Ladd Sanger: Aviation Law in Texas

Aviation Cases Address Pre-Emption, Jurisdictional Matters
by Ladd Sanger as seen in Texas Lawyer (July 13, 2009, issue)

Texas is a national and international hub of aviation activity. The following are some of the more notable decisions involving Texas aviation law in the past year. They run the gamut from tort cases to commercial disputes and include a pre-emption issue that has received nationwide attention.

A particularly noteworthy decision applying Texas law, Ray v. American Airlines Inc. , came from the U.S. District Court for the Western District of Arkansas in April. The suit arose from the now infamous weather delay of an American Airlines flight in Austin in which some passengers were kept on the parked aircraft for more than 11 hours before the flight eventually was canceled. Catherine Ray’s claims against American included false imprisonment, intentional infliction of emotional distress and negligence, among others, according to the opinion. American moved to dismiss the passenger’s claims on the grounds they were pre-empted by the federal Airline Deregulation Act and the Federal Aviation Act. The court dismissed a number of American’s pre-emption arguments, the opinion noted.

Under the Airline Deregulation Act, the court held that “allowing an individual to recover for injuries tortiously caused by a carrier does not create any such regulation” that would impact the carrier’s business functions, as required for pre-emption. While the court upheld American’s pre-emption arguments against passenger compensation under the deregulation act and the airline’s decision to divert the flight under the Federal Aviation Act, the opinion allowed the passenger to proceed with state claims for false imprisonment, intentional infliction of emotional distress and negligence.

U.S. and Texas officials also recently addressed federal pre-emption pertaining to air ambulance operations in Texas. There was a great deal of media attention on the helicopter emergency medical service industry after a number of high-profile crashes over the past year. In the wake of those accidents, federal and state regulatory agencies are rapidly moving to increase regulation of air ambulance operators, according to an article in the April 27 Air Safety Week .

While Texas courts have not yet had the opportunity to rule on the issue, the U.S. Department of Transportation and Texas Attorney General Greg Abbott issued formal opinions in November 2008. They said that the state cannot establish regulations that deal with aviation safety or economic issues, such as rates and scheduling, as the Airline Deregulation Act entirely pre-empts state regulation of those matters. The opinions are in keeping with a November 2006 formal opinion issued by the Office of General Counsel for the Texas Department of State Health Services that concluded only medical services provided onboard an air ambulance remain squarely within the state’s right to regulate, as noted in “Federal Preemption of State Regulation Over Air Ambulances” in the March issue of Air Medical Journal.

Defendants in aviation cases frequently raise jurisdictional challenges and often present substantial hurdles for plaintiffs in the initial stages of a suit. Aircraft commonly are bought and sold, maintained and serve customers at locations separated by state, national and international borders. The U.S. District Court for the Northern District of Texas in Dallas dealt with the jurisdictional issue in King v. Hawgwild Air in June 2008. According to the court’s opinion, Randall King, a Texas resident, responded to a national advertisement by Hawgwild, an Arkansas LLC, in which it solicited a buyer for a business jet. The parties negotiated a purchase price and jointly inspected the aircraft in Dallas, before the deal eventually broke down and King sued in the 116th District Court in Dallas County alleging breach of contract.

The defendant removed the case to the Northern District of Texas, and in the jurisdictional challenge that followed, the court found general personal jurisdiction lacking, even in the face of past repairs performed on the aircraft in Texas by Texas residents. Similarly, some 17 revenue flights made to and from Texas during a three-month period failed to convince the court that Hawgwild had a business presence in the state.

The plaintiff’s assertions of specific jurisdiction arising directly from the cause of action failed as well. The court drew a narrow distinction between contracting business with a resident of the forum state and conducting business within the forum. Neither national advertisements nor the communications that facilitated the deal rose to the level required to establish jurisdiction.

This case is a departure from the normal assumption in Texas jurisdictional analysis.

In the personal-injury context, a federal court in Texas has issued a decision clarifying the extent of aircraft manufacturer liability. After an airplane crashed into the Mediterranean Sea, the personal representative of a deceased airplane passenger sued the successor to the San Antonio airplane manufacturer. The case, Dalrymple v. Fairchild Aircraft Inc. , was heard in the U.S. District Court for theSouthern District of Texas in July 2008.

According to the court’s opinion, the plaintiff, Leslie Dyan Robinson Dalrymple, the personal representative of Stevan Rodger Dalrymple, who was killed in the plane crash, brought a negligence claim under the Death on the High Seas Act (DOHSA) for failure to warn of a known defect that could result in unrecoverable loss of the airplane’s electrical power. The successor moved for summary judgment, arguing it had no duty to warn of defects and if it did, that duty was fulfilled by delivery of an FAA Service Bulletin concerning the issue to the operator of the aircraft prior to the accident. The court found that the remedies afforded to the claim under DOHSA, 14 C.F.R. §21.3(a), applied only to the manufacturer of the defective part, not to the nonmanufacturing successor. The court stated that the delivery of the FAA Service Bulletin to the aircraft operator additionally satisfied any common-law, post-sale duty owed by the successor.

Commercial Context
There were notable developments in commercial litigation in the aviation context this past year, as well. UNC Lear Services Inc. v. Kingdom of Saudi Arabia , a suit between a private American company and the Kingdom of Saudi Arabia, came before the U.S. District Court for theWestern District of Texas in San Antonio, after the plaintiff had trouble resolving a contract dispute with the foreign sovereign.

The case stemmed from maintenance agreements for a fleet of American-designed combat aircraft sold to the kingdom under a commercial agreement, as opposed to a more common sale through diplomatic channels via a Foreign Military Sales Agreement. The kingdom quickly moved for dismissal based on the Foreign Sovereign Immunities Act (FSIA) and forum non conveniens (FNC). The court found jurisdiction proper under the FSIA because, as an originally commercial sale, the kingdom’s acts fell under the commercial activities exception, distinguishing sovereign acts from those substantially commercial.

Moving to the kingdom’s FNC argument, the court applied a comprehensive analysis before eventually dismissing that motion. The court initially examined concerns about the prospects of a fair trial for the plaintiff in Saudi Arabia, before determining that the Saudi forum would, in fact, be adequate. The majority of the court’s analysis of the FNC issue and the primary factor in its dismissal focused on the private- and public-factors balancing tests. Consideration of private factors, including access to proof in the form of witnesses and enforcement of judgments, failed to raise any issues in favor of dismissal and led the court to conclude that the Western District was the more appropriate forum.

Analysis of public factors played an even greater role in the court’s decision, which cited the axiom that under FNC “dismissal is the exception, not the rule.” The court settled concerns raised by both parties regardingthe administration of justice in each specific forum in favor of the plaintiffs, the kingdom failing to prove any particular difficulties with the plaintiff’s choice of forum. Similarly, the court sided with the plaintiffs on the remainder of the public-interest factors, noting the importance in enforcement of contracts and the nexus to the local business community, and the availability of the court to apply foreign law, if it is eventually determined to govern.

With the global economy in recession and aircraft prices plummeting, commercial aviation disputes are on the rise as buyers and sellers work out their disputes. While there have not been any scheduled airline accidents in Texas or involving Texas carriers (see 14 C.F.R. Part 121), there have been several major general aviation crashes (14 C.F.R. Part 91) and commercial air taxi crashes (14 C.F.R. 135) that implicate Texas entities and victims. Given these events, aviation commercial and tort lawyers will be busy working on cases that will make their way through the court system in 2009-2010.

Link to story at Texas Lawyer.