All Aviation Articles By greg reigel

Slander of Title: The Risk of Filing an Invalid Aircraft Mechanic's Lien

An individual recently called me and told me he wanted to file a mechanic's lien against an aircraft. When I asked him what type of work he had performed he indicated that he had performed some maintenance on the aircraft and also provided pilot services to the owner in the aircraft. Unfortunately, in this individual's state, as is the case in most other states, pilot services are not the type of work upon which an aircraft mechanic's lien may be based. When I told him that, he asked why he couldn't just file the lien for the full amount and then worry about whether he could collect for the pilot services component of the lien down the road. I answered that this was not a good idea. Here's why.

One defense an aircraft owner may assert in response to a lien claimant's attempt to enforce a mechanic's lien against an aircraft is that the lien is invalid because the lien claimant is knowingly demanding an amount in excess of what is justly due. This defense is very common in situations where the aircraft owner initially disputed the amount being charged by the lien claimant. It is also common where the lien claimant is trying to get paid for work that is not lienable work, such as the pilot services in the above-situation. Although this defense usually requires that the aircraft owner show bad faith on the part of the lien claimant or that the lien claimant knew the lien statement was overstated, that isn't necessarily hard to do when the lien is for work that is not allowed under the applicable mechanic lien statute.

And here is the risk a lien claimant may be exposed to if his or her mechanic lien is invalid: If the aircraft owner is successful in defending against the foreclosure proceeding, the aircraft owner will also probably succeed in a slander of title claim against the lien claimant. An aircraft owner asserting a slander of title claim alleges that the lien claimant improperly encumbered the aircraft with an invalid lien. A slander of title claim could have serious and expensive implications for the lien claimant if the improper lien prevented a sale of the aircraft or forced the aircraft owner to accept less in a sale than he or she would have in the absence of a lien.

The moral of the story? Perfecting and enforcing an aircraft mechanic's lien can be tricky. In addition to the federal filing requirement, each state has its own specific requirements governing aircraft mechanic's liens. Lien claimants should understand what their particular state laws allow and require in order to assert an aircraft mechanic's lien. When in doubt, contact an aviation attorney familiar with your state's aircraft mechanic's lien laws to analyze your situation and help you choose the best course of action.

What Are An Airman's Options After The FAA Denies A Medical Application Based Upon A Disqualifying Condition?

When the FAA denies an airman's application for a medical certificate based upon an admitted condition that is disqualifying under 14 C.F.R. Part 67 (e.g. heart disease, epilepsy, bipolar disorder, diabetes requiring insulin, etc.), an appeal will, in almost all cases, be unsuccessful. In that situation, the airman has the burden of proving that the airman is qualified to hold a medical certificate. That's a tough thing to accomplish if the airman has already admitted that he or she has a condition that is specifically identified as disqualifying under the regulations.

If an airman is denied based upon a disqualifying condition, but the airman believes he or she is otherwise qualified, the airman should request that the FAA grant a special issuance medical certificate pursuant to 14 C.F.R. §§ 67.115, 67.215 or 67.315 (depending upon the class of medical for which the airman is applying). A special issuance is a medical certificate that has limitations and/or conditions with which the airman must comply in order for the certificate to be valid. The conditions/limitations will often include regular testing or evaluation, test results within acceptable ranges, no changes in medication etc.

If the FAA refuses to grant an airman's request for a special issuance, the airman may appeal that denial to the NTSB. However, since the Board defers to the FAA's discretion in denying a special issuance, the only way to be successful is to show that the FAA's denial is arbitrary or capricious. For example, if a denied airman can prove that the FAA has granted a special issuance in circumstances that are very similar to or identical with those of the airman, then an ALJ may be convinced that the FAA's denial in the airman's case is arbitrary or capricious. As a practical matter, however, this can be a very difficult task.

If you have a medical condition that may disqualify you from obtaining a medical certificate, get help before you apply for your medical certificate. Talk to an aviation attorney or the medical certification professionals at AOPA or NBAA. By taking a pro-active approach and getting help, you will be able to "pick your battles" wisely to maximize your chances of successfully obtaining a medical certificate.

Limiting Personal Liability With A Corporation Or Limited Liability Company

You have probably read the ads in several of the aviation magazines suggesting that aircraft buyers should "incorporate in Delaware" etc. Also, quite often an aircraft buyer's accountant or attorney will recommend that he or she form a corporation or limited liability company ("LLC") to own the aircraft. But does this make sense?

One of the primary benefits of a corporation or LLC is the limited personal liability protection the entity affords. An owner of a corporation or LLC, simply by virtue of that ownership interest, is not personally responsible for the debts and obligations of the entity, other than to the extent of his or her ownership interest in the corporation or LLC. This is in contrast to a sole proprietorship or a co-ownership/partnership situation in which the individual's mere ownership interest in the aircraft does result in the individual owner being legally responsible for the debts and obligations related to the aircraft.

Similarly, a director/officer of a corporation or governor /manager of an LLC is not personally responsible for the debts or obligations of the entity as long as the individual was acting within the scope of his or her duties on behalf of the corporation or LLC, as the case may be. For example, if an individual leases a hangar on behalf of a corporation or LLC and then the corporation or LLC defaults under the lease, the landlord cannot hold the individual who signed the lease responsible for the default, unless the individual was not authorized to enter into the lease on behalf of the corporation or LLC or the individual otherwise personally guaranteed or obligated him or herself under the lease.

However, in the context of aircraft ownership, this limited liability protection is not absolute. If an individual, who may be a shareholder/director/officer of the corporation or member/governor/manager of the LLC, is operating an aircraft owned by the corporation or LLC and that individual is involved in an accident or incident that results in damage to property or personal injury, that individual could still be held personally responsible for his or her negligence etc., in addition to the corporation or LLC.

Additionally, if that same individual improperly performed maintenance on the aircraft (e.g. changing the oil but forgetting to safety wire the oil drain plug) which later resulted in personal injury or property damage, even though the individual wasn't flying the aircraft at the time, that individual could still be personally liable. Also, if an individual acts outside of the scope of his or her authority to act on behalf of the corporation or LLC, he or she may be held responsible for any consequences of those actions.

So, owning an aircraft with a corporation or LLC can provide some personal liability protection for the individual owners of the entity. However, that entity won't be able to shield an individual owner from liability based upon that individual's conduct. If you are going to own an aircraft and someone else will also fly or maintain the aircraft, a corporation or LLC is probably a good idea. On the other hand, if you are going to be the sole owner and operator of the aircraft, the corporation or LLC likely won't be much help, at least from a personal liability perspective.

If you are unsure whether a corporation or LLC is right for you and your aircraft, you should talk to an aviation attorney, to get the answers you need to make an informed decision.

Disputing An Aircraft Mechanic's Lien

What happens if someone records, or threatens to record, a mechanic or artisan lien against an aircraft and the aircraft's owner believes the lien is improper? After all, once recorded, a lien is a "cloud" on the title to the aircraft and, typically, a release or a court order is required to clear the aircraft's title.

So, how does the aircraft owner dispute the lien or have it released if it has been recorded? Fortunately, several options and strategies are available for dealing with the situation.

Resolution Through Negotiation


If the dispute is about the amount of money owed, the best way for the aircraft owner to resolve the situation is to try and reach some agreement with the lien claimant regarding the amount owed. This will certainly save both parties money in the long run. If the lien claimant refuses to settle, the lien claimant will incur significant expense if he or she has to initiate a lien foreclosure action.

Additionally, the lien claimant may also have exposure for slander of title if a court determines that the lien was improper. This could mean that the lien claimant would be required to pay not only the aircraft owner's costs and attorney's fees, but also any losses incurred by the aircraft owner if the lien prevented a sale of the aircraft or forced the aircraft owner to accept less in a sale than he or she would have in the absence of the lien.

Similarly, the aircraft owner will incur significant expense to defend against a mechanic's lien foreclosure action and, if unsuccessful, the aircraft owner could ultimately be required to pay the full amount of the lien plus the lien claimant's costs and attorney's fees. Also, in the meantime, the lien could prevent the aircraft owner from selling the aircraft.

Clearly, both parties have incentives to try and settle the lien claim to avoid the risks and expense associated with litigating the claim. However, if the parties cannot reach an agreement, litigation is available and may be required to resolve the situation.

Resolution Through Litigation


The Mechanics Lien Foreclosure Action
.  To enforce a mechanic lien against an aircraft, a lien claimant must start a lien foreclosure action. In the foreclosure action, the lien claimant asks the court to validate his or her lien and order the aircraft sold to pay the lien claimant the amount owed.

Once the foreclosure action is started, many jurisdictions allow the aircraft owner to post a bond or deposit money with the court to obtain a release of the mechanic's lien before the lawsuit is decided. The amount of the bond or deposit will vary, but is usually the amount of the lien claim plus some additional percentage of the claim (e.g. 125%-150%). The bond or deposit replaces the aircraft as security for the lien claimant's claim. When the court receives the bond or deposit, it then issues an order discharging or releasing the lien. A certified copy of the order must then be filed with the FAA Registry to clear the aircraft's title.

The aircraft owner also has the opportunity to defend against the lien claim in the foreclosure action and to assert any claims the aircraft owner may have against the lien claimant. One common defense to an aircraft mechanic's lien foreclosure action is that the lien was not properly perfected. In this situation, the aircraft owner asserts that the lien statement was not filed within the proper time period after the last day of work or that the lien claimant did not follow the proper procedures to perfect the lien. Similarly, if the foreclosure proceeding was not initiated within the time period allowed by law, the aircraft owner may also assert that defense.

Another defense an aircraft owner may assert is that the lien is invalid because the lien claimant is knowingly demanding an amount in excess of what is justly due. This defense is very common in situations where the aircraft owner initially disputed the amount being charged by the lien claimant. However, this defense usually requires that the aircraft owner show bad faith on the part of the lien claimant or that the lien claimant knew the lien statement was overstated.

If the aircraft owner is successful in defending against the foreclosure proceeding, the aircraft owner will also probably succeed in a slander of title claim against the lien claimant. An aircraft owner asserting a slander of title claim alleges that the lien claimant improperly encumbered the aircraft with an invalid lien. A slander of title claim could have serious and expensive implications for the lien claimant if the improper lien prevented a sale of the aircraft or forced the aircraft owner to accept less in a sale than he or she would have in the absence of a lien.

As a practical matter, a lien claimant does not foreclose on its lien as often as you might think. Oftentimes, the aircraft has a mortgage that takes priority over the lien claimant's claim. As a result, even if the lien claimant succeeded in his or her foreclosure action, the lien claimant would still have to deal with or pay off the lender who holds the mortgage.

In most cases, this doesn't make financial sense for the lien claimant and the lien claimant does not intend to foreclose on its lien. Rather, the lien claimant records the lien with the hope that the aircraft will be sold in the future and the lien claimant will receive some payment in exchange for a release of its mechanic's lien.

The Declaratory Judgment Action
.  In situations where the lien claimant does not initiate a foreclosure action, an aircraft owner may file a declaratory judgment action to ask the court to determine the validity of the lien. The aircraft owner would raise the same defenses to the lien as in a foreclosure action and would be able to assert any additional claims the aircraft owner may have against the lien claimant (e.g. slander of title). The opportunity for the aircraft owner to post a bond or deposit with the court in order to obtain a discharge or release is also available in a declaratory judgment action. The only real difference from the foreclosure action is that the aircraft owner is initiating the lawsuit rather than the lien claimant.

Conclusion


Once a lien is asserted against an aircraft, an aircraft owner isn't without options. Unfortunately, each of the options available to an aircraft owner has a cost, both in time and money. If you find yourself in this situation, I recommend that you contact an aviation attorney familiar with your state's aircraft mechanic lien laws to analyze your situation and help you choose the best course of action.

NTSB No Longer "Bound By" FAA's Choice Of Sanction

As you may be aware, the Pilot's Bill of Rights mandated changes to the way FAA enforcement cases are handled by the NTSB. One of the significant changes to the conduct of hearings relates to the deference the administrative law judge ("ALJ") must give to the FAA's choice of sanction (e.g. suspension versus revocation). Before the Pilot's Bill of Rights, 49 U.S.C. 44703(d)(2) provided that the NTSB was

"bound by all validly adopted interpretations of laws and regulations the [FAA] administrator carries out and of written agency policy guidance available to the public related to sanctions to be imposed under this section unless the Board finds an interpretation is arbitrary, capricious, or otherwise not according to law."

And prior to the Pilot's Bill of Rights the NTSB had, in fact, consistently held that it was bound by (1) the FAA's choice of sanction derived from the Sanction Guidance Table contained in FAA Order 2150.3B and (2) previous cases approving the FAA's choice of sanction for particular types of violations.

The Pilot's Bill of Rights expressly eliminated this "bound by" language. The NTSB is no longer required to simply accept the sanction proposed by the FAA in an enforcement case. Rather, the NTSB is permitted to select what it believes to be the appropriate sanction based upon the facts of the cases and any mitigating or aggravating circumstances. However, the Pilot's Bill of Rights did not address what impact this change in language might have on the Board's reliance upon prior case law and precedent. Fortunately, a recent Board decision addressed this issue.

In Administrator v. Jones, the Board was reviewing an ALJ's decision in an intentional falsification case in which the ALJ adopted the FAA's time-tested assertion that revocation of all airman certificates is the appropriate sanction in such cases. Consistent with the Pilot's Bill of Rights, the Board initially recognized that it was not bound by the FAA's choice of sanction. It then went on to state that "we are reluctant to engage in sanction comparison to cases decided prior to the enactment of the Pilot's Bill of Rights." Thus, rather than rely upon case law and precedent developed while the NTSB was still subject to the "bound by" requirement, the Board will now perform its own analysis to determine whether the sanction sought by the FAA in a particular case is reasonable and appropriate.

However, it is important to understand that this does not change the deference the Board must give an administrative agency's interpretation of its regulations and proposed sanctions for violation of those regulations. If the agency's interpretation and choice of sanction is reasonable and not otherwise arbitrary, capricious, or manifestly contrary to the regulation, the Board must still defer to that position. But, at least the NTSB is no longer required to simply "rubber stamp" the FAA's choice of sanction without performing some analysis as to whether it is reasonable. And that is good news for airmen.

End of content

No more pages to load