Tag Archives: aviation law

Scott Brooksby moderates American Bar Association panel on the impact of Covid on litigation at the National Institute on Aviation Litigation

On June 9, 2022, Scott Brooksby served as the moderator for a distinguished panel of diverse aviation professionals who discussed the impact of Covid-19 on aviation, and the economic, social, operational, and litigation fallout.   The 90 minute panel-discussion that Scott moderated was a segment of the American Bar Association International Aviation Litigation Institute held in Chicago.  Scott was also the lead author of the supporting paper for the panel.

Key issues discussed are aircrew and passenger class actions against airlines; impact of aircraft manufacturing; airport operations; numerous complex insurance issues; and providing aviation sector clients with Covid-19-related legal advice to challenge the changing local, state, national and international regulations.

Scott Brooksby will be featured as a speaker at the American Bar Association’s 3rd Annual Western Regional CLE Program on Class Actions and Mass Torts in San Francisco, California

Scott Brooksby will be featured as a speaker at the American Bar Association’s 3rd Annual Western Regional CLE Program on Class Actions and Mass Torts in San Francisco, California.   The conference explores hot topics in class action and mass tort litigation.  Scott will join federal judges, plaintiffs’ and defense lawyers, academics, and experts to speak on these issues.

Scott’s panel will discuss the interesting substantive, procedural, and strategic considerations for airlines and other types of manufacturers seeking dismissal in forum non conveniens motions, and for passengers and other plaintiffs seeking to defeat FNC motions in multi-district litigation. Using examples from aviation-related MDLs, and specifically after the groundbreaking MDL involving Air France 447, the panel will discuss key aspects of establishing personal jurisdiction over foreign corporate defendants. The panel will discuss the complex issues associated with international treaties, choiceof-law, the meaning of an “unavailable forum” and challenging jurisdiction and venue considerations that arise when both U.S. and foreign individuals
are involved.

Scott Brooksby practices aviation and product liability defense.  He is an experienced trial lawyer who has defended businesses, manufacturers, and organizations in many personal injury and and commercial cases. He has defended and counseled product manufacturers and distributors in a variety of industries including aviation, drugs and medical devices, toys and recreational products, paints and solvents, power tools, heavy equipment and machinery, retail, food, consumer products, and automobiles. He is the former co-chair of a large West Coast law firm’s product liability practice group.

Scott has tried numerous personal injury and product liability cases in Oregon state and federal courts.

In cases that do not necessitate a trial, Scott is a skilled negotiator who has resolved hundreds of cases through arbitration and mediation. He has successfully argued many motions that resulted in the dismissal of claims, or outright dismissal of his client. He also has experience counseling product liability clients regarding the avoidance of litigation, handling product recalls, product modifications, and unwanted governmental intervention.

Scott has litigated everything from small defective product claims to catastrophic injury and wrongful death cases involving punitive damages.  He has experience with medical treatment issues that result from falls, burns and amputation injuries in manufacturing facilities.

As one of the few lawyers in Oregon with significant aviation experience, Scott has litigated helicopter and plane crash cases, as well as aviation component part product liability claims.  Scott was co-counsel on a team that defended a large aviation product manufacturer in a months-long trial.

Scott Brooksby featured as a speaker at the American Conference Institute’s 8th National Forum on Aviation Claims & Litigation at The Carlton Hotel on Madison Avenue in New York, New York

Scott Brooksby will be featured as a speaker at the American Conference Institute’s 8th National Forum on Aviation Claims & Litigation at The Carlton Hotel on Madison Avenue in New York, New York.   The conference will take place June 27–28, 2016.  Scott will speak with other distinguished panelists regarding “Spotlight on Flight Crew Mental Health Issues Post-Germanwings: An In Depth Discussion of the Legal, Regulatory, Public Safety and Ethical Considerations”.

The presentation will touch on  the following issues:

• An in depth discussion of aeromedical
issues and developments following last year’s
Germanwings crash
• What procedures are currently in place
to identify mental health issues in pilots,
crew-members, air traffic controllers? —
Are they enough?
• Who should be in possession of a
crew-member’s mental health information?
• Who has what responsibilities to make reports
of other crew-members’ mental health info?
• Who regulates this?
• Assessing considerations of confidentiality
with considerations of public safety
• Under what circumstances can medical data
be shared and with whom?
• What strides is the FAA taking in response to
the Germanwings tragedy? (ARC and Amsis)

The American Conference Institute’s (ACI’s)  National Forum on Aviation Claims & Litigation provides up to the minute insights and strategies that are necessary to manage and defend against the newest claims and enforcement.  Scott will join ACI’s unparalleled faculty of federal government officials, judges, expert in-house counsel, and leading outside counsel to provide strategic advice, critical insights, and comprehensive updates for:
FAA, DOT & NTSB priorities, initiatives, and practices
DRONES – the latest FAA regulatory developments; the legal,
technical and policy concerns; and emerging developments in the
UAS (Unmanned Aerial System) insurance market
FLIGHT CREW MENTAL HEALTH ISSUES POST-GERMANWINGS:
the legal, regulatory, public safety and ethical considerations
Incorporating the latest PREEMPTION DEVELOPMENTS into your
litigation strategy, and the continuing fallout from DAIMLER AG V. BAUMAN
Liability and safety issues surrounding PILOT OVER DEPENDENCY ON AUTOMATION FEATURES
BREAKING DOWN TWO HYPOTHETICAL AIRPORT CLAIMS: injury in an airport concession stand & airfield “ramp side” work injury
Analyzing the latest PASSENGER DISCRIMINATION CLAIMS
FOREIGN CRASHES / INCIDENTS: navigating the complexities of
forum non conveniens, criminal liability, venue and choice of law
DEFENDING AVIATION CLAIMS: discovery challenges, effective use of experts, spoliation and preservation of evidence, proper use of NTSB reports, and winning over the jury

The uphill climb to establish general personal jurisdiction over a foreign corporate defendant

From Scott Brooksby’s article in the American Bar Association’s Mass Torts Practice Points on January 29, 2016:

The Uphill Climb to Establish General Personal Jurisdiction over a Foreign Corporate Defendant

On December 30, 2015, the U.S. District Court for the Northern District of Illinois granted the French company Airbus S.A.S.’s Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction. Siswanto, et. al. v. Airbus S.A.S., 2015 WL 9489952. The case was brought under the Multiparty Multiforum Trial Jurisdiction Act of 2002 (MMTJA). The court reasoned that because the case was brought under the MMTJA, Fed. R. Civ. P. 4(k)(l)(C) and the MMTJA enabled the court to consider Airbus’s contacts with the United States as a whole, and not just the state of Illinois. However, nothing in the statutes overrode Airbus’s constitutional due-process protections governing the court’s exercise of personal jurisdiction. Siswanto serves as fresh instruction on the vigorous scrutiny that courts apply to determine the existence of general personal jurisdiction over a foreign defendant.

The case arose from a December 28, 2014, crash of Air Asia Flight No. 8501, an Airbus A320-216 flying from Indonesia to Singapore. The heirs and personal representatives of the deceased brought product-liability and negligence claims against several defendants, including Airbus.

There was no dispute that Airbus was incorporated and had its principal place of business in France. For at least the previous five years, Airbus had not maintained any offices or employees in the U.S. or owned or rented property in the U.S. All manufacturing on the aircraft occurred in Europe, and none of Airbus’s subsidiaries in the U.S. undertook this work. The A320-216 had been issued a Type Certificate by the European Safety Agency but not the Federal Aviation Administration. The aircraft was sold to Air Asia Berhad, a Malaysian airline carrier that did not operate in the United States and the aircraft had never been flown in the United States.

Airbus moved to dismiss for lack of minimum contacts under the Fifth Amendment Due Process Clause. The plaintiffs proceeded only under a theory of general personal jurisdiction arising from Airbus’s extensive contacts with the United States as a whole. The court noted that the traditional “minimum contacts” test from International Shoe still governs even when the basis of personal jurisdiction involves a statute providing for nationwide service of process. KM Enters., Inc. v. Global Traffic Techs., Inc., 725 F.3d 718, 723, 730–31 (7th Cir. 2013) (citations omitted). The KM Enterprises court reasoned that when a federal statute authorizes nationwide service of process, the scope of the minimum-contacts test exceeds the forum state’s long-arm statute, and requires “continuous and systematic general business contact” such that Airbus is “essentially at home in the forum, the U.S., not just the State of Illinois.” See also Abelesz v. OTP Bank, 692 F.3d 638, 654, 656 (7th Cir. 2012) (citations omitted).

Against these demanding requirements for general personal jurisdiction, the plaintiffs argued that four categories of contacts between Airbus and the United States warranted the court’s exercise of general personal jurisdiction, all of which the court rejected.

First, the plaintiffs argued that Airbus’ sale of 811 aircraft—6.73 percent of its global sales in the last 10 years—were to U.S. based customers. The court noted that “imputing general personal jurisdiction from a defendant’s sales in the forum, even if sizable, would stretch general personal jurisdiction beyond its reach.” Siswanto, 2015 WL 9489952, at *4.

Second, the plaintiffs argued that 42 percent of Airbus’s procurement was in the United States. The court reasoned that mere purchases, “even if occurring at regular intervals,” do not establish general personal jurisdiction when the underlying cause of action is not related to those purchases. Id. (citing Helicopteros Nacionales de Columbia, S.A. v Hall, 466 U.S. 407 (1984)).

Third, the plaintiffs attempted to impute the contacts from Airbus’s “separately incorporated” subsidiaries, by arguing that the subsidiaries maintain a physical presence in the United States and provide thousands of jobs. The court rejected this argument based on the general rule that the jurisdictional contacts of a subsidiary are not imputed to the parent. Id.

Fourth, the plaintiffs cited a 2006 Associated Press Article showing that the FAA certified another aircraft model, the Airbus A380. The court noted that this isolated fact had no special significance as far as personal jurisdiction was concerned.

Siswanto emphasizes that while Airbus’s contacts with the United States may have been extensive, the contacts advanced by the plaintiffs fell far short of showing the de facto relocation requirement by the Supreme Court for a foreign corporate defendant to satisfy general personal jurisdiction.

Service animal dog bites passenger on commercial flight

Service animal dog bites are becoming more common.  Recently, a trial court in Spokane dealt with a service dog bite on a commercial flight.  The following is from Scott Brooksby’s article in the American Bar Association’s Mass Torts Practice Points, March 31, 2016:

Court Holds ACAA Preempts Passenger Claim Arising From Service Dog Bite

A recent Washington state trial court opinion held that federal field preemption under the Air Carrier Access Act (ACAA) preempts state-law tort claims arising from a service-dog bite that caused injuries to another passenger on a commercial flight. Sullivan v Alaska Air Group Inc., No. 15-02-00227 (Spokane Cnty. Feb. 29, 2016).

In Sullivan, the plaintiff was a passenger on a Horizon Air flight from Seattle to Spokane. On the same flight, defendant Wenzel was accompanied by his Rottweiler service animal. Wenzel and the dog were initially seated in the rear of the plane, but were moved to the front to better accommodate the size of the animal. On arrival, the service animal allegedly bit the palm of the plaintiff as she disembarked.

The plaintiff brought state-law negligence claims and contended that the airline had a duty to protect her from the harm caused by the service animal, and that the animal posed a foreseeable risk. Horizon Air argued that the ACAA preempts the plaintiff’s claims, either through conflict or field preemption. Horizon argued that the FAA has been empowered by Congress to promulgate rules and regulations in regard to airline safety and rules that should be afforded to passengers who may have need of a service animal. The airline argued that the rules and regulations establish a national standard that completely covers the issue of service animals on airplanes, and, therefore, the national standard preempts any state-law tort claim that would undermine the ACAA.

Washington state courts previously held that Congress may preempt local law where the federal government intended to exclusively occupy a field. Campbell v. Dep’t of Soc. & Health Servs., 83 P.3d 999, 1009 (Wash. 2004). The court also relied on a Ninth Circuit holding that under the ACAA, the secretary of transportation is authorized to promulgate rules governing air commerce and safety, and, pursuant to that authorization, the Department of Transportation has issued “detailed requirements that airlines must meet to comply with the ACAA.” Gilstrap v. United Air Lines, Inc., 709 F.3d 995, 1000 (9th Cir. 2013).

The regulations state in part that a carrier must permit a service animal to accompany a passenger with a disability to any seat as long as the animal is not precluded (too large, poses a direct threat to health and safety of others, or would cause a significant disruption of service by doing so). 14 C.F.R. § 382.117. If the animal is not precluded, the carrier must permit the animal to ride in the cabin. Therefore, the airline had a duty to do two things: (1) establish that the animal is in fact a service animal; (2) determine if the animal presents either a direct threat to the health and safety of others or a significant threat to the disruption of airline service. Thus the ACAA establishes the standard of care that Horizon Air owed the plaintiff and preempts any different or higher standard of care that may exist under Washington law. See Gilstrap, 709 F.3d at 1007.

The defendant dog owner assured Horizon that he was aware of the airline’s rules regarding service animals, which stated in part, that the owner must show evidence, either through a type of harness or markings on the harness or other credible assurances that the animal is a service animal. The dog was wearing a harness indicating that it was a service animal. The owner also established that the animal had flown on Horizon or its partners 12 times since 2009 without any incident. The court held that taken together, these facts established that Horizon fulfilled its duty to determine that the animal was a service animal and based on past experience would not disrupt the flight.

The court found that airline passenger safety as it relates to service animals was pervasively regulated by the ACAA, and concluded that the federal statutes and regulation preempt any applicable state standards of care. See 14 C.F.R. § 382.117. The court concluded that because Horizon Air had fulfilled its duties through compliance with the pervasive regulations of the ACAA, it was entitled to summary judgment.

 

Scott Brooksby featured as moderator at prominent aviation conference

Oregon aviation lawyer Scott Brooksby will be featured as a moderator at the 2016 American Bar Association Aviation Litigation National Institute in New York, New York, entitled “Birds, Pets, Lasers, Stowaways, and Other Hot Topics in Aviation”.  The conference will take place at the University Club of New York.

Scott Brooksby will join other distinguished faculty at this prominent aviation conference, which will highlight current developments in aviation law including:

• Birds, pets, lasers, stowaways, and other hot topics
• Recent developments in case law in aviation and space law
• Defenses available in war zone tort actions
• Ethics—The preparation and testimony of witnesses during an aviation trial
• Improving aviation safety
• Defining the boundaries of federal preemption in aviation litigation
• Handling Air Traffic Control issues and aviation mishaps in air crash cases
• Carrier liability surrounding the failure to divert due to medical circumstances
• Liability issues surrounding foreign maintenance of American aircraft

Much of the firm’s practice is devoted to aviation law, and we are one of the few firms in Oregon with aviation trial experience.  Scott Brooksby leads our aviation practice, devoting a substantial amount of his time and practice to aviation-related matters.  Scott served as local counsel for one of the largest aviation manufacturers in the world in a nine-week trial in Oregon state court.  The trial involved product liability issues and concerned a helicopter crash that resulted in burns, permanent injuries, and multiple deaths.  Mr. Brooksby is on the aviation subcommittee of the American Bar Association’s Mass Torts section, and serves as a speaker on aviation matters at aviation law conferences across the nation.

Lasers on the ground pose a threat to aviation safety

Airplane wing

Laser beams on the ground pose a danger to aircraft — this is a serious issue that is well-known to commercial airline pilots.  The following is from Scott Brooksby’s article,  “Aircraft Laser Incidents: A Clear and Present Danger to Aviation Safety” published in the American Bar Association’s Mass Torts Practice Points on June 22, 2015:

Reports of aircraft targeting with handheld ground lasers have been rising sharply. In 2005, there were 300 reported incidents. By 2014, there were 3,894 reported incidents. Exposure to laser illumination may cause hazardous effects to pilots, such as pain, distraction or disorientation, loss of depth perception, and aborted landings.

The increase in reports of ground-based lasers targeting flying aircraft may be due to a number of factors, including the increased availability of inexpensive laser devices on the Internet, higher-power lasers that can strike aircraft at higher altitudes, and increased reporting by flight crews. Regulatory power for laser-light products is delegated to the FDA, and its regulations are found at 21 C.F.R. § 1010.

While some jurisdictions have made interdiction efforts using helicopters and other improved tracking methods, catching laser offenders is difficult. The devices are small, and when extinguished can be easily concealed and the location of the user can be in sparsely populated areas. To respond to the increasing attacks, the FAA launched the Laser Safety Initiative, which provides education on laser hazards and events, news, law, and civil penalties, and encourages reporting.

The latest reports indicate that aircraft illuminations by handheld lasers are overwhelmingly green, as opposed to the previously common red. This is significant because they are 35 times brighter than red, and the wavelength of green lasers is close to the eye’s peak sensitivity when they are dark-adapted. FAA flight simulation studies have shown that the adverse visual effects from laser exposure are especially debilitating when the eyes are adapted to the low-light level of a cockpit at night.

Restricted airspace surrounding commercial airports, in particular, can provide federal, state and/or local criminal penalties for violation with a laser, even if the operator is not operating the laser within the space, but merely causes the beam to intersect the controlled airspace to target an aircraft. In the United States, laser-airspace guidelines can be found in FAA Order JO 7400.2 (Revision “G” as of April 2008). Although it is far beyond the scope of this note, Chapter 29 of the order provides a comprehensive overview of the FAA’s laser guidelines.

In 2011, the FAA announced plans to impose civil penalties against people who point a laser into the cockpit of an aircraft. The FAA released a legal interpretation that concluded that directing a laser bean into an aircraft cockpit could interfere with a flight crew performing its duties while operating an aircraft, a violation of FAA regulations. The legal interpretation includes an analysis of 14 C.F.R. § 91.11, which establishes that “[n]o person may assault, threaten, intimidate, or interfere with a crewmember in the performance of the crewmember’s duties aboard an aircraft being operated.”

14 C.F.R. § 91.11 had initially been adopted in response to hijackings. However, the FAA legal interpretation concluded that nothing in the regulation specified that the person interfering must be on the airplane. Previously, the FAA had taken enforcement action only against passengers on board the aircraft that interfere with crewmembers. The maximum civil penalty is $11,000. By June 2012, the FAA had initiated 28 enforcement actions.

On February 14, 2012, President Obama signed Public Law 112-95. The FAA Modernization and Reform Act of 2012, section 311, amended Title 18 of the United States Code (U.S.C) Chapter 2 § 39, by adding section 39A, which makes it a federal crime to aim a laser pointer at an aircraft.

The unprecedented escalation in the number of recent aviation laser incidents, coupled with more powerful lasers, wide and easy availability of lasers, the increasingly bold use and difficulties with interdiction, all pose problems. The undisputed evidence that lasers pose a danger to flight crews suggests that a tragic accident may only be a matter of time.

Scott Brooksby is co-planning the 2016 ABA Aviation Litigation National Institute

Scott Brooksby will be involved in planning the American Bar Association’s 2016 22nd Annual National Institute on Aviation Litigation in New York, New York.

This prominent, annual conference features seasoned aviation lawyers who present and educate on a variety of aviation litigation topics.  Scott is on the aviation subcommittee of the American Bar Association’s Mass Torts section.

Scott Brooksby has experience representing airlines, aviation insurers, aviation product manufacturers, and airplane owners.  Scott has handled a broad variety of aviation law matters, including personal injury defense; product liability defense litigation; contract and lease drafting; contract negotiation and disputes; and general aviation commercial litigation.

Much of Scott’s practice is devoted to aviation law, and Olson Brooksby is one of the few firms in Oregon with aviation trial experience.  Scott Brooksby leads the firm’s aviation practice, devoting a substantial amount of his time and practice to aviation-related matters.

Scott served as local counsel for one of the largest aviation manufacturers in the world in a nine-week trial in Oregon state court.  The trial involved product liability issues and concerned a helicopter crash that resulted in burns, permanent injuries, and multiple deaths.

While Olson Brooksby’s specialized aviation practice is headquartered in Portland, Oregon, the nature of the firm’s practice often takes its attorneys to various other geographical locations, particularly for investigations, witness interviews, and depositions.

Scott is experienced with a broad range of aviation law topics, and is familiar with allegations concerning: mechanical malfunctions due to airframe or component defects; improper repair or maintenance; improper weight and balance; weather; piloting and human factors; instruments and avionics; air traffic control; and even issues relating to bird strikes and lasers.

Scott Brooksby featured as moderator regarding helicopter accidents

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Scott Brooksby recently moderated a panel at a prominent aviation conference concerning helicopter accidents.  Scott’s panel was featured at the American Bar Association’s Aviation Litigation National Institute in New York regarding “Helicopter Accidents: A Review of Recent Cases of Interest”.

At this prominent aviation conference, Scott was part of a distinguished faculty, which highlighted current developments in aviation law and insurance topics including:

• Safety in the cockpit issues and precedents that developed from the 9/11 litigation and how they relate to the Germanwings tragedy

• The unique challenges involved in emergency medical helicopter services both from a legal and safety perspective

• Choice of forum and other legal issues and precedents arising from several high profile international disasters

• London market claims leaders’ perspectives on handling aviation disasters spanning the globe

• Flying special missions for government and industry from explosives to ebola

• New developments in the law of aircraft financier liability in connection with the tortious actions of lessees and operators

• Common themes and issues faced by the trial teams in domestic cases such as the Colgan Air 3407 and Comair 5191

• Ethical considerations when selecting and preparing experts in aviation accident litigation

• The future of aviation, aerospace law, and litigation in connection with drones and commercial space/sub-orbital travel

 Scott Brooksby is an aviation lawyer in Portland, Oregon, with experience in a broad variety of aviation topics, including helicopter litigation and crashes.

Lease agreements and consent provisions

Lease agreements are common.  But what if your lease agreement says that you can’t do something without the consent of the lessor?  Olson Brooksby deals frequently with airplane lease agreements.  For example, the owner of an airplane might have certain repair facilities that it likes and the lease might contain a consent provision that requires the owner to consent to the repair facility if the plane needs repairs.  This can be very frustrating for the lessee, who has to pay for the repairs.  The lessee might be concerned that the lessor wants an expensive repair facility or a facility that requires transportation of the plane to a faraway place.  How do conflicts over these provisions get resolved?

The following is from Kristin Olson and Scott Brooksby’s article published in the International Association of Defense Counsel’s Business Litigation, “Consent Provisions in Lease Agreements: Must the Lessor Act Reasonably?”

CONSENT PROVISIONS IN LEASE AGREEMENTS: MUST THE LESSOR ACT REASONABLY? 

Experienced business litigators are generally familiar with a broad range of real estate, equipment, and other forms of lease agreements, as well as litigation stemming from such agreements.  But what happens when a lease contract has a provision that requires the consent of the lessor before the lessee takes a certain action?  Does the lessee have recourse against the lessor if the lessee’s consent is, for example, withheld arbitrarily?

Equipment or airplane leases provide a useful case study.  Provisions in airplane lease agreements, for example, may require consent of the lessor.  By way of illustration, an airplane owner (the lessor) leases an airplane to an airline (the lessee) and the lease agreement includes provisions that require that the owner consent to the choice of airplane repair facility if the airplane needs repairs.  In cases where there are those types of contractual provisions, the owner might argue that the lease effectively allows it to unilaterally choose the repair facility for the airplane.  Under that hypothetical lease provision, even if the airline is allowed to initially choose the facility, the owner must consent to the airline’s choice.  This may have serious economic consequences for the airline, which may be concerned that the repair facility chosen by the owner is a slower repair facility than the one that the airline would have chosen, forcing the airline to incur loss of use damages.  The airline may also be concerned that the repairs conducted at the facility approved by the owner will be more costly—this is particularly a concern if, under the lease, the airline is required to pay for the repairs or if the airline’s pilots or mechanics damaged the plane.  The airline may also be concerned that the repair facility chosen by, or approved by, the owner is far away (a common issue with airline repair facilities)—particularly if the lease requires that the airline pay for all transport costs to the repair facility.

So what happens?  Is the airline subject to the owner’s choices?  In the hypothetical above, does the owner get to dictate where the airplane is repaired?  The answers to those questions vary depending on jurisdiction and whether the lease explicitly requires that the lessor act reasonably, as explained in further detail below.

Does the lease explicitly require that the lessor act reasonably?

A lease may explicitly provide that the lessor’s consent “may not be unreasonably withheld.”  If the lease contains this explicit provision, that is obviously helpful to the lessee.  However, it still does not resolve the issue in some jurisdictions.  Some jurisdictions require an examination of the facts and circumstances in order to determine whether the withholding of consent was “unreasonable” under the explicit terms of the lease.

For example, in Georgia, even if there is an explicit provision requiring that a lessor’s failure to consent be reasonable, there are common law tests of “fairness and commercial reasonableness” that must be applied to the lessor’s conduct.  WPD Center, LLC v. Watershed, Inc., 765 S.E.2d 531, 534 (Ga. App. 2014).  In that case, the court found that there was “a jury issue” as to whether consent was unreasonably withheld concerning a proposed sublease.  Id. at 534-35.

In some jurisdictions, courts will not require a lessor to act reasonably unless the lease explicitly requires it.                                                                                 

In New York, if there is no explicit requirement of reasonableness in the lease, the court will not impose such a requirement on the lessor.

In General Electric Capital Corp. v. Gary, 2013 WL 390959, *1 (S.D.N.Y. 2013), the court examined a loan agreement for the purchase of an aircraft.  The loan documents “specified that any assignment, lease or other transfer of any interest in or possession of the Aircraft or any of its parts required prior written approval by the lender.  Notably, the agreement did not require the lender to have a reasonable basis for withholding such consent”.   Id. at *4.  The court explained that, under New York law, when “’a contract negotiated at arm’s length lacks specific language preventing plaintiff from unreasonably withholding consent, the Court can not and should not rewrite the contract to include such language which neither of the parties saw fit to insert in the contract.’”  Id. (quoting Teachers Ins. & Annuity Assn. of Am. v. Wometco Enters., Inc., 833 F.Supp. 344, 349 (S.D.N.Y. 1994)).

In the Second Circuit case of State Street Bank & Trust Co. v. Inversiones Errazuiriz Limitada, 374 F.3d 158, 170 (2d Cir. 2004), cert. denied, 543 U.S. 1177 (2005), the court applied New York law and held that a credit agreement allowed a bank to unreasonably withhold consent on a sale of assets if the other party defaulted on its loans because it was an arms length contract that did not put explicit restrictions on the consent provisions.

Although the court in State Street acknowledged that New York law recognizes the implied covenant of good faith and fair dealing, it explained that the covenant must be consistent with the explicit terms of the contract before it is applied.  Id. at 169-70.  The court held that, under the terms of the agreement at issue in State Street, the bank had the right to “’withhold consent for any reason or no reason . . . .’”  Id. at 170 (quoting Teachers Ins. & Annuity Assn. of Am, 833 F.Supp. at 349).  The agreement did not explicitly restrict the bank’s right to refuse to consent to a sale of assets if the other party defaulted on its loans.  Id.  The court went on to note that, even if the implied covenant of good faith and fair dealing were hypothetically applied to these circumstances, “the bank’s refusal to consent to such a sale was neither unreasonable nor arbitrary” and was “made for a legitimate business purpose.”  Id.

Under South Dakota law, the implied covenant of good faith and fair dealing is generally applied to every contract. However, as long as the parties act honestly, South Dakota courts will probably broadly enforce most contractual terms that explicitly require consent.

In Taylor Equip., Inc. v. John Deere Co., 98 F.3d 1028, 1029 (8th Cir. 1996), Midcon was John Deere’s former industrial equipment dealer.  Midcon argued that John Deere breached the implied covenant of good faith and fair dealing by refusing to approve Midcon’s request to assign its dealership to a willing buyer.  Id.  at 1029-30.  As a result, Midcon had to sell its dealership to the approved buyers for a significantly lower amount of money.  Id. at 1030.  The contract between Midcon and John Deere provided that Midcon could not assign its dealership to any buyer “without the prior written consent of [Deere].”  Id. (internal quotation marks omitted.)  The court held that the implied covenant of good faith and fair dealing “cannot override this express term of the contract”.  Id.

Although “South Dakota law implies a covenant of good faith and fair dealing into every contract”, id. at 1031, the court explained that the definition of “good faith” is “’honesty in fact in the conduct or the transaction concerned.’”  Id. at 1032.  Additionally, under South Dakota law, the implied covenant of good faith and fair dealing “does not affect every contract term” and “cannot ‘block use of terms that actually appear in the contract.’”  Id.

The court explained that, as long as John Deere acted honestly, it had “an unrestricted right to withhold approval” under the contract.  Id. at 1034.  The court noted that, “’[I]n commercial transactions it does not in the end promote justice to seek strained interpretations in aid of those who do not protect themselves.’”  Id.

Michigan law recognizes the implied covenant of good faith and fair dealing. However, Michigan courts will generally refuse to apply the covenant of good faith or reasonableness to a contract that explicitly requires prior consent.

In James v. Whirlpool Corp., 806 F. Supp. 835, 838, 840 (E.D. Mo. 1992), the court applied Michigan law to a distributorship contract between St. Louis Appliance Parts, Inc. (SLAP), an appliance part distributor, and Whirlpool, the appliance manufacturer.  SLAP argued that Whirlpool breached its covenant of good faith and fair dealing because it refused to approve the sale and proposed assignment of SLAP to Aberdeen, another distributor.  Id. at 843.  The court explained that, “Michigan common law recognizes an implied covenant of good faith and fair dealing that applies to the performance and enforcement of all contracts.”  Id.  However, the court also noted that, under Michigan law, the implied covenant of good faith and fair dealing will only limit the parties’ conduct if the covenant does not contradict an explicit provision in the contract.  Id.  The court held that the contract explicitly restricted SLAP from assigning its rights under the contract without Whirlpool’s prior written consent.  Id. at 843-44.  The contract also provided that Whirlpool could terminate the contract “for a change in management or control which it found unacceptable.”  Id. at 844.  The court therefore refused to apply the covenant of good faith and fair dealing because it would “override the express terms” of the contract.  Id.

Under Minnesota law, prior consent requirements in contracts are generally upheld without restriction.

In In re Bellanca Aircraft Corp. v. Anderson-Greenwood Aviation Corp., 850 F.2d 1275 (1988), the court applied Minnesota law and held that Bellanca’s contracts with two companies to manufacture aircrafts were worthless assets because both contracts required the consent of the companies before Bellanca could assign the contracts to a different manufacturer.  Id. at 1285.  Under the contracts, “consent could be withheld for any reason whatsoever, arbitrarily or rationally.”  Id.  The court noted that the duty of good faith under the UCC did not prevent parties from negotiating provisions requiring consent that “may be reasonably or unreasonably withheld.”  Id.  Additionally, the court based its decision on the fact that that the parties did not cite to any common law supporting the idea that the UCC imposes “a duty not to withhold consent to assign unreasonably.”  Id. 

In Colorado, Alaska, Oregon, and Ohio, the courts generally apply the implied covenant of good faith and fair dealing, even if the contract does not explicitly state that the withholding of consent must be reasonable.

Colorado

In Larese v. Creamland Dairies, Inc., 767 F.2d 716, 717–18 (10th Cir. 1985), the court applied Colorado law and held that a franchisor may not unreasonably or arbitrarily withhold its consent to transfer rights to a franchise.  The court explained that, “the franchisor must bargain for a provision expressly granting the right to withhold consent unreasonably, to insure that the franchisee is put on notice.  Since, in this case, the contracts stated only that consent must be obtained, [the franchisor] did not have the right to withhold consent unreasonably.”  Id. at 718.

Alaska

In Alaska, “Where the lessor’s consent is required before an assignment can be made, he may withhold his consent only where he has reasonable grounds to do so.”  Hendrickson v. Freericks, 620 P.2d 205, 211 (Alaska 1980).

Oregon

In Oregon, the lessee has an objectively reasonable expectation that the lessor will consent, especially if the lessor has no objective reason to refuse its consent.  See Hampton Tree Farms, Inc. v. Jewett, 892 P.2d 683, 693 (Or. 1995) (“jury could find that [seller’s] unilateral action in discontinuing to supply logs frustrated [buyer’s] objectively reasonable expectation”).  Oregon courts recognize the implied covenant of good faith and fair dealing as long as it does not contradict an express contractual term.  Stevens v. Foren, 959 P.2d 1008, 1012 (Or. App. 1998).  In other words, the court will require reasonable conduct as long as the contract does not contain an explicit provision that allows the lessor to unreasonably withhold its consent.   Oregon, what is “reasonable” generally depends on the facts and circumstances.  Reasonable expectations include the right of either party to further its own legitimate business interests.  U.S. Genes v. Vial, 923 P.2d 1322, 1325 (Or. App. 1996).

Ohio

In Littlejohn v. Parrish, 839 N.E.2d 49, 50 (Ohio App. 2005), the court found that there was an implied covenant of good faith and fair dealing in a mortgage note, which stated that prepayment was subject to the mortgagee’s approval, but did not explicitly include a requirement that the mortgagee act reasonably.  The court noted that, under Ohio law, “there is an implied duty of good faith in almost every contract.”  Id. at 53.

Best Practices

If you are assisting parties in negotiating a contract, it is best if you include explicit provisions concerning consent.  If you represent the airplane owner in the introductory hypothetical, you may want to include a provision that states that consent is required and may be unreasonably withheld.  If you represent the airline, you obviously want to omit any consent provisions.  However, if the airplane owner requires a consent provision to do business, the airline should try to negotiate for a provision that explicitly states that consent may not be unreasonably withheld.  The airline could also try to negotiate for a specific list of agreed-to repair facilities in advance.