All Aviation Articles By Greg Reigel

FAA’s Intentional Falsification Settlement Policy: Not Much Of An Offer.

As you might imagine, the FAA has a dim view of intentional falsification cases.  These situations arise when the FAA believes that a certificate holder (whether airman, mechanic, air carrier, repair station etc.) has intentionally falsified a required record.  They range from airmen who have failed to disclose information on their applications for medical certificate to mechanics who have either omitted information or included incorrect information in aircraft maintenance records.

According to the FAA’s Compliance and Enforcement Program, a certificate holder who intentionally falsifies a record lacks the qualifications to hold any certificate.  As a result, FAA’s sanction in these cases is revocation of all certificates, usually by emergency order.  And after revocation, the certificate holder is generally prohibited from re-applying for new certificates for one year following the effective date of the order of revocation.

However, before the FAA issues a revocation order, it conducts an investigation in which it gathers evidence, sends out a letter of investigation, reviews any response, and analyzes all of the evidence to support its case.  This process can take a period of time.  But the certificate holder retains all certificates up until the revocation order is issued.

The New Policy

In the case where an airman has allegedly falsified his or her application for medical certificate in violation of 14 CFR 67.403(a)(1)-(4), the FAA recently announced a new “prompt settlement policy.”  According to the FAA, the new policy will afford an airman “the opportunity to apply for any airman and ground instructor certificate sooner than had the case proceeded in the absence of the policy.”

Under the new policy, the airman would still have to wait one year, but that would happen “sooner than under the current process because much of the investigation and evaluation processes would be abbreviated or eliminated.”  The policy provides the airman with an opportunity to resolve the alleged violation with a settlement agreement in which the airman (1) accepts an order revoking all of the airman’s certificates; (2) immediately surrenders all of his or her certificate; and (3) waives all of his or her appeal rights.

The FAA believes this policy will provide predictability for airmen as to when the revocation order is issued, and accordingly, when the airman would again be able apply for a new certificate.  It is also supposed to “promote better resource allocation.”

Who Is Eligible For This Policy?

The policy would be available to an airman who the FAA believes has violated 14 CFR 67.403(a)(1)-(4).  However, the policy will not be available to an airman if (1) the FAA believes the airman may lack qualification to hold his or her certificate(s) (other than because the airman allegedly violated 14 CFR 67.403(a)(1) through (4)); or (2) he or she has a prior violation of 14 CFR 67.403(a)(1) through (4).

How Does It Work?

When the FAA sends a letter of investigation (“LOI”) to an airman for alleged intentional falsification, the LOI will advise the airman that he or she may request consideration for a prompt settlement of the legal enforcement action.  If the FAA determines the airman is eligible, an FAA attorney will send the airman a settlement agreement with the following terms:

  1. The settlement agreement must be executed by the parties within ten days after the FAA sends the agreement to the airman;

  2. The FAA will issue an emergency order revoking all airman, ground instructor, and unexpired medical certificates the airman holds immediately upon receiving the fully executed settlement  agreement;

  3. The order of revocation will (a) require the immediate surrender of all airman, ground instructor, and unexpired medical certificates the individual holds to enforcement counsel; (b) notify the airman that the failure to immediately surrender these certificates could subject the airman to further legal enforcement action, including a civil penalty; and (c) inform the airman that the FAA will not accept an application for any new airman or ground instructor certificate for a period of one year from the date of the issuance of the order of revocation;

  4. The airman will waive all appeal rights from the order of revocation;

  5. The airman acknowledges that the agreement only concerns the legal enforcement action brought by the FAA and does not affect any actions that might be brought by State or other Federal agencies (whether civil or criminal), and that the agreement does not prevent the FAA from providing information about this matter to State or other Federal agencies;

  6. The parties will agree to bear their own costs and attorney fees, if any, in connection with the matter;

  7. The airman will agree to not initiate any litigation before seeking any costs, damages, or attorney fees, including applications under the Equal Access to Justice Act, incurred as a result of the legal enforcement action; and

  8. The airman will agree to waive any and all causes of action against the FAA and its current and/or former officials and employees relating to the legal enforcement action.

Is The Policy A Good Deal For An Airman?

From my perspective, this policy provides little real benefit to an airman, other than an airman who simply wants to roll over on his or her sword and start the clock ticking on his or her punishment.  Here are some of the problems I have with the policy:

  • An airman gives up all of his or her rights to have the FAA prove its case. The FAA has the burden of proof in these cases.  If the case involves factual issues as to whether the airman intentionally falsified rather than simply made a false statement, forcing the FAA to prove its case could be the difference between revocation of all certificates for intentional falsification versus revocation of just the airman’s medical certificate for making a false statement.

  • The policy does not protect the airman from criminal prosecution. An airman who the FAA believes committed intentional falsification could still be referred out to local or federal authorities for prosecution.  And the order of revocation and the facts upon which it was based would make it very easy for the prosecution to prove its case.  And since the FAA has, in fact, referred these cases out for prosecution, this is not a risk to be taken lightly.

  • The airman gives up his or her right to negotiate a reduction in the one-year prohibition on reapplication. If an airman appeals an order of revocation alleging intentional falsification, it is not uncommon for the FAA to agree to a 10 month, or in unusual circumstances a 9 month, prohibition in order avoid having to litigate its case against the airman before an NTSB administrative law judge.

  • The airman must surrender his or her certificates immediately. In the absence of surrender, the airman could have retained his or her certificates while the FAA completes its investigation and until it issues the revocation order.  This could be several months when the airman could continue to exercise the privileges of his or her certificates.

Conclusion

If you find yourself facing an allegation of intentional falsification, you know you made a mistake, and you just want to put the matter behind you, then the new policy may be worth considering.  However, you should also consider what you will give up.  In most situations it will likely make more sense to work through the enforcement process to obtain a more favorable resolution.

Understanding The “In Furtherance Of A Business” Limitation On Sport Pilot Privileges

An airman holding a sport pilot certificate recently asked me if the airman could fly to a location where the airman anticipated having a business meeting.  However, the airman indicated that he wasn’t necessarily flying to the location because he had to, but he wanted to in order to build time.
Unfortunately, based upon those facts it is likely the FAA would interpret the flight as being in furtherance of the airman’s business.  As a result, the airman would not legally be able to conduct the flight holding only a sport pilot certificate.  Here’s why.
Under 14 C.F.R. §61.315(c)(3) an airman holding a sport pilot certificate may not act as pilot-in-command of a light-sport aircraft “in furtherance of a business.”  The regulation does not explain what it means to fly “in furtherance of a business.”  However, the FAA Office of Chief Counsel has issued several letters of interpretation that provide some clarification.
In the 2011 Gilbert Legal Interpretation, the FAA stated that flight incidental to the airman’s employment or the business the airman intends to conduct, even if the flight is not required by the airman’s business, would be considered “in furtherance of a business.”  As a result, a sport pilot would be prohibited from conducting this type of flight.
The FAA explained further in the 2012 Allen-Terrafugia Legal Interpretation that “[a] flight would therefore be considered to be in furtherance of a business if it were conducted for a business purpose, even if the flight is only incidental to that business purpose.”  The FAA also noted that the sport pilot limitation is more restrictive than the “incidental to business” exception to private pilot limitations under 14 C.F.R. §61.113(b).
So, if you are an airman exercising the privileges of a sport pilot certificate, you are only authorized to conduct sport and recreational flights.  A flight in connection with a business purpose is prohibited under the regulations.

Disclosing Medical History On An FAA Application For Medical Certificate Is Not Limited To “Diagnoses”

If you have applied for an FAA medical certificate you know an applicant must complete FAA Form 8500-8GG via MedXPress and answer the questions on the form.  The FAA uses the information disclosed on the application to determine whether an airman is qualified to hold a medical certificate issued under 14 C.F.R. Part 67.
Question 18 asks for information regarding various medical conditions and circumstances that could have an impact on an airman’s medical qualification.  The preamble to Question 18 asks the applicant in all caps whether he or she has “EVER IN YOUR LIFE BEEN DIAGNOSED WITH, HAD, OR DO YOU PRESENTLY HAVE ANY OF THE FOLLOWING?”  The airman is required to answer “yes” or “no” and, if “yes”, he or she must provide an explanation to the FAA.
Unfortunately, some airmen get hung up on the word “diagnosed” and either ignore or fail to consider the broader wording in the rest of the question. An example of this situation occurred in the case of Administrator v. Smith.
In Smith, the airman failed to disclose certain medications he was prescribed for fatigue and depression.  And in response to Question 18(m) (asking about depression), the airman checked “no.”  After the aviation medical examiner (“AME”) issued a medical certificate to the airman, the FAA learned about the medications.  It also discovered that one of the conditions for which the medications were prescribed was depression.  Not suprisingly, the FAA was not pleased.
Consistent with Order 2150.3C, FAA Compliance and Enforcement Program, the FAA revoked all of the airman’s certificates for violation of 14 C.F.R. § 67.403(a)(1) (intentional falsification).  After a hearing, the National Transportation Safety Board Administrative Law Judge affirmed the FAA’s order of revocation.
On appeal to the full Board, the airman argued, among other things, that he did not know he had been diagnosed with a mental disorder because his doctors didn’t share their formal diagnosis with him.  However, the Board rejected this argument.
The Board held the airman’s argument improperly attempted to narrow the scope of the preamble to Question 18 and, specifically, Question 18(m) (asking about “mental disorders of any sort; depression, anxiety, etc.”).  The Board stated

[i]t is clear from the text of the form and both versions of the accompanying instructions, that item 18(m) is not limited to a formal diagnosis.  Rather, any medical “condition” is to be reported.  The existence of an underlying condition is not dependent on [the airman] being told the formal diagnosis or condition.

It went on to conclude that even if the airman was not told of the formal diagnosis, he was still aware of an underlying condition for which he sought treatment.  As a result, the airman’s checking the box “no” in response to Question 18(m) was a false statement, and a violation of the regulations.
Unfortunately, this situation occurs more often then it should.  And the FAA’s response to falsification is predictable and unforgiving: revocation of all certificates.
When you are applying for a medical certificate, it is important that you read the questions carefully.  If you are concerned about whether something should be disclosed, do your research first.  Talk to your AME before you go in for your examination.  Or talk to an experienced aviation attorney who can help you understand the question and determine whether your circumstances require you to check the “yes” box.

Why Should An Aircraft Lessee Use An Operational Control Briefing?

As many of you are aware, the FAA has increased both its investigation of and enforcement against illegal charter operators.  One of the consequences of this heightened oversight is an increase in the FAA's scrutiny of Part 91 dry-leasing structures.  Using an operational control briefing in connection with those Part 91 flights can help minimize unwanted FAA attention.

To start, if structured properly, these leasing structures are legal and comply with FAA regulations. They ARE NOT illegal charter. However, in order to be legitimate, dry-leasing arrangements must be documented correctly.

The actual flight operations also need to be conducted consistent with those documents and the applicable regulations.  But proper documentation will not save an operator from FAA enforcement if the operations ignore the documents and are conducted as illegal charter flights.

How does the FAA figure out whether a properly documented operation is actually being conducted as an illegal charter?  FAA inspectors start asking questions.  For example, if an FAA inspector conducts a ramp check of a Part 91 dry-lease flight, he or she will first speak to the pilot. Next, the inspector will talk to the passengers in the back of the airplane.

The passengers' answers to the inspector's questions need to be consistent with a Part 91 dry-leasing structure. Incorrect answers can, and have, resulted in an illegal charter investigation of an otherwise proper Part 91 dry-lease flight.  And this is where an operational control briefing given by the pilot at the beginning of the flight can make all of the difference in the world.

The operational control briefing is intended to ensure that the passengers are able to tell the FAA inspector who has operational control of the flight.  Subject to a few very specific exceptions, the lessee, not the lessor, has operational control of a Part 91 dry-lease flight, even if the lessee or its principals are not physically on the flight.  The passengers need to know this fact so they can answer the inspector's questions correctly.

So, what should be included in an operational control briefing?  Here are a few, but not necessarily all, of the points that should be covered with the passengers:

  • The flight IS NOT a charter flight.
  • The flight will operate under Part 91 of the Federal Aviation Administration regulations.
  • The flight is operated under a lease between the aircraft owner (or another lessor) and the lessee.  And a copy of that lease agreement is in the aircraft.
  • The flight is under the operational control of the lessee.  (Identification of the lessee is critical, especially when the aircraft may also be leased to other affiliates or related entities).  This means that the passenger, by virtue of his or her relationship with lessee, has operational control of the flight.  He or she has the authority to initiate, conduct and terminate the flight.
  • The pilot is on board to help the passenger operate the aircraft in a safe and prudent manner and in full compliance with the applicable rules and regulations.  He or she will comply with the instructions and directions provided by the passenger, both written and oral, to enable the passenger to exercise operational control.
  • The passenger will still have operational control.  That operational control is only be subject to the pilot's authority to make all safety related decisions relating to the aircraft and the flight.

The operational control briefing should be used regardless of whether the flight is carrying the lessee (or its principal) or the lessee's employees/guests/invitees.  Although the lessee should understand the nature of the Part 91 dry-leasing structure to which it has agreed, the briefing can serve as a reminder of the basic requirements.

When the flight is carrying other passengers, the briefing is an important tool to make sure those passengers understand the nature of the flight so they are able to convey that information to an FAA inspector if or when asked. This will help prevent confusion and, perhaps, an unwanted investigation.

At the end of the day, it is the lessee's responsibility as operator of the aircraft to make sure the lessee's flights are conducted legally. An operational control briefing is a simple, but effective way to make sure the folks in the back of the aircraft also understand who is responsible for the flight.

When Is An Arbitration Clause In An Aircraft Purchase Agreement Enforceable?

As with many legal questions, the lawyerly answer is "it depends."  However, generally speaking, yes, arbitration clauses in aircraft purchase agreements are enforceable.  Here's why.

Courts favor arbitration.  Whether a claim is subject to arbitration will depend on the contractual language in the purchase agreement.  A court will presume a claim is subject to arbitration if an aircraft purchase agreement has an arbitration clause and an interpretation of the clause covers the claim. But that presumption may be rebutted.

When Does This Issue Come Up?

If a party to an agreement containing an arbitration clause is sued in court by the other party, the party being sued may ask the court to force the other party to submit its claims to arbitration. The court must then determine (1) whether an agreement to arbitrate was entered into and (2) whether the dispute falls within the scope of the arbitration provision.

Did The Parties Agree To Arbitrate?

Typically, a court will find that the parties agreed to arbitrate if the aircraft purchase agreement contains an arbitration clause or provision.  However, this may not be the case if the arbitration provision itself was fraudulently induced, which will be addressed in more detail below.

What Issues Did The Parties Agree To Arbitrate?

Assuming the first factor has been satisfied, the court will look at the language of the parties' agreement to determine what issues they intended to arbitrate. The language must either specifically state the issues subject to arbitration, or it must be sufficiently broad to cover the claims alleged.  If the court determines that it is "reasonably debatable" whether a dispute is subject to arbitration, it will require that the dispute be arbitrated.

Examples Of Arbitration Language.

An arbitration clause in an aircraft purchase agreement that states

“any controversy or claim arising out of or relating to this agreement, or the alleged breach thereof”

will likely be considered broad enough to encompass most claims relating to the agreement.  In that instance, a general attack on the purchase agreement alleging that it is void because it was fraudulently induced or the result of mutual mistake would still be subject to arbitration.

Conversely, an arbitration clause stating that it covers

“any claim arising out of or relating to the physical condition of the aircraft”

will only include claims with respect to the condition of the aircraft but not issues of whether the parties actually agreed to arbitrate.  Without some evidence of the parties' intent to arbitrate them, claims of fraud in the inducement of the agreement to arbitrate, rather than claims of fraud with respect to the aircraft purchase agreement as a whole or the condition of the aircraft, would be decided by the court rather than an arbitrator.

To put it another way, the court will not consider claims of fraud in the inducement of the aircraft purchase agreement generally.  Those claims will have to be arbitrated.  Only where the claim of fraud in the inducement goes specifically to the arbitration provision itself will the claim be decided by the court rather than the arbitrator.

Conclusion

If you have an arbitration clause in your aircraft purchase agreement, you will need to carefully review the language and compare it to the claims at issue.  Broad language means all claims will likely have to be arbitrated, including claims that the agreement to arbitrate was fraudulently induced.  Anything less than that broad language and claims may or may not be subject to arbitration.

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