Extending Spaceflight Protections - Making It In California

www.makingitincalifornia.com Mitigating Liability - 1

REMAINING COMPETITIVE: Extending Spaceflight Protections

The recommendation to extend liability protections within the commercial spaceflight industry to manufacturers and

suppliers.

Prepared by Joe Weichman

May 14, 2013

Created through the Centers for Applied Competitive Technologies (CACT) Hub at El Camino

College Grant #10-315-038

California Community College Chancellor’s Office Workforce & Economic Development Division


TABLE OF CONTENTS

Background 3

Introduction 4 California Law 5

Laws In Other States 7

Analysis 11 Recommendation 12


BACKGROUND This report was prepared by the Center for Applied Competitive Technologies (CACT) at El Camino College (ECC), under the 2012-13 Hub grant from the California Community College Chancellor’s Office, Economic & Workforce Development (EWD) program. The ECC CACT helps area manufacturers and aerospace companies compete successfully in changing markets and the global economy. Through technology education, manufacturing training and services that contribute to continuous workforce development, the CACT provides expertise in technology deployment and business development. Services include onsite training, low-or-no cost technical assistance, and educational workshops, as well as information on how to qualify for state funds to assist with retraining employees and upgrading equipment. The EWD is an integral part of the California Community Colleges, investing funding and resources in key industry sectors. EWD's industry-specific programs invest in the skills of California's workforce – now and in the future – through highly specialized industry training, technical consulting and business development. The end result is the ability for businesses to better understand the trends and labor market pertaining to their industry, and make informed decisions about how to grow and compete.


INTRODUCTION

“The first powered flight of Virgin Spaceship Enterprise was without any doubt our single most important flight test to date…”

-- Richard Branson, Virgin Galactic

Credit: Virgin Galactic

Space exploration has always been a risky yet worthwhile endeavor. Humanity’s desire to explore, coupled with scientific and technological breakthroughs, has allowed a select number of human beings to escape Earth’s gravity. Now, with the emergence of the commercial spaceflight industry, that number will soon be increasing at an exponential rate. Given the inherent dangers of commercial spaceflight, it is essential for any company testing and/or operating commercial space vehicles to have limited liability protection. States that have failed to pass limited liability legislation have lost opportunities to land premier spaceflight companies. In fact, states that do not pass protection measures will miss out on the industry all-together. Consequently, a growing number of states are passing limited liability legislation to ensure they can reap the economic benefits from this emerging industry.


CALIFORNIA LAW

“We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard…”

-- John F. Kennedy, Former President

Credit: SpaceDev/Sierra Nevada Corporation

In 2012, California passed limited liability legislation for commercial spaceflight operations (AB 2243), which was a great first-step to ensure a robust commercial spaceflight industry. The bill had no opposition, and no one voted against it. This legislation requires spaceflight entities to have passengers sign a warning and acknowledgement of the dangers involved in taking a trip to sub-orbit. To ensure that the spaceflight company itself is not intentionally putting the lives of its customers at risk, three parameters were put in place that would effectively remove liability protections if a company is found to have done the following:

1. Commits an act or omission that constitutes gross negligence or willful or wanton disregard for the safety of the participant, and that act or omission proximately causes a participant injury.

2. Intentionally causes a participant injury.


3. Has actually knowledge or reasonably should have known of a dangerous condition on the land or in the facilities or equipment used in space flight activities and the dangerous condition proximately causes injury, damage, or death to the participant.

This law defines a space flight entity as:

“…any public or private entity that holds, either directly or through a corporate subsidiary or parent, a license, permit, or other authorization issued by the United States Federal Aviation Administration pursuant to the federal Commercial Space Launch Amendments Act of 2004…”

This language does not cover manufacturers or suppliers involved in the commercial spaceflight industry, which makes California the only State that has passed limited liability legislation without including manufacturers and suppliers.


LAWS IN OTHER STATES

“The human spaceflight industry and the jobs it creates require sensible regulation governing liability.”

-- Virgin Galactic & The Spaceship Company

Credit: XCOR Aerospace

Several other states have passed limited liability legislation to attract the commercial spaceflight industry to their state, with the expressed purpose of growing the economy and creating jobs. Understandably, a commercial spaceflight company would have no reason to set up in any state where they could be sued out of existence. The following breaks down each state that has passed limited liability legislation for the commercial spaceflight industry. More specifically, it looks at each state’s definition of a spaceflight entity, and the parameters under which liability protections would no longer be in effect. Colorado Passed in 2012, Colorado’s limited liability legislation has defined a spaceflight entity as follows:

“Spaceflight entity” means any public or private entity holding a United States Federal Aviation Administration Launch, reentry, operator, or launch site license for spaceflight


activities. The term also includes any manufacturer or supplier of components, services, or vehicles, which manufacturer or supplier has been reviewed by the United States Federal Aviation Administration as part of issuing such a license, permit, or authorization.”

There are three parameters under which the liability protections would be lifted:

1. Commits an act or omission that constitutes gross negligence or willful or wanton disregard for the safety of the spaceflight participant and that act or omission proximately causes injury, damage, or death to the spaceflight participant.

2. Has actually knowledge or reasonably should have known of a dangerous condition on the land or in the facilities or equipment used in spaceflight activities and the danger proximately causes injury, damage, or death to the spaceflight participant.

3. Intentionally injures the spaceflight participant. Florida Passed in 2008, Florida’s limited liability legislation has defined a spaceflight entity as follows:

“Spaceflight entity” means any public or private entity holding a United States Federal Aviation Administration launch, reentry, operator, or launch site license for spaceflight activities. The term also includes any manufacturer or supplier of components, services, or vehicles that have been reviewed by the United States Federal Aviation Administration as part of issuing such a license, permit, or authorization.


1. Commits an act or omission that constitutes gross negligence or willful or wanton disregard for the safety of the participant and that act or omission proximately causes injury, damage, or death to the participant;

2. Has actual knowledge or reasonably should have known of a dangerous condition on the land or in the facilities or equipment used in the spaceflight activities and the danger proximately causes injury, damage, or death to the participant; or

3. Intentionally injures the participant. New Mexico Passed in 2010 and then expanded in 2013, New Mexico’s limited liability legislation has defined a spaceflight entity as follows:

“Space flight entity" means: (1) a public or private entity holding a United States federal aviation administration launch, reentry, operator or launch site license, permit or other authorization for space flight activities; or (2) a manufacturer or supplier of components, services or vehicles used by the entity that has been reviewed by the United States federal aviation administration as part of issuing such a license, permit or authorization.



1. Commits an act or omission that constitutes willful, wanton or reckless disregard for the safety of the participant and that act or omission proximately causes injury, damage or death to the participant;

2. Has actual knowledge or reasonably should have known of a dangerous condition on the land or in the facilities or equipment used in the space flight activities and the danger proximately causes injury, damage or death to the participant; or

3. Intentionally injures the participant. Virginia Passed in 2007, Virginia’s limited liability legislation has defined a spaceflight entity as follows:

"Spaceflight entity" means any public or private entity holding, either directly or through a corporate subsidiary or parent, a license, permit, or other authorization issued by the United States Federal Aviation Administration pursuant to the Federal Space Launch Amendments Act (49 U.S.C. §70101 et seq.), including, but not limited to, a safety approval and a payload determination. "Spaceflight entity" shall also include any manufacturer or supplier of components, services, or vehicles that have been reviewed by the United States Federal Aviation Administration as part of issuing such a license, permit, or authorization

There are two parameters under which the liability protections would be lifted:

1. Commits an act or omission that constitutes gross negligence evidencing willful or wanton disregard for the safety of the participant, and that act or omission proximately causes a participant injury; or

2. Intentionally causes a participant injury. Texas Passed in 2011, limited liability legislation in Texas has defined a spaceflight entity as follows:

"Space flight entity" means a person who has obtained the appropriate Federal Aviation Administration license or other authorization, including safety approval and a payload determination. The term includes: (A) a manufacturer or supplier of components, services, or vehicles used by the entity and reviewed by the Federal Aviation Administration as part of issuing the license or other authorization; and (B) an employee, officer, director, owner, stockholder, member, manager, or partner of the entity, manufacturer, or supplier.

There are two parameters under which the liability protections would be lifted:


1. Proximately caused by the space flight entity's gross negligence evidencing willful or wanton disregard for the safety of the space flight participant; or

2. Intentionally caused by the space flight entity.

STATE YEAR PASSED MANUFACTURERS/SUPPLIERS COVERED California 2012 NO Colorado 2012 YES Florida 2008 YES

New Mexico 2010 YES Texas 2011 YES

Virginia 2007 YES


ANALYSIS

“California aerospace pioneers like Virgin Galactic, SpaceX and the Spaceship Company are blazing a path to the stars with commercial space travel.”

-- Jerry Brown, Governor of California

Credit: Reaction Engines Limited

Common themes emerge when looking at the six states that have passed limited liability legislation. All have liability protection waivers under certain conditions, ensuring that spaceflight companies take all steps to maximize safety. The language that describes 1) the definition of a spaceflight entity, and 2) when liability protection would not be applicable, is virtually identical. Texas and Virginia have two parameters under which liability protections are waived, whereas the remaining states (including California) have three parameters. There is one issue that stands out from the rest. Of all six states, California is the only one whose limited liability legislation does not extend to manufacturers and suppliers. Because of this, California is facing a substantial competitive disadvantage. The inherent dangers of spaceflight, coupled with other states offering full protection, leaves space companies having little reason to setup operations in California. Space vehicle development and testing would still be viable, but space tourist operations would be located elsewhere. Consequently, California would lose out on a substantial economic portion of this emerging industry.


RECOMMENDATIONS

“This legislation will prevent lawsuit abuse and make it easier for businesses related to the space travel industry to thrive and succeed...” Susana Martinez, Governor of New Mexico

Credit: Virgin Galactic

If California is to reap the economic rewards of having a robust commercial spaceflight industry, then it is critical to extend limited liability to manufacturers and suppliers. Arguably, it is one of the most important issues for the industry as a whole. Without extending these protections, California will be severely limited in its ability to compete. Commercial spaceflight operators would be unlikely to burden themselves with the possibility of being sued out of existence, particularly when they can go to another state and avoid that potential all-together. Extending liability protections to manufacturers and suppliers is a necessary step to retain and expand commercial spaceflight companies. By doing so, California can position itself to dominate the commercial spaceflight industry for decades to come, ensuring a brighter, more prosperous future. For more information on the commercial spaceflight industry, please visit http://makingitincalifornia.com/industry_reports.php.

http://makingitincalifornia.com/industry_reports.php

Extending Spaceflight Protections - Making It In California

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