$165 Million Paid By American Leasing Companies

To Resolve Air Philippines Flight 541 Lawsuits

The largest loss of life from an airline crash in Philippine history has led to an unprecedented settlement in Illinois that could change the way old airplanes are leased to developing nations. The settlement of $165 million was achieved on behalf of families of 110 of the 131 deceased passengers and crew who chose to pursue claims in the United States against the American lessors of the Boeing 737-200 airplane. Donald J. Nolan of Nolan Law Group acted as Lead Counsel for all plaintiffs in the cases.

The 110 individually filed wrongful death lawsuits were prosecuted in the Circuit Court of Cook County, Illinois against Chicago area companies, AAR Aircraft & Engine Group, Inc., and Fleet Business Credit Corporation. AAR was the owner of the airplane in January 1999, when it leased the plane to Air Philippines. In April, 1999 the plane was sold by AAR to Fleet, at which time AAR also assigned Fleet its rights under the lease with Air Philippines.

On April 19, 2000, the Boeing airplane was being operated by Air Philippines as Flight 541 on a domestic route from Manila to Davao City. As the airplane was on its initial approach for landing at the Davao airport, the crew performed a “go-around” as a Philippine Airlines plane was occupying the runway to be used for landing. While on its second approach for landing, the Flight 541 airplane encountered low level clouds and consequently collided with trees and the ground on a 577′ hill located within a coconut plantation on Samal Island. All people aboard perished.

In the lawsuits that ensued, Nolan Law Group took the position that these American companies should never have leased the airplane to Air Philippines, a then under-funded and unsafe start-up airline. In other words, the defendants negligently entrusted the airplane to a company that was not able to operate and maintain it in a safe manner. However, the airplane lease was regarded by the defendants as a profitable business venture, in which higher lease payments were gained because the airplane was going to a carrier in the developing world.

Nolan Law Group took the additional position that AAR and Fleet failed to equip the aircraft with an enhanced ground proximity warning system (EGPWS) and instead provided an outdated GPWS that was unsuitable for the topography of the Philippine terrain. The newer system would have given the pilots an approximate half-minute warning that they were approaching the fateful hill. The outdated system provided the pilots of Flight 541 a mere four second warning.

Faced with these facts and that the defendants and their records were located in the Chicago area, Nolan Law Group felt the lawsuits would be handled more efficiently and effectively in the United States than in the Philippines. However, Defendants, AAR and Fleet (now part of Bank of America), fought vigorously to have the lawsuits dismissed in favor of the Philippines under the doctrine of forum non conveniens. Nevertheless, the facts and arguments presented by Nolan Law Group resulted in the trial court denying the defendants’ request. The trial court decision of Judge Kathy Flanagan was later affirmed by the Illinois Appellate Court in a published decision, Ellis v. AAR Parts Trading, Inc., 357 Ill. App. 3d 723, 828 N.E.2d 726 (1st Dist. 2004).

One of the many lessons from this case is that a company leasing an aircraft has a duty to provide oversight to ensure that passengers fly on airplanes that are adequately equipped, safely maintained, and operated by properly trained pilots. Attempting to say, “we leased it and relied on the governmental authorities of foreign countries to assure passenger safety” is not sufficient in the United States or Illinois courts. In the future, lessors and owners will need to learn that “oversight” does not mean to “overlook.”