Vicarious Liability of Aircraft Owners and Lessors: A Chink in the Armor?

In Windham, the Rhode Island court held that provisions of '44112 were negated because Congress erroneously enacted substantive changes to the Transportation Code in 1994. After reviewing legislative history and congressional reports, the court found that Congress did not intend to enact any substantive changes to the existing Transportation Code and had erroneously made substantive changes to the predecessor statute (49 U.S.C. '1404) when the Transportation Code was recodified. The Windham court found that:

A review of the legislative history supports the Plaintiff's argument that the recodification substantively alters '1404 by extending the exemption accorded to owners/ lessor for only security purposes to include all owners and lessor. Such an extension not only reflects a change in language but a fundamental contradiction of the predecessor statute's stated purpose ' to encourage the financing of private airplanes. ' Therefore, the recodification impermissibly extends the scope of the exemption well beyond the confines of the predecessor statute. Because the Court is bound by the intent of the predecessor statute, the Court finds that '44112 does not provide an exemption for Defendant Windham [Aviation Inc.] as they outright owned the Piper involved in the fatal collision. Consequently, the Court must decide whether Defendant Windham [Aviation Inc.] will be liable under applicable
state law. Id. At **5, 6

The court went on to find that under applicable state law the aircraft owner, Windham Aviation Inc., was vicariously liable for any negligence of its lessee in operating the aircraft involved in a fatal accident. Id. at *7.

Because '44112 is plain, clear, and unambiguous, why would the Rhode Island trial court go to such lengths to hold owner/lessor Windham Aviation Inc. vicariously liable for its lessee's negligence? The most likely explanation is that the Windham case is simply the latest in a long line of results-oriented aircraft accident cases. Tragically, the pilot/lessee in Windham was involved in an aircraft runway accident that killed two pilots in another plane on the ground. The pilot/lessee had only $50,000 in liability insurance. Clearly, this amount does not begin to recompense the plaintiffs for the horrendous injuries and untimely and violent deaths of their loved ones. Defendant Windham Aviation Inc. had a liability insurance policy of $1,000,000. This is obviously a better result for the plaintiffs.

There are policy considerations in favor of allowing accident victims to be adequately compensated and indeed we all have a societal interest in making sure that victims are adequately compensated. At the same time, it is important to encourage the development of a growing, strong, and safe aircraft industry. Balancing these interests has historically led to uneven results in aviation litigation because state aviation liability laws are so diverse. See, 'Aviation Law: Owner-Lessor Liability ' The Need for Uniformity' 36 Maine Law Review 93 (1984); 'Vicarious Liability for Pilot's Negligence,' 11 ALR Fed 901 (1972); 'Aviation ' In a Civil Action for Damages, a Pilot's Negligence Is Not Imputed to the Owner and Lessor of the Aircraft By the Federal Aviation Act' 18 Tex. L. Rev. 188 (1969-1970).

At least two other state courts have held that state personal injury claims are not pre-empted by '44112. The Michigan Supreme Court rejected lessor-defendant's claim that '44112 precluded liability through pre-emption and ruled that Michigan state law governed that wrongful death action. Sexton v. Ryder Truck Rental, Inc., 320 NW 2d 843, 847 (Mich.Ct.App. 1982). Likewise, the Appellate Court of Illinois held that '44112 did not pre-empt a state law damage claim against the aircraft lessor. Retzler v. The Pratt and Whitney Company, et al., 723 N.E.2d. 345, (Ill.App.Ct. 1 Dist. 1999). Also see, Abdullah v. American Airlines, Inc., 181 F. 3d 363 (3d Cir. 1999) (federal law pre-empts entire field of aviation safety standards but state law remedies continue to 'exist for violation of those standards'). Id. at 365.

What these courts failed to recognize is that while federal law does not pre-empt state remedies in this area, there is a clear and unambiguous statute ('44112) that plainly deals with liability of owners, lessors, and lenders. Any reasonable person should be able to conclude that the specific language in '44112 would, in fact, pre-empt state law in this limited area. This principal was clearly articulated in Silkwood v. Kerr-McGee Corp., 464 U.S. 239, 256 (1984), which ruled that determination to pre-empt or foreclose state remedies is based on 'whether there is an irreconcilable conflict between the federal and state standards or whether the imposition of a state standard would frustrate the objectives of the federal law.' If a court determines that '44112 does not pre-empt the imposition of vicarious liability in state actions, it has frustrated the intent of Congress and rendered the federal statute meaningless. As a result, under the principles of Silkwood, a court should have no alternative but to find pre-emption in this area.

The analysis in this area becomes even more muddled by the fact that other state courts have imposed vicarious liability on an owner, but the cases failed to analyze the issue of pre-emption or the impact of '44112 or its predecessors on the issue of vicarious liability. See e.g., Malone v. Capital Corr. Res., 808 So.2d 963, 967-68 (Miss. 2002). The only logical explanation is that the defense lawyers failed to raise the federal pre-emption issue.

Federal Decisions and State Circumvention

The good news is that many federal courts have had no trouble in reaching the conclusion that federal law is controlling on this issue. A federal district court recently held that the lessor of a civil aircraft who did not have possession or any operational control of the helicopter at the time of the accident was shielded from liability by '44112. In re Lawrence W. Inlow Accident Litig., No. IP 99-0830-CH/G, 2001 WL 331625 (S.D.Ind. Feb. 07, 2001). There, the court stated:

The plain language of Section 44112 establishes that it preempts state common law claims against covered lessors. ' The word 'only' could have effect only if the statute preempts claims against lessors arising under state law. ' The statutory provision was plainly intended, and plainly written, to preempt such state statutes and parallel common law claims.

The Seventh Circuit interpreted the prior law ['Section 1404] in Matei v. Cessna Aircraft Co., 35 F.3d 1142, 1145 (7th Cir. 1994) and affirmed summary judgment for the owner/lessor of the aircraft where the undisputed evidence showed that the lessee had exclusive possession and control of the aircraft under the terms of an oral lease. The District Court held that Section '1404 pre-empted the plaintiff's state law claim. See Matei v. Cessna Aircraft Co., No. 88 C10536, 1990 WL 43351, at *5 (N.D. Ill. Mar. 30, 1990), aff'd, 35 F.3d 1142 (7th Cir. 1994). In reaching its decision, the district court approvingly cited a Fifth Circuit decision that concisely stated, 'This provision ['1404] pre-empts any contrary state law.' Rogers v. Ray Gardner Flying Service, 435 F. 2d 1389, 1394 (5th Cir.1970), cert. denied, 401 U.S. 1010 (1971).

The 10th Circuit refused to impute negligence of the lessee pilot to the owner/lessors of the aircraft specifically citing '1404. There, the plaintiffs urged the 10th Circuit to hold the owner/lessor vicariously liable because 'it is the deep pocket of the owner who has the most assets to reach and that as a matter of public policy, it would be convenient, logical and consistently even-handed to impute negligence.' The court disagreed:

We find no merit in appellants' argument that Congress, failing to specially exempt owners and lessors, intended that they be absolutely liable for injuries sustained by passengers of leased aircraft. ' Our response is that if Congress had intended to impose strict liability on an owner-bailor, it was capable of clearly and directly so providing. ' We believe that under the Commerce Clause Congress could preempt state law with respect to liabilities for torts arising out of the operation of airplanes. McCord v. Dixie Aviation Corp., 450 F.2d 1129, 1130-31 (10th Cir. 1971).

Surprisingly, the Windham court did not find these federal cases controlling or persuasive. The court ignored the long line of federal cases that found the Transportation Code pre-empted state law and prohibited the imposition of vicarious liability against an owner, lessor, or secured party who is not exerting control over the aircraft.

The Windham decision heavily relied on statutory construction but ignored rules that would have produced a different outcome. Where the meaning of the language of a revision or code is plain and unambiguous, it must be construed without resort to the original statutes that have been brought into it: '[R]eference may be had to antecedent legislation only to resolve a doubt, not to create one.' Ramsey v. Leeper, 1933 OK 661, 31 P.2d 852, 863; Barrett v. United States, 169 U.S. 218 (1898); 82 C.J.S. '374 (1999); Barbee v. United States, 392 F.2d 532 (5th Cir.), cert denied, 391 U.S. 935 (1968); City of Anchorage v. Chugach Electric Association, 252 F.2d 412 (9th Cir. 1958); 82 C.J.S. Statutes '356 (1999); 73 Am.Jur.2d Statutes, '224 (2001). Rules of statutory construction presume that when Congress recodified the Transportation Code and re-enacted '1404 as '44112, it adopted the construction given to the statute by the courts. Therefore, Congress would have adopted '44112 as construed by the courts in Matei and McCord. See, Lorillard v. Pons, 434 U.S. 575 (1978); Pierce v. Underwood, 487 U.S. 552 (1988); 82 C.J.S. Statutes '356 (1999), 73 AmJur2d Statutes '222 (2001).

Conclusion

Throughout civil aviation history there has been an effort to balance the need for uniformity and adequate victim compensation while also encouraging the aircraft industry and treating aircraft owners fairly. Aircraft owner/lessors should not be subject to the application of state law they could not foresee, and they are entitled to rely on the protections of a plainly stated federal law. We are currently facing an intolerable situation where state courts are circumventing a clear and unambiguous federal law limiting liability of owners, lessors, and secured parties to allow vicarious liability recovery against aircraft owners and lessors. Perhaps the time for a uniform aviation liability law has arrived. A comprehensive federal statute including substantive liability law would provide uniformity, predictability, and certainty for the accident victim and the aircraft owner regardless of the state in which an accident occurs. Federal control over aviation tort law would benefit the aircraft industry, and Congress already regulates other aspects of the aviation industry under the commerce clause. The aircraft industry should consider whether it is time for Congress to enact a comprehensive aviation liability law providing for both exclusive federal jurisdiction and substantive law that would clearly pre-empt state law and provide uniformity and fairness for both aircraft owners and lessors, and aircraft accident victims. Until that time, we are likely to see state courts continue to avoid federal pre-emption of state law vicarious liability application in results-oriented decisions such as Windham Aviation Inc.

Under the current unsettled state of judicial decisions and the application of '44112, every owner, lessor, and lender must give careful consideration to the issue of vicarious liability. The first thing to do is check the applicable statutory and case law in the relevant state where operations may be conducted. That would be easy if we were dealing with an immovable item of equipment, but presents certain logistical issues in light of the fact that aircraft can be operated anywhere at any time. To the extent that an owner or lessor has identified a state that presents a particular risk, one should consider restricting operations.

The other and perhaps more practical solution is to place even more emphasis on the existence, amount, and type of insurance applicable to any given operation and to require that the owner or lessor is a named or additional insured, as applicable, based on the applicable circumstances.

In 2005, the Superior Court of Rhode Island held that '44112 of Title 49 of the U.S. Code did not protect the owner and lessor of an aircraft from vicarious liability for negligence of a lessee of the aircraft. Coleman v. Windham Aviation Inc., No. CIV A K.C. 2004-0985, 2005 WL 1793907 (R.I. Super. July 18, 2005). This opinion is unsettling to aircraft owners, lessors, and secured parties who for many years have relied on a plain reading of '44112 to provide statutory protection from the imposition of vicarious liability. In light of the decision in Windham (and others discussed below), owners, lessors, of aircraft must be aware of the possibility that a state court may very well impose vicarious liability.

Because of the clear and unambiguous language of '44112 and its predecessors, including '1404 of the Federal Aviation Act, aircraft owners, lessors, and lenders have understandably done business in reliance on its clear protections:

(a) (1) 'lessor' means a person leasing for at least 30 days a civil aircraft, aircraft engine, or propeller.
(2) 'owner' means a person that owns a civil aircraft, aircraft engine, or propeller.
(3) 'secured party' means a person having a security interest in, or security title to, a civil aircraft, aircraft engine, or propeller under a conditional sales contract, equipment trust contract, chattel or corporate mortgage, or similar instrument.

(b) Liability. A lessor, owner or secured party is liable for personal injury, death or property loss or damage on land or water only when a civil aircraft, aircraft engine, or propeller is in the actual possession or control of the lessor, owner or secured party, and the personal injury, death, or property loss or damage occurs because of ' (1) the aircraft, engine, or propeller; or (2) the flight of, or an object falling from, the aircraft, engine or propeller.

Notwithstanding this statutory protection against vicarious liability, which has existed in some form since 1948, the cases in this area are inconsistent at best
and generally give little comfort to the aviation community with regard to the
imposition of vicarious liability. The matter is complicated by the fact that many states still have laws most of which were adopted in the infancy of aviation, which provide that operators are strictly liable and owners are vicariously liable for damages caused by an aircraft. See, e.g., R.I. Gen. Laws Sec. 1-4-3 (2006).

Windham and Other State Court Decisions

In Windham, the Rhode Island court held that provisions of '44112 were negated because Congress erroneously enacted substantive changes to the Transportation Code in 1994. After reviewing legislative history and congressional reports, the court found that Congress did not intend to enact any substantive changes to the existing Transportation Code and had erroneously made substantive changes to the predecessor statute (49 U.S.C. '1404) when the Transportation Code was recodified. The Windham court found that:

A review of the legislative history supports the Plaintiff's argument that the recodification substantively alters '1404 by extending the exemption accorded to owners/ lessor for only security purposes to include all owners and lessor. Such an extension not only reflects a change in language but a fundamental contradiction of the predecessor statute's stated purpose ' to encourage the financing of private airplanes. ' Therefore, the recodification impermissibly extends the scope of the exemption well beyond the confines of the predecessor statute. Because the Court is bound by the intent of the predecessor statute, the Court finds that '44112 does not provide an exemption for Defendant Windham [Aviation Inc.] as they outright owned the Piper involved in the fatal collision. Consequently, the Court must decide whether Defendant Windham [Aviation Inc.] will be liable under applicable
state law. Id. At **5, 6

The court went on to find that under applicable state law the aircraft owner, Windham Aviation Inc., was vicariously liable for any negligence of its lessee in operating the aircraft involved in a fatal accident. Id. at *7.

Because '44112 is plain, clear, and unambiguous, why would the Rhode Island trial court go to such lengths to hold owner/lessor Windham Aviation Inc. vicariously liable for its lessee's negligence? The most likely explanation is that the Windham case is simply the latest in a long line of results-oriented aircraft accident cases. Tragically, the pilot/lessee in Windham was involved in an aircraft runway accident that killed two pilots in another plane on the ground. The pilot/lessee had only $50,000 in liability insurance. Clearly, this amount does not begin to recompense the plaintiffs for the horrendous injuries and untimely and violent deaths of their loved ones. Defendant Windham Aviation Inc. had a liability insurance policy of $1,000,000. This is obviously a better result for the plaintiffs.

There are policy considerations in favor of allowing accident victims to be adequately compensated and indeed we all have a societal interest in making sure that victims are adequately compensated. At the same time, it is important to encourage the development of a growing, strong, and safe aircraft industry. Balancing these interests has historically led to uneven results in aviation litigation because state aviation liability laws are so diverse. See, 'Aviation Law: Owner-Lessor Liability ' The Need for Uniformity' 36 Maine Law Review 93 (1984); 'Vicarious Liability for Pilot's Negligence,' 11 ALR Fed 901 (1972); 'Aviation ' In a Civil Action for Damages, a Pilot's Negligence Is Not Imputed to the Owner and Lessor of the Aircraft By the Federal Aviation Act' 18 Tex. L. Rev. 188 (1969-1970).

At least two other state courts have held that state personal injury claims are not pre-empted by '44112. The Michigan Supreme Court rejected lessor-defendant's claim that '44112 precluded liability through pre-emption and ruled that Michigan state law governed that wrongful death action. Sexton v. Ryder Truck Rental, Inc. , 320 NW 2d 843, 847 (Mich.Ct.App. 1982). Likewise, the Appellate Court of Illinois held that '44112 did not pre-empt a state law damage claim against the aircraft lessor. Retzler v. The Pratt and Whitney Company, et al., 723 N.E.2d. 345, (Ill.App.Ct. 1 Dist. 1999). Also see, Abdullah v. American Airlines, Inc ., 181 F. 3d 363 (3d Cir. 1999) (federal law pre-empts entire field of aviation safety standards but state law remedies continue to 'exist for violation of those standards'). Id. at 365.

What these courts failed to recognize is that while federal law does not pre-empt state remedies in this area, there is a clear and unambiguous statute ('44112) that plainly deals with liability of owners, lessors, and lenders. Any reasonable person should be able to conclude that the specific language in '44112 would, in fact, pre-empt state law in this limited area. This principal was clearly articulated in Silkwood v. Kerr-McGee Corp ., 464 U.S. 239, 256 (1984), which ruled that determination to pre-empt or foreclose state remedies is based on 'whether there is an irreconcilable conflict between the federal and state standards or whether the imposition of a state standard would frustrate the objectives of the federal law.' If a court determines that '44112 does not pre-empt the imposition of vicarious liability in state actions, it has frustrated the intent of Congress and rendered the federal statute meaningless. As a result, under the principles of Silkwood, a court should have no alternative but to find pre-emption in this area.

The analysis in this area becomes even more muddled by the fact that other state courts have imposed vicarious liability on an owner, but the cases failed to analyze the issue of pre-emption or the impact of '44112 or its predecessors on the issue of vicarious liability. See e.g., Malone v. Capital Corr. Res., 808 So.2d 963, 967-68 (Miss. 2002). The only logical explanation is that the defense lawyers failed to raise the federal pre-emption issue.

Federal Decisions and State Circumvention

The good news is that many federal courts have had no trouble in reaching the conclusion that federal law is controlling on this issue. A federal district court recently held that the lessor of a civil aircraft who did not have possession or any operational control of the helicopter at the time of the accident was shielded from liability by '44112. In re Lawrence W. Inlow Accident Litig., No. IP 99-0830-CH/G, 2001 WL 331625 (S.D.Ind. Feb. 07, 2001). There, the court stated:

The plain language of Section 44112 establishes that it preempts state common law claims against covered lessors. ' The word 'only' could have effect only if the statute preempts claims against lessors arising under state law. ' The statutory provision was plainly intended, and plainly written, to preempt such state statutes and parallel common law claims.

The Seventh Circuit interpreted the prior law ['Section 1404] in Matei v. Cessna Aircraft Co. , 35 F.3d 1142, 1145 (7th Cir. 1994) and affirmed summary judgment for the owner/lessor of the aircraft where the undisputed evidence showed that the lessee had exclusive possession and control of the aircraft under the terms of an oral lease. The District Court held that Section '1404 pre-empted the plaintiff's state law claim. See Matei v. Cessna Aircraft Co., No. 88 C10536, 1990 WL 43351, at *5 (N.D. Ill. Mar. 30, 1990), aff'd , 35 F.3d 1142 (7th Cir. 1994). In reaching its decision, the district court approvingly cited a Fifth Circuit decision that concisely stated, 'This provision ['1404] pre-empts any contrary state law.' Rogers v. Ray Gardner Flying Service , 435 F. 2d 1389, 1394 (5th Cir.1970), cert. denied , 401 U.S. 1010 (1971).

The 10th Circuit refused to impute negligence of the lessee pilot to the owner/lessors of the aircraft specifically citing '1404. There, the plaintiffs urged the 10th Circuit to hold the owner/lessor vicariously liable because 'it is the deep pocket of the owner who has the most assets to reach and that as a matter of public policy, it would be convenient, logical and consistently even-handed to impute negligence.' The court disagreed:

We find no merit in appellants' argument that Congress, failing to specially exempt owners and lessors, intended that they be absolutely liable for injuries sustained by passengers of leased aircraft. ' Our response is that if Congress had intended to impose strict liability on an owner-bailor, it was capable of clearly and directly so providing. ' We believe that under the Commerce Clause Congress could preempt state law with respect to liabilities for torts arising out of the operation of airplanes. McCord v. Dixie Aviation Corp. , 450 F.2d 1129, 1130-31 (10th Cir. 1971).

Surprisingly, the Windham court did not find these federal cases controlling or persuasive. The court ignored the long line of federal cases that found the Transportation Code pre-empted state law and prohibited the imposition of vicarious liability against an owner, lessor, or secured party who is not exerting control over the aircraft.

The Windham decision heavily relied on statutory construction but ignored rules that would have produced a different outcome. Where the meaning of the language of a revision or code is plain and unambiguous, it must be construed without resort to the original statutes that have been brought into it: '[R]eference may be had to antecedent legislation only to resolve a doubt, not to create one.' Ramsey v. Leeper , 1933 OK 661, 31 P.2d 852, 863; Barrett v. United States , 169 U.S. 218 (1898); 82 C.J.S. '374 (1999); Barbee v. United States , 392 F.2d 532 (5th Cir.), cert denied , 391 U.S. 935 (1968); City of Anchorage v. Chugach Electric Association , 252 F.2d 412 (9th Cir. 1958); 82 C.J.S. Statutes '356 (1999); 73 Am.Jur.2d Statutes, '224 (2001). Rules of statutory construction presume that when Congress recodified the Transportation Code and re-enacted '1404 as '44112, it adopted the construction given to the statute by the courts. Therefore, Congress would have adopted '44112 as construed by the courts in Matei and McCord. See, Lorillard v. Pons , 434 U.S. 575 (1978); Pierce v. Underwood , 487 U.S. 552 (1988); 82 C.J.S. Statutes '356 (1999), 73 AmJur2d Statutes '222 (2001).

Conclusion

Throughout civil aviation history there has been an effort to balance the need for uniformity and adequate victim compensation while also encouraging the aircraft industry and treating aircraft owners fairly. Aircraft owner/lessors should not be subject to the application of state law they could not foresee, and they are entitled to rely on the protections of a plainly stated federal law. We are currently facing an intolerable situation where state courts are circumventing a clear and unambiguous federal law limiting liability of owners, lessors, and secured parties to allow vicarious liability recovery against aircraft owners and lessors. Perhaps the time for a uniform aviation liability law has arrived. A comprehensive federal statute including substantive liability law would provide uniformity, predictability, and certainty for the accident victim and the aircraft owner regardless of the state in which an accident occurs. Federal control over aviation tort law would benefit the aircraft industry, and Congress already regulates other aspects of the aviation industry under the commerce clause. The aircraft industry should consider whether it is time for Congress to enact a comprehensive aviation liability law providing for both exclusive federal jurisdiction and substantive law that would clearly pre-empt state law and provide uniformity and fairness for both aircraft owners and lessors, and aircraft accident victims. Until that time, we are likely to see state courts continue to avoid federal pre-emption of state law vicarious liability application in results-oriented decisions such as Windham Aviation Inc.

Under the current unsettled state of judicial decisions and the application of '44112, every owner, lessor, and lender must give careful consideration to the issue of vicarious liability. The first thing to do is check the applicable statutory and case law in the relevant state where operations may be conducted. That would be easy if we were dealing with an immovable item of equipment, but presents certain logistical issues in light of the fact that aircraft can be operated anywhere at any time. To the extent that an owner or lessor has identified a state that presents a particular risk, one should consider restricting operations.

The other and perhaps more practical solution is to place even more emphasis on the existence, amount, and type of insurance applicable to any given operation and to require that the owner or lessor is a named or additional insured, as applicable, based on the applicable circumstances.