On February 21, 2012, the United States Supreme Court refused to grant certiorari in the case of Aerolease v. Vreeland (Docket No. 11-728), and in doing so leaves defendant aircraft owners, lessors and lenders in some states exposed to liability for injuries to passengers occurring when the aircraft is not in the defendant’s possession or control. This outcome is of critical importance not only to institutional financiers of commercial and business/private aircraft, but also to owners and lessees of business/private aircraft who make their aircraft – whole and fractional – available to others by lease, sublease, master dry lease, conditional sales agreement, or other arrangement.

Under the facts of the case, a passenger died when an airplane crashed into the surface of the earth. The aircraft was under a long-term dry lease from its owner (Aerolease) to a 3rd -party operator. The pilot worked for the operator. The passenger’s estate sued Aerolease in state court for wrongful death under Florida’s “Dangerous Instrumentality” doctrine, which holds owners and lessors liable for the negligence of others in connection with injuries and losses caused by their aircraft. Under this doctrine, Aerolease would be vicariously liable for the alleged negligence of the operator’s pilot. Aerolease claimed that Florida’s Dangerous Instrumentality doctrine is pre-empted by Federal law, specifically 49 U.S.C. 44112(b) (1994), which provides:

“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.” [Emphases supplied.]

Subsection (a) defines the following terms found in 44112(b):

(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.

In July 2011, the Florida Supreme Court (71 So.3d 70 (Fla. 2011)) held that the Federal statute did not pre-empt Florida’s Dangerous Instrumentality doctrine with respect to persons in the aircraft, interpreting 49 U.S.C. 44112 to apply only to persons outside the aircraft. The Florida Supreme Court’s view is held by only a few states, although not all states have enunciated a position on this issue. Federal courts have held in favor of pre-emption. In December 2011, Aerolease filed a petition for certiorari with the U.S. Supreme Court, seeking to resolve the conflict on the issue of Federal pre-emption regarding passengers. In rejecting the petition, the U.S. Supreme Court did not comment on the merits.

Absent Congressional action to clarify its intent to pre-empt state law irrespective of the physical location of the injured party, owners, lessors and security interest holders who continue to allow other parties to use their aircraft should consult an experienced aviation attorney to ascertain their exposure and to attempt to protect themselves via carefully tailored insurance, indemnifications, corporate structuring and other measures.

Rex E. Reese, Esquire, is a private attorney specializing in business aviation matters. Mr. Reese has handled over 2,000 business aircraft acquisition, sale and financing transactions and is regarded as one of Washington’s best tax attorneys. He may be contacted at 202.297.5971, [email protected], www.jetviser.com.