In the Matter Of: U.S. DEPARTMENT OF TRANSPORTATION OFFICE OFHEARINGS

WASHINGTON, D.C. 

# CEIVED AUG l 7 2015 Ht=ARING DOCKET ) ) ) ) ) DocketNo. FAA-2014-0119 SpiritAvionics, LTD., CaseNo. 2012-GL-07-0056 Respondent.
RESPONDENT'S REPLY TO COMPLAINANT'S RESPONSE FILEDJULY 1, 2015 Respondent, SpiritAvionics, LTD., files this Replyto Complainant's Response and hereby states as follows: The ultimate issue in this matter is whether the transaction between Respondent and its sub-contractor, Lane Aviation, constitutes a sale offabricated parts. As apreliminarymatter, it is important to note that Respondent, pursuant to its operations certificate, has the authority to manufacturereplacement ormodification articles for installation ontype certificated aircraft. In support of its theory that Respondent sold the parts in question to Lane Aviation, Complainant ultimately relies upon its "smoking gun," an invoice from Respondent to Lane Aviation, which states as follows: "Lane Aviation Portion of Purchase and Assembly of Headliner Installation Kits. Kits supplied to be used for the 3'd FAA Aircraft through the 18th aircraft." In its Motion for Decision, Respondent explains that it worked exclusively with two subcontractors to complete all the work contemplated under the contract with the FAA. The subcontractors were necessary because Respondent could not complete every task required by the contract under its current operations certificate, so it enlisted the services oftwo reputable serviceproviders (Lane Aviation and Tritex).The contract negotiations with the FAAwere lengthy and endured several revisions. As a result, Respondent, Tritex, and Lane Aviation miscalculated their costs; specifically, those costs related to the headliner installation kits for the FAA aircraft. 1 Rather than frustrate the progress of the work under the contract and potentially compromise the business of an important customer; Respondent, Lane Aviation, and Tritex agreed to share the loss.2 This fact explains why the invoices to Tritex and Lane Aviation are identical in both price and description. The invoices do not represent a sale from one entity to the other; they represent reimbursement payments made by Tritex and Lane Aviation to Respondent for a specific portion of a large contract.

A. The Transaction BetweenRespondentandLaneAviation WasNotaSale UnderPart21 Under theApplicable CommonDefinition of a "Sale." In its Response, Complainant first asserts that the transactionbetween Lane Aviation and Respondent was a sale under Part 21 as perthe applicable common definition ofthe term "sale." In support ofthis assertion, Complainant cites themostrecentversion ofBlack's LawDictionary which defines the term sale as: "the transfer ofproperty or title for a price." Complainant also cites two other sources for the definition, butessentially suggests that a "sale" would involve two elements: 1) an exchange ofgoods or services, and 2) money. This definition, however, is overly simplistic and inapplicable to this situation as there was no "exchange." Arguably, when there is

an exchange ofgoods or services the buyerwould get something ofvalue in return (the goods or services). The "buyer" inthis instance, Lane Aviation, got nothing ofvalue in return because the parts inquestion were always the property ofthe FAA and were installed in the eighteen aircraft listed inthe contract.

1 The parts in questioninvolve kits ofhardware used to mount the interior panels within the cabin ofthe aircraft to the airframe. 2 Respondent's CEO declares this fact inhis Declarationattached as EXHIBIT C to its Motion for Decision ftled on June 1, 2015. 2As further support, Complainant lists several analogies that are wholly inapplicable and unsupported by law. For example, a real estate agent does not sell a house. Rather, a real estate agent is just that, an agent, which facilitates the sale ofreal property on the seller's behalf. Complainant also states that one can sell stolen goods without title. While one could sell stolen goods, it does not meanthe sale is valid because such a sale is illegal. Lastly, Complainant cites the example ofa consignment shop. Again, this is an agency relationship where one is selling something on behalfofanother. Simply transferring physical possession ofsomething does not make it a sale. Otherwise, everyinstance ofabailment, loan ofgoods, orlease ofpropertywould constitute a sale ifone were to take Complainant's argument to its logical conclusion. Thus, this argumentmustfail. Finally, Complainant insists that a sale exists based upon the fact that Respondent prepared an invoice and received $7,416.90 for the "purchase and assembly ofheadliner install kits." Conveniently, Complainant omits the entire description on the invoice which specifically states that it was "Lane Aviation's portion" ofthe cost to purchase and install headliner install kits. The headliner kits and subsequent installation ofthe same actually cost $22,250.00.3 This amount is that which was unintentionally omitted from the bid on the contract and subsequent negotiation ofthe same. Since the parties had an expected profit on the entire contract, the three parties were able to determine the total loss from the omission ofthe headlinerinstall kit andhad agreedto share it. Complainantis using vague generalizations and abroad definition oftheterm "sale"to fit

a square peg into a round hole. That is, Complainant is advancing the logic that because an invoice was paid, and because that invoice contains the word "purchase" it must therefore be a sale. Complainant's proposed definition omits one critical component; that where goods are

3 $7,416.90 represents 1/3 ofthe total cost of$22,500.70. 3exchanged for money, the buyer would retain a benefit. Respondent argues that benefit is the passing oftitle, and the rightto have complete and total control ofthe parts inquestion, which is not present. Therefore, Complainant'sproposed applicable common definition ofthe term "sale" mustfail. B. The Plain Language of the Respondent's Invoice Is Irrelevant Because it is Not a

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------ ----------- - - -- --- --------------- Complainant's second argument that the transaction with Lane Aviation constituted a sale under any definition ofthe term must fail. Complainant attempts to treat the invoice issued to Lane Aviation as an unambiguous contract, and as such, argues that parol evidence cannot be introducedto contradicttheplainmeaningofa contract. The invoice issued to Lane Aviation is not a contract. An invoice is neither a bill ofsale
nor evidence of a sale, and, standing alone, furnishes no proof of title. Dows v. National Exchange Bank OfMilwaukee, 91 U.S. 618 (1875). Complainant, however, maintains that there is nothing ambiguous about the parties' "agreement" and that the invoice clearly states it was for the purchase of specific items and shows consideration was given in exchange for those items. Again, Complainant is completely ignoring the factual basis ofthe transaction and providing absolutely no evidence ofits own to
come to its desired outcome. Lane Aviation did not purchase anything from Respondent. Respondent purchased materials onbehalfofits customer, the FAA, which is clearly the proper procedure outlined inthe FAA contract. Respondent even used its customer's money to purchase said materials. Lane Aviation reimbursed Respondent for the shared loss relating miscalculation ofthe parts cost. Further, by seeking to use the invoice in question (which is not a contract) as evidence to prove the terms of a contract between Respondent and Lane Aviation, Complainant is using 4parol evidence, which ithad specifically stated in subheading B ofits Response to Respondent's Motion for Decision, is prohibited. The unambiguous contract is not the invoice, but rather the agreement between the parties to reimburse Respondent for its share ofthe loss on the contract. The invoice, which specifically and unequivocally states that the amount is representative of Lane Aviation's share, is simply a standard business practice (particularly in the context of a joint venture) memorializing that fact that money had been paid to reimburse a loss. Therefore, Complainant's argument must fail because it simply misapplies basic contract and business principles to come to its own faulty conclusion. C. The TransactionWas Not a Sale Under the U.C.C.'s Defmition. Complainant's assertion that the transaction in question constitutes a sale under the U.C.C. is without merit. U.C.C. § 2-106(1) defines a "sale" as consisting ofthe passing oftitle from the seller to the buyer for aprice. Complainant maintains that since Lane Aviationused the parts in question to complete part of the work order, it had "possession" and thus a legally protectedpropertyinterest. Complainant misconstrues the meaning of actual possession and legal possession. For example, one can be in possession of something, but not have the right to possess it. Lane Aviation had possession ofthe parts which were consumed in the course ofproviding the labor to install them. Lane Aviation had no property interest in the parts because the parts were the sole property of the FAA. As was made abundantly clear in the FAA contract, everything purchased to complete the contractis theproperty ofthe FAA: CLIN 004

- Materials Acquired by the Contractor for the Government

- all materials and equipment acquired with government funding are property ofthe FAA and shall be maintained lAW Government Furnished Property (GFP) provisions ofthecontract.4

4 See pages 3, 6, 8, 10, and 12 ofthe FAA Contract. This clause is also referenced inFootnote 18 ofRespondent's Motion for Decision. 5Finally, Complainant asserts that Lane Aviation possessed the parts, had the right to use those parts to complete its work, paid a significant sum of money for the parts, and had an agreement setting forth those rights. This is purely conjecture and Complainant offers no evidence to prove any ofits assertions. Lane Aviation had a duty, not a right to use the parts. Lane Aviation did not pay a significant sum ofmoney for parts; Respondent purchased the parts with funds from the FAA. Further, there was no agreement setting forth those rights because, as stated above, an invoiceis not a contract. The U.C.C. requires the passing oftitle to create a valid sale. Lane Aviation did nothave title to the parts in questionbecause theparts belonged to the FAA. Therefore, thetransaction in question did not constitute a sale underthe U.C.C. D. TheActivity ComplainedofIs NotWithin the Scope of14 C.F.R. § 21.9. Complainant asserts that any discussion following the regulation itselfmay be used to interpretthe intent ofa regulation, butit is not the law and inno waylimits the plainlanguage of the regulation. Respondent agrees that while it may not be controlling, it is certainly helpful to understandhow and whythis specific regulation came into existence. Section 21.9 was enacted to protect unsuspecting consumers from the sale of nonconforming parts in the marketplace. This regulation is a safety measure enacted to protect
consumers from purchasingnon-conformingparts for installationontype certificated aircraft and istherefore inapplicableto the facts and circumstances underlyingthe instantmatter. Under this same section, Complainant also argues the requirement that title pass to a buyer under a U.C.C. contract is contradictory to the plain language ofthe invoice. The "plain language" ofthe invoice is irrelevantbecause it is not a contract.

6Finally, Complainant also argues that there is no evidence regarding any subcontract between the companies and respondent. This is untrue. Respondent directs Complainant's attention to EXHIBIT A, specifically page 17 of the contract which explicitly states Lane Aviation therein. Therefore, to say that there is no evidence of Lane Aviation's involvement under this contract is patently false. Respondent also cites Exhibit C filed with the Motion which contains a Declaration from Eric C. Ochs, the CEO ofRespondent, Spirit Avionics. Specifically, inParagraph 5, Mr. Ochs declares as follows: 5. Due to a combination ofboth limitations ofthe certificate belonging to Spirit Avionics, Ltd. and lack of equipment and/or specialization needed to perform every task contemplated under the terms ofthe contract with the FAA, Spirit Avionics utilized the experience and expertise oftwo highly respected and qualified sub-contractors: Lane Aviation Corporation ("Lane Aviation") and Tritext Corporation ("Tritex") in carrying out the work contemplated by the contract. Respondent maintains that Section 21.9 does not applyto the instantmatter and reiterates the fact thatRespondent did not sell theparts inquestionto Lane Aviation orTritex. The invoice in question simplyrepresents reimbursement oftheportion ofthe loss the parties agreed to share dueto amutual mistake. Therefore, Respondent did notviolate Section21.9. E. Conclusion Complainant has the burden to show that the respondent produced a replacement part or modification article for sale and represented that the part was suitable for installation on a type certificated aircraft. Notwithstanding the invoice submitted to Lane Aviation regarding its share of the reimbursement of the loss, which Complainant prefers to incorrectly view as a valid, binding, and unambiguous contract, Complainant has no evidence to demonstrate that Respondent sold the parts inquestion inviolation ofSection 21.9 because that evidence does not exist. 7Respondent does not dispute that it fabricated the parts in question. It has every right to produce such parts under its operations specifications. What Respondent categorically denies, based on the foregoing, is that it sold said parts to its subcontractor, Lane Aviation. Therefore, Respondent submits that there are no genuine issues ofmaterial fact and that it is entitled to judgment as a matter of law on the grounds that the transaction between Respondent and its subcontractorwas not a "sale" and therefore didnot violate 14 C.P.R. §21.9.
Respectfully submitted,



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## // (///,::::1:., /**J"~·** <»**~** /**""--"~-~~"** // Patrick T. Moro / Jerry A. Eichenberger .!' Eichenberger & Associates, Co. LPA (../ 6037 Frantz Road, Suite 107 Dublin, Ohio 43017 Phone: 614-798-1600 Facsimile: 614-798-1620 Counsel forRespondent

8CERTIFICATE OF SERVICE I hereby certify that a copy ofthe foregoing was served upon the following parties by facsimile this 6'h dayofAugust, 2015. FAAHearingDocket 800 Independence Ave, S.W. Washington, D.C. 20591 Attn: HearingDocket Clerk AGG·430;Wilber·WrightBuilding Suite 2Wl000 Fax: 202-267-1293 TheHonorableJ.E. Sullivan U.S. Administrative Law Judge Office ofHearings, M-20 U.S. Department ofTransportation 1200NewJerseyAve, S.E. (Ell-310) Washington, D.C. 20590 Fax: 202-366-7536 Kate Barber Federal AviationAdministration Office ofRegional Counsel, AGL-7B 2300 East DevonAvenue Des Plaines, Illinois 60018 Fax: 847-294-7862



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### EICHENBERGER &ASSOCIATES

Federal Aviation Administration 800 Independence Avenue, S.W. Washington, DC 20591 Attn: HearingDocket Clerk AGC-430, WilberWrightBuilding Suite 2WIOOO

To the Hearing Docket Clerk, August 6, 2015 

# RECEIVED fl!.UG 17 2015 

## HEARING DOCKET

Re: Respondent's Reply to FAAResponse DocketNo.: FAA-2014-0119 CaseNo.: 2012-GL-07-0056

Please find the enclosed Reply to the FAA's Response. A copy ofthe same has also been served by facsimile to theFAA attorney and Judge Sullivan. Ifyouhave any questions, please do nothesitateto contact me atthe number below.

Enclosures CC: Kate Barber, Esq. Judge J.E. Sullivan

6037FrantzRoad, Suite 107 Dublin, Ohio 43017 T/ 614-798-1600 

## i F/ 614-798-1600 www.ehlawyers.com