Late last year, a decision was handed down by the first federal appellate court to interpret the General Aviation Revitalization Act of 1994 (GARA), which immunized general aviation manufacturers for defects in aircraft or component parts older than 18 years. The Ninth Circuit Court of Appeals sitting in southern California carved a hole in GARA by ruling that an aircraft's flight manual is a part of the aircraft. Thus, any post-sale revisions or deletions to an aircraft manual may restart the 18-year clock each time they are made.
This decision creates new exposure for manufacturers who might have unwittingly increased their product liability by revising, editing or altering their manuals. This article goes into greater detail on the facts and impact of this decision, below. But in the meantime, What is GARA? How does GARA work? Does GARA affect just GA manufacturers or everyone in general aviation? Finally, how does this latest court decision change the status quo?
GARA Gave Manufacturers an Unheard-Of and Unique Immunity
GARA provides immunity to established general aviation aircraft manufacturers for accidents involving aircraft that are more than 18 years old. GARA raised lawyers' eyebrows because it represented the first time that federal legislation imposed rules governing state tort litigation. In the field of product liability, GARA is unique. GARA also caught industry attention because the immunity afforded to general aviation manufacturers is the envy of every manufacturing industry with ongoing product liability exposure.
Automobile, boat and recreational vehicle manufacturers have no immunity for their products. No matter how old their products get or how long the product exceeds its intended useful life, its manufacturer can still be sued. Many of these manufacturers face extensive product liability exposure and litigation expenses.
How Did General Aviation Manufacturers Get Such Protection?
In the 1980s, general aviation began to decline. The industry's annual production of general aviation aircraft plunged from over 17,000 in 1979, to only 2,600 in 1983. Cessna, the largest manufacturer of general aviation aircraft, ceased production of piston-engined aircraft in 1986. General aviation manufacturers testified in Congress that the decline in manufacturing was because of the increased cost of insuring and defending products liability actions brought by plaintiffs attorneys.
It is ironic that general aviation manufacturers have faced extensive product liability litigation exposure in that small airplane manufacturers built their aircraft too well. Manufacturers did such a good job on the engineering of small aircraft, that the aircraft were usable beyond their expected service lives with many aircraft that have been the subject of product liability lawsuits living to be more than 40 years old. This created an almost never-ending "liability tail." Thus, with close to 400,000 general aviation aircraft in use by 1994, GA manufacturers faced enormous product liability exposure.
Various delegations of congressional representatives, primarily from Kansas, lobbied for more than five years to enact product liability reform. They finally narrowed their goals to a simple statute of repose that would cut off the liability tail for older aircraft.
On August 17, 1994, President Clinton, with the stroke of his pen, signed into law the "General Aviation Revitalization Act of 1994." President Clinton immunized approximately 75% of all general aviation aircraft certificated in the United States against civil liability. All aircraft that had been in use more than 18 years were granted amnesty. The immunity applied even if there were design defects that caused a crash that resulted in injuries or death. General aviation manufacturing advocates were finally able to persuade Congress to pass a law giving them the protection they wanted.
Who Was Left Out of GARA's Protection?
GARA was written to protect established manufacturers. GARA only protects certain general aviation manufacturers. Only aircraft older than 18 years are protected. Thus, if a new entrepreneurial general aviation manufacturer (or a part manufacturer) comes along, it is denied protection under GARA until 18 years later. The new builders must buy insurance to set up reserves for 18 years of potential litigation before they are home free, like Cessna, Beech, Piper and a few others. In turn, GARA does not protect pilots, mechanics, maintenance facilities, FBOs, dealers, overhaulers, or any distributor not acting in a manufacturing capacity. As we will see, GARA purports to protect component part manufacturers but does not really protect the typical (short service life) part manufacturers. Only parts older than 18 years are protected.
How Does the Manufacturers' Immunity Affect Me?
GARA, and any legal decisions interpreting GARA, can have a direct effect on you if you are involved in general aviation as one of the following:
GARA has had the adverse effect of changing the focus in general aviation air crash litigation from the manufacturer to the parties listed above. If you are a pilot, you may be exposed to a double whammy. You or your estate may be sued because the manufacturer cannot be sued after many GA crashes. Further, if you are seriously injured or killed resulting from a product defect, you or your estate can't sue the manufacturer that caused your injuries.
How can this be? Wasn't GARA supposed to be in the interest of aircraft owners and pilots? Didn't AOPA support passage of the General Aviation Revitalization Act of 1994?
How Does GARA Work?
A general aviation manufacturer's immunity starts after 18 years from the date of delivery of the aircraft to its first purchaser, dealer or lessee. Importantly, GARA also applies to new component system, subassembly or part manufacturers. Thus, the manufacturer of a new component system, subassembly or other part that replaces a part in the aircraft, or adds a part to an aircraft, also enjoy an immunity after 18 years. The immunity for the part is measured from the first actual replacement or addition of the part, not the date of delivery. Thus, if the part sits on the shelf for some time before it is physically installed, the 18 years will not start running from delivery but instead will start from the date of replacement or addition.
GARA immunity is for general aviation aircraft only. The federal statute defines what constitutes a general aviation aircraft to be protected:
How Does GARA Create More Exposure for Everyone Else?
GARA has had the effect of creating greater liability exposure for everyone in the aviation industry except those established manufacturers that lobbied for its protection. Let's look at some specific examples.
The pilot and the "operator" for whom he works have always been the "target defendants" in general aviation litigation. However, the other prime suspect has traditionally been the manufacturer. Now the pilot is the prime target because the manufacturer has immunity.
The pilot who is injured in an accident or his estate, if he did not survive, cannot sue the possibly negligent operator (company) who employed him. The pilot is usually an "employee" who under the laws of most states, cannot sue his employer. The pilot or estate's only recourse is be to collect the meager workers' compensation benefits paid by the employer's workers compensation insurer. Now recognize that GARA ends the pilot's ability to sue the manufacturer that might have designed an aircraft with a defect that ultimately injured or killed him. The injured pilot or the pilot's surviving spouse must look to other "suspects" in the aviation industry for compensation if the crash is not solely due to pilot error and has resulted in serious injury or death.
Of course, in such an event there may be insufficient insurance to compensate the victims of a typical general aviation crash. Even small aircraft accidents often involve two or more people, many of who are high wage earners. With small, privately-owned general aviation aircraft, the "shallow-pocket" dilemma is even greater. Many aircraft owners obtain insurance with "seat limitations" of $100,000 or $200,000. This means that passengers who die or are seriously injured in the crash may only recover $100,000 or $200,000 from the insurance company because of the accident. The practical effect of limited insurance coverage is that passengers and pilots may consider chasing the assets of the insured who caused or contributed to the crash. Alternatively, they often look to other insured suspects for compensation in serious air crash accidents.
... Mechanics and Overhaulers ...
Mechanics, maintenance facilities, FBOs and overhaulers are suffering a greater number of lawsuits. If a plaintiff cannot allege a product defect against a manufacturer, the next logical focus is whether the product was improperly maintained or overhauled. Many of these businesses and professionals must decide to buy more insurance to cover their increased risk. The cost will be passed onto owners and pilots.
... Component Part Manufacturers ...
Parts manufacturers are the new deep pockets in general aviation product liability litigation. In a typical general aviation aircraft the various component parts have a short service life. They must be replaced, redesigned or overhauled before 18 years have elapsed and the component part manufacturers may have to put their product at risk more than once in that 18-year period. Thus, it should come as no surprise to general aviation aircraft owners that the cost of replacement parts has skyrocketed.
... Aircraft Owners ...
Owners, even if they are not acting as the pilot of the aircraft, may face additional lawsuits. Plaintiffs will look for some viable defendant with insurance or assets to pay for their injuries. In some states, passive aircraft owners (who do not pilot or maintain their aircraft) have minimal liability exposure. In other states owners are vicariously liable for the wrongdoing of the pilot at the controls and even the maintenance professional who worked on their aircraft. The best protection for the owner is more insurance. (See my article, "Can Aircraft Owners Avoid Personal Liability for Air Crashes?")
... Dealers, Distributors and Factory-Authorized Service Facilities ...
These parties are the manufacturers' partners, but they face substantial redirected exposure. GARA provides only immunity for manufacturers. Nothing in the statute protects dealers, distributors or factory-authorized service facilities. Under the product liability laws of most states, every entity in the distribution chain of a defective product has product liability exposure. Thus, the manufacturer, distributor and retailer can often be held liable for a defective product. That is why a general retailer such as Sears, for example, is sued when they unknowingly sell a defective lawn mower or other product that causes injury.
Defense attorneys will surely argue that such representatives of the manufacturer should be included within the definition of "manufacturer." Aircraft are often delivered to dealers, distributors or other sales agents on consignment until they are actually sold. GARA starts the 18-year clock running in such transactions from the time it is delivered to a "person engaged in the business of selling or leasing such aircraft." The delivery to the dealer is the point at which the protection starts for the manufacturer, not the dealer. Therefore, as a matter of statutory interpretation, the very wording of the statute puts the dealer, distributor or retailer in a separate category of exposure.
... Employees of Manufacturers
Some plaintiff's attorneys have pointed out that GARA referred only to "manufacturers" and did not specifically immunize employees within a manufacturing company. It has been suggested that those who were personally responsible for the design or quality control decisions could be sued in order to get past GARA. The statute is not clear on this point. One would think that Congress intended to protect the manufacturer and its employees from lawsuits once the aircraft is 18 years old. It appears that if plaintiffs were allowed to sue individual employees of a manufacturer, the whole legislative purpose of GARA could be avoided. However, it is ambiguities like these that provide attorneys with plenty of fodder.
A tax lawyer once told me that every time a new tax relief law is enacted one result is ten years of work for every "income tax avoidance lawyer" in the United States. Maybe the same is true of aviation legislation.
Some of the Finer Points About GARA
GARA Protects Only the Manufacturing Function ...
GARA provides protection to manufacturers in their "capacity" as manufacturers. It is undecided whether a manufacturer has immunity under GARA for its retail sales or other non-manufacturing activity. However, it seems that if the manufacturer steps outside its manufacturing role and engages in maintenance, overhaul, servicing, flight operations, or other non-manufacturing functions, the manufacturer cannot legitimately claim the immunity.
Insurance defense lawyers who regularly defend manufacturers might try to argue that Congress did not intend to limit the protection of GARA to just manufacturing. However, the words of the statute give immunity to a manufacturer only "in its capacity as a manufacturer." Moreover, the House Committee on the Judiciary explained at the time that it put the "capacity" language in the statute to ensure that manufacturers were not immunized from liability when they functioned in non-manufacturing roles.
... GARA Applies to New Aircraft and New Parts ...
GARA does not apply to used replacement parts or additions. The statute specifically applies to "new" components. The statute is not clear whether a re-manufacturer or a component part overhauler is protected by GARA. Because rebuilt parts must often meet the same strict specifications as new parts, re-manufacturers can argue that a rebuilt part is "new" because of regulations granting it a new service life. Thus, the newly rebuilt parts might be immunized after 18 years of use.
On the other hand, compare the situation where the overhauling of parts is not subject to the same strict requirements as new parts. Arguably, the overhauler is liable not only for its negligence but also strictly liable for any defective parts it replaced even after 18 years. As a practical matter, overhaulers may not be able to assert immunity under GARA because the time between overhaul (TBO) is usually much shorter than 18 years.
... Is GARA Constitutional?
GARA has withstood constitutionality attacks. Last year in Michigan plaintiffs mounted a weak effort to declare GARA unconstitutional. Cessna's defense attorneys were able to easily defeat that attack by showing that Congress had carefully and narrowly drafted GARA. This is one law with extensive legislative history explaining the rational basis for the legislation.
... GARA Can Apply Outside the United States ...
GARA applies to accidents in the United States as well as in foreign countries. Courts have ruled that it does not matter where the accident occurs. As long as the aircraft qualifies as a "general aviation aircraft" as defined by the statute and meets the other requirements of GARA, the manufacturer has immunity when considering lawsuits brought in the U.S.
... GARA Does Not Cover Military Aircraft ...
Military aircraft are not covered by GARA. A federal trial court in Washington state recently ruled that a helicopter originally manufactured for the Navy by Bell Helicopter Inc., and then subsequently sold in the civilian market as surplus, cannot enjoy the protections of GARA. The court described the military helicopter prior to its certification as a civilian aircraft as a "public aircraft" and thus, not covered by GARA. Therefore, the surplus re-manufacturers must wait 18 years before they can assert the immunity.
... GARA Is Not a Statute of Limitations ...
GARA is a statute of repose, not a statute of limitations. This statute of repose "puts to rest" the potential for lawsuits arising from accidents involving a general aviation aircraft. A statute of limitations is different it defines the time from the date of injury, by which the plaintiffs must sue or forever lose their cause of action. A statute of repose, on the other hand, provides an outer limit beyond which lawsuits will not be allowed.
Aviation professionals are sometimes confused because many states have their own statutes of repose applicable to air crash accidents in their state. These laws provide different time frames and different rules that measure whether a manufacturer is immune in that state and are beyond the scope of this article.
GARA Contains Four "Innocent Victim" Exceptions to Immunity
The Knowing Misrepresentation or Concealment Exception ...
If a plaintiff can properly plead and prove that the manufacturer knowingly misrepresented, concealed or withheld material information from the FAA, it can be sued for aircraft or parts older than 18 years. The deception must involve the certificated "performance," "maintenance" or "operation" of the aircraft. The GARA statute says that the misrepresentation must be "knowing" but concealment or withholding does not have to be "knowing." Thus, clever attorneys will argue that negligent concealment or negligent withholding, if properly pleaded and proved, may be sufficient to avoid the immunity. Also, this exception to immunity focuses on an "obligation with respect to continuing airworthiness." Thus, even after 18 years, the manufacturer must reveal airworthiness deficiencies that are discovered. Arguably, a failure to issue service bulletins can cause a waiver of the immunity.
This exception is a tough obstacle for plaintiffs to overcome. In my past personal experience defending general aviation manufacturers, I have found that engineers are quite ethical in their dealings with the FAA. Yet, wrongdoing does occur.
In the case of Rickert v. Mitsubishi Heavy Industries, Ltd., 923 F.Supp. 1453 (D. Wyo. 1996), a pilot and three passengers were killed when the 21-year old twin-engine Mitsubishi crashed into a mountain range in Wyoming. Plaintiff Rickert claimed the accident was caused by an in-flight accumulation of ice on the aerodynamic surfaces of the airplane. The ice resulted in a loss of control. The plaintiffs alleged that Mitsubishi knowingly misrepresented, concealed or withheld required information from the FAA regarding aircraft controllability in icing conditions. Plaintiff's lawyers initially pleaded the case correctly, but their only evidence of misrepresentation by the manufacturer was their own expert's opinion testimony. The trial judge rejected the plaintiffs' expert opinion affidavits and granted a summary judgment in favor of Mitsubishi. The judge explained that an expert's opinion, that the manufacturer was negligent, was not sufficient to show that the manufacturer "knowingly" misrepresented anything to the FAA.
Plaintiff Rickert filed a motion to reconsider the decision and requested additional "discovery" (investigative) opportunities. The court wanted to be thorough and allowed the request for additional discovery. Plaintiffs' investigators found "whistleblowers" formerly employed by Mitsubishi, specifically the director of flight operations and the international vice president. These former supervisors signed sworn affidavits, revealing that Mitsubishi had withheld information from the FAA concerning the icing problems with the aircraft. In light of this new evidence, the court ruled that the affidavits satisfied the GARA misrepresentation exception and refused to grant the motion for summary judgment in favor of Mitsubishi.
... Medical Passenger Exception ...
This statute does not immunize the manufacturer for injury or death to a passenger who is aboard for purposes of receiving treatment for a medical or other emergency. Thus, a "life flight" accident caused by a defect or an accident involving the transportation of victims resulting from a natural disaster, fire, flood, earthquake, etc., may result in litigation. It is not clear whether a passenger, who is injured on such a flight, but who was not on board for purposes of receiving medical treatment, will be included within the exception. The statute does not discuss whether passengers such as flight nurses, rescue paramedics, etc., who are not crew members will be permitted to sue the manufacturer.
... Persons Not on Board the Aircraft Exception ...
If a person an aircraft is injured or killed in a midair collision with a defective aircraft older than 18 years, the statute does not prevent a lawsuit against the manufacturer. Similarly, innocent victims on the ground can sue the manufacturer, no matter how old the airplane is. As Gary Allen, a prominent government aviation lawyer, said, "Ground victims killed or injured by the proverbial aluminum hailstorm, which rains down on them in an accident, need not worry about the age of the cloud."
... and the Warranty Exception
This provision allows a suit to be brought under a manufacturer's warranty if the warranty period exceeds 18 years. If you know anyone that obtained a warranty from a manufacturer that exceeds 18 years, I want to shake their hand.
Does a Manufacturer Have Any Duty to Warn of Defects After 18 Years?
In most states, manufacturers have a continuing duty to warn of dangers discovered in their products, even many years after the products have been sold. Manufacturing defects are typically discovered early while design defects may evade detection for many years. GARA may not protect general aviation manufacturers from this continuing duty to warn.
The GARA misrepresentation exception specifically refers to the "continuing airworthiness of the aircraft or component systems or subassemblies." Arguably, if a manufacturer "conceals" or "withholds" information from the FAA, concerning an airworthiness defect discovered after 18 years, the manufacturer could still be subject to liability under the misrepresentation and concealment exception to GARA.
A New Loophole in GARA Recently Created by the Ninth Circuit ...
More than one court has been faced with the issue of whether an aircraft's flight manual or maintenance manual are to be considered defective parts of the aircraft. Most courts have rejected plaintiffs' attempt to overcome GARA by claiming that revisions to such manuals have the effect of re-starting the 18 year clock.
In the case of Alter v. Bell Helicopter Textron, 944 F.Supp. 531 (S.D. Tex. 1996), Texas plaintiffs alleged that Bell Helicopter negligently issued maintenance manuals that contained misleading statements which caused or contributed to the crash. Bell had revised and re-issued the manuals twice a year since 1974, when the aircraft was originally sold. Plaintiffs argued that the maintenance manual revisions were a new component system or subassembly and that the 18 year GARA statute of repose should start running from each revision. The Texas court rejected plaintiffs' argument and held that the manuals were not a component or system, originally in, or "part of the aircraft."
Until recently, no federal appellate court had analyzed this federal statute. Until, that is, the Ninth Circuit Court of Appeals, which governs the western states, rendered the first federal appellate decision on GARA and specifically addressed the issue of the manuals.
In Caldwell v. Enstrom Helicopter Corporation, (Case No. 99-15746, decided Oct. 30, 2000) the Ninth Circuit reversed a lower federal trial court and ruled that the flight manual is "an integral part of a general aviation aircraft product." The court further held that the 18-year clock under GARA starts running from each revision or deletion in the manual, as long as it is related to the cause of the accident.
The Caldwell case involved the crash of an Enstrom helicopter resulting from fuel exhaustion. The helicopter was within 10 minutes of its destination when it ran out of usable fuel. Plaintiffs contended that the helicopter's flight manual was defective because it did not contain a warning that the last two gallons of gasoline in the fuel tanks would not burn (unusable fuel). Plaintiffs argued that the manual, which was revised several times during the last 18 years, was a "new system or other part" within the meaning of GARA. The federal trial judge disagreed based on the reasoning used by many courts that had said that a revised manual is not a system or other part of an aircraft.
On appeal, the Ninth Circuit noted that the aircraft itself, which was manufactured in 1974, was not attacked by the plaintiff as being defective. The plaintiff simply said that the manual was defective because it did not contain information about the fuel tank's inability to burn the last two gallons of fuel.
The appellate justices in Caldwell applied the logic that there are two possibilities: either the aircraft flight manual is part of the aircraft, or it is a separate product. The California federal justices then cited the federal aviation regulations (FARs) which require that manufacturers of helicopters must include a flight manual with the aircraft which contains "all information that is necessary for the safe operation because of design, operating or handling characteristics." (FAR 27.1581(a)(2).) Moreover, the regulation provides that the manual must specifically include information about a gas tank's usable fuel supply, if the unusable portion exceeds one gallon or 5% of the tank capacity. (FAR 27.1585(e).)
The Ninth Circuit concluded that the helicopter's flight manual was not a separate product but was in fact, an integral part of a general aviation aircraft. Since the subject matter in the manual was relevant to the cause of the crash, the court overturned the trial judge and allowed the plaintiff to proceed with his lawsuit against the manufacturer. (Because the opinion only dealt with the GARA issue, the court did not address the issue of whether the pilot was prudent in flying the helicopter with only two gallons of fuel left usable or unusable!)
... Manufacturers Are "Damned If They Do, Damned If They Don't"
The Caldwell decision provides a new loophole for plaintiffs to circumvent GARA, particularly in the western states, Almost every manual sold with an aircraft needs to be revised over time. If a manufacturer discovers a problem in the aircraft before or after 18 years from the date of sale, and revises its manuals, the manufacturer will have restarted the product liability clock. If the manufacturer elects not to revise the manual, and the "continued airworthiness of the aircraft" is at stake, the manufacturer may be accused of concealing or withholding information affecting airworthiness. Thus, a manufacturer may be damned if it does and damned if it doesn't.
As long as people are injured or killed in aviation accidents, there are going to be lawsuits against the parties who are potentially liable. The "usual suspects" buy insurance to protect themselves. If manufacturers are no longer the usual suspects, they should get special low insurance rates and be able to pass the savings on to us.
General aviation manufacturing reached an all-time low in 1983. Thus, the 18-year product liability "tail" of the general aviation manufacturer should get as short as it's going to be by next year. One would think that insurance costs for this short liability tail should be correspondingly small. If not, then the insurance tail will be wagging the dog while insurance companies recoup larger premiums from all the other "mutts" in the industry.