16 March 2010

US Aviation And Aerospace Newsletter

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Ninth Circuit holds that Airline Deregulation Act preempts passenger's class action claims based on airline's collection of Mexican tourism tax
United States Transport
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Ninth Circuit holds that Airline Deregulation Act preempts passenger's class action claims based on airline's collection of Mexican tourism tax

Sanchez v. Aerovias de Mexico, S.A. de C.V., 590 F.3d 1027 (9th Cir. 2010); 2010 WL 10981

The United States Court of Appeals for the Ninth Circuit recently issued a decision relating to taxes and fees collected by airlines from their passengers. The Sanchez case was a proposed class action lawsuit, which arose when Ms. Sanchez purchased a ticket for air transportation from California to Mexico on Aeromexico. At the time she purchased her ticket, Aeromexico collected a tourism tax in the sum of US$22 on behalf of the Mexican government. Passengers who were Mexican citizens were legally exempt from paying the tax under Mexican law; however, Aeromexico collected the tax from every passenger flying from the United States to Mexico, regardless of his or her citizenship.

Ms. Sanchez, who is a Mexican citizen and, therefore, exempt from paying the tourist tax, brought an action in the US against Aeromexico, alleging that Aeromexico breached its contractual obligations by improperly collecting the tax and failing to disclose that the tourism tax was not due from exempt passengers.

Aeromexico moved for summary judgment on the grounds that the Airline Deregulation Act of 1978 ("ADA") preempted Sanchez's claims, since her claims relate to an airline's "price, route or service." The preemption clause of the ADA provides that a "State...may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier...." 49 U.S.C. § 41713(b)(1). Sanchez argued that her claims were not subject to the preemption clause of the ADA, because the tourism tax is "a fee separate from the fare for air transportation that had no economic effect on "price."

The district court held that the ADA preempted Sanchez's claims and the Ninth Circuit Court of Appeals affirmed, holding that there was no evidence that Aeromexico had a contractual obligation to Sanchez to advise her of her rights with respect to the tourism tax or her rights to a refund of the tax. The Court specifically found that Aeromexico's website, which stated that the passenger "shall remain fully liable for all...taxes arising from the use of this Site," did not create any obligations on the part of Aeromexico with respect to the tourism tax. The Court noted that, if Sanchez had been able to demonstrate that Aeromexico breached its own, self-imposed undertakings, Sanchez's claims would have fallen outside the ADA preemption clause and Sanchez's claims would have survived dismissal based on the decision in American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995). Since Sanchez could not show that Aeromexico had a contractual obligation to advise her of her rights with respect to the tourism tax, the ADA preempted Sanchez's claims, and the Court of Appeals affirmed the district court's ruling granting summary judgment in favor of Aeromexico.

Two federal district courts hold that Montreal Convention preempts state law claims

Nobre v. American Airlines, 2009 WL 5125976 (S.D. Fla. 2009)

Schaefer-Condulmari v. US Airways Group, Inc., 2009 WL 4729882 (E.D. Pa. 2009)

The United States District Court for the Southern District of Florida recently held that the Montreal Convention preempts federal racial discrimination claims. In Nobre v. American Airlines, plaintiffs were passengers on board an American Airlines flight from New York to Sao Paulo, Brazil. Plaintiffs claimed that during the flight, the flight attendants subjected them to racially charged and discriminatory comments. Plaintiffs filed an action against the airline alleging violations of federal racial discrimination laws.

American Airlines moved to dismiss the complaint on the grounds that plaintiffs' claims were preempted by the Montreal Convention. Plaintiffs argued that the Montreal Convention did not preempt their claims because the acts of the flight attendants were "not incident to or otherwise related to any aspect of [the airline's] provision of service."

The Court rejected plaintiffs' arguments, holding that Article 29 of the Montreal Convention provides the exclusive remedy for all claims, however founded, falling within its scope. The Court held that the Montreal Convention is not limited to claims arising from the airline's provision of "services," but instead applies to all claims arising out of international transportation, however founded.

Similarly, in Schaefer-Condulmari v. US Airways Group, Inc., the United States District Court for the Eastern District of Pennsylvania held that plaintiff's personal injury claims arising out of her alleged food poisoning on board an international flight were completely preempted by the exclusivity provision of Article 29 of the Convention. The Court considered the text of Article 29 as well as the Explanatory Notes to the Montreal Convention and determined that the Montreal Convention completely preempts state law claims involving a passenger's bodily injury suffered on board an international flight.

Texas Federal Court Upholds Liability Limitation Under Article 21 of the Montreal Convention

Wright v. American Airlines, Inc., 2010 WL 446077 (February 8, 2010)

In Wright v. American Airlines, Inc., plaintiff filed an action against American and fellow passenger Craig Thompson ("Thompson"). Plaintiff alleged that on September 8, 2007, he and Thompson were passengers on American flight number 322, which traveled from Dallas/Fort Worth International Airport to New York's John F. Kennedy International Airport. Flight 322 was the first leg of the outbound portion of plaintiff's round trip between Dallas/Fort Worth and Zurich, Switzerland.

Shortly after the departure of Flight 322, and while the "fasten seat belt" light was still illuminated, Thompson got out of his seat and attempted to retrieve baggage from the overhead compartment. The bag containing Thompson's laptop computer fell from the overhead compartment and struck plaintiff on the head, allegedly causing him immediate and severe pain in his head, neck, and upper back area. After several days in Switzerland, plaintiff alleged that his injuries became unbearable, and he was admitted to the hospital for treatment.

Plaintiff asserted a cause of action against American for personal injury under Articles 17 and 21 of the Montreal Convention, which provides for compensation to passengers in international air carriage for death and personal injury caused by accidents occurring on board an aircraft or in the course of embarking or disembarking. Plaintiff alleged that the injuries he sustained when Thompson's baggage fell from the overhead compartment were the direct and proximate result of American's failure to: (1) take necessary precautions to anticipate the situation that caused the hazardous condition onboard Flight 322 that resulted in plaintiff's injury; (2) avoid the hazardous condition the caused plaintiff's accident onboard Flight 322 that resulted in plaintiff's injury; (3) adequately train and/or supervise its agents, servants, and employees in the proper security protocol and customer relations and violated their own rules, guidelines, and policies; and (4) control all the embarked passengers and ensure that they adhered to Federal Aviation Regulations by remaining seated during the critical take-off phase of the flight.

Plaintiff sought damages for medical expenses, loss of earning capacity, economic loss, and physical and mental pain and suffering, as well as all other recoverable damages. He alleged that because his injuries were caused by American's negligence or other wrongful act, American was liable for damages exceeding 100,000 Special Drawing Rights as provided in Article 21.

The Court noted that an air carrier is strictly liable for any damages up to 100,000 SDR, as long as those damages result from an "accident" occurring on board its aircraft or during the embarking or disembarking processes. However, the court recognized that a carrier can avoid liability for any damages exceeding 100,000 SDR by proving that plaintiff's damages were not caused by its own negligence, omission, or other wrongful act, or by proving that they were solely caused by the negligence, omission, or other wrongful act of a third party.

The Court held that American adduced evidence sufficient to prove that plaintiff's injuries were not caused by any negligence, omission, or other wrongful act on its part or on the part of its flight crew. The Court found that the undisputed summary judgment evidence showed that the flight crew did all that it could do to prevent Thompson from getting up.

The crew made all of the standard pre-flight safety announcements. These included informing the passengers that the captain had turned on the "fasten seat belt" sign and warning the passengers to "be careful when opening overhead bins because falling objects can cause injury to you or someone seated near you." The Court focused on the fact that Thompson got up from his seat while the aircraft was still ascending, before the point when the flight attendants typically unbuckle themselves and begin performing their in-flight duties, the flight attendant seated closest to plaintiff did not see Thompson get up and that she could not have seen him get up, as, by plaintiff's own admission, her line of sight would have been obstructed by the wall of the aircraft lavatory.

The Court held that this evidence demonstrated that there was nothing that the flight crew could have done differently to prevent Thompson from opening the overhead bin, that plaintiff's injuries were not due to the negligence, omission, or other wrongful act of American and that American was not liable for any of plaintiff's damages exceeding 100,000 SDRs.

Washington State Supreme Court Upholds US$8 Million Default Judgment Against Manufacturer for Discovery Abuses

Magaña v. Hyundai Motor America, 220 P.3d 191 (Wash. 2009)

While not an aviation or aerospace case, this case is instructive to manufacturers in respect of discovery obligations in the US.

Washington State's highest court recently upheld a default judgment in the sum of US$8 Million against an automobile manufacturer for discovery abuses during pretrial discovery. In Magaña v. Hyundai Motor America, Jesse Magaña, a passenger in a Hyundai Accent automobile was rendered paraplegic in an automobile accident in 1997. He filed suit in Washington State Court against the automobile manufacturer, alleging claims for a design defect which caused the seat to collapse.

During pretrial discovery, Magaña requested that the manufacturer produce documents related to other incidents of seat back failures from 1980 to the present, and to identify the name and model number of all Hyundai models that used the same front right seat as the automobile involved in the incident. The manufacturer responded by stating that that there were "no personal injury or fatality lawsuits or claims in connection with or involving the seat back of the Hyundai Accent model years 1995 to 1999," and that "the 1995 to 1999 Hyundai Accents used the same...right front seat as the 1996 Hyundai Accent...[and] no other Hyundai model automobile uses the same or substantially similar design for the right front seat."

Magaña prevailed at a jury trial and was awarded US$8 Million in damages, with 60 percent of the fault attributed to the automobile manufacturer and 40 percent to the other drivers involved in the accident. The Court of Appeals reversed the verdict as to the manufacturer and ordered a retrial, holding that the trial court erred in failing to strike certain expert testimony. The trial court set the retrial date for January 17, 2006.

Several months prior to the retrial date, Magaña requested that the manufacturer update its responses to Magaña's previous discovery requests. The manufacturer produced some additional documents, but continued to limit its discovery responses to specific years and model types. The trial court ordered the manufacturer to produce all the documents responsive to Magaña's original requests. Six weeks before the retrial date, the manufacturer for the first time produced documents from its consumer hotline database, which included nine reports of seat back failure involving 1995 to 1999 Hyundai Accents.

Magaña moved for a default judgment against the manufacturer, arguing that it would be impossible to prepare the case for retrial in light of the newly produced evidence of other similar incidents. The trial court found that the manufacturer had committed serious discovery violations which substantially prejudiced Magaña's ability to prepare for trial, and the trial court granted default judgment in favor of Magaña in the sum of US$8 Million.

The Court of Appeals reversed the default judgment and the Washington Supreme Court granted review, in which it upheld the trial court's default judgment in a bluntly worded decision. The Supreme Court noted that "trial courts need not tolerate deliberate and willful discovery abuse...the trial court appropriately diagnosed Hyundai's willful efforts to frustrate and undermine truthful pretrial discovery efforts by striking its pleadings and rendering an $8,000,000 default judgment. This result appropriately compensates the other party, punishes Hyundai, and hopefully educates and deters others so inclined."

The Court specifically found that Hyundai had made false representations in its discovery responses, and that it had failed to supplement its incorrect responses as required by the discovery code.

The Court further noted that corporations have an obligation to search all of their departments, not just their legal department, when a party requests information in discovery. The Court dismissed Hyundai's argument that it would have taken "an extensive computer search" to comply with the discovery requests, holding that Hyundai had an obligation to "maintain a document retrieval system that would enable the corporation to respond to plaintiff's requests." Finally, the Court noted that while lesser sanctions against Hyundai could have been imposed by the trial court, the trial court did not abuse its discretion in imposing the default judgment against Hyundai for its willful and deliberate failure to comply with discovery.

Montreal Convention limits of liability increased

The ICAO has increased the limits of liability under the Montreal Convention in light of inflation over the last five years. The new limits became effective December 30, 2009. The new limits are as follows: for destruction, loss, damage or delay of cargo, 19 SDRs; for damage or delay of baggage, 1,131 SDRs; for delay in carriage of passengers, 4,694 SDRs; and for death or bodily injury to passengers, 113,100 SDRs. The US Department of Transportation has advised air carriers to revise their contracts of carriage and tariffs accordingly.

Malev Hungarian Airlines Renationalized

Hungarian airline Malev has been re-nationalized. The Hungarian State recently acquired 95 percent of the airline's shares. The remaining 5 percent is owned by the Russian air transport group AirBridg Zrt. It has been reported that part of the transaction involved a US$127 Million investment in the airline by Hungry, but the precise terms of the deal have not yet been released.

The Federal Aviation Administration Proposes Stiff Penalties against American Eagle and GE Caledonian

On February 17, the Federal Aviation Administration ("FAA") issued a press release announcing its proposed US$2.9 Million civil penalty against American Eagle Airlines for allegedly operating more than 1,000 flights using aircraft on which improper repairs had been performed on landing gear doors. The FAA alleges that between February and May 2008, American Eagle conducted at least 1,178 passenger-carrying flights using four Bombardier jets with main landing gear doors that had not been repaired in accordance with an Airworthiness Directive that became effective in August 2006. The FAA stated that Airworthiness Directive 2006-14-05 required operators of certain Bombardier aircraft to inspect the left and right main landing gear inboard doors for cracks and other damage, including loose or missing fasteners. The directive required operators to remove affected doors and replace them with new or repaired ones, or that the doors be removed and the discrepancy noted in the aircraft's records.

The FAA alleges that American Eagle found such damage on four aircraft, and repaired the landing gear doors while they remained on the aircraft, rather than removing them. The FAA states that its inspectors found that the airline operated at least 961 flights while it was unaware that the situation existed on these aircraft and that, after the situation was discovered, the airline continued to operate these aircraft on 217 additional flights. American Eagle subsequently removed the landing gear doors on each of the affected aircraft and repaired them in accordance with the Airworthiness Directive. The alleged violations resulted in a proposed civil penalty of US$2.9 Million.

On February 19, the FAA issued a press release announcing its proposed US$1.2 Million civil penalty against GE Caledonian, an FAA-certificated foreign repair station based in Scotland. The FAA has alleged improper maintenance procedures involving 101 engines over a three-and-one-half-year period. Specifically, the FAA alleges that between January 2005 and May 2008, GE Caledonian used a procedure to remove the thrust pins from the forward engine mounts of 101 CF6 engines that was different than the one required by the manufacturer's maintenance manuals. When it removed the thrust pins, the FAA alleges that GE Caledonian welded the locking screw to the thrust pin instead of drilling and tapping a hole in the thrust pin, as required in the manual.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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