Fallout of Boeing 737 Max 8—Will Legislation Repair Broken System?

The 737 Max 8 tragedy offers the FAA, Boeing, and aviation manufacturers an opportunity to learn from the mistakes of the past and to make aviation safer, says Ladd Sanger managing partner of the Dallas office of Slack Davis Sanger.

By Ladd Sanger

On Nov. 18, 2020, the Federal Aviation Administration set forth the requirements for the 737 Max 8 to return to service after the March 13, 2019, grounding of the world’s most popular airliner following two crashes that killed 346 people. The scrutiny associated with the Max 8 crashes has highlighted the way the FAA has deputized aviation manufacturers to self-certify the safety of their own products.

Operating under the Organization Designation Authorization (ODA), 14 C.F.R. part 183, subpart D, the FAA has the authority to delegate its safety oversight responsibilities to the aviation manufacturer to review and confirm the designs meet the FAA-imposed minimum standards of safety. A review of the ODA system in the aftermath of the 737 Max crashes has revealed the aircraft manufacturers have been exploiting this privilege to certify that aircraft systems meet FAA minimum safety standards when they do not. Larger aviation companies are self-approving approximately 95% or more of their own products. Congress has recognized the inherent conflicts of interest the ODA system creates and its negative impact on aviation safety. In an effort to keep the ODA system but erect some guardrails to provide more oversight, Congress is considering the Aviation Safety and Certification Reform Act of 2020.

This bipartisan proposal aims to take back some of the oversight the FAA has turned over to manufacturers in an effort to hold manufacturers more accountable. It would require a Safety Management System (SMS) where manufacturer employees can confidentially report safety concerns to a reorganized Aviation Safety Whistleblower Investigation Office. It would increase funding to the FAA for recruitment of approximately 250 new engineers and people with specialized expertise to more effectively oversee manufacturers’ use of the ODA.

While some have advocated for complete elimination of the ODA authority, given the sheer amount of manpower and technical expertise that would shift to the FAA, it is not a practical solution. Today’s aircraft and the computers that run the systems are incredibly sophisticated, and it takes an army of engineers with specialized knowledge to develop and vet them. There is not a big enough pool of talent outside of the manufacturers’ own employees that can be readily tapped by the FAA to staff the positions needed to adequately take back the ODA responsibilities.

The proposed legislation attempts to strike a balance of allowing the ODA program to continue with markedly increased FAA oversight and more stringent enforcement of revocation of the ODA privilege for manufacturers who abuse the program.

The act will attempt to make the FAA less susceptible to the political and external pressures exerted by large manufacturers.

The act will also require the FAA to approve ODA members based on newly established technical expertise requirements. This is a notable change, since manufacturers currently have discretion to appoint ODAs. Instead of having technical expertise to actually review the safety of the design and operation of systems, ODAs currently have limited technical expertise but are well versed on how to navigate the FAA paperwork to expeditiously self-certify the products.

From a legal responsibility perspective, the ODA system has significant legal benefits to manufacturers.

Presently, manufacturers use the self-certification of their products as a shield in product liability cases, claiming the product is “FAA approved.” Some states have enacted laws that allow aircraft manufacturers to use FAA approval as a legal defense against defective-design claims. For example, the manufacturer can claim it is entitled to a presumption that its product is safe since it has been “FAA certified,” even though that certification was done by one of the manufacturer’s employees wearing the ODA hat.

While it is not currently part of the act, there has been a proposal to prohibit manufacturers from using governmental approval as a defense if that approval is based on certification by a manufacturer’s employee under ODA.

The fallout from the Max experience goes far beyond the tarnished reputations of Boeing and the FAA. The claims associated with the grounding of the Max fleet, in addition to the wrongful-death claims, has hit the aviation insurance industry hard, with numerous aviation underwriters exiting the market.

As a result, insurance premiums have increased and, in some cases, risen dramatically higher if underwriters are even willing to underwrite the risk at all. This will most assuredly result in some smaller commercial, general aviation, and helicopter operators being underinsured or opting to go with no insurance at all, since there is no legal requirement for noncommercial operators. This is going to significantly exacerbate the problem aircraft operators and aviation maintenance providers have been struggling with for years, which is how to get adequate liability coverage limits for a reasonable premium payment.

The 737 Max tragedy offers the FAA, Boeing, and aviation manufacturers an opportunity to learn from the mistakes of the past and to make aviation safer. Unfortunately, the 737 Max is just the latest high-profile example of the broken ODA system. Other examples include Boeing 787 lithium batteries, helicopter fuel tanks, and flight controls such as power levers in general aviation aircraft.

With the recognition that manufacturers have exploited the current ODA system, thus allowing unsafe products to cause multiple high-profile crashes, the pending legislation, the tort system, and public pressure will hopefully bring about changes that will enhance aviation safety.

Ladd Sanger is managing partner of the Dallas office of Slack Davis Sanger. He focuses his practice on aviation law, including products liability, business litigation, and representing clients who have been injured as a result of air disasters. He is also an FAA-licensed airline transport pilot with a jet type rating and a licensed helicopter pilot. He can be reached at lsanger@slackdavis.com.

 

Reprinted with permission from the January edition of  Texas Lawyer © 2021 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.