OpEd: The NewSpace Liability Myth: Why Lawyers Will Not Scuttle the Industry

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  Space News Business

OpEd: The NewSpace Liability Myth: Why Lawyers Will Not Scuttle the Industry

By DOUG GRIFFITH

posted: 06 February 2008
04:40 pm ET







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e’ve all heard the mantra: In today’s litigious society, a nascent industry engaging in something as revolutionary, but as hazardous, as rocketing fare-paying citizens into space, is doomed from the launch pad. One or two catastrophic accidents, and the promise of the commercial human spaceflight industry, or “NewSpace,” will be forever gutted by greedy lawyers, entitlement-obsessed plaintiffs, and run-amuck juries.









I don’t think so.





The legal liability atmosphere awaiting NewSpace, while certainly a reality to be dealt with, is not a black cloud of despair. As in the aviation industry, the responsible and professionally-run NewSpace companies will endure the occasional lawsuit resulting from an accident.



There are practical reasons why the NewSpacecompany should incorporate this perspective of optimism into its business strategy. First, keeping liability concerns in their proper perspective means devoting only a rational amount of the company’s resources to legal precautions, rather than permitting an overly lawyer-centric mindset to dominate engineering and economic advancement.




The Wright Brothers resorted to lawyers to protect their novel wing-warping design from competitors, while Glenn Curtiss concentrated on building better airplanes -undoubtedly content to see the Wright Brothers’ business stall in the courtroom rather than soar in the skies




.

Second, recognizing that lawsuits are just another predictable and controllable part of doing business encourages the NewSpace entrepreneur to take the necessary steps to fortify the enterprise against attack. With the input of legal counsel, the company can begin to engineer its destiny in the courtroom, well in advance of an accident, through the implementation of a risk management architecture consisting generally of five modules:




a documented culture of safety;




disclosure-oriented communications with customers;




consideration of the state(s) in which to base operations;




responsible image-making and public relations; and




if accessible, liability insurance.




A Documented Culture of Safety:



This core module of a risk-management architecture is not as abstract as it might seem




. Any organization involved in putting people in rockets will face decisions impacting safety on a daily basis. A documented culture of safety is created – or not –




depending on




how those everyday decisions are
made. When a catastrophe hits, it will be imperative to the company’s survival of the ensuing lawsuit that it be able to demonstrate to the jury, in evidentiary form, that every decision impacting safety was made through the lens of an overarching safety program or philosophy.

Invariably there are going to be times when the absolutely safest course yields to other concerns rooted in engineering or economic realities. The main thing is that the company be able to establish that the safety decision being scrutinized by the jury was reasonable based on what was known at the time. If it is unable to do this (for example, because it consciously avoided creating a paper trail about safety decisions), the jury will likely conclude that the company was negligent, or worse, reckless.




Disclosure-Oriented Communications with Customers:





This is not a mere “CYA” tactic. In the eyes of the legal system that will ultimately be judging the company, it is simply the right thing to do.



The premise is simple: a company should not be legally responsible for injury or death that was caused by a danger of which the company made the customer fully aware, and in the face of which the customer chose to voluntarily proceed. It is this basic tenet that underlies the enforceability of waivers and releases, the “assumption of the risk” doctrine, the disclosure rules in the Federal Aviation Administration’s human spaceflight regulations, and state-based industry protective statutes like the one recently enacted in Virginia.




Thoughtful Consideration of the State(s) in Which to Base Operations:


The law varies from state to state on such issues as who is entitled to sue for a given accident, the standard for negligence, recoverable damages, the enforceability of waivers and releases, and statutory immunity. Thus, how a company fares in accident litigation can be affected by which state’s law governs. Although there are no guarantees, a company can hope to secure a given state’s law by basing its operations there.



Obviously other, arguably more important factors go into a NewSpace company’s decision about which state(s) to operate in, including business climate, legislative accommodations, launch facilities, weather and geography, and accessibility and attractiveness in the eyes of the company’s target customer base. In a close call between two states, however, considerations of local law can tip the balance.




Responsible Image-Making and Public Relations:


The public face that a company creates for itself both before and in the aftermath of an accident can bear significantly on its fate in any litigation




. A NewSpace company that seeks to build and capitalize on a daredevil, ultra-thrill seeking persona will find it challenging to later convince a jury that underneath its edgy ad campaign was a responsible, safety-conscious company who respected the lives of its customers.

As the airlines have learned, public relations following an accident can have a dramatic impact as well. The enlightened post-accident media plan shuns the old (and often devastating) tactic of avoiding the press, public and grieving families out of “liability concerns.” As TWA failed to observe in its handling of its major crash in 1996, and as SwissAir firmly grasped following its accident in 1998, the best lawsuit mitigation technique can be the execution a preplanned disaster response procedure that elevates concerns for




the emotional well-being of the victims over any fear of litigation.




Liability Insurance:


Liability insurance protects a company in two ways:




it pays a judgment or settlement against the company up to the coverage limit of the policy; and




it provides the company with paid-for attorneys for the defense. Considering that a catastrophic space tourism accident could result in an expensive lawsuit with potential judgments in the tens of millions of dollars, the benefit of insurance is obvious.

While it is presently unknown whether the insurance market will be ready to provide this line of insurance any time soon, no risk management architecture is complete until the company has done its due diligence in trying to obtain affordable insurance.



In any event, both the unavailability of liability insurance, or, if it is available, the requirements of the insurance company, dictate that the NewSpace company implement a well-conceived risk management architecture addressing the other four components.



The potential for litigation arising from accidents in the NewSpace industry does not present an insurmountable threat. It is, simply, a reality that will remain an accepted and managed part of the business environment from the dawn of the industry through its maturation. The successful company with a solid business model that incorporates the foregoing risk management principles into its operations will weather the occasional lawsuit and perhaps emerge from each stronger than before.


Doug Griffith, a Marine Corp veteran with air combat experience, is a Los Angeles based aviation and spaceflight attorney with an extensive background in catastrophic air crashes.