For the FAR Folks

[poadeleted20]

Does that depend on state laws as well?

Yes, but I've never heard of a state whose laws protect co-owners from liability in a non-corporate ownership structure.

Do you know of an example where that's happened? Not trying to contradict you, just figure out what our exposure is.

You need to ask these questions of an attorney licensed to practice in your state.

 

[jbarrass]

We hold title in our aircraft as "co-owners" individually. We discussed forming an LLC, but the aviation lawyer I talked to basically said "I'll take your money if you want, but I'd suggest you don't bother".

His suggested solution to liability worries was "as much insurance as you can afford"

Same advice as my attorney gave. Others should get their own. Depends on a lot of things, but in a 2 or person arrangement piercing the corporate veil is quite trivial. Liability insurance is cheap (I pay 300 a year), buy what you need.

 

[JeffDG]

Does that depend on state laws as well?

Do you know of an example where that's happened? Not trying to contradict you, just figure out what our exposure is.

Doesn't really depend on state. As co-owners, you are, effectively, a partnership. And partnerships operate under a principle of "joint agency" and all partners are jointly and severally liable for anything that happens with partnership assets without limit.

 

[Lindberg]

There seems to be lots of questionable legal advice being given out by non-lawyers in this thread (which, by the way is a felony in some states ). The best advice so far was to talk to a lawyer who represents you. And if you're happy with advice you've been given by the guy with a license and malpractice insurance to back it up, you should not hesitate to ignore any contrary advice you get here.

Just my $.02 as a lawyer (but not your lawyer ).

 

[dans2992]

There seems to be lots of questionable legal advice being given out by non-lawyers in this thread (which, by the way is a felony in some states ). The best advice so far was to talk to a lawyer who represents you. And if you're happy with advice you've been given by the guy with a license and malpractice insurance to back it up, you should not hesitate to ignore any contrary advice you get here.



Just my $.02 as a lawyer (but not your lawyer ).

Ok, so if you were to own a plane with partners, what structure would YOU choose?

Not talking about me, I am talking about you.

 

[poadeleted20]

The best advice so far was to talk to a lawyer who represents you. And if you're happy with advice you've been given by the guy with a license and malpractice insurance to back it up, you should not hesitate to ignore any contrary advice you get here.

It sounds like Lindberg is saying that if a lawyer tells you that you don't have to worry about being held personally liable for your co-owner's actions, and it turns out that lawyer is wrong, you can sue that lawyer and collect from his/her malpractice insurance to cover your losses. While that may be true, it will be an ugly and expensive process.

My feeling is that it's much better to be sure whatever structure you have will protect you without having to go to those lengths. I am not an attorney, but I've learned through reading law books that co-ownership usually does not protect one co-owner from another co-owner's actions. Buying enough insurance to protect you from your co-owner's actions may also be more complicated, expensive, and difficult than it sounds. For that reason, I would question the legal advice from an attorney to rely on co-ownership and "as much insurance as you can afford" to protect me from my co-owner's actions, and would obtain a second legal opinion from a qualified attorney licensed in my state on that point before committing to that course of action.

 

[N801BH]

It sounds like Lindberg is saying that if a lawyer tells you that you don't have to worry about being held personally liable for your co-owner's actions, and it turns out that lawyer is wrong, you can sue that lawyer and collect from his/her malpractice insurance to cover your losses. While that may be true, it will be an ugly and expensive process.

My feeling is that it's much better to be sure whatever structure you have will protect you without having to go to those lengths. I am not an attorney, but I've learned through reading law books that co-ownership usually does not protect one co-owner from another co-owner's actions. Buying enough insurance to protect you from your co-owner's actions may also be more complicated, expensive, and difficult than it sounds. For that reason, I would question the legal advice from an attorney to rely on co-ownership and "as much insurance as you can afford" to protect me from my co-owner's actions, and would obtain a second legal opinion from a qualified attorney licensed in my state on that point before committing to that course of action.

Ron is right on with that observation,,, My neighbor had a crystal clear cut case of legal malpractice.. Started out as poor legal advice that lead to the attorney stealing several hundred thousand dollars of the clients money that was in his escrow account.... It took my neighbor months to EVEN find another attorney that would take his case as it seems there is a secret agenda among lawyers that you don't sue each other... The case took years to wind it's way though the count system and in the end the estate attorney claimed he had a " substance abuse" problem and the poor advice and theft was out of his control.. His legal malpractice insurance did NOT pay a penny to the client and at the final court date, the judge gave the bad attorney a 60 day suspended sentence with NO judgement placed against him for the client to recover any stolen funds.......

Why did the judge rule that way.

Because before they are judges... They are attorneys....

 

[Lindberg]

It sounds like Lindberg is saying that if a lawyer tells you that you don't have to worry about being held personally liable for your co-owner's actions, and it turns out that lawyer is wrong, you can sue that lawyer and collect from his/her malpractice insurance to cover your losses. While that may be true, it will be an ugly and expensive process.

More or less. More generally, it's usually safer to take advice from someone with the credentials to back it up and a strong incentive not to be wrong. Lawyers' advice isn't always good or correct, and clients have a recourse when it isn't. Internet advice on the other hand....

My feeling is that it's much better to be sure whatever structure you have will protect you without having to go to those lengths. I am not an attorney, but I've learned through reading law books that co-ownership usually does not protect one co-owner from another co-owner's actions.

Everyone is (almost) always liable for his own acts. I don't know what theory you are thinking of that makes you liable for someone else's acts just because you co-own property. But there are a lot of layers to owning and operating an airplane.

Buying enough insurance to protect you from your co-owner's actions may also be more complicated, expensive, and difficult than it sounds. For that reason, I would question the legal advice from an attorney to rely on co-ownership and "as much insurance as you can afford" to protect me from my co-owner's actions, and would obtain a second legal opinion from a qualified attorney licensed in my state on that point before committing to that course of action.

No problem with second opinions. But just because they are different doesn't mean one's wrong and one's right. Attorneys aren't fortune tellers, and no one can predict what will happen with your particular plane or situation. If you're advised to buy lots of insurance and never need it, was that bad advice? And as to insurance, remember that one of the primary values of insurance in situations such as these is that it will defend you even if you're not ultimately liable. You can have the best, most elaborate, ironclad liability shield known to the legal profession, but it won't prevent someone from suing you. And if confidence in your liability protection led you to underinsure, you may wind up on the hook for big legal bills even though you're ultimately vindicated.

I've never met a defendant who wished he'd bought less insurance.

 

[Lindberg]

Ron is right on with that observation,,, My neighbor had a crystal clear cut case of legal malpractice.. Started out as poor legal advice that lead to the attorney stealing several hundred thousand dollars of the clients money that was in his escrow account.... It took my neighbor months to EVEN find another attorney that would take his case as it seems there is a secret agenda among lawyers that you don't sue each other...

Many lawyers are hesitant to sue other lawyers, just like many pilots don't like publicly bashing other pilots. But there are other lawyers who specialized in malpractice claims. Finding them is no secret; they advertise. Also, like any specialty, if you call the wrong guy, he's not going to be interested.

The case took years to wind it's way though the count system and in the end the estate attorney claimed he had a " substance abuse" problem and the poor advice and theft was out of his control.. His legal malpractice insurance did NOT pay a penny to the client and at the final court date, the judge gave the bad attorney a 60 day suspended sentence with NO judgement placed against him for the client to recover any stolen funds.......

One could surmise that a lawyer stealing client funds probably doesn't have much in the way of assets to go after. Judgment-proof defendants suck, whether they be lawyers or not. And insurance usually doesn't cover intentional acts, especially overtly criminal acts.

Why did the judge rule that way.

Because before they are judges... They are attorneys....

Yeah, well, you could always head down to the JP courts around here. Most of them are not lawyers. Any guesses as to whether that makes them better judges?

 

[N801BH]

Many lawyers are hesitant to sue other lawyers, just like many pilots don't like publicly bashing other pilots. But there are other lawyers who specialized in malpractice claims. Finding them is no secret; they advertise. Also, like any specialty, if you call the wrong guy, he's not going to be interested.
One could surmise that a lawyer stealing client funds probably doesn't have much in the way of assets to go after. Judgment-proof defendants suck, whether they be lawyers or not. And insurance usually doesn't cover intentional acts, especially overtly criminal acts.
Yeah, well, you could always head down to the JP courts around here. Most of them are not lawyers. Any guesses as to whether that makes them better judges?

Judging by the way to worded your post.. It is VERY clear you are an attorney....

 

[poadeleted20]

Everyone is (almost) always liable for his own acts. I don't know what theory you are thinking of that makes you liable for someone else's acts just because you co-own property. But there are a lot of layers to owning and operating an airplane.

I'm basing those statements on the writings of aviation attorney J. Scott Hamilton in his book "Practical Aviation Law", Chapter 5 on "Organizing the Business to Limit Liability" (a standard text for university undergraduate aviation law courses). As noted above by JeffDG (who I believe is an attorney), co-ownerships are generally considered to be "partnerships", and Mr. Hamilton notes in his book, "Sole proprietorships and partnerships are considered to be identical to their owners." As such, he strongly recommends some sort of corporate ownership such as an LLC to provide protection for each individual from the acts of the other owners. Therefore, I would question the advice of an attorney who tells me that there is no advantage as regards liability protection for the individual owners in creating an LLC for a co-owned aircraft as opposed to just checking the "co-ownership" box on the FAA form and leaving it at that (no matter how much insurance you can afford).

 

[Lindberg]

I'm basing those statements on the writings of aviation attorney J. Scott Hamilton in his book "Practical Aviation Law", Chapter 5 on "Organizing the Business to Limit Liability" (a standard text for university undergraduate aviation law courses). As noted above by JeffDG (who I believe is an attorney), co-ownerships are generally considered to be "partnerships", and Mr. Hamilton notes in his book, "Sole proprietorships and partnerships are considered to be identical to their owners." As such, he strongly recommends some sort of corporate ownership such as an LLC to provide protection for each individual from the acts of the other owners. Therefore, I would question the advice of an attorney who tells me that there is no advantage as regards liability protection for the individual owners in creating an LLC for a co-owned aircraft as opposed to just checking the "co-ownership" box on the FAA form and leaving it at that (no matter how much insurance you can afford).

Ron, I'm not sure what JeffDG meant, but in my state (and others I am familiar with, which is fewer than all), simply co-owning an asset outside of a business context does not make the co-owners partners. There may be other factors (is the plane rented out, leased to a school, used for instruction) that suggest that a partnership exists and the plane is a partnership asset, but simply owning an asset together wouldn't do it IMO.

I note that Mr. Hamilton agrees with me on page 249 of his book: "ndividuals often chip in together to buy an aircraft to share. This is not a partnership . . . it is co-ownership. Such owners are not partners . . . ." Of course there's more to it, and this only answers the first of many questions. Nothing we say here will put an end to the discussion, nor should anyone assume that advice that applies to someone else's situation applies to his. One's personal situation may have a greater impact than his flying situation on the best ownership course to take.

 

[poadeleted20]

Ron, I'm not sure what JeffDG meant, but in my state (and others I am familiar with, which is fewer than all), simply co-owning an asset outside of a business context does not make the co-owners partners. There may be other factors (is the plane rented out, leased to a school, used for instruction) that suggest that a partnership exists and the plane is a partnership asset, but simply owning an asset together wouldn't do it IMO.

I note that Mr. Hamilton agrees with me on page 249 of his book: "ndividuals often chip in together to buy an aircraft to share. This is not a partnership . . . it is co-ownership. Such owners are not partners . . . ." Of course there's more to it, and this only answers the first of many questions. Nothing we say here will put an end to the discussion, nor should anyone assume that advice that applies to someone else's situation applies to his. One's personal situation may have a greater impact than his flying situation on the best ownership course to take.

Good points all, and clearly Mr. Hamilton has added some text in the 4th edition which is not in my 3rd edition.

However, I would still counsel caution in such deals. Even if there is no liability to the co-owner, there are quite a few reasons other than liability why having a plane with multiple owners in an LLC (or other corporate structure) rather than co-ownership makes a lot more sense, including debts, buy-outs or changes in members, deaths, divorces, taxation, etc. Liability issues alone should not be the deciding factor.