June 2000 

Flight 261 Update: The DOHSA Conundrum

by Robert F. Hedrick

Airline accidents are unique human disasters in a class of their own. They can occur at any time, at any place, and be the result of many different remote factors, all of which strangely come together at the same time. In many major aviation accidents, the liability and/or damage issues do not fall squarely within developed law. When that occurs, the legal warriors from each side enter the litigation trenches to do battle.

Unfortunately, for many family members the great battle means waiting, sometimes 10 to 15 years or more, before they receive any money. How can that be? Case in point: the 1983 KAL 007 downing over the Sea of Japan. Litigation arising out of that accident has been before the Federal Court of Appeals on at least 10 occasions, with two decisions going all the way to the U.S. Supreme Court in 1996 and 1998.1 Both decisions relate to efforts to limit damage recovery under the Death on the High Seas Act (DOHSA).

In the meantime, the surviving sons and daughters, who may have been children at the time of the accident, are now grown up. After burying their loved ones, they were raised without one or both parents, went to grade school, high school and likely to college, all without a dime of compensation from the culpable defendants. Over the years, the money at issue gained strong investment earnings for the holder.

A similar scenario played out with regard to the 1988 Pan Am Flight 103 crash over Lockerbie, Scotland. Once the liability round was over, the bell rang for the second round, where a plethora of damage issues were tossed into the ring of dispute. The same fight is occurring in the TWA 800 litigation, where there are issues involving DOHSA and the retroactive effect of new DOHSA amendments, which may cause that case to drag on in the courts for many years. Since the aftermath of Flight 261 may lead to similar disputes over damages, it too could be caught in the dark web of legal jostling and judicial delay.

Can aviation disaster claims be streamlined? It is interesting to note that insurance costs to airlines appear very low, typically averaging 0.3 to 0.5 percent of total operating costs.2 Even though airlines can be very cost sensitive, a minute change across the industry might help alleviate these significant delay problems.3 Believe it or not, in the aviation accident arena, the tortoise judicial system becomes a hare when compared to congressional response. (That is a topic for another day.)

Since the time the original Flight 261 article went to press for the April issue of Bar News, there have been some significant developments regarding DOHSA. It appears that DOHSA,4 which contains serious limitations on recoverable damages, will probably not apply to Flight 261 for a number of reasons. However, depending on how the case unfolds, the final word on DOHSA may not come for some time, and perhaps not until the battle dust settles.

First, the location where Flight 261 crashed into the Pacific Ocean has been reported at less than three miles off the coast of Anacapa Island, one of the California Channel Islands. If so, that location is outside the scope of DOHSA coverage, which, by its original language, begins beyond three nautical miles from shore. However, the exact location may be too close to call at this time.

Second, on April 5, 2000, President Clinton signed the Aviation Investment and Reform Act for the 21st Century (AIR-21).5 It contains a provision that precludes DOHSA application to "commercial aviation accidents" occurring within 12 nautical miles of the U.S. shore. Importantly, the DOHSA provision applies retroactively to July 17, 1996, in order to cover claims arising from the TWA 800 accident. The retroactive effect is also needed to cover Flight 261 claims, because that accident occurred more than two months before AIR-21 was signed into law.

Last, on March 29, 2000, the 2nd Circuit (in a 2-1 decision) held that Presidential Proclamation 5928,6 extending the territorial sea from three miles to 12 miles, also acted to shift the boundary where DOHSA begins to apply to 12 miles.7 Since TWA 800 crashed into the Atlantic Ocean eight miles from Long Island, DOHSA's restricted damage remedies were held not to apply.

Despite AIR-21 and the 2nd Circuit decision, the DOHSA issue is not yet laid to rest in the TWA 800 litigation. Boeing has petitioned for a rehearing, and for a rehearing en banc. In addition to the merits of the issue involving DOHSA application and Proclamation 5928, another issue involving the constitutionality of the retroactive provision of AIR-21 will be raised once the case is remanded back to the district court in the first instance.8 The curve ball that AIR-21 throws into the equation may warrant further appellate review in light of the re-troactive provision, the alleged confusion of congressional intent behind DOHSA (and as amended by AIR-21), and the alleged inconsistent treatment by the 2nd Circuit. Unless Flight 261 crashed within three nautical miles of shore, the resolution of the DOHSA issue in the TWA 800 litigation will likely have legal ramifications for Flight 261 claims.

Another related issue is the effect of the 2nd Circuit's decision on non-aviation claims. Though decided in the aviation context, and unlike AIR-21, the TWA 800 decision also applies to non-aviation accidents occurring within 12 miles of shore. Therefore, maritime deaths (and non-commercial aviation deaths) occurring from three to 12 nautical miles are no longer governed by DOHSA, but are now covered under general maritime law and/or state tort law. However, the effect of the decision is inconsistent with AIR-21, because the 106th Congress apparently treated the DOHSA boundary at three miles, and did not extend it to 12 miles via Proclamation 5928. This inconsistency will someday be resolved in the courts.

Two other provisions of the DOHSA portion of AIR-21 are worth mentioning. First, the law does not define "commercial aviation," of which the amendments only apply. There is no dispute that the term includes regularly scheduled commercial airline flights. However, there are many other types of flying activity where the lack of definition will cause uncertainty and future legal dispute.9 All we know for certain is that the pre-AIR-21 law (and the 2nd Circuit decision) will apply to non-commercial aviation accidents occurring between three to12 miles from shore.

Second, there is a supplemental damage provision for commercial aviation accidents covered by DOHSA. If the accident occurs beyond 12 miles, family members can now recover one type of non-pecuniary damage, which is "loss of care, comfort and companionship." Obviously this does not include other non-pecuniary damages such as survivors' grief and anguish, and passenger pre-death pain and suffering. Punitive damages are expressly excluded.

The reason that the damage issue is so highly contested is the amount of money involved. As pointed out in the April article [Bar News, p. 21], DOHSA could make the difference of whether or not approximately 60 percent of total damages are recoverable. That amount, and its inherent investment value, makes it cost effective to wage battle from the defendants' perspective. Though the liability mystery is nearly solved, issues surrounding compensation are lining up to linger on.

1 See Zicherman v. Korean Air Lines, Inc., 516 U.S. 217 (1996); and Dooley v. Korean Air Lines, Inc., 524 U.S. 116 (1998).

2 P. Chrystal, Warsaw Requiem or Unfinished Symphony? Specific Aspect of the New-Law Making: The View of the Reinsurer, XXII-I Annals of Air & Space Law 131 (1997) (citing Swiss Reinsurance Company, Economic Research Department, High Volatility in Aviation Insurance: Are Premium Rates Due for a Nosedive?, Sigma No.1/1996 (Zurich: Swiss Reinsurance Company, 1996). The author notes that 0.3 to 0.5 percent is a minute fraction compared to what he pays for car insurance, which is about 25 percent of the total operating cost.

3 On the international level, there has been some talk and movement in favor of payment of early front money. Under this approach, airlines would pay a lump sum shortly after the accident to assist family members. That amount would then be considered in any subsequent settlement, or offset from final judgment.

4 46 U.S.C. sec. 760 et seq.

5 H.R. 1000, 106th Cong. (2000) (enacted), sec. 404; Pub. L No. 106-181 (signed by President Clinton on April 5, 2000).

6 16 Presidential Proclamation 5928, 54 Fed. Reg. 777 (Dec. 27, 1988).

7 In Re: Air Crash Off Long Island, New York, on July 17, 1986, 2000, U.S. App. Lexis 5637 (2d Cir., March 29, 2000).

8 With regard to the constitutionality issue, Article 1, Clause 10 of the U.S. Constitution provides that: "No State Shall...pass any...law impairing the obligation of contracts..." The contract clause has been held to apply to the federal government via the Fifth Amendment's due process clause. See generally Lynch v. U.S., 292 U.S. 571 (1934). It applies to both government contracts (United Trust v. New Jersey, 431 U.S. 1 (1977)), and private contracts (Allied Structural Steel v. Spannaus, 438 U.S. 234 (1978)).

The contracts that could be impaired are: (1) the insurance policy between the airline and its insurer, (2) the contract between the airline and passengers, and (3) agreements relating to the manufacturer (indemnity and/or insurance contracts).

The risks related to these contracts involve the application of DOHSA (with its restrictive remedies), which are much less than under general maritime law or state tort law. Therefore, a retroactive change in these risks arguably subjects the defendants to greater exposure. However, the application of DOHSA to aircraft accidents occurring on the high seas was only recently confirmed in Zicherman v. Korean Air Lines, Inc., 516 U.S. 217 (1996), and considered the exclusive remedy in Dooley v. Korean Air Lines, Inc., 524 U.S. 116 (1998). This suggests that since the law was not well established before these cases, there was no essential difference in the risks underlying the contracts. See Energy Reserves Group, Inc. v. Kansas Power and Light Co., 459 U.S. 400 (1983) (where the court set out the threshold elements for violation of the contract clause).

Another argument in favor of constitutionality despite retroactive effect might be that the law is a "curative statute." When congressional intent is thwarted by unforeseen judicial decision, and Congress acts to clarify its intent with retroactive application, the law may be constitutional as a curative statute. In Anderson v. Mt. Clemens Potter Co., 320 U.S. 680 (1946), the Fair Labor Standards Act was interpreted by the U.S. Supreme Court in an unforeseen way, allowing potentially huge overtime wage claims. In response, Congress passed an act that precluded the miners' right to sue. All constitutional challenges to the retroactive effect of the act were lost because the act restored the original congressional intent, and was thus curative. See, e.g., Battaglia v. General Motors Corp., 169 F.2d 254 (2nd Cir. 1948), cert. denied, 335 U.S. 887.

9 For example, helicopter flights to offshore oil platforms, sightseeing flights, charter flights, commercial fishing flight operations and flight instruction.

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