Planes, Claims, and Mechanic's Liens

As Written in the May 2013 Issue of Ohio TMA News
By Alan M. Koschik and Suzana K. Koch, Brouse McDowell, LPA

Lenny “Nails” Dykstra. Major League Baseball centerfielder for the New York Mets. The 1986 World Series champion, beating the Red Sox with the assistance of his teammates (and Bill Buckner’s error) in seven dramatic games. Helped take the Phillies to the World Series in 1993. Retired from baseball to manage a stock portfolio. Hailed as a financial genius by Jim Cramer. Owner of Players Club, Inc. – a charter jet company with a magazine touting a highflying lifestyle to professional athletes. Purchased Wayne Gretsky’s $17-million Los Angeles mansion and a $4-million Gulfstream private jet for his Players Club business.

Time, however, passes. Prison. Bankruptcy. Fraud. Three counts of grand theft auto. Allegations of assaulting county jail officials, possession and use of cocaine and other drugs, and sexual misconduct. Reports on TMZ that he just wants his “d—n plane back.”

In the midst of this chaos and media frenzy, Dykstra’s Gulfstream jet ended up in a hangar at Hopkins Airport. The company hired to refurnish the jet’s interior had not been paid. Another company hired to do mechanical work on the jet was not paid, either. Each filed mechanic’s liens with the Federal Aviation Administration. Then, one of them filed a foreclosure complaint in the Cuyahoga County Court of Common Pleas.

Foreclosing on an aircraft, even in a straightforward foreclosure proceeding, has its own unique set of challenges. Add to that the complexity of the relationship among the parties, the senior lender’s own Federal Deposit Insurance Company receivership, and complex behind-the-scenes negotiations, and you begin to see what went into selling Dykstra’s jet. Among the issues peculiar to aircraft foreclosure:

Aircraft liens are governed by both federal law regarding perfection by FAA filing and also non-Uniform Commercial Code state law regarding priority.

• Ohio’s statute governing relative priority of aircraft liens and consensual security interests in aircraft held by lenders is fraught with ambiguity.
• Mechanic’s liens on aircraft must follow strict requirements regarding timing measured from date of completion and/or date of surrendering possession.
• An aircraft’s records are critical to its sale and registration, and therefore value, and are frequently held by third parties who might assert possessory liens if not paid.
• Secured party sales under the UCC do not foreclose aircraft liens, which are governed by non-UCC law, requiring judicial foreclosure absent settlement and release.
• Clear aircraft title is difficult to obtain without express releases filed with the FAA, placing a premium on explicit foreclosure decrees and sale orders.
• Sheriff sales cause delays that increase cost of storage and maintenance that are severe in the case of aircraft and limit the ability of the secured creditor to maximize the sale price in a specialized market.
• Judgment and tax liens filed against an aircraft after commencement of a foreclosure action imposes additional obstacles to clean title following a sale.

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