Starting Monday, lawyers for the FAA’s aviation registry will no longer issue legal opinions to people outside of the agency on registrations involving non-citizen trusts and non-revocable living trusts.
Further, according to some who regularly work with the registry at the FAA’s Aeronautical Center in Oklahoma City, the language of the notice issued this week could allow FAA attorneys to defer on a broader range of issues.
“In the past, the Registry has required non-citizen trusts to be reviewed and approved by the Central Region Counsel before the Registry would process documents and register an aircraft,” the National Aircraft Finance Association (NAFA) wrote to its members. “Parties would normally request this review in advance to avoid any delay in registering the aircraft – especially for matters that require a temporary certificate of registration (fly wire) such as imports or flights outside the US. Another instance where the Central Region Counsel review is often necessary involves making the determination as to whether a lease should be treated as a conditional sales contract requiring registration in the name of a lessee rather than a lessor.”
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The FAA is not obligated to provide such opinions, but the agency has done so for decades, helping private attorneys and others involved in the transfer of aircraft registrations.
The notice from the FAA stops short of saying its attorneys will no longer issue any legal opinion on registration issues and states that it will continue assisting with “novel registration issues.”
“I think this thing is still unfolding,” said aviation attorney Jack Gilchrist, founder of Gilchrist Aviation Law, a firm that works regularly with the registry.
Gilchrist said his firm and similar firms will still “be able to do business as usual;” however, such private firms will now likely have to issue opinions to clients directly, drawing their own legal conclusions without the opinion of FAA attorneys.
The other impact, in regard to estates and family trusts, is that they could have to file paperwork, including estate holdings and other financial information, with the FAA directly.
“And those documents are available for the world to view,” Gilchrist said, something that might make many people involved with such trusts uneasy, leading them to use other methods of aircraft registration.
Gilchrist said he and others are pushing for the FAA to establish other methods for reviewing registration issues involving trusts.
“I don’t know if they’ll do it, but we’re hopeful of that,” he said.
In an article published on LinkedIn, Gilchrist speculated that the move may be the most dramatic change in the public-facing role of the FAA that I have seen in my career.”
“It appears to be yet another demonstration of what I have seen as a concerning change in the FAA,” he wrote, “from a U.S. government branch in service of the people who make up the flying public, to one more exclusively serving the needs of the U.S. federal government itself.”
The FAA’s move comes just after the conviction of Debra Lynn Mercer-Erwin, whose businesses Wright Brothers Aircraft Title and Aircraft Guaranty Corporation served as a trusted for more than 1,000 aircraft, some of which were linked to drug smuggling.
Mercer-Erwin was convicted on drug trafficking and fraud charges as federal prosecutors convinced a jury that she was aware of the smuggling operations and that she ran trusts as a Ponzi scheme, defrauding customers of hundreds of millions of dollars.
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While it’s not clear if there is a direct link in the policy change by the FAA, its attorneys would have reviewed paperwork regarding many of the deals.
For those involved with the legal transfer of aircraft, they must now do so in a changing environment.
“The FAA is not just an enforcement organization and if they take that position it will be a long, hard road for everyone involved,” Gilchrist said. “The industry wants to work with the FAA at every level. … The world will be much better from the FAA’s perspective if we can talk.”
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