Legal Issues Related to Implementation and Operation of SMS for Airports (2018)

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21 V. PRESENTATION AND DISCUSSION OF SURVEY RESULTS A. Demographics of Survey Participants Nineteen individuals from thirteen different air- port sponsors were interviewed over the course of several months. These thirteen airport sponsors own and operate Part 139 airports that have either implemented SMS in some form, participated in the FAA pilot studies, or both. The nineteen individuals were a mixture of airport directors/managers, attor- neys, risk managers, and SMS managers. No more than two individuals were interviewed for any given airport. Again, because of the sensitive nature of the material discussed during the interviews, the indi- vidual airports and interview participants are not identified by name in this Legal Research Digest. In addition to airport representatives, two SMS consultants with a significant role in SMS imple- mentation at airports were interviewed for back- ground information and to identify additional potential survey participants, but those interviews are not included as part of the results in this Legal Research Digest.140 B. Overall Findings Overall, interview participants reported few sig- nificant legal issues associated with the implemen- tation of SMS. Most interview participants reported that they (or someone in their organization) were at least aware of the potential legal issues with SMS implementation, but very few participants reported that any of these issues has yet presented much if any practical challenge to their implementation efforts. While all participants reported at least some level of SMS implementation, nearly all sponsors reported that they have not yet undertaken full-scale imple- mentation of SMS because of the absence of a final rule from FAA. Several interview participants reported that their upper management or legal departments had specifically recommended or ordered the opera- tional staff to delay certain aspects of SMS implemen- tation for fear of triggering legal issues that would only be further complicated when a final rule is actu- ally promulgated. In particular, sponsors varyingly have declined to undertake certain implementation actions that are most likely to trigger legal issues, such as the follow- ing: identifying an accountable executive, drafting 140 For instance, if the consultants reported that one of their clients experienced a legal issue, that report was not included in the survey results unless a representative from the airport was also interviewed. • Developed or implemented additional SMS- related training for sponsor and/or third-party employees, • Prepared an SMS Manual or implementation plan, • Renegotiated any contracts with aeronautical tenants as part of SMS implementation, • Established a confidential hazard reporting system, • Designated an “accountable executive,” • Purchased any additional software to accom- modate SMS implementation, or • Developed any new internal hierarchy or re- porting structure. If participants answered any of these items in the affirmative, they were asked to further describe the sponsor’s implementation actions for that item. Par- ticipants were then given an opportunity to describe any other specific steps the sponsor had taken toward SMS implementation. Based on the specific actions taken at each airport, participants were then asked a series of questions on their awareness of particular legal or operational issues that had been encountered during or after the implementa- tion of SMS. These specific issues included: • Open records requests for SMS documents, • Open records requests for incident or hazard reports, • Lawsuits filed against the sponsor or an indi- vidual or executive related to alleged safety viola- tions or negligence at the airport, • Contract negotiations or disputes with ten- ants or potential tenants concerning safety-related issues, • Discussions about or changes to insurance policies or premiums, • Discussions with labor unions regarding SMS or safety-related issues, • Complaints from employees regarding new safety procedures, and • Revisions to governing documents. Interview participants were then given an oppor- tunity to discuss any legal or operational issues that were not already mentioned earlier in the interview. Finally, participants were asked about the internal structure of their organization, the role of their legal staff in SMS implementation, and the extent to which the legal staff would be involved in SMS going forward.

22 produced its SMS Manual and implementation plan. The representatives reported, however, that the SMS Manual and implementation plan, and the sponsor’s liability or standard of care under those documents, have not been presented or used in the case thus far. The litigation is still ongoing as of this Legal Research Digest. Numerous airport sponsors did report that they were the targets of other safety-related litigation involving slip-and-fall accidents, workers’ compen- sation, landside premises liability, and cracks in the airfield pavement, but all of those sponsors reported that such litigation is relatively common notwith- standing SMS implementation. These sponsors reported that these lawsuits were not necessarily affected by SMS implementation; in other words, the lawsuits did not involve records from the confi- dential hazard reporting system or any internal SMS documents or policies.141 Notably, sponsors indicated that in most of these cases they expected the state’s government immunity statute to protect the sponsor from liability, and in some instances the cases had already been dismissed on those grounds. In addition, many representatives (though not all) reported that the legal departments at their respec- tive sponsors had at least preliminarily assessed the possibility that full implementation of SMS would change their liability, but had concluded that even if the sponsor’s liability increased, the state’s immu- nity laws would likely be broad enough that they would continue to provide nearly complete protec- tion from tort lawsuits. One interview participant noted that even if the state immunity statute did not completely protect the airport sponsor, the stat- ute provided for a very low damages cap that would provide at least some protection in the event of a lawsuit. In two cases, however, interview participants stated that their sponsors’ legal departments were at least somewhat concerned that full SMS imple- mentation would increase the sponsors’ liability and that the government immunity statute may not be sufficient to protect the sponsor. Both of these spon- sors have declined to pursue full SMS implementa- tion or preparation of an SMS Manual in part because of this uncertainty. One sponsor has begun preliminary legislative efforts at the state level to clarify and potentially expand the scope of the gov- ernmental immunity statute to help allay some of these concerns. 141 Several interview participants from airports with less robust implementation noted that even if they had a fully implemented SMS program, they did not anticipate that the types of lawsuits they were currently experienc- ing would implicate any SMS issues. or finalizing the SMS Manual and implementation plan, implementing confidential hazard reporting systems, implementing SMS training programs, discussing changes to tenant leases, revising gover- nance documents, engaging insurers in discussions about rate changes, or updating safety policies. Respondents at many sponsors reported a cultural struggle with either their legal departments or upper management (or both) because of uncertainty in implementing SMS without an explicit require- ment to do so. While those sponsors generally reported an internal recognition of the potential benefits of SMS, they found it difficult to make sig- nificant progress, secure funding, or get definitive approval to take certain actions perceived as legally risky without the federal requirements in place. Thus, the results of this survey could be charac- terized as somewhat premature and may not accu- rately represent all of the legal issues that sponsors implementing SMS may face in the future. While sponsors did report some legal issues associated with implementation and that information is cer- tainly valuable, it may not reflect the overall land- scape once more sponsors implement SMS, and especially when the more legally difficult elements of SMS are implemented. However, this result is itself an instructive conclusion—it appears that the biggest legal issue facing airport sponsors today in implementing SMS is the uncertainty surrounding the lack of a final SMS rule or definitive FAA direc- tion on implementation steps or requirements. C. Analysis of Previously Identified Legal Issues Although the majority of interview participants did not identify significant legal issues associated with implementation of SMS at their airports, a minority of sponsors did report that they have encountered some legal issues. This subsection reviews the results of the survey as related to each potential legal issue identified in Section III. 1. Sponsor Liability and Lawsuits Only one airport sponsor, which has nearly com- pleted implementation of SMS, reported that it was involved in a lawsuit that significantly implicated SMS or a potentially expanded scope of liability for the sponsor. In this case, a contractor’s employee was struck by lightning on the airfield and killed. The worker’s estate filed a lawsuit against the spon- sor, the airport director, and the airline consortium at the airport. The respondents reported that one of the legal issues presented in the case is whether the airport sponsor was responsible for detecting poten- tial lightning strikes. In discovery, the sponsor

23 could eventually translate into litigation against the sponsor, most expressed the same sentiment as above—that the state’s government immunity stat- ute would most likely protect the sponsor from lia- bility. In addition, these interview participants indicated that they received these types of requests regardless of the status of SMS implementation. Regardless of whether sponsors have received open records requests for SMS-related information, several have taken steps to protect themselves from liability in the event that SMS information is made public. One sponsor who has not received any open records requests but maintains a confidential haz- ard reporting system reported that, initially, the sponsor advertised it would “investigate and keep confidential reports” submitted through that sys- tem. The sponsor’s legal team recommended that this language be amended to include the phrase “to the extent allowed by law” to prevent the appear- ance that the reports would definitively be confiden- tial.142 Another sponsor reported that upon launching its confidential hazard reporting system, it included similar “to the extent allowed by law” language and also added a statement disclaiming sponsor liability for hazards reported through the system. Another sponsor who has received open records requests reported that its confidential hazard reporting sys- tem was maintained by a third-party software com- pany, at least in part in an attempt to make open records requests more challenging for requesters.143 A different sponsor reported that although it does not yet maintain a fully operational confidential hazard reporting system, it has recently refrained from attaching police reports to incident reports because of concerns with recurring open records requests. Nearly all sponsors that maintain confi- dential hazard reporting systems permit the report- ing party to remain anonymous. Most sponsors reported that if the operations staff receives a haz- ard or incident report that may result in legal action, that report is forwarded to the legal staff to ensure that they are aware of the incident and the informa- tion that has been collected. The same sponsor who refrained from including police reports in its data was also the only one to report that it received a public records request for internal SMS documents. The sponsor reported that, at the time that request was received, the SMS 142 One of the SMS consultants interviewed also stated that a client who has not yet implemented its confidential hazard reporting system was considering similar language. 143 This interview participant acknowledged, however, that the information was likely subject to disclosure even with this third-party arrangement, and another represen- tative confirmed that at least one open records request had been granted. 2. Accountable Executive Liability and Lawsuits Only one airport sponsor reported that its accountable executive was the target of a lawsuit that involved any SMS issues — the lightning strike case discussed above. While the sponsor’s account- able executive was named as a defendant, the spon- sor successfully moved to dismiss the accountable executive as a defendant because of immunity under the state’s governmental immunity statute. Similar to the reports on the liability of the spon- sor itself, most interview participants generally stated that to the extent that the accountable execu- tive shouldered any liability as a result of SMS implementation, they expected that the state’s immunity statutes would protect that individual. Only one sponsor reported that its legal department was concerned that the government immunity stat- ute might not sufficiently protect the accountable executive, and stated that implementation was being delayed in part due to this concern, though it was not the primary reason. This same sponsor also reported preliminary legislative efforts to expand the scope of the state’s governmental immunity statute. 3. A Note on Liability and the Absence of Lawsuits To a certain extent, it should not be surprising that few sponsors have yet to encounter liability issues or lawsuits that directly implicate SMS issues. The concept of SMS for airports is (relatively) new, and many sponsors have not yet implemented key parts of SMS that might be affected by such liti- gation. While accidents or incidents that might give rise to a lawsuit do occur, the chances of such an incident occurring at an airport that already has implemented SMS remain slim. Furthermore, liti- gation is slow by nature, so any lawsuits that may implicate SMS may be pending. In short, the absence of lawsuits that involve SMS should not be surpris- ing, nor should it be taken as an indication that such lawsuits will not arise in the future. 4. Freedom of Information or Open Records Issues Five airport sponsors with varying levels of implementation reported that they had received at least one state-level open records request for SMS- related data from the airport’s confidential hazard reporting system or an analogous system if a confi- dential hazard reporting system had not yet been fully implemented. The sponsors reported that, in general, they received these requests after an acci- dent or incident at the airport, and did not regularly receive requests for hazard reports outside of those instances. While several of the sponsors indicated some concern or awareness that these requests

24 Outside of mandatory reporting, other sponsors reported positive results from informally or formally building a culture of hazard reporting. Sponsors with SMS working groups that included airline and other tenant representatives reported that they pre- ferred this approach to mandating reporting because they felt it built a positive culture and in turn resulted in more reports with better information included in those reports. One sponsor also reported that this informal approach allowed the sponsor to better protect confidential airline information because it was not entered into the sponsor’s data- base. However, other participants reported manage- ment or legal department hesitance to engage airlines (or vice versa) because of the absence of a final regulation and/or the need for further steps in the implementation process. One sponsor described releasing quarterly hazard reporting data and the statistics on the resolution of the reports to encour- age additional reporting from tenants and airlines, and stated that the legal department had no com- ments on publicly releasing that information. 6. Existing Contracts and Leases No sponsors reported any conversations with their tenants about amending leases or contracts to account for SMS implementation, and none reported that SMS implementation issues were raised by either party in recent negotiations of new agree- ments. To the extent that any sponsors were consid- ering making changes to these agreements in the future, they reported that, without a final rule, they did not believe that they had leverage to demand additional contract terms (mandatory reporting, open records, etc.), and several reported that longer- term agreements were not set to expire for several years. As discussed above, sponsors instead have predominantly chosen to engage their tenants and encourage compliance through SMS panels and informal safety-related working groups. 7. Employment and Labor Issues No sponsors reported any legal issues or prob- lems associated with their own employees and implementation of SMS. Several sponsors did note that as a practical matter, implementing SMS was more successful when the culture at the airport was built from the top down and upper management was wholeheartedly in support of SMS implementation. One sponsor noted that it revised its internal employment policies as part of SMS implementation and made compliance with the sponsor’s SMS poli- cies mandatory. Additionally, no sponsors reported any issues sur- rounding training of their own or tenant employees. Sponsors that have formalized an SMS training Manual and implementation plan were in draft, were several years out of date, and were provided to the requester without objection. The interview par- ticipant expressed little concern about providing those specific documents to the requester because they were not particularly relevant given that they were outdated, but stated that he felt future disclo- sure of final documents could be more problematic because of potential shifts in the sponsor’s standard of care and other liability issues. While only one sponsor has received a request for its SMS Manual, it should be noted that many sponsors reported they do not currently have an SMS Manual or have held off on finalizing it while waiting for FAA to publish a final rule. 5. Other Data Protection and Collection Issues Sponsors reported one other practical issue related to data collection and protection that is also connected to the sponsor’s existing contractual rela- tionships. Several sponsors with varying levels of implementation mentioned their concern about receiving accurate and comprehensive reports from non-airport employees. Sponsors reported taking a wide range of approaches to this issue. Four sponsors reported internal discussions regarding renegotiating leases with tenants to require reporting of hazards by those tenants’ employ- ees.144 Respondents reported that none of their spon- sors had yet approached their tenants with this strategy and cited a variety of reasons. An interview participant representing one of these sponsors noted that he would be concerned that mandatory report- ing language could operate to destroy the indepen- dent contractor relationship between the sponsor and a third party. Another interview participant indicated that because most of the leases at that airport were not set to expire for several years, there was little opportunity to renegotiate at this time. One other interview participant that had considered including mandatory reporting language was concerned that mandated reporting would produce too much data which the sponsor was currently not equipped to handle. One sponsor stated that although his air- port’s contracts did not contain mandatory reporting language and the sponsor had apparently had no dis- cussions with tenants about including such language, all of the contracts at the airport contained a broad “audit clause” that would allow the sponsor to access the tenant’s documents and internal reports if necessary. 144 One sponsor has mandated reporting of incidents and accidents (not necessarily hazards) through revisions to its rules and regulations as part of its SMS implementation. This approach is discussed in more detail elsewhere.

25 which both individual participants attributed in part to the implementation of SMS.146 That sponsor reported that since SMS implementation, the air- port has experienced fewer incidents and the insur- ance company sees the organization as a lower risk enterprise, resulting in lower rates. This sponsor also pointed to mandating compliance under the sponsor’s rules and regulations, which the insur- ance company viewed favorably. Two other sponsors reported that although they have not seen a reduc- tion in rates, their respective insurance carriers have been actively involved in the implementation process by participating in safety risk management panels, assisting with the development of hazard reporting software, and providing input on the drafting of the SMS manuals. One other interview participant reported that he felt the sponsor lacked leverage to negotiate changes in rates or insurance policies in the absence of a final rule. 9. Governing Documents As discussed elsewhere, one sponsor reported making significant changes to its rules and regula- tions and employee policies as a result of SMS implementation, and another reported adopting ordinances to assist with enforcement of safety issues. Several sponsors also reported that they had made changes to their training programs, as also noted above. Other than those instances, no sponsors reported making any changes to existing governance documents, with most noting that they were specifically waiting to make such revisions until a final rule is published. Most sponsors did, however, report that they were aware these docu- ments would need to undergo review and revision (including by the sponsor’s legal staff) as part of SMS implementation. D. An Overarching Issue: Regulatory Uncertainty The overarching legal issue identified by the sur- vey participants was the continued uncertainty of the FAA’s rulemaking process and the resulting delays in implementation of SMS. Nearly every interview participant mentioned that their sponsor had delayed some aspect of SMS implementation — including several who have delayed implementation significantly—in anticipation of the final rule, and that this uncertainty permeated their SMS imple- mentation efforts. Outside of particular implementation delays, interview participants also discussed the regulatory 146 The interview participants explained that a recent shift in the management of common areas to an airline consortium also likely contributed to these reductions. process reported that they train their own employ- ees on relevant SMS job duties and use their badging process to capture third-party employees. However, most sponsors have not fully implemented a formal training process because of the uncertainty sur- rounding the scope and substance of the training requirement in the final rule. Two sponsors with near-full implementation did, however, report some legal issues with the employees of tenants or contractors that required additional enforcement measures. One sponsor reported that it revised its rules and regulations as part of its SMS implementation plan to mandate the reporting of incidents and accidents, and the wearing of safety vests when employees are in the air operations area and to prohibit smoking in the movement and non- movement areas. The sponsor reported that several airline employees have since violated those revised rules and regulations, and the sponsor subsequently stripped those individuals of their SIDA badges. The sponsor reported that it has not received any com- plaints directly from the airline as a result of this policy, but did receive informal complaints from the union representing the workers who had their badges revoked. The sponsor has not had continued issues with compliance for some time. Another sponsor undertook similar measures by developing an ordi- nance and notice-of-violation system to enforce safety issues, which the sponsor can use to cite carriers, ten- ants, or their employees. This sponsor reported that the ordinances have been revised several times to provide for greater penalties for violations in an attempt to encourage ongoing compliance. 8. Insurance Issues For those sponsors that reported any involve- ment with their insurance carriers, they generally reported positive trends with policies and rates.145 Sponsors with more robust SMS programs reported that they had, at the very least, provided informa- tion about their programs to their insurance carri- ers. Although some reported that the insurance carriers had provided no response or had made no changes to the policies or rates, others reported more promising results. Several sponsors that have actively involved their insurance carriers (or had insurance carriers that chose to become heavily involved) in SMS imple- mentation have seen reduced premiums and deduct- ibles as a result, though the sample size is small. One sponsor reported a significant reduction in insurance premiums and a complete elimination of the sponsor’s deductible over the past five years, 145 We did not survey any insurance carriers in the preparation of this Legal Research Digest.