information relating to an individual
without the individual’s written authorization. Further, the Privacy Act forbids agen-
cies from providing the names and addresses of citizens without specific authorization
by law.
142 Fundamentals of Aviation Law

Sunshine Act The Sunshine Act requires certain agencies to open their meetings to the public. The
agencies most affected by the Sunshine Act are the commissions and boards in which the
members are appointed by the President. For example, meetings of the NTSB are held in
public in accordance with the Sunshine Act. Examples of other agencies that are required
to hold public hearings are the Securities and Exchange Commission, the Federal Trade
Commission, and the Federal Communications Commission.

As a general rule, agencies may close meetings for the same reasons that they would not
disclose information under the FOIA. In addition to the exception provided in the FOIA,
an agency may close a meeting under Exemption 10 of the Sunshine Act if it involves
discussion regarding future litigation or legal matters pending before the agency.

Similar to the FOIA, the purpose of the Sunshine Act is to ensure that the work of agen-
cies is performed in as transparent an environment as possible. In the end, making meet-
ings public makes agencies more accountable to the public.

CASES AND COMMENTARY

The first case presented, ATA v. DOT and FAA, involves the issue of rulemaking.35 The
question presented is whether the FAA should have provided for notice and comment
for new civil penalty rules.

To help set the stage, it must be understood that for many years, the FAA had been using
its civil penalty authority (issuance of fines) as an enforcement tool. Civil penalties
turned out to be a relatively weak enforcement tool for the FAA under the old system.
The problem was that if airmen or aircraft owners were fined and they decided not to
pay the fines, the case would be referred to the U.S. Attorney’s Office. If the U.S.
Attorney who got the case wanted to prosecute on the fine, she’d be forced to litigate in
U.S. District Court. As time passed, it became clear that the civil penalty laws had no
teeth because the Office of the U.S. Attorney was often too busy to prosecute an airman
or aircraft owner on a relatively small fine.

The FAA consulted with Congress on this problem. Eventually, the FAA persuaded
Congress to pass a 2-year demonstration law whereby the FAA would get a trial run at
running the prosecution and adjudication of civil penalty cases involving amounts less
than $50,000. Armed with the mandate from Congress, the FAA developed hearing pro-
cedures for civil penalty cases and decided that “notice and public comment procedures
are impractical, unnecessary, and contrary to the public interest.”

A number of organizations, including Air Transport Association, Aircraft Owners and

Pilots Association, and various other aviation interests, filed suit in the U.S. Court of
Appeals for the District of Columbia Circuit. These aviation organizations argued that
the rules being enacted by the FAA required notice and comment. This is the issue the
circuit court wrestles with in Case 5-1.
 Administrative Agencies and Aviation 143

CASE 5-1
AIR TRANSPORT ASSOCIATION OF AMERICA V. DOT AND FAA
900 F. 2d 369 (1990)

OPINION: EDWARDS, Circuit Judge: [their safety] systems are maintained at the high-
est of standards.” [Citation.]
* * *
At the same time, however, Congress remained
I. BACKGROUND
attentive to the adjudicative rights of civil penalty
In December of 1987, Congress enacted a series defendants. Congress provided that the FAA could
of amendments to the Federal Aviation Act relat- assess a civil penalty “only after notice and oppor-
ing to civil penalties. [Citation.] Among other tunity for a hearing on the record in accordance
things, these amendments raised to $10,000 the with section 554 of [the APA].” [Citation.] As the
maximum penalty for a single violation of avia- conference report accompanying section 1475
tion safety standards, [Citation], and established a explained, the express incorporation of the APA’s
“demonstration program” authorizing the FAA to procedural protections was designed to achieve
prosecute and adjudicate administrative penalty two purposes:
actions involving less than $50,000, [Citation].
Under the terms of the demonstration program, First, the requirement is intended to advise the FAA
the FAA was granted the authority to assess of the appropriate level of procedural formality
administrative penalties for a two-year period and attention to the rights of those assessed civil
beginning on December 30, 1987, [Citation] and penalties under this demonstration program. Sec-
was to report to Congress on the effectiveness of ondly, this requirement is intended to provide rea-
the program within eighteen months, [Citation]. sonable assurance to the potential subjects of such
civil penalties that their due process rights are not
Congress’ goal in enacting this legislation was to compromised. [Citations.]
strengthen the enforcement powers of the Federal
Aviation Administration. Before the 1987 amend- Approximately nine months after enactment of
ments, the FAA could propose a maximum civil section 1475, the FAA promulgated the Penalty
penalty of only $1,000 per violation and had no Rules. [Citation.] Effective immediately upon
enforcement authority of its own. When an alleged their issuance, the Penalty Rules established a
violator disputed a penalty, the FAA was obliged schedule of civil penalties, including fines of up
to refer the case to the United States Attorney’s to $10,000 for violations of the safety standards
office for prosecution in federal district court; rel- of the Federal Aviation Act and related regulations.
atively few such cases were prosecuted, however, [Citation.] The Penalty Rules also established a
because of competing work obligations facing comprehensive adjudicatory scheme providing for
U.S. Attorneys. [Citation.] Understandably, Con- formal notice, settlement procedures, discovery,
gress did not view this as a particularly effective an adversary hearing before an ALJ and an
system for assuring compliance with aviation administrative appeal. [Citation.] In explaining
safety standards. By raising the maximum penalty why it dispensed with prepromulgation notice
and giving the FAA the power to prosecute penalty and comment, the FAA emphasized the proce-
actions administratively, Congress sought to “close dural character of the Penalty Rules and the time
the holes in the FAA’s safety net” and thereby constraints of section 1475. [Citation.] The FAA
“provide an incentive for airlines to ensure that did respond to post promulgation comments but
144 Fundamentals of Aviation Law

declined to make any amendments to the Rules. established by the APA. These procedures reflect
[Citation.] Congress’ “judgment that … informed administra-
* * * tive decisionmaking require[s] that agency decisions
be made only after affording interested persons” an
In its petition for review, Air Transport raises two
opportunity to communicate their views to the
challenges to the Penalty Rules. First, it attacks
agency. [Citation.] Equally important, by mandating
the procedural adequacy of the Rules, arguing
“openness, explanation, and participatory democ-
that the FAA was obliged by section 553 of the
racy” in the rulemaking process, these procedures
APA to permit notice and comment before the
assure the legitimacy of administrative norms.
Rules became effective. Second, Air Transport
[Citation.] For these reasons, we have consistently
attacks the substantive adequacy of the Rules on
afforded a narrow cast to the exceptions to section
the ground that they establish adjudicatory proce-
553, permitting an agency to forgo notice and com-
dures inconsistent with section 554 of the APA. In
ment only when the subject matter or the circum-
a previous order, we deferred consideration of the
stances of the rulemaking divest the public of any
FAA’s motion to dismiss the petition on ripeness
legitimate stake in influencing the outcome.[Cita-
grounds and directed the parties to address this
tions.] In the instant case, because the Penalty Rules
issue in their briefs on the merits. We now find
substantially affected civil penalty defendants’ right
that Air Transport’s procedural challenge to the
to avail themselves of an administrative adjudica-
Penalty Rules is ripe for review and grant the
tion, we cannot accept the FAA’s contention that
petition on that ground.
the Rules could be promulgated without notice and
comment.
II. ANALYSIS
* * *
* * * C. Remedy
B. The Merits
Having determined that the FAA promulgated the
Section 553 of the APA obliges an agency to pro- Penalty Rules in violation of the APA’s notice and
vide notice and an opportunity to comment before comment requirements, we must next consider the
promulgating a final rule. No question exists that appropriate remedy. Ordinarily, when agency rules
the Penalty Rules fall within the scope of the APA’s have been invalidated, the agency may not rely on
rulemaking provisions. [Citation.] Nonetheless, the those rules until they have been repromulgated in
FAA maintains that the Penalty Rules were exempt accordance with the APA. [Citation.] We find such a
from the notice and comment requirements for two, disposition appropriate in this case; therefore, we
independent reasons: first, because they are “rules hold that the FAA may not initiate new prosecutions
of agency organization, procedure, or practice,” under the Penalty Rules unless and until they are
[APA] § 553(b) (3)(A); and second, because the repromulgated. Insofar as the FAA’s pending notice
time constraints of section 1475 gave the FAA of proposed rulemaking seeks public comment on
“good cause” to find that prepromulgation notice the individual Rules that the agency intends to
and comment would be “impracticable, unneces- amend, the agency may rely on the outcome of that
sary, or contrary to the public interest,” [APA] § rulemaking as a partial fulfillment of this mandate.
553(b) (3)(B). The FAA also argues that its enter- * * *
tainment of post promulgation comments cured
any violation of section 553. III. CONCLUSION
Section 553’s notice and comment requirements are An agency may dispense with the notice and
essential to the scheme of administrative governance comment requirements of section 553 “only
 Administrative Agencies and Aviation 145

where the need for public participation is over- [Citation.] We therefore grant the petition for
come by good cause to suspend it, or where the review and order the FAA not to initiate further
need is too small to warrant it.” [Citation.] Neither prosecutions under the Penalty Rules until the
of these conditions obtains in this case. The FAA agency has engaged in further rulemaking in
did not have good cause to forgo notice and com- accord with section 553. Nonetheless, pursuant to
ment procedures, for nothing in section 1475 our remedial powers, we hold that the FAA is free
either excused or mandated noncompliance with to hold pending cases in abeyance and resume
section 553. Nor was this a case in which the need prosecution upon the repromulgation of a scheme
for public participation was “too small to warrant for adjudicating administrative civil penalty
it”; civil penalty defendants have a legitimate actions under section 1475.
interest in influencing agency action affecting
their statutory and constitutional “right to avail It is so ordered.
[themselves] of an administrative adjudication.”

Do you agree with the circuit court’s assessment in this case? Were the rules drafted by
the FAA substantive or procedural? What lessons can an administrative agency learn
from a case like this?

This next case, Case 5-2, is a relatively recent case of great importance to the aviation com-
munity. As discussed in this chapter, the NTSB and the courts are required by law to extend
deference to the FAA’s validly adopted interpretations of its own regulations. One of the
critical questions presented is, What constitutes a “validly adopted” interpretation? The
decision contains a rich discussion of FAA enforcement matters. See if you agree with the
way the circuit court handles an airline pilot’s deviation from a clearance in Case 5-2.

CASE 5-2
GARVEY V. NTSB AND MERRELL
190 F. 3d 571 (1999)

OPINION BY: GARLAND 17,000 feet. Merrell correctly repeated, or “read

back,” this instruction to ATC. About a minute later,
* * *
ATC transmitted an altitude clearance to another
The facts of the case are undisputed. On June 19,
aircraft, American Airlines Flight 94, directing it to
1994, Merrell was the pilot-in-command of a com-
climb to and maintain an altitude of 23,000 feet. The
mercial passenger plane, Northwest Flight 1024.
American flight promptly and correctly acknowl-
After Flight 1024 took off in the heavily trafficked
edged this clearance with its own “readback.”
Los Angeles area, air traffic control (ATC)
instructed it to climb to and maintain an altitude of
146 Fundamentals of Aviation Law

Merrell, however, mistakenly thought that the exercised,” in violation of 14 C.F.R. § 91.123(b); and
instruction to American was intended for his air- (2) “operating an aircraft according to a clearance or
craft, so he also read the instruction back to ATC. instruction that had been issued to the pilot of
Unfortunately, because Merrell made his read- another aircraft for radar air traffic control pur-
back at the same time as the American pilot, his poses,” in violation of 14 C.F.R. § 91.123(e).
transmission was blocked, or “stepped on.” The
Merrell appealed the FAA’s order to the NTSB.
ATC radio system can handle only one transmis-
At the outset of the proceedings, the FAA agreed
sion at a time on any given frequency; when two
that because Merrell had filed a timely incident
transmissions overlap, both may become blocked
report pursuant to the FAA Aviation Safety
or garbled, or the stronger signal alone may be
Reporting Program, it would waive any sanction
heard (i.e., it may “step on” the weaker signal).
for the alleged violations. It sought affirmance of
ATC can often detect that a transmission has been
its enforcement order, however, arguing that Mer-
stepped on because, unless the signals overlap
rell had deviated from clearly transmitted ATC
completely, ATC will receive a portion of the
instructions, that this mistake was due to his own
stepped-on message, and because a loud buzzing
carelessness rather than to ATC error, and that the
noise usually accompanies the period of overlap.
deviation therefore constituted a regulatory viola-
On rare occasions, however, two transmissions
tion. The Administrative Law Judge (ALJ) agreed
will overlap completely without creating an iden-
and affirmed the order. The ALJ found, based on
tifiable buzz. This appears to have happened in
both the recording and the transcript of the radio
Merrell’s case. His readback apparently coin-
communications, that the ATC transmission to
cided precisely with that of American Flight 94,
American Flight 94 had been clear and that the
and as a result his transmission was entirely
instruction to climb to 23,000 feet had plainly not
blocked. ATC heard neither Merrell’s readback
been intended for Merrell’s aircraft. Indeed, after
nor any indication that it had occurred. And
Merrell listened to the tape, he conceded that he
because ATC did not hear the erroneous read-
had simply “misheard” the instruction. The ALJ
back, it could not correct Merrell’s mistake.
concluded that the fact that Merrell’s readback
Meanwhile Merrell, unaware that ATC had not was stepped on did not absolve “Captain Merrell
received his transmission, proceeded to ascend of his responsibility to hear that [the] initial clear-
toward 23,000 feet. As the Northwest flight rose ance” was for another flight. He explained that:
from its assigned altitude, the ATC controller “Aviation is ... particularly unforgiving of care-
noticed the deviation and directed the aircraft to lessness or neglect. And in this particular case,
return to 17,000 feet. Before Merrell could com- the initial mistake was made by Captain Merrell,
ply, he had ascended to 18,200 feet and lost the and he’s going to have to be responsible for it.”
standard safety separation required between com- Accordingly, the ALJ held that Merrell “was in
mercial flights. regulatory violation as alleged.”
On November 3, 1995, the FAA issued an enforce- Merrell appealed the ALJ’s decision to the Board.
ment order against Merrell. The order alleged that He argued that under NTSB precedent, a pilot
Merrell had violated FAA safety regulations by, inter cannot be held responsible for an inadvertent devi-
alia, (1) “operating an aircraft contrary to an ATC ation caused by ATC error. His had been such a
instruction in an area in which air traffic control is deviation, he contended, because he had taken
 Administrative Agencies and Aviation 147

actions which, but for ATC, would have kept him reasonable explanation for the failure to comply
from leaving his assigned altitude. He reasoned with the ATC clearance.” According to the FAA,
that because ATC controllers are required to cor- reasonable explanations include events such as
rect erroneous readbacks, his construction of “radio malfunction” or a controller error that pre-
ATC’s silence as tacit confirmation had been rea- cipitates a misunderstanding, but “to excuse [Mer-
sonable and justified. In response, the FAA again rell’s] deviation in these circumstances as an
argued that because the primary cause of the devi- acceptable, though unexplained, ‘error of percep-
ation had been Merrell’s misperception of a clear tion’ “ would be inconsistent with the agency’s
instruction, his actions had violated the safety reg- construction of § 91.123. Moreover, the FAA
ulations. The FAA maintained that this outcome argued that the Board’s decision would have a
was consistent with Board precedent which, it “profound” negative effect on air safety: “Under
contended, absolves pilots only when “ATC error the decision, airmen can claim, without further
is the initiating or primary cause of the deviation.” proof, that they did not hear or that they misper-
ceived safety crucial instructions as a means to
The NTSB accepted Merrell’s arguments and dis-
avoid responsibility for noncompliance or erro-
missed the enforcement order. It found that Merrell
neous compliance with ATC clearances and
had made only “an error of perception,” and that
instructions.” The Board denied the petition for
there was “no evidence in the record ... that [he] ...
reconsideration. Although it acknowledged its
was performing his duties in a careless or other-
“general obligation to defer to the FAA’s validly
wise unprofessional manner.” A “perception mis-
adopted interpretation of its regulations,” the
take,” the Board said, does not always result from
Board considered itself under no such obligation
“a failure of attention,” and therefore “careless inat-
in this case because “the FAA cites no rule it has
tention … will not be automatically assumed in
adopted that stands for the proposition the FAA
every case” in which a pilot mishears ATC instruc-
urges here.” The Board further noted that the FAA
tions. Moreover, there was no “failure of proce-
offered “no evidence of any policy guidance writ-
dure” on Merrell’s part, as he had “made a full
ten by the FAA, validly adopted or otherwise,” to
readback so that the opportunity was there, absent
support its interpretation, and instead offered only
the squelched transmission, for ATC to correct his
“counsel’s litigation statements.”
error.” The FAA then petitioned the Board for
reconsideration of its decision. The agency argued Because the Board determined that it was not
that the Federal Aviation Act requires the Board to required to defer to the FAA’s interpretation, it
defer to the FAA’s reasonable interpretation of its followed its own view of appropriate aviation
own safety regulations. In the FAA’s view, 14 C.F.R. policy. It stated:
§ 91.123 obligates pilots “to listen, hear, and com-
We … disagree with the FAA’s underlying belief that
ply with all ATC instructions except in an emer- our policy threatens aviation safety. The premise of
gency.” “Inattention, carelessness, or an unex- our approach is this—human beings make mistakes,
plained misunderstanding,” it said, “do not excuse and there is no regulatory action, remedial or other-
a deviation from a clearly transmitted clearance or wise, that can eliminate all mistakes… Where an
instruction.” “When there is an ‘error of percep- inevitable error of perception does occur, the pilot
tion’ resulting in a deviation, inattentiveness or should not face sanction if he has acted responsibly
carelessness are imputed in the absence of some and prudently thereafter…
148 Fundamentals of Aviation Law

Adhering to this principle, the NTSB announced finds an interpretation is arbitrary, capricious, or
the following rule: otherwise not according to law.”
If a pilot makes a mistake and mishears a clearance or If dissatisfied with a final order of the Board, either
ATC direction, follows all prudent procedures that the FAA Administrator or any “person substantially
would expose the mistake (e.g., reads back the clear- affected” may petition for review in this court.
ance), and then acts on that mistaken understanding [Citation.] On judicial review, the “findings of fact
having heard no correction from ATC, the regulatory of the Board are conclusive if supported by sub-
violation will be excused if that mistake is not shown
stantial evidence.” [Citation.] We must, however,
to be a result of carelessness or purposeful failure of
some sort.
set aside Board decisions if they are “arbitrary,
capricious, an abuse of discretion, or otherwise not
The FAA then petitioned for review in this court. in accordance with law.” [Citation.] And, like the
Under the Federal Aviation Act’s split-enforcement NTSB, we must defer to the FAA’s interpretations
regime, Congress has delegated rulemaking author- of its own aviation regulations. [Citation.]
ity to the FAA: “The Administrator of the Federal As we have just described, Congress has “unam-
Aviation Administration shall promote safe flight biguously directed the NTSB to defer to the
of civil aircraft in air commerce” by prescribing, FAA’s interpretations of its own regulations.”
among other things, “regulations and minimum [Citation.] Here, however, the NTSB explicitly
standards for ... practices, methods, and procedure declined to defer to the agency’s interpretation of
the [FAA] finds necessary for safety in air com- 14 C.F.R. § 91.123. In this Part, we consider the
merce and national security.” 49 U.S.C. § 44701(a). argument that deference to the FAA was not
Pursuant to that authority, the FAA promulgated the required, either because its interpretation was not
safety regulations at issue here, 49 C.F.R. §§ 91.123(b), validly adopted or because that interpretation was
(e). Congress has also given the FAA authority to really a factual finding in disguise.
enforce its regulations through a number of
methods, including the issuance of “an order The NTSB declined to defer to the FAA primarily
amending, modifying, suspending, or revoking” a because the agency had offered “no evidence of
pilot’s certificate if the public interest so requires. 49 any policy guidance written by the FAA, validly
U.S.C. § 44709(b). The FAA exercised that adopted or otherwise,” to support its interpreta-
authority in issuing its enforcement order to tion. Instead, the agency had merely offered the
Captain Merrell. “litigation statements” of FAA counsel, as well as
citations to the Board’s own case law. See id. The
Congress has assigned adjudicatory authority NTSB believed the former insufficient to qualify
under this regime to the NTSB. [Citation.] A pilot for Board deference under section 44709(d)(3).
whose certificate is adversely affected by an FAA Accordingly, it rejected the FAA’s interpretation
enforcement order may appeal the order to the and expressly adopted its own policy to govern
NTSB. [Citation.] Such an appeal is initially cases like that of Captain Merrell.
heard by an ALJ, [Citation] whose final decision
may be appealed to the full Board, [Citation]. The The NTSB’s refusal to defer to the FAA on this
Board’s decision, in turn, may be reconsidered question of regulatory interpretation and air safety
policy was error. The FAA is not required to
upon the petition of either party. [Citation.] In
promulgate interpretations through rulemaking or
reviewing an FAA order, “the Board is not bound
the issuance of policy guidances, but may instead
by findings of fact of the [FAA] Administrator.”
do so through litigation before the NTSB. We
[Citation.] It is, however, “bound by all validly
adopted interpretations of laws and regulations have said as much before, and the Supreme Court
the Administrator carries out ... unless the Board so held in [Citation] with respect to the similar
 Administrative Agencies and Aviation 149

split-enforcement regime of the Occupational lation” it is interpreting. [Citations.] And even if

Safety & Health Act. Indeed, the NTSB itself has the interpretation meets this standard, the NTSB
repeatedly made the same point. The fact that this need not follow it if it “is arbitrary, capricious, or
mode of regulatory interpretation necessarily is otherwise not according to law.”
advanced through the “litigation statements” of * * *
counsel does not relieve the NTSB of its statutory Because the NTSB failed to defer to the FAA’s rea-
obligation to accord it due deference. sonable interpretation of its own regulations, we con-
* * * clude that the Board’s ruling was not in accordance
Deference, of course, does not mean blind obedi- with law. We therefore grant the petition for review,
ence. The agency’s interpretation still must not be reverse the Board’s decision, and remand the case for
“plainly erroneous or inconsistent with the regu- further proceedings consistent with this opinion.

If anything, this case should draw your attention to the fact that the aviation world is
very unforgiving of error, even good faith error. Do you think Captain Merrell was
treated justly in this case? Did the court go too far in according deference to the FAA
attorney’s interpretation?

By way of background, the case heavily relied in by the circuit court in Merrell is the
Supreme Court decision in Martin v. OSHRC.36 One commentator has characterized defer-
ence to an agency’s litigation position as “an extreme manifestation of the tendency to extend
judicial acceptance to nonlegislatively-issued agency positions.”37 This same commentator
indicates that the Supreme Court in Martin “just didn’t get it.” Do you agree that there might
be hazard in deferring to an agency attorney’s litigation position during the course of a hear-
ing before an administrative agency? Are there any potential Constitutional concerns in grant-
ing such deference? Consider whether any due process concerns might arise.

The final “case” for this chapter is not really a judicial case, it is an NTSB Accident
Report with findings of probable cause. As indicated earlier in the chapter, the NTSB is
responsible for investigating aviation accidents and determining probable cause for the
accidents. The Board maintains Accident Investigation Dockets for each accident inves-
tigated. The dockets contain preliminary reports, factual reports, and briefs.

The following report, Case 5-3, involves an all too familiar situation in which a non-
instrument-rated pilot gets in over his head. Unfortunately, the results are often fatal, as
in this case. The NTSB’s brief report with a finding of probable cause is found at the
beginning. The full narrative follows to illustrate the level of detail that the investiga-
tions take on.
150 Fundamentals of Aviation Law

CASE 5-3
NTSB IDENTIFICATION: NYC05FA001
14 CFR Part 91: General Aviation
Accident occurred Sunday, October 10, 2004 in Germantown, NY
Probable Cause Approval Date: 6/8/2005
Aircraft: Cessna 172N, registration: N2771J
Injuries: 2 Fatal.

Prior to departing on a round-trip flight, the non- NYC05FA001

instrument rated pilot telephoned a flight service HISTORY OF FLIGHT
station and received a standard weather briefing.
On October 10, 2004, at 0035 eastern daylight
The briefing included information about marginal
time, a Cessna 172N, N2771J, was substantially
VFR conditions for the proposed return trip;
damaged during a collision with trees, following
including increased cloud cover and scattered
a loss of control in cruise flight near German-
showers. VFR flight was not recommended for
town, New York. The certificated private pilot and
the return trip. After completing the first leg of
passenger were fatally injured. Night visual mete-
the trip, the pilot again telephoned the flight serv-
orological conditions prevailed for the flight that
ice station. The second briefing included informa-
departed Long Island MacArthur Airport (ISP),
tion about a slow moving cool front with poorer
Islip, New York; destined for Fulton County Air-
weather conditions north and west of the planned
port (NY0), Johnstown, New York. No flight plan
route, with the possibility of a shower or two
was filed for the personal flight conducted under
along the route. At the time, one of the airports
14 CFR Part 91.
near the route was reporting marginal VFR condi-
tions. The return flight was conducted at night, During the day prior to the accident, the pilot and
and proceeded uneventfully for approximately passenger flew uneventfully from NY0 to ISP.
two-thirds of the planned flight. The pilot was The airplane was fueled before departing NY0,
receiving flight following, and asked the con- and again after arriving at ISP. The pilot and pas-
troller how high the clouds were, so that he could senger attended a meeting, and then departed ISP
get out of them. The airplane then descended rap- about 2337, for a return trip to NY0.
idly in a left turn and struck trees.
According to Federal Aviation Administration
The National Transportation Safety Board deter- (FAA) communication and radar data, the pilot
mines the probable cause(s) of this accident as made radio contact with the Albany, New York
follows: Terminal Radar Approach Control (TRACON),
about 0020, and requested flight following. The air
The pilot’s inadequate in-flight planning/decision
traffic controller acknowledged the transmissions,
which led to VFR flight into IMC and his loss of
verified radar contact about 0023, and provided a
aircraft control. Factors were night and cloud
conditions.
 Administrative Agencies and Aviation 151

current altimeter setting. The pilot then acknowl- experience. However, the logbook did not provide
edged the altimeter setting and verified his alti- a current record of total night experience, total
tude. At the time, the airplane was approximately recent experience, or total simulated instrument
3,100 feet msl, and 50 miles southeast of Albany, experience.
New York.
AIRCRAFT INFORMATION
About 0034, the pilot contacted the Albany
TRACON controller and stated, “could you tell The airplane’s most recent annual inspection was
me how high these clouds are [unintelligible] get performed on July 4, 2004. At that time the air-
out of them.” No further transmissions were plane had accumulated 4,194 hours of operation.
received from the accident airplane, and radar con-
tact was lost. Prior to radar contact being lost, a METEOROLOGICAL INFORMATION
radar target indicated the airplane was at an altitude Review of recordings from the Burlington, Vermont
of 1,700 feet, about 1/3-mile northwest of the acci- flight service station (FSS) revealed that pilot
dent site. Prior to that, the airplane made a left turn telephoned the FSS about 1200 on October 9,
at an altitude of approximately 3,000 feet. 2004. The pilot advised that he was planning a
visual flight rules (VFR) flight from NY0 to ISP,
Review of data from the pilot’s handheld global
departing within the hour, and returning that
positioning system (GPS) receiver revealed the
evening about 2100.
airplane proceeded on a northwesterly track. Prior
to the end of the data, the airplane traveled in a The FSS specialist provided a standard weather
360-degree left turn. The last data point recorded a briefing. The specialist stated several times that mar-
position of approximately 1/2-mile northeast of ginal VFR conditions were forecast for the return
the accident site, at an altitude of 2,429 feet. flight, with thickening cloud cover and scattered
showers, and he would not recommend VFR flight
Three witnesses reported that about 0030, an air-
in those conditions at night. The specialist further
plane descended through a cloud layer with an
stated that if the pilot waited until the following
increase in engine noise. The noise was continu-
morning, the weather was forecast to improve.
ous, with no sputtering. Two of the witnesses
reported that the airplane was initially on a north- The pilot again telephoned the FSS about 2100,
westerly heading, and then made a turn toward a and advised he was planning a VFR flight from
southeasterly direction, before descending rap- ISP to NY0, departing about 2300.
idly into terrain. The third witness reported that
The FSS specialist stated that there was only one
the airplane was heading southeast, and “took a
precaution listed for the route; which was for turbu-
sharp fall-nose-down.”
lence. However, he did advise of a slow moving
cool front in central New York, with most of the
PILOT INFORMATION
weather north of the planned route, but a possibility
The pilot held a private pilot certificate, with a of a shower or two along the route. The specialist
rating for airplane single engine land. The pilot further stated that the current temperature- dew point
was not instrument rated. spread at Schenectady, New York, was 18 degrees
The pilot’s most recent FAA third class medical C, and 16 degrees C, respectively; and remarked
certificate was issued on January 28, 2004. that it was “getting a little close.”

According to his logbook, the pilot had accumu- The FSS specialist stated that current conditions
lated approximately 1,231 hours of total flight along the route included: Bridgeport, Connecticut
152 Fundamentals of Aviation Law

reporting few clouds at 1,200 feet and visibility The right wing was resting inverted in bushes,
10 miles; White Plains, New York reporting mar- and a portion of the right aileron was found in the
ginal VFR conditions with scattered clouds at vicinity of the wing. The right wing sustained
1,200 feet, a broken ceiling at 4,000 feet, a bro- impact damage to the leading edge, and the dam-
ken ceiling at 10,000 feet, and visibility 3 miles in age was greater near the wing root. Flight control
mist; Poughkeepsie, New York reporting sky clear continuity was confirmed from the right aileron
with visibility 9 miles; and Newburgh, New York and flap to the wing root. The right wing fuel tank
reporting scattered clouds at 8,000 feet with visi- was compromised.
bility 7 miles.
The left wing was resting inverted on the main
The weather briefing contained a forecast for wreckage, and remained attached by control
Albany, New York, valid after 2300. The forecast cables. Flight control continuity was confirmed
included visibility greater than 6 miles and an from the left flap and aileron to the wing root.
overcast ceiling at 6,000 feet. The flap was found in the retracted position. The
leading edge of the left wing sustained greater
Columbia County Airport (1B1), Hudson, New
impact damage than that of the right wing. The
York, was located about 10 miles northeast of the
left wing fuel tank was compromised.
accident site. The recorded weather at 1B1, at
0021, was: wind from 350 degrees at 7 knots; vis- The main wreckage was oriented about a 030-degree
ibility 10 miles; scattered clouds at 2,100 feet, heading, and the cockpit area was crushed and
ceiling broken at 2,600 feet, ceiling overcast at folded underneath the empennage. The nose
3,400 feet; temperature 64 degrees F; dew point wheel and right landing gear were found with the
55 degrees F; altimeter 30.05 inches Hg. main wreckage. Flight control continuity was con-
firmed from the elevator and rudder to the for-
WRECKAGE INFORMATION ward cabin area. A measurement of the elevator
The wreckage was located in a field about 0700, trim jackscrew corresponded to an approximate
and examined at the accident site on October 10 neutral trim setting. The fuel selector had sepa-
and 11, 2004. All major components of the air- rated from the cockpit, and was found positioned
plane were accounted for at the scene. A debris to the right tank.
path was observed, which originated from a row Some flight and engine instruments were recov-
of trees. The debris path extended approximately ered along the debris path. The airspeed indicator
330 feet, on a heading of 070 degrees, to the main was found with the needle positioned near 150
wreckage. Discolored vegetation was noted along knots. The attitude indicator was found in a left
the debris path. A large impact crater was bank position. The attitude indicator was disas-
observed about 20 feet along the debris path. The sembled for inspection, and scoring was noted on
left wingtip was located to the left of the crater. the gyro housing. The altimeter needle had sepa-
The propeller was located about 75 feet along the rated, and 29.99 was displayed in the Kollsman
debris path, and the right wing was located about window. The directional gyro was positioned near
110 feet along the debris path. The left main gear 130 degrees, and the tachometer needle indicated
and engine cowling were located about 180 feet approximately 1,700 rpm. The electric gyro for
along the debris path. The carburetor and cockpit the turn coordinator was recovered and disassem-
panel were located about 275 feet along the bled for inspection. Scoring was observed on the
debris path. The magnetos and emergency locator gyro housing.
transmitter were found approximately 50 feet
beyond the main wreckage.
 Administrative Agencies and Aviation 153

The engine had separated from the airframe, and obtained on the number two, three, and four cylin-
was found inverted on the left side of the main ders. Thumb compression could not be obtained
wreckage. The propeller had separated from the on the number one cylinder, which had sustained
engine. The propeller blades exhibited chordwise impact damage near the exhaust valve.
scratching, s-bending, and leading edge gouging.
All spark plugs were removed from the engine for
inspection. Their electrodes were intact, and light MEDICAL AND PATHOLOGICAL
gray in color. The valve covers were removed, INFORMATION
and oil was noted in all cylinders. The vacuum An autopsy was performed on the pilot by the
pump was removed, and the drive shaft was Columbia County Coroner’s Office, Hudson,
intact. The oil filter was examined, and no con- New York.
tamination was observed. The oil suction screen
Toxicological testing was conducted on the pilot
was also absent of contamination. When the sin-
at the FAA Toxicology Accident Research Labo-
gle-drive dual magneto was rotated by hand, a
ratory, Oklahoma City, Oklahoma.
spark was produced at all towers.
The crankshaft was rotated through an accessory
gear drive. Except for the number two intake ADDITIONAL INFORMATION
pushrod that had separated, and the number four The wreckage was released to a representative of
exhaust pushrod that was bent, valve train conti- the owner’s insurance company on October 11,
nuity was confirmed. Thumb compression was 2004.

One question that has arisen in judicial proceedings is whether the NTSB’s accident
reports are admissible as evidence in civil court actions related to aviation accidents.
Congress has acted on this question, and 49 U.S.C. § 1154(b) states that “No part of a
report of the Board, related to an accident or an investigation of an accident, may be
admitted into evidence or used in a civil action for damages resulting from a matter
mentioned in the report.” A relatively recent judicial interpretation of this statute affirm-
ing the absolute nature of the prohibition against using Board reports as evidence is
found in Chiron v. NTSB, 198 F. 3d 935 (1999). In Chiron, the U.S. Court of Appeals
for the District of Columbia Circuit reiterates, “The simple truth here is that NTSB
investigatory procedures are not designed to facilitate litigation, and Congress has made
it clear that the Board and its reports should not be used to the advantage or disadvan-
tage of any party to a civil lawsuit.” Why do you think Congress does not want NTSB
accident reports to be used as evidence in civil lawsuits related to the accident NTSB
investigated? What harm might come from admitting the reports as evidence?

DISCUSSION CASES

1. Ferguson, a 12,000-hour ATP with no FAA violations ever, was the pilot-in-command
of Western Airlines Flight 44 from Los Angeles to seven locations. By the time Flight
44 departed from its Denver, Colorado, to Sheridan, Wyoming, leg, it was already 35
154 Fundamentals of Aviation Law

minutes behind schedule. During the flight from Denver to Sheridan, ATC offered
Flight 44 a direct clearance to Sheridan. Flight 44 accepted the direct routing to save
time and fuel. Ferguson handled radio communications, and the first officer, Bastiani,
was flying the aircraft. Neither Ferguson nor Bastiani had ever flown to Sheridan
before, but each believed that the other had. Ferguson reviewed navigational charts, but
he failed to note that Buffalo Airport was directly under Flight 44’s flight path.
Sometime around 10:00 p.m., Ferguson and Bastiani noticed runway lights, and they
began a visual approach to what they believed to be Sheridan Airport. Ferguson failed
to use available radio aids to confirm the destination airport. During the approach,
Flight 44 maintained contact with Sheridan’s FSS. ATC notified Flight 44 that another
aircraft was on final approach. However, neither Ferguson nor Bastiani could spot the
other aircraft. The VASI lights Ferguson expected to see at Sheridan were also absent.
It was only after the aircraft landed that Ferguson realized that Flight 44 had landed at
Buffalo Airport, not Sheridan Airport. Ferguson filed a timely NASA ASRP report out-
lining the incident. The FAA pursued enforcement action, and Ferguson sought NASA
immunity from sanction. The FAA refuses to waive sanction, claiming that Ferguson’s
actions were not inadvertent. Should Ferguson be able to claim NASA immunity? Why
or why not?

2. Money is involved in a fuel exhaustion incident. She files a timely NASA report
and on the identification strip where it asks for “Type of Event/Situation” Money
writes, “Emergency landing due to fuel exhaustion.” The FAA pursues an enforcement
action against Money, citing fuel mismanagement and careless operations. The FAA
seeks a 90-day suspension of Money’s commercial pilot certificate. Money presents the
FAA with a copy of the identification strip when she claims immunity from FAA sanc-
tion. Money disputes the charges, and the case goes before an NTSB administrative law
judge (ALJ). At Money’s hearing, the FAA agrees with Money that she is entitled to
waiver of sanction from FAA’s proposed suspension. However, the FAA seeks to pres-
ent the copy of Money’s NASA ASRP identification strip as an admission that Money
ran out of fuel. The NTSB ALJ admitted the identification strip into evidence. Was it
correct for the ALJ to admit the NASA identification strip as evidence of Money’s
alleged violation? Why or why not?

3. In the late 1970s, National Airport in Washington, D.C. (now Ronald Reagan
International Airport), was one of the busiest airfields in the United States. Due to air
traffic congestion, the FAA limited the number of commercial airline arrival and depar-
ture slots to 40 per hour. Up until October 1980, the allocation of 40 slots per hour was
worked out by voluntary agreement by an airline scheduling committee (ASC) made up
of airlines serving National Airport. In October 1980 the ASC ran into an impasse and
could not decide on slot allocations when New York Air insisted on 20 slots at peak
hours. To help break the impasse, the FAA issued a notice and request for comments on
how slots should be allocated. On October 16, the secretary for the Department of
Transportation issued a Notice and Request for Comments. The notice requested pub-
lic comments on the mechanism that should be used for the temporary allocation of IFR
reservations or slots using National Airport. The notice gave one week for comments
and described no mechanism for the distribution of slots. Thirty-nine comments were
received, and the secretary issued Special Federal Aviation Regulation 43 (SFAR 43),
 Administrative Agencies and Aviation 155

effective immediately on October 29, 1980. SFAR 43 decreased the number of slots
held by current carriers, shifting those slots to less desirable times. Northwest Airlines
claimed that SFAR 43 was unlawful and should be set aside because (1) SFAR 43 was
not a product of “reasoned decision making” and is “arbitrary and capricious” and
(2) the rulemaking did not comply with the usual time allowed for comments and effec-
tiveness of regulations. How should the court of appeals rule in this case? Explain.

4. Krueger was the nonflying pilot-in-command (PIC) of Midwest Express Airlines’

flight from Boston to Milwaukee. The experienced copilot on board the DC-9 was
Phillips, and FAA inspector Polak was along to perform an en route inspection. During
the preflight checklist procedures, Krueger and Phillips properly went through all items
in the checklist. However, the copilot mistakenly notified Krueger that he had placed
the auxiliary hydraulic pump switch in the on position. In fact, the switch was in the off
position throughout the takeoff when it should have been on. Polak noticed the switch
in the off position and after the flight notified Krueger of the incident. The FAA sought
to suspend Krueger’s ATP certificate for 30 days. Krueger argued that he had a right to
reasonably rely on his copilot to properly comply with his duties. The switch in ques-
tion was approximately 3 feet from Krueger to the right and 12 inches from the bot-
tommost engine indicators. There were no annunciator lights that would indicate the
switch was off unless an engine failed. As PIC, should Krueger be held responsible for
this incident? Why or why not?

5. Thomas is the owner and director of operations for Aero Charter, Inc., a Part 135 air
carrier. She is also qualified as a pilot. On October 30, 1991, respondent and an employee
pilot, Guin, took the company’s Merlin-2 (an aircraft certificated for single-pilot oper-
ations) for a sales flight (a Part 91 flight). Thomas flew various portions of the trip. On
the return flight to the company’s base in St. Louis’ Lambert Field, Guin was the pilot
flying the aircraft; Thomas worked the radios almost all the time, called out the check-
lists and altitudes, searched for and called out the runway environment, and deployed
the flaps and propeller position. During the first attempt to land, Guin lowered the gear
handle but failed to confirm that the landing gear was down and locked. As the aircraft
was about to land, Thomas noticed that the gear-down lights were not illuminated and
notified Guin. Guin executed an immediate go-around with only minor damage to the
aircraft’s propellers and an antenna. The FAA pursued both Thomas and Guin with
requests for reexamination and enforcement actions. Guin agreed to a reexamination
and negotiated a 5-day suspension with the FAA. Thomas was subject to a reexamina-
tion by the FAA which he successfully passed. The FAA also initiated an enforcement
action against Thomas, ordering a 15-day suspension. Thomas appealed the FAA’s
order. She argued that (1) she was successfully reexamined and therefore enforcement
action was not appropriate and (2) she was not a required crewmember in the aircraft
and therefore should not be held responsible for the incident in question. Do you agree
with Thomas’ arguments? Explain.

6. Roach is the president of Roach Aircraft Company. He has been in the business of
selling aircraft for over 20 years, and he has accumulated more than 10,000 flight hours.
He has no record of any FAA violations. While demonstrating a Piper Aerostar, Roach
156 Fundamentals of Aviation Law

made several low passes and an aileron roll at low altitude. The FAA investigated the
matter and issued an order suspending Roach’s commercial pilot certificate for 120 days.
During the course of the NTSB hearing on Roach’s case, the FAA attorney called Roach
as an adverse witness. Roach’s attorney objected and argued that the case involved a
semicriminal case and therefore Roach should not be compelled to testify. The ALJ
overruled the objection and Roach went on to testify. Was the ALJ correct in compelling
Roach to testify? Explain.

7. Atkins and Richards were pilot-in-command and second-in-command, respective-

ly, of Piedmont Flight 1756. Flight 1756 had been cleared by Atlanta Air Route Control
Center (ATC) to climb and maintain flight level 220. Atkins and Richards acknowl-
edged the clearance and had previously expressed their desire to climb higher than
flight level 220 because of turbulence. A short while later ATC cleared Piedmont Flight
1258 to climb to flight level 240. Atkins and Richards mistakenly believed that the trans-
mission from ATC was meant for them. Atkins read back the clearance, transmitting the
following to ATC: “Piedmont seventeen fifty-six up to two four zero thousand now.

Thanks.” Neither the controller assigned to the relevant position nor the controller mon-
itoring the communications of the controller (the controller was undergoing recertifica-
tion) heard the readback by Atkins. When Flight 1756 reached flight level 226, loss of
separation occurred with another aircraft and Atkins was instructed to make an imme-
diate left turn. The FAA charged Atkins and Richards with violating FAR §§ 91.75 and
91.9 (currently 91.13). The ALJ hearing the case found that Atkins and Richards were
careless because they mistook an ATC communication to another aircraft. Atkins and
Richards appeal to the Board. Who should prevail? Why?

ENDNOTES

1. 343 U.S. 470 (1952).

2. See 5 U.S.C. § 553.
3. Id. at 551(4).
4. Id. at § 553.
5. See www.gpoaccess.gov/fr/ for current Federal Registers.
6. 5 U.S.C. § 557(c).
7. Id. at § 553(b)(3)(A).
8. See 14 C.F.R. § 135.261 et seq.
9. 323 U.S. 134 (1944).
10. 5 U.S.C. § 553(b)(3)(A).
11. See United States v. Powell, 379 U.S. 48 (1964).
12. See 14 C.F.R. § 61.51(i)(1). See also 14 C.F.R. § 91.417 for aircraft maintenance
records.
 Administrative Agencies and Aviation 157

13. See Administrator v. Salkind, 1 NTSB 714 (1970) and Administrator v. Funk, 6 NTSB
1016 (1989).
14. See 49 C.F.R. § 821.33.
15. 346 F. 3d 1121 (2003).
16. See 5 U.S.C. § 554(c)(1) and 49 U.S.C. § 44709(c).
17. 3 NTSB 1319 (1978) and 3 NTSB 2997 (1980).
18. Typically, an ALJ will issue an oral initial decision at the conclusion of a hearing.
However, in some cases, the ALJ may deliberate further and issue a written deci-
sion as per 49 CFR § 821.42(a).
19. See 49 U.S.C. § 44709(f).
20. See FAA AC No. 120-66B.
21. See FAA Order No. 2150.3A.
22. While administrative actions remain on an airman’s record for 2 years, a violation
resulting in a suspension of pilot privileges will only be expunged after 5 years. See
FAA Enforcement Records; Expunction Policy, 56 Fed. Reg. 55,788 (1991).
23. EA-4116 (1994).
24. 49 U.S.C. § 44709(a).
25. See Administrator v. Hinman, 2 NTSB 2496 (1976) and Administrator v. Gamble,
EA-4789 (1999).
26. See Administrator v. Gamble, EA-4789 (1999).
27. See Administrator v. Thomas, EA-4309 (1994).
28. See Administrator v. Carson, EA-3905 (1993).
29. See 5 U.S.C. § 701.
30. See Id. § 704.
31. 49 U.S.C. § 44709(d)(3).
32. See 5 U.S.C. § 504.
33. See 49 CFR § 821.1 et seq.
34. See 5 U.S.C. § 552(a).
35. 900 F. 2d 369 (1990).
36. 499 U.S. 144 (1991).
37. See Robert A. Anthony, “Symposium on the 50th Anniversary of the APA: The
Supreme Court and the APA: Sometimes They Just Don’t Get It,” 10 Admin. L .J.
Am. U. 1 (Spring 1996).
This page intentionally left blank
6 Commercial Law Applications
to Aviation-Related Transactions

CONTRACTS 160
Mutual agreement 160
Consideration 161
Capacity 162
Lawfulness 162
Defenses to contracts 164
Rights, duties, and remedies for breach 167
SALES LAW 170
Sales law versus contract law 171
Warranties 171
Transfer of title and risk of loss 173
DEBTOR-CREDITOR LEGAL ISSUES 174
Credit—unsecured and secured 175
Bankruptcy 177
CASES AND COMMENTARY 179
DISCUSSION CASES 187
ENDNOTES 189

159

Copyright © 2006 by The McGraw-Hill Companies, Inc. Click here for terms of use.
160 Fundamentals of Aviation Law

Every day aviation businesses and professionals are engaged in commercial transac-
tions that are aviation-related. The function of this chapter is to provide you with a
working knowledge of basic commercial law as it relates to the aviation environment.
For the purposes of this chapter, we will loosely define commercial law as the law of
contracts, sales law, and debtor-creditor relationships.

CONTRACTS

Have you entered into any contracts today? You may not think you have, but it is likely
that you have engaged in one or more contracts by the time any given day is over. Every
time you make a purchase at a retail store, whenever you eat out at a restaurant or cafeteria,
as you register for classes at your university—during any of these routine occasions you
are entering into a contract.

What is a contract? A contract is defined by the American Law Institute (ALI) as “… a

promise or a set of promises for the breach of which the law gives a remedy or the per-
formance of which the law in some way recognizes a duty.”1 Boiled down to its essence,
the definition indicates that a contract involves promises that the law will enforce. Does
this mean that there are promises that the law will not enforce? Indeed, the answer to
this is yes—there are many promises the law will not enforce. For example, courts will
not enforce social promises; for instance, a promise that you might make with a girl-
friend or boyfriend to go on a date this coming Saturday may be morally binding, but
it is not legally binding.

What will make one promise legally enforceable while another promise is not? The
answer to this question has been developed over many centuries of cases establishing a
formidable body of common law for contracts. It essentially distills to the following:
For a contract to be legally enforceable, it must meet all these requirements:
1. There must be a mutual agreement or meeting of the minds between all parties.2
2. The agreement must be supported by legally recognized consideration.3
3. Parties to the contract must have the intellectual capacity to enter into a contract.4
4. The agreement must be for a lawful objective.5
5. There must not be any legal defense to the contract.6

We will briefly go through each of these requirements, along with some other basic
contract law issues.

Mutual To have a legally enforceable contract, both parties must agree on the substance of
agreement the agreement. Many times this requirement is referred to as a “meeting of the
minds.”7

When courts check to see if there is a mutual agreement between the parties, one of the
first things they might look for is whether there was (1) an offer and (2) an acceptance.
An offer is defined as “the manifestation of willingness to enter into a bargain, so made
 Commercial Law Applications to Aviation-Related Transactions 161

as to justify another person in understanding that his assent to that bargain is invited to
and will conclude it.”8 If someone says, “I will buy your airplane for $100,000,” it will
probably be considered a valid offer because it demonstrates the current intent to make
a deal. On the other hand, if someone says, “Would you consider selling your airplane
for $200,000?” it is probably not an offer—most likely the courts would view this kind
of statement as an invitation for negotiations. In the end, to create a valid offer, the
terms of the offer must be definite and communicated with clarity.

An acceptance is an action or a promise by the party receiving the offer that indicates
a willingness to abide by the offer as presented. One issue that comes up from time to
time is the offer that is accepted with a condition. Suppose you were selling an airplane
and your offer was “as is” with a $200,000 sales price. A few days later a potential
buyer comes to you and states, “I accept your offer to sell the airplane for $200,000 as
long as you repaint the aircraft before I take delivery.” That sort of exchange does not
represent an offer and acceptance. The law views this exchange as an offer and a coun-
teroffer. Therefore you, as the seller, have the legal ability to either accept or reject the
counteroffer presented by the prospective purchaser.

Consideration is the second requirement for an enforceable agreement. The term Consideration
consideration means something of legal value that is given in exchange for a promise
or an act.9 Consideration is typically presented in the form of money. However, it can
be other property, performance of services, or the giving up of a legal right (e.g., agree-
ing to drop a lawsuit in exchange for a monetary settlement). In essence, consideration
means giving up or doing something you otherwise would not have to give up or do.

The requirement for consideration makes many promises legally unenforceable. For
instance, a promise to give a friend a new Global Positioning System (GPS) receiver for
her birthday is not an enforceable contract—your friend does not give up anything in
exchange for your promise. This situation is often referred to as a gift or gratuitous
promise. If, however, you promised to give your friend a new GPS if she tutored you
for your aviation law class—and she did—the promise would be legally enforceable.

Sometimes determining whether consideration exists is a tricky question. Suppose your

company sent one of your corporate aircraft for a new paint job. You were placed in
charge of seeing the job through and given a budget of $30,000. The paint shop agreed
on a fixed price of $25,000, and an estimated completion date was set. About one week
before the expected completion date, the paint shop calls your office to inform you that
the price of the paint you wanted to use on the aircraft recently increased by 50 percent,
and the company would need an extra $5000 to complete the job in a timely manner.
You agree to pay the extra $5000; the aircraft is painted, the job looks good, and it is
done on time. When your boss sees the bill for $30,000, he discusses the deviation from
the original agreed upon price with you. Although the job was still within your budget,
your boss refuses to pay the extra $5000 requested by the paint shop. He sends a check
for $25,000, and the paint shop sues for the remaining $5000. Who will win?

The initial instinct of most nonlawyers is to say that the paint shop will win. After all,
you promised to pay the additional $5000. You should have to live up to your promise.
162 Fundamentals of Aviation Law

However, most courts would look at this situation differently. The fact is that the paint
shop agreed to paint the airplane for $25,000. That was the deal. When the paint shop
called you to ask for $5000, the company offered no additional consideration for the
extra money. In other words, the paint shop had a preexisting contractual duty to fin-
ish the job for $25,000. The paint shop will not be able to change the deal just because
the cost of the job increased. However, the courts would respond differently to this sit-
uation if the paint shop simply offered something in the way of additional considera-
tion, for example, some fancy decals or a faster delivery schedule. If that were the
case, the courts would uphold the need to pay the extra $5000 because of the additional
consideration.10

Capacity For an agreement to rise to the level of a legally enforceable contract, another require-
ment that must be met is capacity. Capacity means the ability to knowingly enter into
and understand the obligations that a contract entails. The law presumes that all parties
to a contract have the capacity to enter into the contract. However, there are certain
instances in which the law recognizes that a person may not be contractually capable.
The three most common instances of incapacity to contract are
• Minority age11
• Mental incompetence12
• Intoxication13

In the aviation environment, you seldom run across cases involving the issue of inca-
pacity. However, if a person entering into a contract is deemed to have lacked contrac-
tual capacity at the time of the contract, the contract will be deemed to be voidable by
the party with the incapacity. This means, for instance, that if an aircraft was sold to
a16-year-old, the 16-year-old can return the aircraft (at his option) after the purchase
and receive back the entire purchase price (even if the aircraft was used for several
hours of flight time).

Lawfulness Beside the requirements already discussed, an agreement has to have a legal objective
in order to be enforceable under the law. If an agreement involves illegal objectives, it
will be deemed void by the courts—this means that it cannot be enforced by any of the
parties involved.

Obviously, contracts that involve the commission of crimes are illegal and not enforceable
by the law. A contract employing a “hit man” to dispose of a nasty boss or curmudgeonly
college professor is clearly not going to be enforceable by either the “hit man” or the party
paying the hit man. However, often the question of illegality in a contract is much more
subtle.

Case law is replete with examples of contracts the courts deem “illegal” and thus unen-
forceable. Examples of “illegal” contracts include, but are not limited to, (1) contracts
violating usury laws (laws that cap interest rates on loans), (2) contracts violating
gambling or lottery statutes, (3) contracts contrary to public policy, (4) covenants
not to compete, and (5) exculpatory or hold harmless contracts or clauses within
contracts.
 Commercial Law Applications to Aviation-Related Transactions 163

Within the context of the aviation industry, we will take a look at covenants not to com-
pete and exculpatory or hold harmless contract clauses in greater detail here. These are
two situations that often arise in an aviation context.

Covenants not to compete

Covenants not to compete often arise in the context of the sale of a business and/or
employment contracts.

When someone sells a business, the buyer will often want to ensure that the seller
cannot open up a similar business that will have the ability to compete with the very
business the seller just sold. For example, State Municipal Airport has one fixed base
operator (FBO), State Aero. that sells fuel, provides flight instruction, rents aircraft,
and provides maintenance and repair services for aircraft. The owners of State Aero
enter into negotiations with you to sell their business to you via a sale of all assets. You
and your counsel discuss a potential agreement, and your counsel suggests that to pro-
tect your interests, you should require that State Aero sign an agreement that includes
a covenant not to compete. Your counsel drafts a provision in the final agreement that
prohibits State Aero from operating a similar business on State Municipal Airport or
any other airport within 50 miles for a period of 2 years. Will this provision be valid and
enforceable against State Aero?

Under general common law principles, this agreement might have a problem. The
courts generally disfavored any contracts that restricted trade. However, over time, the
courts have recognized that covenants not to compete can be valid if (1) they are ancil-
lary to a legitimate sale of a business; (2) the line of business protected is clearly
defined; (3) the geographic area protected is reasonable within the context of the agree-
ment and the type of business to be protected; and (4) the duration of the restriction is
reasonable. Obviously, the most common disagreements come about when one is
attempting to determine just what a “reasonable” restriction might be; but for the pur-
poses of this example, if 2 years and 50 miles are considered fair, the provision will
likely stand up to any legal challenge.

In the context of employment agreements, the test is also one of “reasonableness.” What
if you are presented with an employment agreement from a regional air carrier that
prohibits you from working for a competitor for 1 year after you leave your employment?
What sort of restrictions might be deemed reasonable with respect to geographic
location or time?

Hold harmless clauses

Exculpatory or hold harmless clauses are contract provisions that relieve parties from
tort liability. These types of clauses arise from time to time in an aviation context.
Properly drafted and in appropriate circumstances, exculpatory clauses may work to
relieve a party of liability for ordinary negligence. However, they will not excuse lia-
bility for willful misconduct or gross negligence.

As a general rule, courts will not favor an exculpatory clause unless the parties involved
are deemed to be of roughly equal bargaining power. When such parity exists, the courts
164 Fundamentals of Aviation Law

will usually permit the parties to negotiate their risk for liability. However, in all cases,
the courts will ensure that the language of the clause in question is unambiguous and
fitting for the circumstances in which it is being evoked.

Defenses Even if it appears that all the elements to create a valid contract are present, there may
to contracts still be defenses available that will cause the contract to be unenforceable. The first set
of defenses can be generally classified as challenging whether the mutual agreement
between the parties was real. Lawyers often refer to this as genuineness of assent. The
second defense deals with a more technical issue: Should the contract be in writing?
Most nonlawyers believe that all contracts must be in writing. You’ll learn that is hardly
the case.

Is the mutual agreement real?

There are several possible grounds to challenge the genuine nature of the “meeting of
the minds” between the parties to an agreement. Some of the more likely grounds are
the following:
• Mistake
• Fraud
• Undue influence
• Duress

Mistake Can a mistake cause an agreement to be unenforceable? The answer to this

question depends on the type of mistake made.

If the mistake was a misunderstanding by only one party, often referred to by lawyers
as a unilateral mistake, the contract will still be enforceable. For example, you approach
an aircraft dealer for a new corporate jet for the corporate flight department you man-
age. You would like an aircraft with a JXY-2 GPS. You do not say anything to the bro-
ker about this preference; however, you have assumed that the aircraft you have settled
on has the JXY-2. You sign a contract for the aircraft and soon learn that the aircraft
does not have a JXY-2. Your unilateral mistake will not cause the contract to be invali-
dated. One exception to this rule exists if the nonmistaken party knows of the other
party’s error and uses it to his or her advantage.

Another type of mistake is the mutual mistake of material fact. If both parties are mis-
taken as to an important fact that forms the basis of their bargain, the contract may be
rescinded by either party. The basic theory of rescission in the case of a mutual mistake of
fact is that there was never a true “meeting of the minds” between the parties—therefore,
there was never genuine assent. To illustrate, assume that you purchase an aircraft from
a dealer with the understanding that it had a total of 5000 hours and another 1100 hours
until an engine overhaul was required. The dealer had the same understanding when he
purchased the aircraft from the original owner. However, it turns out that the aircraft had
more than 10,000 hours of total time and just 60 hours until its next overhaul was
required. In this case, both you and the dealer made a mutual mistake of material fact.
It is therefore likely that you would be able to rescind the contract.14
 Commercial Law Applications to Aviation-Related Transactions 165

One final type of mistake worth noting is mutual mistake of value. This is a mistake in
which the parties to the agreement properly identify the object of the agreement. However,
both parties are mistaken as to its value. For instance, suppose you spot an advertisement
on the Internet posted by someone selling a vintage Piper Cub that has been taken apart
and boxed up in parts. Some of the parts are damaged, and it is unknown whether all nec-
essary parts are available to reconstruct the original airplane. The seller is selling the
boxed parts for $1000. You are interested and willing to take a chance. You pay the $1000
and take the boxed parts home to your hangar. Once you begin construction of the aircraft,
it is discovered that this was the Piper Cub first soloed by Neil Armstrong, the first astro-
naut to walk on the moon. The airplane can be sold for $100,000. This is a mistake of
value, and the seller cannot rescind the contract. If the rule were any different, all con-
tracts could be subject to rescission by the party who did not get the best of the deal—the
courts are not responsible to protect parties from mistakes in contracts.

Fraud Fraud is a defense to a contract. The terms fraud and fraudulent misrepresenta-
tion refer to situations in which a person deliberately misleads another with regard to mate-
rial facts that are relied upon in forming a contract. If the fraud induces someone to enter
into a contract, the law holds that there was never genuine assent to the contract and, there-
fore, no meeting of the minds. If this is the case, the innocent party harmed by the fraud
may be able to void the contract if she or he can prove the following elements of fraud:
• False representation of material fact
• Intention to deceive
• Justifiable reliance on the part of the innocent party
• Injury to the innocent party

Note that the elements of fraud do not permit a party to void a contract simply because
another party made a false statement. There must be proof that the false statement was
made with the intention to deceive and was reasonably relied upon by the innocent
party. There must also be actual damage incurred.

For example, Sam Seller intentionally misleads Betty Buyer into thinking that his aircraft
engines had a recent overhaul, when in fact the overhaul was done many years earlier and
was never properly documented by Sam in the aircraft maintenance logs. If Sam’s fraudu-
lent statement induced Betty to purchase the aircraft and caused her damage because of the
need to overhaul the engines sooner than expected, she can void the contract with Sam.

Undue influence The law may permit a party to rescind a contract if the injured party
can show that the other party took advantage of his or her physical or mental infirmity
by unduly influencing that person to enter into a contract. In some cases, undue influ-
ence is presumed when someone in a dominant position or a position of trust, such as
a physician or lawyer, exerts pressure on a patient or client to enter into a contract that
benefits the dominant party.

To illustrate, Charlie is 80 years old and suffers partial paralysis from a stroke. He requires
constant nursing care. His children hire Valerie, aged 28, as his full-time, live-in nurse.
Valerie is an aviation aficionado, and she and Charlie often converse about airplanes and
166 Fundamentals of Aviation Law

the private airstrip at Charlie’s waterfront house in Connecticut, which is now worth sev-
eral million dollars. When Charlie passes on several months later, his children learn that
Charlie sold the beach house and airstrip to Valerie for $25.00. They sue to have the con-
tract rescinded based on a theory of undue influence. Will they succeed?

Duress Having a contract rescinded due to duress is a very rare occurrence. However,
duress is a ground of defense against a contract. Duress occurs when one person forces
another to enter into a contract under threat of bodily harm (to the innocent person or
another).

Does the contract need to be in writing?

Nonlawyers are often surprised to learn that most types of contracts do not need to be
in writing. In fact, when our current system of contract law was first developing in
England, there was no requirement that any contracts be in writing. However, the
English courts became increasingly concerned about perjured testimony being used to
establish contracts that never existed. In response to these concerns, the English devel-
oped a “Statute of Frauds” designed to reduce fraud by requiring that certain contracts
be reduced to written form.

Most states have adopted the Statute of Frauds in one form or another. Contracts
required to be in writing include (but are not limited to) the following:
• Contracts transferring or involving interests in land15
• Contracts that cannot be performed within 1 year16
• Contracts for the sale of goods greater than $50017

The requirement for contracts involving interests in land to be in writing is expansive.

This requirement includes land, land improvements (such as buildings or houses), min-
erals, timber, crops, or anything else attached to the land. Mortgages representing
indebtedness secured by land must also be in writing, as must contracts with real estate
agents who assist in selling land and improvements to land.

The “1-year rule” under the Statute of Frauds requires that if a contract cannot be
performed by its own terms within 1 year, it must be reduced to written form to be
enforceable. The motivation behind this rule is to protect against misunderstandings
and disputes that might occur because of the passage of time and difficulty in remem-
bering all the details of a distant transaction. Under this rule, a contract to hire Jim as
a chief pilot for 6 months need not be in writing. However, if Jim is hired as chief pilot
with a 2-year contract, the contract will need to be in writing.

Perhaps one of the most important requirements of the Statute of Frauds is that any con-
tract for the sale of goods (goods are usually defined as things that can be touched and
moved) greater than $500 be in writing. This requirement has been codified in most
state laws adopting the Uniform Commercial Code (to be discussed later in this chapter).
This rule is especially important in the aviation environment where many sales of goods
include equipment or machinery of very high value—for these contracts to be enforce-
able, they must, as a general rule, be in writing.
 Commercial Law Applications to Aviation-Related Transactions 167

Once all the elements of a contract are in place, and no defenses exist, the contract is a Rights, duties,
legally enforceable promise or set of promises. Each party has rights and duties as they and remedies
have been laid out in either a written or an oral agreement. But what happens if a party
for breach
wants to transfer her or his contract rights or duties to a third party? And what happens
if a party breaches the contract by failing to live up to his or her obligations under the
agreement? We will briefly discuss these issues below.

Assigning contract rights to a third party

In most cases, a party to a contract can assign or transfer rights in the contract to another
party. Most times this is referred to as an assignment or an assignment of rights.18

To illustrate, let’s assume that Sam’s aviation repair station (“Sam’s Mufflers”) over-
hauls and remanufactures airplane mufflers. Most of its business comes from repeat
customers who buy the mufflers on credit from the repair station. From time to time,
Sam needs cash before his credit accounts come due or can pay. When this happens,
Sam assigns his rights to the payment from his customers to a finance company (“Aero
Finance”) that gives him cash (90 percent of the total amount of the credit accounts
due) and then collects the full value of the credit account from Sam’s customers. The
only requirement for this arrangement to work is that any of Sam’s credit customers
who are involved must be given notice of the assignment and to whom they should
make payment. See Fig. 6-1 for an illustration of how this type of assignment works.

In certain instances, the parties may agree that an assignment may not take place or that it
may take place only if the other party approves. These provisions are generally enforceable.
However, the courts tend to side on the ability to freely transfer or assign contract rights.

Delegation of contract duties

In concert with the right to assign contract rights, the law also permits the delegation of
contractual duties. When a party delegates a duty to a third party, and the third party
does not perform in accordance with the underlying contract, the person who delegated
his or her duties remains liable.19

Although most contract duties can be delegated, some are of such a personal nature or
require significant skills and experience that they cannot be transferred. To illustrate,

Mufflers Figure 6-1

Sam’s Mufflers Customers
Illustration
of contract
Assigns assignment.
right to
collect $90,000
$100,000
of credit $100,000
accounts

Aero finance
168 Fundamentals of Aviation Law

suppose a military aircraft manufacturer, Grummor, signed a contract with Charleen, a

veteran test pilot and engineer who has flown several thousand hours in aircraft similar
to the one she contracted to test for Grummor. If Charleen attempted to delegate her
duties to another test pilot, there is a reasonable chance that Grummor could invalidate
the designation by arguing that the company specifically wanted Charleen because of
her particular experience and skills.

Third-party beneficiaries
Sometimes a contract is designed to benefit someone who is not a party to a contract.
Someone designated to benefit under such a contract is referred to as a third-party ben-
eficiary. The most common example of a third-party beneficiary is a designated bene-
ficiary under a life insurance contract.20

There are also times when a contract is not designed to intentionally benefit third parties,
but it will clearly have the effect of such benefit. For instance, Parker County contracts
with a builder to construct a large, modern airport capable of handling large corpo-
rate aircraft. Seeing the potential for growth in the area, a real estate developer begins
work on developing commercial sites around the area where the expected airport will
be located. The developer invests millions of dollars in the project. However, the proj-
ect is delayed more than 5 years owing to breaches by the builder. The delay causes the
real estate developer to cancel the project and declare bankruptcy. Even though the real
estate developer would have benefited if the project went through as planned, the devel-
oper has no cause of action against either Parker County or the builder—in this case the
developer was a mere incidental beneficiary. Incidental beneficiaries have no cause of
action against any parties to an agreement.

Remedies for breach of contract

Most contracts, whether verbal or written, come to a successful conclusion with all par-
ties substantially performing their duties in accordance with the contract terms.
However, there are contracts that do not have such happy endings. When a party fails
to materially adhere to the terms of a contract, the contract has been breached.

So what happens when a contract is breached? What remedies are available to the non-
breaching party? For all practical purposes, there are three types of damages available
when a contract has been breached:
• Rescission of contract
• Monetary damages
• Equitable damages

A brief discussion of these different forms of contract damages follows.

Rescission Rescinding a contract means undoing it. A contract may be rescinded if

one of the parties has materially breached a contract or if the contract is invalid because
it does not meet all the required elements of a contract (e.g., the contract was entered
into based on fraud).21
 Commercial Law Applications to Aviation-Related Transactions 169

To undo the contract and restore the parties to the position that they were in prior to the
contract, both parties must be prepared to return any consideration transferred by the
other party. This return of consideration is often referred to as restitution.

Consider this example. Swifty’s Pilot Shop enters into a contract with Sonics, a supplier
of low-noise headsets, for $200,000. Swifty’s makes an initial good faith payment of
$20,000, and the first order of approximately $15,000 worth of headsets arrives. It is
soon discovered that the headsets are materially defective and the defects cannot be
cured. Swifty’s can rescind the contract and get back its $20,000. Sonics is entitled to
the return of its headsets.

Monetary damages In some cases rescission is not a viable option. In many of these
cases, the nonbreaching party may be able to pursue money or monetary damages to
remedy a breach. Monetary damages usually come in one of three forms:22
• Compensatory damages
• Consequential damages
• Liquidated damages

We will take an overview of each of these different forms of monetary damages.

Compensatory damages With compensatory damages, the law attempts to make the
nonbreaching party whole. It does so by compensating the nonbreaching party so she
stands in the same position she would have been in if the contract were fully performed.

Consider the following example. An airport owner, Crosswinds County, contracts with
Salgado Bros., Inc., a builder, to construct new T-hangars on the airport. Salgado and
Crosswinds enter into an agreement requiring Salgado to prepare the land and erect 25
T-hangars within 6 months from the contract date. The contract calls for a $1.5 million fee
to be paid to Salgado in exchange for its work on the project. Crosswinds breaches the con-
tract and informs the builder a few days after work is started that it does not wish to contin-
ue the project at that time. If Salgado’s reasonable expectation was a $1.5 million contract
with $1.2 million in costs (labor, materials, etc.), Salgado should be able to collect com-
pensatory damages equal to the amount of its profit if the contract had been fully execut-
ed ($300,000) plus any amounts already expended on the work started.

Consequential damages Consequential damages are allowed in cases in which com-

pensatory damages for lost profits or costs paid are not sufficient to bring a party back
to where the party would have been if a contract were not breached. Suppose in the
example above that just days before Salgado started work on the T-hangars, another air-
port owner requested Salgado’s services, but required that the work start immediately.
Salgado declined the offer to do the work because of the commitments to Crosswinds.
When Crosswinds breaches the contract, it may be liable to Salgado for the lost profits
from the job that Salgado had to forgo because of its expectation that Crosswinds would
follow through on its contractual obligations.

Liquidated damages Sometimes, the parties to a contract will agree to damages at

the time they come to agreement on the contract. There are two requirements for
170 Fundamentals of Aviation Law

liquidated damages to be enforceable. First, the circumstances must be such that actual
damages would be difficult to determine. Second, the amount of liquidated damages
called for in the contract must be reasonable—if the damages are excessive, they will
be deemed a penalty and therefore would be unenforceable.23

To illustrate, assume that Joan contracts with Pete’s A&P Shop to perform an annual check-
up on her aircraft. The agreed upon minimum charge for the annual checkup is $4000. Joan
tells Pete that it is imperative that the aircraft be ready in 6 weeks on July 1 so that Joan can
use the aircraft for some marketing and sightseeing flights she would like to take her cus-
tomers on during a marketing convention day. Joan and Pete agree that if the aircraft is not
ready by that date, she will be entitled to liquidated damages in the sum of $2000. Without
good cause, Pete does not have Joan’s aircraft ready by July 1, and Joan misses the oppor-
tunity to use her aircraft at the marketing convention. In this case, the courts would likely
enforce the liquidated damages clause. It is very difficult to assess Joan’s damages due to
the lost opportunity to schmooze her clients with the flights. Under the circumstances, it
also appears that the amount imposed as liquidated damages ($2000) is not excessive or
unreasonable, given that the minimum cost of the annual checkup is $4000.

Equitable damages If monetary damages cannot remedy a contract breach, the injured
party may have to resort to equitable remedies. The three most common equitable reme-
dies are (1) specific performance, (2) reformation, and (3) injunction.24

Specific performance means that the courts will require the breaching party to perform in
accordance with the contract. This remedy is very rarely granted because it is permitted
only when the subject matter of the contract is so unique that it cannot be replicated.
Specific performance is usually available in cases involving land, antiques, heirlooms, etc.

Reformation is also rarely utilized by the courts. However, when necessary, the courts
will “reform” a contract to better reflect the parties’ intentions. This may be appropri-
ate when typographical or clerical errors need to be corrected in a contract.

Injunctions are granted to prohibit a party from performing an act in violation of a contract.
For example, an airport owner signs a 5-year lease for a hangar and office space with a
tenant who will use the space for commercial operations. The tenant complies with the
terms of the lease in all respects. However, about 18 months into the lease, the airport
owner gets a better offer for the space and takes action to have the tenant removed, with
an offer to refund the rent paid. The tenant refuses to leave and argues that he has spent
a lot of time and money to establish a business at the airport. In a case like this, the
tenant will likely file for an injunction ordering the airport owner to abide by the terms
of the lease because monetary damages may not be sufficient to compensate the tenant
if he is forced to vacate the hangar and office space.

SALES LAW

Sales are transactions involving the transfer of goods from one party to another. Goods are
understood to be personal property (as opposed to real property—land or buildings affixed
to land). Personal property has the characteristic of being both tangible and movable.
 Commercial Law Applications to Aviation-Related Transactions 171

For many centuries, sales of goods were treated just as any other contracts. However,
during the early 1900s there was a push to standardize the laws among the various states
for transactions involving commerce, including sales transactions. These efforts at stan-
dardization culminated in late 1930s with the development of the Uniform Commercial
Code (U.C.C.). The U.C.C. dealt with sales law, negotiable instruments, secured trans-
actions, and other commercial law issues. The U.C.C. is now adopted as state law in vir-
tually every state in the United States.

In many respects, U.C.C. sales law is a subset of contract law and property law. For the
purposes of our discussion, we will focus on some of the significant aspects of sales law
as it relates to transactions in an aviation context. In that regard, first we will look at a
few examples of how sales law differs from contract law. Next we will look at how war-
ranties can be created and disclaimed in sales contracts—a significant topic in the aviation
environment. Finally, we will review the basics of transfer of title and risk of loss.

There are several instances in which contracts (driven by common law) and sales Sales law
(driven by statutory law) differ. Some critical points of departure between the two relate versus
to the issue of definiteness. Under common law, contracts had to be very definite and contract law
complete. The U.C.C. loosens these requirements. Specifically, the U.C.C. allows sales
contracts to contain open price, delivery, and quantity provisions. This means that a
sales contract, unlike a common law contract, can be enforced with no reference to
price, mode of delivery, and/or quantity of goods to be sold. The U.C.C. addresses these
issues by requiring that parties act in good faith and that any amounts unknown at the
time of contract be “filled in” using reasonable valuations, times, and amounts.25

Another significant difference between common law contracts and the U.C.C. involves
the use of option contracts. Under the common law version of contracts, an offer could
be revoked at any time before an acceptance. For instance, if Bob was selling a used
GPS unit for $2000 and told Juanita that he’d hold his offer open to her for 10 days,
Bob could still sell the unit to a third party within the 10 days because Juanita provided
no consideration in exchange for Bob’s promise to hold the offer open for 10 days.
However, under the U.C.C., Bob’s promise to keep the offer open would be treated as
an “option” and would be enforceable, even with no consideration from Juanita.26

There are numerous additional differences between the U.C.C. treatment of sales
contracts and common law contracts. Suffice it to say that the U.C.C. reduced the need
for rigid formality required under the common law. The rigidity is replaced with stan-
dards of good faith and reasonableness that the courts must enforce, if necessary. In the
end, the law of sales under the U.C.C. was designed to make it less cumbersome for
parties to engage in commerce.

In the aviation environment, the issue of warranties is frequently encountered. Under Warranties
the U.C.C. warranties are assurances from a seller to a buyer that the goods being pur-
chased meet certain standards. If the goods fail to meet the standards set in the warranty,
the buyer has a claim against the seller for breach of warranty.

The U.C.C. recognizes two types of warranties: express and implied. A quick review of
the legal essentials for both types of warranties follows.
172 Fundamentals of Aviation Law

Express warranties
Express warranties are the most recognizable type of warranties. They are created when
a seller affirms that the goods being sold meet certain quality standards. Contrary to
what most lay people believe, express warranties do not have to be created in writing.
They can be generated by oral statements or inferred by the conduct of the seller.27
Express warranties may also be created by descriptions of goods that become a part of
the bargain28 and samples of models of the goods to be sold.29

It can be confusing at times to sort out the difference between express warranties and
salesmanship involving statements of opinion. If an aircraft dealer tells you that the air-
craft you are looking at is the “sweetest flying aircraft this side of the Mississippi,” the
dealer is stating an opinion, not creating a warranty. On the other hand, if the dealer tells
you the engine on the aircraft has 1000 hours before the next required overhaul, the
seller creates an express warranty.

Implied warranties
Three types of implied warranties are important in the aviation environment: (1) implied
warranty of title, (2) implied warranty of merchantability, and (3) implied warranty of
fitness for a particular purpose.

The implied warranty of title is relatively straightforward. This implied warranty means
that whether stated or not, all sellers warrant that (1) they hold title to the asset they are
selling and have the legal authority to sell the asset and (2) there are no claims by third
parties (liens) against the asset. With aircraft, a buyer does have the ability to ensure (by
searching FAA records) that the aircraft being purchased belongs to the person who is
selling the aircraft. However, with many aircraft parts and accessories, such an inquiry
may be difficult, if not impossible. Therefore, the buyer gets the protection of this
implied warranty of title.30

An implied warranty of merchantability is created when a merchant (someone who

regularly deals in goods of a certain type or who has special knowledge of such
goods) sells goods. This warranty implies that the goods sold are fit for the ordinary
purposes for which they are used. The first thing to note with this type of warranty
is that it applies only to sales made by merchants. It does not apply to casual sales
made by individuals selling their personal-use goods second hand. The second thing
to note is that the implied warranty of merchantability does not require that the
goods sold be of the highest quality—only that the goods be usable for their ordinary
function.31

An implied warranty of fitness for a particular purpose applies to both merchant and
nonmerchant sellers. This warranty applies if the following conditions are met: (1) the
seller has reason to know that the buyer will make a particular use of the goods to be
purchased; (2) the seller indicates that the goods will function appropriately for the con-
templated use; and (3) the buyer is dependent on the seller’s skill or judgment in mak-
ing the purchase. To illustrate, Joel considers the purchase of new seats for his Cessna
Caravan, an aircraft he uses in his cargo operations. He contacts Torgeson Aircraft
 Commercial Law Applications to Aviation-Related Transactions 173

Refurbishment to see if it can help. After Joel describes his needs, the salesperson at
Torgeson leads Joel to purchase a set of reconditioned aircraft seats for the Caravan.
After a few uses, it becomes apparent to Joel that the seats are fine, but they are not the
right fit for the Caravan—they are hard to adjust and too tight against the side panels of
the cockpit. Joel would have a cause of action against Torgeson for breach of warranty
of fitness for a particular purpose.32

Implied warranties may be disclaimed by sellers. The U.C.C. provides for several dif-
ferent approaches to legally disclaiming implied warranties. Perhaps the most widely
used approach to disclaiming implied warranties is the use of language clearly and con-
spicuously indicating that a sale is being made “as is” and/or “with all faults.”33 Implied
warranties may also be inapplicable when a buyer has been offered an opportunity to
inspect goods but has refused the opportunity to examine.34 Both of these disclaimers
and exclusions come about frequently in cases of aircraft sales in which used aircraft are
sold and when a buyer is offered the opportunity for a prepurchase inspection of an air-
craft but fails to do so.

Rules related to transfer of title and risk of loss are particularly important in the avia- Transfer of title
tion environment. Aircraft and aircraft parts and accessories are expensive, and it is and risk of loss
imperative that the parties know just when they own these types of goods and when they
bear the risk that they will need to insure for losses. While the discussion below is by
no means exhaustive, it is meant to acquaint you with the fundamentals of transfer of
title and risk of loss issues as they relate to aviation transactions.

Transfer of title
Once a buyer identifies the goods that she or he will be purchasing and a contract for
purchase is in place, either the goods can be physically delivered to the buyer or the
buyer can pick up the goods at a predetermined place. The determination of when title
is transferred depends, in part, on whether the goods are delivered to the buyer or not.

If the goods have to be transported to the buyer, the next question concerns whether a
shipment contract or a destination contract is in place. In a shipment contract, the seller’s
responsibility is to get the goods to a common carrier (e.g., UPS, FedEx, Yellow Line).
In a destination contract, the seller has the responsibility to transport the goods all
the way to a place designated by the buyer. In a shipment contract, title passes once the
goods are delivered to a common carrier. In a destination contract, title passes once the
goods arrive at the buyer’s designated destination. Therefore if Earhart Avionics enters
into a contract with Air Transport in which Earhart will sell and deliver to Air Transport
5 new weather radar units, via a shipment contract (using UPS as the common carrier),
then title to the radar units will pass once the goods reach UPS. If the contract is a
destination contract and the designated destination is Air Transport’s hangar at Fort
Lauderdale, Florida, then title to the radar units does not transfer to Air Transport until
they are received by Air Transport at its Fort Lauderdale hangar.35

If the goods are delivered to the buyer without the need for transportation, title trans-
fers at the moment of contract. For instance, if Air Transport simply contracted and
174 Fundamentals of Aviation Law

simultaneously picked up the 5 radar units directly from Earhart, the transfer of title
would be complete at the time and place of the contract.36

Risk of loss
Article 2 of the U.C.C. establishes a rather intricate set of rules for when risk of loss pass-
es from a seller to a buyer. Determination of risk of loss is important because sometimes
goods are destroyed, lost, or damaged before delivery to a buyer (not due to any fault by
either the buyer or the seller). The question is, Who will bear such a loss? Interestingly,
risk of loss does not always pass to a buyer at the same time as the title does. A review of
some of the more commonly encountered risk of loss issues in aviation follows.

The first thing to note is that the U.C.C. allows the parties to determine who bears the
risk of loss. Therefore, by agreement, the parties can assign risk of loss, and the law will
respect any such agreement by the parties.37 If the parties do not specifically agree on
how risk of loss will be assigned, then the determination of who bears the risk depends
on whether the goods are to be transported or not (see example above for Earhart
Avionics).

Risk of loss rules when goods are transported to the buyer closely parallel the rules for
transfer of title. If the agreement is a shipment contract, then title and risk of loss pass
at the time the goods are delivered to the common carrier. If the agreement is a desti-
nation contract, then title and risk of loss pass at the time the goods are delivered to the
designated destination agreed to by both seller and buyer.38 Therefore, in transportation
cases, the risk of loss will transfer at the same time as the title.

In most other situations (in which no transportation is required to deliver goods to

the buyer), risk of loss will depend on whether the seller is a merchant or a non-
merchant. If the seller is a merchant, risk of loss will only pass upon the buyer’s
receipt of the goods. If the seller is a non-merchant, risk of loss will pass only upon
the seller’s offer to the buyer to pick up the goods. For example, suppose Betty goes
to Sidney’s pilot aircraft supplies shop and purchases a new transponder for $2000
upon Sidney’s agreement to install the transponder in Betty’s plane the next day.
That evening, the transponder is accidentally destroyed by a fire. Although the par-
ties had a contract for the purchase of the transponder, and although title had passed
to Betty, the risk of loss is borne by Sidney because he is the seller. On the other
hand, assume that Betty purchased a used transponder from Samantha, a bank exec-
utive selling some used parts from an old aircraft she owned. In this situation, the
risk of loss would pass immediately to Betty upon Samantha’s notification that the
transponder was available for pick up.

DEBTOR-CREDITOR LEGAL ISSUES

In Hamlet (1600), Shakespeare wrote: “Neither a borrower nor a lender be: For loan oft
loses both itself and friend. And borrowing dulls the edge of husbandry.” Despite his
admonitions regarding debt, there is little doubt that the U.S. economy is driven in large
 Commercial Law Applications to Aviation-Related Transactions 175

part by borrowing and lending activities. There is even less doubt that in the aviation
industry, debtor-creditor transactions have become an integral part of doing business.
In the first part of this section, we will take a brief look at the legal aspects of creditor-
debtor relationships. In the second part of this section, we take a broad overview of
bankruptcy laws—a topic that comes up all too frequently in recent years in the aviation
environment.

When creditors lend money or sell goods on credit, they can do so on a secured or an Credit—
unsecured basis. Unsecured credit is credit that does not require the debtor to provide unsecured
collateral (security) for the loan. This type of credit carries the highest risk for credi- and secured
tors and often the highest rates for debtors (e.g., credit card debt). Often if a debtor
defaults on amounts due to a creditor, the creditor may not be able to recover any of
the debt due if the debtor has no assets or income (this type of debtor is often referred
to as judgment-proof ).

On the other hand, secured credit is supported by collateral that the debtor must put up to
get the extension of credit. Of course, this type of creditgives the creditor a stronger meas-
ure of protection. For this reason, many transactions in the world of aviation are secured
transactions. These transactions are governed by Article 9 of the U.C.C. A discussion of
the basics of Article 9 follows.

Nature of secured transactions

The two most common forms of secured transactions are two-party and three-party
transactions. In two-party transactions, a seller sells goods (such as an airplane) to a
buyer and retains a security interest in the goods. For example, Campbell wants to sell
his airplane to Palmer, but Palmer does not have the money to pay for the purchase price
and cannot get credit elsewhere. Campbell may agree that Palmer can pay over time,
but with Campbell retaining a security interest in the aircraft until such time as Palmer
has fully paid. A two-party secured transaction is illustrated in Fig. 6-2.

In three-party transactions, the seller sells goods to a buyer who has obtained financing
from a third-party lender. The third-party lender then takes a security interest in the
goods purchased by buyer. To illustrate, assume in the example above that Campbell is
unwilling to sell his aircraft unless Palmer can pay the full purchase price. Palmer is
able to find a bank that will finance a loan for the purchase price. Campbell is paid in
full by funds from the bank, and Palmer now owes the bank the amount borrowed to
purchase the aircraft. The bank retains a security interest in the aircraft until Palmer
pays back the loan. A three-party secured transaction is illustrated in Fig. 6-3.

Figure 6-2
Two-party secured transaction.
Sale of aircraft on credit

Campbell (seller) Palmer (buyer)

Secured interest in aircraft

176 Fundamentals of Aviation Law

Figure 6-3 Purchase money

Three-party Campbell Palmer
(seller) (buyer)
secured Title to aircraft
transaction.
Security
Loan interest
of in
money aircraft

Bank

Protecting security interests

While the bank in the example above may have a security interest in the aircraft pur-
chased by Palmer, what would happen if Palmer defaulted on an earlier (and unrelated)
loan by another bank and that bank sought to obtain the aircraft in a judgment against
Palmer? This scenario raises the question of how a secured party (such as Palmer’s
bank) can protect its security interest against the interests that other creditors may have
in a debtor’s assets.

In U.C.C. Article 9, the law provides for three ways to protect a security interest. The
U.C.C. refers to this process as perfecting a security interest.

The first and most common method of perfection is to file a financing statement or other
approved document with the appropriate government recording office. This filing puts
the world on notice that the creditor has a security interest in the debtor’s property.39 In
many aviation transactions involving aircraft, engines, and propellers, the place to send
any such documents is the FAA’s Civil Registry Branch in Oklahoma City, Oklahoma.
This allows anyone who extends credit to review an aircraft’s files to determine whether
there are any prior creditors with an interest in the same collateral. Once the debt is sat-
isfied by the debtor, the creditor must file a termination statement indicating to anyone
reviewing government files that the debt has been discharged and the collateral released
from the security agreement.

A second method, which is very rarely used, is perfection by possession. This method
requires the creditor to physically hold an item as collateral until the loan or extended
credit is paid off. As you might guess, this approach is somewhat impractical in most
circumstances, especially in an aviation setting in which an aircraft or equipment must
be used by the debtor. When this method is used, the collateral must be returned upon
the payment of any debt owed.40

The third method is also a rarity in aviation, but not so uncommon in other transactions.
It is known as perfection by purchase of the money security interest. This method
allows for automatic protection or perfection in the case of consumer goods (e.g., home
appliances, furniture, televisions) when the seller extends the credit.41
 Commercial Law Applications to Aviation-Related Transactions 177

Other types of secured transactions

Artisans’ and mechanics’ liens are liens that artisans or mechanics may place on prop-
erty they have worked on in order to secure payment for their services. In the aviation
environment, if a mechanic has performed work on an aircraft or related equipment,
most state laws will permit the mechanic to hold a lien against the aircraft or equipment
regardless of whether the mechanic has possession of the aircraft or equipment. In other
states, the lien can be created without the need for possession. The FAA will record
mechanics’ liens from 32 states. In the remaining states, the FAA requires a court judg-
ment to record the lien.

Guarantees and surety arrangements

From time to time, a creditor may refuse to grant any credit to a party unless a third
person either guarantees or serves as a surety. In both cases, the guarantor or surety
holds out his or her credit as the security for the transaction.

A guarantor agrees to pay the debt of a debtor if the debtor defaults. In this type of
arrangement, if Joe’s parents guaranteed his debt on an airplane he purchased for his
new flight school, and Joe defaults, his parents will have to pay the full amount due on
Joe’s debt.

On the other hand, a surety is primarily liable. This means that the creditor does not
have to go after the debtor first. The creditor can simply pursue the surety. Sometimes
sureties are also referred to as cosigners. In the previous example, if Joe’s parents were
cosigners, the creditor who loaned the money would not have to pursue Joe first in order
to collect on the debt. Instead the creditor could simply turn to Joe’s parents as soon as
the debt came due.

In the case of a guaranty or a surety, the debtor will be liable to the guarantor if she or
he fails to pay the obligation. If Joe failed to pay his loan, his parents would have a
claim against him if they were required to pay as guarantors or sureties.

Sometimes the relationship between a creditor and a debtor does not end on a happy Bankruptcy
note. Debtors are sometimes unable to make good on their loans, and creditors are
sometimes harmed as a result.

The framers of our Constitution were well aware of this problem. They provided in the
Constitution that “the Congress shall have power … to establish … uniform Laws on the
subject of Bankruptcies throughout the United States.”42 Because of this very explicit
mandate to the federal government and subsequent laws, federal bankruptcy law has
superceded state laws on issues of debtor insolvency or bankruptcy. Consistent with the
need for a uniform body of bankruptcy law, all bankruptcy courts are federal courts.

Bankruptcy laws are very complex—we have no intention here of providing anything
but a brief overview with a focus on the most relevant bankruptcy issues affecting the
aviation industry. The discussion will begin with an introduction to the purpose of bank-
ruptcy laws, a description of the different types of bankruptcy available, and a closer
178 Fundamentals of Aviation Law

look at reorganizations under Chapter 11 of the Bankruptcy Code—an all too familiar
journey for many prominent air carriers in recent years.

Purpose of bankruptcy laws

The need for uniform bankruptcy laws resonated with the framers of the Constitution.
They understood that to create a society with an economic vibrancy, you had to
acknowledge that progress required risk taking. Of course, risk taking always carries
the chance of failure—the greater the risk, the greater the chance for failure. Rather than
stifle the motivation to take risks, the framers thought it would be best to provide failed
debtors with a chance at a fresh start. For better or for worse, that is what bankruptcy
laws are designed to do—allow debtors a chance to get out from under burdensome debt
and to move forward.

Specifically, bankruptcy laws achieve their general purpose by

• Creating an orderly process for creditors to get at a debtor’s remaining assets with-
out taking unfair advantage of other creditors
• Protecting creditors from improper or illegal attempts by a debtor to hide assets
• Shielding debtors from abusive collection methods
• Providing a chance to maintain existing business relationships

Different types of bankruptcy

There are several different provisions for bankruptcy. The Bankruptcy Code contains
nine chapters that deal with different types of bankruptcies and procedural issues in
bankruptcy courts. The most common types of bankruptcy are liquidation (Chapter 7),
reorganization (Chapter 11), and consumer debt adjustment (Chapter 13).

In a Chapter 7 or liquidation bankruptcy, a debtor files for protection with a bankruptcy

court, and the filing automatically suspends or stays all creditors’ actions against the
debtor. All of a debtor’s property, with the exception of certain property exempted by
federal and/or state law (e.g., a residence or retirement funds), is sold for cash. The
cash remaining after subtraction of the expenses of the bankruptcy (e.g., lawyer and
accountant fees) is used to pay off creditors to the extent possible. This discharges the
debtor from having to make any further payments on the debt involved in the bank-
ruptcy proceeding. In most modern-day liquidations, creditors receive only pennies for
each dollar they are owed. Sometimes a Chapter 7 bankruptcy is referred to as a “straight”
bankruptcy.

Chapter 11 bankruptcy is also referred to as reorganization. In a Chapter 11 proceeding,

the debtor can continue to operate its business, but must do so under the supervision of
the bankruptcy court. This is typically the approach employed by a business that is viable,
but unable to continue presently under the strain of current liabilities. One important
feature of a Chapter 11 bankruptcy is the right of the debtor to retain possession of its
assets during the bankruptcy proceedings. This gives the debtor the ability to continue
its operations as it works its way through bankruptcy.
 Commercial Law Applications to Aviation-Related Transactions 179

A Chapter 13 bankruptcy is designed to allow consumers to readjust their debt. The

readjustments can take the form of a plan authorized by the bankruptcy court in which
the debtor stretches out payments (over no longer than a 5-year period) and/or reduces
the total payments to be made. Once the plan is executed, the court can discharge the
debtor from any unpaid debts under the plan of readjustment.

Airlines and Chapter 11 bankruptcy

In the recent past, several airlines in the United States have filed for bankruptcy pro-
tection under the provisions of Chapter 11. Under Chapter 11 proceedings, the airline
is permitted to continue operations during the process of reorganizing and restructur-
ing its debts. Creditors’ committees—consisting of the airline’s largest creditors—are
formed and participate in the reorganization plan. During the bankruptcy proceed-
ings, the debtor airline gets a stay from certain legal actions by creditors. Once a plan
is approved by the airline’s creditors and the bankruptcy court, the debtor airline is
granted a discharge of all debts not included in the approved reorganization plan—
this terminates the discharged airline’s legal obligation to pay these debts.

Some large air carriers in the United States have filed for Chapter 11 bankruptcy once
or even multiple times. Some have survived the process, and others such as Eastern,
TWA, and Pan Am have not. Beyond the legalities involved in the bankruptcy process,
you should consider, in conjunction with Case 6-3 (found below in the “Cases and
Commentary” section), the following questions:
1. Does seeking Chapter 11 bankruptcy protection give an airline an unfair advantage
over its competitors?
2. Should there be a limit on the number of times an airline can seek the shelter of
Chapter 11 bankruptcy (some have been back to the courts two or three times)?
3. What industries and companies are most likely to suffer (as creditors) when an
airline gets Chapter 11 protection from the courts?
4. Who wins (financially) when an airline seeks Chapter 11 reorganization?

Delta and Northwest Airlines recently filed for bankruptcy protection under Chapter 11.
At the same time, tighter measures for Chapter 11 protection go into place and will be
in place by the time this text is published. It is anticipated by some legal experts that
there will be more filings—maybe even a raft of filings—in the near future to avoid the
obstacles imposed by the new bankruptcy laws. Some even believe that airlines that
might have gone to Chapter 11 bankruptcy for protection will now chose to file for
Chapter 7 and liquidate instead. Only time will tell how the new laws affect the airlines
and the industry as a whole.

CASES AND COMMENTARY

Sales of aircraft and related equipment are usually subject to the requirements of the
U.C.C. This means that there should be a written agreement laying out the terms of the
purchase and sale. It also means that the parties have to pay close attention to the issue
180 Fundamentals of Aviation Law

of warranties. If sellers do not wish to create warranties (and most sellers of previously
used aircraft and parts do not want to create warranties), they must disclaim them in
accordance with U.C.C. rules. On the other hand, buyers should be aware of the fact
that a lawful disclaimer of a warranty means that they purchase an aircraft or aircraft
parts at their own peril—careful inspections and research may be necessary. Case 6-1
makes the point that a disclaimer of warranty, if properly drafted and agreed to by the
parties, will be enforced by the courts.

CASE 6-1
DALLAS AEROSPACE, INC. V. CIS AIR CORPORATION
352 F. 3d 775 (2003)

OPINION BY: JOHN M. WALKER, JR. not been modified; (2) for the purposes of its
fraud claim, Dallas could not show it justifiably
Plaintiff-appellant Dallas Aerospace, Inc. relied on any purported misrepresentation under
(“Dallas”), a buyer of a used jet engine from the contract because (a) the contract specifically
defendant-appellee CIS Air Corporation (“CIS”), disclaimed the very representation alleged to be
appeals from the judgment of the United States fraudulent, and (b) the truth of the allegedly misrep-
District Court for the Southern District of New resented matter was easily discoverable by Dallas;
York (Barbara S. Jones, District Judge), grant- (3) the contract terms were not unconscionable;
ing summary judgment to CIS. and (4) no special relationship existed between
the parties that would trigger a duty to disclose on
Dallas and CIS are both corporations in the busi-
CIS’s part, for the purposes of Dallas’s negligent
ness of buying, selling, and leasing aircraft and
misrepresentation claim.
aircraft engines. The various claims at issue in
this appeal arose out of CIS’s sale to Dallas of a
I. BACKGROUND
JT8D engine in August 1997 under a written
agreement. Months after the purchase, Dallas A Japan Air Systems (“JAS”) aircraft experienced
discovered that the engine had been involved in a a hard landing in Japan in April 1993. While the
hard landing years earlier that rendered the ensuing fire substantially destroyed the aircraft,
engine not “airworthy.” “Airworthy” is a term of the engine remained intact and was salvaged from
art in the aviation industry indicating that an the wreckage. The insurance company that took
engine is safe and that it comports with FAA title to the engine sold it to Charlotte Aircraft
requirements. Dallas brought this diversity Corporation (“Charlotte”). In 1996, American Air
action alleging various claims under New York Ventures, Inc. (“AAV”), a broker, negotiated the
law to recover the $1.15 million it paid for the sale of the engine to CIS and took title from
engine. Charlotte pursuant to a separate contract before
transferring it to CIS for $425,000, which was
The district court agreed with CIS that there was paid directly by CIS to Charlotte. CIS paid AAV a
no genuine issue of material fact precluding a finder’s fee of $10,000.
grant of summary judgment in CIS’s favor and
concluded that, as a matter of law: (1) for the pur- CIS understood that it would have to overhaul the
poses of Dallas’s breach of contract claim, the engine to get it back into “serviceable” condition
agreement between Dallas and CIS, which dis- under guidelines established by the engine’s manu-
claimed all representations about the engine, had facturer, Pratt & Whitney (“P&W”), for returning a
 Commercial Law Applications to Aviation-Related Transactions 181

used engine to service in compliance with FAA specifically disclaimed any representation as to
regulations. CIS claims that it had no specific the engine’s airworthiness in Paragraph 8 and
knowledge of the hard landing, however, and obligated plaintiff to accept delivery of the engine
undertook a less expensive overhaul that was and its records “as-is, where-is” in Paragraph 7.
appropriate for used, but not incident-related, All of the exclusions and disclaimers in the
engines. CIS sent the engine for overhaul to ST Agreement were “conspicuous,” as required by
Aerospace (“ST”), a reputable repair shop author- § 2-316 of the Uniform Commercial Code
ized by the FAA, with overhaul instructions that (“UCC”), and the Agreement contained an inte-
had been provided by AAV. CIS asserts that it gration clause stating that “no warranties, repre-
relied on AAV because CIS has no internal tech- sentations or undertakings have been made by
nical staff. CIS paid approximately $350,000 for either party except as expressly set forth herein.”
the overhaul and, in due course, ST returned the On August 29, 1997, Dallas signed the Agree-
engine to CIS, certifying it—mistakenly as it ment as well as an Engine Delivery Receipt,
turned out—as airworthy. ST was not aware of which recited that Dallas “accepted delivery of”
the engine’s incident-related status, which, under the engine and “confirms its acceptance of the
the P&W guidelines, would have necessitated a [engine], in ‘AS IS’ ‘WHERE IS’ condition.”
$500,000 overhaul.
Dallas did not pay for the engine until September 9,
Upon return of the engine to CIS, CIS found 1997 or thereabouts. Dallas claims that at the
Dallas as a willing buyer in August 1997, and time it wire-transferred payment, it also delivered
the two parties quickly reduced their agreement to CIS a purchase order that, after stating that “all
to a written contract, subject to Dallas’s inspec- the terms and conditions of this purchase are
tion of the engine and its records. While the stated in the contract dated August 28, 1997,”
contract between Charlotte and AAV expressly purported to modify the contract by requiring CIS
stated that the engine had been involved in an to deliver a serviceable and airworthy engine that
accident, neither the contract between AAV and had “not been subjected to extreme stress or heat
CIS, nor the one between CIS and Dallas con- as in a major engine failure[,] accident, incident
tained any such provision. The extent of CIS’s or fire.” The status of the purchase order is a dis-
own knowledge about the hard landing and puted issue and is discussed more fully in connec-
CIS’s corporate relationship with AAV are both tion with Dallas’s breach of contract claim below.
disputed. It is undisputed, however, that Dallas
Dallas subsequently leased the engine to Sky
was not told prior to its purchase about the hard
Trek Airlines, and the engine was flown in daily
landing in Japan or that ST’s overhaul was other
service for several months without incident. In
than adequate. Dallas’s extensive boroscopic
1999, Dallas attempted to sell the engine, but the
physical inspection of the engine prior to pur-
prospective buyer walked away from the negotia-
chase revealed no defects and its month-long
tions after informing Dallas that the engine was
“back-to-birth” review of the engine’s records
incident-related. P&W confirmed this informa-
did not bring the fact of the JAS accident to
tion to Dallas; P&W had always known about the
light. Accordingly, Dallas consummated its
engine’s history because it keeps records on every
purchase of the engine from CIS.
engine it manufactures, including data related to
Dallas’s contract with CIS, dated August 26, incidents and accidents. While just who had access
1997, (the “Agreement”) disclaimed that CIS had to the P&W records at the time of Dallas’s negotia-
made any representations regarding the engine. It tions with CIS is disputed, it is not disputed that
182 Fundamentals of Aviation Law

both JAS and Charlotte knew about the engine’s express or implied, as to … the [engine’s] title, air-
incident-related history and would not have with- worthiness, design, value, operation, condition,
held the information if they had been asked about quality, durability, suitability, merchantability or fit-
it by Dallas at any time. ness for a particular purpose.…

After unsuccessfully trying to recover its pur- Paragraph 13D of the Agreement states:
chase price from CIS, Dallas filed suit against This Agreement contains the entire understanding
CIS for breach of contract, fraudulent misrepre- of the parties with respect to the purchase and sale
sentation, and negligent misrepresentation in the of the engine, and no warranties, representations or
district court. Applying New York law, pursuant undertakings have been made by either party except
to the Agreement of the parties, the district court as expressly set forth herein. Any other previous
granted summary judgment in favor of CIS on all oral or written communications, representations,
of Dallas’s claims. This appeal followed. agreements or understanding between the parties
are no longer of any force and effect, and are super-
seded and replaced in their entirety by the provi-
II. DISCUSSION
sions of this Agreement.
*** [The court then examines claims by Dallas that
B. The Breach of Contract Claim the disclaimer provisions were nullified by subse-
Dallas alleges that CIS breached their agreement quent actions by the parties].
by delivering an engine that was falsely represented Under all of the circumstances, no reasonable
as airworthy based on an airworthiness inspection jury could find that the parties agreed to modify
for non-incident-related engines performed by the Agreement so as to nullify its disclaimer pro-
ST. CIS responds that two clear and unambiguous visions. Accordingly, for all the foregoing reasons,
contractual provisions in the Agreement disclaim the district court’s grant of summary judgment on
any representation as to airworthiness. Paragraph the appellant’s breach of contract claim is affirmed.
8 of the Agreement states (with emphasis in the
original):
DISCLAIMER OF WARRANTY Seller has not III. CONCLUSION
made and does not make, nor shall Seller be deemed For the foregoing reasons, the district court’s
to have made or given, and hereby expressly dis- grant of summary judgment in favor of appellee
claims, any warranty, guaranty or representation, CIS is affirmed.

The language in paragraphs 8 and 13D in the Dallas Aerospace case is very commonly
used to disclaim all warranties and to remind all parties that everything that needs to be
said is stated in the agreement. If nothing else, this case provides a lesson: What a con-
tract says is what the courts will enforce.

Case 6-2 illustrates the hazards involved when the parties fail to prepare a well-drafted
agreement for a sale. Please note that this case involves the issue of express warranties.
 Commercial Law Applications to Aviation-Related Transactions 183

CASE 6-2
EDWARD MILES, RICHARD W. KEENAN AND KENNETH L. “DUSTY” BURROW,
APPELLANTS, V. JOHN F. KAVANAUGH, APPELLEE
350 So. 2d 1090 (1977)

OPINION BY: Hubbart, J. harrowing engine malfunction while the airplane

was in flight. On December 5, 1973, he took off
OPINION: This is an action for breach of express from a narrow airstrip in the Everglades approxi-
warranty and misrepresentation in the sale of an mately fifty miles out of Miami. After takeoff, the
airplane. Judgment was rendered for the plaintiff- engine began to lose power, shake violently and
buyer and the seller-defendant appeals. Party emit a loud clanking sound. The plaintiff was
defendants responsible for repairing the airplane barely able to land on the Everglades airstrip
prior to the sale also appeal. We affirm. without crashing.
In March, 1973, the plaintiff [John Kavanaugh] Subsequent thereto, the plaintiff had to arrange at
answered a newspaper ad placed by the defendant considerable expense for the airplane to be trans-
[Richard Keenan] advertising the sale of a used ported in parts to an aircraft repair shop and there
1956 Cessna 172 private airplane. The plaintiff completely reoverhauled. It was there discovered
and defendant Keenan met on several occasions that the prior overhaul had not included new parts
to examine the airplane and to discuss the sale. as represented and that the prior overhaul had been
The defendant Keenan stated that the engine in performed in a completely defective manner. All
the airplane had recently been completely over- parties to this appeal agree that the logbook con-
hauled during which time a number of new tained inaccurate, misleading and false informa-
mechanical parts had been placed in the engine. tion about the prior repair history of the airplane.
The defendant Keenan gave the plaintiff an engine
The plaintiff paid approximately $350 to trans-
and propeller logbook detailing the mechanical
port the airplane from the Everglades for repairs
repair and flight history of the airplane which the
and $5,700 for the re-overhaul job. In addition,
plaintiff carefully inspected.
the plaintiff estimated his loss of use of the air-
The logbook reflected that on May 16, 1972, the plane during this repair period to be $600.
engine had been given a major overhaul in which
The plaintiff sued the defendant Keenan and the
new mechanical parts were placed in the engine
defendants Burrow and Miles for breach of express
all in conformity with the manufacturer’s engine
warranty and misrepresentation. After a non-jury
overhaul manual. The repair work had been done
trial, the court awarded a judgment in favor of the
by the defendant [Kenneth L. “Dusty” Burrow]
plaintiff against all defendants in the amount of
whose work was certified in the logbook by the
$5,800. The defendant Keenan appeals questioning
defendant F.A.A. inspector [Edward Miles].
his liability on the sale of the airplane as well as the
Based on the accuracy of this information, the
amount of damages awarded. The defendants Bur-
plaintiff purchased the airplane from the defen-
row and Miles appeal solely on the damages issue.
dant Keenan. The plaintiff specifically testified
that he would not have purchased the airplane had
I
he not been able to inspect and rely upon the
information contained in the logbook. The first issue presented by this appeal is whether
a private party, who sells his used airplane to a
The plaintiff flew the airplane without incident buyer and to induce the sale shows the buyer an
for several months. Thereafter, he experienced a
184 Fundamentals of Aviation Law

engine and propeller logbook setting forth the A description need not be by words. Technical spec-
repair history of the airplane, expressly warrants ifications, blueprints and the like can afford more
the accuracy of the information contained in the exact description than mere language and if made
logbook within the meaning of Florida’s Uniform part of the basis of the bargain goods must conform
with them. [Emphasis added.]
Commercial Code, Section 672.313, Florida Statutes
(1975). We hold that the seller expressly so war- In the instant case, the defendant Keenan gave the
rants the accuracy of the information contained in plaintiff-buyer the engine and propeller logbook
the logbook where it forms part of the basis of the which, much like a blue-print, set out in some
bargain between the parties. detail the prior repair and flight history of the air-
The controlling law in this case is set forth at Sec- plane. The accuracy of the information contained
tion 672.313, Florida Statutes (1975), as follows: in the logbook formed the basis of the bargain as
the plaintiff relied upon the accuracy of such
672.313 Express warranties by affirmation, prom- information and would not have purchased the
ise, description, sample. airplane if he had not been permitted to see the
(1) Express warranties by the seller are created as logbook. The logbook thus constituted a descrip-
follows: tion of the goods purchased by the plaintiff and
(a) Any affirmation of fact or promise made by an express warranty of the accuracy of such
the seller to the buyer which relates to the goods and description.
becomes part of the basis of the bargain creates an
The defendant Keenan argues that he never in so
express warranty that the goods shall conform to the
affirmation or promise.
many words warranted the accuracy of the infor-
(b) Any description of the goods which is made mation contained in the logbook and was in fact
part of the basis of the bargain creates an express ignorant of the admittedly false information on
warranty that the goods shall conform to the the prior repair history of the airplane. The sim-
description. [Emphasis added.] ple answer to that argument is that an express
(c) Any sample or model which is made part of warranty need not be by words, but can be by
the basis of the bargain creates an express warranty conduct as well, such as, the showing of a blue-
that the whole of the goods shall conform to the print or other description of the goods sold to
sample or model. the buyer. Moreover, fraud is not an essential
(2) It is not necessary to the creation of an express ingredient of an action for breach of express
warranty that the seller use formal words such as warranty and indeed it is not even necessary that
‘warrant’ or ‘guarantee’ or that he have a specific the seller have a specific intention to make an
intention to make a warranty, but an affirmation express warranty. It is sufficient that the war-
merely of the value of the goods or a statement pur- ranty was made which formed part of the basis
porting to be merely the seller’s opinion or com-
of the bargain. We find such an express warranty
mendation of the goods does not create a warranty.
[Emphasis added.]
in this case through Keenan’s showing of the
logbook to the plaintiff without which this sale
The official comments of the above provision of would never have been made. For breach of such
Florida’s Uniform Commercial Code are instruc- warranty, the defendant Keenan is liable to the
tive on the issue presented in this case and state in plaintiff. [Citation.]
part as follows:
***
(1)(b) makes specific some of the principles set
forth above when a description of the goods is given
by the seller.
 Commercial Law Applications to Aviation-Related Transactions 185

Is this a fair result? What if the sellers did not even own the aircraft at the time of the
misleading maintenance entries? What does the court say about that situation? Would
the language used in the Dallas Aerospace disclaimer protect the sellers in this case?

The final case for this chapter involves a recent bankruptcy court decision. By way of
background, United Airlines sought protection from creditors under Chapter 11 of the
Bankruptcy Code.

One of United’s biggest liabilities was its pension obligation to retired employees. In
these plans, called defined benefit plans, United promised to pay its employees a fixed
amount during their retirement years. The pension plans were negotiated and agreed to
between the various employee groups and United over the years. However, by the time
United Airlines filed bankruptcy, United’s benefit promises exceeded its ability to pay
on those promises by almost $10 billion.

During bankruptcy proceedings, United sought an agreement with the Pension Benefit
Guaranty Corporation (PBGC), a taxpayer-subsidized entity that insures private pen-
sion providers. PBGC charges companies a premium to insure their pension plans. If
the plans fail, PBGC bails them out. In the agreement, United wanted to terminate its
pension plans and hand over the liability for payment to the PBGC. The court addresses
this issue in Case 6-3.

CASE 6-3
IN RE: UAL CORPORATION, ET AL., DEBTORS.
CHAPTER 11, CASE NO. 02-B-48191 (JOINTLY ADMINISTERED)
2005 Bankr. LEXIS 816
May 11, 2005, Decided

OPINION BY: EUGENE R. WEDOFF it appearing that the relief requested is in the
best interests of the Debtors’ estates, their cred-
OPINION: ORDER APPROVING DEBTORS’ itors and other parties in interest; it appearing
EMERGENCY MOTION TO APPROVE AGREE- that the relief requested is essential to the con-
MENT WITH PBGC tinued operation of the Debtors’ businesses; it
appearing that this Court has jurisdiction over
Upon the emergency motion (as amended hereby,
this matter pursuant to [Citations]; it appearing that
the “Motion”) by the Debtors to approve the Agree-
this proceeding is a core proceeding within the
ment with PBGC attached hereto as Exhibit 1
meaning of [Citations]; it appearing that venue
(as amended by this Order, the “Agreement”) and
is proper in this District pursuant to [Citations];
incorporated herein; all interested parties having
adequate notice having been given; it appearing
been afforded an opportunity to be heard with
that no other notice need be given; and after due
respect to the Motion and all relief related thereto;
186 Fundamentals of Aviation Law

deliberation and sufficient cause appearing of its “controlled group” as defined under the
therefore, it is hereby ORDERED THAT: Employee Retirement Income Security Act of
1974 (as amended, “ERISA”), and all of its suc-
1. The Motion is granted in all respects. All objec-
cessors and assigns (collectively, “United”), and
tions not otherwise resolved or withdrawn are
Pension Benefit Guaranty Corporation (“PBGC”)
hereby overruled, except to the extent set forth in the
(United and PBGC each shall be referred to
Court’s statements on the record in open court on
herein individually as a “Party” and collectively
May 10, 2005. The Court’s statements on the record in
as the “Parties”).
open court on May 10, 2005 are incorporated herein
by reference, including, without limitation: WHEREAS, on December 9, 2002, United filed
voluntary petitions for relief (the “Chapter 11
(A) Under Section [Citation], PBGC may terminate
Cases”) under Chapter 11 of Title 11 of the United
a pension plan in order to protect the pension benefit
States Code (the “Bankruptcy Code”) in the
guaranty system with the consent of the plan sponsor
United States Bankruptcy Court for the Northern
without a court hearing even though that overrides
District of Illinois, Eastern Division (the “Bank-
the provisions of a collective bargaining agreement;
ruptcy Court”), as Case Numbers 02-B-48191 et.
(B) Aggrieved parties have their rights under [Cita- seq. and continue to operate their business as
tion], to bring actions against PBGC to challenge debtors-in-possession pursuant to Sections 1107
the propriety of its actions under ERISA (and and 1108 of the Bankruptcy Code;
PBGC reserves its rights in any such action); and
WHEREAS, the Parties have reached a settle-
(C) The Agreement, and United’s entry into the ment and compromise (the “Agreement”) with
Agreement, does not violate the law. respect to their various disputes and controversies
in connection with their defined benefit pension
2. Any findings by the Court herein and conclu-
plans, and this Agreement sets forth the principal
sions of law stated herein shall constitute find-
terms and conditions under which United and
ings of fact and conclusions of law pursuant to
PBGC will agree to a settlement and compromise
[Citation], made applicable to this proceeding by
of their various disputes in connection with
[Citation]. To the extent any finding of fact shall
United’s Pilot Plan, the Flight Attendant Plan, the
be determined to be a, conclusion of law, it shall
Ground Plan, the Management, Administrative
be so deemed, and vice-versa.
and Public Contact Employee (“MA&PC”) Plan,
3. The Agreement is hereby approved. and the Variable Plan (collectively, the “Pension
Plans”), all on the terms and conditions here-
***
inafter set forth.
Exhibit I
NOW, THEREFORE, in consideration of the
Agreement
above recitals and for other good and valuable
IN RE UAL CORPORATION, ET AL. (Case No.
consideration, the receipt and adequacy of which
02-B-8191)
are hereby mutually acknowledged, and intending
Settlement Agreement By and Among UAL
to be legally bound hereby, the Parties do hereby
Corporation and all Direct and Indirect Subsidiaries
agree as follows.
and Pension Benefit Guaranty Corporation
1. Termination of Agreement. Prior to the Approval
This Settlement Agreement (this “Agreement”) is
Date, the Parties may continue to explore alterna-
made effective as of the Approval Date (defined
tives to the termination of the Pension Plans; and if
below) by and among UAL Corporation, all of its
the Parties agree, in each of their respective sole
direct and indirect subsidiaries, and all members
 Commercial Law Applications to Aviation-Related Transactions 187

and absolute discretion, to pursue any such alterna- United shall execute termination and trusteeship
tive, this Agreement will terminate. agreements with respect to such Plans;
*** ***
4. Termination of Pension Plans. Subject to Para- c. Pilot Plan. As soon as practicable after the
graph 1: Approval Date, PBGC and United shall execute
termination and trusteeship agreements with
a. Flight Attendant and MA&PC Plans. As soon as
respect to the Pilot Plan, with a termination date
practicable after the date that the Bankruptcy Court
that is either mutually agreed by the Parties or
enters an order approving the Agreement (the
judicially determined (but, in neither event any
“Approval Date”), PBGC staff will initiate termi-
later than the latest termination date for any of the
nation under [Citation] of the Flight Attendant and
other Pension Plans); * * *
MA&PC Plans. If and when PBGC issues Notices
of Determination that the Flight Attendant and ***
MA&PC Plans should terminate, then PBGC and

The United bankruptcy case raises some interesting legal and ethical issues. From a
legal standpoint, the bankruptcy law is clear that the pension plan could be terminated
as part of United’s bankruptcy. The question that arises here is whether this is good law.

At the time of this ruling, the PBGC was $23.3 billion in the red due to earlier defaults
by U.S. Airways, United, and other airlines. The issue is whether U.S. taxpayers should
be required to subsidize the pensions of a failed business plan. What do you think?

At the personal level, United’s failure took a heavy toll on employees. In a related news
piece, one recently retired United pilot stated

I was required by federal law to retire at age 60. Another federal law made me ineligible
for Social Security for some period of time, for a minimum of two years after that. And
should the pension be terminated, there is a further concern, agewise, because the Pension
Benefit Guaranty Corporation, which would take over these plans, imposes very strict
penalties if you are less than 65 years old when you retire. We may, in fact probably will,
have to sell our home and start over. And you can’t start over as a pilot after the federal
government shuts you down at age 60.43

What, if anything, should be done to assist the current and former employees of a failed
company? Is it more important to try to keep the airline alive by terminating the pen-
sion plan or to force an airline to keep its pension plan intact for the benefit of retired
employees?

DISCUSSION CASES

1. Byron Construction Company was employed as a general contractor to build a

hangar/office at a large municipal airport. Byron hired Donovan Carpentry, Limited, to
188 Fundamentals of Aviation Law

perform the carpentry work on the building. The contract with Donovan clearly indicated
that Donovan was responsible for providing all the labor, materials, tools, scaffolding,
and any other items needed to complete the carpentry work. On July 17, 2006,
Donovan’s employees constructed 18 trusses at the job site and installed them. The next
day, 16 of the trusses fell off the structure. There was no explanation for the fact that
the trusses fell, and evidence indicated that it was not due to any fault of Byron or
Donovan. Byron told Donovan that it would pay Donovan to reerect the trusses and fin-
ish the job. When the job was finished, Byron paid Donovan the original contract price,
but refused to pay the additional costs of reerecting the trusses. Donovan sues Byron for
the added expenses. Who will win this lawsuit? Explain.

2. Blake and Associates purchases and sells antique aircraft. Blake purchased a vin-
tage warplane purportedly flown in a famous air duel during World War I. The purchase
price was $60,000. Blake then sold the aircraft to Hinds Antiques, Inc., a vintage air-
craft collector, for $70,000. A principal of Hinds examined the aircraft for several hours
prior to its purchase. Soon afterward, Hinds received an offer of $100,000 for the air-
craft subject to certification of its war heritage by the British War Bird Society. When
this organization concluded that the aircraft had never seen any action in World War I,
and was therefore not worth more than $40,000, Hinds sued Blake to rescind their contract.
Will Hinds be successful in rescinding the contract? Why or why not?

3. Kissick invites Jonsen, LeBlanc, and Schmierer to fly with him to Coghill Lake for
a fishing trip. Kissick and his three passengers were killed when their aircraft hit a
mountain bordering Burns Glacier. Kissick was a major in the U.S. Air Force and a
member of the Elmendorf Aero Club. His passengers were all civilians. The Aero Club
is established by the U.S. Air Force and managed in accordance with Air Force regula-
tions. Before they departed for the flight, an Aero Club representative directed the civil-
ian passengers to sign Air Force Form AF-1585 in which they agreed not to bring a
claim against “the US Government and/or its officers, agents, or employees, or Aero
Club members … for any loss, damage, or injury to my person or my property which
may occur from any cause whatsoever.” Following the accident, the widows of Jonsen,
LeBlanc, and Schmierer filed wrongful death claims against the Kissick estate. Kissick
asserted as an affirmative defense that Air Force Form 1585 barred all claims. Will the
agreement not to sue bar the claims of the widows in this case? Explain.

4. Glover owned an aircraft avionics shop located at Powell Municipal Airport for more
than 25 years. His business was very successful, and aircraft owners flew in from sur-
rounding states to have him paint their aircraft. Glover wanted to retire and sell his busi-
ness. Portier was interested in buying the business, but only on the condition that Glover
agree to a noncompete clause in their buy/sell agreement. Glover agreed and signed an
agreement with a noncompete clause that stated, “Seller agrees not to enter into the busi-
ness of aircraft painting within a 500 mile radius of Powell Municipal Airport for period
of ten (10) years from the date of this agreement and will not compete in any manner with
the Buyers.” Two years later, Glover was financially devastated by his compulsive gam-
bling habit. He needed money and opened up a paint shop at Hutchins Town International
Airport, about 400 miles from Powell Municipal Airport. Portier sues Glover, claiming
that Glover violated their noncompete clause. Who will win? Discuss.
 Commercial Law Applications to Aviation-Related Transactions 189

5. Northwest Airlines leased space from the Port of Portland for its Portland Airport
Operations. The Port entered into a contract with Crosetti to provide janitorial services
for the building. The contract specifically required that Crosetti keep the floors clean in
terminal areas. Crosetti also had to indemnify the Port for any losses resulting from
Crosetti’s failure to perform and to provide public liability insurance for the Port and
Crosetti. A Northwest Airlines passenger sued Northwest after injuring herself in a fall
at Northwest’s ticket counter. It is undisputed that the passenger slipped on a foreign
substance on the floor right in front of the ticket counter. After settling the lawsuit with
its passenger, Northwest sued Crosetti to recover the amount of its damages in the law-
suit. Northwest claimed that it was a third-party beneficiary of Crosetti’s contract with
the Port of Portland. Will Northwest win this case? Why or why not?

6. Prior to relocating at a new airport, Burtner attempts to sell some of the equipment
he has been storing in his hangar. One of the items for sale is a gasoline-powered tow
bar. Martin makes an offer on the tow bar that Burtner accepts for $250. Burtner offers
the tow bar to Martin for pickup whenever he is ready. Martin is delayed a few days. In
the meantime, the tow bar is stolen from Burtner’s hangar. Will Burtner be able to
recover the $250 sales price? Explain.

7. Would your answer to discussion case 6 above be different if Burtner were an air-
craft parts and equipment dealer? Why or why not?

ENDNOTES

1. Restatement (Second) of Contracts, § 1.

2. Id. § 3.
3. Id. § 71.
4. Id. §§ 13, 14, and 16.
5. Id. §§ 181 and 195.
6. Id. §§ 152, 153, 161, 174, and 175.
7. Id. § 3.
8. Id. § 24.
9. Id. § 71.
10. Id. § 89.
11. Id. § 14.
12. Id. § 13.
13. Id. § 16.
14. Id. § 152.
15. Id. § 125.
16. Id. § 130.
17. U.C.C § 2-201.
18. Restatement (Second) of Contracts, § 317.
19. Id. § 318.
20. Id. § 302.
21. Id. § 373.
22. Id. § 346.
23. Id. § 356.
190 Fundamentals of Aviation Law

24. Id. §§ 361 and 364.

25. U.C.C. §§ 2-204, 2-305, 2-308, and 2-306.
26. Id. § 2-205.
27. Id. § 2-313(1)(a).
28. Id. § 2-312(1)(b).
29. Id. § 2-313(1)(c).
30. Id. § 2-312.
31. Id. § 2-314.
32. Id. § 2-315.
33. Id. § 2-316(3)(a).
34. Id. § 2-316(3)(b).
35. Id. § 2-401.
36. Id. § 2-401.
37. Id. § 2-303.
38. Id. § 2-509.
39. Id. § 9-402.
40. Id. § 9-207.
41. Id. § 9-302.
42. U.S. Constitution, Article I, § 8, clause 4.
43. See Religion and Ethics Newsweekly, June 17, 2005, No. 842.
7 Entity Choice for Aviation Enterprises

THE SOLE PROPRIETORSHIP 192

Establishing a sole proprietorship 192
Liability issues for sole proprietors 193
Taxation of sole proprietorships 193
PARTNERSHIPS 194
Establishing a partnership 194
Operation of a partnership 194
Liability issues for partnerships 195
Ownership of assets 196
Taxation of partnerships 196
Termination of a partnership 197
LIMITED PARTNERSHIPS 197
Establishing a limited partnership 198
Liability of general and limited partners 198
Taxation of limited partnerships 200
LIMITED LIABILITY COMPANY 200
LLC formation 200
LLC operating agreement 200
Liability of LLC members 201
LLC taxation 202
CORPORATIONS 202
Formation of a corporation 203
Operating the corporation 204
Duties of directors and officers 204
Liability issues for corporations and shareholders 205
Taxation of corporations 206
CASES AND COMMENTARY 208
DISCUSSION CASES 212

191

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192 Fundamentals of Aviation Law

Whether you are a pilot, an air traffic controller, an aircraft maintenance specialist, or a
management executive, you will likely work for, or work with, business entities of all
different types and sizes. It is important that you gain an appreciation of the basics of
business entity law and the pros and cons of each type of entity.

In this chapter, we will review the fundamentals of business entities under U.S. law. Our
approach will include a description of each of the more prominent types of business
entities. Specifically, we will take a look at the following entity forms:
• Sole proprietorship
• Partnership
• Limited partnership
• Limited liability company
• Corporation

Beyond the legal basics, this chapter will also allow you to take a look at how each of
these entities is affected by current tax laws in the United States. Understanding how
the tax code impacts an entity is often a critical step in making business decisions
and/or deciding what type of entity will best suit your business plan.

THE SOLE PROPRIETORSHIP

One of the most common forms of operating a business in the United States is the sole
proprietorship. Although this form of business is often associated with small business
enterprises, a substantial number of large businesses are also sole proprietorships.

In the sole proprietorship, the owner is the business enterprise. There is no distinction
between the owner and the business. The business is not a separate entity from the
owner.

There are advantages to a sole proprietorship, including the following:

• There is no additional cost to starting a sole proprietorship.
• The owner calls all the shots in the business, including the hiring and firing of
employees.
• It is a simple process to transfer ownership of a sole proprietorship with no approvals
from partners or shareholders required.
• All profits inure to the benefit of the sole proprietor.

Establishing The sole proprietorship is probably the simplest of all business entities to create. There
a sole are no government approvals required, and no legal formalities are necessary. Although
proprietorship some local and state governments may require a business license, this is likely to be
required of any business. In many cases, a sole proprietorship is looked upon as being
the default form of business. If no other form of business has been established, the law
will look to the sole proprietorship as the most likely form of business.
 Entity Choice for Aviation Enterprises 193

In selecting a name for a sole proprietorship, the owner can use her own name or select
a trade name that appeals most. A budding aviation entrepreneur named Arnold Tuddle
may wish to name his new flight school “Arnie’s Future Aces” or Arnold Tuddle d/b/a
(doing business as) “Arnie’s Future Aces.” In many states, any trade names must be reg-
istered with the state under fictitious name statutes. The statutes allow consumers and
vendors to be able to track down the owner of a business that uses a trade name who
might be otherwise difficult to identify by name.

Perhaps the most significant disadvantage of the sole proprietorship is the unlimited Liability issues
personal liability borne by the owner. Unlimited personal liability means that creditors for sole
of the sole proprietorship may recover on their claims by pursuing the sole proprietor’s proprietors
business or personal assets. This disadvantage is arguably magnified in the context of
the aviation industry where liability exposure is a constant hazard.

For example, let us assume that Ray wants to establish an air charter business. He
names it Ray’s Air Services. If anyone is injured while the business operates an aircraft,
or if the business cannot pay its creditors in a timely manner, those with claims related
to the business can go directly after Ray’s personal assets. See Fig. 7-1 for a depiction
of how liability to business creditors works in the context of a sole proprietorship.

Because of pervasive concerns regarding liability exposure in the world of aviation, you
will seldom find an aviation business that is operated as a sole proprietorship. One alter-
native to the sole proprietorship model that is discussed below is the one-member lim-
ited liability company (LLC) or corporation. For a fuller discussion of these forms of
doing business, see the discussion below.

The sole proprietorship is not taxed as an entity separate from its owner. The profits of Taxation
the company are treated directly as the profits of the entity’s owner. Federal and Internal of sole
Revenue Service (IRS) rules require that sole proprietors prepare an income statement proprietorships
for their businesses on a form called a Schedule C. Schedule C includes a summary of
all the corporation’s revenue and expenses. Any net income or net loss is then filtered
through to the sole proprietor’s individual income tax return (IRS Form 1040) and in
turn taxed at the sole proprietor’s individual tax rate. See Fig. 7-2 for a flowchart depict-
ing the approach to taxation for sole proprietorships, assuming an effective tax rate for
the owner (Ray) of 20 percent, revenues of $100,000, and expenses of $40,000.

Figure 7-1
Owner
Sole proprietorship
Liability liability.

Creditor

Liability
Sole
proprietorship
194 Fundamentals of Aviation Law

Figure 7-2 Ray’s tax return

Sole proprietorship
Sole proprietorship Schedule C Form 1040
taxation.
Revenue $100,000 $60,000
Expenses 40,000 × 20%
Net income $60,000 $12,000 tax
from Ray’s sole
proprietorship

PARTNERSHIPS

Partnerships are a voluntary combination of two or more individuals or entities for the
purposes of engaging in a trade or business for profit. Partnerships are also referred to
as general partnerships to distinguish them from limited partnerships (discussed below).

Establishing A partnership can be created with very little formality or effort. All that needs to be
a partnership present are two or more persons or entities that voluntarily agree to coown a business
with the intention of making and sharing profits. No formal documents or agreements
are required for a partnership to be legally established. Interestingly, there is no require-
ment that partners be active participants in the management of the partnership business.
The day-to-day operations of a partnership can be delegated to employees and hired
managers without any impact on the legality of the partnership’s existence.

Similar to a sole proprietorship, a partnership can function using the name of its part-
ners. A partnership can also use a fictitious trade name, in which case it will be subject
to registering the trade name under state law.

One important note is that a partnership is not the same as a coownership. A coowner-
ship is evidenced by two or more persons owning an asset. A coownership does not
require that the parties have any intention of coowning a trade or business with the
intention of making a profit (as is required for a partnership). The terms coownership
and partnership are often confused in the aviation industry. It is important to make the
distinction correctly because aircraft can be registered to either a partnership or a
coownership. See Chap. 8 for further discussion.

Operation of Unlike a sole proprietorship, a partnership has more than one owner. Therefore, there is
a partnership a bit more complication in the way the partnership will be operated. With a sole pro-
prietorship, there is one person calling the shots, and that person’s way of doing things
is generally not subject to challenge. With the introduction of two or more owners, a
partnership requires greater attention to the rights and duties of each partner in the func-
tioning of the business enterprise.

Unless there is an agreement that states differently, all partners have a right to share in
the management of the partnership. This means that each partner will have a single vote,
no matter how large or small his or her contribution of capital to the partnership unless
 Entity Choice for Aviation Enterprises 195

an agreement indicates something different. Partners also have the flexibility to desig-
nate management of the partnership to one or more partners.

Although it is not required, a well-drafted partnership agreement is strongly recommended

for any partnership. In a partnership agreement, the partners can address issues such as cap-
ital contributions, management of the partnership, and termination or sale of the partnership.

As indicated above, perhaps the strongest indicator of a partnership is the sharing of

profits from the partnership business. The general rule for partnerships is that, unless
expressly stated differently, all partners have an equal right to sharing in the partnership’s
profits. However, most partnership agreements indicate that partners will share in profits in
proportion to capital contributions to the partnership by each partner. The same rules also
apply to partnership losses. It is assumed, unless expressly stated otherwise, that partner-
ship losses are to be applied equally. Again, most partnership agreements will call for shar-
ing losses in proportion to capital contributions made by partners to the partnership.

Just as with a sole proprietorship, partners share exposure to unlimited personal liability to
creditors of the partnership. In addition, there is the added complexity of whether liability Liability
can attach to one partner when it was another partner who created the liability in question. issues for
partnerships
With respect to torts, a partner will generally be held liable for the torts of another part-
ner or an employee of the partnership. This means that a partner can be held liable for
the negligence or intentional tort(s) of one or more of the other partners. For example,
Ray (from the previous example) now wants to expand his business. He takes on a part-
ner and friend named Bob. Bob and Ray form a 50-50 partnership for the purpose of
providing on-demand air charter service (B&R Air Services). Both Bob and Ray share
duties managing the partnership and piloting the aircraft for charters. One day Ray gets
into a landing accident owing to his negligence in providing for proper crosswind cor-
rections, and two passengers are seriously injured. Naturally, Ray is personally liable
for the injuries to the passengers. However, Bob will also be liable to the passengers.
The passengers may even collect all their damages from Bob, who would then have to
pursue Ray for an appropriate contribution of his share of the loss.

Similarly, a partner is liable for the contractual obligations entered into by the other
partners on behalf of the partnership. Therefore, all partners are jointly liable for the
debt created by the contract. If one partner is required to pay more than her fair share
on a judgment, she may be able to seek contributions from other partners to equalize
the loss from the judgment. Let’s say B&R Air Services also entered into a contract to
purchase new Global Positioning System (GPS) equipment for their aircraft. They
financed the transaction by taking a note and promising to pay the bank that underwrote
the transaction in monthly installments. If Bob and Ray default on the note, the bank
can recover damages from either or both of them. Again, if one of them pays an unequal
amount of the damages to the bank, that partner can pursue the other partner for con-
tribution to equalize the liability borne by each partner.

See Fig. 7-3 for a chart depicting how partnerships and individual partners share liabil-
ity in a general partnership.
196 Fundamentals of Aviation Law

Figure 7-3
Partnership
Partnership Liability
liability.

Creditor

Partner A
Liability
Liability

Partner B

Just as with sole proprietorships, the issue of legal liability, especially in the aviation
industry, has greatly diminished the number of pure partnerships that run aviation-related
enterprises. Alternatives such as limited liability companies and corporations have
become the more likely form of doing business in the aviation environment. These
forms of doing business are discussed in greater detail below.

Ownership Another interesting issue with partnerships is the question of whether individual part-
of assets ners own specific partnership assets. Put another way, this question asks, What do the
partners in a partnership actually own? With a sole proprietorship, the question is easily
answered. All assets belong to the sole proprietors. However, with a partnership, the
answer is a bit more complex. Partners own a right to only their share of the partner-
ship’s profits. They do not own any rights to specific partnership assets. Therefore, upon
the death of a partner, a deceased partner’s heirs cannot seek to recover specific assets
such as buildings, aircraft, and computers. Instead, the heirs would be entitled to the
deceased partner’s share of the partnership profit.

Let’s go back to the example of B&R Air Services to further explore this issue. Suppose
that B&R Air Services owns two aircraft (both Cessna 310s) of equal fair market value.
The partnership owns no other assets (all office space and equipment are leased). If Bob
dies, his heirs cannot stake a claim on one of the Cessna 310s based on the fact that Bob
was a 50 percent owner of the partnership and is thus entitled to one-half of the part-
nership’s assets. Instead, Bob’s heirs can only make a claim to an interest in 50 percent
of the profits of B&R Air Services. Further, Bob’s heirs do not have any rights to the
management of the partnership.

Taxation For taxation purposes, a partnership files a separate information tax return as a business
of partnerships entity on IRS Form 1065. The tax return requires the partnership to report all revenue
less expenses. However, the profit is not taxed at the partnership level. Instead, it flows
(based on partnership arrangements for sharing profits) to each partner individually. It is
at the individual level that partnership profits are taxed at the individual partner’s tax rate.

For example, assume that B&R Air Services had revenue of $100,000 and expenses of
$40,000 in tax year 2006. The resulting profit of $60,000 would not be taxable at the
 Entity Choice for Aviation Enterprises 197

Figure 7-4
Ray’s tax return
Form 1040 Partnership
taxation.
$30,000
× 25%
50%
$7,500
Profit
Partnership
Form 1065
B&R Air Services

Revenue $100,000
Expenses 40,000
Net income $60,000

50% Bob’s tax return

Profit Form 1040

$30,000
× 20%
$6,000

partnership level, meaning that B&R Air Services would not be taxed on the $60,000
profit. However, the profit of $60,000 would flow to each partner individually and then
be taxed at that partner’s individual tax rate. Therefore both Bob and Ray would have
to report $30,000 (50 percent of $60,000) as income, and they would be taxed at their
respective personal income tax rates (which increase with greater personal income).
Figure 7-4 depicts the flow of income from a partnership to its individual partners, assum-
ing an effective tax rate of 20 percent for Bob and 25 percent for Ray.

A partnership is terminated upon the death of a partner or the withdrawal of a partner Termination of
from the partnership. The termination of a partnership is often referred to as dissolution a partnership
of the partnership.

However, the remaining partners may still proceed with the business of the dissolved part-
nership, albeit in a different business form. If Ray decided to withdraw from B&R Air
Services, the partnership between Bob and Ray would be dissolved. However, that would
not necessarily stop Bob from continuing the business as a sole proprietor or taking on a
new partner and starting a new partnership. Of course, it would be best for all parties to
have a carefully drafted agreement outlining the procedures to be followed to buy out a
withdrawing or deceased partner and continue the business. Such an agreement lessens
the possibility of confusion and disputes upon the death or withdrawal of a partner.

LIMITED PARTNERSHIPS

One special type of partnership is the limited partnership. A limited partnership consists
of two types of partners: general partners and limited partners. General partners man-
age the partnership and invest capital in the partnership. Limited partners invest only
capital in the partnership and do not participate in the management of the partnership.
198 Fundamentals of Aviation Law

Establishing Unlike a regular partnership, a limited partnership requires that certain formalities be
a limited met prior to the recognition of the limited partnership by the law. Each state has its own
requirements for a limited partnership to be established. As a general matter, most states
partnership
require the filing of a certificate of formation or articles of formation. Typically, the cer-
tificate will identify the following items:
• The limited partnership name
• Purpose(s) of the limited partnership
• Address of the limited partnership’s place of business
• Address of the limited partnership’s resident agent
• Identification and address of each general and limited partner
• Duration of the limited partnership
• The amount and type of capital contributions

The limited partnership is only recognized by the law once the written filing is accepted
by the state. In most cases the certificate or articles of formation are filed directly with
the secretary of state or department of revenue.

The general and limited partners are generally not required to enter into a written agree-
ment outlining the operation of the limited partnership and the rights and duties of each
of the parties. However, it is prudent for the parties to draft such an agreement to avoid
confusion and/or misunderstanding.

If Bob and Ray of B&R Air Services wished to draw more capital from investors, one
approach they might consider is the limited partnership. Bob and Ray might be attracted
to the idea that they could run the day-to-day business as general partners while still
being able to add to their capital through investors who will not participate in the man-
agement of the business. Let us assume they took that option and found four new
investors to help them expand their business: Joy, Dean, Joel, and Rose. The parties
would prepare a certificate of limited partnership and submit it to the state for approval.
The new entity would have to be identified as a limited partnership. One possible name
would be B&R Air Services, L.P. Once approved, Bob and Ray would run the business
as general partners. Joy, Dean, Joel, and Rose would invest in the partnership but not
play an active role in the daily business of the enterprise.

Liability One of the unique features of a limited partnership is that it limits the liability of limited
of general partners to the amounts of capital contributions they have made to the partnership. On
and limited the other hand, general partners remain personally liable to creditors of the partnership.
partners
As indicated above, limited partners do not participate in the management of the partnership.
Limited partners may not contractually obligate the partnership or do business on behalf of
the partnership. Once a limited partner gets too actively involved in partnership affairs and
“crosses the line” by taking on the role of a general partner, that limited partner steps into the
shoes of a general partner and becomes personally liable for the debts of the partnership.

However, the laws for limited partnerships in most states permit some involvement by
limited partners before any such loss of limited liability status. The laws that set the bar
 Entity Choice for Aviation Enterprises 199

for how far limited partners can go are often referred to as safe harbor provisions. Some
of the activities that a limited partner can engage in without “crossing the line” include
• Serving as an employee of the partnership
• Consulting and advising with general partners
• Requesting meetings or attending meetings of general partners
• Voting on major issues such as admission or termination of a partner

These rules were instituted to allow a limited partner some authority to intervene in
important partnership matters as necessary.

Following the example of B&R Air Services, L.P., it would not be advisable for Joy,
Dean, Joel, or Rose to get involved in the daily operations of the business. If they did,
they would risk the possibility of personal liability to partnership creditors. Just how far
they could go is largely governed by state law and the safe harbor provisions outlined
above. It is also fair to say that the limited partners do not have to sit around as
bystanders if the partnership encounters serious enough problems that their investment
is in jeopardy. It is often a tough judgment call, but in such situations, there may be
room to argue that the active involvement of a limited partner would not necessarily
place him or her in peril of personal liability.

See Fig. 7-5 for an illustration of how liability exposure is distributed among general
and limited partners in a limited partnership.

Limited
Figure 7-5
partnership Limited
partnership
Liability
liability.
General
partner A
Liability
General
Liability partner B
Creditor

Limited
partner A

No personal Limited
liability partner B

Limited
partner C
200 Fundamentals of Aviation Law

Taxation Limited partnerships get the same tax treatment as general partnerships. The partner-
of limited ship is not taxed as an entity. Instead, each partner’s share of income or loss is passed
through to that partner and taxed at his or her individual tax rates. See the section
partnerships
“Partnerships” above for a fuller discussion of the taxation of partnerships.

LIMITED LIABILITY COMPANY

In many ways, the limited liability company, or LLC, has rendered the sole proprietor-
ship, partnership, and limited partnership forms of doing business obsolete. LLCs are
relatively new as recognized business entities. They embody most of the favorable
features of corporations (discussed below), partnerships, and limited partnerships. An LLC
is an unincorporated business entity. In most states, owners who contribute capital are
referred to as members. The LLC is recognized as an entity separate and apart from its
members.

LLC formation An LLC requires the approval of the state. Typically, the entity must file articles of for-
mation or articles of organization with the secretary of state in which the LLC is to be
formed. Usually, the LLC articles must include the following information:
• Name of LLC
• Address of company and resident agent
• Purpose of LLC
• Duration of LLC (although in many states the duration is presumed to be perpetual)

It is important to note that the name of an LLC must include the abbreviation LLC or LC
or words limited liability company in most states. This puts persons on notice that they are
dealing with a business entity and not an individual. Therefore, if Bob and Ray decided to
convert the partnership of B&R Air Services to an LLC, then they would be required to file
articles of organization and they might name the new company B&R Air Services, LLC.

LLC operating An LLC operating agreement is required in some states and is optional in others.
agreement Nonetheless, it is always prudent for an LLC to have a well-drafted operating agree-
ment in place to lay out the rights and duties of the LLC members. If Bob and Ray of
B&R Air Services, LLC, wished to draft an LLC operating agreement, some of the spe-
cific issues they might address would include
• Reporting the members’ names and percentage ownership of each member
• Establishing a residence for the business
• Outlining the rights and duties of certain officers
• Noting procedures for further capital contributions
• Establishing a procedure for the termination of a member’s interest or a member’s
death

Some LLC operating agreements will provide for the issuance of certificates that evi-
dence the ownership of each member. Such certificates are not required in most states.
 Entity Choice for Aviation Enterprises 201

Typically, an LLC operating agreement that notes percentage ownership by each mem-
ber is sufficient evidence of each member’s share of the LLC.

One other important issue that should be tackled in an LLC operating agreement is Liability of LLC
whether the LLC will be member-managed or manager-managed. In some cases, all the members
members wish to act as agents of the LLC and manage the LLC in accordance with their
percentage of ownership or some other agreed upon formula for sharing management
authority. In other cases, the members will appoint a manager to manage the LLC. In a
manager-managed LLC, the nonmanager members do not have a right to manage the
LLC. The LLC managers can be members or nonmembers of the LLC.

One big advantage to an LLC over any form of sole proprietorship or partnership is the
ability to shelter the members of the LLC from personal liability to creditors of the
LLC. As indicated earlier, an LLC is treated as a separate entity from its owners.

With respect to contract claims against the LLC, creditors may not pursue the personal
assets of the LLC members. For example, suppose B&R Air Services, LLC, has a claim
filed against it by a company that overhauls aircraft engines. If the claim relates to the
LLC’s failure to pay for services performed, the claim cannot be pursued against Bob’s
or Ray’s personal assets.

When it comes to tort claims, the same basic rules apply. If an employee of the LLC
operates an aircraft negligently and damages someone else’s property, neither Bob nor
Ray will be personally liable to the injured party. The injured party can go after the
LLC, but not after Bob or Ray. Of course if Bob or Ray were operating the aircraft, that
person could be personally liable for his own negligence.

It is also worth noting that LLCs are available to single-member entities. Therefore, a
sole proprietor can readily convert his or her sole proprietorship to an LLC to take
advantage of the protection from personal liability.

See Fig. 7-6 for an overview of the liability exposure of LLCs and LLC members.

Figure 7-6
LLC liability.
Member A

Liability No
Creditor LLC liability
Member B

Member C
202 Fundamentals of Aviation Law

Figure 7-7
Single-member LLC Ray’s tax return
LLC taxation. Schedule C Form 1040

Revenue $100,000 $60,000

Expenses 40,000 × 20%
Net income $60,000 $12,000 Tax
from Ray’s interest in LLC

Ray’s tax return

Form 1040

50% $30,000
Interest × 25%
Partnership $7,500
Form 1065
B&R Air Services

Revenue $100,000
Expenses 40,000
Net income $60,000
Bob’s tax return
50% Form 1040
Interest
$30,000
× 20%
$6,000

LLC taxation Another great advantage of LLCs is the ability to choose the approach to taxation for
the LLC. Members can choose to have the LLC taxed as a sole proprietorship (for single-
member LLCs), a partnership, or a corporation. Most LLCs choose to be taxed as sole
proprietorships or partnerships because that allows the individual members to be taxed
at their individual tax rates. Under current tax law, individual tax rates are somewhat
lower, and thus more favorable, than corporate rates.

See Fig. 7-7 for an illustration of how single-member and multiple- member LLCs will
be taxed, using the same figures as we employed in Figs. 7-2 and 7-4 for the examples
related to sole proprietorships and partnerships.

CORPORATIONS

Corporations are legal entities that are created by virtue of state law (and in some spe-
cial cases federal law). Just as with the limited liability company, a corporation is a sep-
arate legal entity—often referred to as an artificial person—that can do the same things
that a natural person can do, such as doing business, making legal claims and having
claims made against it, and engaging in contracts.
 Entity Choice for Aviation Enterprises 203

To form a corporation, certain legal requirements must be met. The first thing to do is Formation of
to file articles of incorporation. Typically, state law requires that articles of incorpora- a corporation
tion include the following (at a minimum):
• Corporate name
• The number of stock shares that the corporation can issue
• The name of the person acting as the incorporator
• The address of the corporation’s principal office
• The name and address of a resident agent for the corporation
• The purpose of the corporation

The articles of incorporation can be simple or very complex, depending on the needs of
the corporation involved. Usually, the document is prepared and filed with appropriate
state agencies by attorneys.

The next formality that must be complied with in forming a corporation is the establishment
of bylaws. Bylaws are the internal rules of the corporation. They detail how the corporation
will be operated and the processes involved in selecting management of the corporation.

Once the bylaws are in place, the next step is the corporation’s organizational meeting.
This meeting usually involves the adoption or approval of bylaws, the selection of a board
of directors, the selection of a bank, the issuance of stock shares, and any other provisions
deemed necessary to get the new corporate entity started as a viable business entity.

Following our earlier example, if Bob and Ray decided to incorporate B&R Air Services,
they might decide to name the corporation B&R Air Services, Inc. (most states require
the corporate name to include the term Incorporated, Inc., or Corporation after the name
of the corporation). Once the name is established, Ray and Bob will prepare and submit
articles of incorporation for the new entity. When the articles are accepted by the state,
the corporation can finalize its new bylaws and hold an organizational meeting to select
the board of directors. In a small corporation such as B&R Air Services, Inc., most
likely Bob and Ray will be the only two shareholders and directors in the entity. In a
larger corporation, there may be many directors with several of the directors coming
from outside the corporation. This type of director is often referred to as an outside
director. Many larger corporations are relying more and more heavily on outside direc-
tors owing to increased pressure from shareholders and regulators to ensure independ-
ence on the board.

Another important action at the organizational meeting will be the issuance of stock
certificates for each of the corporation’s shareholders—in our case Bob and Ray. Let us
assume for the rest of this discussion that the corporation has been authorized by the
state to issue up to 1000 shares of stock. Bob and Ray are the only shareholders, so they
have decided that the corporation will actually issue only 100 shares, with 50 going to
Bob and 50 going to Ray, once Bob and Ray contribute capital to the corporation. The
1000 shares are called authorized shares since the corporation was authorized to issue
only that many shares. The 100 shares that have been issued to Bob and Ray are known
as outstanding shares as they have now been issued “outside” the corporation.
204 Fundamentals of Aviation Law

Operating By law, corporations have formal standards and procedures for governance. Shareholders
the corporation own shares in the corporation through the issuance of corporate stock. The shareholders,
in turn, select the management of the corporation when they vote for the corporation’s
board of directors. The board of directors is responsible for the management of the cor-
poration. However, the board works through officers that it appoints to manage the day-
to-day affairs of the corporation’s business.

Naturally, the formality of the typical governance structure for a corporation will vary
from entity to entity. In a small corporation such as the one established by Bob and Ray,
the two shareholders will likely be the board of the directors and officers of the corpo-
ration as well. In a huge, multinational corporation, the formality of corporate gover-
nance and the separation between ownership and management of the corporation become
more apparent.

In any corporation, large or small, the shareholders must hold at least one annual meet-
ing, typically at a time and place detailed in the corporation’s bylaws. Special meetings
can also be called to convene shareholders regarding special issues or new develop-
ments in a corporation. In a small corporation, shareholder meetings may take place by
telephone or at informal settings. Sometimes small corporations waive the requirements
for in-person meetings and permit meetings to take place through written resolutions in
lieu of meetings. In large corporations, shareholder meetings are usually well planned
and orchestrated in a more formal manner. Most of the time, shareholders can vote
according to the number of shares of stock they own. In large corporations, most share-
holders vote by proxy, permitting another person (often a large shareholder and/or
director of the corporation) to cast their votes for them. Before any vote can count, a
quorum of members (a majority of shareholders entitled to vote) must be present unless
the requirement is modified in the articles of incorporation and/or bylaws.

Once a board of directors is selected, the board will typically meet on a regular basis to
discuss corporation business. Just as with shareholder meetings, board meetings are
held on a regular basis according to bylaws, and sometimes special meetings may be
called. Quorums are typically required for board actions to be considered valid.

One of the primary duties of a board of directors will be the selection of corporate offi-
cers. Most corporations employ at least a president, one or more vice presidents, a sec-
retary, and a treasurer for the corporation. Beyond these offices, the corporation bylaws
can provide for however many officer positions are deemed necessary. These officers are
delegated authority for the day-to-day operations of the corporation. They report directly
to the board, and usually they serve at the pleasure of the board. The duties of the corpo-
ration’s officers are detailed in the corporate bylaws. Sometimes officers are also board
members—a board member in this situation is often referred to as an inside director.

See Fig. 7-8 for an illustration of the governance structure for the typical corporation.

Duties Directors and officers of a corporation are placed in a position of high trust in the cor-
of directors poration. The relationship of trust with the corporate entity is often referred to as a fidu-
and officers ciary duty.
 Entity Choice for Aviation Enterprises 205

Figure 7-8
Shareholders Corporate
management
structure.
Elect

Board of directors

Appoint

Officers

One of the primary duties the director or officer has is the duty of loyalty to the corpo-
ration. Directors and officers must be ready to place their interests second to the inter-
ests of the corporation. In a large corporation, it might mean that directors or officers
who might lose their positions due to a merger cannot oppose the merger if it will bring
benefits to the majority of shareholders holding stock in the company. In a corporation
as small as that of Bob and Ray, it might mean that neither one can take on “side busi-
ness” without full notification to the other.

Directors and officers are also held to a high standard of care. This is often referred to
as a duty of care. Many commentators indicate that to measure compliance with this
standard, the director or officer must act in good faith, with ordinary care (as compared
to someone in a similar position), and for the betterment of the corporation. Although
this legal standard sets a high mark, it does not mean that directors or officers must be
right all the time. A standard like that would drive anyone away from a directorship or
officership of an institution. Instead, this legal standard means that honest mistakes or
lapses in judgment cannot be held against directors or officers as long as the directors
or officers exercised due diligence in their performance of duties.

Similar to LLCs, corporations are treated as entities separate from their owners. Liability issues
Therefore, the general rule for corporations is that shareholders are not liable to credi- for corpora-
tors of the corporation beyond the shareholders’ levels of capital contribution. The law tions and
treats contract and tort liability in a manner consistent with the description above for
LLCs. The only difference with a corporation is that the owners are shareholders and
shareholders
not members.

The high level of liability exposure in the aviation industry often persuades business
owners to incorporate their enterprises. However, once an entity is incorporated, care
must be taken to ensure that all corporate formalities are met and that the corporation’s
business is treated as an entity separate and apart from its owners.
206 Fundamentals of Aviation Law

Failure to maintain the requisite “separateness” may open the door for creditors of the
corporation to “pierce the corporate veil” and pursue the assets of the corporation’s
shareholders. Sometimes creditors will resort to the approach of piercing the corporate
veil because the corporation has no assets to pursue and the shareholders have assets
that may satisfy all or part of the creditors’ claims. In making their argument to pierce
the corporate veil, creditors will typically argue that the corporation is the mere “alter
ego” of its shareholders. This may be evidenced by
• Commingling of personal and corporate funds
• Failure to follow corporate formalities and records
• Forming the corporation with little or no funding by shareholders

The courts are usually reluctant to pierce the corporate veil. However, it does happen
from time to time when the circumstances dictate. Also note that the same issues may
be faced by members of an LLC if the LLC fails to operate as an entity separate from
its members.

Taxation of Corporations are looked upon as a separate taxable entity under the tax law. The IRS
corporations has established special rates at which it taxes corporate profits. Under current tax law,
corporate tax rates are somewhat higher than the tax rates applied to individuals. This
creates some disadvantage for corporate taxpayers. The disadvantage becomes even
more apparent when the corporation has its profits taxed at the corporate level at cor-
porate rates and then any distributions of profit by way of dividends are taxed at the
shareholder level at individual rates for each shareholder receiving dividends. This cre-
ates the tax phenomenon known as double taxation. First the corporation’s profits are
taxed at corporate rates; then the profits that are distributed to shareholders as dividends
are taxed again at individual rates.

In the case of B&R Air Services, Inc., assume that the corporation enjoys a profit of
$100,000 after the first year of operation as a corporation. If the applicable corporate
rate is 30 percent, the corporation will have to pay tax of $30,000.1 If the corporation
distributed a dividend of all remaining profits to Bob and Ray in a 50-50 split (since
each owns 50 percent of the shares of the corporation, the $70,000.00 distributed
would be taxed at the individual rates applicable to both Bob and Ray). If Bob’s appli-
cable individual rate were 20 percent, he would have to pay tax of $7000.00 on his div-
idend of $35,000.00. If Ray’s applicable individual rate were 10 percent, he would
have to pay tax of $3500.00 on his dividend of $35,000.00. All told, in this situation,
the corporation and shareholders combined would have paid a total tax of $40,500.00,
consisting of $30,000.00 paid by the corporation, $7000.00 paid by Bob, and $3500.00
paid by Ray.

However, when a corporation meets certain requirements, it may elect to be taxed as a

Subchapter S corporation, or an S corporation.2 The rules for S corporations allow any
corporate income to pass through directly to shareholders for taxation at their individ-
ual rates with no tax paid at the corporate level. In the case of Bob and Ray, they could
pass through the entire $100,000 of corporate profit to themselves. Bob would pay tax
of $20,000.00 based on his individual tax rate of 20 percent. Ray would pay tax of
 Entity Choice for Aviation Enterprises 207

$10,000.00 based on his individual tax rate of 10 percent. All told, the S corporation
election in this case would save more than $10,000.00 in taxes overall.

Not all corporations can qualify for treatment under S corporation status. To be eligible
for an S corporation election, the following conditions must be met:
• The corporation making the election must be a domestic U.S. corporation.
• The corporation cannot be a member of an affiliated group of corporations.
• There can be no more than 75 shareholders in the corporation.
• All shareholders must be individuals, estates, or certain trusts (corporations and part-
nerships cannot be shareholders).
• All shareholders must be U.S citizens or permanent residents of the United States.
• The corporation cannot have more than one class of stock.

For many small corporations, the S corporation election makes a lot of sense. The elec-
tion is fairly simple to make, and it can be rescinded. (However, if it is rescinded, the
corporation cannot go back to S corporation status for 5 years following the rescission.)
An S corporation election makes sense for shareholders who have individual tax rates
lower than their corporation’s tax rates. It may also make sense for certain corporations
that experience losses if the shareholders wish to pass the losses through to their indi-
vidual tax returns to offset other individual income that will be subject to taxation.

See Fig. 7-9 for a summary of corporate tax procedures for regular corporations and
S corporations.

Regular corporation Figure 7-9

Corporate Corporate
tax (Form 1120) taxation.
on profits

Dividends Dividends

Shareholder Shareholder
taxed on taxed on
dividends dividends

S Corporation

No tax on
corporate profit
(Form 1120s)

Profits Profits

Shareholder taxed on Shareholder taxed on

share of profits share of profits
208 Fundamentals of Aviation Law

CASES AND COMMENTARY

Case 7-1 deals with the corporate opportunity doctrine. As noted in the discussion
above, it is critical that directors and officers of corporation act with loyalty to the cor-
poration. The importance of that fiduciary relationship to the corporation is emphasized
in Case 7-1.

CASE 7-1
KLINICKI V. LUNDGREN
298 Ore. 662; 695 P. 2d 906 (1985)

OPINION BY: JONES business. Plaintiff was in charge of operations and

maintenance. In November, 1977, plaintiff and
The factual and legal background of this compli- Lundgren, as representatives of Berlinair, met with
cated litigation was succinctly set forth by Chief representatives of the Berliner Flug Ring (BFR), a
Judge Joseph in the Court of Appeals opinion as consortium of Berlin travel agents that contracts
follows: for charter flights to take sallow German tourists to
sunnier climes. The BFR contract was considered
In January, 1977, plaintiff Klinicki conceived the
a lucrative business opportunity by those familiar
idea of engaging in the air transportation business
with the air transportation business, and plaintiff
in Berlin, West Germany. He discussed the idea
and defendant had contemplated pursuing the con-
with his friend, defendant Lundgren. At that time,
tract when they formed Berlinair. After the initial
both men were furloughed Pan American pilots
meeting, all subsequent contacts with BFR were
stationed in West Germany. They decided to enter
made by Lundgren or other Berlinair employees
the air transportation business, planning to begin
acting under his directions.
operations with an air taxi service and later to
expand into other service, such as regularly sched- During the early stages of negotiations, Lundgren
uled flights or charter flights. In April, 1977, they believed that Berlinair could not obtain the con-
incorporated Berlinair, Inc., as a closely held tract because BFR was then satisfied with its
Oregon corporation. Plaintiff was a vice-president carrier. In early June, 1978, however, Lundgren
and a director. Lundgren was the corporation’s pres- learned that there was a good chance that the BFR
ident and a director. Each man owned 33 percent contract might be available. He informed a BFR
of the company stock. Lelco, Inc., a corpora- representative that he would make a proposal on
tion owned by Lundgren and members of his behalf of a new company. On July 7, 1978, he
family, owned 33 percent of the stock. The corpo- incorporated Air Berlin Charter Company (ABC)
ration’s attorney owned the remaining one percent and was its sole owner. On August 20, 1978, ABC
of the stock. Berlinair obtained the necessary gov- presented BFR with a contract proposal, and after
ernmental licenses, purchased an aircraft and in a series of discussions it was awarded the contract
November, 1977, began passenger service. on September 1, 1978. Lundgren effectively con-
cealed from plaintiff his negotiations with BFR
As president, Lundgren was responsible, in part, for
and his diversion of the BFR contract to ABC,
developing and promoting Berlinair’s transportation
 Entity Choice for Aviation Enterprises 209

even though he used Berlinair working time, staff, There is no dispute that the corporate opportunity
money and facilities. doctrine precludes corporate fiduciaries from divert-
ing to themselves business opportunities in which
Plaintiff, as a minority stockholder in Berlinair,
the corporation has an expectancy, property inter-
brought a derivative action against ABC for usurp-
est or right, or which in fairness should otherwise
ing a corporate opportunity of Berlinair. He also
belong to the corporation. The doctrine follows
brought an individual claim against Lundgren for
from a corporate fiduciary’s duty of undivided loy-
compensatory and punitive damages based on
alty to the corporation. ABC agrees that, unless
breach of fiduciary duty.
Berlinair’s financial inability to undertake the con-
The trial court found that ABC, acting through tract makes a difference, the BFR contract was a
Lundgren, had wrongfully diverted the BFR con- corporate opportunity of Berlinair.
tract, which was a corporate opportunity of Berli-
Where a director or principal senior executive of
nair. The court imposed a constructive trust on
a close corporation wishes to take personal advan-
ABC in favor of Berlinair, ordered an accounting
tage of a “corporate opportunity,” as defined by
by ABC and enjoined ABC from transferring its
the proposed rule, the director or principal senior
assets. The trial court also found that Lundgren, as
executive must comply strictly with the following
an officer and director of Berlinair, had breached
procedure:
his fiduciary duties of good faith, fair dealing and
full disclosure owed to plaintiff individually and to (1) The director or principal senior executive must
Berlinair. The court did not award plaintiff any promptly offer the opportunity and disclose
actual damages on the breach of fiduciary duty all material facts known regarding the oppor-
claim. All the issues were tried to the court, except tunity to the disinterested directors or, if there
that a jury was empaneled to try the punitive dam- is no disinterested director, to the disinter-
ages issue. It returned a verdict in favor of plaintiff ested shareholders. If the director or principal
and assessed punitive damages against Lundgren senior executive learns of other material facts
in the amount of $750,000. Lundgren then moved after such disclosure, the director or principal
to dismiss plaintiff’s claim for punitive damages. senior executive must disclose these additional
The court granted the motion to dismiss and, sua facts in a like manner before personally taking
sponte, entered judgment in favor of Lundgren the opportunity.
notwithstanding the verdict on the punitive dam- (2) The director or principal senior executive may
ages claim. take advantage of the corporate opportunity
ABC appealed to the Court of Appeals contend- only after full disclosure and only if the oppor-
ing that it did not usurp a corporate opportunity tunity is rejected by a majority of the disinter-
of Berlinair. ested directors or, if there are no disinterested
directors, by a majority of the disinterested
ABC petitions for review to this court contending shareholders. If, after full disclosure, the disin-
that the concealment and diversion of the BFR terested directors or shareholders unreasonably
contract was not a usurpation of a corporate oppor- fail to reject the offer, the interested director or
tunity, because Berlinair did not have the finan- principal senior executive may proceed to take
cial ability to undertake that contract. ABC argues the opportunity if he can prove the taking was
that proof of financial ability is a necessary part otherwise “fair” to the corporation. Full disclo-
of a corporate opportunity case and that plaintiff sure to the appropriate corporate body is, how-
had the burden of proof on that issue and did not ever, an absolute condition precedent to the
carry that burden. validity of any forthcoming rejection as well as
210 Fundamentals of Aviation Law

to the availability to the director or principal (4) Lundgren did not offer Berlinair the BFR
senior executive of the defense of fairness. contract.
(3) An appropriation of a corporate opportunity (5) Lundgren did not attempt to obtain the con-
may be ratified by rejection of the opportunity sent of Berlinair to his taking of the BFR cor-
by a majority of disinterested directors or a porate opportunity.
majority of disinterested shareholders, after (6) Lundgren did not fully disclose to Berlinair
full disclosure subject to the same rules as his intent to appropriate the opportunity for
set out above for prior offer, disclosure and himself and ABC.
rejection. Where a director or principal senior
(7) Berlinair never rejected the opportunity pre-
executive of a close corporation appropriates a
sented by the BFR contract.
corporate opportunity without first fully disclos-
ing the opportunity and offering it to the cor- (8) Berlinair never ratified the appropriation of
poration, absent ratification, that director or the BFR contract.
principal senior executive holds the opportu- (9) Lundgren, acting for ABC, misappropriated
nity in trust for the corporation. the BFR contract.
Applying these rules to the facts in this case, we
Because of the above, the defendant may not
conclude:
now contend that Berlinair did not have the
(1) Lundgren, as director and principal executive financial ability to successfully pursue the BFR
officer of Berlinair, owed a fiduciary duty to contract. As stated in [citation] “if the challeng-
Berlinair. ing party satisfies the burden of proving that a
(2) The BFR contract was a “corporate opportu- corporate opportunity was taken without being
nity” of Berlinair. offered to the corporation, the challenging party
will prevail.”
(3) Landgren formed ABC for the purpose of
usurping the opportunity presented to Berli- [Judgment Affirmed]
nair by the BFR contract.

In large and small corporations, there may be ample opportunities for directors and offi-
cers to make secret profits from their relationship with the corporation. The law is clear
on this point—officers and directors must subordinate their own personal interests to
the interests of the corporation and of the shareholders who own the corporation.

Beyond issues related to the corporate opportunity doctrine, there have been recent
scandals involving publicly held companies in which officers and directors have not
acted in the best interests of their constituents—shareholders and employees. In the
scandals involving Enron, Worldcom, and Tyco, the shareholders, employees, and
creditors suffered huge losses due to failures of corporate governance at these enti-
ties. These scandals prompted the government to address the issues of corporate
governance.

The government response came in the form of the Sarbanes-Oxley Act of 2002.
Sarbanes-Oxley was enacted to meet the following goals:
 Entity Choice for Aviation Enterprises 211

• Improve corporate governance by forcing directors to be more vigilant in guiding the

conduct and business practices of corporate officers.
• Eliminate problems created by conflicts of interest.
• Foster a sense of shareholder confidence in the system of corporate governance.

Sarbanes-Oxley attempted to meet these goals through the following provisions:

• Chief executive officers (CEOs) and chief financial officers (CFOs) must now per-
sonally certify that the financial statements of the corporation are free of material
misstatements. Any CEO or CFO who violates this provision knowingly and will-
fully will be subject to severe penalties including prison terms and large fines.
• Any bonuses received by a CEO or CFO must be reimbursed to the corporation if it
is later learned that the corporation must restate its financial statements owing to
noncompliance with the law related to financial disclosures.
• Corporations are now prohibited from making personal loans to directors or execu-
tive officers.

These are just some of the provisions enacted in Sarbanes-Oxley to ensure stronger cor-
porate governance and to protect shareholders. Although the law is applicable to only
larger, publicly held corporations, many nonpublic and not-for-profit organizations are
adopting the practices required by Sarbanes-Oxley in order to strengthen their own cor-
porate governance. Compliance with Sarbanes-Oxley is now a part of life in publicly
held U.S. corporations. The jury is still out on whether the law will have a positive
impact on the ethical conduct of directors and officers in U.S. corporations.

Case 7-2 involves an aircraft leasing company operated as an LLC. The case demon-
strates the peril of failing to meet formalities that ensure that the line between business
and personal matters is not crossed with a separate entity such as an LLC or corporation.

CASE 7-2
NELSEN V. MORRIS
2004 U.S. Dist. LEXIS 6928

OPINION BY: WILLIAM T. HART induce plaintiff’s investment. There is complete

diversity of citizenship and the amount in contro-
Plaintiff Daniel Nelsen, an Illinois resident, versy exceeds $75,000. Defendant has moved to
alleges that he lost money investing in limited lia- dismiss based on lack of personal jurisdiction.
bility companies (“LLC’s”) that leased aircraft.
According to the allegations of the complaint,
Plaintiff alleges that defendant Waldo Morris, an
defendant was the managing member of two
Iowa resident, caused these losses by breaching
LLC’s known as Interlease IV and Interlease V.
his fiduciary duty as a managing member of the
Both LLC’s were in the business of leasing aircraft
LLC’s and by committing fraud in order to
212 Fundamentals of Aviation Law

that were owned by the LLC’s. Plaintiff was a LLC’s are generally the same as those for cor-
25% member of Interlease IV and a 5% member porations. [Citation] (Personal liability of LLC
of Interlease V. Plaintiff allegedly loaned Inter- member is same as that of a corporate shareholder
lease V $1,000,000 in return for a promissory except that failure to observe formalities as to
note secured by an aircraft, but later relinquished meetings is not a consideration.) [Citations]. Here,
the note for his 5% share of Interlease V. Plaintiff it must be taken as true that funds of the various
allegedly invested another $1,000,000 and also LLC’s were commingled, that Interlease IV
personally guaranteed a $5,800,000 loan as part of became insolvent in that the guarantors had to
his purchase price for his interest in Interlease IV. pay off the outstanding balance of its loan, and
Defendant allegedly used the loan proceeds to that defendant used LLC funds for his own bene-
pay off debts defendant would have otherwise fit. There is also evidence that defendant man-
owed. Also, defendant allegedly intermingled aged and/or directed activities of the LLC’s. It
funds among various LLC’s and used some funds cannot be held that plaintiff’s alter ego theory is
for his own benefit. After the foreclosure on the not viable. [Citation]. Therefore, the conduct of
loan, defendant allegedly improperly purchased the LLC’s is attributable to defendant for personal
one of the aircraft that had been security. Plaintiff jurisdiction purposes and, at this stage of the pro-
lost his $2,000,000 investment and, based on the ceedings, it is appropriate to continue to exercise
personal guaranty, was required to pay $1,451,250 personal jurisdiction over defendant. Because
in principal plus $92,940 interest and incurred personal jurisdiction is being upheld on this basis,
$46,060 in attorney fees. it is unnecessary to consider whether the fiduciary
shield doctrine should not apply because defendant
In response to the motion to dismiss, plaintiff
was acting in his own interest instead of the inter-
need only make a “minimally viable” showing
ests of the LLC’s and whether, on that basis, it
that the LLC’s are a sham. [Citation]. It is enough
would be appropriate to exercise general and/or
to show that the allegations are not “patently
specific personal jurisdiction.
without merit.” The alter ego rules applicable to

Although Case 7-2 is limited to a discussion of whether personal jurisdiction could be exer-
cised, it provides a good discussion of what can trigger the personal liability of a person
for his or her actions as a member of the LLC. As discussed earlier, one of the primary rea-
sons for selecting an LLC or a corporate form of doing business is to shelter the owners of
the business from personal liability to the creditors of the business. As can be seen in this
case, by treating an LLC as an alter ego, a member can potentially expose herself or him-
self to personal liability.

DISCUSSION CASES

1. Samantha, Joe, Marty, and Charlie formed DataTrax, LLC, a limited liability com-
pany located in Detroit, Michigan. The company designs and manufactures custom equip-
ment for airport automated weather systems. Charlie is an engineer, and he has been sent
to discuss specifications for a new weather station at an airport outside Reno, Nevada. The
business trip is scheduled to require 4 days of out-of-town travel for Charlie. Charlie is
 Entity Choice for Aviation Enterprises 213

a pilot, and he flies a King Air owned by DataTrax to the business meeting location out-
side of Reno. After a long day of meetings with airport management, Charlie decides to
take the aircraft for a flight to Las Vegas to unwind for the evening. He arrives safely at
Las Vegas. However, while he is taxiing to the general aviation parking area, he misjudges
his distance from a parked Gulfstream V and damages the wingtips on the Gulfstream.
The Gulfstream owners seek to file claims against Samantha, Joe, Marty, and Charlie. Are
all four LLC members liable for the damage incurred by the Gulfsteam in this accident?
Is the LLC liable for damages related to the accident? Why or why not? Would your
answer be any different if DataTrax were a general partnership rather than an LLC?

2. Kirk and Bill form MSM LLC. MSM is a limited liability company that operates a
chain of flight schools all along the eastern seaboard. The LLC is a manager-managed
LLC. Kirk has been designated as the manager of the LLC in the articles of organiza-
tion filed with the state. Kirk spots a hangar and shop location in the Pittsburgh,
Pennsylvania, area that would, in his opinion, be an excellent location for a new flight
school. He enters into a 5-year lease with the hangar owner on behalf of MSM, LLC.
While visiting the Cumberland Maryland area, Bill sees a location that he thinks will
be the perfect spot for a flight school. Bill signs a lease with the Cumberland Maryland
hangar owner. Is MSM, LLC, bound to either of these leases? Please explain.

3. Freemont Aviation, Inc., is an incorporated entity located in the state of Connecticut.

The corporation operates an on-demand air taxi service out of Bridgeport Airport. The
corporation is owned by two shareholders, Tara and Sandra, in equal 50 percent shares.
For tax year 2006, Freemont has net profits of $100,000.00. If Tara and Sandra agree to
pay a dividend consisting of all net profits for 2006, what are the tax ramifications to
Freemont and to Tara and Sandra? How would your response differ if the corporation
made a timely election with the IRS to be treated as a subchapter S corporation? Assume
that the applicable corporate tax rate is 30 percent and that the applicable individual tax
rates for Tara and Sandra are 15 percent and 25 percent, respectively.

4. Dana was the president and general manager of Air Freight, Inc., a subsidiary of
Flying Tiger Cargo Services, Inc. Flying Tiger Cargo is a corporation with national and
international offices. Air Freight, Inc., concentrates on air cargo services in the mid-
Atlantic region of the United States. In 2004, Dana recruited three other Air Freight
executives to join her in starting up a new air freight enterprise. The four remained at
Air Freight for the 3 years it took to develop a business plan and put their new business
enterprise into place. During this time, the four used their positions at Air Freight to
travel to customers, gathering ideas, new customer leads, and working out equipment
and aircraft purchases for their new business. At no time did they reveal their plans to
Flying Tiger Cargo. In 2006, they all resigned their positions at Air Freight and started
their new business, incorporated as Chesapeake Air Cargo, Inc. When the executive
officers at Flying Tiger Cargo learned of the new venture formed by the former Air
Freight executives, they sued all four for damages. Who will win the lawsuit? Why?

5. Stanton comes to you seeking legal and tax advice. He currently owns seven air-
craft that are being leased to various flight schools and air charter companies. All the
aircraft are owned by Stanton as a sole proprietor doing business as Stanton Air. During
214 Fundamentals of Aviation Law

the course of the last several years, Air Stanton has been profitable, with profits ranging
from $50,000 to $80,000. Stanton’s individual income tax rate is 20 percent. Corporate
income tax rates for the income range of Stanton Air are 30 percent. Stanton’s primary
concern is whether he should continue to operate Stanton Air as a sole proprietorship or
some other type of legal entity. What would you advise Stanton to do? Explain fully,
describing the positive and negative aspects of possible options.

6. Terry purchased a new aircraft manufactured by Koda Aircraft, Inc., a privately

held corporation with 10 shareholders that designs and manufactures light general avi-
ation aircraft. Terry was killed when her Koda aircraft crashed shortly after an engine
failure in mountainous terrain. Terry’s widowed husband brought a lawsuit against Koda,
alleging that the aircraft crash was caused by a defect in Koda’s engineering that caus-
es the aircraft engine to seize in certain weather conditions. If Terry’s widowed husband
is successful in suing Koda, will the shareholders of Koda be held personally liable for
any judgment? Explain.

7. Jake and Sally formed a limited liability company that will allow them to own and
lease aircraft to flight schools. What sort of provisions would you suggest for an oper-
ating agreement between the parties? Please list your suggestions along with a brief
explanation of why you would propose certain provisions.

8. Aviation Properties was a limited partnership engaged in buying, selling, and man-
aging corporate aircraft. The limited partnership consisted of Greer as the sole general
partner and a group of limited partners. About a year after its formation, the business
ran into cash flow problems and was near insolvency. The limited partners called sev-
eral meetings to address the cash flow crisis. Eventually, the limited partners hired two
employees to take over the management of the business from Greer. During this time,
all the limited partners also were personally involved in dealing with creditors and ven-
dors with respect to the debts owed by the partnership. Greer was still legally the gen-
eral partner and was looked upon as such by the creditors and vendors. However, he
was no longer treated as a general partner and no longer received compensation from
the partnership. Eventually Greer went to work for another aircraft dealer. Creditors of
the company now file suit to recover debts owed by Aviation Properties. The creditors
file a lawsuit against both the limited partnership and the limited partners of the enter-
prise. Will the creditors be able to successfully pursue the limited partnership? What
about the individual limited partners? Explain your response fully.

9. Steve sets up a corporation for the purpose of aircraft muffler repairs. Steve is the
sole shareholder. He receives FAA certification as a repair station and opens his shop
for business with the name AvMuffler, Inc. The corporation is profitable, but Steve
wants to expand the operation. AvMuffler applies for and receives a commercial loan of
$500,000.00 from a bank. In the loan application, the corporation indicates that the loan
proceeds are to be used for working capital needs (inventory, increased labor costs, and
small tools). Around the same time that he receives the loan proceeds from the bank,
Steve and his wife find a home that they are very interested in purchasing. However,
they do not have the money available for a down payment. Steve decides that he will
use $150,000.00 of the commercial loan proceeds received by AvMuffler for a down
 Entity Choice for Aviation Enterprises 215

payment on the home. Steve takes the money from AvMuffler’s account and puts it in
his personal bank account, where it is eventually used for the down payment on the
house. There are no efforts made by Steve to repay the $150,000 to AvMuffler. Later,
AvMuffler runs into cash flow difficulty and defaults on the bank loan of $500,000.00.
The bank learns of the $150,000.00 transfer from AvMuffler to Steve and sues both
AvMuffler and Steve. Steve argues that AvMuffler is the only party that may be sued in
this case. Is Steve correct? Explain.
This page intentionally left blank
8 Property Law Issues for Aircraft Owners
and Airport Operators

REAL PROPERTY 218

Ownership rights in real property 219
Multiple ownership 219
Transfers of real property 220
Easements 221
Local zoning issues 221
Leasing 222
AIRPORTS 223
PERSONAL PROPERTY 224
Tangible property 224
Intangible property 230
INSURANCE 230
Hull insurance and liability insurance 231
The insurance contract 232
Other types of insurance 234
CASES AND COMMENTARY 236
DISCUSSION CASES 247
ENDNOTES 251

217

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218 Fundamentals of Aviation Law

The rules of law relating to the ownership of property are among the most fundamental
in our system of law. Acquisition and use of property are an important part of life in
most societies. Without some stable and enforceable set of laws regarding property
ownership and rights, ownership and use of property would be dependent on the phys-
ical or military strength of the possessor.

In modern property law there are basically two types of property recognized—real
property and personal property. Real property is sometimes referred to as real estate or
realty. This category of property consists of land and things that are annexed or affixed
to the land.

Personal property is in many ways a default category—anything that does not fit the
definition of real property is categorized as personal property. Tangible property that is
movable is considered personal property and often referred to as goods. Personal prop-
erty can also be intangible and can take the form of copyrights, patents, trademarks, or
other intellectual property.

Property law is a vast field of study. In this chapter, we will endeavor to highlight some
of the major features of both real and personal property law and will provide relevant
examples of applications of these principles to businesses and individuals in the avia-
tion environment.

REAL PROPERTY

Some of the different types of real property are

• Land and buildings
• Rights to minerals or subsurface rights
• Plants and vegetation (although plant life severed from the land is considered to be
personal property)
• Fixtures attached to land or buildings
• Air rights

The key characteristic of real property is that is either land or things that are affixed to
the land. One general test often applied to determine whether property is real property
is, Would the removal of the property from the land damage or leave a scar on the land?

Of course, this test would not necessarily permit the inclusion of air rights as a type of
real property. Interestingly, but not unexpectedly, the concept of air rights has changed
over centuries of evolving property law. In the earliest days of property law develop-
ment, it was understood that a property owner owned the property from the surface
going up the sky above and to the center of the earth. Over time, environmental con-
siderations, zoning restrictions, and air navigation needs have diluted the absolute
nature of property ownership as it relates to air rights.
 Property Law Issues for Aircraft Owners and Airport Operators 219

There are several types of ownership interests in real property. The most common is Ownership
known in the legal world as the fee simple absolute. This essentially means that property rights in real
ownership is exclusive and complete, subject to only government regulation or private
property
restraints. Sometimes the fee simple can be qualified. A qualified fee simple provides
for absolute ownership as long as certain conditions are met. For instance, land might
be transferred to an owner on the condition that it be used only as an airport. An addi-
tional type of interest in real property is the life estate. This type of real property own-
ership creates an interest in real property for the duration of a person’s life. Most often,
the person granting the property (the grantor) grants the property for the life of the
receiver (the grantee).

Whether property is real or personal, it can be owned by more than one person. This is Multiple
often referred to by lawyers as concurrent ownership. There are four basic forms of ownership
concurrent ownership: tenancy in common, joint tenancy, tenancy by the entirety, and
community property. Each of these is briefly discussed below.

In a tenancy in common, each owner gets a share of the property owned that she or he
may pass on to heirs. Further, each ownership share is separate and freely transferable
by its owner. Let us say that Nick and Susan (who are not married) wish to establish
ownership of a maintenance hangar on the perimeter of a busy regional airport with
Nick owning 50 percent and Susan owning 50 percent. In many states their concurrent
ownership would automatically be treated as a tenancy in common unless otherwise
stated. However, to be certain that there were no misunderstandings, Nick and Susan
could create a tenancy in common by stating in the deed that the property was being
transferred to “Nick and Susan, as tenants in common.” In this case, if Nick dies, he
can, as a general rule, leave his 50 percent share of the hangar to his heirs by will. He
also has the legal right to sell his 50 percent share to any person without the need for
Susan’s consent. In most states, there is a presumption that property owned by more
than one person or entity is owned as a tenancy in common, unless the description of
the property ownership clearly states otherwise.

When two or more persons wish to set up a joint tenancy, they must expressly state that
they wish to do so. Using the previous example, words creating the joint tenancy such
as Nick and Susan, as joint tenants with right of survivorship will suffice. The unique
feature of a joint tenancy is the right of survivorship vested in each owner. This means
that in the joint tenancy with Nick and Susan, if Nick dies, Susan now owns 100 percent
of the hangar—regardless of what Nick’s will might state regarding the disposition
of his property. It is also important to note that a joint tenant can transfer his or her share
in a joint tenancy to another person without the consent of the other joint tenant. Let’s
say that Nick decides to transfer his 50 percent interest in the hangar to Amanda. He
can do so without Susan’s consent, but after the transfer, Amanda and Susan now own
the hangar as tenants in common.

In some states, a special form of joint tenancy known as tenancy by the entirety occurs
between husband and wife. A married couple wishing to establish a tenancy by the
entirety can do so only with express language. To continue the example above, if Nick
220 Fundamentals of Aviation Law

and Susan were married and wanted to create a tenancy by the entirety, they would have
to state, “Nick and Susan, husband and wife, as tenants by the entireties.” Everything
operates the same in a tenancy by the entirety and a joint tenancy with one important
exception—in a tenancy by the entirety, neither husband nor wife can transfer his or her
share of the property without the consent of the other. So if Nick and Susan created a
tenancy by the entirety, Nick could not transfer his share to Amanda without Susan’s
authorization.

Another form of concurrent ownership that applies only to married couples is commu-
nity property. This form of multiple ownership is recognized only in Arizona, California,
Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Community
property laws require that each spouse own an equal one-half share of any assets accu-
mulated during a marriage, regardless of who earned the income (with some exceptions
for property obtained by one party through a gift or inheritance). In community property
states, when one spouse dies, the spouse who survives is automatically entitled to one-
half of the community property. Therefore, in the case of Nick and Susan, if they resided
in a community property state and purchased the hangar in the same state, they would
each be deemed to own an equal one-half share of the hangar. In a community property
state, neither spouse can transfer community property to a third person without the other
spouse’s authorization.

Transfers There are several ways to transfer real property from one person to another. The most
of real property common methods of transfer are
• Sales
• Gifts and inheritance
• Adverse possession

In sales, gifts, and inheritance situations, the real property is transferred from one party
to another by a deed. The deed is a written document that evidences the seller or
donor’s intention to convey the property to another person. Usually the person selling
or gifting the property is called the grantor. The person receiving the property is the
grantee. Once a deed is signed by the grantor and delivered to the grantee, the transfer
of the property is complete. However, in virtually every state in the United States, the
deed must then be recorded with a county recording office. This allows any persons
who later want to purchase the property or lend money on the property to confirm that
the person they are dealing with actually owns the property. A search of county land
records will also confirm whether there are any liens or mortgages recorded on the
property.

In certain circumstances, real property may be transferred involuntarily by adverse pos-

session. Adverse possession is the unauthorized possession of another person’s real
property that meets certain statutory requirements. A transfer by adverse possession
does not require a deed. Every state has a slightly different twist when it comes to
spelling out the requirements for adverse possession. However, the common threads
that run through most state statutes are as follows:
 Property Law Issues for Aircraft Owners and Airport Operators 221

• There must be a 10- to 20-year period of unauthorized possession of the property.

• The unauthorized possession must be open and visible to the rightful owner (if the
rightful owner took the time to look).
• The unauthorized possessor must actually occupy the land (living in a building or
planting crops would count for this requirement).
• The unauthorized possession must be continuous (allowing for normal periods of
absence for work, vacation, etc.).
• The unauthorized possession must be just that—unauthorized (the rightful owner
cannot have granted rights to use the property by permission).

If all these elements are met, the adverse possessor can get clear title to the real property
possessed. For instance, if a farmer planted crops for the last 25 years on a half-acre
stretch adjacent to a 4000-acre airport, the farmer may be entitled to adverse possession
of the half-acre parcel of land—not the entire 4000-acre airport.

To many, the adverse possession laws appear to reward the person who makes unautho-
rized use of another’s property. That may be so. However, the adverse possession laws were
designed to require landowners to diligently oversee their property and its boundaries.

Easements are interests in land that give the easement holder the legal right to make Easements
limited use of property owned by another. There are two legally recognized types of
easements—easements appurtenant and easements in gross.

An easement appurtenant exists when a landowner is given the right to use the property
of another for specified purposes. This type of easement is often found in situations with
common driveways and rights-of-way.

An easement in gross is created when one party grants another party who does not own
adjacent land the right to use the first party’s land. This type of easement commonly
exists with utility poles and underground cable lines.

Most easements “run with the land.” That means that when an owner sells her property,
the person buying will be subject to the easement.

Easements can be created in several ways. Some easements are created expressly by
granting the easement to another party (usually for a price) or by reserving an easement
when the property is sold. Easements can also be implied (1) when a landowner subdi-
vides and sells property with a road, walkways, or water supply that serves all proper-
ties within the subdivision; or (2) when a property is situated between various other
properties, and the only way to enter and exit the property is through the surrounding
properties—this is often referred to as an easement by necessity. Easements can also be
created by adverse possession. This is often referred to as an easement by prescription.

Zoning authority is the power of local government—usually at the county or municipal Local zoning
level—to regulate land use. To make land available for appropriate use, most local issues
222 Fundamentals of Aviation Law

governments have adopted zoning ordinances or codes. These codes typically accom-
plish three things:
• Create “zones” for agricultural, residential, commercial, and industrial land use
• Establish a certain “look and feel” for buildings or other improvements made within
designated zones
• Develop restrictions for building heights, size, and location in the various zones

To establish and enforce zoning requirements, many local governments create zoning
commissions or planning boards that make formal recommendations to elected coun-
cils or commissioners on how land should be zoned. If landowners seek to make a use
for their property that does not conform to the zoning for their land, they may seek a
waiver from the zoning commission. This is often referred to as a request for a variance.
Sometimes land is rezoned, and certain uses that have already been established within
the designated zone do not comply—these are called nonconforming uses and are typ-
ically permitted to continue even though they do not fit the new zoning scheme.

Leasing Leasing occurs when the owner of property permits another person to possess and use
the property on a temporary basis. Many of the business relationships in aviation are
based on leases and landlord-tenant law. Sometimes the leasing involves real property
such as land or hangars on an airport. On other occasions, the leasing involves personal
property such as aircraft or aircraft-related equipment. This discussion will focus on
leasing real property.

In the leasing relationship, the property owner is called the landlord or lessor. The per-
son leasing the property is referred to as the tenant or lessee.

A lease is a rental agreement between a landlord and a tenant. The lease may be oral, but
it must be in writing (under most state laws) if it involves a lease of more than 1 year
(see earlier discussion in Chap. 6 on Statute of Frauds requirements for writings). Some
of the essential terms that should be included in any lease are the term of the lease, the
amount of rent to be paid, and a description of the property to be used and possessed
under the lease.

If a tenant wants to transfer his or her rights under a lease, the tenant may do so by
either the assignment of the lease or a sublease. An assignment of a lease involves the
transfer of all the tenant’s rights in a lease. A transfer of anything less than all the ten-
ant’s rights under a lease is a sublease.

For instance, if Matthew’s fixed base operator (FBO) leases a building and hangar from
the city of Santa Anna and the lease has another 5 years until expiration, Matthew is
assigning his rights in the lease if he transfers the remaining 5 years of the lease to
Emily. However, if Matthew transfers only 2 years of the lease, it is a sublease.

If an assignment takes place, Emily will be responsible for paying rent to the Santa
Anna, the landlord. However, that does not mean that Matthew is off the hook. He is
also responsible for paying rent if Emily fails to pay.
 Property Law Issues for Aircraft Owners and Airport Operators 223

If Matthew subleases the property to Emily, Emily has no direct obligation or relation-
ship with the landlord, Santa Anna. Emily’s only contractual obligation is with
Matthew. Further, Matthew remains on the hook for all rent payments to Santa Anna.

Most leases contain clauses that prohibit a tenant from either assigning or subleasing
her or his interests in a property without authorization from the landlord. Most of the
time the antiassignment or sublease clause requires that the landlord not act unreason-
ably in deciding whether to authorize an assignment or sublease.

AIRPORTS

Many people labor with the misunderstanding that the FAA owns most of the airports in
the United States. That is far from correct. In fact, the only airport the FAA owns in the
entire United States is the FAA’s research facility in Atlantic City, New Jersey.1 Airport
owners are typically state, county, municipal, or private owners. Many airports are pub-
licly owned for public use. Others are privately owned for public use. And still others are
privately owned for private use. This discussion focuses on public use airports.

Although the FAA does not own airports, it does play a big role in assisting airport
owners in improving airports. The FAA does this through its Federal Airport Aid Program
(FAAP), Airport Development Aid Program (ADAP), and Airport Improvement
Program (AIP). If an airport owner is granted federal funds from the FAA to make
airport improvements, the airport owner is typically required to comply with certain
“Sponsor’s Assurances.” The assurances are promises that the airport owner makes in
exchange for the grant money. They are typically enforceable by the FAA for up to
20 years from the date the grant money is accepted by the airport owner.

Some of the more substantial promises made by the airport owner are as follows:
• No exclusive rights will be granted to any person providing or intending to provide
services at the airport (with some exceptions allowed for FBOs in certain circum-
stances).
• The airport will be made available to all types, kinds, and classes of users on rea-
sonable terms and without unjust discrimination.
• The airport owner will properly maintain and operate airport facilities and approaches
to the airport.
• Good title to the airport property will be maintained.
• Revenues generated by the airport and any local taxes on aviation fuel will be
expended for capital operating costs of the airport, and books and records will be
kept allowing audit of such practices.
• Assurance is given that terminal airspace required for instrument and visual opera-
tions will be adequately cleared and protected.
• The airport owner will take appropriate action, to the extent reasonable, to restrict
the use of land (through zoning laws) to activities and purposes compatible with
normal airport operations.
224 Fundamentals of Aviation Law

These assurances provided by the airport owner are typically found in either a deed that
conveys the airport property to the airport owner or grant agreements executed under
one of the federal grant programs noted earlier.

A closer look at the kinds of promises requested by the FAA reveals that the FAA is
seeking to ensure that money it provides to airport owners or proprietors will be used
to enhance a national transportation system and not just a local airport. That is why the
FAA wants assurances that the airport will be open to all classes of users, that airport
money will be used for airport projects, and that the airport will do what it can to ensure
that it remains viable by judiciously guarding land restrictions and zoning rules for sur-
rounding properties.

If an airport proprietor fails to abide by its promises, then users or other interested par-
ties may file a complaint with the FAA. Such complaints are filed in accordance with
Part 16 of the Federal Aviation Regulations (FARs). The FAA investigates these Part 16
complaints and may take action against proprietors who fail to meet their obligations
under the required Sponsor’s Assurances.

PERSONAL PROPERTY

Besides real property, the next big category of property law relates to personal property.
As indicated earlier, personal property is all property other than real property. This
leaves a lot of ground to cover. First, we will give an overview of tangible personal
property which includes aircraft and equipment. Next we will touch very briefly on the
second type of personal property—intangible personal property.

Tangible Tangible personal property includes all property that can be touched and moved. For our
property purposes, we will focus on aircraft as an example of tangible personal property. Specifically,
we will focus on (1) transferring or acquiring an interest in an aircraft; (2) registering
aircraft; (3) storage arrangements including leasing and bailments; (4) leasing aircraft for
use by others; and (5) multiple-ownership arrangements for aircraft.

Transferring aircraft ownership

By far, the most common way that persons acquire an interest in tangible personal
property, such as an aircraft, is through a purchase. While most items of tangible per-
sonal property do not require any special documentation of a sale (e.g., purchasing gro-
ceries at the local supermarket), aircraft require formal documentation of a purchase
and sale.

To alleviate confusion and uncertainty in determining aircraft ownership questions, the

federal government established a system for recording documents that transfer title or
affect interests in aircraft ownership. The federal system was first established in 1938.
In its current form, the law requires the FAA to maintain a system for recording docu-
ments affecting title to aircraft. The system is really designed as a one-stop federal
clearinghouse for all aircraft documents.2
 Property Law Issues for Aircraft Owners and Airport Operators 225

The law requires that any bills of sale or other instruments affecting title to aircraft be
subject to recording with the FAA’s registry. Importantly, the law states that no docu-
ment or conveyance will be valid against any third person until it is recorded with the
FAA.3 An interesting discussion of how the FAA’s registry plays a role in aircraft own-
ership issues can be found in Case 8-1 below. Commentary following the case addresses
some practical issues related to aircraft sales.

As a practical matter, a person who purchases an aircraft receives a bill of sale. A sam-
ple bill of sale is illustrated in Fig. 8-1. The bill of sale is filed for recordation with the
FAA along with an application for aircraft registration. A sample application for regis-
tration is illustrated in Fig. 8-2. Once the FAA has a bill of sale and an application for
registration in hand, it can issue a permanent registration certificate for the aircraft.

In addition to being sold, aircraft can be transferred by gift or by will. However, in all
these cases, the same basic procedures are followed as outlined above in the example
of an aircraft sale. The first step is to convey the aircraft by way of a bill of sale or deed
of gift. The second step is to file the bill of sale or deed of gift along with an applica-
tion for registration with the FAA registry for recordation.

Registering aircraft
Under U.S. law, it is not legal to operate an aircraft that is eligible for registration unless
the aircraft is registered with the FAA.4 Under the FARs, an aircraft can be registered
under the following conditions:
1. It is not registered under the laws of any foreign country.5 and
2. The aircraft is owned by a “citizen of the United States.”6 or
3. The aircraft is owned by a citizen of a foreign country who is a permanent U.S. res-
ident (green card holder).7 or
4. The aircraft is owned by a corporation that is not a citizen of the United States, if the
corporation is organized under the laws of the United States and the aircraft is based
and primarily used in the United States.8 or
5. The aircraft is owned by the federal government or a state, territory, or possession of
the United States.9

The regulations provide a detailed definition of who qualifies as a “citizen of the United
States.” The definition includes individual citizens, partnerships in which all partners
are individual citizens, and corporations where two-thirds or more of the board of direc-
tors and 75 percent or more of the shareholders are U.S. citizens.

Storing aircraft
With aircraft another important issue is storage. In most cases aircraft are either stored
in a hangar or secured at a tie-down facility. If the aircraft is stored at a hangar, the
arrangement usually takes the form of a lease in which the aircraft owner and the hangar
owner arrange for the aircraft to be stored at a hangar in exchange for rental payments.
With a leasing arrangement, the aircraft owner is responsible for any damages incurred
by the aircraft unless the hangar owner (landlord) acts in a negligent manner that causes
226 Fundamentals of Aviation Law

Figure 8-1
FAA bill of sale.
Figure 8-2
FAA aircraft registration application.
228 Fundamentals of Aviation Law

harm to the aircraft. However, there is no specific duty that a landlord incurs to ensure
the safety of the aircraft stored at the landlord’s facility.

On the other hand, with tie-down arrangements, a question often arises as to whether
the arrangement is a bailment or a lease. A bailment is a legal arrangement whereby a
person who owns personal property (such as an aircraft) delivers the personal property
to another for a specific purpose (e.g., storage). If a bailment is entered into, there is an
implied or express agreement by the person being paid for the bailment that personal
property will be safely stored and returned to its owner intact. The specific legal duty
by the person undertaking the bailment is the duty to exercise ordinary and reasonable
care for the preservation of the property. In the context of an aircraft tie-down, this can
be an important distinction.

To illustrate, assume Frank’s Air Charter ties down two light twin-engine aircraft at
Seabreeze FBO. A strong storm sweeps through the area, and one of Frank’s aircraft is
damaged when garbage containers from Seabreeze’s facility blow onto the ramp and
dent the empennage on his twin Cessna 310. If the arrangement between Frank and
Seabreeze is a lease, Frank will have to establish that Seabreeze was negligent in fail-
ing to secure the garbage containers. If the arrangement is a bailment, the burden on
Frank is somewhat lessened—Frank will now have to establish that Seabreeze failed to
exercise ordinary and reasonable care for the preservation of the aircraft. Most tie-down
arrangements tend to be looked upon in the courts as bailments.10

Leasing aircraft
Personal property can be leased just as real property can be leased. Aircraft leasing
arrangements are a very common way of defraying aircraft expenses and allowing flex-
ible approaches to financing aircraft. An aircraft lease is a way for an aircraft owner to
grant another person the right to possession and use of the owner’s aircraft for a speci-
fied period of time in return for periodic payments (e.g., rent). As indicated earlier in the
chapter, while a lease permits possession and use, it does not convey title to an aircraft.

As a general rule, a lease is a lease. However, in the world of aviation we can generally
break down leasing activity into three categories with respect to timing of the lease:
• Nonexclusive leases in which the owner leases an aircraft for short-term periods
such as weeks, days, or even hours
• Exclusive leases in which the party leasing the aircraft is provided continuous use
and possession of an aircraft for a specified, and generally longer, stretch of time
• So-called leasebacks with flight schools and/or FBOs in which the owner purchases
the aircraft from an FBO or school and then leases it back for use in flight instruc-
tion or charter services

Another set of categories for aircraft leasing arises from the type of lease involved.
Some aircraft leases are referred to as “wet” and others as “dry.”

In a wet lease, the aircraft owner provides the aircraft, pilots and other crewmembers,
maintenance for the aircraft, and insurance. Such leases can go for any length of time.
 Property Law Issues for Aircraft Owners and Airport Operators 229

Dry leases involve the leasing of an aircraft without crews, maintenance, insurance, etc.
As with wet leases, there are no time criteria—the lease can be long- or short-term.

Often, the designation of a lease as wet or dry can have an impact on whether the air-
craft’s operations are deemed to be subject to Part 91 or for compensation or hire. The
NTSB has ruled that obtaining both a flight crew and an airplane from the same source
(as in a wet lease) is usually conclusive evidence of an operation for compensation or
hire, and thus subject to regulation under Part 135 or 121 rather than Part 91.11

The FAA generally does not regulate the leasing of aircraft. However, when a large air-
craft (aircraft weighing more than 12,500 pounds maximum certificated takeoff weight)
is leased, the FAA requires that the lease be in writing and contain the following:12
1. Identification of the FARs controlling the operation and maintenance of the aircraft
for the preceding 12 months
2. Name and address of the person maintaining operational control of the aircraft
3. A statement that questions related to the operational control of the aircraft can be
answered by an FAA Flight Standards District Office.

Multiple-ownership arrangements
There are several approaches to sharing the cost of operating an aircraft through multiple-
ownership arrangements. Traditionally, persons have gotten together and created flying
clubs that operate as coownerships, partnerships, or limited liability companies or corpo-
rations (see Chap. 7 for more detailed discussion of these entity forms).

In recent years, the concept of fractional ownership has played a major role in corporate
aircraft ownership. Fractional ownership programs involve pools of aircraft, and each air-
craft is owned by several parties. All the aircraft are placed in dry lease exchange “pools,”
and the aircraft are made available to any program participant who owns an aircraft that
is not available at the time it is needed. An important feature of a fractional ownership
program is the management company that runs the aircraft pool, providing the exchange
services, handling maintenance, crew selection, and hiring, and doing the recordkeeping.13

As the popularity of fractional ownership programs grew, the question of regulating

these programs came to the forefront. Should they continue to be regulated under Part 91
standards, or should they be treated as commercial operations and regulated under Part 135
or Part 121? The FAA opted to treat fractional ownership programs under Part 91 and
recently adopted Subpart K to Part 91, titled “Fractional Ownership Operations.” Some
of the most significant requirements of Subpart K include
• A contractual acknowledgment by the fractional owners that they are the operators
of aircraft used in their program (and are therefore responsible for airworthiness and
all other aspects of the aircraft’s operation)
• Formal contracts with fractional program managers
• FAA-approved operating manuals
• Background checks on pilots
• Six- and twelve-month pilot check rides
230 Fundamentals of Aviation Law

In the end, much of Subpart K brings formalized requirements that much of the corpo-
rate aviation world already had in place. However, by keeping fractional ownership
requirements within the purview of Part 91, fractional programs are able to avoid some
of the constraints of a commercial carrier, such as additional runway length require-
ments, the ability to make instrument approaches at airports without weather reporting,
flight-time limitations, and drug and alcohol testing programs.14

Another type of personal property is intangible property. Intangible property is property

that does not take a physical form. The most common types of intangible personal prop-
erty are copyrights, patents, trademarks, and franchise rights.

Intangible Intangible property can have great value. Each airline may have a name or logo in the
property form of a trademark that creates a “brand” for that airline. Trademark laws protect such
branding. Aircraft manufacturers and equipment makers may develop systems or air-
craft designs that are unique. If patents can be obtained, their intellectual property will
be protected.

INSURANCE

Insurance involves a special kind of contract between the insurer and the insured. The
contract in an insurance context is commonly referred to as a policy. In the insurance
policy, an insurer agrees to defend and indemnify the insured upon the occurrence of a
contingency or unknown occurrence as specified in the insurance agreement. The
agreement to defend means that the insurer will provide legal counsel to the insured to
defend the insured against any claims that might arguably be covered by the policy. The
agreement to indemnify involves an agreement to make the person insured whole (with-
in the limits of a policy) in the case of a loss.

The whole concept of insurance involves the spreading of risk among a large pool of
individuals who might experience a loss. Persons seeking insurance pay regular premi-
ums to keep their policies in force. The insurance companies use those premiums to pay
on the losses that their policyholders might experience. Of course, it is the insurance
company’s goal to collect at least as much in premium dollars as it needs to pay off any
legitimate claims, pay its operating expenses, and make a profit. Insurance companies
are often large-scale investors, placing excess premiums collected in stocks and bonds in
order to grow their assets and ensure their ability to pay on future claims. Sometimes,
insurers spread risk even further by engaging reinsurers who will, in turn, insure the
insurers. This is done by selling a portion of a policy’s risk and right to receive premi-
ums to other insurance companies.

Insurance is sold in three ways. (1) Insurance agents work exclusively for one insurance
company and act as agents of that company. (2) Insurance brokers are typically inde-
pendent contractors who act as agents of the insured by selling them policies from any
number of qualified insurance companies. (3) Many insurance companies will sell
insurance directly to the insured by direct mail or via the Internet.
 Property Law Issues for Aircraft Owners and Airport Operators 231

Insurance and insurers play a large role in the aviation environment. The discussion in
this chapter is designed to make you more aware of the way insurance works in general
and to give you some insight into some of the thornier issues that have faced aviation
insurers and their policyholders.

The two most common types of aviation-related insurance are hull insurance and liability Hull insurance
insurance. The first type, hull insurance, is often referred to as physical damage insur- and liability
ance. As the name implies, this insurance covers damage to an aircraft. The second type insurance
is liability insurance, which covers the contingency that an aircraft mishap may cause
damage to someone else’s person or property.

Hull insurance
Hull insurance comes in different versions. One version is the in-flight or in-motion
policy. The other version is the not-in-flight or not-in-motion version. When hull insurance
is purchased on an in-flight basis, it covers damage to the aircraft from the time it starts
its takeoff run to the time it has landed and stopped or exited the runway. In-motion insur-
ance is a bit more comprehensive, covering the aircraft any time an aircraft is moving
under its own power. Obviously, neither of these policies will provide any coverage if
an aircraft is damaged while parked or tied down. For this reason, many private and
commercial operators choose all-risk ground and flight insurance to cover any damages
incurred to the aircraft hull. Often banks or financing companies that financed the
purchase of an aircraft will require the owner to provide all-risk coverage and name them
as insureds—this will allow them to be the first in line to recover if the aircraft is damaged
while the loan is not fully paid.

Liability insurance
As indicated above, liability insurance is designed to cover the possibility that an air-
craft could do harm to someone else’s person or property. As a general rule, there are
two types of policies for aircraft liability insurance. The first type is sublimited cover-
age. The second is smooth limits insurance.

Sublimited coverage sets two limits. The higher amount is often referred to as an occur-
rence limit. This amount is the maximum amount that an insurance company will be
liable for any single accident. The lower limits usually refer to the maximum coverage
that may be available for each person injured or killed.

Let us take a look at how this would work in the context of a typical general aviation
aircraft policy. We will assume a policy covering the aircraft owner for $1,000,000 per
occurrence with $100,000 sublimits per injury or death to each person involved in any
single occurrence. This means that if the covered aircraft is involved in an accident, the
absolute top dollar amount that the insurer will cover is $1,000,000. However, the insurer
will only cover the aircraft owner for up to $100,000 for each person injured or killed in
the accident.

Smooth limits provide the aircraft owner with the broadest coverage. This coverage
usually combines property damage and liability limits. With smooth coverage of
$1,000,000 per occurrence, the aircraft owner is covered whether the damage or injury
232 Fundamentals of Aviation Law

was to passengers or persons or property on the ground. The entire $1,000,000 is avail-
able to cover the losses from the same accident. While smooth limits provide greater
protection, they do command a higher insurance premium. Determining the right com-
bination of hull and liability insurance is an important responsibility for any aircraft
owner, from the light plane general aviation aircraft owner to an international airline.
Often the right combination of premium to product is a decision made in consultation
with lawyers and risk management professionals.

Insurable interest
For either hull or liability insurance to be effective, the person insured must have an
insurable interest. When it comes to aircraft, ownership typically creates an insurable
interest. Others with insurable interests in an aircraft could be lienholders and lessees.
Insurance on an aircraft is ineffective if the insured does not have an insurable interest
at the time of the loss.

The insurance Every insurance contract or policy has certain common elements. We will take some
contract time now to look at the common elements found in all insurance contracts. Next we will
review some of the specific provisions that can be found in the majority of aircraft hull
and liability insurance policies.

Basic elements of insurance policies

Insurance policies are governed generally by the common law of contracts. However,
many states regulate insurers and require that policies be written on standard forms. Most
insurance policies, including aircraft policies, contain the following basic elements:
1. Definitions for special terms in the policy. These definitions need to be read care-
fully because the meaning of words in an insurance policy does not always match
the commonly understood meaning or the dictionary definition of the word as it is
used outside the insurance policy.
2. Events or items covered under the policy. In an aviation policy this generally means
damage to an aircraft and payments for bodily injury and property damage to others
that the insured might be liable for. One other very important duty of the insurer is the
duty to defend the insured against any lawsuits that arguably involve a claim within
the coverage of the policy. As indicated earlier, this duty to defend includes the duty
to pay for lawyers and court costs on behalf of the insured.
3. Exclusions to coverage under the policy. Aviation policies often contain exclusions
for certain types of operations, territorial limits, pilot qualifications, and common
exclusions for war, civil revolt, etc.
4. Duties for the person insured. Most aircraft insurance policies include requirements
for prompt notification to the insurance company, cooperation, proof of loss, and
protection of insured aircraft from further damage. Of course, all policies include the
either express or implied agreement of the insured to pay the premiums agreed to in
the policy in a timely manner.
5. Deductible clauses. These clauses provide for insurance proceeds to be payable only
after the insured has paid a certain amount of the damage or loss.
 Property Law Issues for Aircraft Owners and Airport Operators 233

Beyond the basic elements directly found in an insurance policy, two common law
issues are a recurring theme in various insurance policies. The first is the issue of mis-
representation or concealment in the application for an insurance policy. The second is
the legal concept of subrogation.

Most insurance companies will require applicants to disclose relevant information in

forms and questionnaires prior to agreeing to provide coverage. If the party to be insured
makes misrepresentations or conceals material information, the insurance company may
be able to avoid coverage. Usually this rule applies regardless of whether the misrepre-
sentation or concealment was intentional. For instance, before agreeing to provide hull
and liability insurance to an air carrier, the insurance company sends a questionnaire to
the air carrier requesting information regarding its pilots. One of the questions inquires if
any of the pilots have had their certificates suspended or revoked by the FAA for regula-
tory infractions that occurred within the last 3 years. The air carrier responds no to this
question. However, three of the air carrier’s ten pilots have had their certificates suspend-
ed or revoked within the past 3 years. These false responses may invalidate the coverage
provided in the insurance policy if a court deems them to be material enough that the
truthful response would have altered the insurer’s decision to insure the air carrier.

One last general item for discussion is right of an insurance company to subrogation.
Here’s how subrogation works: Suppose an insurance company pays a claim on an air-
craft that was damaged when a fuel truck owned by a local FBO crashed into it while
the aircraft was parked on a ramp. After the aircraft owner is paid for her or his dam-
ages, the insurance company that paid the claim can then sue the FBO to recover the
amounts it paid on the claim. In essence, subrogation allows the insurance company to
step into the shoes of its policyholder and pursue legal action against the wrongdoer
who caused the damage leading to the claim. In the end, this allows an insurer to be
made whole. Insurers carefully guard their right to subrogation. In fact, most policies
indicate that coverage will be denied if the person insured did something to deny the
insurer’s right to subrogation (e.g., releasing the wrongdoer from liability).

Coverage issues for aviation policies

A review of case law and trade publications reveals that there are several recurring
issues in the realm of aviation-related hull and liability policies. A discussion of some
of the more common issues follows.
• Has the insured provided proper notice in accordance with policy procedures? It is
vital that an insured supply proper notice of a claim (often required in writing) in a
timely manner after an incident. All notices, demands, and lawsuit filings must also
be forwarded to the insurer in accordance with policy terms. Failure of the insured
to do so may result in loss of coverage.
• Has the insured misrepresented or concealed any material facts? As indicated
above, any misrepresentation or concealment of a material fact is likely to nullify
insurance coverage. This becomes especially true in aviation policies in which so
much depends upon written logs and certifications issued by the government.
• Were there any restrictions on the aircraft’s operations? Most aviation policies will
restrict coverage to aircraft used for “business or pleasure” or commercial operations.
234 Fundamentals of Aviation Law

If the aircraft was not being appropriately utilized at the time of an accident, that will
place coverage in peril.
• Did the pilot have the right certifications at the time of the accident? Was the pilot
properly rated? These two questions are critical in many aviation insurance cases.
Most aviation insurance policies require certain ratings and do require that the pilot
be current at the time of a covered incident or accident.
• Did the pilot have the required number of logged hours? This is another issue that
trips up many insureds in getting coverage. It is imperative that logged hours match
the requirements of the policy. Many claims are denied because logged hours did not
meet insurance policy requirements for time in type, total time, or currency.
• Did the aircraft have a current airworthiness certificate? This is a simple enough
item to check on. However, sometimes it can become more complex if the policy in
question nullifies coverage on a special flight permit or ferry permit.
• Was the pilot operating the aircraft with a current medical certificate? This issue bites
many insureds when they go to make a claim and discover that they or the pilot oper-
ating the aircraft at the time of an accident failed to have a current medical certificate.
• Did the failure of the insured to meet the policy requirements have a causal connec-
tion to the accident? This issue often arises when an insurance company attempts to
avoid coverage because the insured fails to meet a particular technical requirement
in the policy. The question boils down to whether failure to meet the technical policy
requirement actually caused the accident or loss in the claim. Some state courts find
this inquiry relevant; others do not.

This is by no means a comprehensive list of all the major issues that come up with reg-
ularity in aviation insurance policies. However, it is meant to give you a feel for the
types of things that aviation risk managers need to be on the lookout for. Some of these
issues are addressed more fully in the “Cases and Commentary” section below.

Other types The discussion above has focused on the typical hull and liability aviation policy.
of insurance However, there are many other types of insurance that all professionals (whether or not
they operate in the aviation environment) should be familiar with.

Health and disability

One of the pressing issues in today’s society is the ability of individuals and families to
obtain affordable health care insurance. Health insurance is designed to cover the cost
of medical treatment, prescription medications, hospitalization, and surgical care. Dental
insurance covers the cost of dental treatment. Employers have traditionally contributed
a share of the cost of health and dental insurance. However, rapidly increasing costs have
forced many employers to transfer more of the burden of health and dental insurance
costs to their employees.

Disability insurance can be obtained by employers, employees, and self-employed per-

sons. This type of insurance provides for regular income (usually on a monthly basis)
during the time when a person is disabled and cannot work. With stringent medical
requirements on pilots and air traffic controllers, disability insurance is a must in these
professions.
 Property Law Issues for Aircraft Owners and Airport Operators 235

Life insurance
Life insurance is designed to provide death benefits to persons designated by the
insured person. There are three basic types of life insurance. A brief and very general
description of each type follows.

Whole life insurance provides coverage throughout the life of the insured. Premiums for
whole life policies are set to cover a death benefit. Some amounts are set aside from
each premium payment to create a savings component otherwise known as a cash sur-
render value. The savings component grows at a fixed percentage of interest.

Term life insurance covers only a limited period of time—typically from 5 to 20 years.
There is no savings feature associated with a term life policy. However, premiums on a
term life policy are usually lower than those on whole life policies.

Universal or variable life insurance policies are a hybrid of whole life and term life poli-
cies. There is a savings component—but it grows at a variable rate often tied to equity
or bond funds.

Business insurance
Several types of insurance products are used by businesses to protect themselves and
employees from foreseeable contingencies. A few of the more significant types of busi-
ness insurance policies are outlined below.

Business interruption insurance is critical if a business is severely damaged or destroyed

due to a physical or nonphysical peril. This type of insurance replaces lost revenue and
allows a company to continue paying employees and vendors until business can be resumed.
In the aftermath of 9/11 several airlines turned to business interruption policies. In one
recent case interpreting a business interruption policy, a Virginia state appellate court held
that U.S. Airways was entitled to reimbursement from its $25 million business interruption
policy based on claims that events subsequent to 9/11 caused losses covered under the
policy. The insurer in that case argued that the policy did not cover U.S. Airways losses due
to 9/11 because the airline did not suffer property damage. However, the court found that
other provisions in the policy related to civilian or military intervention provisions were
applicable and therefore the airlines claims under the policy should be honored.15

Workers’ compensation insurance is also a big part of any employer’s risk management
plan. Workers’ compensation insurance covers an employee if the employee is injured
while performing duties within the scope of his or her employment. Many states require
employers to buy workers’ compensation insurance for their workers.

Key-person life insurance is often used by small businesses as they plan for the succession
of the business from the current owners. With a key-person policy, the business pays the
premiums on life insurance policies on the lives of key executives, shareholders, members,
or partners. If one of these key people dies, the insurance proceeds can be used to pay the
deceased’s family or other beneficiaries. Often this type of insurance is purchased and
funded by a company as part of a buy-sell agreement where the parties make plans ahead
of time for what happens when a key person sells her or his interest in the company or dies.
236 Fundamentals of Aviation Law

CASES AND COMMENTARY

Case 8-1 is one of the rare aviation cases that made it all the way to the Supreme Court.
Recall from Chap. 1 that the Supreme Court is not obliged to take on every case that
comes its way. In essence, the Court selects the cases that it wants to hear. It is proba-
bly fair to infer from this that the Supreme Court believed that aircraft ownership and
recordation of interests in aircraft with the FAA were significant enough issues to take
on in this landmark case.

CASE 8-1
PHILKO AVIATION, INC, V. SHACKET ET UX.

462 U.S. 406 (1983)

OPINION BY: White, J. Aviation. According to Philko, Smith said that the
plane was in Michigan having electronic equip-
OPINION: This case presents the question whether ment installed. Nevertheless, Philko and its financ-
the Federal Aviation Act of 1958 (Act), [Citation], ing bank were satisfied that all was in order, for
prohibits all transfers of title to aircraft from hav- they had examined the original bills of sale and had
ing validity against innocent third parties unless checked the aircraft’s title against FAA records.
the transfer has been evidenced by a written instru- At closing, Smith gave Philko the title documents,
ment, and the instrument has been recorded with but, of course, he did not and could not have given
the Federal Aviation Administration (FAA). We Philko possession of the aircraft. Philko’s bank
conclude that the Act does have such effect. subsequently recorded the title documents with
the FAA.
On April 19, 1978, at an airport in Illinois, a
corporation operated by Roger Smith sold a new After the fraud became apparent, the Shackets
airplane to respondents. Respondents, the Shackets, filed the present declaratory judgment action to
paid the sale price in full and took possession of determine title to the plane. Philko argued that it
the aircraft, and they have been in possession ever had title because the Shackets had never recorded
since. Smith, however, did not give respondents their interest in the airplane with the FAA. Philko
the original bills of sale reflecting the chain of relied on § 503(c) of the Act, [Citation], which pro-
title to the plane. He instead gave them only pho- vides that no conveyance or instrument affecting
tocopies and his assurance that he would “take the title to any civil aircraft shall be valid against
care of the paperwork,” which the Shackets under- third parties not having actual notice of the sale,
stood to include the recordation of the original until such conveyance or other instrument is filed
bills of sale with the FAA. Insofar as the present for recordation with the FAA. However, the District
record reveals, the Shackets never attempted to Court awarded summary judgment in favor of
record their title with the FAA. the Shackets, [Citation], and the Court of Appeals
affirmed, reasoning that § 503(c) did not pre-empt
Unfortunately for all, Smith did not keep his
substantive state law regarding title transfers, and
word but instead commenced a fraudulent scheme.
that, under the Illinois Uniform Commercial Code,
Shortly after the sale to the Shackets, Smith pur-
[Citation], the Shackets had title but Philko did
ported to sell the same airplane to petitioner, Philko
 Property Law Issues for Aircraft Owners and Airport Operators 237

not.[Citation]. We granted certiorari, [Citation], Rather, § 503(c) means that every aircraft transfer
and we now reverse and remand for further must be evidenced by an instrument, and every
proceedings. such instrument must be recorded, before the
rights of innocent third parties can be affected.
Section 503(a)(1) of the Act, [Citation] directs the
Furthermore, because of these federal require-
Secretary of Transportation to establish and main-
ments, state laws permitting undocumented or
tain a system for the recording of any “con-
unrecorded transfers are pre-empted, for there is a
veyance which affects the title to, or any interest
direct conflict between § 503(c) and such state
in, any civil aircraft of the United States.” Section
laws, and the federal law must prevail.
503(c), [Citation], states:
These conclusions are dictated by the legislative
No conveyance or instrument the recording of
history. The House and House Conference Com-
which is provided for by [§503(a)(1)] shall be
mittee Reports, and the section-by-section analy-
valid in respect of such aircraft … against any
sis of one of the bill’s drafters, all expressly declare
person other than the person by whom the con-
that the federal statute “requires” the recordation
veyance or other instrument is made or given, his
of “every transfer … of any interest in a civil air-
heir or devisee, or any person having actual notice
craft.” The House Conference Report explains:
thereof, until such conveyance or other instru-
“This section requires the recordation with the
ment is filed for recordation in the office of the
Authority of every transfer made after the effec-
Secretary of Transportation.
tive date of the section, of any interest in a civil
The statutory definition of “conveyance” defines aircraft of the United States. The conveyance
the term as “a bill of sale, contract of conditional evidencing each such transfer is to be recorded
sale, mortgage, assignment of mortgage, or other with an index in a recording system to be estab-
instrument affecting title to, or interest in, prop- lished by the Authority.” Thus, since Congress
erty.” [Citation.] If § 503(c) were to be interpreted intended to require the recordation of a con-
literally in accordance with the statutory definition, veyance evidencing each transfer of an interest in
that section would not require every transfer to be aircraft, Congress must have intended to pre-empt
documented and recorded; it would only invalidate any state law under which a transfer without a
unrecorded title instruments, rather than unrecorded recordable conveyance would be valid against
title transfers. Under this interpretation, a claimant innocent transferees or lienholders who have
might be able to prevail against an innocent third recorded.
party by establishing his title without relying on an
Any other construction would defeat the pri-
instrument. In the present case, for example, the
mary congressional purpose for the enactment of
Shackets could not prove their title on the basis of
§ 503(c), which was to create “a central clearing
an unrecorded bill of sale or other writing purport-
house for recordation of titles so that a person,
ing to evidence a transfer of title to them, even if
wherever he may be, will know where he can find
state law did not require recordation of such instru-
ready access to the claims against, or liens, or
ments, but they might still prevail, since Illinois
other legal interests in an aircraft.” [Citations.]
law does not require written evidence of a sale
Here, state law does not require any documenta-
“with respect to goods for which payment has been
tion whatsoever for a valid transfer of an aircraft
made and accepted or which have been received
to be effected. An oral sale is fully valid against
and accepted.” [Citation.]
third parties once the buyer takes possession of
We are convinced, however, that Congress did not the plane. If the state law allowing this result
intend § 503(c) to be interpreted in this manner. were not pre-empted by § 503(c), then any buyer
238 Fundamentals of Aviation Law

in possession would have absolutely no need or judgment on the basis that if an unrecorded trans-
incentive to record his title with the FAA, and he fer of an aircraft is valid under state law, it has
could refuse to do so with impunity, and thereby validity as against innocent third parties. Of course,
prevent the “central clearing house” from provid- it is undisputed that the sale to the Shackets was
ing “ready access” to information about his claim. valid and binding as between the parties. Hence, if
This is not what Congress intended. Philko had actual notice of the transfer to the
Shackets or if, under state law, Philko failed to
In the absence of the statutory definition of con-
acquire or perfect the interest that it purports to
veyance, our reading of § 503(c) would be by far
assert for reasons wholly unrelated to the sale to the
the most natural one, because the term “con-
Shackets, Philko would not have an enforceable
veyance” is first defined in the dictionary as “the
interest, and the Shackets would retain possession
action of conveying,” i.e., “the act by which title
of the aircraft. Furthermore, we do not think that
to property … is transferred.” Webster’s Third
the federal law imposes a standard with which it is
New International Dictionary 499 (P. Gove ed.
impossible to comply. There may be situations in
1976). Had Congress defined “conveyance” in
which the transferee has used reasonable diligence
accordance with this definition, then § 503(c)
to file and cannot be faulted for the failure of the
plainly would have required the recordation of
crucial documents to be of record. But because of
every transfer. Congress’ failure to adopt this def-
the manner in which this case was disposed of on
inition is not dispositive, however, since the statu-
summary judgment, matters such as these were
tory definition is expressly not applicable if “the
not considered, and these issues remain open on
context otherwise requires.” [Citation] * * *
remand. The judgment of the Court of Appeals is
* * * reversed, and the case is remanded for further pro-
ceedings consistent with this opinion.
In view of the foregoing, we find that the courts
below erred by granting the Shackets summary So ordered.

Notice that in this case, the district court and the circuit court ruled in favor of the
Shackets. The Supreme Court’s decision overturned the district court and circuit court
rulings. The Court essentially states that if you want your interest in an aircraft to be
valid against third parties, you must record your interest with the FAA in Oklahoma
City. One of the key questions in this case related to the issue of preemption (see
Chapter 2 ). If state law prevailed, the Shackets would win because under Illinois’
adaptation of the U.C.C., no filing with a central FAA clearinghouse would be nec-
essary. Ultimately the Supreme Court ruled that the federal law requiring a national
central clearinghouse for recording interests in aircraft preempts any state or local
laws on this issue.

Does the Supreme Court’s ruling make sense? Why do aircraft need a central registry
for recording documents related to transfers of title and liens? After all, most other
items of real and personal property (title to cars, boats, and real estate) do not require
filing with the federal government—they only require filing with the appropriate state
or local agency. What is so special about an aircraft that it requires a single national
registry for aircraft?
 Property Law Issues for Aircraft Owners and Airport Operators 239

One other lesson that might be drawn from this case is the very practical need to ensure
that paperwork related to interests in aircraft actually gets recorded at FAA’s registry in
Oklahoma City. What is the best way to do this? Many experienced lawyers prefer to
take a page from the typical real estate closing by using an escrow agent to assist in
closing the deal. This allows all the money and necessary documents to be handled by
an expert and neutral third party. In most cases the escrowed transaction can be broken
down into two phases, the setup phase and the closing phase.

In the setup phase the following occurs:

1. The buyer wire-transfers a deposit (usually 5 to 10 percent of the purchase price of
the aircraft) to the escrow agent along with an application for registration for the air-
craft being purchased.
2. The buyer’s bank (the bank lending money to the buyer) wires all remaining funds
needed to pay the purchase price to the escrow agent.
3. The seller sends the escrow agent a bill of sale transferring ownership of the aircraft
to the buyer.
4. The seller’s bank is contacted by the escrow agent regarding the aircraft sale.
Subsequently the seller’s bank sends a lien release to the escrow agent that releases
the seller from any amounts the seller may still owe on the aircraft.

Once all the funds and documents from the setup phase are in place, the transaction is
poised to be closed. At the closing the following occurs:
1. The escrow agent wires the necessary funds to the seller’s bank to cancel any debt
and release any liens by the seller’s bank.
2. The escrow agent wires any remaining proceeds to the seller.
3. The escrow agent sends the following documents to the FAA registry:
• Lien for the buyer’s bank
• Bill of sale transferring title from seller to buyer
• Buyer’s registration application
• Release of lien by seller’s bank

In most transactions, the escrow agent takes its fees in equal shares from the buyer
and seller. A graphical illustration of the escrow transaction described above is seen in
Figs. 8-3 and 8-4.

While many buyers and sellers forgo escrowed transactions, the lessons from Philko v.
Shacket should remain clear—make sure the necessary documents are properly record-
ed with the FAA. It may be foolhardy to let a party to the transaction “take care of the
paperwork.”

As discussed earlier in this chapter, one of the fundamental issues in any insurance
claim is whether the claimant has an insurable interest in the property insured. Case 8-2
deals with the question of whether an insurable interest in an aircraft had passed to
another at the time of an accident.
240 Fundamentals of Aviation Law

Figure 8-3
Initiation of an Buyer Buyer’s bank
aircraft escrow
transaction.
Wire-transfer deposit Wire funds financed
and send FAA by buyer and lien
registration application documents

Escrow agent

FAA bill of sale Lien release

Seller Seller’s bank

Figure 8-4
Closing an Seller Seller’s bank
aircraft escrow
transaction.

Net sale proceeds Funds to release lien

Escrow agent

1. Lien for buyer’s bank

2. Bill of sale
3. Registration application
4. Release of lien by seller’s bank

FAA
Registry
 Property Law Issues for Aircraft Owners and Airport Operators 241

CASE 8-2
JAMES BOWMAN V. AMERICAN HOME ASSURANCE COMPANY
213 N.W. 2d 446 (1973)

OPINION BY: White, J. was to remain the owner of the aircraft until “we
were able to fill out the necessary paperwork.”
OPINION: This is an action on a contract of Hemmer, the buyer, testified numerous times that
insurance. The insured, James Bowman, seeks to he was to be the owner when he received the bill
have his insurer pay for damage done to an air- of sale. This was to allow the buyer to comply
plane covered under a policy issued by the insurer, with the Federal Aviation Administration require-
American Home Assurance Company. The insurer ments and make arrangements for insurance prior
argues that the insured did not have title as to the time he was to become the owner. Bowman
defined under the Uniform Commercial Code at also testified that he told Hemmer that he would
the time of the loss and therefore asserts that the leave his insurance in effect until it expired on
insured had no insurable interest at the time of the December 23, 1970, only 11 days later. Bowman
loss and should be denied recovery. The insured retained possession of the plane.
had the verdict and judgment at trial. The insurer On December 15, 3 days later, Bowman con-
appeals. We affirm. tacted Hemmer and asked Hemmer if he wanted
James Bowman, the appellee-insured, and Keith to go with him on a business trip to Kansas. The
Moeller were engaged in a partnership doing busi- purpose of the flight was for Bowman to transact
ness as Bowman Hydro-Vat in Fremont, Nebraska. some business in Kansas. Upon their return to
The partnership purchased a twin-engine Cessna Fremont, Hemmer asked Bowman for permission
in 1969. Upon purchasing the aircraft, Bowman to use the plane on the following Friday and
applied for and obtained a policy of insurance Saturday. Bowman and Hemmer specifically
issued by the appellant-insurer, American Home examined Bowman’s insurance policy to ascertain
Assurance Company, insuring the aircraft during whether it would provide coverage while Hemmer
the period from December 23, 1969, through flew the plane. Bowman then gave Hemmer per-
December 23, 1970. The named insured under the mission and Hemmer took the plane to Columbus.
policy was James Bowman. On December 16, Hemmer flew the plane from
Columbus to Fremont to obtain the bill of sale,
In December of 1970, Bowman and James Hemmer but it had not been signed so he returned to
entered into negotiations for the sale of the plane Columbus without it.
to Hemmer. On December 12, 1970, Bowman
and Hemmer agreed upon a price of $18,500 for On December 18, Hemmer flew the plane to
the purchase of the aircraft and Hemmer paid Mitchell, South Dakota, pursuant to the permis-
$15,000 down. The remaining $3,500 was to be sion granted by Bowman. In attempting to take off
paid later in cash or through its equivalent in air- from Mitchell, the tip of a wing caught in a snow
craft instrument instruction which Hemmer was bank causing extensive damage to the aircraft.
to give to Bowman. Hemmer requested a bill of Hemmer testified that the Federal Aviation Admin-
sale signed by both partners to protect himself, istration regulations require that a registration
and to comply with the Federal Aviation Admin- certificate be in an aircraft before title to the plane
istration requirements for the transfer of an air- can be transferred to a new owner, and that once
craft. Bowman testified that it was agreed that he the bill of sale is received, it is attached to a new
242 Fundamentals of Aviation Law

registration application and sent to the Federal buyer (1) at the time and place where the seller
Aviation Administration. A pink copy of the new completes his performance with reference to the
registration is placed in the aircraft to serve as a physical delivery of the goods or (2) at any other
temporary registration. This paperwork had not time explicitly agreed to by the parties. As dic-
been completed at the time of the loss because the tated by the Uniform Commercial Code, the trial
bill of sale had not yet been received. The regis- court submitted two factual questions to the jury.
tration certificate in the aircraft at the time of the First, whether the seller had completed physical
accident showed James Bowman as the owner. delivery of the goods. Second, whether there
was an explicit agreement between the buyer
The signature of Bowman’s partner was obtained
and the seller as to the time when title was to
and the bill of sale was mailed to Hemmer on
pass. * * *
December 18, the day of the accident. Hemmer
received the bill of sale on December 20. The bill There was substantial evidence from which the
of sale was in blank form and had not been filled jury could have inferred that the seller had not
out at the time Hemmer received it. It was under- completed physical delivery of the goods. The
stood that Hemmer was to fill out the necessary evidence shows that the buyer was only given
information on the bill of sale. Bowman filed an limited use of the plane to make the trip to South
accident report after the accident and indicated he Dakota. The buyer even asked the seller for per-
was the owner. mission to use the plane for this one trip. The
seller had only granted a limited possession of
The controversy between the parties centers
the plane to the buyer, even though the buyer had
around two provisions of the Uniform Commer-
possession of the plane for 3 days prior to the
cial Code. Section 2-501, U.C.C., provides in
accident.
part: “(2) The seller retains an insurable interest
in goods so long as title to or any security interest The jury could have also inferred from the evi-
in the goods remains in him * * *.” dence that the buyer and seller had an explicit
agreement that title was to pass upon the comple-
The case was tried to the jury on the theory that
tion of the “necessary paperwork.”
the seller retained an insurable interest in the
goods as long as title to the goods remained with ***
the seller. Both parties agree this was the appro-
Bowman testified that it was agreed that he was to
priate standard for submission of the case to the
remain the owner of the aircraft until “we were
jury. Section 2-401, U.C.C., details the concept of
able to fill out the necessary paperwork.” * * *
passage of title:
The evidence showed that the bill of sale sent to
(2) Unless otherwise explicitly agreed title passes
the buyer from the sellers on the day of the acci-
to the buyer at the time and place at which the
dent was not signed by both sellers until the day
seller completes his performance with reference
of the accident. The bill of sale was not received
to the physical delivery of the goods, despite any
by the buyer until several days after the accident,
reservation of a security interest and even though
and even at this time it remained in blank form.
a document of title is to be delivered at a different
The parties knew that the buyer would fill in and
time or place * * *.” (Emphasis supplied.)
complete the bill of sale after he received it. Thus,
As section 2-501, U.C.C., provides, the seller has it is clear from the evidence that “completion of
an insurable interest until title passes to the buyer. the necessary paperwork” involved more than the
Under section 2-401, U.C.C., title passes to the mere signing of the bill of sale by both sellers. It
 Property Law Issues for Aircraft Owners and Airport Operators 243

at least included receipt of the blank bill of sale had not completed physical delivery of the goods
by the buyer, but it could also have included the under section 2-401, U.C.C., or (2) there was an
action of the buyer in filling out the necessary explicit agreement for title to pass upon comple-
Federal Aviation Administration papers and com- tion of the necessary paperwork which had not
pleting the bill of sale. None of the above steps occurred at the time of the accident. Under either of
had been completed at the time of the accident, these findings title had not passed to the buyer
and therefore the time of the completion of the under section 2-401, U.C.C., and therefore under
necessary paperwork had not occurred at the time section 2-501, U.C.C., the sellers retained an
of the accident. insurable interest. For these reasons we affirm the
judgment of the District Court.
In summary, the jury could reasonably have found
from substantial evidence that either (1) the seller Affirmed.

Whether or not you agree with the findings of the court, what would you have suggested
to the parties to avoid all the confusion and subsequent litigation that followed the
accident? [Hint: Should this agreement have been in writing? If so, what provisions
would you have included?]

Cases 8-3 and 8-4 wrestle with the issue of causal connection. Each of these cases
involves an insurance claim after an accident. In both cases, the pilot-in-command did
not have a current medical certificate. Also in both cases, there was no apparent causal
connection between the accident and the failure of the pilot-in-command to hold an
effective medical certificate.

CASE 8-3
WESTERN FOOD PRODUCTS COMPANY, INC. V. UNITED STATES
FIRE INSURANCE COMPANY
699 P. 2d 579 (1985)

OPINION BY: Parks, J. on stipulated facts and the trial court granted
judgment to defendant insurer. Plaintiff appeals.
OPINION: Plaintiff, Western Food Products Co.,
The parties stipulated that at the time of the crash,
Inc., was the owner of an airplane insured by
the airplane was being operated by Charles Newton
defendant, United States Fire Insurance Com-
Benscheidt, who had been issued a private pilot’s
pany. The plane was totally destroyed in a crash
certificate on January 14, 1976, with ratings for
on January 5, 1981, and plaintiff filed a claim for
single engine land aircraft. Mr. Benscheidt was
its loss with the insurer. Defendant denied cover-
issued a third-class medical certificate with no
age for the loss and plaintiff filed this action.
limitations on October 3, 1977, which expired on
Both parties requested summary judgment based
244 Fundamentals of Aviation Law

October 31, 1979. The records of the Federal between the crash and the health of the pilot.
Aviation Administration fail to indicate that any Although such a holding would certainly depart
subsequent medical certificate was issued to from the ordinary rule mandating enforcement of
Mr. Benscheidt. an unambiguous provision according to its terms,
the argument is not without some support in other
The district court held that because defendant’s
jurisdictions. [Citations.] These opinions gener-
insurance policy requires the pilot to have valid
ally stress the social purpose of insurance and the
medical certification as a condition of coverage,
unfairness to the insured if he loses his expected
defendant was not liable for the loss of the air-
protection because of a technical breach of the
craft. Plaintiff contends that this holding is erro-
policy which is unrelated to the risks insured.
neous because the policy provision requiring a
However, in each of these cases the court was able
medical certificate did not apply to the person
to say that the provision relied on by the insurer
piloting the plane when it crashed. Arguing that
failed to include language of express exclusion.
this clause is ambiguous, plaintiff contends that it
The opinions could fairly conclude that the provi-
must be construed in its favor and held inapplica-
sion relied upon to exclude coverage under the
ble under the circumstances. The clause at issue
aviation policy was a forfeiture clause or condi-
states as follows:
tion subsequent which is not ordinarily deserving
THE PILOT FLYING THE AIRCRAFT: The air- of enforcement. [Citation.] Thus, in these cases
craft must be operated in flight only by a person the court was generally concerned with a provision
shown below who must have a current and proper viewed as attempting to eliminate extended cov-
(1) medical certificate and (2) pilot’s certificate erage rather than one which defines the intended
with necessary ratings, as required by the FAA for scope of coverage in the first instance.
each flight. There is no coverage under the policy if
the pilot does not meet these requirements. In this case, the provision states unequivocally,
“there is no coverage under the policy if the pilot
Immediately after the above clause was typed the
does not meet these requirements.” It is not a ques-
following language:
tion of the insured being forced to forego cover-
STEVE BENSCHEIDT, JAMES DRISCOLL, III; age for which he has already paid; no protection
OTHERWISE, PILOTS WHO HAVE A CURRENT was ever extended to cover the circumstances of the
PRIVATE OR COMMERCIAL CERTIFICATE loss. Thus, since the policy specifically excludes
AND A MINIMUM OF 750 LOGGED PILOT coverage, its application cannot be categorized as
HOURS OF WHICH AT LEAST 25 HOURS a forfeiture.
HAVE BEEN IN THE SAME MAKE AND
MODEL AIRCRAFT WE COVER IN ITEM 5. A second distinguishing point of the cases hold-
ing that a causal connection must be shown to
It is undisputed that at the time the insured airplane
exclude coverage in an aviation insurance policy
crashed, it was being piloted by an individual who
is that in each of the cases relied upon by plaintiff,
is not named in the above paragraph. In addition,
there is state law either strongly favoring cover-
plaintiff concedes that the pilot of the plane did not
age in the absence of causation or requiring liberal
have a current medical certificate. * * *
construction of exclusionary clauses even without
* * * a specific finding of ambiguity. For example, in
Plaintiff contends that * * * the provision of the [Citation], the court relied on a line of cases
policy excluding coverage of a flight piloted by a involving automobile liability and life insurance.
person without a medical certificate * * * should These precedents held in varying situations that
not be enforced absent proof of a causal connection the violation of a provision limiting coverage
 Property Law Issues for Aircraft Owners and Airport Operators 245

would effectively operate to exclude liability whether it is applicable under the policy terms.
only if a causal connection were demonstrated We hold that it is.” [Citation.]
between the risk sought to be excluded and the
Thus, the Court refused to discuss an argument
actual loss.
similar to that made here—that there must be
By contrast, Kansas decisions have considered some relevant connection between the actual loss
the purpose and reasonableness of an exclusion- sustained and the limiting provision sought to be
ary provision in other types of insurance policies enforced. The connection between the limitation
to determine its scope, but they have not demanded and the abstract risks insured may be examined to
a relationship between the failure to satisfy the determine the scope of the limitation but there is
limitation and the actual loss sustained. For exam- no need for the loss to be caused by the condition
ple, in [Citation], the Court was concerned with named in the exclusion in order for the exclusion
whether a geographical limitation in an insurance to be effective.
policy covering a mobile home was unambiguous
* * *
and enforceable. The insured argued that there
was no relevant connection between the geograph- In conclusion, we remain unconvinced by plain-
ical limitation and the extended coverages and tiff’s argument that the ordinary rules of con-
that, thus, the parties did not intend this limitation struction should be abandoned in this case. The
to apply. The Court pointed out that there was exclusionary provision of the insurance contract is
indeed good reason for the insurer to seek to geo- unambiguous and we refuse to alter this plain lan-
graphically limit its extended coverage and held guage to forestall its effect. Therefore, like the
the provision doing so to be unambiguous. The majority of jurisdictions, we must conclude that a
Court then refused to further consider the relation- causal connection between the accident causing the
ship between the limitation imposed and the loss and the purpose of an exclusionary clause
actual loss suffered, stating as follows: “Further need not be proven before coverage can be denied
discussion of the relevance, materiality or impor- by the aircraft insurer on the basis of the exclusion.
tance of location of insured property is not war-
***
ranted here, for the issue here is not whether the
geographic limitation should be applicable, but Affirmed.

CASE 8-4
SOUTH CAROLINA INSURANCE COMPANY V. LOIS S. COLLINS
237 S.E. 2d 358 (1977)

OPINION BY: Rhodes, J. crash of the aircraft and the insured pilot’s failure
to have a valid and effective medical certificate as
OPINION: This appeal presents the question of provided by the terms of the policy. For the rea-
whether, in order to avoid liability under an air- sons set forth herein, we affirm the relief granted
craft insurance policy, the insurer is required to by the special circuit judge and hold that such
demonstrate a causal connection between the causal connection must be shown.
246 Fundamentals of Aviation Law

The plaintiff-appellant, South Carolina Insurance following facts are not in dispute: The Federal
Company (hereinafter appellant), issued to Metz Aviation Regulations promulgated by the Federal
W. Collins, the named insured, its aircraft liability Aviation Agency require a medical examination of
insurance policy, number AC-801297, effective pilots under the supervision of the Federal Air Sur-
for the period April 27, 1975 to April 27, 1976. geon or his authorized representative. The insured
The contract of insurance covered a Piper Colt air- held a third-class medical certificate which was
craft, Federal Aviation Agency registration num- valid for a twenty-four (24) month period. The last
ber N5723Z, owned by Collins. On May 23, 1975, medical certificate issued to the insured was in
Collins, while piloting the airplane described in February, 1973, and it expired on the last day of
the policy, crashed, resulting in Collins’ death and February, 1975, or nearly three (3) months before
injuries to one Wesley B. Nesbitt, a passenger in the date of the crash. The Federal Aviation Regula-
the airplane. Subsequently, Lois S. Collins and tions also require the insured to obtain and to have
Evelyn C. Lee were appointed administratrices of in his possession a valid and effective pilot certifi-
the estate of the deceased, Metz W. Collins, and cate. The insured had his last required flight review
Nesbitt commenced an action against the estate on November 3, 1974, or a period of six (6) months
seeking damages for injuries he sustained in the and twenty (20) days before the date of the acci-
crash. Nesbitt’s action is pending in the Court of dent. It was stipulated by the parties that at the time
Common Pleas of Horry County. of the accident the insured possessed a valid and
effective pilot certificate but that he did not have a
The appellant [insurance company] refused the
valid and effective medical certificate. Moreover,
demand of the administratrices to defend the
for the purposes of this declaratory judgment action
insured’s estate against the lawsuit instituted by
only, it was stipulated that the insured, to the best
Nesbitt and subsequently commenced this action
of the parties’ knowledge, had no physical or men-
for declaratory judgment pursuant to [Citation].
tal defects at the time of or immediately prior to the
The appellant sought an order declaring that the
accident and that there was no causal connection
policy issued to the insured was not in effect dur-
between the accident and the failure of the insured
ing the flight of May 23, 1975, and that it did not
to have a valid and effective medical certificate.
afford the estate of the deceased any coverage.
The above statement by the trial judge of the
Named as defendants in the appellant’s action
undisputed or stipulated facts has not been chal-
were both administratrices and the injured pas-
lenged on this appeal.
senger, Nesbitt. (All defendants are hereafter
referred to as “respondents”). The appellant argues vigorously that the failure of
the insured to have a valid and effective medical
The respondents answered and sought affirmative
certificate on the date of the accident amounted to
relief, demanding that the appellant’s complaint
a breach of a condition subsequent or promissory
be dismissed and seeking an order declaring that
warranty under the terms of the policy, thereby
the aforesaid policy was in full force and effect at
suspending coverage and permitting the appellant
the time of the crash. The trial judge, after hear-
to avoid liability. The appellant contends that the
ing arguments and considering briefs, issued an
trial judge’s classification of the pertinent policy
order which granted the relief prayed for by the
provisions as being merely an “exclusion” of the
respondents.
insured’s liability was erroneous. Additionally,
In the trial judge’s order it is stated that the par- the appellant maintains that the case law does not
ties, through responses to requests for admissions support the court’s holding that the insurer, in
and stipulations made before him, agreed that the order to avoid liability on a policy such as that
 Property Law Issues for Aircraft Owners and Airport Operators 247

involved here, must show that there exists a ***

causal connection between the resulting loss and
After examination of the decisions cited by the
the insured’s failure to have the required effective
appellant, we find them unpersuasive. Only their
medical certificate.
number, not their reasoning, lends support to a
*** reversal here. We find that the reasoning used in
The appellant cites cases from other jurisdictions the [citing South Carolina cases requiring causal
holding that under circumstances virtually identi- connection in automobile insurance policies] line
cal, or closely related, to those in the instant case, of cases no less compelling when applied to an
the insurer need not show a causal connection aircraft liability policy.
between damages and injuries sustained in the
In view of the stipulation by the parties that there
crash of the aircraft and the insured’s failure to
was no causal connection between the loss and
comply with certain terms of the policy. These
injuries resulting from the crash and the failure of
decisions hold essentially that the purpose of the
the insured to have a valid and effective medical
exclusionary language of such policies is not that
certificate at the time of the accident, we hold that
the risk is excluded if damage to the aircraft is
the lower court acted correctly in awarding the
caused by the failure of the pilot to be properly
relief sought by the respondents.
certificated, but that the risk is excluded absolutely
if loss occurs while the aircraft is being flown by a Affirmed.
pilot not properly certificated. [Citations.]

At last count, 19 states had case law holding that no causal connection is required for
an insurer to void coverage, and 8 states had case law indicating causal connection was
required for an insurer to avoid coverage on a claim.16 Which approach do you believe
to be the most appropriate? Why?

DISCUSSION CASES

1. On October 5, 1997, several organizations conducted a fly-in at Auburn airport

near Auburn, Nebraska. As part of the event, persons attending the fly-in could pay
$10 for a short flight piloted by Sarah Farrington in a plane owned by Auburn Flying
Services (“AFS”). Money for the flights was collected at a table near the runway, which
had a sign near it advertising the rides. On the ninth ride of the day, Farrington was
landing with three passengers on board when her aircraft collided with a passing semi-
tractor truck. All on board, including Farrington, were killed in the crash. AFS had a
noncommercial liability insurance policy on the aircraft issued by Avemco Insurance
Company. Farrington was a covered pilot under that policy. The policy contained the
following exclusion: “This policy does not cover bodily injury, property damage, or loss ...
when your insured aircraft is ... used for a commercial purpose.” The term commercial
purpose is defined in the policy as “any use of your insured aircraft for which an insured
person receives or intends to receive, money or other benefits.” Based on this exclusion,
248 Fundamentals of Aviation Law

Avemco denied any coverage or defense to AFS. Both Avemco and AFS agreed that
while money was collected for the flights, the amounts collected did not cover the oper-
ating expenses of the flights. AFS goes to court to challenge Avemco’s denial of cover-
age. Who will prevail? Explain.

2. In September 2001, Kevin Jensen was piloting an aircraft on approach at the

Carson City Airport in Nevada. His engine quit and he crashed into the backyard of
Robert Griffin. Griffin was pinned down by the wreckage and suffered extensive
injuries exceeding $200,000. Jensen owned the aircraft for a few months prior to the
crash and purchased liability insurance through Old Republic Insurance Co. (“Old
Republic”). Griffin filed suit against Jensen for the damages he suffered as a result of
the crash. Jensen turned to Old Republic for defense and coverage. However, Old
Republic refused to defend or cover Jensen for this crash. Old Republic argued that
Jensen was not entitled to coverage because he failed to complete an annual inspection
on the aircraft as required by the insurance policy’s airworthiness requirements. In the
NTSB’s accident report, it determined that the probable cause for the accident was
Jensen’s incorrect setting of a fuel valve during the aircraft’s prelanding checklist. The
NTSB opined that the incorrect setting resulted in fuel starvation. Jensen sues Old
Republic to force Old Republic to provide him with insurance coverage in this case.
Will Jensen be successful? Why or why not? What arguments are likely to surface from
both sides?

3. McCarthy operated her aircraft on a ferry flight permit in order to get the aircraft to
the manufacturer’s facility in Georgia for a required FAA annual inspection. The air-
craft’s previous annual inspection expired on January 31, 2004. McCarthy made several
attempts to fly her aircraft to Georgia prior to that date, but snow and other weather con-
ditions forced her to delay past the annual expiration date. Therefore, she applied for and
received an FAA authorized ferry permit to move the aircraft from Ice Breaker, Maine,
to the manufacturer’s factory in Georgia. Upon arrival at the Georgia airport, she lost
directional control of the aircraft. The resulting ground loop caused her right main land-
ing gear to collapse and the right wing to strike the ground. All parties agreed that
McCarthy’s accident and the ensuing damage were caused by pilot error. McCarthy
obtained her current insurance policy through Aviation Underwriter Enterprises
(“AUE”). McCarthy’s original AUE insurance policy and policies up until May 2001
included the following language under Part Two (Exclusions): “This insurance does not
apply: … under any coverage … when the aircraft is in flight: … when a special permit
or waiver is required by the FAA; except in order to obtain an Annual Inspection or
maintenance required by the Federal Aviation Regulations” (emphasis added). Unlike
the language in McCarthy’s renewal policy, this language provided coverage if the air-
craft was operated under a ferry permit if the ferry permit was required to fly the aircraft
to obtain an FAA mandated annual inspection or other FAA required maintenance. To
the best of McCarthy’s knowledge and recollection, neither AUE nor her insurance bro-
ker/agent, Aviation Insurance Resources, ever notified McCarthy of the modification to
her policy which after his May 2001 renewal excluded from coverage a ferry permit
flight for the purpose of obtaining an FAA-required annual inspection. If McCarthy is
denied coverage by AUE, will she be able to force AUE to provide coverage in the
courts? Discuss.
 Property Law Issues for Aircraft Owners and Airport Operators 249

4. Robins owned and operated a Piper Malibu Meridian airplane. The Meridian is pow-
ered by a Pratt & Whitney PT6A-42A turbine engine. Robins insured the aircraft with
Associated Aviation Underwriters, Inc. (“AAU”). While attempting to start the aircraft’s
engine on August 10, 2001, Robins observed flames coming out of both exhaust stacks.
He properly employed emergency engine shutdown procedures, and the fire was eventu-
ally extinguished. Inspections after the incident revealed that the engine had been operat-
ed at an unsafe temperature range for several seconds, and the aircraft required extensive
repairs. Robins paid approximately $240,000 for repairs, engine removal and installation,
and alternative transportation. Robins submitted his claim for damages to AAU. AAU
denied the claim on the basis that the policy had exclusions for physical damage due to
wear and tear including damage caused by heat from the operation, attempted operation,
or shutdown of the engine. Based on this exclusion, AAU argued that the damage was
caused by heat and not the fire. AAU further argued that the circumstances faced by
Robins were not in the nature of an emergency, but instead part of the normal operation
of the aircraft. Robins decides to bring this matter to court to have a judge determine
whether AAU should honor his claim. Will Robins or AAU prevail? Explain.

5. Courtney and her law firm procured aircraft liability insurance from U.S.
Specialty Insurance Co. (“USSI”). Courtney and one of the employees of her law office
were killed when her aircraft crashed en route to a business-related function. The estate
of the deceased employee filed suit against Courtney’s estate, claiming gross negli-
gence. Claims were filed with USSI. USSI denied the claims and sought a ruling from
the court that it had no duty to defend or indemnify Courtney’s estate or her law firm
because the liability policy in question had language that specifically excluded employ-
ees acting in the scope of their employment. USSI also argued that Minnesota’s
Worker’s Compensation Act permitted it to exclude coverage for employees injured in
the course of their employment. However, the claimants (Courtney’s estate, the law
firm, and the estate of the deceased employee) countered by citing a Minnesota law that
stated, “No policy of insurance issued or delivered in this state covering an aircraft
equipped with passenger seats and covering liability hazards shall be issued excluding
coverage for injury to or death of passengers or non-passengers.” Will the exclusions in
the USSI policy withstand this challenge? Discuss.

6. Westchester County in New York State owns and operates the Westchester County
Airport, a busy regional facility for private and commercial aircraft. The airport borders
a small lake in the west and the State of Connecticut to the east. The airport was origi-
nally built in the early 1940s for military use and later turned over to Westchester for
civil aviation. There are two runways at the airport. Runway 16/34 is 6550 feet long and
is the primary runway used by larger aircraft, both commercial and private. Runway
11/29 is the shorter runway at 4450 feet. Its western boundary ends at the lake. Its east-
ern boundary is only 300 feet from the Connecticut state line. As a result, when aircraft
use runway 11/29, they typically fly low over land within the Town of Greenwich in
Connecticut. As years passed, trees growing in Connecticut under the flight path of
departing and landing air traffic for runway 11/29 grew to heights that affected safe
flight paths. In a 1984 NOTAM, the FAA urged pilots landing on 11/29 to use a descent
angle of 9 degrees rather than the standard 3 degree angle for landing approaches.
Eventually, in 1988 or 1989, the FAA ordered Westchester County to shorten the usable
250 Fundamentals of Aviation Law

length of runway 11/29 by 1350 feet because of the tree growth on the Connecticut side
of the border. Fearing that the runway will become totally unusable, Westchester
County brings an action in federal district court to force the Town of Greenwich and
residents owning trees that impinge on the flight path to runway 11/29 to trim the trees
so they would no longer adversely affect flight safety. The district court hears the case
and rules that with so many years of use over the Connecticut properties by the aircraft
landing and taking off on runway 11/29, Westchester County acquired a prescriptive avi-
ation and clearance easement to the airspace above the Connecticut property owners, and
it ordered that Westchester County be permitted to cut back certain trees affecting the use
of runway 11/29. The Town of Greenwich and other affected landowners in Connecticut
appeal the case to the U.S. Court of Appeals. Who will win this case on appeal? Explain.

7. Durango Air Services, Inc., owned an aircraft and employed Borcher as a pilot.
During a flight in 1995, Borcher was piloting Durango’s Cessna aircraft when it
crashed, killing Borcher and two passengers, Colt and John Ross. Both Ross families
filed a wrongful death and mental anguish claims against Durango and won a judgment
of $4 million. At the time of the crash, Durango held a policy with Old Republic
Insurance Company. The policy provided for a maximum event limit of $1 million and
a per passenger sublimit of $100,000. After Durango files a claim, Old Republic agrees
that it is liable on the aviation policy. However, Old Republic claims that the claims
made by the passengers’ families are included within the $100,000 sublimit because
these claims by the passengers’ families are derived from the actions for bodily injury
(which included mental anguish under the terms and definitions in the policy). Should
the mental anguish claims by the nonpassenger families be limited by the $100,000 sub-
limit per passenger included in the policy? Discuss.

8. Winter spends several years constructing a home-built aircraft. After the aircraft was
completed and ready for use, Winter made arrangements to keep his aircraft tied down
at Aerowake FBO located at North Huntsville Airport in Alabama. There was no written
agreement between Winter and Aerowake. Aerowake was a full-service FBO with
employee attendance from 8:00 a.m. to 8:00 p.m. every day. Winter’s plane was tied
down under a covered plane port. The port was right next to the trailer where Aerowake’s
mechanic, Trulson, lived with his family. From time to time if a storm approached,
Trulson would clear debris and ensure the aircraft at the tie-down ports were secure. One
night Sunholm drove his dune buggy onto airport premises and crashed into Winter’s air-
plane, causing substantial damage to Winter’s plane. Sunholm was related by marriage
to Trulson, and from time to time he and Trulson’s son would ride their dune buggies in
fields around the airport. Winter sues Aerowake and argues that his arrangement with
Aerowake was a bailment. Aerowake argued that it was a lease. Who will prevail? If the
arrangement is recognized as a bailment, what does that mean to Winter?

9. Davis is a commercial pilot. From time to time he has flown for Mathis Aviation
and received compensation for his services. Mathis owns a Cessna 421 that it seeks to
lease in order to defray costs. Davis sends a letter to Mike Cole, president of Chem-
Nuclear, offering the use of an aircraft that Chem-Nuclear had previously chartered
from a Part 135 operator (Eagle Aviation) when Davis was employed by Eagle Aviation.
The letter from Davis to Mike Cole of Chem-Nuclear states as follows:
 Property Law Issues for Aircraft Owners and Airport Operators 251

I have the Cessna 421 that you used when I was with Eagle Aviation. I am offering it on a
rental basis to a few of my old customers at a greatly reduced rate. The way this works is
you rent the plane from Mathis Aviation and pay the pilot separately.

The letter goes on to detail a cost work-up for three destinations and concludes with the
following: “Mike, I hope we can accommodate some of your travel needs. If you have
any questions, you can contact me at the above address or call me.” Davis is subse-
quently contacted by Chem-Nuclear and flies two flights, using the Cessna 421. Mathis
Aviation billed Chem-Nuclear for the rental of the aircraft, and Davis billed Chem-
Nuclear separately for his pilot services. The FAA investigates the flights and concludes
that Davis violated the FARs requiring these types of flights to operate under Part 135
rules. Davis argues that the arrangement with Chem-Nuclear was a dry lease and there-
fore subject only to Part 91. Who is correct? Explain.

ENDNOTES
1. See AOPA’s “Airport Compatible Land Use,” www.aopa.org.
2. 49 U.S.C. § 44107.
3. 49 U.S.C. § 44018.
4. 49 U.S.C. § 44101.
5. 14 C.F.R. § 47.3(b).
6. 14 C.F.R. § 47.3(b)(1)(A)(i).
7. 14 C.F.R. § 47.3(b)(1)(A)(i).
8. 14 C.F.R. § 47.9.
9. 14 C.F.R. § 47.3(b)(1)(B)(2).
10. See Aerowake Aviation Inc. v. Winter and Avemco Insurance Company, 423 So. 2d 165
(1982).
11. See Administrator v. Poirier, 5 NTSB 1928 (1987).
12. See 14 C.F.R. § 91.23.
13. See Eileen M. Gleimer, “When Less Can Be More: Fractional Ownership of Aircraft-The
Wings of the Future,” SMU Journal of Air Law and Commerce, Fall 1999, 64 J. Air L. &
Com. 979.
14. See 14 C.F.R. Subparts D, E, and F.
15. See U.S. Airways Inc. et al. v. Commonwealth Insurance Co., No. 03-587, 2004 WL 1637139
(VA. Cir. Ct. Arlington County, July 23, 2004).
16. See Paul A. Lange, “Is Causal Connection Required to Avoid Coverage on an Aviation
Liability Policy?” Presentation before the Lawyer-Pilots Bar Association, Summer Meeting,
Sun Valley, ID, July 20, 2000.
This page intentionally left blank
9 Employment Law and the
Aviation Industry

AGENCY LAW 254

Defining agency 254
Employee versus independent contractor 254
Creating and terminating agency relationships 255
Duties of parties 257
Contract liability 258
Tort liability 259
LABOR UNIONS AND EMPLOYMENT 261
Major federal labor union laws 261
Basics of collective bargaining 261
What if collective bargaining fails? 262
Strikes and related issues 263
EMPLOYEE PROTECTION 263
Employment discrimination 263
Employee safety and security 265
CASES AND COMMENTARY 269
DISCUSSION CASES 276
ENDNOTES 278

253

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254 Fundamentals of Aviation Law

In order to function, the aviation industry utilizes many highly skilled professionals. Air
traffic controllers, pilots, engineers, flight attendants, mechanics, and business profes-
sionals are all part of the aviation world as we know it today. These professionals are
typically employees or employers. Through the years, case law and statutory law have
developed to create a body of law known as employment law.

For the sake of presentation and clarity, this chapter is broken down into three parts,
with each part tackling a significant aspect of employment law. First, in a discussion of
agency law we will introduce the basics of the relationship between employers and their
employees and independent contractors. Second, we will review the impact of labor
unions on employment relationships. Third, we will address selected laws that were put
in place to protect employees and applicants for jobs from discrimination, loss of
income, and unsafe working conditions.

AGENCY LAW

To operate just about any business in the modern world requires the use of third parties
to act on behalf of the business owners. This applies to megacorporations such as
Microsoft and small businesses such as the FBO at your local airport. Persons who are
authorized to act for a business are agents, and their relationship with the business
employing them is considered to be an agency relationship. Agents and agency rela-
tionships are governed by agency law, which is largely a blend of contract and tort law.
In this section we will take a closer look at the fundamentals of agency law and how
this body of law impacts the aviation industry.

Defining Agency is defined as a fiduciary relationship in which one person is authorized to act
agency on behalf of another person. The word fiduciary means that the relationship is a rela-
tionship of trust.1 The relationship must be consensual; that is, both parties agree to
the arrangement. In the final analysis, much of agency law deals with the legal propo-
sition that persons who act through agents act themselves. Lawyers often refer to the
agency relationship as a master-servant relationship. This is a somewhat antiquated way
of referring to a relationship in which one party—the servant—acts as an agent on
behalf of another—the master. In modern times, the relationship is often referred to
as principal-agent.

Employee The agency relationship can take two forms—employer-employee or employer-

versus independent contractor. As a general matter, the employer-employee relationship is one
independent in which the employer controls the methods and means by which the employee gets his
or her job accomplished. Most persons who work for others are engaged in an employer-
contractor employee relationship. Airline pilots, air traffic controllers, flight attendants, and any-
one who works during hours prescribed by someone else and who uses someone else’s
equipment to perform the work is considered an employee.2

On the other hand, independent contractors are required to do the job they’ve contracted
to perform. Unlike the employee, the independent contractor controls the methods and the
means used to do the job.3 In the world of aviation, aviation medical examiners, owners
 Employment Law and the Aviation Industry 255

of small charter operations, and certain flight instructors who do freelance work may be
considered to be independent contractors.

Sometimes it is not easy to determine whether someone is an independent contractor or

an employee. Over the years, the courts have determined a list of tests that can be used
in analyzing this question. This list includes (but is not limited to) the following tests:
• How much control does the employer exercise over the details of the work?
• Is the person employed engaged in a distinct business or profession?
• Is the work performed part of the regular work of the employer?
• What is the skill and training level required of the person performing the work?
• Does the employer provide the equipment or tools for getting the work completed?

Why is it important to properly distinguish between an independent contractor and an

employee? There are several reasons. First, for tax purposes, an employer dealing with
employees must withhold income taxes and Social Security and Medicaid taxes while
paying a share of the tax to the government. On the other hand, someone who employs
an independent contractor has no such duty. Independent contractors have the duty to
pay their own taxes directly to the government, including all Social Security and
Medicaid taxes. Second, as we will see later in this chapter, there are many federal and
state protections built into the law for employees. Often, these protections such as
workers’compensation insurance, unemployment insurance, and unemployment com-
pensation do not apply to independent contractors. Third (as discussed in greater detail
later), as a general rule, employers may be held liable for the torts of their employees,
but not for those of their independent contractors.

Agency relationships are consensual, which means that the parties must be competent Creating and
to enter an agreement and both must consent to being a part of an agency relationship.4 terminating
As discussed in greater detail below, the agency relationship can be expressed or agency
implied by the parties. In most cases, there are no special formalities to satisfy to create
an agency relationship. However, in some cases, an agency relationship must be in
relationships
writing if required by the Statute of Frauds. One particular case in which a written
agency agreement is required is the real estate agent contract. The reason for the writing
requirement is the need to have any agreement dealing with the sale of real property
reduced to writing.

Creating the agency relationship

In express agency relationships, the agent and principal have explicitly agreed that they
will enter into a fiduciary relationship wherein the agent will act on behalf of the prin-
cipal. The agreement can be in writing or strictly oral. In some cases, the relationship
can also be exclusive. That means the principal cannot employ any other agent to serve
a particular purpose. In a nonexclusive agency relationship, the principal can hire as
many agents as desired to complete a task. Once one of the agents gets the job accom-
plished, all other agency agreements are terminated.

Most employees and independent contractors enter into an express agency relationship.
If an A&P mechanic is hired by Larrivee’s Air Repair, it is expressly understood that
256 Fundamentals of Aviation Law

that she will work as an A&P mechanic for Larrivee’s Air Repair and Larrivee will pay
her for her services (as negotiated on a per hour or salaried basis).

Implied agencies are not nearly so common in the aviation industry. These agency rela-
tionships occur when an agency relationship is implied or inferred by the conduct of the
parties. The inference of an agency relationship can come from past dealings with
clients or customers, industry custom, or other relevant factors. For instance, if Tara Air
brings its Part 135 Pilatus to Golden’s AvRepair Shop for an annual inspection and each
year at the time an annual is due, Golden tows the aircraft to its shop for the annual
without any express authorization from Tara Air, and Tara Air pays for the services, then
an implied agency relationship was formed whereby Tara Air, the principal, impliedly
directs Golden to perform the annual on its Pilatus.

Terminating the agency relationship

The law recognizes two ways that an agency relationship may be terminated. The first
is by acts of the parties. The second is by operation of law.

Termination by acts of the parties Because an agency relationship requires the con-
sent of both parties, the relationship can be terminated by the withdrawal of either party.
These are some of the typical ways in which an agency relationship might be terminated
by acts of the principal or agent:
• The principal and agent mutually agree to termination of the relationship.
• A specified or reasonable amount of time has lapsed. Many agencies are established
for a specified period of time. Once that time is up, or a reasonable time has passed,
the agency is terminated.5
• The purpose of the agency is fulfilled.6
• The principal revokes the agent’s authority.7
• The agent gives up his or her authority.

Termination by operation of law Sometimes an agency relationship can be termi-

nated automatically by the law. Usually these events make it impossible for either the
agent or the principal to perform the duties required by an agency relationship. Some
of the events that will terminate an agency relationship by operation of law are listed
below.
• Death of either the principal or agent.
• Incapacity of the principal or agent. If either the principal or the agent is incapaci-
tated mentally or physically so as to be unable to perform her or his duties, the
agency relationship is terminated.
• Bankruptcy of principal. In most cases the agent’s bankruptcy does not terminate the
agency relationship.
• Disloyal actions of an agent.
• Destruction of the subject matter of the agency (e.g., the aircraft that Bob was hired
to sell as an agent of John is destroyed in a crash).
 Employment Law and the Aviation Industry 257

Ordinarily, the principal-agent relationship is created by a contract, whether oral or Duties

written. Each contract may spell out specific duties of the parties. However, regardless of parties
of what any individual contract might provide for, the agent and the principal are
responsible to each other for various duties imposed by law. A brief review of the legal
duties implied in an agency relationship follows.

Duties of agent
Agents have a fundamental legal duty of obedience to their principals.8 This duty simply
requires that an agent follow all reasonable directions presented by the principal. For
instance, George’s Flight School has a standing rule that no flights are to depart when wind
gusts exceed 20 knots. Emilio is a veteran flight instructor at George’s. He has always com-
plained about the “20-knot rule” because it limits student exposure to gusty wind condi-
tions. Emilio disregards the rule and takes a commercial student on an instructional flight
when wind gusts exceed 25 knots. During one takeoff after a touch-and-go, the wind sud-
denly shifts, and Emilio’s aircraft departs the runway and is substantially damaged. Emilio
can be held liable for the damages done to George’s aircraft and business as a result of his
failure to obey George’s directive on departures during windy conditions.

Another primary duty of agents is the performance of their duties with reasonable care
and skill. If special skills are required for the agent’s duties, those skills must also be
exercised by the agent.9 For example, if George’s Flight School hires Kristen as a flight
instructor, it can expect that she will demonstrate the skill and expertise required by a
certificated flight instructor. If Kristen damages an aircraft while demonstrating a rela-
tively routine soft-field landing, she may be liable to George’s for her breach of duty.

Agents also have a duty to inform their principals regarding matters relevant to their
services.10 To illustrate, suppose Mike, one of George’s flight instructors, learns that
one of his regular students has recently filed for bankruptcy. Mike would have a duty to
inform George about the situation because George might decide that he can no longer
provide services to this student unless they are paid for in cash.

Other general and fiduciary duties owed by an agent to a principal are as follows:
• Avoidance of conflicts of interest
• No self-dealing
• Duty not to compete
• Duty to keep information confidential

Any dereliction of these fiduciary duties by an agent could allow the principal to recover
damages.11

Duties of principal
The duties of a principal in an agency relationship are fairly limited, but nonetheless
important. There are essentially three duties owed by a principal to an agent:
• Compensation
• Reimbursement
• Indemnification
258 Fundamentals of Aviation Law

The duty of compensation requires that the principal pay the agent for his or her services
in accordance with the agreement between the parties. Compensation means payment for
services provided. The payment can be cast as an annual salary, an hourly wage, or com-
missions on sales. If the parties have not agreed on a specific amount of compensation, the
principal will have a duty to pay the agent for the reasonable value of services provided.12

A principal also has a duty to reimburse an agent for any expenses the agent has
incurred on behalf of the principal.13 For instance, Trudy is a flight instructor for
George’s Flight School. She takes a student on a cross-country flight and lands at the
second destination of the day. She and her student need additional fuel to get back to
their home base. Trudy pays for the fuel, using her personal credit card. Trudy will be
entitled to reimbursement from George for her credit card payment.

Indemnification is the duty of the principal to make the agent whole for any losses the
agent may suffer while acting at the direction of the principal. For example, suppose
that Cole is employed as an agent to sell Ashley’s twin-engine Seneca aircraft. Ashley
does not inform Cole that she does not possess title to the aircraft. Cole sells the air-
craft, and shortly thereafter he is sued by the rightful owner of the aircraft, Sandra. Cole
pays damages to Sandra. Cole will be entitled to indemnification from Ashley for the
damages he incurred due to his actions at Ashley’s direction.

Contract One of the most common issues in the agency relationship is the sorting out of the contract
liability liability of the principal and agent to third parties that they deal with in the course of doing
business. If the agent is acting on behalf of a principal, is the agent personally liable on con-
tracts made for the principal? Is the principal liable? Are both liable? In this portion of our
discussion, first we will look at the liability of the principal. Next, we will look at whether
an agent can become personally liable on a contract entered into on behalf of a principal.

Principal’s contract liability

As a general rule, a principal who authorizes an agent to enter into contracts on his or
her behalf will assume full liability for the contract. That means that whether a princi-
pal wants to be or not, the principal will be responsible for performing on a contract if
the contract was otherwise valid. The theory behind this rule is that the third party enter-
ing into the contract believes—reasonably—that the agent has the authority to enter into
the contract. The third party should be secure in knowing that her or his deal is with the
principal and that the principal can be held liable.

For example, Kreke Air Cargo hires Chappy to manage its corporate aviation depart-
ment, and Chappy enters into a contract with Hook Avionics for four new moving map
displays. Even if Kreke is unhappy with the contract Chappy entered with Hook
because another supplier is less expensive and faster, Kreke is still obligated under the
contract with Hook.

Agent’s contract liability

An agent’s liability to third persons under a contract depends on whether the agent’s rela-
tionship with the principal is (1) fully disclosed, (2) partially disclosed, or (3) undisclosed.
 Employment Law and the Aviation Industry 259

A fully disclosed relationship is one in which the third party entering into the contract
is fully aware that (1) the agent is working for a principal and (2) the third party also
knows the identity of the principal. In the vast majority of cases, the agent’s relation-
ship with the principal is fully disclosed. In the example above, Hook was aware that
Chappy was entering into a deal on behalf of Kreke. In cases like this, the principal,
Kreke, remains liable on the contract. However, Chappy has no liability on the contract.
He was simply acting in his capacity as Kreke’s agent. Of course, this rule makes prac-
tical sense for most agency relationships. There would be very few employees willing
to work in today’s environment if they believed they could be held liable for every con-
tract they entered into behalf of their boss.

On some rare occasions, an agency relationship may be partially disclosed or undis-

closed. A partially disclosed agency exists when a third party dealing with an agent knows
that the agent is acting for a principal. However, the third party does not know the iden-
tity of the principal. A partially disclosed agency is most likely to exist because the prin-
cipal does not want to be identified. In some unusual cases, it may exist because the
agent neglects to inform the third party of the principal’s identity. An undisclosed
agency exists when the principal does not even want his or her existence to be known
to the third party. The third party is led to believe that the agent is the principal. Partially
disclosed and undisclosed agencies often result when a principal believes that knowl-
edge of their existence will make it more difficult to fairly negotiate a contract. For
instance, if Sollenberger were a rich and famous entertainer, he might prefer to have an
agency that is undisclosed or partially disclosed as he goes out searching for a certain
rare war bird. If sellers knew his identity, it might be hard to bargain or get a good price.

In the case of both undisclosed and partially disclosed agencies, both the principal and
the agent are liable on any contracts. If the agent is forced to pay anything on a con-
tract, the agent can recover, calling on indemnification from the principal.

Another significant issue for employers, employees, and independent contractors is tort Tort liability
liability. Can an employer be liable for a tort committed by employees? Can an employer
be liable for a tort committed by an independent contractor? These are significant ques-
tions, especially in the high-dollar, high-exposure world of aviation.

Principal’s liability for torts of employees

Of course, an employer and an employee are personally liable for their own torts. The
bigger question for employers is whether they can be held liable for the torts of their
employees. In companies with hundreds and even thousands of employees (such as
many aviation enterprises) this question looms even larger. Often, the answer to these
questions lies in the type of tort committed—was it a negligent or intentional tort?

Employer’s liability for employee negligence The general rule is that employers will
be held liable for the negligence of their employees when the employees are acting within
the scope of their employment. The legal philosophy behind this rule is that an employer
gains the benefit from having others acting on the employer’s behalf. Therefore, it is not
unreasonable to require the employer to bear the responsibility for the employees’ negli-
gence if it occurs while they are operating within the scope of their employment.
260 Fundamentals of Aviation Law

Lawyers often refer to this general rule as respondeat superior. This means “let the
master answer.” The concept of respondeat superior arose from the notion of vicarious
liability—making a person liable without fault because that person is responsible for
the conduct of another.

The sometimes tricky part in applying this general rule lies in determining whether an
employee was operating within the scope of her or his employment. For instance, Tim
is a corporate pilot. He has finished the first leg of his flight and safely delivered his
passengers in Tulsa, Oklahoma, with the next leg of the trip scheduled for the follow-
ing morning. Tim’s company makes arrangements for him to get lodging and food at
the nearest airport hotel. Tim stays at the hotel and decides to go out for a late dinner at
a nearby restaurant. Tim drives his rental car from the hotel. On the way to the restau-
rant, he negligently misses a stop sign and injures a pedestrian. There is no question that
Tim is liable for his negligence. However, is his employer liable as well?

There is no one test to determine whether an employee is acting within the scope of his
or her employment. However, these are some factors that should be considered:14
• Was the act specifically authorized by the employer?
• Did the negligence occur while the employee was within the time period of employ-
ment authorized by the employer?
• Did the negligence occur near or in close proximity to the employer’s place of business?
• Was the employee working to advance the employer’s business at the time of the
negligent act?

Employer’s liability for employee’s intentional torts As a general rule, employers

will also be held liable for the intentional torts (e.g., assault, battery, false imprisonment)
of employees that are committed within the scope of their employment. The usual test
applied is the “work-related test.” This test requires that for an employer to be held liable
for the intentional torts of employees, the employee must commit the intentional tort
while within a work related place or time. Again, this all gets back to the basic question
of whether the employee was acting within the scope of the employee’s work.

Principal’s liability for torts of independent contractors

Recall from the discussion above that independent contractors are different from
employees. They are usually “outsiders” with special expertise who are engaged to
work on special projects on an as-needed basis. Independent contractors supply their
own tools and equipment and have the right to control the methods and means they will
employ to get a job done.

Because of the “separateness” between a principal and an independent contractor, a

principal is generally not held liable for the torts of an independent contractor. The
independent contractor is solely liable for any injuries caused by its negligent or inten-
tional torts.

For example, suppose Fox Flyers hires Bornarth Builders to put an addition on its hangar
and office buildings at the municipal airport. If one of Bornarth’s trucks negligently
 Employment Law and the Aviation Industry 261

strikes a parked aircraft on the ramp, Bornarth will be solely liable for the damages
done to the aircraft.

There are some exceptions to this general rule. A principal may be held liable for the
torts of an independent contractor when (1) the principal assigns the independent con-
tractor “inherently dangerous activities” or (2) the principal is negligent in the selection
of an independent contractor.

These exceptions have some implications for aviation businesses. It has been held that
crop dusting is an “inherently dangerous activity.”15 Could this be extended to make
liable the aviation employers who hire independent contractors for rescue operations,
air ambulance services, or firefighting activities?

LABOR UNIONS AND EMPLOYMENT

Until the late 1800s, workers were largely at the mercy of their employers when it came
to pay and working conditions. Employees eventually turned to unions to represent their
interests through bargaining leverage, often referred to as collective bargaining. In this
section of the chapter, we will give an overview of some fundamentals of labor union law.

There are several major federal laws that codify the right of workers to organize and Major
bargain with employers. Three of the major pieces of union legislation passed in the federal labor
1900s are as follows: union laws
• Railway Labor Act (RLA). The RLA was passed in 1926 and amended in 1934. This
act relates to railroad and airline workers.16
• Norris-LaGuardia Act. This law was enacted in 1932. It protects the rights of
employees to organize.17
• Wagner Act. This law is also known as the National Labor Relations Act (NLRA).
The NLRA was passed as law in 1935. It protects the rights of employees to create,
join, and collectively bargain with employers through labor unions.18

Once a labor union is established by election, its most potent tool is collective bargaining— Basics of
the ability of the union to represent all workers within a plant, business, or other employer collective
unit. Laws protecting the right to collective bargaining require that employers and unions bargaining
bargain in good faith.

Collective bargaining agreements often contain certain provisions that are so funda-
mentally important to the employer-employee relationship that they are considered
compulsory to negotiations. Compulsory subjects include wages, hours, safety rules,
pension and retirement plans, and similar issues.

Subjects that are not compulsory, but that may be a part of employer-union negotiations
include management/supervisory structures, plant locations, and reorganization of the
employer’s business. These noncompulsory subjects are permitted to become part of a
collective bargaining agreement.
262 Fundamentals of Aviation Law

What if As this chapter is being drafted, mechanics at Northwest Airlines walked off their jobs
collective after union officials and management failed to reach an agreement on Northwest’s
demands for $178 million in wage and benefit cuts. Unions and employers may attempt
bargaining
to act in good faith during collective bargaining agreements. However, attempts to come
fails? to agreement may not always be successful. That leaves the question, What next?

To respond to this question, we will focus on the process as it affects most employees
in the aviation industry. As indicated above, most pilots, dispatchers, mechanics, and
other air carrier employees are covered under the Railway Labor Act.

The RLA was enacted in 1926 to allow railway laborers to organize and collectively
bargain while protecting railroads and the general public from “wildcat” or unautho-
rized strikes that had crippling effects on commerce in the early days of the labor move-
ment. In 1936 the RLA was expanded and amended to include employees from the
growing airline industry.

The RLA’s provisions regarding breakdowns in collective bargaining negotiations

require that workers continue to perform their duties, even while collective bargaining
efforts may falter. This is sometimes referred to as the “work now, grieve later” rule.
The philosophy behind the rule is to avoid wholesale disruptions of commerce while
unions and employees try to sort out their differences.

The first step in the collective bargaining process is usually direct negotiation, that is,
negotiations without the presence of any third parties.

If the parties reach an impasse during direct negotiations, either party can prepare an
application for mediation before the National Mediation Board (NMB). The NMB will
assign a mediator to the case. Most mediators have labor or management backgrounds
with extensive experience in the airline industry. The role of the mediator is to move the
parties to productive discussions of the issues in the hopes of reaching compromise. The
NMB mediators will continue to work with the parties until an agreement can be reached
or until the mediator concludes that all reasonable attempts at a voluntary agreement
have failed. At that point, the NMB will offer the opportunity for the parties to submit
any remaining disagreements to arbitration.

If either party rejects arbitration, the NMB will then release the parties from mediation.
This begins a 30-day “cooling off” period. Near the end of the cooling off period, the
parties are joined again by the NMB for another round of intense mediation in an
attempt to reach an agreement.

If this fails, the parties are free to proceed with “self-help” efforts. For the employer, this may
mean an air carrier can forcibly impose its last offer, shut down temporarily, or hire replace-
ment workers. For the union, self-help means a strike or other legal self-help activity.

In certain instances, the NMB may recommend a Presidential Emergency Board during
the 30-day cooling off period. This may be done if the dispute “threaten(s) substantially
to interrupt interstate commerce to a degree such as to deprive any section of the
 Employment Law and the Aviation Industry 263

country of essential transportation service.”19 If a Presidential Emergency Board is con-

vened, it has 30 days to present a proposed agreement to the parties, after which another
30-day cooling off period begins. If this proposal is rejected by either party, self-help
can begin after the second cooling off period. In serious enough cases, Congress can
intervene and impose a settlement, usually by taking the recommendations of the
Presidential Emergency Board and enacting them as law.

As discussed above, at times the collective bargaining process reaches a point where the Strikes and
parties are unable to reach an agreement and one or both parties choose to engage in self- related issues
help. The most potent (and legal) self-help tool available to union employees is the strike.

To be legal, a strike must be authorized by a majority vote of union members. Strikers

usually set up picket lines and demonstrations outside the employer’s place of business.
Union members and representatives carry signs announcing and supporting the strike.
The technique of striking is designed to place pressure on an employer to settle any dif-
ferences in a manner more favorable to the union.

Strikes are a legal form of self-help. However, they become illegal if they are (1) accom-
panied by violent actions or (2) preventing nonstriking employees, customers, and vendors
from entering and doing business with the employer.

Sometimes strikes can last for extended periods of time. Individual employees may
decide from the start that they do not want to strike. At other times they may decide they
do not want to strike after the strike has been underway for some time. In either case,
if the employees return to work, they are referred to as crossover workers.

In some instances, employers who reasonably anticipate a strike can lock out union
workers and hire replacements. The replacements can be either permanent or temporary.
There is no requirement that a replacement employee be terminated once a strike is over.

EMPLOYEE PROTECTION

Under common law, and continuing in today’s world, most employees are employees at
will. This means that they can be dismissed by an employer with or without cause for
just about any reason. While the fundamental principle of employment at will contin-
ues, it has been eroded by federal and state statutes and judicial doctrine that give
employees, and prospective employees, greater rights and protections under the law.

In reviewing the changing landscape of employee protection law, first we will review
laws that protect employees and applicants for employment from discrimination. Then
we will review laws designed to provide employees with greater safety and security.

Over the course of the last 40 years, both federal and state lawmakers have tackled the Employment
issue of discrimination against employees and applicants for employment. In this seg- discrimination
ment of the chapter, we will focus on the most prominent federal statutes that seek to
protect employees from discrimination in the workplace.
264 Fundamentals of Aviation Law

Fair employment practices act

The Fair Employment Practices Act is part of the Civil Rights Act of 1964. This act is
more commonly known as Title VII because it is Title VII to the Civil Rights Act of
1964. Title VII prohibits job discrimination for current employees and applicants based
on the following protected classifications:
• Race
• Color
• Nationality
• Gender
• Religion

Title VII does not apply to all employers. However, it does apply to many, especially
larger entities including the following:
• Private employers with more than 15 employees
• Federal, state, and local governments
• Employment agencies
• Labor unions with more than 15 employees

Title VII specifically prohibits employers within its scope from discrimination in hiring
decisions; payment of salary, wages, and benefits; determinations regarding dismissal;
and all other terms, conditions, or privileges of employment.

When workers want to bring Title VII complaints, they must do so with the Equal
Employment Opportunity Commission (EEOC). Some states require that the claim be
filed first with their state or local office that serves in the same capacity at the EEOC.
The EEOC or local agency will investigate the complaint and decide if the claim has
merit. If it is decided that the case has merit, the EEOC or local agency can sue on
behalf of the claimant. If the EEOC or local agency decides that it does not wish to file
suit, it will issue a “right to sue” letter to the person who filed the complaint, thus giv-
ing that person the right to sue the employer privately.

An employee or applicant for employment who is successful in a Title VII claim might
recover back pay and reasonable attorney fees. Beyond monetary awards, the claimant
could get reinstatement or other remedies whereby the court forces changes in the
employer’s behavior and/or hiring practices.

Equal pay act

The Equal Pay Act seeks to eliminate gender discrimination in matters of compensa-
tion. As implied in the title of the law, it seeks to ensure that if a man and a woman are
performing essentially equal work functions, they are similarly paid. Someone who
feels that he or she has been paid less than someone of the opposite gender will be able
to establish a basic (or prima facie) case of discrimination if evidence can be presented
that someone of the opposite gender who works a similar job at the same employer is
paid more. Once the basic case is established, it is up to the employer to prove that the
 Employment Law and the Aviation Industry 265

differential in pay is justifiable. Under the Equal Pay Act, an employer has justification
for unequal pay if the inequality is based on
• Seniority
• Merit or performance
• A verifiable measure of production by quantity or quality
• Any reasonable factor other than gender

If an employer loses an Equal Pay Act case, the employer can be liable for back pay,
court orders to cease the unequal treatment of workers, and payment of the claimant’s
reasonable attorney fees to bring the claim.20

Age discrimination in employment act (ADEA)

The ADEA was passed in 1967. Its objective is to protect employees and job applicants
over age 40 from discrimination in the workplace. The ADEA applies to all government
employers and private employers with more than 20 employees.21 The ADEA also pro-
hibits (with some exceptions for highly placed executives) a mandatory retirement age.

Employers have several defenses against an ADEA charge. The first defense is that the
age requirement imposed is a bona fide occupational qualification (or BFOQ). This
means that the employer is able to establish that there are reasonable and appropriate
grounds to require age limits on certain jobs due to physical and mental demands of the
job. A second defense for an employer is a bona fide seniority system. Such a system
would likely have the effect of compensating junior employees at a lesser rate than
more experienced (and likely older) employees. A final defense will be any other rea-
sonable action taken by the employer.

If an employer violates the ADEA, it may be liable for back pay, injunctions against the
employer, and reinstatement. As indicated in Case 9-2 below, the issue of employment
of pilots over the age of 60 in the airline industry has been litigated several times.

Americans with disabilities act (ADA)

The ADA became law in 1990. By 1994 it was applicable to all employers with more than
15 employees. The ADA prohibits employers from discriminating against current employ-
ees or applicants for employment because the employee or applicant has a disability.22

The law further requires that employers provide for accommodation for employees, cus-
tomers, and clients who may be disabled. The accommodations typically take the form of
wheelchair ramps, interpreters, larger-screen computers, etc. These accommodations must
be made unless the employer can establish that to do so would create an “undue burden.”

A chart outlining the provisions of the federal employment discrimination laws is found
in Fig. 9-1.

Over time, the federal government and state and local governments provided greater Employee
protections for the safety and security of employees. Some of the major enactments and safety and
provisions related to worker safety and security are outlined below. security
266 Fundamentals of Aviation Law

Figure 9-1 Equal Pay Act Title VII ADEA ADA

Summary • • • •
Type of Sex Nationality Age Disability
of employee Discrimination • Religion
protection Targeted • Color
provisions. • Race
• Sex

Conduct • Wages • Employment • Employment • Employment

Prohibited terms or terms or terms or
conditions conditions conditions

Allowable • Merit • Demonstrated • Seniority • Job-required

Defenses • Seniority Ability • BFOQ criteria
• Considerations • BFOQ • Safety

other than sex • Seniority considerations

• Undue

hardship to
employer

Typical • Back pay • Back pay • Back pay • Back pay

Remedies for • Lawyers’ fees • Injunction • Injunction • Injunction
Successful • Back pay • Compensation • Reinstatement • Reinstatement
Claimant for damages • Lawyers’ fees • Lawyers’ fees
• Reinstatement

• Lawyers’ fees

Occupational safety and health act

The Occupational Safety and Health Act became law in 1970. Its purpose is to create
and preserve safe working environments for employees. The act created the
Occupational Safety and Health Administration (OSHA), a government agency charged
with enforcing worker safety standards.

OSHA typically performs its functions through inspections of work sites, reviews of
employer records, and (if necessary) citations against violators. Penalties for violations
of the act’s requirements can be civil or criminal depending on the nature and severity
of the violations.

If a state wants to regulate its own workers’ safety, it may do so by filing a plan that is
approved by OSHA. The state plan must meet the minimum standards applied by OSHA.
However, the state plan does not have to conform line by line to OSHA standards.
Many states now regulate worker safety through their own plans that have been approved
by OSHA.

Employee privacy
Employee privacy has become an important issue in recent years. Employers have the
ability to read employee emails, monitor phone calls, initiate electronic surveillance,
and (in certain cases, especially relevant to aviation employees) perform drug testing.

As a general rule, it is a federal crime to intentionally intercept another person’s wire or

electronic communications.23 However, employers are armed with substantial exceptions
 Employment Law and the Aviation Industry 267

to this general rule. As a matter of law, employers are permitted to monitor employee
electronic communications upon the implied or express consent of employees (which is
typically not very difficult to obtain). These exceptions routinely permit employers to
monitor employees’ emails and business-related telephone conversations.

For employees who serve in safety-sensitive functions in the aviation environment, drug
testing is a part of the job. Appendix I to FAR Part 121 requires preemployment testing,
periodic testing, random testing, testing based on reasonable cause, return-to-duty test-
ing, and postaccident testing. The testing is applicable to employees working for Part
135 and Part 121 operations. The specific employees subject to testing include
• Flight crewmembers
• Flight attendants
• Flight instructors
• Aircraft dispatchers
• Aircraft maintenance personnel
• Ground security personnel
• Air traffic controllers

Employees who fail or refuse to take required drug tests are subject to certificate sus-
pensions, revocations, and/or mandatory drug treatment.24

Workers’ compensation insurance

On occasion, employees are injured while performing their duties. Under traditional
common law, an employee could sue an employer for negligence or any other theory
appropriate to the case. This approach to compensating injured workers had obvious
limits. First, it pitted employee against employer. Second, it did not guarantee that the
injured employee would be compensated for injuries.

Because of the drawbacks to the traditional common law system, virtually every state
has a workers’ compensation law. Workers’ compensation statutes typically require
employers to obtain workers’ compensation insurance for the benefit of their employees.
The insurance is often purchased from third-party providers, or employers may be
permitted to self-insure if they have adequate resources.

If an employee is injured on the job, the employee files a claim with the state’s workers’
compensation board or commission. That agency is tasked with determining the validity of the
claim. Appeals are often made a part of the system. Often the biggest hurdle the employee
faces in a claim is being able to establish that an injury was work-related. Injuries incurred
while a worker is performing work duties are clearly covered. If the employee were injured
at a company gymnasium or involved in an accident while taking a client to lunch, it would
be within the scope of employment. However, accidents that took place off the employer’s
premises while the employee was at lunch or after work hours would not be covered.

It is important to note that workers’ compensation is considered to be an exclusive

remedy. That means that once an employee selects workers’ compensation as her remedy,
268 Fundamentals of Aviation Law

she must forgo any other remedy, including taking legal action against her employer.
One significant exception to this rule occurs if an employee was intentionally injured
by her employer. An employee can also sue a responsible third party for injuries with-
out being barred by a workers’ compensation claim.

Social Security and unemployment insurance

Congress enacted Social Security in 1935. Initially the law was put in place to provide
modest retirement benefits to eligible employees. Over time, the scope of Social Security
grew. Today, the system covers the following benefits:
• Old-Age and Survivors Insurance (monthly payments of retirement benefits based
on working years and compensation earned)
• Disability insurance
• Hospitalization insurance (Medicare)
• Supplemental Security Income

The Social Security system is financed through withholding taxes paid for by both
employers and employees. The current rate is approximately 7.65 percent with both
employers and employees each paying 7.65 percent of the employees’ salaries up to a
certain cap. The rate and caps are subject to change by Congress.

In recent years there has been substantial talk regarding reformation of Social Security
designed to allow the program to remain solvent over the long term. Consideration is
being given to raised rates and caps, allowing employees the option to create private
accounts where their tax contributions will be invested, and other combinations of these
approaches.

The federal unemployment system was also put into place in 1935. This system was a
part of the Social Security legislation. Employers pay into this system a percentage of
workers’ earned income. The system provides for several months of payments to a
worker who is out of work not due to his or her own fault. Most states also have an
unemployment program in place that corresponds to the federal unemployment system.

Family and Medical Leave Act

In 1993 Congress passed the Family and Medical Leave Act (FMLA).25 This law
applies to employers (including federal and state governments) with 50 or more
employees. The purpose of FMLA is to allow employees unpaid leave for medical
emergencies. Not all employees are covered by this act. All covered employees must
have served their employers for at least 1 year and performed a minimum of 1250 hours
of work in the preceding 12 months. Any covered employees are allowed up to 12 weeks
of unpaid leave for the following situations:
• Birth and early care of children
• Placement of a child for adoption or foster care
• Serious health problems
• Care for a spouse, child, or parent with serious health problems
 Employment Law and the Aviation Industry 269

Generally, an employee who takes leave under FMLA must be restored to her or his
previous position at the same pay as when the employee left. One exception to this rule
applies to salaried employees who are in the highest-paid 10 percent of the employer’s
workforce.

CASES AND COMMENTARY

A survey of Title VII case law reveals that a substantial number of the cases involve
some form of harassment in the workplace. Case 9-1 illustrates how the courts dealt
with a claim involving racial discrimination.

CASE 9-1
DAVID E. HOLLINS V. DELTA AIRLINES
238 F. 3d 1255 (2001)

OPINION BY: SEYMOUR At some point prior to his telling of the “well-hung”
joke, Mr. Fidler had told a group of employees,
David E. Hollins appeals from the order of the
including Mr. Hollins, the following joke: “If you
district court granting summary judgment to his
have a Black, a Mexican, and a Tongan in a car,
former employer, Delta Airlines, on his racial
who is the driver?” Answer: “The Sheriff.” [Citation
harassment claim under [Citation to Title VII].
to Record]. No employee ever reported this joke
For the reasons stated below, we affirm.
to a Delta supervisor.
Sometime after the “well-hung” joke incident,
I
Mr. Hollins noticed several hangman’s nooses
David E. Hollins began his employment as an dangling from the ceiling above his work area. He
associate customer service agent with Delta Airlines also noticed nooses hanging in two other areas.
in December 1995. On February 4, 1996, a white One was hung in such a way that it swung down
co-worker, Rex Fidler told Mr. Hollins the follow- when a door was opened. The other was hung in an
ing joke: “How can you tell when a person is area where an African-American employee worked.
well-hung?” Answer: “When you can’t get two Mr. Hollins did not complain about these nooses
fingers between his neck and the rope.” [Citation.] to anyone. However, Charles Wilson, an African-
Mr. Hollins immediately reported the joke to two American co-worker of Mr. Hollins, complained
Delta supervisors, Dennis Jacobson and Carla Sutera. about the nooses to Tom Brothers, the immediate
Mr. Jacobson and Ms. Sutera spoke with Mr. Fidler supervisor of both Mr. Hollins and Mr. Wilson.
about the inappropriateness of the joke and requested Mr. Brothers immediately removed all the ropes
written statements from Mr. Fidler, Mr. Hollins, and and then held a meeting with the employees in
another Delta employee who had witnessed the which he indicated the ropes were offensive and
incident. Delta thereafter gave Mr. Fidler a warning would not be tolerated. Shortly thereafter, an
letter and placed it in his employment file. employee named Stan White told Mr. Brothers that
270 Fundamentals of Aviation Law

it was he who had tied the ropes. He stated he tied view the ropes as racial symbols.” Id. Alternatively,
ropes to pass the time and had not intended to the court held that Delta was entitled to summary
offend anyone. Mr. White was given a warning let- judgment in any event because it took prompt
ter and a copy was placed in his employment file. remedial action whenever it learned about the
offensive conduct.
According to Mr. Hollins, Mr. Brothers’ treatment
of him dramatically changed after he complained II
about the “well-hung” joke. Mr. Brothers began to
***
follow him during his meal breaks, warning him and
The issue presented for our resolution is whether
other African-American employees that “You’d bet-
the district court erred in concluding that Mr. Hollins
ter be back to work before I’m through eating.”
was not subjected to a racially hostile work envi-
[Citation to Record.] He followed and “intently”
ronment and that even if he were, Delta was not
watched African-American employees while they
liable for the harassment. For the reasons dis-
ate. [Citation to Record.] Mr. Brothers also began to
cussed below, we affirm the district court’s grant
stand near Mr. Hollins while he was at work and to
of summary judgment. In so doing, we reject the
scrutinize his work closely. He followed Mr. Hollins
district court’s conclusion that the “well-hung”
and used the restroom at the same time. Mr. Hollins
joke and the presence of hangmen’s nooses were
also contends Mr. Brothers began to write him up
uncontrovertedly innocuous. The joke appears to
for minor infractions in the workplace that, while
be a facially racist remark, and the nooses may
violations of Delta policy, were often ignored by
also have been racially motivated, regardless of
supervisors. However, Mr. Hollins never complained
the rope-tying employee’s representations to Delta.
of Mr. Brother’s conduct to a supervisor or to Delta’s
These are genuine issues of material fact that
Equal Employment Opportunity (EEO) officer.
preclude summary judgment on the hostile work
In granting summary judgment for Delta, the district environment issue. However, we agree with the
court focused on whether the treatment Mr. Hollins district court that Delta can not be held liable for
received from his co-workers and supervisors the asserted harassment on this record.
amounted to a racially hostile work environment,
An employer may be liable for the racially
relying on this Court’s analysis in Bolden v. PRC,
harassing conduct of its employee under three
Inc., 43 F. 3d 545 (10th Cir. 1994). The district court
theories, all of which are derived from the com-
held that Mr. Hollins failed to meet the Bolden
mon law of agency: the negligence theory, under
requirement that the harassment be “pervasive or
which the employer fails to remedy a hostile work
severe enough to alter the terms, conditions, or
environment it “knew or should have known
privileges of employment” and that it be “racial
about;” the actual authority theory, under which
or stem from racial animus.” [Citation.] The court
an employee harasses another employee within the
concluded “there is no viable evidence that either
scope of his employment; or the apparent author-
the hanging joke or rope incidents were racial or
ity theory, under which the harassing employee
stemmed from racial animus,” and that while the
acts with apparent authority from the employer.
“‘sheriff’ joke appears to have racial overtones …
[Citations.]
it clearly was an isolated incident.” [Citation to
Record]. The district court held it “uncontroverted Mr. Hollins contends the situation here implicates
that one of Delta’s employees had a habit of tying all three theories of liability. Pursuant to the neg-
knots of various kinds in ropes found in the area ligence theory, he argues that Delta knew or
and that he sometimes would throw the ropes should have known about the hostile work envi-
over pipes near the ceiling. The employee did not ronment he suffered because Delta was notified
 Employment Law and the Aviation Industry 271

about the “well-hung” joke and the nooses. Alterna- claim Mr. Fidler told him any other racially offen-
tively, he asserts that Delta is vicariously liable for sive jokes after this intervention by Delta. Finally,
the acts of Mr. Brothers because, as a supervisor, as soon as the nooses were brought to the attention
Mr. Brothers acted with either actual or apparent of Mr. Brothers, he immediately removed the ropes,
authority. We examine each of these contentions. warned his employees against such offensive and
intolerable conduct, and reprimanded the employee
involved. Mr. Hollins does not contend that any
A. Negligence Theory
other ropes were found in the workplace after this
Employers are not automatically liable for harass- action was taken by Delta.
ment perpetrated by their employees. [Citation.]
In order to prevail on a negligence-based hostile Although Mr. Hollins asserts that Mr. Brothers’
work environment claim, Mr. Hollins “bears the conduct was racially harassing, Mr. Hollins never
burden of establishing that the employer’s con- complained about Mr. Brothers to a supervisor or
duct was unreasonable.” [Citation.] He must prove to Delta’s EEO officer. Consequently, Delta did
that Delta was itself negligent because “it knew not have actual knowledge of the situation. More-
or should have known about the conduct and over, knowledge cannot reasonably be imputed to
failed to stop it.” [Citation.]. Thus, the focus is Delta given that it had no prior notice of any kind
not on whether the employer is liable for the bad that Mr. Hollins believed he was being harassed
acts of others, but whether the employer itself is by a supervisor.
responsible for failing to intervene. In each of the above incidents, when Delta was
At the outset, we note that Delta has a written presented with a potentially harassing situa-
harassment policy. Although this fact is more tion, it immediately investigated, took corrective
directly relevant to evaluating Mr. Hollins’ vicar- action, and disciplined any offending employees.
ious liability claims, it is also relevant to his Delta conducted itself as a reasonable employer.
actual liability argument. Delta’s harassment pol- [Citation.]
icy encourages employees to go to their supervi-
sors or, if they “cannot resolve the matter” within B. Vicarious Liability
their own department, to go directly to Delta’s
Mr. Hollins’ alternative theory of liability is that
EEO director. [Citation.] This policy satisfies the
Mr. Brothers acted with either the actual or appar-
requirements placed on harassment policies by
ent authority of Delta, making Delta vicariously
the Supreme Court in its recent hostile work envi-
liable for his acts. We cannot properly evaluate this
ronment decisions. [Citation.]
argument because Mr. Hollins offered no evidence
The “sheriff” joke which Rex Fidler told Mr. Hollins whatsoever that would show Mr. Brothers was act-
was never reported by Mr. Hollins or any other ing at the behest of Delta, with actual authority. He
Delta employee to any Delta supervisor, as also offered no evidence that Mr. Brothers was a
Mr. Hollins concedes. Delta cannot be held liable “management level employee” who could be said
for this incident because there is no evidence it could to be acting under the apparent authority of his
have reasonably known of it. The “well-hung” joke employer. [Citations.] Delta, conversely, provided
was timely reported by Mr. Hollins to two supervi- evidence on the two issues it must prove in order to
sors, who acted immediately by taking written mount an affirmative defense to vicarious liability:
statements, reprimanding Mr. Fidler, and sending “(a) that the employer exercised reasonable care to
Mr. Fidler a warning letter which went on his prevent and correct promptly any … harassing behav-
employment record at Delta. Mr. Hollins does not ior, and (b) that the plaintiff employee unreasonably
272 Fundamentals of Aviation Law

failed to take advantage of any preventive or cor- liable for any racial harassment that may have
rective opportunities provided by the employer …” occurred in the workplace.
[Citation.] Under these circumstances, Delta’s
We AFFIRM the judgment of the district court.
responses were reasonable, and it may not be held

Note that in the Hollins case the circuit court had to wrestle with two issues. First, the
court had to deal with the question of whether Hollins was the victim of a “hostile or
abusive” work environment. While the district court rejected this claim, the court of
appeals determined that jokes and rope tying were enough to at least arguably assert a
hostile work environment.

However, the second issue was whether Delta should be held liable for any Title VII
violations. What two theories did Hollins assert in making the claim that Delta was
liable? How did the court address each of these theories?

One of the most often claimed Title VII violations is sexual harassment that creates a
hostile or abusive work environment. While there is no bright line test available for
determining whether a hostile or abusive work environment exists, the Supreme Court
has provided the following guidance:

We can say that whether an environment is “hostile” or “abusive can be determined only by
looking at all the circumstances. These may include the frequency of the discriminatory
conduct; its severity; whether it is physically threatening or humiliating, or a mere offensive
utterance; and whether it unreasonably interferes with an employee’s work performance.26

Against this backdrop, one question that many employers have to address is how to avoid
liability for sexual harassment claims. In two relatively recent cases, the Supreme Court
has ruled that employers cannot be held strictly liable for sexual harassment. From these
cases we can glean that if an employer exercises reasonable care to prevent and remedi-
ate conduct that might be considered harassment, then that employer has a reasonable
defense in a sexual harassment case. The Supreme Court has also indicated that a plain-
tiff’s claims may fail if he or she has not taken advantage of any reasonable opportunities
presented by the employer to prevent or correct the inappropriate behavior.27

If an employer wants to be able to effectively defend itself in a sexual harassment case, it will
most likely have to be able to establish at least some of the following preventive measures:
• A clearly enunciated antiharassment policy
• A fair and easy-to-access complaint process
• Regular communications to sensitize employees to antiharassment policies

Case 9-2 deals with the very thorny issue of the so-called Age 60 rule that requires air-
line captains to retire upon reaching 60 years of age. Does the Age 60 rule discriminate
against older pilots?
 Employment Law and the Aviation Industry 273

CASE 9-2
PROFESSIONAL PILOTS FEDERATION, ET AL. V. FAA
118 F. 3d 758 (1997)

OPINION: GINSBURG, Circuit Judge: The Pro- the expert knowledge” of the agency, accepted this
fessional Pilots Federation and two individual conclusion and dismissed an early challenge to the
pilots petition for review of two decisions of the Rule. [Citation.]
Federal Aviation Administration: not to institute a
The FAA has reconsidered the Rule on several
rulemaking to relax the FAA Rule that requires
occasions. In the early 1960s, the agency began,
commercial airline pilots to retire at age 60, and
but never completed, a study to determine the fea-
to extend application of the Rule to commuter air-
sibility of testing individual pilots over the age of
line operations. The Pilots contend, first, that the
60 in order to determine whether they remained fit
Rule unlawfully requires airlines to violate the
to fly. [Citation.] In 1970 the Air Line Pilots Asso-
Age Discrimination in Employment Act, [Citation],
ciation called upon the FAA to replace the blanket
and, second, that the FAA acted arbitrarily and
prohibition of the Age 60 Rule with a regime of
capriciously, in violation of the Administrative
individualized performance tests and medical eval-
Procedure Act, when it decided to retain and expand
uations, but the agency decided to retain the Rule
the scope of the Rule. Finding merit in neither con-
because “an increase in the number of medical
tention, we deny the petitions for review.
examinations administered to a given pilot … would
not be an effective deterrent to incapacitation inas-
I. BACKGROUND much as the indices of such incapacitation are not
The FAA first promulgated the Age 60 Rule in now sufficiently developed.” [Citation.]
1959 pursuant to its mandate under the Federal In 1979 the Congress directed the National Insti-
Aviation Act of 1958 to ensure air safety. [Citation] tutes of Health to determine whether the Rule was
(authorizing Administrator to promulgate “regula- still medically warranted. [Citation.] In its final
tions in the interest of safety for the … periods of report, the NIH concluded that there was “no
service of airmen”); [Citation] (requiring Adminis- special medical significance to age 60 as a manda-
trator to regulate “in a way that best tends to tory age for retirement of airline pilots” but rec-
reduce or eliminate the possibility or recurrence of ommended that the age 60 limit be retained
accidents in air transportation”); [Citation] (requir- nonetheless because there was still no “medical
ing Administrator to consider “the duty of an air or performance appraisal system that can single
carrier to provide service with the highest possible out those pilots who would pose the greatest haz-
degree of safety” when issuing an airman, air car- ard because of early, or impending, deterioration
rier, or other certificate); [Citation]. The agency in health or performance.” [Citation.]
concluded that the Rule would promote air safety
after finding “that available medical studies show In 1982 the FAA considered relaxing the Rule
that sudden incapacitation due to heart attacks or in order to allow a small group of pilots to con-
strokes becomes more frequent as men approach tinue flying until age 62 in order to generate
age sixty and present medical knowledge is such data on their performance under actual operating
that it is impossible to predict with accuracy those conditions. [Citation.] The FAA ultimately deter-
individuals most likely to suffer attacks.” [Citation.] mined, however, that “no medical or performance
The Second Circuit, reasoning that it was not for a appraisal system can be identified that would sin-
court to substitute its own “untutored judgment for gle out pilots who would pose a hazard to safety.”
274 Fundamentals of Aviation Law

[Citation.] Unable “to distinguish those pilots previously conducted under Part 135, under Part
who, as a consequence of aging, present a threat 121. [Citation.] These operations would then
to air safety from those who do not,” the agency become subject to the more stringent safety stan-
decided not to experiment with changing the dards of Part 121, including the Age 60 Rule,
Rule. [Citation.] relaxation of which the agency was still consider-
ing in the wake of the Hilton Study.
The present litigation was stimulated, at least in
part, by a 1993 study of the Age 60 Rule that was In December 1995 the FAA denied the Pilots’
performed by Hilton Systems, Inc. for the FAA’s petitions to repeal the Age 60 Rule and decided
Civil Aeromedical Institute. The Hilton Study not to institute a rulemaking in response to the
correlated accident data for the period from 1976 Hilton Study. [Citation.] The agency determined
to 1988 with pilot age and flying time. This that the “concerns regarding aging pilots and
analysis revealed “no support for the hypothesis underlying the original rule have not been shown
that pilots of scheduled air carriers had increased to be invalid or misplaced,” and concluded that the
accident rates as they neared the age of 60.” Rule was still warranted as a safety measure.
Hilton Study at 6-2. On the contrary, the study [Citation.] The FAA therefore retained the Rule,
found a “slight downward trend” in accident rates which provides that: No certificate holder may use
as pilots neared the age of 60. The authors cau- the services of any person as a pilot on an air-
tioned, however, that this decrease might have plane engaged in operations under [Part 121] if
resulted from “the FAA’s rigorous medical and that person has reached his 60th birthday. No per-
operational performance standards screening out, son may serve as a pilot on an airplane engaged
over time, pilots more likely to be in accidents.” in operations under [Part 121] if that person has
reached his 60th birthday. [italics added]
Shortly after publication of the Hilton Study the
FAA announced that it was again considering [Citation.] In addition the FAA adopted its pro-
whether to institute a rulemaking concerning the posed rule bringing under Part 121 certain com-
Age 60 Rule and invited comments from the pub- muter operations previously conducted under Part
lic on various aspects of the Hilton Study. (April 135. [Citation.] As a result, these commuter oper-
20, 1993). The agency held a public hearing in ations became newly subject to the Age 60 Rule.
September 1993 at which 46 members of the pub- The Pilots petitioned this court for review of both
lic made presentations. The agency also received rulemaking decisions.
more than a thousand written comments.
II. ANALYSIS
In July 1993 the Professional Pilots Federation
filed with the FAA a rulemaking petition to repeal The Pilots challenge the FAA’s decision not to
the Rule. The Pilots maintained that “time and institute a rulemaking to repeal the Age 60 Rule
empirical evidence have shown that the blanket and its decision to apply the Rule to commuter
elimination of the country’s most experienced airlines as violations of both the ADEA and the
pilots is not justified in the interests of safety and, APA. First, the Pilots assert that by requiring
therefore, is arbitrary and capricious, and violates the airlines to discriminate on the basis of age the
this country’s policy of prohibiting employment Rule is in “direct conflict” with the ADEA. Sec-
discrimination on the basis of age.” ond, they claim that the agency violated the APA
by: (1) not affording adequate consideration to
In early 1995 after a series of accidents involving the reasonable alternatives proposed by various
commuter airlines, the FAA proposed in a separate commenters; (2) reaching a decision that is against
rulemaking to bring certain commuter operations, the weight of the evidence; and (3) failing to
 Employment Law and the Aviation Industry 275

provide any reasoned basis for treating older comparably specific or otherwise capable of
pilots differently than other groups of pilots who over-riding the authorization of [Citation]—”not
create as great or greater a safety risk. withstanding any other provision of law” comes
to mind—the ADEA places no limitation upon the
A. The ADEA rulemaking authority of the FAA.
The Pilots argue that the Age 60 Rule violates the The FAA also contrasts the ADEA with the
ADEA because it requires the airlines to discrim- Rehabilitation Act, in which the Congress expressly
inate against older pilots and because the FAA subjected the programmatic activities of the
need not have relied upon an age-based Rule in Government to the stricture against discrimina-
order to achieve its objective of air safety. The tion. [Citation.] Absent a similarly plain and
agency, we are told, could instead have imple- unequivocal expression of intent, the FAA urges
mented a scheme of medical evaluations and indi- that we ought not lightly infer that the Congress
vidualized testing in order to determine whether intended to compromise its single-minded pursuit
each pilot remains fit to fly. In any event, in the of safety in the air.
ADEA the Congress spoke directly to the role
We agree with the FAA that the ADEA places no
that age may play in employment decisions and
substantive limitation upon the agency’s authority
the FAA cannot—as a matter of logic if not of
to act as a regulator of the airline industry. The
statutory interpretation—countermand that clear
statute prohibits both an employer in the private
statutory command through an exercise of its
sector and an agency of the federal government
rulemaking authority.
from discriminating upon the basis of age in mak-
The FAA responds that the ADEA speaks only to ing employment decisions. [Citation.] Nothing in
employers—including federal agencies acting in the Act can plausibly be read to restrict the
their role as employers—and therefore places no FAA from making age a criterion for employment
substantive limitation upon the agency’s power to when its acts in its capacity as the guarantor of
regulate airline safety pursuant to the mandate of public safety in the air. The general prohibition of
the Federal Aviation Act. In the alternative, the the ADEA, addressed as it is to employers, should
FAA contends that if the ADEA does apply to the not be read by mere implication to override the
air safety rules it promulgates, then the Age 60 specific grants of authority to the FAA in [Cita-
Rule comes within the exception in [Citation] of tion]. If the Congress intends to limit the means
that statute for a bona fide occupational qualifica- available to the FAA in its pursuit of air safety,
tion. [Citation.] we trust it will say so rather than leave the matter
to the courts to infer. Therefore, we conclude that
The FAA bases its first point upon the central
the ADEA does not limit the authority of the
provision of the ADEA itself, which states that “it
FAA to prescribe a mandatory retirement age for
shall be unlawful for an employer” to discrimi-
pilots; as a result, we need not reach the question
nate in employment upon the basis of age. [Cita-
whether the Age 60 Rule constitutes a bona fide
tion.] The FAA argues that it promulgated the
occupational qualification within the meaning of
Age 60 Rule in its capacity not as an employer
[Citation] of that Act.
but as a regulator; in that capacity the agency is
specifically authorized, inter alia, to prescribe ***
“regulations in the interest of safety for the max- [In this portion of the opinion the Court of
imum hours or period of service of airmen.” Appeals addresses the Pilots’ arguments that the
[Citation.] Absent a provision in the ADEA APA is violated by FAA’s Age-60 Rule.]
276 Fundamentals of Aviation Law

III. CONCLUSION FAA was not arbitrary and capricious, in viola-

We hold that the ADEA does not limit the author- tion of the APA, in deciding not to conduct a rule-
ity of the FAA to regulate air carriers in the inter- making for the purpose of amending the Age 60
est of safety. Because we also conclude that the Rule, the petitions for review are Denied.

This case provides a good overview of the background and history to the Age 60 rule.
Regardless of whether you think the Age 60 rule reflects good policy, what do you think
of the court’s decision? Can the FAA be held responsible for ADEA violations? Is age
an appropriate consideration for an airline pilot job? These questions are becoming
even more pressing in modern times as airline pilots have suffered pay cuts and less job-
security than in previous times. The problem is compounded by the fact that most
Americans can—and may need to—work well past 60 years of age. Could the Age 60
rule become a deterrent to encouraging young people entering the profession?

DISCUSSION CASES

1. Butler County Airport contracted with Kauffman Excavating Company to prepare

site work and necessary drainage for a 1000-foot runway addition to its airport.
According to the terms of the contract, Butler retained the right to inspect the property
and Kauffman’s work to ensure compliance with contract terms. However, Butler did
not have any authority to guide Kauffman with respect to the methods and means used
to do its work. Shannon Pugh, an employee of Kauffman, was killed on the job when
the sides of an excavation she was working on caved in over her. Investigations later
revealed that the excavation site was not properly shored up and violated minimum
safety standards. Pugh’s parents and estate seek to recover from Butler County Airport.
Will Pugh’s family and estate prevail? Why or why not?

2. Chipman was a flight instructor and charter pilot for Barrickman’s Aero Services,
Inc. Barrickman’s chief pilot requested that Chipman fly an airplane to its maintenance
base at another airport and fly back with an aircraft that had just completed its annual.
Chipman invited his girlfriend, Estell, along for the ride without Barrickman’s knowl-
edge. On the return flight, the aircraft was involved in an accident due to Chipman’s
negligence and Estell was injured. Estell sued Chipman and Barrickman’s. At a trial
court, Estell’s case against Barrickman’s was dismissed after the trial court noted
Barrickman’s had a “no rider” rule. Estell appeals the trial court decision. You are the
appellate judge ruling on this case. How will you rule? Explain.

3. Rodriquez was the sole flight instructor for SafeFlight, Inc., an FBO at a small
municipal airport. She was usually the only person at the FBO, and the company’s
owner visited the FBO on an occasional basis only. Although she had no hiring authority,
 Employment Law and the Aviation Industry 277

Rodriguez hired Amy on a salary basis to act as a receptionist for the FBO. After Amy
worked a bit over a month and did not get paid, she sued SafeFlight for her unpaid com-
pensation. Will she be successful? Explain.

4. Chauvinista Airlines is a highly profitable small airline running passengers and

freight service in the Caribbean. The senior management of the company recently passed
an employment rule requiring that any new applicants for first officer be at least 5 feet,
7 inches tall. They have come to you for legal advice on whether the requirement will pass
muster when measured against the requirements of Title VII. Records from the meeting
when the measure was discussed indicate that management felt the rule should be defen-
sible because it is neutral and applies to anyone who applies for a first officer position
with the airline. What advice would you give the airline’s management? Explain.

5. Sandra is a highly accomplished business executive with a CPA and MBA degrees
from Harvard, and on top of all that she’s a commercial pilot with instrument and flight
instructor ratings. She applies for a job with Forgang Air Safety Group, a world-
renowned flight training company. She interviews with Bill, a senior vice president. Bill
indicates that he’s very impressed with all Sandra’s credentials and lets her know that
she is the last candidate to be interviewed and clearly the best of the bunch. However,
he concludes the interview by confiding in Sandra that he will nonetheless be unable to
offer her a position with the company. Sandra is surprised and disappointed, so she asks
Bill why she is not being offered the position. Bill then tells Sandra that the problem is
a bit awkward for him to bring up, but he feels that she is simply too attractive. He
explains that her physical attractiveness would likely cause distractions and loss of pro-
ductivity in the mostly male environment of the company. Sandra is angered by all this
and files a complaint with the EEOC, claiming that Forgang violated Title VII. Will
Sandra succeed in her claim? Why or why not?

6. Victor is a tug operator employed by Albatross Airlines. While known to be very

careful and professional while towing airliners, Victor has been known to hot-rod
around carelessly on tugs that are not being used. He’s been cited by management on a
prior occasion for horsing around on the tugs. While on the job, he decides to hot-rod
around the ramp during a slow period. During his antics, he crashes the tug into a
parked supply truck and sustains serious injuries. Will he be able to recover for his
injuries? If so, how?

7. Wilson was employed by the City of Emmittown as a police officer and pilot for
one of the city’s helicopter rescue and patrol units. He was a member of one of the city’s
special emergency reaction teams (SERTs) that is trained to handle highly dangerous
rescue missions. SERT membership was strictly voluntary, and no additional pay or
benefits were provided by the city. To be a member of SERT, each officer was required
to pass rigorous physical tests involving running, pull-ups, push-ups, sit-ups, etc., four
times a year. Officers not a part of SERT were not required to take these physical tests.
One evening, after completing his patrol flights, Wilson closed out his paperwork,
changed clothes, and drove to a nearby college running track to do some running and
physical training. While running, he injured his ankle. Wilson filed for workers’ compen-
sation benefits. The City of Emmittown contested the claim. Who will win? Explain.
278 Fundamentals of Aviation Law

8. Ned Naïve is a newly minted flight instructor with CFI-A and CFII ratings. He starts
a new position as a flight instructor with Albatross Air (“Albatross”), an FBO and flight
school. The owner of Albatross, Sammy Slick, provides Ned with a weekly schedule
that clearly indicates the start and end hours of each workday for Ned. Sammy pays
Ned only for the hours that he is flying with a student or providing ground instruction
for a student. Ned gets his first paycheck after two weeks. He notices that he has no
taxes withheld from his paycheck. He asks Sammy why no withholding had ever taken
place. Sammy replies that Ned is an independent contractor; therefore, Ned is respon-
sible for paying quarterly self-employment and income taxes. Ned is a bit confused and
comes to you for some guidance. He wants to know if you think he’s an employee or
an independent contractor. What do you think? Explain.

ENDNOTES

1. Restatement (Second) Agency § 1.

2. Id. at § 2.
3. Id. at § 2(3).
4. Id. at § 15.
5. Id. at § 105.
6. Id. at § 106.
7. Id. at § 119.
8. Id. at §§ 383 and 385.
9. Id. at § 379.
10. Id. at § 381.
11. Id. at § 469.
12. Id. at § 443.
13. Id. at § 438.
14. Id. at § 228.
15. A. R. Boroughs et al. v. Leo Joiner, 337 So. 2d 340 (1976).
16. 45 U.S.C. §§ 151–162 and 181–188.
17. 29 U.S.C §§ 101–110 and 113–115.
18. 29 U.S.C. §§ 151–169.
19. Railway Labor Act § 160.
20. 29 U.S.C. § 206.
21. 29 U.S.C. §§ 621–634.
22. 42 U.S.C. § 1201 et seq.
23. 18 U.S.C. § 2701 et seq.
24. 14 C.F.R. § 61.14.
25. 29 U.S.C. §§ 2601, 2611–2619, and 2651–2654.
26. Harris v. Forklift Systems, 510 U.S. 17 (1993).
27. See Farragher v. City of Boca Raton, 524 U.S. 775 (1998) and Burlington Industries, Inc. v.
Ellerth, 524 U.S. 742 (1998).
10 International Aviation Law

FUNDAMENTALS OF INTERNATIONAL LAW 280

Origins of international law 280
PUBLIC INTERNATIONAL AVIATION LAW 281
The beginnings of public international aviation law 281
The Chicago Convention 282
Open skies agreements 283
PRIVATE INTERNATIONAL AVIATION LAW 283
The Warsaw Convention 284
The Cape Town Convention 286
INTERNATIONAL CIVIL AVIATION ORGANIZATION 287
CASES AND COMMENTARY 287
DISCUSSION CASES 295
ENDNOTES 297

279

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280 Fundamentals of Aviation Law

Modern aircraft routinely traverse international boundaries for private and commercial
purposes. While the safety and ease of air transportation make international travel sim-
pler, it sometimes complicates things when it comes to legal questions. If an aircraft that
belongs to a U.S. carrier is involved in an accident in France, do U.S. or French laws
apply? How can an aircraft with South African registry gain access to airports in
Mexico?

As air travel grew in speed and sophistication, it became more and more obvious that
nations would need to cooperate to establish a body of law applicable to international
aviation activities. Over time, two distinct bodies of international aviation law have
developed—private and public international aviation law. In this chapter we will pro-
vide a brief overview of these two subject areas along with a summary and update of
activities related to the International Civil Aviation Organization (ICAO). However,
before getting to the specific aviation applications of international law, we will discuss
the basics of international law.

FUNDAMENTALS OF INTERNATIONAL LAW

Some legal scholars have questioned whether there is really such a thing as international
law. Those questioning the existence of a true body of international law typically cite
the fact that there is (1) no single legislative source, (2) no single court or judicial body
assigned to interpreting such law, and (3) no single executive organization or branch
with authority to enforce international law.

Despite these questions, there is widespread acceptance that a body of international law
exists and continues to become increasingly relevant in today’s more connected world.
A review of the varied sources of international law and of the impact of international
law on the U.S. legal system follows.

Origins There are five widely recognized sources of international law:1

of international • Treaties
law • Conventions
• Custom
• Court decisions and treatises
• General law

Treaties are agreements between sovereign nations that have been formally adopted
under the laws of each nation involved. Sometimes treaties are referred to as bilateral
when they involve two nations and multilateral when they involve multiple nations.

Conventions are a form of treaties. The distinction is that a convention is sponsored by

an international organization. For that reason, conventions typically have many nations
involved as signatories.
 International Aviation Law 281

Custom is a course of dealing that develops over time between nations. For custom to
rise to the level of international law, it must be established that (1) the custom has been
consistently applied in the nations’ dealings for a substantial length of time and (2) the
nations involved have come to treat the custom as law between them.

Court decisions and treatises by noted legal scholars also create a source of interna-
tional law. Although international courts are not bound by their previous decisions
(there is no doctrine of stare decisis), they often turn to past decisions and the writings
of experts in the law to help shape opinions in particular cases.

General law is a body of law that emanates from the general principles of common and
statutory law developed by civilized nations. It is hard to get a precise fix on where
these general principles of law might be derived in any given case. However, in the
absence of treaties, conventions, or customs directly addressing an issue, international
courts may turn to this nebulous source of international law for guidance.

PUBLIC INTERNATIONAL AVIATION LAW

Public international law, in an aviation context, refers to agreements and treaties among
various nations related to issues such as
• Landing rights
• Overflight authorizations
• Security and registration
• Communications

The earliest origins of public international aviation law are rooted in the period follow-
ing the end of World War I. Before and during the war, aircraft were largely viewed as
military weapons. In the aftermath of the war, lawyers, judges, and politicians from all
over the world recognized the profound impact that air travel would have in challenging
traditional notions of borders and “ownership” of airspace. Some of the more significant
aviation treaties, conventions (international agreements), and compacts related to public
aviation law are outlined below.

After World War I, the Paris Convention of 1919 was drafted. The Paris Convention The beginnings
marked the first formal efforts at establishing a rule of law related to sovereignty over of public
airspace, registration of aircraft, standards for pilots, and movement of military aircraft. international
The Paris Convention also created the first formal organization for the oversight of inter-
aviation law
national aviation activities, the Commission Internationale de Navigation Aerienne.

Although the Paris Convention was a start in the right direction, it became apparent that
more extensive cooperation and legal infrastructure might be necessary to support a
growing aviation industry. The Havana Convention of 1928 built on much of what was
started in the Paris Convention and established several new legal principles upon which
international aviation would be governed.
282 Fundamentals of Aviation Law

The Chicago Perhaps one of the most significant agreements in public international aviation law is
Convention the Chicago Convention of 1944. One of the most noteworthy achievements of the
Chicago Convention was the establishment of the International Civil Aviation Organization,
which continues to operate today. When the Chicago Convention came into effect in
1947, it resulted in the termination of the Paris Convention of 1919 and the Havana
Convention of 1928.

It is probably fair to state that the Chicago Convention created the foundation for our
current system of international transportation by air. The Chicago Convention states
that each “state has complete and exclusive sovereignty over the airspace above its ter-
ritory.”2 Care was taken during the drafting of the Chicago Convention to specifically
exclude all military, police, customs, and other state-operated aircraft from the opera-
tion of the convention.3

The key provisions for civil aircraft permit aircraft that are not engaged in scheduled air
service to4
• Make flights into or in transit nonstop across its territory
• Make stops for nontraffic purposes (fuel and maintenance) without the necessity of
obtaining prior permission.

However, the convention clearly states that aircraft operating in scheduled international
air service are prohibited from operating “over or into the territory of a contracting
State, except with the special permission or other authorization of that State.”5

Other noteworthy provisions of the Chicago Convention include

• The rights of each state to establish restricted and prohibited areas as long as the
restrictions and prohibitions apply equally to domestic and international aircraft6
• Establishment of responsibility for each contracting state to maintain radio and air
navigation services and facilities7
• The adoption of a standard system of communication procedures8

Some commentators have noted that while the Chicago Convention did establish the
two fundamental freedoms of overflight and stops for fuel and maintenance, it failed to
establish three additional freedoms sought in an amendment or annex to the Chicago
Convention.9 The three freedoms sought in the unsuccessful annex were
1. The right of a country’s airlines to transport passengers and/or cargo from its home
nation to a second nation without special authorization
2. The right of a country’s airlines to freely transport cargo and passengers from a second
nation back to its home nation
3. The right of a country’s airlines to freely transport passengers and cargo between a
second and third nation

In the end, the Chicago Convention left these issues up to the individual nations involved
to negotiate directly. If all these freedoms were codified in the Chicago Convention, the
 International Aviation Law 283

result would have been a sort of “open skies” agreement among the more developed
nations of the world.

Although the multilateral Chicago Convention failed to create an open skies environ-
ment for international air transportation, it did spawn several bilateral agreements
(agreements between individual nations) that have effectively created a more open skies
type of approach over time. The first of these bilateral agreements was known as the
Bermuda I agreement. Bermuda I was entered into in 1946, and the sole parties were
the United States and Great Britain. The Bermuda I agreement permitted the airlines of
United States and Great Britain to operate to and from each country—but only to des-
ignated “gateway” airports. Each airline would be allowed as many flights as it desired.
Agreements similar to Bermuda I were entered into between the United States and
many other nations. Similar agreements were also entered into by various nations
throughout the world. Later, the Bermuda I agreement was superseded in 1967 by
Bermuda II.

In 1992, the Department of Transportation initiated an “open skies” initiative that would Open skies
allow for a more liberal framework for air route selection, capacity determinations, fare agreements
setting, and frequency of flights. The first open skies agreement was entered into in
October 1992 between the United States and the Netherlands. Subsequently, the United
States entered into open skies agreements with 13 European nations. Open skies agree-
ments were subsequently entered into with Canada, South America, Peru, Malaysia,
Taiwan, New Zealand, and Singapore, among others.

Some of the newer bilateral open skies agreements have even opened up what are
referred to as beyond rights. These beyond rights permit air carriers to fly cargo to a
partner country and then fly directly from the partner country to a third nation with no
requirement that the flights first return to the United States.

Other open skies initiatives target the logistics of hundreds of bilateral agreements
between individual countries. The trend appears to be moving in the direction of
more multilateral open skies agreements such as the agreement entered into in 2002
between the United States, Brunei, Chile, New Zealand, and Singapore. In one
recent effort, the United States and the European Union (EU) have entered into an
agreement that will allow any U.S. or EU airline to operate flights to any U.S. or EU
destination.10

PRIVATE INTERNATIONAL AVIATION LAW

Private international aviation law is the body of law relating to agreements and treaties
between different countries in which the liability of a party in one country to an injured
party in another country can be established. In many ways, the development of private
international aviation law is an effort to sort out the uncertainties of jurisdiction and lia-
bility when persons from various sovereign nations are involved.
284 Fundamentals of Aviation Law

The formation of a body of private international aviation law began in 1925 at the
First Conference on Private Air Law in Paris. The conference established an International
Technical Committee of Aerial Legal Experts. This committee was charged with
providing an ongoing study of the issues involved with private liability stemming
from international air transportation. The committee studied the legal landscape of
international air transportation, and as a result the Warsaw Convention was convened
in Warsaw, Poland, in 1929. The Warsaw Convention is the centerpiece of private
international aviation law. It is discussed below along with some relatively new devel-
opments from the Montreal Convention of 1999 and the Cape Town Convention
of 2001.

The Warsaw The Warsaw Convention as we know it today includes the work of the 1929 Warsaw
Convention Convention along with subsequent protocols that amended the original convention.
Currently, more than 135 nations are parties to the Warsaw Convention. The delegates
to the Warsaw Convention had two major objectives. The first was the creation of a uni-
form system of regulation for issues such as ticketing, baggage transport, movement of
cargo, and claims by passengers or customers concerning lost or damaged luggage or
cargo. The second primary goal of the convention was to cap the amount of damages
an air carrier could incur in an accident with the offsetting limitation to the defenses
that air carriers could invoke to avoid liability. In the end, the overarching concern
of the Warsaw Convention drafters was protection of the fledgling international air
transportation industry.

In the discussion below, we will provide an overview of some of the key provisions,
agreements, and protocols of the Warsaw Convention.

Air carrier liability

Articles 17, 18, and 19 of the Warsaw Convention are of key importance. Article 17
states that an international air carrier will be liable for a passenger’s death or injury
resulting from an “accident” that takes place when a passenger is (1) on an airplane,
(2) boarding an airplane, or (3) disembarking an airplane. Article 18 imposes liability
on an air carrier for baggage that is checked and goods that are damaged while in the
care and custody of the air carrier. Exposure to liability for baggage was expanded in
the Montreal Convention of 1999. The Montreal Convention modified the Warsaw
Convention by defining baggage as both checked and unchecked (carry-on) baggage.
Article 19 states that an air carrier is liable for any damages resulting from delays of
passengers, cargo, or baggage.

While Articles 18 and 19 are fairly straightforward in application, the use of the word
accident to trigger liability under Article 17 has sometimes spawned conflicting views.
In a 1985 case, the U.S. Supreme Court defined the term accident as “an unexpected or
unusual event or happening that is external to the passenger.”11

Defenses available to airlines

Airlines have two primary defenses available to liability claims under the Warsaw
Convention. The first defense is based on Article 20. Article 20 permits an airline to
 International Aviation Law 285

completely avoid liability if it took “all necessary measures” to avoid an accident, or

if it was impossible for the carrier to avoid the accident. Warsaw Convention Article 21
permits an airline to mitigate its damages if the injuries to a passenger were caused in
part or in their entirety by the contributory negligence of the injured passenger. As
discussed below, the defenses available to air carriers under the original provisions
of the Warsaw Convention were significantly modified by the Montreal Convention
of 1999.

Dollar limits to liability

One of the linchpins of the Warsaw Convention was a limit on an air carrier’s liability
for injury or death of a passenger. The limit is found in Article 22. Article 22 limits an
airline’s liability to 125,000 francs (or approximately $8300). Naturally, this limitation
has engendered controversy—especially in view of the fact that a passenger injured in a
domestic accident could recover damages in the millions of dollars.

The $8300 limitation on liability was doubled by the Hague Protocol of 1955.
Nonetheless, the United States was still displeased with the relatively low value placed
on a human life while traveling overseas on an air carrier. After threatening to denounce
the Warsaw Convention, air carriers agreed to a $75,000 limitation of liability in the
Montreal Convention of 1966. However, this increased limit applied to only flights
going to and from the United States.

The latest revisions to liability limitations came with the Montreal Convention of 1999.
The Montreal Convention created a two-tiered liability structure and modified Articles 21
and 22 of the Warsaw Convention.

First, an air carrier is held strictly liable up to approximately $140,00012 for injuries
and/or death of a passenger due to an accident. For claims up to $140,000 the only
defense for the carrier is contributory negligence of the passenger.

In claims that exceed $140,000 the air carrier can now be held liable for unlimited
amounts. However, the carrier can defend itself by using the defense that the harm
caused to a passenger was not due to the carrier’s negligence or wrongful act. In claims
larger than $140,000 the air carrier can also claim that the accident occurred due to cir-
cumstances out of the carrier’s control.

Forum for trial

Another thorny question that arises in the context of international air transportation is
the place for a trial. Article 28 of the Warsaw Convention provides the four possible
places where a plaintiff may bring an action against an air carrier:
• The place where the air carrier is domiciled
• The primary place of business for the air carrier
• The country where the contract of travel was made (as long as the air carrier does
business in that country)
• The destination country
286 Fundamentals of Aviation Law

Interestingly, the Warsaw Convention did not permit a plaintiff to bring suit in his or her
country. This rule tended to act as a bar to plaintiff’s filing suit due to the inconvenience
and cost of having to file a lawsuit in a foreign country.

Ultimately, dissatisfaction with the inability of a passenger to bring a lawsuit in his or her
home country led to modification of these provisions in the 1999 Montreal Convention.
Under Article 33 of the 1999 Montreal Convention, a plaintiff may file a lawsuit in the
county of the “principal and permanent residence” of the passenger. However, to make use
of this newly available forum, the carrier must lease or own property in the passenger’s
home country and fly to and from that country.

Statute of limitations
Article 29 of the Warsaw Convention provides for a 2-year statute of limitations for
bringing an action against an air carrier. Some courts have calculated the 2-year limita-
tion strictly, and others have allowed for suspended periods to the time limits.

The Cape Town Because aircraft are easily moved from one country to another, there are inherent
Convention difficulties in financing arrangements and securing the interests of lenders. A lender in
France may wish to use a newly purchased aircraft as security for a loan on that air-
craft. However, the value of that aircraft as collateral for the loan is diminished by the
fact that the aircraft can be easily moved to another country where the lender’s inter-
ests may not be protected. Because of this type of issue, several nations participated in
the UN International Institute for the Unification of Private Law (the “Cape Town
Convention”).

At the Cape Town Convention, the participants sought to draft an agreement that would
create a more stable and enforceable legal rubric for aircraft title, security interests in
aircraft, and aircraft leasing. Fifty-three nations adopted the Cape Town Convention in
2001. The Cape Town Convention addresses airframes, aircraft engines, and helicopters
that exceed certain weight thresholds.13

The Cape Town Convention was signed by the United States on May 9, 2003. Some of
the more significant features of the Cape Town Convention include the following:
1. The right of creditors to repossess or sell aircraft in case of default on a loan
2. A high-tech international aircraft registry that gives first-in-time priority to creditors
who file security interests in an aircraft (in the United States the FAA will act as the
entry point for the International Registry)
3. Creation of a system of protections for creditors and debtors that closely mirrors the
current U.S. system
4. Permitting of creditors to deregister an aircraft when a debtor defaults and to procure
the export of the aircraft
5. Giving to creditors the ability to take possession or control of an aircraft upon a default

The hope is that the Cape Town Convention will result in lower financing charges and
provide easier funding of aircraft transactions. The convention became effective on
April 1, 2004, and was signed into U.S. law on August 9, 2004.
 International Aviation Law 287

INTERNATIONAL CIVIL AVIATION ORGANIZATION

As indicated earlier, the ICAO was created during the Chicago Convention in 1944. The
aims and purposes of the ICAO are outlined in a U.S. government bulletin as follows:14

Under the terms of the convention there will now come into being a permanent
International Civil Aviation Organization, which will be brought into relationship with the
United Nations into accordance with the Charter of the [United Nations] and will form a
part of the general pattern of international cooperation. This organization has as its aim the
establishment of principles and techniques of international air navigation and the fostering
of the development of international air transport to the end that it will—
a. Insure the safe and orderly growth of international civil aviation throughout the world;
b. Encourage the arts of aircraft design and operation for peaceful purposes;
c. Encourage the development of airways, airports, and air-navigation facilities for inter-
national civil aviation;
d. Meet the needs of the peoples of the world for safe, regular, efficient, and economical air
transport;
e. Prevent economic waste caused by unreasonable competition;
f. Insure the that rights of contracting states are fully respected and that every contracting
state has a fair opportunity to operate international airlines;
g. Avoid discrimination between contracting states;
h. Promote safety of flight in international air navigation;
i. Promote generally the development of all aspects of international civil aeronautics.

ICAO is a special agency of the United Nations. It is governed by an Assembly and a

Council. The Assembly meets at least once every 3 years at meetings convened by the
Council. Each member state of the ICAO is entitled to one vote on the Assembly where
majority rule prevails. The Council has 36 member states that are elected by the Assembly
for 3-year terms. Most of the day-to-day work of the ICAO is accomplished by the
Council.

A major duty of the Council lies in adopting “International Standards and Practices” for
the benefit of all member states. These standards can include safety measures, airport
infrastructure issues, airworthiness issues, aircraft operation, search and rescue, envi-
ronmental concerns, new technology, and security.

Currently the ICAO is working on a number of safety and security issues. One of the more
recent ICAO issues is the creation of standard passports by using biometric identification
features. The ICAO is also reviewing ways to communicate accident investigation data-
bases in a more efficient and timely manner to all member states to enhance air safety.

CASES AND COMMENTARY

As indicated earlier, one of the most litigated issues created by the Warsaw Conference
is the question of whether a passenger has been involved in an accident. In Case 10-1,
the U.S. Supreme Court tackles the issue of just what constitutes an accident.
288 Fundamentals of Aviation Law

CASE 10-1
AIR FRANCE V. SAKS
470 U.S. 392 (1985)

OPINION BY: O’CONNOR testimony, indicated that the aircraft’s pressuriza-

tion system had operated in the usual manner.
Article 17 of the Warsaw Convention makes air
Accordingly, the airline contended that the suit
carriers liable for injuries sustained by a passen-
should be dismissed because the only alleged
ger “if the accident which caused the damage so
cause of respondent’s injury—normal operation
sustained took place on board the aircraft or in the
of a pressurization system—could not qualify as
course of any of the operations of embarking or
an “accident.” In her opposition to the summary
disembarking.” We granted certiorari, [Citation],
judgment motion, Saks acknowledged that “[the]
to resolve a conflict among the Courts of Appeals
sole question of law presented … by the parties is
as to the proper definition of the word “accident”
whether a loss of hearing proximately caused by
as used in this international air carriage treaty.
normal operation of the aircraft’s pressurization
system is an ‘accident’ within the meaning of
I Article 17 of the Warsaw Convention.…” [Citation.]
On November 16, 1980, respondent Valerie Saks She argued that “accident” should be defined as a
boarded an Air France jetliner in Paris for a 12-hour “hazard of air travel,” and that her injury had
flight to Los Angeles. The flight went smoothly in indeed been caused by such a hazard.
all respects until, as the aircraft descended to Relying on precedent which defines the term
Los Angeles, Saks felt severe pressure and pain in “accident” in Article 17 as an “unusual or unex-
her left ear. The pain continued after the plane pected” happening, [Citation], the District Court
landed, but Saks disembarked without informing granted summary judgment to Air France. [Cita-
any Air France crew member or employee of her tion to case holding that normal cabin pressure
ailment. Five days later, Saks consulted a doctor changes are not “accidents” within the meaning
who concluded that she had become permanently of Article 17]. A divided panel of the Court of
deaf in her left ear. Appeals for the Ninth Circuit reversed. [Citation.]
Saks filed suit against Air France in California The appellate court reviewed the history of the
state court, alleging that her hearing loss was Warsaw Convention and its modification by the
caused by negligent maintenance and operation 1966 Montreal Agreement, a private agreement
of the jetliner’s pressurization system. [Citation among airlines that has been approved by the
to record.] The case was removed to the United United States Government. [Citation.] The court
States District Court for the Central District of concluded that the language, history, and policy
California. After extensive discovery, Air France of the Warsaw Convention and the Montreal
moved for summary judgment on the ground that Agreement impose absolute liability on airlines
respondent could not prove that her injury was for injuries proximately caused by the risks inher-
caused by an “accident” within the meaning of the ent in air travel. The court found a definition of
Warsaw Convention. The term “accident,” accord- “accident” consistent with this history and policy
ing to Air France, means an “abnormal, unusual or in Annex 13 to the Convention on International
unexpected occurrence aboard the aircraft.” [Cita- Civil Aviation, [Citation] conformed to in 49 CFR
tion.] All the available evidence, including the § 830.2 (1984): “an occurrence associated with
postflight reports, pilot’s affidavit, and passenger the operation of an aircraft which takes place
 International Aviation Law 289

between the time any person boards the aircraft passenger’s injuries. [Citation.] For example, lower
with the intention of flight and all such persons courts in this country have interpreted Article 17
have disembarked.…” [Citation]. Normal cabin broadly enough to encompass torts committed by
pressure changes qualify as an “accident” under terrorists or fellow passengers. [Citations.] In cases
this definition. A dissent agreed with the District where there is contradictory evidence, it is for the
Court that “accident” should be defined as an trier of fact to decide whether an “accident” as here
unusual or unexpected occurrence. [Citation.] We defined caused the passenger’s injury. [Citations.]
disagree with the definition of “accident” adopted But when the injury indisputably results from the
by the Court of Appeals, and we reverse. passenger’s own internal reaction to the usual,
normal, and expected operation of the aircraft, it
***
has not been caused by an accident, and Article 17
of the Warsaw Convention cannot apply. The judg-
III ment of the Court of Appeals in this case must
We conclude that liability under Article 17 of the accordingly be reversed.
Warsaw Convention arises only if a passenger’s
The judgment of the Court of Appeals is reversed,
injury is caused by an unexpected or unusual event
and the case is remanded for further proceedings
or happening that is external to the passenger.
consistent with this opinion.
This definition should be flexibly applied after
assessment of all the circumstances surrounding a It is so ordered.

After reading the case, do you agree with the Court’s assessment of how an accident
should be defined?

After the Saks case, the Supreme Court was faced with another intriguing Warsaw
Convention issue. If the plaintiff is not permitted to recover damages under the terms of
the Warsaw Convention, does the plaintiff still have the ability to reach outside the
Warsaw Convention and sue in an action based on local law? See the Court’s response
to this question in Case 10-2.

CASE 10-2
EL AL ISRAEL AIRLINES, LTD. V. TSUI YUAN TSENG
525 U.S. 155 (1999)

OPINION BY: GINSBURG damages from El Al for this occurrence. The

episode-in-suit, both parties now submit, does not
Plaintiff-respondent Tsui Yuan Tseng was sub-
qualify as an “accident” within the meaning of the
jected to an intrusive security search at John
treaty popularly known as the Warsaw Convention,
F. Kennedy International Airport in New York
which governs air carrier liability for “all interna-
before she boarded an El Al Israel Airlines May
tional transportation.” Tseng alleges psychic or
22, 1993 flight to Tel Aviv. Tseng seeks tort
290 Fundamentals of Aviation Law

psychosomatic injuries, but no “bodily injury,” as maintain “a state cause of action for negligence.”
that term is used in the Convention. Her case [Citation.] In Eastern Airlines, Inc. v. Floyd,
presents a question of the Convention’s exclusiv- [Citation], we held that mental or psychic injuries
ity: When the Convention allows no recovery for unaccompanied by physical injuries are not com-
the episode-in-suit, does it correspondingly pre- pensable under Article 17 of the Convention, but
clude the passenger from maintaining an action declined to reach the question whether the Con-
for damages under another source of law, in this vention “provides the exclusive cause of action
case, New York tort law? for injuries sustained during international air trans-
portation.” [Citation.] We resolve in this case the
The exclusivity question before us has been settled
question on which we earlier reserved judgment.
prospectively in a Warsaw Convention protocol
(Montreal Protocol No. 4) recently ratified by the At the outset, we highlight key provisions of the
Senate. In accord with the protocol, Tseng con- treaty we are interpreting. Chapter I of the Warsaw
cedes, a passenger whose injury is not compensable Convention, entitled “SCOPE — DEFINITIONS,”
under the Convention (because it entails no “bodily declares in Article 1(1) that the “Convention shall
injury” or was not the result of an “accident”) will apply to all international transportation of persons,
have no recourse to an alternate remedy. We con- baggage, or goods performed by aircraft for hire.”
clude that the protocol, to which the United States [Citation.] Chapter III, entitled “LIABILITY OF
has now subscribed, clarifies, but does not change, THE CARRIER,” defines in Articles 17, 18, and
the Convention’s exclusivity domain. We therefore 19 the three kinds of liability for which the Con-
hold that recovery for a personal injury suffered “on vention provides. Article 17 establishes the condi-
board [an] aircraft or in the course of any of the tions of liability for personal injury to passengers:
operations of embarking or disembarking,” Art. 17, “The carrier shall be liable for damage sustained in
49 Stat. 3018, if not allowed under the Convention, the event of the death or wounding of a passenger
is not available at all. or any other bodily injury suffered by a passenger,
if the accident which caused the damage so sus-
The Court of Appeals for the Second Circuit ruled
tained took place on board the aircraft or in the
otherwise. In that court’s view, a plaintiff who
course of any of the operations of embarking or
did not qualify for relief under the Convention
disembarking.” [Citation.]
could seek relief under local law for an injury sus-
tained in the course of international air travel. [Cita- Article 18 establishes the conditions of liability for
tion.] We granted certiorari, [Citation.]), and now damage to baggage or goods. [Citation.] Article 19
reverse the Second Circuit’s judgment. Recourse to establishes the conditions of liability for damage
local law, we are persuaded, would undermine the caused by delay. [Citation.] Article 24, referring
uniform regulation of international air carrier liability back to Articles 17, 18, and 19, instructs:
that the Warsaw Convention was designed to foster.
(1) In the cases covered by articles 18 and 19 any
action for damages, however founded, can only be
I brought subject to the conditions and limits set out
We have twice reserved decision on the Conven- in this convention.
tion’s exclusivity. In Air France v. Saks, [Citation.], (2) In the cases covered by article 17 the provisions
we concluded that a passenger’s injury was not of the preceding paragraph shall also apply, without
caused by an “accident” for which the airline could prejudice to the questions as to who are the persons
be held accountable under the Convention, but who have the right to bring suit and what are their
expressed no view whether that passenger could respective rights. [Citation.]
 International Aviation Law 291

II District Court stated, because Tseng “sustained no

With the key treaty provisions as the backdrop, bodily injury” as a result of the search, [Citation],
we next describe the episode-in-suit. On May 22, and the Convention does not permit “recovery for
1993, Tsui Yuan Tseng arrived at John F. Kennedy psychic or psychosomatic injury unaccompanied by
International Airport (hereinafter JFK) to board bodily injury.” [Citation]. The District Court further
an El Al Israel Airlines flight to Tel Aviv. In con- concluded that Tseng could not pursue her claim,
formity with standard El Al preboarding proce- alternately, under New York tort law; as that court
dures, a security guard questioned Tseng about read the Convention, Article 24 shields the carrier
her destination and travel plans. The guard con- from liability for personal injuries not compensable
sidered Tseng’s responses “illogical,” and ranked under Article 17. [Citation.]
her as a “high risk” passenger. Tseng was taken to The Court of Appeals reversed in relevant part.
a private security room where her baggage and [Citation] The Second Circuit concluded first that
person were searched for explosives and detonat- no “accident” within Article 17’s compass had
ing devices. She was told to remove her shoes, occurred; in the Court of Appeals’ view, the Con-
jacket, and sweater, and to lower her blue jeans to vention drafters did not “aim to impose close to
midhip. A female security guard then searched absolute liability” for an individual’s “personal reac-
Tseng’s body outside her clothes by hand and tion” to “routine operating procedures,” measures
with an electronic security wand. that, although “inconvenient and embarrassing,” are
After the search, which lasted 15 minutes, El Al per- the “price passengers pay for … airline safety.”
sonnel decided that Tseng did not pose a security [Citation.] In some tension with that reasoning, the
threat and allowed her to board the flight. Tseng Second Circuit next concluded that the Convention
later testified that she “was really sick and very does not shield the very same “routine operating
upset” during the flight, that she was “emotionally procedures” from assessment under the diverse laws
traumatized and disturbed” during her month-long of signatory nations (and, in the case of the United
trip in Israel, and that, upon her return, she under- States, States within one Nation) governing assault
went medical and psychiatric treatment for the lin- and false imprisonment. [Citation.]
gering effects of the body search. [Citation.] Article 24 of the Convention, the Court of
Tseng filed suit against El Al in 1994 in a New York Appeals said, “clearly states that resort to local
state court of first instance. Her complaint alleged law is precluded only where the incident is ‘cov-
a state law personal injury claim based on the ered’ by Article 17, meaning where there has
May 22, 1993 episode at JFK. Tseng’s pleading been an accident, either on the plane or in the
charged, inter alia, assault and false imprisonment, course of embarking or disembarking, which led
but alleged no bodily injury. El Al removed the to death, wounding or other bodily injury.” [Cita-
case to federal court. tion.] The court found support in the drafting his-
tory of the Convention, which it construed to
The District Court, after a bench trial, dismissed “indicate that national law was intended to provide
Tseng’s personal injury claim. [Citation.] That claim, the passenger’s remedy where the Convention did
the court concluded, was governed by Article 17 of not expressly apply.” [Citation.] The Second Cir-
the Warsaw Convention, which creates a cause of cuit also rejected the argument that allowance of
action for personal injuries suffered as a result of an state-law claims when the Convention does not
“accident … in the course of any of the operations of permit recovery would contravene the treaty’s
embarking or disembarking.” [Citation.] Tseng’s goal of uniformity. The court read our decision in
claim was not compensable under Article 17, the Zicherman v. Korean Air Lines Co., [Citation.], to
292 Fundamentals of Aviation Law

“instruct specifically that the Convention expresses international air carriers at that time endeavored to
no compelling interest in uniformity that would require passengers, as a condition of air travel, to
warrant … supplanting an otherwise applicable relieve or reduce the carrier’s liability in case of
body of law.” [Citation.] injury. [Citation.] The Convention drafters designed
Articles 17, 22, and 24 of the Convention as a com-
III promise between the interests of air carriers and
* * * their customers worldwide. In Article 17 of the
The Court of Appeals looked to our precedent for Convention, carriers are denied the contractual pre-
guidance on this point, but it misperceived our rogative to exclude or limit their liability for per-
meaning. It misread our decision in Zicherman to sonal injury. In Articles 22 and 24, passengers are
say that the Warsaw Convention expresses no limited in the amount of damages they may recover,
compelling interest in uniformity that would war- and are restricted in the claims they may pursue by
rant preempting an otherwise applicable body of the conditions and limits set out in the Convention.
law, here New York tort law. [Citation.] Zicherman Construing the Convention, as did the Court of
acknowledges that the Convention centrally Appeals, to allow passengers to pursue claims
endeavors “to foster uniformity in the law of inter- under local law when the Convention does not
national air travel.” [Citation.] It further recognizes permit recovery could produce several anomalies.
that the Convention addresses the question whether Carriers might be exposed to unlimited liability
there is airline liability vel non. [Citation.] The under diverse legal regimes, but would be pre-
Zicherman case itself involved auxiliary issues: vented, under the treaty, from contracting out of
who may seek recovery in lieu of passengers, such liability. Passengers injured physically in an
and for what harms they may be compensated. emergency landing might be subject to the liabil-
[Citation.]. Looking to the Convention’s text, ity caps of the Convention, while those merely
negotiating and drafting history, contracting traumatized in the same mishap would be free to
states’ postratification understanding of the Con- sue outside of the Convention for potentially
vention, and scholarly commentary, the Court in unlimited damages. The Court of Appeals’ con-
Zicherman determined that Warsaw drafters intended struction of the Convention would encourage art-
to resolve whether there is liability, but to leave to ful pleading by plaintiffs seeking to opt out of the
domestic law (the local law identified by the Convention’s liability scheme when local law
forum under its choice of law rules or approaches) promised recovery in excess of that prescribed by
determination of the compensatory damages avail- the treaty. [Citation.] Such a reading would
able to the suitor. See id., at 231. scarcely advance the predictability that adherence
A complementary purpose of the Convention is to to the treaty has achieved worldwide.
accommodate or balance the interests of passen- * * *
gers seeking recovery for personal injuries, and For the reasons stated, we hold that the Warsaw
the interests of air carriers seeking to limit poten- Convention precludes a passenger from maintaining
tial liability. Before the Warsaw accord, injured an action for personal injury damages under local
passengers could file suits for damages, subject law when her claim does not satisfy the conditions
only to the limitations of the forum’s laws, includ- for liability under the Convention. Accordingly, we
ing the forum’s choice of law regime. This expo- reverse the judgment of the Second Circuit.
sure inhibited the growth of the then-fledgling
international airline industry. [Citation.] Many It is so ordered.
 International Aviation Law 293

What do you think about the Court’s ruling in this case? What problems could ensue if
the Court ruled that the Warsaw Convention did not provide the exclusive remedy?

This final case involves another difficult issue facing international travelers who want
to file a claim against an airline: Where should the claim be filed? See Case 10-3 for a
discussion of how the proper forum for a case is determined under the Warsaw
Convention.

CASE 10-3
RESHAM JEET SINGH, GURSHARAN JEET KAUR, INDIVIDUALLY AND AS
GUARDIANS OF GURPREET KAUR V. TAROM ROMANIAN AIR TRANSPORT
88 F. Supp. 2d 62 (2000)

OPINION BY: David G. Trager Singhs to continue travel to New York. Plaintiffs
allege that Tarom employees then confined plain-
Defendant foreign airline moves to dismiss plain-
tiffs in the customs area of the airport for six days
tiff passengers’ personal injury claims for lack
and deprived them of sufficient food and bathing
of subject matter jurisdiction under the Warsaw
facilities before allowing them to continue their
Convention.
travel to New York.
Background Plaintiffs subsequently brought this action, com-
Plaintiffs (the “Singhs”) are citizens of India plaining that Tarom’s conduct during the six-day
admitted to the United States for permanent resi- detention constituted a violation of Articles 17 and
dence, who reside in Queens, New York. In or 19 of the Warsaw Convention. In addition, plain-
about May 1998, Resham Jeet Singh’s father tiffs claim that the detention constituted “mali-
purchased three tickets for plaintiffs from Globe cious prosecution” under New York law.
Travel, a travel agency in Jackson Heights, Defendant moves to dismiss: (1) plaintiffs’ state
New York. The tickets were for round trip travel law claim on the ground that it is preempted by the
on defendant Tarom Romanian Air Transport Convention, and (2) plaintiffs’ Warsaw Convention
(“Tarom”) from Delhi, India to New York and claim for lack of subject matter jurisdiction.
back. Plaintiffs explain that round trip tickets
were purchased in order to save money on a short Discussion
trip back to India that plaintiffs intended to take
(1)
later in the year. Although the tickets were paid
As a treaty of the United States, the Warsaw
for in New York, the tickets were issued by Bajaj
Convention is supreme law of the land. [Citations.]
Travels in Delhi, India, and were picked up by
It is well-established that where the provisions
plaintiffs in Delhi.
of the Warsaw Convention apply to a claim, the
Plaintiffs’ flight from Delhi to New York included Convention exclusively governs the rights and
a stop-over in Bucharest, Romania. Although plain- liabilities of the parties, and, thus, preempts state
tiffs had the proper documentation for entry into law. [Citations.] In this case, plaintiffs concede—
the United States, when the flight arrived in perhaps unwisely—that the Convention governs their
Bucharest, agents of Tarom refused to permit the claims. [Citation to record.] Accordingly, plaintiffs’
294 Fundamentals of Aviation Law

state law malicious prosecution claim is preempted the majority of its flights out of Bucharest. Tarom’s
by the Convention and must be dismissed. principal place of business is, therefore, Bucharest,
Romania. Accordingly, the carrier’s principal
(2) place of business clause does not provide a basis
Defendant moves to dismiss plaintiffs’ remaining for this court to exercise jurisdiction under the
Warsaw Convention action on the ground that this Convention.
court has no subject matter jurisdiction over the Third, the “destination” of a round trip interna-
action under the provisions of the Warsaw Con- tional airline ticket within the meaning of Article
vention. Article 28(1) of the Convention specifies 28(1) is the starting point of the journey. [Citation.]
that actions arising out of international trans- In determining the “destination” of a journey cov-
portation governed by the Convention must be ered by the Convention, the Second Circuit has
brought in one of four clearly identified fora: made clear that the unexpressed intentions of the
(1) the domicile of the carrier, (2) its principal passenger are not relevant if the instrument evi-
place of business of the carrier, (3) the forum in dencing the contract is unambiguous. [Citation
which the carrier has a place of business through including quote—”When a person purchases a
which the contract was made, or (4) the place of roundtrip ticket, there can be but one destination,
destination. It is well-established that unless one where the ticket originated.”]. Here, plaintiffs’
of the specified fora is in the United States, a fed- tickets clearly indicate that Delhi was the starting
eral district court lacks jurisdiction over the claim point of plaintiffs’ travel. Thus, notwithstanding
under the terms of the Convention and, hence, plaintiffs’ claim that they intended to remain in
lacks federal subject matter jurisdiction over the New York for an extended period of time—a fact
controversy. [Citation.] Because plaintiffs have they did not communicate to Tarom or its agents,
conceded that the Convention does apply, [Cita- Article 28(1)’s destination clause does not give a
tion to record] the dispositive question for the basis for this court to exercise jurisdiction under
present motion is whether the Eastern District of the Convention.
New York is a proper forum for plaintiffs’ action
under the terms of the Convention. Each of the The only remaining possible basis for this court’s
possible bases for subject matter jurisdiction jurisdiction, then, is the clause of Article 28(1)
under Article 28(1) will be considered in turn. relating to the carrier’s place of business through
which the contract was made. Defendant argues
First, the “domicile” of a carrier within the mean- that the place of business through which it made
ing of Article 28(1) is the carrier’s place of incor- the contract was the travel agency that issued and
poration. [Citation.] There is no dispute that delivered the tickets, viz., Bajaj Travels in Delhi.
Tarom is organized under the laws of the Repub- [Citations—with quotation (holding that the “‘place
lic of Romania. Romania is, therefore, Tarom’s of business through which the contract has been
domicile for the purposes of the Convention. made’ is the place where the passenger ticket was
Accordingly, the domicile of the carrier clause issued”]. In this regard, it should be noted that the
does not provide a basis for this court to exercise tickets themselves indicate that they were issued
jurisdiction over the Singhs’ claims. in Delhi. Plaintiffs, however, argue that the place
Second, for the purposes of Article 28(1), a for- of business through which the contract was made
eign corporation has only one “principal place of is Globe Travel, the New York travel agent to
business.” [Citation.] Tarom’s corporate head- whom the purchase price of the tickets was paid.
quarters are located at the Otopeni Airport in ***
Bucharest, Romania. Moreover, Tarom operates
 International Aviation Law 295

In absence of any evidence of a principal-agent motion to dismiss plaintiffs’ Warsaw Convention

relationship between Globe Travel and Bajaj Travel claim for lack of subject matter jurisdiction must
or Tarom, it can only be found that the place of be granted.
business through which the contract was made
was the agency that actually issued the tickets, Conclusion
Bajaj Travel. Since Bajaj Travel is located in Delhi, For the reasons set forth above, plaintiffs’ state
India, the place-of-business clause of Article 28(1) law malicious prosecution claim is preempted by
does not provide a basis for this court to exercise the Warsaw Convention, and this court has no
jurisdiction over plaintiffs’ Warsaw Convention subject matter jurisdiction over plaintiffs’ remain-
claim. ing claim under the Convention. Accordingly,
Because the Eastern District of New York is not defendant’s motion to dismiss is granted. The Clerk
an appropriate forum for this action under any of of Court is directed to enter judgment and close
the bases specified in Article 28(1), defendant’s the case.

Do you think the decision in this case is a fair result? Should the intent of the passen-
gers be taken into consideration when determining what their destination may have
been? Should the fact that the plaintiffs purchased a round trip ticket back to India mean
that the U.S. was not the real destination (and therefore a possible site for the lawsuit)?
Would the results of this case have been any different if the Montreal Convention of
1999 been in force?

DISCUSSION CASES

1. In February 2001, Eric Searcy was en route from New Orleans, Louisiana, to
Ecuador. He was on board an American Airlines passenger jet. Searcy is a paraplegic.
On the date of the flight, he was accompanied by his mother, Rhonda Searcy. The first
leg of their trip was a flight from New Orleans to Miami. In Miami, both Rhonda and
Eric Searcy disembarked their first aircraft so they could transfer to another plane for
the final leg of their trip. Eric was physically injured while being assisted by American
Airlines employees onto the aircraft that would depart Miami for Ecuador. Both Eric
and Rhonda Searcy file claims against American. Eric claims that he was physically
injured due to negligence by the American employees sent to assist him. Rhonda claims
that she saw the whole episode, including Eric’s injury. She files a suit against
American for mental damages she experienced when she witnessed her son’s injury.

2. The Coyles, a married couple in Portland, Oregon, purchase airline tickets through
a travel agent in Portland. The intended travel route was United States to Taipai, Taipai
to Jakarta, Jakarta to Singapore, and from Singapore back to the United States.
Sometime after the couple arrived in Jakarta, they decided on a side trip and purchased
296 Fundamentals of Aviation Law

a round-trip ticket from Garuda Airlines from Jakarta to Medan (on the Indonesian
island of Sumatra) and back to Jakarta. The couple was killed when their flight from
Jakarta to Medan crashed in Medan. The surviving family sued the airline. The ques-
tion raised was whether the family could sue in a U.S. court. How would this case be
decided under the Warsaw Convention Article 28? Would it be decided any differently
under the Montreal Convention of 1999? Explain.

3. Neil Scala was an American Airlines passenger on a flight from Aruba to Puerto
Rico. During the flight he was offered a drink by the flight attendant. He requested
cranberry juice. However, as a result of a mixup, he was accidentally served a mixture
of cranberry juice and alcohol. Scala alleged that the alcohol caused him to suffer dam-
age to his heart due to a preexisting heart condition. There is no question that the inci-
dent took place on an international flight. There is also no question regarding Scala’s
preexisting heart condition. The question faced by the U.S. District Court is whether the
incident qualifies as an “accident” under the Warsaw Convention. You have been
assigned to review this case. What is your opinion? Explain.

4. Caroline Neischer suffered from asthma. She booked a trip from Los Angeles to
Georgetown, Guyana. The domestic leg of the trip from Los Angeles to New York was
flown by American Airlines. British West India Airline (BWIA) flew the leg of the trip
from New York to Guyana. During the period of time when Neischer had to connect to
the BWIA flight, she was forced to give up her carry-on bag that contained her asthma
medicine to an employee of either American Airlines or BWIA. The employee told her
the bag would be promptly returned to her once the flight reached Guyana. However,
her baggage did not reach her until approximately 48 hours had elapsed from the time
she arrived in Guyana. Neischer became very ill, was admitted to a Guyana hospital,
and died a few days later. Would Neischer’s family have a cause of action against the
airline(s) responsible? Discuss.

5. Clariza Luna lived with her husband and two children in Houston, Texas. She pur-
chased a ticket for a round trip between Houston and Cali, Columbia, on June 3, 1992.
The ticket was purchased through a travel agency, Excelsior Travel. The ticket provided
for the following route of flight: Houston to Panama City (via Continental Airlines),
Panama to Cali, Columbia [with the leg from Panama City to Cali on Compania
Panamena De Aviacion (COPA)]. The return flight followed the same route with the
same carriers. On June 6, 1992, the COPA flight crashed in the vicinity of Tuciti,
Panama, and killed all passengers on board, including Luna. Luna’s family sought to
have the case heard in the U.S. District Court for the Southern District of Texas. The
family argued that the company that issued the COPA ticket, Excelsior, was a U.S. com-
pany and the ticket was purchased as part of a standard airline interline agreement.
Under the interline agreement, other carriers, such as Continental, could make reserva-
tions and issue tickets for COPA flights. The family also cited the fact that COPA had
aircraft engines overhauled by a Texas company and had previously sent employees to
Texas in connection with the overhauls. COPA argued that it should not be subject to
jurisdiction in the United States. It argued that it was a Panamanian corporation with no
place of business in the United States and no flights into the United States. Does the
U.S. District Court have jurisdiction to hear this case? Discuss.
 International Aviation Law 297

6. Dr. Hanson and his wife, Rubina Husain, boarded an international flight returning
to the United States in December 1997. Because Dr. Hanson suffered from severe asth-
ma and was sensitive to second-hand smoke, he specifically requested to be seated in
nonsmoking sections during the flight. Upon boarding, Dr. Hanson learned that
although he was seated in a nonsmoking section of the airplane, he was only three rows
in front of the economy-class smoking section. Ms. Husain advised a flight attendant
that her husband would have to be moved. The flight attendant told Ms. Husain to “have
a seat.” Prior to takeoff, Ms. Husain again requested that her husband be moved and
specifically noted his allergies to second-hand smoke. The flight attendant replied that
Dr. Hanson could not be moved because the aircraft was fully loaded and she was “too
busy.” After takeoff, passengers in the smoking section began to smoke and Dr. Hanson
found himself surrounded by ambient smoke. Ms. Husain spoke to the same flight
attendant for a third time, stating, “You have to move my husband from here.” Again
the flight attendant refused to assist, but indicated that Dr. Hanson could switch seats if
another passenger was willing. After 2 hours, the smoking increased behind Dr. Hanson.
He ultimately moved himself to the front of the airplane to get some fresher air and col-
lapsed while leaning against a chair in the galley. Despite immediate medical interven-
tion by an allergist onboard the aircraft, Dr. Hanson died. His wife sues the airline for
wrongful death in a U.S. district court. Who will prevail? Explain.

ENDNOTES

1. Statute of the International Court of Justice (I.C.J. Acts & Docs.), art. 38(1).
2. Convention on International Civil Aviation, December 7, 1944, art. 3(d), 61 Stat. 1180, 1181,
15 U.N.T.S. at 298.
3. Id.
4. Id. at 1181, 15 U.N.T.S. at 298.
5. Id. at 1182, 15 U.N.T.S. at 300.
6. Id. at 1182, 15 U.N.T.S. at 302.
7. Id. at 1188, 15 U.N.T.S. at 314.
8. Id.
9. Gabriel S. Meyer, U.S.–China Aviation Relations: Flight Path to Open Skies, 35 Cornell Int’l
L. J. 427, 432–433 (Fall 2002).
10. Laura Meckler, EU and U.S. Approve an Open Skies Agreement, Wall St. J. November 19–20,
2005 at A2.
11. See United States v. Saks, 470 U.S. 292, 405 (1985).
12. This is an approximate dollar value based on the legal limit of 100,000 SDRs (Special
Drawing Rights) as this standard is used in the Montreal Convention. The SDR is an inter-
national measurement of a reserve asset. The measurement was created by the International
Monetary Fund (IMF) in 1969. SDRs are allocated to various countries based on their pro-
portion of IMF quotas. Its value is based on a basket of key international currencies. The cur-
rent SDR rate for U.S. dollars indicates that one SDR equals approximately $1.40.
13. Sean D. Murphy, Contemporary Practice of the United States Relating to International Law:
Private International Law: Cape Town Convention on Financing of High-Value, Mobile
Equipment, The American Society of International Law American Journal of International
Law, 98 A.J.I.L. 852 (October 2004).
14. See Department of State Bulletin, vol. XVI, no. 403, March 23, 1947, at 530.
This page intentionally left blank
Appendix A Case Briefs

From time to time your instructor may request that you prepare written case briefs. The
case briefs, if prepared properly, should help you to develop a better understanding of
the legal issues involved in each case you are assigned.

In essence, a case brief is a summary of the case. The typical structure of a case brief-
ing will include the following elements:
1. Case citation (name of the case with references)
2. Summary of relevant facts
3. Issues presented
4. Case holding
5. Summary of court’s analysis

As you prepare to brief a case, keep in mind the following legal terms and definitions:
• The plaintiff is the party who initially brings a lawsuit.
• The defendant is the party who has been sued.
• A petitioner or appellant is the party appealing that decision of a lower court or trial
court. An appellant could be either a plaintiff or a defendant, depending on who pre-
vailed or lost at the lower court or trial court.
• A respondent or appellee is the party responding to the appeal. Again, an appellee
could have been either a plaintiff or a defendant in the lower court or trial court.
Typically the appellee was the prevailing party at the lower court or trial court level.
However, there may be cases in which both the plaintiff and the defendant are in dis-
agreement with aspects of the lower court or trial court decision.

To provide you with some guidance on how to brief a case, read the following edited
case and a sample brief following the case.

WACKENHUT CORPORATION and DELTA AIRLINES, INC. v. LIPPERT

SUPREME COURT OF FLORIDA

609 So. 2d 1304

December 3, 1992, Decided

OPINION: GRIMES, J.

299

Copyright © 2006 by The McGraw-Hill Companies, Inc. Click here for terms of use.
300 Fundamentals of Aviation Law

Felice Lippert and her husband bought tickets on a Delta Airlines’ flight from West
Palm Beach to New York. On her way to board the flight, Ms. Lippert took a handbag
containing valuable jewelry through a security checkpoint at Palm Beach International
Airport. Because this portion of the airport was designated exclusively for Delta flights,
Delta was responsible for maintaining the checkpoint. Delta contracted with the
Wackenhut Corporation to act as its agent in the operation of the checkpoint. The
checkpoint included a magnetometer scan of baggage and other carry-on items as well
as a scan of the person that occurs as the person walks through a specially designed
archway. Ms. Lippert placed her bag on the conveyor belt as required and walked
through the archway. When the archway magnetometer alarm sounded, Ms. Lippert was
briefly inspected by Wackenhut personnel. She then walked forward to collect her
handbag containing the jewelry at the end of the conveyor, but it was missing. A search
of the area for the missing handbag was unsuccessful.

Ms. Lippert sued Delta and Wackenhut for the value of the lost jewelry. As an affirma-
tive defense, Delta and Wackenhut asserted a $1,250 limitation on liability which is set
forth on her ticket and on Delta’s published tariff. The trial judge initially entered a
partial summary judgment for Delta and Wackenhut, upholding the limitation on
liability to the maximum amount of $1,250. The judge reasoned that Ms. Lippert had
delivered her property into Delta’s custody through its agent, Wackenhut, and had there-
by invoked the liability limitation. At the time of trial, a new judge was assigned to the
case. The second judge permitted the jury to consider the total amount of damages
claimed by Ms. Lippert, though throughout the trial the judge remarked that he would
be bound to enter a final judgment for no more than $1,250 despite the jury’s verdict.
The jury returned a verdict in favor of Ms. Lippert for $431,000. At this point, the judge
changed his mind regarding the applicability of the liability limitation and entered a
final judgment against both defendants for $431,000.

The district court of appeal held that the limitation on liability contained in the ticket
and the tariff did not apply under the facts of the case. The court also found that a bail-
ment for the mutual benefit of both the passenger and the airline had been created when
Ms. Lippert relinquished possession of her valuables to go through the x-ray machine.
Therefore, the trial court was correct in applying the ordinary negligence standard.
However, the court felt that the defendants had been unduly prejudiced by the judge’s
assurances throughout the pretrial proceedings and the trial that the potential judgment
could not exceed $1,250. Thus, the case was remanded for a new trial with the proviso
that the limitation of liability would not apply.

On petition for review in this Court, Delta and Wackenhut argue for the $1,250 limita-
tion. In addition, they contend that, because the airport security check was mandated by
law, they were gratuitous bailees, who could only be held liable if grossly negligent.
Ms. Lippert cross-petitions to review the granting of a new trial.

The airline ticket purchased by Ms. Lippert provided in pertinent part:

[Defendants] shall be liable for the loss of, damage to, or delay in the delivery of a fare-
paying passenger’s baggage, or other property (including carry-on baggage, if tendered to
 Appendix A 301

[Defendant’s] in flight personnel for storage during flight or otherwise delivered into the
custody of [Defendants].) Such liability, if any, for the loss, damage or delay in the
delivery of a fare-paying passenger’s baggage or other property (whether checked or
otherwise delivered into the custody of [Defendants]), shall be limited to an amount equal
to the value of the property, plus consequential damages, if any, and shall not exceed the
maximum limitation of USD 1,250.00 for all liability for each fare-paying passenger
(unless the passenger elects to pay for higher liability as provided for in paragraph 3)
below). The passenger shall not be automatically entitled to USD 1,250.00 but must
prove the value of losses or damages.

2) Exclusions From Liability

[Defendants][are] not responsible for jewelry, cash, camera equipment, or other similar
valuable items contained in checked or unchecked baggage, unless excess valuation has
been purchased. These items should be carried by the passenger.

Ms. Lippert seems to argue that under the emphasized portion of section 1 of her
ticket, quoted above, an article only becomes baggage, and therefore triggers the lim-
itation on liability, when it reaches the cargo compartment or the cabin of the aircraft.
However, this interpretation would lead to the dubious conclusion that passenger’s
property in transit to the airplane after being delivered to the airline at the check-in
point where tickets are purchased should not be considered baggage. The phrase in the
ticket’s definition of baggage— “whether checked in the cargo compartment or carried
in the cabin” …“—s more realistically construed as emphasizing that, for purposes of
Delta’s contract with its passengers, there is no difference between “carry-on” and
“checked” baggage. Thus, the ticket’s references to the cargo compartment and the
cabin are merely descriptive of the words “checked” or “carried,” and there can be no
doubt that Ms. Lippert’s handbag was a passenger’s “article or other property …
acceptable for transportation … whether checked or carried .…” We believe that a
ticketed passenger’s property, destined for an airplane and in transit between the
airport’s security checkpoint and the actual airplane, constitutes “baggage” as defined
by the ticket.

We cannot accept Ms. Lippert’s contention that our interpretation will mean that an arti-
cle carried by a nonticketed person which had gone through the checkpoint screening
process would be subject to the $1,250 limitation. Nonticketed persons have not con-
tracted to a limitation of liability as have those persons who purchase tickets. Therefore,
the liability for articles of nonticketed passengers would be determined by the ordinary
laws of bailment.

We hold that the $1,250 baggage limitation of liability was applicable to the loss of
Ms. Lippert’s handbag while it was in the possession of Delta’s agent at the airport
security checkpoint.

It is so ordered.

Here’s what a case briefing for this case might look like:

Brief of the Case

302 Fundamentals of Aviation Law

1. Case citation: The Wackenhut Corporation and Delta Airlines, Inc. v. Lippert, 609
SO. 1304 (1992); Supreme Court of Florida

2. Summary of facts:
• Felice Lippert deposits her handbag (carrying approximately $431,000 in jewel-
ry) with airport security screeners (employed by Wackenhut, a Delta contractor)
as she passes through a Delta airport security checkpoint.
• The handbag is lost.
• Ms. Lippert and her husband sued Delta and Wackenhut for the full value of the
jewelry contained in the handbag.
• Delta and Wackenhut claim that they are only liable for $1250, the limitation of
liability for luggage contained in writing in Ms. Lippert’s ticket and airline tariff.

3. Issue presented: Is Ms. Lippert’s handbag “baggage” and therefore subjecting the
Lipperts to a $1250 limitation in damages?
4. Holding: Yes.
5. Summary of court’s analysis: The court rejects Ms. Lippert’s argument in that her
handbag does not become “baggage” (subject to the liability limitation in her ticket
and tariff) until it reaches the aircraft cargo compartment or the aircraft cabin. The
court reasons that this line of argument would also mean that check-in luggage is not
considered “baggage” until it reaches the aircraft. Accordingly, the court held that
the $1250 limitation of liability for baggage was applicable to this case.

Author’s Note: This illustration provides just one example of how you can put together
a case briefing. Your instructor may provide you with more detailed instructions. This
illustration is merely meant to provide you with some basic guidelines.
Appendix B The Constitution of the
United States of America

We the People of the United States, in Order to form a more perfect Union, establish
Justice, insure domestic Tranquility, provide for the common defense, promote the
general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do
ordain and establish this Constitution for the United States of America.

Article I

Section 1.

All legislative Powers herein granted shall be vested in a Congress of the United States,
which shall consist of a Senate and House of Representatives.

Section 2.

Clause 1: The House of Representatives shall be composed of Members chosen every

second Year by the People of the several States, and the Electors in each State shall have
the Qualifications requisite for Electors of the most numerous Branch of the State
Legislature.

Clause 2: No Person shall be a Representative who shall not have attained to the Age of
twenty five Years, and been seven Years a Citizen of the United States, and who shall
not, when elected, be an Inhabitant of that State in which he shall be chosen.

Clause 3: Representatives and direct Taxes shall be apportioned among the several
States which may be included within this Union, according to their respective Numbers,
which shall be determined by adding to the whole Number of free Persons, including
those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths
of all other Persons. The actual Enumeration shall be made within three Years after
the first Meeting of the Congress of the United States, and within every subsequent
Term of ten Years, in such Manner as they shall by Law direct. The Number of
Representatives shall not exceed one for every thirty Thousand, but each State shall
have at Least one Representative; and until such enumeration shall be made, the State
of New Hampshire shall be entitled to choose [sic] three, Massachusetts eight, Rhode
Island and Providence Plantations one, Connecticut five, New York six, New Jersey
four, Pennsylvania eight, Delaware one, Maryland six, Virginia ten, North Carolina five,
South Carolina five, and Georgia three.

303

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304 Fundamentals of Aviation Law

Clause 4: When vacancies happen in the Representation from any State, the Executive
Authority thereof shall issue Writs of Election to fill such Vacancies.

Clause 5: The House of Representatives shall choose their Speaker and other Officers;
and shall have the sole Power of Impeachment.

Section 3.

Clause 1: The Senate of the United States shall be composed of two Senators from
each State, chosen by the Legislature thereof, for six Years; and each Senator shall
have one Vote.

Clause 2: Immediately after they shall be assembled in Consequence of the first

Election, they shall be divided as equally as may be into three Classes. The Seats of the
Senators of the first Class shall be vacated at the Expiration of the second Year, of the
second Class at the Expiration of the fourth Year, and of the third Class at the Expiration
of the sixth Year, so that one third may be chosen every second Year; and if Vacancies
happen by Resignation, or otherwise, during the Recess of the Legislature of any State,
the Executive thereof may make temporary Appointments until the next Meeting of the
Legislature, which shall then fill such Vacancies.

Clause 3: No Person shall be a Senator who shall not have attained to the Age of thirty
Years, and been nine Years a Citizen of the United States, and who shall not, when elect-
ed, be an Inhabitant of that State for which he shall be chosen.

Clause 4: The Vice President of the United States shall be President of the Senate, but
shall have no Vote, unless they be equally divided.

Clause 5: The Senate shall choose their other Officers, and also a President pro tem-
pore, in the Absence of the Vice President, or when he shall exercise the Office of
President of the United States.

Clause 6: The Senate shall have the sole Power to try all Impeachments. When sitting
for that Purpose, they shall be on Oath or Affirmation. When the President of the United
States is tried, the Chief Justice shall preside: And no Person shall be convicted with-
out the Concurrence of two thirds of the Members present.

Clause 7: Judgment in Cases of Impeachment shall not extend further than to removal
from Office, and disqualification to hold and enjoy any Office of honor, Trust or Profit
under the United States: but the Party convicted shall nevertheless be liable and subject
to Indictment, Trial, Judgment and Punishment, according to Law.

Section 4.

Clause 1: The Times, Places and Manner of holding Elections for Senators and
Representatives, shall be prescribed in each State by the Legislature thereof; but the
 Appendix B 305

Congress may at any time by Law make or alter such Regulations, except as to the
Places of chusing [sic] Senators.

Clause 2: The Congress shall assemble at least once in every Year, and such Meeting
shall be on the first Monday in December, unless they shall by Law appoint a differ-
ent Day.

Section 5.

Clause 1: Each House shall be the Judge of the Elections, Returns and Qualifications of
its own Members, and a Majority of each shall constitute a Quorum to do Business; but
a smaller Number may adjourn from day to day, and may be authorized to compel the
Attendance of absent Members, in such Manner, and under such Penalties as each
House may provide.

Clause 2: Each House may determine the Rules of its Proceedings, punish its Members
for disorderly Behavior, and, with the Concurrence of two thirds, expel a Member.

Clause 3: Each House shall keep a Journal of its Proceedings, and from time to time
publish the same, excepting such Parts as may in their Judgment require Secrecy; and
the Yeas and Nays of the Members of either House on any question shall, at the Desire
of one fifth of those Present, be entered on the Journal.

Clause 4: Neither House, during the Session of Congress, shall, without the Consent of
the other, adjourn for more than three days, nor to any other Place than that in which
the two Houses shall be sitting.

Section 6.

Clause 1: The Senators and Representatives shall receive a Compensation for their
Services, to be ascertained by Law, and paid out of the Treasury of the United States.
They shall in all Cases, except Treason, Felony and Breach of the Peace, be privileged
from Arrest during their Attendance at the Session of their respective Houses, and in
going to and returning from the same; and for any Speech or Debate in either House,
they shall not be questioned in any other Place.

Clause 2: No Senator or Representative shall, during the Time for which he was elect-
ed, be appointed to any civil Office under the Authority of the United States, which
shall have been created, or the Emoluments whereof shall have been increased during
such time; and no Person holding any Office under the United States, shall be a Member
of either House during his Continuance in Office.

Section 7.

Clause 1: All Bills for raising Revenue shall originate in the House of Representatives;
but the Senate may propose or concur with Amendments as on other Bills.
306 Fundamentals of Aviation Law

Clause 2: Every Bill which shall have passed the House of Representatives and the Senate,
shall, before it become a Law, be presented to the President of the United States; If he
approve he shall sign it, but if not he shall return it, with his Objections to that House in
which it shall have originated, who shall enter the Objections at large on their Journal, and
proceed to reconsider it. If after such Reconsideration two thirds of that House shall agree
to pass the Bill, it shall be sent, together with the Objections, to the other House, by which
it shall likewise be reconsidered, and if approved by two thirds of that House, it shall
become a Law. But in all such Cases the Votes of both Houses shall be determined by yeas
and Nays, and the Names of the Persons voting for and against the Bill shall be entered
on the Journal of each House respectively. If any Bill shall not be returned by the
President within ten Days (Sundays excepted) after it shall have been presented to him,
the Same shall be a Law, in like Manner as if he had signed it, unless the Congress by
their Adjournment prevent its Return, in which Case it shall not be a Law.

Clause 3: Every Order, Resolution, or Vote to which the Concurrence of the Senate and
House of Representatives may be necessary (except on a question of Adjournment)
shall be presented to the President of the United States; and before the Same shall take
Effect, shall be approved by him, or being disapproved by him, shall be repassed by two
thirds of the Senate and House of Representatives, according to the Rules and
Limitations prescribed in the Case of a Bill.

Section 8.

Clause 1: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and
Excises, to pay the Debts and provide for the common Defence and general Welfare of
the United States; but all Duties, Imposts and Excises shall be uniform throughout the
United States;

Clause 2: To borrow Money on the credit of the United States;

Clause 3: To regulate Commerce with foreign Nations, and among the several States,
and with the Indian Tribes;

Clause 4: To establish an uniform Rule of Naturalization, and uniform Laws on the sub-
ject of Bankruptcies throughout the United States;

Clause 5: To coin Money, regulate the Value thereof, and of foreign Coin, and fix the
Standard of Weights and Measures;

Clause 6: To provide for the Punishment of counterfeiting the Securities and current
Coin of the United States;

Clause 7: To establish Post Offices and Post Roads;

Clause 8: To promote the Progress of Science and useful Arts, by securing for limited Times
to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;
 Appendix B 307

Clause 9: To constitute Tribunals inferior to the supreme Court;

Clause 10: To define and punish Piracies and Felonies committed on the high Seas, and
Offenses against the Law of Nations;

Clause 11: To declare War, grant Letters of Marque and Reprisal, and make Rules con-
cerning Captures on Land and Water;

Clause 12: To raise and support Armies, but no Appropriation of Money to that Use
shall be for a longer Term than two Years;

Clause 13: To provide and maintain a Navy;

Clause 14: To make Rules for the Government and Regulation of the land and naval
Forces;

Clause 15: To provide for calling forth the Militia to execute the Laws of the Union,
suppress Insurrections and repel Invasions;

Clause 16: To provide for organizing, arming, and disciplining, the Militia, and for gov-
erning such Part of them as may be employed in the Service of the United States,
reserving to the States respectively, the Appointment of the Officers, and the Authority
of training the Militia according to the discipline prescribed by Congress;

Clause 17: To exercise exclusive Legislation in all Cases whatsoever, over such District
(not exceeding ten Miles square) as may, by Cession of particular States, and the
Acceptance of Congress, become the Seat of the Government of the United States, and
to exercise like Authority over all Places purchased by the Consent of the Legislature
of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals,
dock-Yards, and other needful Buildings;—And

Clause 18: To make all Laws which shall be necessary and proper for carrying into
Execution the foregoing Powers, and all other Powers vested by this Constitution in the
Government of the United States, or in any Department or Officer thereof.

Section 9.

Clause 1: The Migration or Importation of such Persons as any of the States now exist-
ing shall think proper to admit, shall not be prohibited by the Congress prior to the Year
one thousand eight hundred and eight, but a Tax or duty may be imposed on such
Importation, not exceeding ten dollars for each Person.

Clause 2: The Privilege of the Writ of Habeas Corpus shall not be suspended, unless
when in Cases of Rebellion or Invasion the public Safety may require it.

Clause 3: No Bill of Attainder or ex post facto Law shall be passed.

308 Fundamentals of Aviation Law

Clause 4: No Capitation, or other direct, Tax shall be laid, unless in Proportion to the
Census or Enumeration herein before directed to be taken.

Clause 5: No Tax or Duty shall be laid on Articles exported from any State.

Clause 6: No Preference shall be given by any Regulation of Commerce or Revenue to

the Ports of one State over those of another: nor shall Vessels bound to, or from, one
State, be obliged to enter, clear, or pay Duties in another.

Clause 7: No Money shall be drawn from the Treasury, but in Consequence of

Appropriations made by Law; and a regular Statement and Account of the Receipts and
Expenditures of all public Money shall be published from time to time.

Clause 8: No Title of Nobility shall be granted by the United States: And no Person
holding any Office of Profit or Trust under them, shall, without the Consent of the
Congress, accept of any present, Emolument, Office, or Title, of any kind whatever,
from any King, Prince, or foreign State.

Section 10.

Clause 1: No State shall enter into any Treaty, Alliance, or Confederation; grant Letters
of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and
silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law,
or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Clause 2: No State shall, without the Consent of the Congress, lay any Imposts or
Duties on Imports or Exports, except what may be absolutely necessary for executing
it’s [sic] inspection Laws: and the net Produce of all Duties and Imposts, laid by any
State on Imports or Exports, shall be for the Use of the Treasury of the United States;
and all such Laws shall be subject to the Revision and Controul [sic] of the Congress.

Clause 3: No State shall, without the Consent of Congress, lay any Duty of Tonnage,
keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact
with another State, or with a foreign Power, or engage in War, unless actually invaded,
or in such imminent Danger as will not admit of delay.

Article II

Section 1.

Clause 1: The executive Power shall be vested in a President of the United States of
America. He shall hold his Office during the Term of four Years, and, together with the
Vice-President, chosen for the same Term, be elected, as follows

Clause 2: Each State shall appoint, in such Manner as the Legislature thereof may
direct, a Number of Electors, equal to the whole Number of Senators and
Representatives to which the State may be entitled in the Congress: but no Senator or
 Appendix B 309

Representative, or Person holding an Office of Trust or Profit under the United States,
shall be appointed an Elector.

Clause 3: The Electors shall meet in their respective States, and vote by Ballot for two
Persons, of whom one at least shall not be an Inhabitant of the same State with them-
selves. And they shall make a List of all the Persons voted for, and of the Number of
Votes for each; which List they shall sign and certify, and transmit sealed to the Seat of
the Government of the United States, directed to the President of the Senate. The
President of the Senate shall, in the Presence of the Senate and House of
Representatives, open all the Certificates, and the Votes shall then be counted. The
Person having the greatest Number of Votes shall be the President, if such Number be
a Majority of the whole Number of Electors appointed; and if there be more than one
who have such Majority, and have an equal Number of Votes, then the House of
Representatives shall immediately choose [sic] by Ballot one of them for President; and
if no Person have a Majority, then from the five highest on the List the said House shall
in like Manner chuse the President. But in choosing [sic] the President, the Votes shall
be taken by States, the Representation from each State having one Vote; A quorum for
this Purpose shall consist of a Member or Members from two thirds of the States, and
a Majority of all the States shall be necessary to a Choice. In every Case, after the
Choice of the President, the Person having the greatest Number of Votes of the Electors
shall be the Vice President. But if there should remain two or more who have equal
Votes, the Senate shall chuse from them by Ballot the Vice President. (See Note 8)

Clause 4: The Congress may determine the Time of chusing the Electors, and the Day on
which they shall give their Votes; which Day shall be the same throughout the United States.

Clause 5: No Person except a natural born Citizen, or a Citizen of the United States, at
the time of the Adoption of this Constitution, shall be eligible to the Office of President;
neither shall any Person be eligible to that Office who shall not have attained to the Age
of thirty five Years, and been fourteen Years a Resident within the United States.

Clause 6: In Case of the Removal of the President from Office, or of his Death,
Resignation, or Inability to discharge the Powers and Duties of the said Office, the
Same shall devolve on the Vice President, and the Congress may by Law provide for
the Case of Removal, Death, Resignation or Inability, both of the President and Vice
President, declaring what Officer shall then act as President, and such Officer shall act
accordingly, until the Disability be removed, or a President shall be elected.

Clause 7: The President shall, at stated Times, receive for his Services, a Compensation,
which shall neither be encreased nor diminished during the Period for which he shall
have been elected, and he shall not receive within that Period any other Emolument
from the United States, or any of them.

Clause 8: Before he enter on the Execution of his Office, he shall take the following
Oath or Affirmation:—”I do solemnly swear (or affirm) that I will faithfully execute the
Office of President of the United States, and will to the best of my Ability, preserve,
protect and defend the Constitution of the United States.”
310 Fundamentals of Aviation Law

Section 2.

Clause 1: The President shall be Commander in Chief of the Army and Navy of the
United States, and of the Militia of the several States, when called into the actual
Service of the United States; he may require the Opinion, in writing, of the principal
Officer in each of the executive Departments, upon any Subject relating to the Duties
of their respective Offices, and he shall have Power to grant Reprieves and Pardons for
Offences against the United States, except in Cases of Impeachment.

Clause 2: He shall have Power, by and with the Advice and Consent of the Senate, to
make Treaties, provided two thirds of the Senators present concur; and he shall nomi-
nate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors,
other public Ministers and Consuls, Judges of the supreme Court, and all other Officers
of the United States, whose Appointments are not herein otherwise provided for, and
which shall be established by Law: but the Congress may by Law vest the Appointment
of such inferior Officers, as they think proper, in the President alone, in the Courts of
Law, or in the Heads of Departments.

Clause 3: The President shall have Power to fill up all Vacancies that may happen
during the Recess of the Senate, by granting Commissions which shall expire at the
End of their next Session.

Section 3.

He shall from time to time give to the Congress Information of the State of the Union,
and recommend to their Consideration such Measures as he shall judge necessary and
expedient; he may, on extraordinary Occasions, convene both Houses, or either of them,
and in Case of Disagreement between them, with Respect to the Time of Adjournment,
he may adjourn them to such Time as he shall think proper; he shall receive Ambassadors
and other public Ministers; he shall take Care that the Laws be faithfully executed, and
shall Commission all the Officers of the United States.

Section 4.

The President, Vice President and all civil Officers of the United States, shall be
removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other
high Crimes and Misdemeanors.

Article III

Section 1.

The judicial Power of the United States, shall be vested in one supreme Court, and in
such inferior Courts as the Congress may from time to time ordain and establish. The
Judges, both of the supreme and inferior Courts, shall hold their Offices during good
Behaviour, and shall, at stated Times, receive for their Services, a Compensation, which
shall not be diminished during their Continuance in Office.
 Appendix B 311

Section 2.

Clause 1: The judicial Power shall extend to all Cases, in Law and Equity, arising
under this Constitution, the Laws of the United States, and Treaties made, or which
shall be made, under their Authority;—to all Cases affecting Ambassadors, other pub-
lic Ministers and Consuls;—to all Cases of admiralty and maritime Jurisdiction;—to
Controversies to which the United States shall be a Party;—to Controversies between
two or more States;—between a State and Citizens of another State;—between
Citizens of different States, —between Citizens of the same State claiming Lands
under Grants of different States, and between a State, or the Citizens thereof, and
foreign States, Citizens or Subjects.

Clause 2: In all Cases affecting Ambassadors, other public Ministers and Consuls, and
those in which a State shall be Party, the supreme Court shall have original Jurisdiction.
In all the other Cases before mentioned, the supreme Court shall have appellate
Jurisdiction, both as to Law and Fact, with such Exceptions, and under such Regulations
as the Congress shall make.

Clause 3: The Trial of all Crimes, except in Cases of Impeachment, shall be by Jury;
and such Trial shall be held in the State where the said Crimes shall have been com-
mitted; but when not committed within any State, the Trial shall be at such Place or
Places as the Congress may by Law have directed.

Section 3.

Clause 1: Treason against the United States, shall consist only in levying War against
them, or in adhering to their Enemies, giving them Aid and Comfort. No Person shall
be convicted of Treason unless on the Testimony of two Witnesses to the same overt
Act, or on Confession in open Court.

Clause 2: The Congress shall have Power to declare the Punishment of Treason, but no
Attainder of Treason shall work Corruption of Blood, or Forfeiture except during the
Life of the Person attainted.

Article IV

Section 1.

Full Faith and Credit shall be given in each State to the public Acts, Records, and judi-
cial Proceedings of every other State. And the Congress may by general Laws prescribe
the Manner in which such Acts, Records and Proceedings shall be proved, and the
Effect thereof.

Section 2.

Clause 1: The Citizens of each State shall be entitled to all Privileges and Immunities
of Citizens in the several States.
312 Fundamentals of Aviation Law

Clause 2: A Person charged in any State with Treason, Felony, or other Crime, who
shall flee from Justice, and be found in another State, shall on Demand of the executive
Authority of the State from which he fled, be delivered up, to be removed to the State
having Jurisdiction of the Crime.

Clause 3: No Person held to Service or Labour in one State, under the Laws thereof,
escaping into another, shall, in Consequence of any Law or Regulation therein, be dis-
charged from such Service or Labour, but shall be delivered up on Claim of the Party
to whom such Service or Labour may be due.

Section 3.

Clause 1: New States may be admitted by the Congress into this Union; but no new
State shall be formed or erected within the Jurisdiction of any other State; nor any State
be formed by the Junction of two or more States, or Parts of States, without the Consent
of the Legislatures of the States concerned as well as of the Congress.

Clause 2: The Congress shall have Power to dispose of and make all needful Rules and
Regulations respecting the Territory or other Property belonging to the United States;
and nothing in this Constitution shall be so construed as to Prejudice any Claims of the
United States, or of any particular State.

Section 4.

The United States shall guarantee to every State in this Union a Republican Form of
Government, and shall protect each of them against Invasion; and on Application of the
Legislature, or of the Executive (when the Legislature cannot be convened) against
domestic Violence.

Article V.

The Congress, whenever two thirds of both Houses shall deem it necessary, shall pro-
pose Amendments to this Constitution, or, on the Application of the Legislatures of two
thirds of the several States, shall call a Convention for proposing Amendments, which,
in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution,
when ratified by the Legislatures of three fourths of the several States, or by
Conventions in three fourths thereof, as the one or the other Mode of Ratification may
be proposed by the Congress; Provided that no Amendment which may be made prior
to the Year One thousand eight hundred and eight shall in any Manner affect the first
and fourth Clauses in the Ninth Section of the first Article; and that no State, without
its Consent, shall be deprived of its equal Suffrage in the Senate.

Article VI

Clause 1: All Debts contracted and Engagements entered into, before the Adoption of
this Constitution, shall be as valid against the United States under this Constitution, as
under the Confederation.
 Appendix B 313

Clause 2: This Constitution, and the Laws of the United States which shall be made in
Pursuance thereof; and all Treaties made, or which shall be made, under the Authority
of the United States, shall be the supreme Law of the Land; and the Judges in every
State shall be bound thereby, any Thing in the Constitution or Laws of any State to the
Contrary notwithstanding.

Clause 3: The Senators and Representatives before mentioned, and the Members of the
several State Legislatures, and all executive and judicial Officers, both of the United
States and of the several States, shall be bound by Oath or Affirmation, to support this
Constitution; but no religious Test shall ever be required as a Qualification to any Office
or public Trust under the United States.

Article VII.

The Ratification of the Conventions of nine States, shall be sufficient for the
Establishment of this Constitution between the States so ratifying the Same.

Amendments to the Constitution

Amendment I [1791]

Congress shall make no law respecting an establishment of religion, or prohibiting the

free exercise thereof; or abridging the freedom of speech, or of the press; or the right
of the people peaceably to assemble, and to petition the Government for a redress of
grievances.

Amendment II [1791]

A well regulated Militia, being necessary to the security of a free State, the right of the
people to keep and bear Arms, shall not be infringed.

Amendment III [1791]

No Soldier shall, in time of peace be quartered in any house, without the consent of the
Owner, nor in time of war, but in a manner to be prescribed by law.

Amendment IV [1791]

The right of the people to be secure in their persons, houses, papers, and effects, against
unreasonable searches and seizures, shall not be violated, and no Warrants shall issue,
but upon probable cause, supported by Oath or affirmation, and particularly describing
the place to be searched, and the persons or things to be seized.

Amendment V [1791]

No person shall be held to answer for a capital, or otherwise infamous crime, unless on
a presentment or indictment of a Grand Jury, except in cases arising in the land or naval
314 Fundamentals of Aviation Law

forces, or in the Militia, when in actual service in time of War or public danger; nor
shall any person be subject for the same offence to be twice put in jeopardy of life or
limb; nor shall be compelled in any criminal case to be a witness against himself, nor
be deprived of life, liberty, or property, without due process of law; nor shall private
property be taken for public use, without just compensation.

Amendment VI [1791]

In all criminal prosecutions, the accused shall enjoy the right to a speedy and public
trial, by an impartial jury of the State and district wherein the crime shall have been
committed, which district shall have been previously ascertained by law, and to be
informed of the nature and cause of the accusation; to be confronted with the witness-
es against him; to have compulsory process for obtaining witnesses in his favor, and to
have the Assistance of Counsel for his defence.

Amendment VII [1791]

In Suits at common law, where the value in controversy shall exceed twenty dollars, the
right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-
examined in any Court of the United States, than according to the rules of the common law.

Amendment VIII [1791]

Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual
punishments inflicted.

Amendment IX [1791]

The enumeration in the Constitution, of certain rights, shall not be construed to deny or
disparage others retained by the people.

Amendment X [1791]

The powers not delegated to the United States by the Constitution, nor prohibited by it
to the States, are reserved to the States respectively, or to the people.

Amendment XI [1798]

The Judicial power of the United States shall not be construed to extend to any suit in
law or equity, commenced or prosecuted against one of the United States by Citizens of
another State, or by Citizens or Subjects of any Foreign State.

Amendment XII [1804]

The Electors shall meet in their respective states, and vote by ballot for President and
Vice-President, one of whom, at least, shall not be an inhabitant of the same state with
themselves; they shall name in their ballots the person voted for as President, and in
 Appendix B 315

distinct ballots the person voted for as Vice-President, and they shall make distinct lists
of all persons voted for as President, and of all persons voted for as Vice-President, and
of the number of votes for each, which lists they shall sign and certify, and transmit
sealed to the seat of the government of the United States, directed to the President of
the Senate;—The President of the Senate shall, in the presence of the Senate and House
of Representatives, open all the certificates and the votes shall then be counted;—The
person having the greatest number of votes for President, shall be the President, if such
number be a majority of the whole number of Electors appointed; and if no person have
such majority, then from the persons having the highest numbers not exceeding three on
the list of those voted for as President, the House of Representatives shall choose imme-
diately, by ballot, the President. But in choosing the President, the votes shall be taken
by states, the representation from each state having one vote; a quorum for this purpose
shall consist of a member or members from two-thirds of the states, and a majority of
all the states shall be necessary to a choice. And if the House of Representatives shall
not choose a President whenever the right of choice shall devolve upon them, before the
fourth day of March next following, then the Vice-President shall act as President, as in
the case of the death or other constitutional disability of the President. The person hav-
ing the greatest number of votes as Vice-President, shall be the Vice-President, if such
number be a majority of the whole number of Electors appointed, and if no person have
a majority, then from the two highest numbers on the list, the Senate shall choose the
Vice-President; a quorum for the purpose shall consist of two-thirds of the whole num-
ber of Senators, and a majority of the whole number shall be necessary to a choice. But
no person constitutionally ineligible to the office of President shall be eligible to that of
Vice-President of the United States.

Amendment XIII [1865]

Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime
whereof the party shall have been duly convicted, shall exist within the United States,
or any place subject to their jurisdiction.

Section 2. Congress shall have power to enforce this article by appropriate legislation.

Amendment XIV [1868]

Section 1. All persons born or naturalized in the United States, and subject to the juris-
diction thereof, are citizens of the United States and of the State wherein they reside.
No State shall make or enforce any law which shall abridge the privileges or immunities
of citizens of the United States; nor shall any State deprive any person of life, liberty,
or property, without due process of law; nor deny to any person within its jurisdiction
the equal protection of the laws.

Section 2. Representatives shall be apportioned among the several States according to

their respective numbers, counting the whole number of persons in each State, excluding
Indians not taxed. But when the right to vote at any election for the choice of electors for
President and Vice President of the United States, Representatives in Congress, the
Executive and Judicial officers of a State, or the members of the Legislature thereof,
316 Fundamentals of Aviation Law

is denied to any of the male inhabitants of such State, being twenty-one years of age,
and citizens of the United States, or in any way abridged, except for participation in
rebellion, or other crime, the basis of representation therein shall be reduced in the pro-
portion which the number of such male citizens shall bear to the whole number of male
citizens twenty-one years of age in such State.

Section 3. No person shall be a Senator or Representative in Congress, or elector of

President and Vice President, or hold any office, civil or military, under the United States,
or under any State, who, having previously taken an oath, as a member of Congress,
or as an officer of the United States, or as a member of any State legislature, or as an
executive or judicial officer of any State, to support the Constitution of the United
States, shall have engaged in insurrection or rebellion against the same, or given aid or
comfort to the enemies thereof. But Congress may by a vote of two-thirds of each
House, remove such disability.

Section 4. The validity of the public debt of the United States, authorized by law,
including debts incurred for payment of pensions and bounties for services in sup-
pressing insurrection or rebellion, shall not be questioned. But neither the United
States nor any State shall assume or pay any debt or obligation incurred in aid of
insurrection or rebellion against the United States, or any claim for the loss or eman-
cipation of any slave; but all such debts, obligations and claims shall be held illegal
and void.

Section 5. The Congress shall have power to enforce, by appropriate legislation, the
provisions of this article.

Amendment XV [1870]

Section 1. The right of citizens of the United States to vote shall not be denied or
abridged by the United States or by any State on account of race, color, or previous con-
dition of servitude.

Section 2. The Congress shall have power to enforce this article by appropriate
legislation.

Amendment XVI [1913]

The Congress shall have power to lay and collect taxes on incomes, from whatever
source derived, without apportionment among the several States, and without regard to
any census or enumeration.

Amendment XVII [1913]

The Senate of the United States shall be composed of two Senators from each State,
elected by the people thereof, for six years; and each Senator shall have one vote. The
electors in each State shall have the qualifications requisite for electors of the most
numerous branch of the State legislatures.
 Appendix B 317

When vacancies happen in the representation of any State in the Senate, the executive
authority of such State shall issue writs of election to fill such vacancies: Provided, That
the legislature of any State may empower the executive thereof to make temporary
appointments until the people fill the vacancies by election as the legislature may direct.

This amendment shall not be so construed as to affect the election or term of any
Senator chosen before it becomes valid as part of the Constitution.

Amendment XVIII [1919]

Section 1. After one year from the ratification of this article the manufacture, sale, or
transportation of intoxicating liquors within, the importation thereof into, or the expor-
tation thereof from the United States and all territory subject to the jurisdiction thereof
for beverage purposes is hereby prohibited.

Section. 2. The Congress and the several States shall have concurrent power to enforce
this article by appropriate legislation.

Section. 3. This article shall be inoperative unless it shall have been ratified as an
amendment to the Constitution by the legislatures of the several States, as provided in
the Constitution, within seven years from the date of the submission hereof to the States
by the Congress.

Amendment XIX [1920]

The right of citizens of the United States to vote shall not be denied or abridged by the
United States or by any State on account of sex.

Congress shall have power to enforce this article by appropriate legislation.

Amendment XX [1933]

Section 1. The terms of the President and Vice President shall end at noon on the 20th
day of January, and the terms of Senators and Representatives at noon on the 3d day of
January, of the years in which such terms would have ended if this article had not been
ratified; and the terms of their successors shall then begin.

Section. 2. The Congress shall assemble at least once in every year, and such meet-
ing shall begin at noon on the 3d day of January, unless they shall by law appoint a
different day.

Section. 3. If, at the time fixed for the beginning of the term of the President, the
President elect shall have died, the Vice President elect shall become President. If a
President shall not have been chosen before the time fixed for the beginning of his term,
or if the President elect shall have failed to qualify, then the Vice President elect shall
act as President until a President shall have qualified; and the Congress may by law pro-
vide for the case wherein neither a President elect nor a Vice President elect shall have
318 Fundamentals of Aviation Law

qualified, declaring who shall then act as President, or the manner in which one who is
to act shall be selected, and such person shall act accordingly until a President or Vice
President shall have qualified.

Section. 4. The Congress may by law provide for the case of the death of any of the per-
sons from whom the House of Representatives may choose a President whenever the
right of choice shall have devolved upon them, and for the case of the death of any of
the persons from whom the Senate may choose a Vice President whenever the right of
choice shall have devolved upon them.

Section. 5. Sections 1 and 2 shall take effect on the 15th day of October following the
ratification of this article.

Section. 6. This article shall be inoperative unless it shall have been ratified as an
amendment to the Constitution by the legislatures of three-fourths of the several States
within seven years from the date of its submission.

Amendment XXI [1933]

Section 1. The eighteenth article of amendment to the Constitution of the United States
is hereby repealed.

Section 2. The transportation or importation into any State, Territory, or possession of

the United States for delivery or use therein of intoxicating liquors, in violation of the
laws thereof, is hereby prohibited.

Section 3. This article shall be inoperative unless it shall have been ratified as an
amendment to the Constitution by conventions in the several States, as provided in the
Constitution, within seven years from the date of the submission hereof to the States by
the Congress.

Amendment XXII [1951]

Section 1. No person shall be elected to the office of the President more than twice,
and no person who has held the office of President, or acted as President, for more
than two years of a term to which some other person was elected President shall be
elected to the office of the President more than once. But this article shall not apply
to any person holding the office of President when this article was proposed by the
Congress, and shall not prevent any person who may be holding the office of
President, or acting as President, during the term within which this article becomes
operative from holding the office of President or acting as President during the
remainder of such term.

Section 2. This article shall be inoperative unless it shall have been ratified as an
amendment to the Constitution by the legislatures of three-fourths of the several
states within seven years from the date of its submission to the states by the
Congress.
 Appendix B 319

Amendment XXIII [1961]

Section 1. The District constituting the seat of government of the United States shall
appoint in such manner as the Congress may direct:

A number of electors of President and Vice President equal to the whole number of
Senators and Representatives in Congress to which the District would be entitled if it were
a state, but in no event more than the least populous state; they shall be in addition to those
appointed by the states, but they shall be considered, for the purposes of the election of
President and Vice President, to be electors appointed by a state; and they shall meet in
the District and perform such duties as provided by the twelfth article of amendment.

Section 2. The Congress shall have power to enforce this article by appropriate legislation.

Amendment XXIV [1964]

Section 1. The right of citizens of the United States to vote in any primary or other elec-
tion for President or Vice President, for electors for President or Vice President, or for
Senator or Representative in Congress, shall not be denied or abridged by the United
States or any state by reason of failure to pay any poll tax or other tax.

Section 2. The Congress shall have power to enforce this article by appropriate legislation.

Amendment XXV [1967]

Section 1. In case of the removal of the President from office or of his death or resig-
nation, the Vice President shall become President.

Section 2. Whenever there is a vacancy in the office of the Vice President, the President
shall nominate a Vice President who shall take office upon confirmation by a majority
vote of both Houses of Congress.

Section 3. Whenever the President transmits to the President pro tempore of the Senate
and the Speaker of the House of Representatives his written declaration that he is unable
to discharge the powers and duties of his office, and until he transmits to them a writ-
ten declaration to the contrary, such powers and duties shall be discharged by the Vice
President as Acting President.

Section 4. Whenever the Vice President and a majority of either the principal officers of
the executive departments or of such other body as Congress may by law provide, trans-
mit to the President pro tempore of the Senate and the Speaker of the House of
Representatives their written declaration that the President is unable to discharge the
powers and duties of his office, the Vice President shall immediately assume the pow-
ers and duties of the office as Acting President.

Thereafter, when the President transmits to the President pro tempore of the Senate and
the Speaker of the House of Representatives his written declaration that no inability
320 Fundamentals of Aviation Law

exists, he shall resume the powers and duties of his office unless the Vice President and
a majority of either the principal officers of the executive department or of such other
body as Congress may by law provide, transmit within four days to the President pro
tempore of the Senate and the Speaker of the House of Representatives their written
declaration that the President is unable to discharge the powers and duties of his office.
Thereupon Congress shall decide the issue, assembling within forty-eight hours for that
purpose if not in session. If the Congress, within twenty-one days after receipt of the
latter written declaration, or, if Congress is not in session, within twenty-one days after
Congress is required to assemble, determines by two-thirds vote of both Houses that the
President is unable to discharge the powers and duties of his office, the Vice President
shall continue to discharge the same as Acting President; otherwise, the President shall
resume the powers and duties of his office.

Amendment XXVI [1971]

Section 1. The right of citizens of the United States, who are 18 years of age or older, to
vote, shall not be denied or abridged by the United States or any state on account of age.

Section 2. The Congress shall have the power to enforce this article by appropriate
legislation.

Amendment XXVII [1992]

No law varying the compensation for the services of the Senators and Representatives
shall take effect until an election of Representatives shall have intervened.
Appendix C NAS ASRS Form 277B

321

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322 Fundamentals of Aviation Law
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Selected Bibliography

Anthony, Robert A. Symposium on the 50th Anniversary of the APA: The Supreme Court and the
APA: Sometimes They Just Don’t Get It, 10 Admin. L. J. Am. U. 1 (Spring 1996).
CCH Editorial Staff. Aviation Law Reporter. 4 vols. Chicago: CCH Incorporated, November
2001.
Elder, Bill, Comment: Free Flight: The Future of Air Transportation Entering the Twenty-First
Century, 62 J. Air L. & Com. 871 (February/March 1997).
Holmes, Eric Mills. Holmes’s Appleman on Insurance, vol. 1, 2d ed. Minneapolis, MN: West
Publishing Co., 1996.
Krause, Charles F., and Krause, Kent C. Aviation Tort and Regulatory Law, 2d ed. Eagan, MN:
West Group, 2002.
Kuchta, Joseph D. Federal Aviation Decisions, 5 vols. New York: Clark Boardman Callaghan,
1999.
McKay, Jennifer. Notes: The Refinement of the Warsaw System: Why the 1999 Montreal
Convention Represents the Best Hope for Uniformity, 34 Case W. Res. J. Int’l L. 73 (Fall
2002).
Nelson, Deborah L., and Howicz, Jennifer L. Williston on Sales, vol. 1, 5th ed. New York: Clark
Boardman Callaghan, 2000.
Pike & Fischer, Inc. Uniform Commercial Code Case Digest. New York: Clark Boardman
Callaghan, 1995.
NTSB Bar Association, Select Comm. On Aviation Policy. Aviation Professionals and the
Threat of Criminal Liability—How Do We Maximize Aviation Safety? 67 J. Air L. & Com. 3
(Summer 2002).
Rollo, Vera Foster. Aviation Law: An Introduction. Lanham, MD: Maryland Historical Press,
1985.
Rollo, Vera Foster. Aviation Insurance. Lanham, MD: Maryland Historical Press, 1986.
Speiser, Stuart M., and Krause, Charles F. Aviation Tort Law. Eagan, MN: West Group, 2000.
Yodice, John S. Aviation Lawyer’s Manual: Representing the Pilot in FAA Enforcement Actions.
Lanham, MD: Maryland Historical Press, 1986.

325

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Index

Absolute liability crimes, 69 Administrative agencies (Cont.): Aircraft:

Acceptance (of contract), 161 power of, 5 leasing, 228–229
Accidents: reasons for establishing, 120–121 multiple ownership of, 229–230
definition of, 284, 287–289 rulemaking by, 124–125, registering, 225, 227
NTSB investigation of, 123 142–145 storing, 225, 228
Accused, rights and protections and stare decisis doctrine, 4 transferring ownership of, 224–225
for, 73 state, 120 Aircraft noise regulation, 56–58
ACs (Advisory Circulars), 125 and “validly adopted” regulations, Aircraft Owners and Pilots
Acts, criminal, 69 145–149 Association, 142
Actual cause test, 100 Administrative law judges (ALJs), Airman/pilot certificates, 83–85,
Actus reas, 69 130, 132 133–135
ADA (Americans with Disabilities Administrative Procedure Act (APA) Airport Development Aid Program
Act), 265 of 1946, 124–125 (ADAP), 223
ADAP (Airport Development Aid Administrator v. Dailey, 132 Airport Improvement Program
Program), 223 Administrator v. Parker, 132 (AIP), 223
Adaptability of legal system, 10 Administrator v. Ramaprakash, 129 Airport proprietor exception, 58–59
ADEA (Age Discrimination in Adverse possession, 220 Airports, public use, 223–224
Employment Act), 265 Advisory Circulars (ACs), 125 ALI (see American Law Institute)
Adjudication, 123, 131–133 Aeronautical Information Manual ALJs (see Administrative law judges)
Administrative actions (FAA), 137 (AIM), 125 Alternative dispute resolution, 25–26
Administrative agencies, 119–153 Aeronautics Branch, Department of Altseimer v. Bell, 112–114
adjudication by, 131–133 Commerce, 122 Amendments to the Constitution, 49,
Air Transport Association of America Age 60 rule, 43, 272–276 312–318
v. DOT and FAA, 143–145 Age Discrimination in Employment American Law Institute (ALI), 69,
authority for creation of, 5 Act (ADEA), 265 93, 160
checks on, 138–142 Agency law, 254–261 Americans with Disabilities Act
delegation of authority to, 41 contract liability, 258–259 (ADA), 265
Department of Transportation, 122 creating/terminating relationships, Answer, 18–20
enforcement by, 126–131 255–256 APA (see Administrative Procedure
Federal Aviation Administration, duties of parties, 257–258 Act of 1946)
122–123, 133–138 tort liability, 259–261 Appeals, 23–24
functions of, 121, 123–124 and types of agency relationship, 255 of administrative agency actions,
Garvey v. NTSB and Merrell, Agreements for sale, 182–185 138–139
145–149 AIM (Aeronautical Information courts of, 11–13 (See also Federal
interdependence of functions Manual), 125 Court of appeals)
within, 123–124 AIP (Airport Improvement in criminal cases, 71
National Transportation Safety Program), 223 of FAA orders, 131, 132
Board, 123 Air Commerce Act of 1926, 122 “Arbitrary or capricious” test, 139
and non-instrument-rated pilot Air France v. Saks, 288–289 Arbitration, 25, 262
problem, 149–153 Air Transport Association, 142 Arraignment, 71
NTSB Identification: NYC05FA001, Air Transport Association of America Arrests, 70
150–153 v. DOT and FAA, 142–145 Articles of Confederation, 44

327

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328 Index

Artificial person, 202 Burden of proof, 92 Civil Aeronautics Administration

Artisans’ liens, 177 Bureau of Air Commerce, 122 (CAA), 122–123
ASAP (Aviation Safety Action Burke v. Pan World Airways, Inc., Civil Aeronautics Authority, 122
Program), 137 97–98 Civil Aeronautics Board (CAB),
ASRP (see Aviation Safety Reporting Business entities, 191–212 122, 123
Program) and corporate opportunity doctrine, Civil law, 7, 8
Assault, 93–94 208–211 Civil penalty laws, 142
Assets, ownership of, 196 corporations, 202–207 Civil procedure, 17
Assumption of risk, 104, 106 Klinicki v. Lundgren, 208–211 Civil Rights Act of 1964, 264
Attachment jurisdiction, 16 limited liability companies, Clinton v. City of New York, 41
Authority, distribution of, 41–49 200–202 Code (statutory) law, 4–5
and commerce clause, 44–48 limited partnerships, 197–200 Code of Federal Regulations
and federal preemption, 42–44 and line between business and (CFR), 124
under federalism system, 41 personal matters, 211–212 Collective bargaining, 261–263
and full faith and credit clause, Nelsen v. Morris, 211–212 Comity, doctrine of, 49
48–58 partnerships, 194–197 Commentaries on the Laws of
to U.S. Congress, 41–42 sole proprietorships, 192–194 England (Sir William
Availability of legal system, 10 Business insurance, 235 Blackstone), 71
Aviation Safety Action Program Businesses, basic rights of, 49–52 Commerce clause, 44–48
(ASAP), 137 But for rule, 100 Commercial law, 159–187
Aviation Safety Reporting Program and agreements for sale,
(ASRP), 135–136 182–185
Aviation Safety Reports, 136, CAA (see Civil Aeronautics and bankruptcy, 185–187
319–321 Administration) contracts, 160–170
CAB (see Civil Aeronautics Board) Dallas Aerospace, Inc. v. CIS Air
California v. Ciraolo, 85–88 Corporation, 180–182
Bailments, 228 Capacity (contracts), 162 debtor-creditor issues, 174–179
Bankruptcy, 177–179, 185–187 Cape Town Convention, 286 Edward Miles, Richard W. Keenan
Battery, 94 Capital punishment, 73 and Kenneth L. “Dusty”
Bermuda I agreement, 283 Care, duty of, 97–98 Burrow, Appellants, v. John F.
Bermuda II agreement, 283 Careless operations laws, 76 Kavanaugh, Appellee,
Betts v. Brady, 73 Case briefs, 299–302 183–185
Beyond rights, skies as, 283 Case law, 4, 26–27 In re: UAL Corporation, et al.,
Bill of Rights, 49 Causal connection (property law), Debtors. Chapter 11, Case
Blackstone, Sir William, 71 243–247 No. 02-B-48191 (Jointly
The Board (see National Causation in fact test, 100 Administered), 185–187
Transportation Safety Board) Certificates, 83 sales law, 170–174
Boards of directors, 204 FAA inspection of, 127 warranties, 179–182
Borrowing (government functions), revocation of, 133–135 Commercial speech, 52
40–41 Cessna Aircraft Company, 114 Common (case) law, 4, 5, 26–27
Braniff Airways, Inc. v. Nebraska CFR (Code of Federal Community property, 220
State Board of Equalization and Regulations), 124 Comparative negligence (fault,
Assessments et al., 59–62 Chattel, 96 responsibility), 103–104,
Breach of contract, 168–170 Checks and balances, 39–40, 106–107
Breach of duty, 92, 98–99 138–140 Compensatory damages, 169
British Airways Board v. Port Chicago Convention of 1944, Complaint, 17–18
Authority of New York, 58, 59 282–283, 287 Complete Auto Transit, Inc. v. Brady,
Brockelsby v. United States of Chiron v. NTSB, 153 47–48, 62
America and Jeppesen, 108–112 City of Burbank et al. v. Lockheed Air Conciliation, 25–26
Brown v. Board of Education of Terminal, Inc. et al., 43, 56–58 Concurrent jurisdiction, 14
Topeka, 52 Civil Aeronautics Act of 1938, 122 Concurrent ownership, 219
 Index 329

Congress of the United States: Contracts, 160–170 Criminal law (Cont.):

authority of, 41–42 capacity requirement for, 162 and levels of aviation regulation,
commerce regulation by, 44–46 consideration requirement for, 76–79
control of administrative agencies 161–162 and regulatory vs. criminal
by, 140 defenses to, 164–166 violations, 79–83
delegation of authority by, 41 defined, 160 Robert David Ward v. State of
express preemption by, 43 insurance, 230, 232–234 Maryland, 76–79
Congressional Review Act of lawfulness requirement for, state, 76
1996, 140 162–164 tort law vs., 92
Consequences, foreseeable, mutual agreement requirement for, United States of America v.
100–101 160–161 SabreTech, 80–83
Consequential damages, 169 of partnerships, 195 United States v. Evinger, 83–85
Consideration (contracts), 161–162 remedies for breach of, 168–170 Criminal procedure, 69–71
The Constitution of the United States rights and duties of, 167–168 Criminal violations, 79–83
of America, 37–62, 303–318 sales, 171 Cruel or unusual punishments, 73
and aircraft noise regulation, 56–58 written vs. oral, 166 Custom (international law), 281
amendments to, 312–318 Contributory negligence, 103, 106
Articles of, 39, 303–312 Conventions, 280 (See also specific
authority for, 39 conventions) Dallas Aerospace, Inc. v. CIS Air
basic rights of individuals and Conversion of personal property, Corporation, 180–182
businesses, 49–52 96–97 Damages:
Braniff Airways, Inc. v. Nebraska Coownership, 194 monetary (contracts), 169
State Board of Equalization Corporate opportunity doctrine, redress for (see Tort law)
and Assessments et al., 59–62 208–211 David E. Hollins v. Delta Airlines,
checks and balances under, Corporations, 202–207 269–272
39–40 duties in, 204–205 De novo review, 139
City of Burbank et al. v. Lockheed formation of, 203 Debtor-creditor issues, 174–179
Air Terminal, Inc. et al., liability issues for, 205–206 Defamation, 52, 95
56–58 operating, 204 Defendants, protections for, 71–73
commerce clause, 42–44 taxation of, 206–207 Delta Airlines, 179
court system under, 11–12 Counterclaims, 19 Department of Commerce, 122
distribution of authority between Courts, 11–13 Department of Labor (DOL), 120
federal and state governments, appellate court authority, 4 Department of Transportation (DOT),
41–49 federal, 11–13 (See also United 120–122
full faith and credit clause, 48–49 States Supreme Court) FAA under, 123
and long-arm statutes, 16 state, 12–13 NTSB independence from, 123
and priority of laws, 5 (See also specific cases) open skies initiative of, 283
protections for defendants, 71–73 Covenants not to compete, 163 rulemaking by, 123
as source of law, 3 Credit, 175–177 Department of Transportation (DOT)
structure and organization of the Criminal law, 7–8, 67–88 Act, 122, 123
federal government, 39–41 acts and intents in, 69 Depositions, 21
supremacy clause, 42–43 affecting aviation activities, 74–76 Direct conflict, preemption by, 43
and “taking” of property, 52–56 and airman/pilot certificates, 83–85 Disability insurance, 234
and taxation, 59–62 California v. Ciraolo, 85–88 Disclaimers, 107
United States v. Causby et ux., classifications of, 68–69 Disclosure of information, 127
53–56 constitutional protections for Discovery, 21
Constitutionality of laws, 39 defendants, 71–73 Discrimination:
Constitutions, state, 3–5, 38 criminal procedure under, 69–71 employment, 263–269
Consumer debt adjustment (Chapter 13) and evidence obtained by flying against interstate commerce, 46
bankruptcy, 179, 180 over private property, 85–88 racial, 269–272
Contract liability, 258–259 federal, 74–76 in “undue burden” cases, 47–48
330 Index

Dispute resolution, 11–26 Employee protection laws (Cont.): FAAP (Federal Airport Aid
alternative methods for, 25–26 Family and Medical Leave Act of Program), 223
in court system, 11–13 1993, 168–169 Fair Employment Practices Act, 264
jurisdictional matters, 13–17 Occupational Safety and Health Fairness of legal system, 10
litigation process, 17–25 Act of 1970, 266 False imprisonment, 94
Disputes, 3 privacy, 266–267 Falsifying documents, 74
District courts, federal, 11, 27 Social Security, 268 Family and Medical Leave Act
Documents: unemployment insurance, 268 (FMLA) of 1993, 168–169
FAA inspection of, 127 workers’ compensation, 267–268 FARs (see Federal Aviation
falsifying, 74 Employees: Regulations)
DOL (Department of Labor), 120 and labor unions, 261–263 Fault, standards of, 69, 70
DOT (see Department of laws protecting, 263–269 Federal Airport Aid Program
Transportation) Employer-employee relationships, (FAAP), 223
Double jeopardy, 72 254, 255, 259, 260 Federal Arbitration Act, 25
Drug testing, 267 Employment law, 253–276 Federal Aviation Act of 1958,
Dry leases, 228, 229 and Age 60 rule, 272–276 122–123
Due process, 50–51 agency law, 254–261 Federal Aviation Administration
Duress: David E. Hollins v. Delta Airlines, (FAA), 122–123, 133–138
as defense to contract, 166 269–272 and adjudication of cases, 131–133
Duties, contract, 167–168 employee protection, 263–269 administrative actions by, 137
Duty, breach of, 92, 98–99 and labor unions, 261–263 aircraft leasing requirements of, 229
Duty of care, 97–98, 205 Professional Pilots Federation, aircraft registry, 224–225
et al. v. FAA, 273–276 airport improvement programs,
and racial discrimination, 269–272 223–224
EAJA (Equal Access to Justice Enforcement, 123 Aviation Safety Action Program
Act), 140 flow of, 134 of, 137
Easements, 221 of judgments, 24–15 civil penalties from, 142
Eastern Airlines, 75, 179 Enforcement investigative reports emergency actions by, 133–135
Edward Miles, Richard W. Keenan (EIRs), 130 enforcement investigative reports
and Kenneth L. “Dusty” Enron, 210 of, 130
Burrow, Appellants, v. John F. Entities, business (see Business entities) impact of, 5, 120
Kavanaugh, Appellee, 183–185 Environmental Protection Agency interpretations of rules by, 125
Eighteenth Amendment, 315–316 (EPA), 120 investigations by, 127–131, 134
Eighth Amendment, 73, 313 Equal Access to Justice Act letters of investigation from,
EIRs (enforcement investigative (EAJA), 140 127–128
reports), 130 Equal Pay Act, 264–265 NASA ASRP, 135–136
El Al Israel Airlines, Ltd. v. Tsui Yuan Equal protection, 51–52 Notice of Proposed Certificate
Tseng, 289–293 Equitable damages, 170 Action from, 128–130
Eleventh Amendment, 313 Escrow, 239–240 and reexamination for
Emergency orders (FAA), 133–135 Ethics, law and morals vs., 8, 9 compliance, 138
Eminent domain, 50, 51 Evidence obtained by flying over regulation by, 120
Emotional distress: private property, 85–88 regulations of, 27, 124
intentional infliction of, 94–95 Exclusionary rule, 72 rule-making power of, 41, 123
negligent infliction of, 102 Executive branch (U.S. government), Federal Aviation Agency, 123
Employee protection laws, 263–269 39, 139 Federal Aviation Regulations (FARs),
Age Discrimination in Express preemption, 43, 62 124, 127, 224
Employment Act, 265 Express warranties, 172 Federal Communications
Americans with Disabilities Commission, 142
Act, 265 Federal (U.S.) Court of Appeals:
Equal Pay Act, 264–265 FAA (see Federal Aviation appeals of administrative agency
Fair Employment Practices Act, 264 Administration) actions, 138
 Index 331

Federal (U.S.) Court of Appeals (Cont.): Freedom of press, 52 In rem jurisdiction, 16

FAA filings with, 133 Freedom of speech, 52 Independent contractors, 254–255,
reporters for, 26 FTC (see Federal Trade Commission) 260–261
Federal court system, 11–13, 39–40 FTC v. Ruberoid Co., 120 Independent Safety Board Act of
Federal criminal law, 74–76 Full faith and credit clause, 48–49 1975, 123
Federal government: Functions of law, 2–3 Indictments, 70
delegation of authority to, 41–42 Individuals, basic rights of, 49–52
distribution of authority between In-flight (-motion) insurance, 235
state governments and, 41–49 GARA (see General Aviation Information, disclosure of, 127
limits on authority of, 49–52 Revitalization Act) Injunctions, 170
overlapping function within, 40–41 Garnishments, 24 Injury:
structure and organization of, Garvey v. NTSB and Merrell, as element of negligence, 102
39–41 145–149 redress for (see Tort law)
Federal jurisdiction, 28–31 General Aviation Revitalization Act Inside directors, 204
Federal law, 7 (GARA), 112, 114 Inspections, 127
Federal preemption, 42–44 General law, 281 Insurable interest in aircraft, 232,
Federal statutes, priority of laws and, 5 General partnerships (see 239, 241–243
Federal Trade Commission (FTC), Partnerships) Insurance, 230–235, 267–268
120, 142 Gideon v. Wainwright, 73 Intangible property, 230
Fee simple absolute, 219 Government, protecting process of, 3 Intent, criminal, 69
Felonies, 8, 68 Grand jury indictments, 70 Intentional infliction of emotional
Fiduciary duty, 204 Griggs v. Allegheny County, 56 distress, 95
Fiduciary relationship, 254 Guarantees, 177 Intentional torts, 93–97
Fifteenth Amendment, 315 Gun Free School Zone Act of 1990, 45 against persons, 93–95
Fifth Amendment, 49–51, 72, against property, 95–97
312–313 Intermediate scrutiny test (equal
First Amendment, 52, 312 Hague Protocol of 1955, 295 protection), 51–52
First Conference on Private Air Law Hamlet (William Shakespeare), 174 International aviation law, 279–295
(Paris), 284 Havana Convention of 1928, 281, 282 Air France v. Saks, 288–289
FMLA (see Family and Medical Hazardous Materials Transportation and definition of “accidents,”
Leave Act of 1993) Act, 75 287–289
FOIA (see Freedom of Health insurance, 234 El Al Israel Airlines, Ltd. v. Tsui
Information Act) Helicopteros Nacionales De Yuan Tseng, 289–293
Foreseeability test, 100–101 Colombia, S.A. v. Hall et al., and forum for filing claims,
Form 277B (NASA ASRS), 136, 31–33 293–295
319–321 Hold harmless clauses, 163–164 and International Civil Aviation
Forms of business (see Business Hull insurance, 231 Organization, 287
entities) Hunt v. Washington State Apple origins of, 280–281
Fort Gratiot Sanitary Landfill, Inc. v. Advertising Commission, 46 private, 283–286
Michigan Department of Natural public, 281–283
Resources, 46 Resham Jeet Singh, Gursharan Jeet
Fourteenth Amendment, 49–52, ICAO (see International Civil Kaur, Individually and as
314–315 Aviation Organization) Guardians of Gurpreet Kaur
Fourth Amendment, 71–72, 312 Implied assumption of risk, 104 v. Tarom Romanian Air
Fractional ownership, 229–230 Implied preemption, 43 Transport, 293–295
Fraud: Implied warranties, 172–173 and suits in actions based on local
as defense to contract, 165 In personam jurisdiction, 15–16 law, 289–293
mail and wire, 74–75 In re: UAL Corporation, et al., International Civil Aviation
Fraudulent misrepresentation, 165 Debtors. Chapter 11, Case No. Organization (ICAO), 282, 287
Freedom of Information Act (FOIA), 02-B-48191 (Jointly International Shoe Co v.
141, 142 Administered), 185–187 Washington, 33
332 Index

International Standards and Law(s): Litigation process, 17–25

Practices, 287 code (statutory), 4–5 answer, 18–20
International Technical Committee of common (case), 4, 5 appeals, 23–24
Aerial Legal Experts, 284 definitions of, 2 civil procedure, 17
Interpretations of regulations/mandates, functions of, 2–3 complaint, 17–18
125, 139 priority of, 5, 6 enforcing judgments, 24–15
Interrogatories, 21 researching, 27 pre-trial, 19–22
Interstate commerce, 45–48 sources of, 3–6 summons, 18–19
Intervening cause, 101 (See also specific laws; specific types trial, 22–23
Inverse condemnation, 50 of law, e.g.: Criminal law) LLCs (see Limited liability
Investigation: Law review articles, 27 companies)
of accidents (NTSB), 123 Lawyer’s Edition, 26 Logbooks, FAA inspection of, 127
in enforcing statutes/regulations, Lear Romec, 114 LOI (see Letter of investigation)
127–131 Leasing: “Long-arm statutes,” 16
aircraft, 228–229 Loss, risk of, 174
real property, 222–223 Lucia v. Teledyne, 28–31
James Bowman v. American Home Legal brief, 24
Assurance Company, 241–243 Legal precedents, 4
Johnson, Lyndon, 122 Legal research, 26–27 Machado v. Administrator, 137
Joint tenancy, 219 Legal systems, effectiveness of, Mail fraud, 74–75
Journal of Air Law and Commerce 9–10 (See also United States Malum in se, 68
(Southern Methodist legal system) Marbury v. Madison, 39
University), 27 Legislative branch (U.S. Martin v. OSHRC, 149
Judges, 11, 12, 39 government), 39, 140 Material interference, 43
Judgment on pleadings, motion for, 20 Legislative enactments, 5 Mechanics’ liens, 177
Judgment-proof debtors, 175 Legislative rules, 124 (See also Mediation, 21, 25–26, 262
Judicial branch (U.S. government), Regulation(s)) Medical certificates, 83
39, 138–139 Letter of Correction (FAA), 137 Mens reas, 69
Judicial circuits, 11 Letter of investigation (LOI), Minitrials, 26
Jurisdiction, 13–17 127–128 Miranda rights, 72
concurrent, 14 Liability: Misdemeanors, 8, 69
defined, 13 in agency relationships, Mistakes, contracts and, 164–165
federal, 28–31 258–261 Model Penal Code (American Law
in federal courts, 11–12 for corporations, 205–206 Institute), 69, 70
over parties (personal), 14–17 dollar limits to, 285 Modified comparative negligence,
personal, 31–33 for limited partnerships, 198–199 103–104, 107
state, 15 of LLC members, 201, 202 Montreal Convention of 1999,
in state courts, 12–13 for partnerships, 195–196, 198 284–286, 295
subject matter, 13–15 for sole proprietors, 193 Morals, law and ethics vs., 8, 9
Jury trials, 22, 26 under Warsaw Convention, Motion for judgment on
284, 285 pleadings, 20
Liability insurance, 231–232 Motion for summary judgment, 22
Kassell v. Consolidated Freightways, Libel, 95 Mutual mistakes, 164–165
Corp., 47 Liens, 177
Kelo v. City of New London, Life insurance, 235
Connecticut, 50 Limited liability companies (LLCs), NASA (see National Aeronautic and
Key-person life insurance, 235 200–202 Space Administration)
Klinicki v. Lundgren, 208–211 Limited partnerships, 197–200 NASA ASRS Form 277B, 136,
Line-Item Veto Act, 41 319–321
Liquidated damages, 169–170 National Aeronautic and Space
Labor unions, 261–263 Liquidation (Chapter 7) Administration (NASA),
Land, trespass to, 95–96 bankruptcy, 179 135–136
 Index 333

National Labor Relations Act Notice of Proposed Certificate Action Philko Aviation, Inc, v. Shacket et ux.,
(NLRA), 261 (NPCA), 128–130 236–240
National Labor Relations Board Notices (tort liability), 107 Pilots, non-instrument-rated, 149–153
(NLRB), 120 Not-in-flight (-motion) insurance, 231 Plaintiff misconduct, 106
National Mediation Board (NMB), NPCA (see Notice of Proposed Plaintiffs, 92
120, 262 Certificate Action) Plea bargains, 71
National Transportation Safety Board NTSB (see National Transportation Precedents, 4
(NTSB), 123 Safety Board) Preemption, federal, 42–44, 62
accident investigation function NTSB Identification: NYC05FA001, Presentment clause, 41
of, 123 150–153 President, agency control by, 139
adjudication of cases by, 40, 123, Presidential Emergency Board,
131–133 262–263
administrative law judges, 130 Occupational Safety and Health Act Press, freedom of, 52
EAJA rules by, 140 of 1970, 266 Pretrial conferences, 21–22
and FAA emergency orders, Occupational Safety and Health Pretrial process, 19–22
133–135 Administration (OSHA), Privacy Act of 1974, 141
and FAA reexamination of 127, 266 Private international aviation law,
airmen, 138 Offer, defined, 160–161 283–286
impact of, 120 Open skies agreements, 283 Private pilot certificates, 83
NYC05FA001 Accident Report, Operating agreement (LLCs), Private property:
150–153 200–201 evidence obtained by flying over,
public meetings of, 142 Opinion and Order (NTSB), 132–133 85–88
safety recommendations from, 120 Oral Initial Decisions, 132 preservation of, 3
and substantial evidence test, 139 Orr v. Orr, 52 rights to, 3
web site catalogue of cases, 27 OSHA (see Occupational Safety and Privity, 107
Negligence, 97–104 Health Administration) Procedural rules, 125
and agency, 259–260 Ownership: Product misuse, 106
breach of duty, 98–99 of aircraft, 224–225, 229–230 Professional Pilots Federation, et al.
comparative, 103–104, 106–107 of assets, 196 v. FAA, 273–276
contributory, 103, 106 fractional, 229–230 Proof:
defenses to, 102–104 of real property, 219–220 burden of, 92
duty of care, 97–98 standard of, 7, 8
elements of, 97 Property:
injury, 102 Palsgraf v. Long Island Railroad, and eminent domain, 50, 51
proximate cause, 99–102 100–101 and full faith and credit clause,
Negligence per se, 98–99 Pan Am, 179 48–49
Nelsen v. Morris, 211–212 Paris Convention of 1919, 281, 282 intangible, 230
New York Times Co. v. Sullivan, 52 Parties, jurisdiction over (personal intentional torts against, 95–97
“Nexus” test, 48 jurisdiction), 14–17, 31–33 jurisdiction over, 16
Nineteenth Amendment, 316 Partnerships, 194–197 real, 218–223
Ninth Amendment, 313 Patents, 230 seizure of, 24
NLRA (National Labor Relations People v. DeFore, 71 “taking” of, 52–56
Act), 261 Perfection of security interest, 176 takings clause, 49–50
NLRB (National Labor Relations Personal jurisdiction (see Parties, tangible, 224–230
Board), 120 jurisdiction over) (See also Personal property)
NMB (see National Mediation Board) Personal property, 224–230 Property law, 217–247
Noise regulation, 56–58 conversion of, 96–97 and causal connection, 243–247
Nolo contendere, 71 intangible, 230 and insurable interest in aircraft,
Non-instrument-rated pilots, tangible, 224–230 239, 241–243
149–153 trespass to, 96 and insurance, 230–235
Norris-LaGuardia Act of 1932, 261 Persons, intentional torts against, James Bowman v. American Home
Northwest Airlines, 179 93–95 Assurance Company, 241–243
334 Index

Property law (Cont.): Regulation(s) (Cont.): Santa Monica Airport Association,

personal property, 224–230 interpretations of, 125 et al. v. City of Santa Monica, 59
Philko Aviation, Inc, v. Shacket noise, 56–58 Sarbanes-Oxley Act of 2002, 210–211
et ux., 236–240 origin of, 122 Search and seizure, 71–72
private property rights, 3 researching, 27 SEC (see Securities and Exchange
public use airports, 223–224 state, 5 Commission)
real property, 218–223 “validly adopted,” 145–149 Second Amendment, 312
South Carolina Insurance Rental agreements, 222–223 Secured transactions, 175–177
Company v. Lois S. Collins, Reorganization (Chapter 11) Securities and Exchange Commission
245–247 bankruptcy, 179, 180 (SEC), 120, 142
Western Food Products Company, Reporters (case law), 6 Self-incrimination, 72
Inc. v. United States Fire Repose, statute of, 107, Separation of powers, doctrine of, 41
Insurance Company, 243–245 112–114 Seventeenth Amendment, 315
Protections: Res ipsa loquitur, 99 Seventh Amendment, 313
for accused, 73 Rescission of contract, 168–169 Shakespeare, William, 174
for employees, 263–269 Resham Jeet Singh, Gursharan Jeet Shares, corporate, 203
Proximate cause, 99–102 Kaur, Individually and as Simpson, O. J., 92
Public hearings, 142 Guardians of Gurpreet Kaur v. Sixteenth Amendment, 315
Public international aviation law, Tarom Romanian Air Transport, Sixth Amendment, 73, 313
281–283 293–295 Skidmore v. Swift & Co., 125
Public use airports, 223–224 Resource Conservation and Recovery Slander, 95
Punitive damages, limits on, 107–108 Act (RCRA), 75 Smooth limits insurance, 231–232
Pure comparative negligence, 103, Respondeat superior, 260 Social Security, 268
106–107 Restatement of Torts (American Law Social Security Administration
Institute), 93 (SSA), 40
Rights: Sole proprietorships, 192–194, 201
Quasi in rem jurisdiction, 16 for accused, 73 Sources of law, 3–6
assignment of, 167 South Carolina Insurance Company
of individuals/businesses, 49–52 v. Lois S. Collins, 245–247
Racial discrimination, 269–272 Risk: Southern Methodist University, 27
Railway Labor Act (RLA), 261, 262 assumption of, 104, 106 Special (special jurisdiction) courts, 12
Rational relationship test, 51 of insurers, 230 Special skills/knowledge, negligence
RCRA (Resource Conservation and of loss, 174 and, 99
Recovery Act), 75 RLA (see Railway Labor Act) Specific performance, 170
Real property, 218–223 Robert David Ward v. State of Speech, freedom of, 52
easements, 221 Maryland, 76–79 Speedy trial, 73
leasing, 222–223 Rulemaking, 123 SSA (Social Security
ownership of, 219–220 by administrative agencies, Administration), 40
test for, 218 124–125, 142–145 Stability of legal system, 9
transfers of, 220–221 APA requirements for, 124–125 Standard of proof:
zoning issues with, 221–222 by FAA, 123 in civil cases, 7
Reasonable doubt, 68 in criminal cases, 8
Reasonable person test, 98–99 Stare decisis, doctrine of, 4
Reasonableness test, 163 S corporations, 206–207 State administrative agencies, 120
Reckless operations laws, 76 Safety: State constitutions, 3–5, 38
Reformation, 170 documentary evidence for, 74 State court systems, 12–13, 15–17
Registering aircraft, 225, 227 employee, 265–269 State criminal law, 76
Regulation(s): Sales: State governments:
of aviation, levels of, 76–79 of aircraft, 224–226 distribution of authority between
under commerce clause, 44–48 of real property, 220–221 federal government and, 41–49
creation of, 124–125 Sales law, 170–174 limits on authority of, 49–52
 Index 335

State jurisdiction, 15 Taxation, 59–62 Twenty-fifth Amendment, 318

State laws/statutes, 7 and agency relationships, 255 Twenty-first Amendment, 317
and priority of laws, 5 of corporations, 206–207 Twenty-fourth Amendment, 317
reporters for, 27 of limited partnerships, 200 Twenty-second Amendment, 317
taxation, 62 of LLC members, 202 Twenty-seventh Amendment, 318
State regulations, priority of laws of partnerships, 196–197 Twenty-sixth Amendment, 318
and, 5 of sole proprietorships, 193–194 Twenty-third Amendment, 317
States’ rights, 3 in “undue burden” cases, 47–48 Tyco, 210
Statute of Frauds, 166, 255 Teledyne Continental Motors, 114
Statute of limitations, 286 Tenancy:
Statute of repose, 107, 112–114 in common, 219 U.C.C. (see Uniform Commercial
Statutes, researching, 27 by the entirety, 219–220 Code)
Statutory law (see Code law) Tenth Amendment, 114, 313 “Undue burden” regulations, 46–48
Storing aircraft, 225, 228 Terrorism, federal law on, 75 Undue influence, 165–166
Strict liability crimes, 69 Third Amendment, 312 Unemployment insurance, 268
Strict product liability, 104–112 Third-party beneficiaries, 168 Uniform Commercial Code (U.C.C.),
Brockelsby v. United States of Thirteenth Amendment, 314 166, 171, 174–176
America and Jeppesen, Title, transfer of, 173–174 Unilateral mistakes, 164
108–112 Tort law, 91–114 Unions, 261–263
defenses to, 105–108 Altseimer v. Bell, 112–114 United Airlines, 185–187
elements of, 104–105 Brockelsby v. United States of United Nations, 287
Strict scrutiny test (due process), 51 America and Jeppesen, United States Coast Guard, actions
Strict scrutiny test (equal 108–112 by, 123
protection), 52 criminal law vs., 92 United States Code (U.S.C.), 74
Strikes, labor, 263 and GARA statute of repose, United States Constitution (see The
Subject matter, classifying law 112–114 Constitution of the United States
by, 6–7 intentional torts, 93–97 of America)
Subject matter jurisdiction, 13–15 negligence, 97–104 United States Court of Appeals (see
Sublimited insurance coverage, 231 objectives of, 92 Federal Court of Appeals)
Substantial evidence test, 139 strict product liability, 104–112 United States legal system, 1–33
Substantive due process, 51 wrongful death, 104 alternative dispute resolution
Summary judgment, motion for, 22 Tort liability, 259–261 methods, 25–26
Summary jury trials, 26 Tort reform, 108 classifications of law, 6–8
Summons, 18–19 Trade names, 193 court system, 11–13
Sunshine Act, 142 Trademarks, 230 and distinctions between law,
Superseding cause, 101 Transfer of title, 173–174 ethics, and morals, 8, 9
Supremacy clause, 42–43 Transferred intent, doctrine of, 94 and effectiveness of legal
Supreme Court Reporter, 26 Treaties, 4 systems, 9–10
Supreme courts: and priority of laws, 5 federal jurisdiction case, 28–31
federal (see United States Supreme as source of international law, 280 functions of law, 2–3
Court) Trespass: Helicopteros Nacionales De
state, 13 to land, 95–96 Colombia, S.A. v. Hall et al.,
Surety arrangements, 177 to personal property, 96 31–33
Surrounding circumstances (in Trials: jurisdictional matters, 13–17
negligence), 98 criminal, 71, 73 legal research, 26–27
NTSB, 132 litigation process, 17–25
in U.S. legal system, 22–23 Lucia v. Teledyne, 28–31
“Taking” of property, 52–56 under Warsaw Convention, 285–286 personal jurisdiction case, 31–33
Takings clause (Fifth Amendment), TWA, 179 sources of law, 3–6
49–50 Twelfth Amendment, 313–314 United States of America v.
Tangible property, 224–230 Twentieth Amendment, 316 SabreTech, 75, 80–83
336 Index

United States Reports, 26 U.S.C. (see United States Code) Warsaw Convention, 284–286
United States Supreme Court, 12 “Validly-adopted” interpretations, 139 Western Food Products Company,
and commerce clause, 44 “Validly-adopted” regulations, 145–149 Inc. v. United States Fire
power of judicial review, 39–40 Venue, 16–17 Insurance Company, 243–245
reporters for, 26 Violations (criminal), 69 Wet leases, 228, 229
(See also specific cases) Voir dire, 22 Wickard v. Filburn, 44–45
United States v. Causby et ux., 53–56 Wire fraud, 74–75
United States v. Evinger, 83–85 Workers’ compensation, 267–268
United States v. Lopez, 45 Wackenhut Corporation and Delta WorldCom, 210
United States v. Morrison, 45 Airlines, Inc. v. Lippert Supreme Writ of certiori, 12, 79
United States v. State of New York, 59 Court of Florida, 300–301 Wrongful death, 104
United States v. Virginia, 52 Wagner Act, 261
Unsecured credit, 175 Warning Notice (FAA), 137
Unwarranted by the facts Warranties, 171–173, 179–182 Zone of danger, 101
standard, 139 Warrants, arrest, 70 Zoning, 221–222