Stranded passengers may not be able to sue, attorney says

JetBlue Airways and the parent company for American Airlines could face stiff fines for stranding hundreds of passengers in planes on an airport tarmac for seven hours during a snowstorm last month. But a lawyer who specializes in business litigation says the passengers probably can’t sue over the ordeal.

JetBlue has apologized and offered to refund the airfares and pay for round-trip tickets for future travel for passengers on six JetBlue flights that were stranded on the tarmac at Bradley International Airport near Hartford, Conn., during a heavy storm that disrupted thousands of flights.

Under U.S. Department of Transportation rules, airlines that keep passengers in a grounded plane for three hours or more for domestic flights or four hours or more for international flights can be fined up to $27,000 per passenger.

The agency is investigating both airlines, but a spokesman said the rules exempt airlines that keep passengers on the tarmac because trying to return them to the terminal disrupts airport operations or creates a safety or security problem.

Since the new rule took effect in April 2010, the agency has yet to impose a fine on any airline.

It’s possible that the once-stranded passengers will get nothing more from the airline than the apology, the refunds and the extra airline tickets, said Hugh Totten, a Chicago attorney who has represented airlines in business litigation matters.

“While the new federal regulation limits tarmac delays to three hours, there are several exceptions to the rule,” he said. “Exceptions such as ‘disruption to airport operations’ or ‘passenger safety’ have been put in place, leaving passengers with no leverage for filing suit.”

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-- Hugo Martin

Photo: Some passengers at Bradley International Airport were able to get off a stranded plane. Credit: Erika Pesantes / South Florida Sun Sentinel

TSA chief says airport screening tactics are changing

Transportation Security Administration chief John Pistole told a congressional panel last week that his agency is overhauling the airport screening process that treats everyone the same, including infants and the elderly.

Pistole said the TSA is moving in a new direction to rely more on intelligence-gathering and targeting those travelers the TSA knows least about.

“Since I became TSA administrator, I have listened to ideas from people all over this country,” he told the Senate Committee on Homeland Security and Government Affairs on Wednesday.

Pistole said the agency is moving in the new direction by expanding several pilot security programs and changing the way children are searched.

But don’t expect the changes to cut down on the long airport security lines during the upcoming holiday travel season. TSA’s revised security tactics probably won’t be expanded nationwide for several months, a TSA spokesman said.

A pilot program that was launched last month and tested at four airports -- Miami, Dallas, Detroit and Atlanta -- lets passengers who volunteer personal information zip through a special screening lane without having to remove their shoes or jackets. Pistole told lawmakers that it has worked so well that he wants to expand it to more airports.

“We are working closely with other airlines and airports to determine when they may be operationally ready to join,” he said, without offering more details.

Another pilot program that was tested in Boston Logan International Airport deploys special “behavior detection officers” who chat with passengers in the terminal to detect suspicious behavior. Pistole said the program was recently expanded to Detroit Metropolitan Wayne County Airport.

Pistole also said the agency has changed its policy for searching children under 12. TSA agents now have the discretion whether or not to perform a pat-down search on youngsters or require that they remove their shoes.

“By streamlining procedures for these lower-risk passengers through programs like these, TSA is better able to focus its finite resources on those who pose higher risks to transportation,” he said.

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-- Hugo Martin

Scam watch: Credit cards, weight-loss supplement, chimney sweeps

Here is a roundup of alleged cons, frauds and schemes to watch out for.

Stolen credit cards -– A Costa Mesa man has been convicted of identity theft and other federal crimes related to the theft of credit cards from Vietnamese immigrants living in Southern California. A federal jury in Los Angeles convicted Hung Van Tieu, 62, of conspiracy, credit card fraud and identity theft. The charges carry a sentence of two to 32 years in federal prison. Tieu was part of a team of con men who called credit card companies in 2010 and 2011, impersonated customers and asked for new cards to be mailed to the address on file. The team intercepted the cards from the mail and used them to run up more than $100,000 in purchases of luxury goods, including Rolex watches, and to withdraw thousands of dollars in Las Vegas casinos, including the Bellagio, Mandalay Bay and MGM Grand hotels.

Weight-loss supplement -- As part of a crackdown on companies promoting bogus health claims, the Federal Trade Commission settled charges brought against three people and two companies for deceptively advertising a supposed weight-loss supplement ingredient. One defendant was banned from making any weight-loss claims related to foods, drugs or dietary supplements and was ordered to turn over a vacation home and other assets to the FTC. The marketers were part of a scheme that supplied manufacturers of weight-loss supplements with a substance they claimed was a derivative of a plant native to southern Africa commonly referred to as hoodia.

Chimney sweeps -– With winter approaching, the Better Business Bureau is warning consumers to be careful about who they hire to clean their chimneys. So far this year, the group has received more than 380 complaints from consumers who say they were scammed by chimney cleaners who did poor work or no work at all. That’s an increase from 342 complaints in all of 2010. “Chimney sweeping is not something that homeowners deal with often, so we may lack knowledge of the cleaning process,” said Katherine Hutt, spokesperson for the Council of Better Business Bureaus. “Many scammers take advantage of this.” The group suggests that consumers research chimney sweep companies on the Internet to find out how long they’ve been in business, whether they have liability insurance and whether employees were certified by the nonprofit Chimney Safety Institute of America.

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-- Stuart Pfeifer

Photo: The Bellagio hotel in Las Vegas. Credit: Jim Laurie / Associated Press 

Podcast: Jobs Report, European Debt and the Flat Tax

Each month, the Labor Department issues a report on jobs and unemployment. It would be a relief to get one showing that jobs are being created in large numbers in the United States, and that unemployment in rapidly sinking.

But we will have to keep waiting: that, alas, was not the report that the Labor Department released for October.

Instead, like so many monthly tallies before it, the latest report paints a picture of an economy that isn’t creating enough jobs to keep up with population growth, Catherine Rampell says in the new Weekend Business podcast. While the unemployment rate dipped slightly, from 9.1 to 9.0 percent, the drop was so slight that it might well be a statistical anomaly.

Heightened uncertainty from the Greek financial crisis has affected the global economy and the markets. It’s the focus of my column in Sunday Business, as I mention on the podcast. And as Gretchen Morgenson says on the podcast, the crisis has already caused collateral damage in the United States. It contributed to the downfall of MF Global, the financial firm that went into bankruptcy last week. It had been headed by Jon Corzine, the former governor and senator from New Jersey and a former chief of Goldman Sachs. She writes about some of the broader implications of the firm’s failure in her Sunday Business column.

In this presidential campaign season, proposals for the institution of a flat tax have re-emerged but they are likely to go nowhere once again, in the opinion of Robert Frank, the Cornell economist. He discusses his Economic View column in Sunday Business, which says that while flat taxes are attention-getters, they would add to the growing income inequality in the United States.

And in a separate conversation in the podcast, David Gillen talks to Evelyn Rusli about Reid Hoffman, the founder of LinkedIn, who has become an increasingly important figure in Silicon Valley.

You can find specific segments of the podcast at these junctures: Catherine Rampell on the jobs report (31:11); news headlines (22:55); Evelyn Rusli on LinkedIn (20:51); Gretchen Morgenson on the European crisis (15:36); Robert Frank on flat taxes (9:51); the week ahead (1:36).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Trammell Crow buys Los Angeles River development site

Developer Trammell Crow Co. has agreed to buy a once-controversial site along the Los Angeles River near downtown Los Angeles with the intention of turning it into a manufacturing center for technology businesses.

Trammell Crow said it would pay $15.4 million to the Los Angeles Community Redevelopment Agency for 20 acres of land at Santa Fe Avenue and Washington Boulevard. The deal is contingent on a decision from the state Supreme Court expected by January on budget legislation that sharply limited the agency’s functions.

The Cleantech Manufacturing Center project would create 300,000 square feet of industrial and office space to house about 200 workers and would be the southern anchor of a planned technology corridor along the river, said David Bloom of the CRA.

The top 30 feet of soil at the site has been cleared of contaminants left by generations of industrial use involving train maintenance and bus manufacturing, said Brad Cox, a senior managing director at Trammell Crow. Work could begin by the end of 2012 while further pollution abatement continued, he said.

“There are just not a lot of large parcels available in the downtown-adjacent area, and this is a chance for us to deliver a state-of-the-art product to attract clean-tech tenants,” Cox said.

Earlier plans to reuse the site decades ago included a prison and a toxic waste incinerator, but neighborhood opposition thwarted those proposals.

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-- Roger Vincent

Photo: Redevelopment official Cecilia Estalano, left, and city planner Claire J. Bowin look over the clean technology corridor plan on the Los Angeles River in 2009. Credit: Lawrence K. Ho / Los Angeles Times

Commercial property prices stay flat in October

 

Commercial real estate values have risen substantially since the trough of 2009 but remained flat in October, an industry analyst said.

Properties such as office buildings, warehouses, apartment complexes and malls have increased in value by more than 45% from the bottom of the market in 2009, according to Newport Beach-based Green Street Advisors Inc. That means that three-quarters of the decline in values that occurred as the market went down between 2007 and 2009 has been erased.

Prices are back to where they were in late 2006, about 10% below their all-time highs.

“After enjoying a robust two-year recovery, property prices have effectively gone into a stall over the last six months,” said Mike Kirby, director of research at Green Street. “Some of the factors that have been fueling the impressive recovery in values have taken a turn for the worse, including the economic outlook and capital availability.”

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-- Roger Vincent

Photo:  Commercial buildings in Kansas City. Credit: Kansas City Convention & Visitors Assn.

Groupon IPO: Did investors get a deal or a dud?

Some relevant numbers in the wake of daily-deals purveyor Groupon Inc.’s initial public stock offering, which began trading on Friday:

--- Deal size: The Chicago company sold 35 million shares at $20 each, raising $700 million. It was the largest IPO for a U.S. Internet-related firm since Google Inc. raised $1.66 billion in August 2004.

But some foreign Net-related companies have raised more than Groupon recently. Russian search engine Yandex raised $1.3 billion in its IPO in May.

--- First-day pop: Groupon stock finished its first day of trading at $26.11, for a gain of nearly 31%. It traded as high as $31.14 shortly after the session opened as buyers rushed in. They should have waited: Within an hour of the peak price the stock fell as low as $25.90.

The first-day price gain was relatively modest compared with some other Net-related IPOs this year. LinkedIn surged 109% on its first day, Zillow jumped 79% and Yandex rose 55%. But another way to look at those gains is that the companies’ underwriters priced the shares too low in the IPOs.

--- Flippers: Did a lot of the buyers in the Groupon IPO immediately flip the stock? Looks that way: 49.8 million shares traded for the day on Nasdaq, or 142% of the shares offered. Of course, some shares undoubtedly changed hands multiple times during the session.

--- Market value: The company ended the day with a market value of $16.65 billion. That’s the value of the 35 million shares that were sold and the 600 million shares that are still in the hands of insiders and other early Groupon investors.

At $16.65 billion, three-year-old Groupon is worth more than a lot of established companies across the business spectrum, including semiconductor-equipment maker Applied Materials ($16.4 billion), grocer Whole Foods Market ($12.2 billion) and retailer Nordstrom ($10.7 billion).

Groupon is far smaller than Internet titans such as Google ($193 billion), Amazon.com ($98.4 billion) and EBay ($42.2 billion). But it has more than twice the valuation of LinkedIn ($7.9 billion) and about 14 times the valuation of online job-search firm Monster Worldwide ($1.2 billion).

--- Revenue and losses: Groupon’s quarterly sales have rocketed from just $4 million in the third quarter of 2009 to $420 million in the quarter just ended. But as investors hopefully know, Groupon still hasn’t turned a profit. (Read the company's prospectus here.)

In the first nine months of this year the company lost $215 million, or about 34 cents a share, on revenue of $1.1 billion. Groupon has to spend a lot to market itself to the merchants who use its daily-deals service. Marketing costs alone were $613 million in the first nine months.

--- When will profits come? As Karl Denninger writes on SeekingAlpha, that will depend on whether merchants keep coming back to Groupon. And the only way they’ll keep coming back is if their Groupon customers come back to pay full price rather than the deep-discount price.

Remember: The Net-based daily-deals idea that Groupon has popularized is a young concept. The revenue so far is huge, but that won’t help Groupon's stock if investors see little hope of achieving and sustaining strong profitability.

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-- Tom Petruno

twitter.com/tpetruno

Photo: Groupon Chief Executive Andrew Mason (wearing the blue tie) jokes around with Groupon's largest shareholder and chairman, Eric Lefkofsky, outside the Nasdaq Market in New York, where the company's stock began trading on Friday. Credit: Brendan McDermid / Reuters