Following up on our item of last May 12: the Eighth Circuit federal court of appeals ruled last year that the safety rating group ARGUS (Aviation Research Group) had not defamed Aviation Charter Inc. in 2001 by assigning the charter operator its lowest safety rating, “DNQ” or “Does Not Qualify”. Aviation Charter Inc. operated the plane whose crash a year later, in 2002, killed Sen. Paul Wellstone of Minnesota and seven others. The Eighth Circuit affirmed a lower court’s decision to dismiss the suit, saying ARGUS’s comparative ratings involved subjective interpretations of data and were not “sufficiently factual to be susceptible of being proved true or false”. So for now, at least, it seems that if you want to rate air carriers’ safety, go ahead and rate away. (”Court decisions: Air carrier’s poor safety rating isn’t defamatory”, National Law Journal, Aug. 1, 2005, not online).
From a Forbes article on safety problems in charter aviation:
Businesses pay [Joseph Moeggenberg's] company, Aviation Research Group/U.S., or “Argus” in the trade, as much as $20,000 per month for full access to ratings reports on 848 charters, or $249 for a single report. Argus provides specifics about a flight, the jet’s history, the owner, whether the plane is double-booked from another charter, the pilot’s record and so on. It assigns a red, yellow or green light on safety (36% receive reds or yellows).
One charter outfit got a prescient “Does Not Qualify” rating from Argus: Aviation Charter of Eden Prairie, Minn., which flew U.S. Senator Paul Wellstone of Minnesota in a Beechcraft King Air A100 as he campaigned for reelection in October 2002. When a newspaper later reported that Aviation Charter got a bad rating, the company sued Argus for defamation but lost the case on summary judgment; the case is pending on appeal. The flight crashed at the Eveleth, Minn. airport in October 2002, killing all eight people aboard, including the senator, his wife and their adult daughter. Says Argus attorney Eric Heiberg of Minneapolis: “I can’t imagine we’re going to lose.”
(Seth Lubove, “Flight of Fear”, Forbes, May 9). An online summary of the case (Aug. 2004, courtesy Cousineau McGuire & Anderson; scroll to “Federal Courts — Defamation”) indicates that the court agreed that the rating contained inaccuracies which harmed Aviation Charter’s reputation, but found no proof that Argus had acted with malice or reckless disregard for the truth. UpdateMar. 15, 2006: Eighth Circuit (in summer 2005) dismissed suit, ruling ratings subjective.
“The stock market is not eager to fund this capital-intensive, risk-burdened, lawyer-strafed industry. … 40 years of lawsuits and heavy-handed regulation have made the bizjet industry hyperconservative.” (Rich Karlgaard, “Digital Rules: Cheap Jet Update”, Forbes, Jan. 10).
Ten years ago, in one of the few significant liability reforms to emerge from Washington, D.C. in modern times, Congress provided litigation relief to small-aircraft makers, most notably by cutting off lawsuits filed more than 18 years after an aircraft was sold. As was widely reported, general aviation thereafter enjoyed a substantial recovery from its previous slump, with significant numbers of planes again being manufactured and sold. But trial lawyers, casting around for parties to sue after crashes, simply began naming everyone else in sight: flight instructors, “mechanics, manufacturers of replacement parts, fuel suppliers and airports. Aviation is again in decline.” Frasca Field in the college community of Champaign-Urbana, Ill. has “shut down its flight training, recurrent training and mechanics’ services a year ago because of skyrocketing insurance costs brought on by a lawsuit in which the field itself was found not guilty.
“The case stemmed from the 1996 death of a man who was a passenger in a Piper J-3 Cub that crashed in a cornfield near Thomasboro. Federal Aviation Administrators inspectors found no mechanical problems. The National Transportation Safety Board said the accident was caused by pilot error. Frasca Air Services Owner Rudy Frasca said the final legal defense price tag was about $600,000. ‘We won the case, but we lost the field,’ said Tom Frasca.” Much more here (J. Philip Bloomer, “Liability costs ground Frasca”, Champaign (Ill.) News-Gazette, Jun. 20).
This year’s Economic Report of the President, just published, includes a chapter (large PDF, look for chapter 11) on the economic impact of the U.S. tort system, its growth, the mixed evidence on its success in hazard-reduction, and its impact on particular fields such as medicine and light aviation (via Alex Tabarrok).
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