Opinion ID: 417705
Heading Depth: 1
Heading Rank: 2

Heading: Operation of the Aircraft

Text: 6 Landy bought a Boeing 707 from a German airline in 1976. The plane was converted to carry cargo. Landy and IAL executed a one year lease agreement on April 28, 1977. Between May 2 and August 2, 1977, IAL entered into a series of subleases. Most of these subleases, operating out of Newburgh, New York, involved transportation of livestock to foreign airports. On occasion, the plane was ferried by an American crew to a foreign airport, and these crews flew seven trips between foreign airports. A typical sublease contract stated that the shipper-lessee would have 7 full and exclusive possession, use and control of the Aircraft, shall have the sole responsibility for operation, use and control, for pilot assignment and direction, and for all other aspects of utilization of the Aircraft. Lessee shall obtain from a reputable aircraft service company or employ directly properly certified crew members ... [who] shall be under the complete supervision, direction and control of Lessee and not in any way under the supervision, direction or control of or in any way responsible to Lessor. 8 Thus, at all times, Landy and IAL operated in form as if the plane were leased to the cargo shipper who controlled its operation, bringing the flights under the General Operating Rules, 14 C.F.R. Part 91. The jury, however, found that Landy and IAL retained control of the flights, which were operated for compensation, and should therefore have complied with the stricter certification, inspection and maintenance requirements of 14 C.F.R. Part 121. 9 A. Landy. The link between Landy and operational control of the plane is Henry Warton, president of Air-Trans Ltd., an entity the jury apparently concluded was a shell company for Landy. 8 Warton told Landy in the summer of 1976 that Lufthansa was interested in selling the aircraft. Warton brought the Lufthansa representative to Landy to negotiate the sale, went to Germany to complete the paperwork, accompanied the plane back to Miami where he supervised its refitting from passenger to cargo configuration, and supervised the preparation of an inspection program and application for airworthiness certification by the FAA. Warton then found a party willing to lease the plane. He negotiated the IAL lease under which the plane operated during the three-month period at issue here, and delivered the plane to IAL at Stewart Airport in New York State. Warton notified IAL in August 1977 that Landy was terminating the lease, repossessed the plane for Landy several weeks later, and then supervised the operation of various of Landy's aircraft both directly for Landy and under lease to other parties. Indeed, because Warton was to receive twenty-five percent of Landy's profits from operation of the aircraft for his services as broker on the original sale, the jury could have concluded that Landy and Warton were joint venturers. 10 Warton's company, Air-Trans Ltd., supplied all the crews for all the subleased flights. Air-Trans appeared as transferee on the bill of sale when Landy purchased the aircraft from Lufthansa and authorized the work order for inspection of the aircraft in Florida. Moreover, Air-Trans had no office of its own. Warton conducted Air-Trans' business from Landy's office, including the payment of crew members for the aircraft and, frequently, supervision of the crews when they conducted overseas flights. Landy's secretary signed all the Air-Trans checks paying crew members for their services. 11 B. IAL. The link between IAL and operational control of the plane is J.D. Smith Inter-Ocean, Inc. (J.D. Smith), the company serving as IAL's exclusive sales agent. 9 IAL relied on the terms of the sublease agreements to prove that IAL was not responsible for operation of the aircraft. The evidence, however, indicated that IAL and J.D. Smith performed virtually all of the functions necessary to operate the aircraft, and the shippers were almost entirely excluded from any responsibility for the aircraft or its operation. A shipper would ask the air export manager of J.D. Smith to arrange for shipment of cargo. The manager would then send a sublease agreement prepared by IAL. At the same time, the manager obtained from IAL the cost charged by IAL for the flight, and from Air-Trans the cost of the crew, and would inform the shipper of the total cost. The shipper was responsible only for delivering the cargo to the airport when IAL specified that the plane would be ready. IAL provided maintenance, fuel and all auxiliary services for the plane, either directly or through airport personnel, who billed IAL or J.D. Smith, not the shipper. J.D. Smith supplied animal storage equipment, refitted the plane for each cattle-carrying flight, and disbursed the shipper's lump sum payment to Air-Trans (for the crew) and to IAL (for the other costs of operation). 12 The language of the subleases notwithstanding, the jury could conclude that IAL, by handling the shipping arrangement and payments directly and through J.D. Smith, as well as Landy, by supplying the aircraft and, through Warton and Air-Trans, the crews, had control of the plane. The facts support the jury's finding that IAL and Landy both operated the plane for compensation or hire, and therefore that IAL as well as Landy should have complied with Part 121 of the Federal Aviation Regulations governing commercial operators. 10 Courts evaluating relationships similar to those here have looked beyond the form of contractual agreements to the substance of actual aircraft operations, sanctioning those who effectively operate an aircraft for compensation or hire in violation of FAA safety regulations. See e.g., Aircrane, Inc. v. Butterfield, 369 F.Supp. 598, 601-03, 611-13 (E.D.Pa.1974) (three judge court); United States v. Bradley, 252 F.Supp. 804, 805 (S.D.Tex.1966). The evidence at trial was clearly sufficient to support the jury's finding that Landy and IAL operated the aircraft for compensation or hire and were therefore subject to Part 121 safety regulations. See United States v. Ozark Air Lines, Inc., 419 F.Supp. 795, 799 (E.D.Mo.1976); United States v. Garrett, 296 F.Supp. 1302, 1304 (N.D.Ga.) (liability for civil penalties by preponderance of the evidence), aff'd, 418 F.2d 1250 (5th Cir.1969) (per curiam), cert. denied, 399 U.S. 927, 90 S.Ct. 2239, 26 L.Ed.2d 792 (1970). 13 C. The Jury Charge. Appellants also assert that the trial court's charge on operational control was erroneous, and tainted the jury's verdict. The Special Verdict form asked as to Landy and IAL: Do you find by a preponderance of the evidence that defendant ... operated the aircraft for compensation or hire? Landy and IAL first argue that the phrase operated the aircraft does not match FAR 121.3(f) which specifies that [n]o person ... may engage in the carriage of persons or property for compensation or hire in air commerce without, or in violation of a commercial operator operating certificate and appropriate operations specifications issued under this part. We note first that the trial judge did use the regulation's language (engage in) in instructing the jury. Second, the violation requires no finding of intent, and we fail to see how the jury would have been misled by the semantic distinction between to operate and to engage in. 14 Landy and IAL additionally argue that two instructions, which we set out in the margin, 11 misstated the law. Aircrane v. Butterfield, supra, 369 F.Supp. at 611-12, is, however, adequate authority for an instruction that recommendation of crews is probative on the question of operational control. Every flight employed an Air-Trans crew, and the jury could reasonably infer that the crews came with the plane. The second challenged instruction is little more than a truism; Landy's counsel agreed that if the lessor and the crew supplier keep operational control, then the lessee does not. Further, the instruction is supported as a matter of law by Shaffer v. Golden Eagle Aviation, Inc., 1 NTSB 1028 (Jan. 6, 1971). Finally, IAL claims error in the court's failure to charge on agency. Agency, however, was not an element of the complaint, and was not in issue. The court properly charged on operational control. In sum, we have examined the contention that the court's charge erroneously led the jury to its key finding on Landy's and IAL's role, and find the arguments insubstantial. 15 D. Evidentiary Rulings. Appellants objected to exclusion of opinion testimony by one witness, a former FAA District Office Supervisor, who would have testified as to industry practice and FAA policy concerning operational control of a leased aircraft under Part 91, as reflected in Advisory Circulars. The testimony was properly excluded for two reasons. First, questions soliciting the former FAA employee's understanding of the meaning and applicability of Part 91 and Part 121 FARs would invade the province of the court to determine the applicable law and to instruct the jury as to that law. See, e.g., United States v. Ingredient Technology Corp., 698 F.2d 88 at 96-97 (2d Cir.1983) (tax evasion); Marx & Co. v. Diner's Club, Inc., 550 F.2d 505, 509-12 (2d Cir.) (contracts), cert. denied, 434 U.S. 861, 98 S.Ct. 188, 54 L.Ed.2d 134 (1977). Second, industry practice and FAA policy (apparently suggesting that others operated aircraft for meat hauling under Part 91 rather than Part 121) were irrelevant to the jury's determination of violations of the regulations, which requires no finding of intent. Compare 49 U.S.C. Sec. 1471 (civil penalties for any violation) with 49 U.S.C. Sec. 1472 (criminal penalties, requiring proof of knowing and willful violation). If the testimony had been offered to show good faith confusion as to applicability of Part 91 regulations to this type of aircraft leasing, the testimony would be relevant to the sanction issue, see, e.g., United States v. Bradley, supra, 252 F.Supp. at 805-06, but this was not an issue of fact for jury consideration. 16 For the same reason of relevancy, the court properly excluded warning letters to the plane's flight crews, which defense counsel would have offered to show that the violations were deemed by the FAA not to be serious, or not to involve a threat to safety. The issue of seriousness of the violations, like the issue of good faith confusion, goes to the scope of the penalties imposed. Imposition of penalties is committed to the court, not the jury. United States v. Duffy, 550 F.2d 533, 534 (9th Cir.1977) (per curiam). The court did receive all this evidence in Landy's post-trial papers submitted on the question of penalties. 17 IAL objects on grounds of unfair surprise to the admission of testimony of the FAA Regional Counsel, who was not listed as a Government witness, but was nonetheless called as a rebuttal witness. The substance of his testimony came as no surprise, because he had testified at the first trial. See note 1 supra. Further, even though the government had indicated that it was not going to call this witness, it was proper to do so in rebuttal and impeachment of IAL's president's testimony that he had been assured by the FAA that his operation was proper. 18 Two other evidentiary rulings on the issue of operational control are raised on appeal. The Government was allowed, over a hearsay objection, to put in evidence a telex sent by the German government through the State Department to the FAA. The telex went to rebut the testimony of a shipper that in order to get landing rights, he had satisfied the German government that a flight from Germany to New York was not a commercial operation. The telex informed the Government that Germany would not permit the aircraft to enter German air space in the future because it had been operated on that flight without approval by the German government. The telex was identified by the FAA inspector to whom it had been sent. As a statement by a foreign government to the federal government, incorporated in the FAA's factual findings resulting from an investigation made pursuant to authority granted by law, the telex was admissible as a public record and report under Fed.R.Evid. 803(8)(B), (C). See United States v. Grady, 544 F.2d 598, 604 (2d Cir.1976).