Gatx/Airlog Co. v. U.S.

Citation286 F.3d 1168
Decision Date19 April 2002
Docket NumberNo. 99-36024.,99-36024.
PartiesGATX/AIRLOG COMPANY; GATX Capital Corporation; Airlog Management Corporation; Frederick L. Hatton and Sanford P. Burnstein, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Scott D. Devereaux, Cooley Godward LLP, Palo Alto, CA, for the appellants.

Barbara B. O'Malley, United States Department of Justice, Torts Branch, Civil Division, Washington, DC, for appellee the United States of America.

Appeal from the United States District Court for the Western District of Washington; Robert S. Lasnik, District Judge, Presiding. D.C. No. CV-98-01029-L.

Before: ALARCON, FERGUSON, and McKEOWN, Circuit Judges.

ORDER

This court's opinion, filed December 13, 2000, is hereby WITHDRAWN and replaced with the attached opinion.

With the filing of this new opinion, the panel has voted to deny the petition for rehearing and to deny the petition for rehearing en banc, filed February 22, 2002.

The full court has been advised of the petition for en banc rehearing, and no judge of the court has requested a vote on the petition for rehearing en banc. Fed. R.App. P. 35(b).

The petition for rehearing and the petition for rehearing en banc are DENIED.

OPINION

McKEOWN, Circuit Judge.

Aircraft safety is a matter of significant public importance, and the Federal Aviation Administration ("FAA") plays a central role in monitoring safety through its certification of commercial aircraft. At issue in this case is whether the United States is immune from liability under the Federal Tort Claims Act, 28 U.S.C. §§ 2671-2680 (1994) ("FTCA"), for the FAA's alleged negligence in issuing aircraft certifications. GATX/Airlog Company ("Airlog") brought suit against the United States under the FTCA after the FAA issued a directive modifying the terms of two design certificates for converting passenger airplanes to cargo freighters. The district court dismissed Airlog's complaint for lack of subject matter jurisdiction under the discretionary function exception to the FTCA. See GATX/Airlog Co. v. United States, 79 F.Supp.2d 1208, 1210-14 (W.D.Wash.1999). We affirm.

BACKGROUND
A. FAA Design Certification

Under the Federal Aviation Act of 1958, 49 U.S.C. § 40101 et seq. (1994 & Supp. IV 1998),1 the FAA is charged with promoting flight safety by establishing minimum standards for, among other things, aircraft design. See 49 U.S.C. § 44701(a)(1) (Supp. IV 1998). Accordingly, the FAA has prescribed a comprehensive set of rules and regulations, including a multi-step certification process, for aircraft design and production. A detailed description of this certification process is set out in the Supreme Court's decision in United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines), 467 U.S. 797, 804-07, 816-19, 104 S.Ct. 2755, 81 L.Ed.2d 660 (1984). Three aspects of the design certification process are relevant here: the type certificate, supplemental type certificate, and airworthiness directive.

The first stage of this process is type certification, in which airplane manufacturers seek approval of new aircraft designs. Under federal regulations, aircraft manufacturers must analyze and test their new aircraft designs. See 14 C.F.R. §§ 21.21(b), 21.33(b), 21.35 (2000). Based on the resulting engineering and test data, the FAA then determines the airworthiness of those designs. See 14 C.F.R. §§ 21.21(b), 21.33 (2000). If the manufacturer demonstrates that the design complies with federal regulations, the FAA issues a type certificate. See 49 U.S.C. § 44704(a) (1994); 14 C.F.R. § 21.21(b). In most instances, the type certificate covers an aircraft model, rather than an individual airplane. See 49 U.S.C. § 44704 (1994 & Supp. IV 1998).

Any major change to an FAA-approved design then requires additional certification in the form of a supplemental type certificate, also known as an STC. See 14 C.F.R. § 21.113 (2000). By issuing an STC, the FAA approves a modification to a previously-certified aircraft design. See 49 U.S.C. § 44704(b) (Supp. IV 1998). STCs are obtained through the same process as type certificates: the applicant must provide the FAA with sufficient engineering and test data to demonstrate compliance with federal regulations. See 14 C.F.R. § 21.115 (2000); see also 14 C.F.R. § 21.33(b).

After issuing a type certificate or STC, the FAA continues to monitor the safety of the certified aircraft. See 49 U.S.C. § 44709(a) (1994); 14 C.F.R. § 39.1 (2000). The FAA may amend, modify, suspend or revoke a certificate for airworthiness reasons. Such an order takes the form of an airworthiness directive and may require the aircraft owner to alter the aircraft to maintain its certification. See 49 U.S.C. § 44709(b) (1994); 14 C.F.R. §§ 21.99, 21.277, 39.11 (2000). After the FAA issues an airworthiness directive, the particular aircraft may only be operated in compliance with that directive. See 49 U.S.C. § 44713(a) (1994); 14 C.F.R. § 39.3 (2000).

B. The FAA's issuance of the STCs and an Airworthiness Directive

Airlog is in the business of converting passenger airplanes into cargo freighters. Airlog's predecessor entered into a contract with Hayes International Corporation ("Hayes"), an aeronautical engineering company, to design the cargo conversions for Boeing 747 passenger airplanes, and to obtain STCs from the FAA. Because Airlog did not have an engineering staff, it relied on Hayes for engineering expertise.

The approval process involved FAA offices in Seattle and Atlanta and took place over a several-year period. According to Airlog, an important part of this particular approval process was the selection of the engineering methodology that would generate the necessary compliance data, as the methodology would greatly affect the cost and schedule of the project. Two methods were considered: the "comparative" or "equivalent strength" method, and the "original loads" method.

Under the equivalent strength method, each component or section of the proposed modified aircraft is compared to similar components or sections of a previously-approved aircraft. In contrast, the original loads method does not involve component-by-component or section-by-section analysis. Rather, it requires the designer to determine what forces are actually applied to the airplane's structure under various flight scenarios ("external loads"); how those external loads are distributed within the structural elements of the airplane ("internal loads"); and whether the structure is strong enough to withstand the internal loads, within the margin of safety required by federal regulations. According to Airlog, the original loads method is more costly and time-consuming than the equivalent strength method.

Airlog claims that in 1986, the FAA determined that the equivalent strength method was acceptable from an engineering standpoint to assure that Hayes's conversion design complied with federal regulations. The FAA reaffirmed this conclusion in 1987 and 1988. In 1988, based on data provided by Hayes and generated by the equivalent strength method, the FAA issued Hayes two STCs, thereby approving its conversion design. Hayes, with the FAA's authorization, assigned the STCs to Airlog. Between 1988 and 1994, the certified design, which related to the cargo door and cargo compartment, was then used to convert ten Boeing 747 airplanes into cargo freighters.

Following conversion, the FAA received multiple reports that the converted airplanes were experiencing substantial — and potentially dangerous — in-flight problems. In one incident the pilot had to recover from a dive maneuver; in others, the airplanes suffered substantial structural damage. Consequently, the FAA reconsidered the conversion design and determined that its deficiencies required a reduction in the airplanes' maximum allowable payload. The FAA issued an airworthiness directive to this effect in 1996 in which it reduced the allowable payload by approximately 100,000 pounds. See Airworthiness Directives, 61 Fed.Reg. 116 (Jan. 3, 1996).

In the airworthiness directive, the FAA concluded that "[a]irplanes modified in accordance with all of the STC's ... are unsafe, and the FAA approved these STC's in error." Id. at 117. Specifically, the FAA stated that "the ultimate strength of the main deck floor and ... the surround structure of the main deck and side cargo door are inadequate." Id. The FAA went on to note that because "there would be no warning prior to collapse of the main deck floor ... the only immediate option... would be to reduce the weight of the cargo on the main deck." Id. The FAA also concluded that, as a result of the lack of reinforced fuselage near the side cargo door, "[i]n the worst case, the aft fuselage may collapse and separate from the airplane" without warning. Id. Finally, the FAA stated that in order to reinstate the full load capacity, additional data would have to be generated under the original loads method, rather than the equivalent strength method. See id. at 118. The equivalent strength method was insufficient because, as it turned out, the Hayes design was not sufficiently similar to the design that the FAA had previously approved. See id. at 116.

The practical effect of the airworthiness directive was that the cargo capacity of the converted airplanes was significantly reduced. As a result of the reduction in payload, owners of the converted airplanes brought suit against Airlog. Airlog then brought this action against the United States, claiming that the FAA had been negligent in approving the equivalent strength method, and in issuing STCs based on that method. The government moved to dismiss Airlog's complaint, arguing that the district court lacked subject matter jurisdiction, because the FAA's alleged conduct was protected by the discretionary function exception to the FTCA....

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