Free Statement - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Plaintiff United States of America moved this court, pursuant to the Court's powers under UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA UNITED STATES OF AMERICA, CIV-04-363-PHX-JWS Plaintiff, ORDER FOR PUBLIC JUDICIAL Vs. INTERLOCUTORY SALE OF 1. Lear Jet, Model 31A, Serial Number 31A-224, U.S. Registration # N224LJ; 2. Agusta Helicopter, Model A109E, Serial Number 11116, Mexican Registration # XA-TSR; 3. Cessna Caravan, Model 208B, Serial Number 208B-0941, Mexican Registration # XA-TUF. Defendants. DEFENDANT 1

20 18 U.S.C. § 983(j); Rule E(9)(b) of the Supplemental Rules to the Federal Rules of Civil 21 Procedure for Certain Admiralty and Maritime Claims; and the customs laws, 19 U.S.C. § 22 l612(a) made applicable to this action by 18 U.S.C. §981(d), for an order directing the 23 interlocutory sale of the defendant aircraft number one, Lear Jet, with all its tools, log books, 24 appurtenances, fixtures, and improvements. Plaintiff has shown that: 25 The defendant property is liable to deterioration, decay, or injury pending this action and 26 the expenses of keeping and maintaining the property during the pendency of the proceedings 27 are excessive and must continue until the litigation is terminated. Given the international 28 implications of this action, it is not anticipated that this matter shall be quickly resolved. It is

Case 2:04-cv-00363-JWS

Document 103-2

Filed 09/02/2005

Page 1 of 7

1 preferable to limit the accrual of such expenses at this point in time as the result of the improving 2 resale market for the aircraft. 3 The equity in the property is being reduced by because the owner and claimant has not

4 made required payments. The economic value of the defendant aircraft could be significantly 5 reduced or eliminated if the aircraft is not sold in a commercially reasonable manner. 6 An immediate interlocutory sale by public auction is in the best interests of all parties

7 concerned, due to the improving resale market for this aircraft. 8 9 Accordingly, it is hereby ORDERED, ADJUDGED, and DECREED: 1. The following factors affect the sales price of the aircraft and shall be addressed

10 by the party indicated. For purposes of this Order only, all references to plaintiff are understood 11 to be references to the Fines, Penalties, and Forfeiture Unit of Customs and Border Protection, 12 previously commonly referred to as the United States Customs Service. All steps shall be 13 undertaken as indicated in this Order to insure the greatest value shall be obtained from the 14 interlocutory sale of the aircraft. At sale all of the following items must be performed to insure 15 that the aircraft is in an airworthy state at or near the date of sale. In the event that any party 16 disputes the need for, extent of, or airworthiness of repairs performed pursuant to this Order the 17 matter will be referred to an independent FAA Certified Aircraft and Powerplant Expert who 18 will advise the Court regarding the issues involved. The expenses of the FAA Certified AP 19 Technician shall be paid by the party determined by the Court to have failed to prevail regarding 20 the issue presented to the expert. With respect to the preparation of the aircraft for sale: 21 22 23 24 25 26 27 28
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A.

The airframe and engine log books are present and in the custody of plaintiff. If the engines are required to be removed from the aircraft for maintenance, it is the Order of the Court that the original log books be provided to the facility which is performing the maintenance. Plaintiff, at its election and expense, may copy the engine log books, and maintain a copies in its custody. Similarly, if maintenance is performed to other components of the aircraft, including the airframe, then it is the Order of the Court that the original log book be provided to the facility

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 E. D. C. B.

which is performing the maintenance. Plaintiff, at its election and expense, may copy the airframe log book, and maintain a copy in its custody. At the time the aircraft was seized the engines were protected with a type of an extended maintenance program which preserved the warranties associated with the engines. During the period of this forfeiture action the aircraft has been removed from the Manufacturer's Service Program (MSP), and the engines have been placed on a "damaged engine" list by Honeywell, the manufacture. The aircraft shall be returned to the MSP program prior to the auction of the aircraft at the expense of plaintiff. Plaintiff shall coordinate with Honeywell for the timely maintenance of the engines. Honeywell, may charge only reasonable and customary rates based upon industry standards for the maintenance and repair of the engines required to cause the engines to be returned to the Manufacturer's Service Program. The engines shall be placed in approximately the same condition as of the date of seizure of defendant number 1. Brakes and landing gear hardware show signs of rust or corrosion. The affected parts will be repaired or replaced at the expense of plaintiff to be brought within the compliance with the warranties provided by Lear Jet and FAA airworthiness standards. Paint blistering and corrosion from substantial contact with salt air and moisture requires that the exposed areas be entirely stripped and inspected to determine the extent of damage to the airframe. The affected parts will be repaired or replaced at the expense of plaintiff and shall be brought within the compliance of the warranties provided by Lear Jet and FAA airworthiness standards. The area will be repainted both with primer and final coats, as required by the standards of the industry. During the inspection and evaluation of the aircraft a prior damage event was noted. The damage was most likely a bird strike and was repaired by Lear Jet. No

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H. G. F.

additional work is required regarding this item, however, it shall be noted and made public at the auction. Experience has shown that an aircraft with avionics such as installed in this aircraft will develop numerous system defects when the aircraft has been parked for more than two years without operation, and exposed to salt air. The avionics shall be inspected, repaired, and certified as airworthy or the units may be replaced at the expense of plaintiff to be brought within compliance with the warranties provided by Lear Jet and FAA airworthiness standards. Annual and Mandatory Inspections are required for this aircraft, regardless of the use made of the aircraft. In addition, Airworthiness Directives or ADs are issued by the FAA regarding aircraft and compliance must be obtained. Required inspections have not been performed during the period the aircraft has been in storage. Phase Inspections A1 through A6, B1 through B6 and C1 through C6 are overdue and must be performed in order for the aircraft to be considered airworthy. In addition, multiple limited life items (such as fire extinguisher explosive cartridges) are overdue for replacement. To the extent that these inspections and replacement of supplies is a regular expense of the operation of the aircraft, they are chargeable to the sale of the aircraft. The required

inspections and replacement of limited life supplies shall be replaced at the expense of plaintiff to be brought within compliance with the warranties provided by Lear Jet and all FAA requirements and advisories. Plaintiff shall recover the costs of these expenses as a cost from the net sales proceeds of the sale of the defendant aircraft. Specific reference is made to AD2004-03-08 regarding inspection and repair of the shear web structure which supports the engines. Plaintiff shall recover as costs from the net proceeds of sale the expense of the inspection, estimated to be between $20,000 and $34,000 per engine, as a necessary expense incurred regardless of the maintenance required to be performed in paragraph B above.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 2. I.

To the extent that, in the opinion of the FAA Certified AP Technician conducting the inspections, any FAA AD is or should be considered notice of a recall or design defect which could or should be considered a warranty claim or manufacturers obligation of Lear Jet, plaintiff may make such modifications and repairs as required by the FAA AD in order to make the aircraft airworthy for the sale. In the event that the costs for this inspection exceed $68,000, plaintiff may recover the costs of these expenses as a cost from the net sales proceeds of the sale of the defendant aircraft, and the Court will consider at a subsequent hearing whether any setoff should be applied to any potential sum recovered by the appropriate party. Since the date of the seizure of this aircraft the FAA has mandated that aircraft flying at the altitude within which the Lear-31A may operate must have modifications or additions commonly described as "Reduces Vertical Separation Minimums" or RVSM. To comply with this new requirement, defendant aircraft must now be equipped with a TAWS Ground Proximity Warning System. At the election of plaintiff, this improvement to the aircraft can be made prior to the auction of the aircraft and the cost recovered from the net sales price from the sale, or plaintiff can elect to make the FAA requirement public at the auction and make clear that the RVSM is a factor which must be addressed by the purchaser prior to the operation of the aircraft, if the aircraft is to be operated within the United States. Plaintiff may consider whether the additional expense will increase the potential sales value of the aircraft sufficiently to justify the installation prior to the sale and whether the aircraft can be sold, for example for export, absent this modification. Any party may communicate its preference to plaintiff within 30 days of this Order. However, it is the Order of the Court that the decision as to how to proceed will be made by plaintiff. It is contemplated that the process to make this aircraft airworthy may take some

28 time. Plaintiff is directed to commence immediately this process and shall advise the Court and
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1 parties of the status of the defendant aircraft each month from the date of this order until the 2 maintenance and repairs are completed. 3 3. The defendant property shall be sold at public sale pursuant to 28 U.S.C. §

4 2001(a), after notice and a hearing has been held, pursuant to 28 U.S.C. § 2001(b). 5 4. Pursuant to 28 U.S.C. § 2002, notice of the sale shall be published once a week

6 for four weeks in a newspaper regularly issued and of general circulation in the county, state, 7 or district where the defendant property is located. If the aircraft is sold at auction where it is 8 presently located, the newspaper designated is the Miami Herald. If the location of the sale is 9 any place other than the present location, plaintiff may comply with this portion of the Order by 10 publishing said Notice in the appropriate and usual newspaper utilized by the Fines, Forfeiture, 11 and Penalties Unit of Customs and Border Protection which has jurisdiction at the place of sale. 12 This publication shall commence four weeks prior to the sale date noticed by plaintiff. Notice 13 shall also be sent by mail or other reasonable means to all persons known to the government to 14 assert an interest in the property. The notice shall include the description of the property, the 15 time and location of the sale, and either a copy of this order or a statement to the effect that: the 16 property will be sold free and clear of all liens and encumbrances; any person having an interest 17 in the property who fails to appear and participate in the sale will lose any right to assert that 18 interest against the property; and only persons filing timely claims in this forfeiture proceeding 19 may assert claims against the proceeds of sale. 20 5. The date and sale location cannot be set at this point in time, due to the unknown

21 delay while necessary maintenance and repairs are performed. Plaintiff shall notice a date and 22 location for this sale to be held not later than sixty (60) days from the date of the Notice and not 23 less than thirty (30) days from the date of the Notice, which shall be advertised as specified in 24 paragraph 4 above. Plaintiff and its agents or any party may make any additional advertisements 25 as plaintiff or any party deems appropriate for the sale of this aircraft, consistent with the 26 provisions of this Order. All parties to this litigation shall receive a copy of the Notice of Sale. 27 Unless otherwise altered by order of the Court, this Notice of the Sale shall be served within 28
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1 ninety (90) days of the date of this Order. Adjustments can be made based upon status reports 2 served by plaintiff which demonstrate continued progress toward making the aircraft airworthy. 3 6. The net proceeds of the sale (sales price less commission, closing costs, storage,

4 advertising, preparation and maintenance of the aircraft as noted herein, and other selling 5 expenses) shall be used to pay off the outstanding taxes on the aircraft, if any, the costs incurred 6 by Customs and Border Protection, to maintain the property since the seizure on September16, 7 2002. The net equity then may be held at the direction of the Court for a hearing upon the issue 8 of whether and how much of the proceeds may be applied to any claimant to the res. If the net 9 proceeds are insufficient to pay the contract due between Bombardier Capital, Inc. (BCI) or if 10 BCI is not successful in its claim against the defendant Lear Jet 31A, then this order shall not 11 affect any rights BCI may have to seek a deficiency judgment against its obligor or its guarantor, 12 Alberto Abed-Schekaiban, Uptongrove Ltd., CASAFIN, CALEZAR, LTD, VUELABUS, S.A. 13 de C.V. and other company or individual which BCI may have, pursuant to the terms of the 14 contract. No deficiency resulting from a sale pursuant to this order shall be a basis for action or 15 recovery against the United States or any agency or personnel thereof. 16 6. The remaining proceeds shall be deposited in the Registry of the Court, and shall

17 be substituted as the defendant res in this action. 18 19 20 21 22 23 24 25 26 27 28
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SO ORDERED, this _____ of _______________, 2005.

John W. Sedwick United States District Judge