Month: August 2018

In the age of internet banking, hackers accessing online banking accounts is a widespread problem.  One common fraud scheme involves obtaining a business’s bank account login information and then replacing intended beneficiary account numbers with account numbers belonging to the hacker or his or her accomplice.  The account numbers could be swapped on scheduled outgoing payments or templates for frequently paid vendors.  Whether the login information is obtained through a “phishing” attack or malware, unauthorized bank account access can cause the loss of hundreds of thousands or even millions of dollars for which banks often disclaim responsibility.

In the past, parties perpetrating banking fraud often needed to forge payment instructions and/or trick bank employees by phone or in-person.  Today, any scammer with unauthorized access to an online bank account can steal funds without needing to forge documents and without even needing to speak to anyone.  The fact that a bank offers internet account access for convenience does not allow it to ignore online security risks for its customers.  Banks confirm a customer’s identity by photographic ID when he or she visits a branch to access an account, and for the same reason, banks need security procedures in place to ensure authorized persons are requesting access to online accounts.

Widespread fraud schemes are one of the primary reasons that commercially reasonable standards in the banking industry require banks to use multi-factor authentication, i.e., to ensure that a single set of user logins cannot enable fraudulent activity.  It is also why banks use monitoring and reporting software to detect suspicious and unauthorized activity or compromised user passwords.  Banks sometimes fail to utilize such procedures but nonetheless deny responsibility for a customer’s resulting losses, relying upon disclaimers contained in the bank’s boilerplate contracts.   

Such contractual defenses may be overcome by relying upon Federal Financial Institutions Examination Council (“FFIEC”) Guidance which spell out minimum elements that should be part of a financial institutions security procedures.  Courts frequently hold that failure to comply with FFIEC Guidelines reflects that the banking institution has not complied with commercially reasonable banking standards.  

GKG Law would be happy to consult with victims of such banking frauds in order to address whether they have rights arising therefrom.  Please contact Brendan Collins or Oliver Krischik, attorneys in the firm's Litigation Practice, if you would like to discuss any issues in this regard.  Brendan may be reached by telephone at (202) 342-6793 or by email at bcollins@gkglaw.com.  Oliver may be reached by telephone at (202) 342-5266 or by email at okrischik@gkglaw.com.

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GKG Law frequently represents aircraft owners in contesting the validity of notices of liens filed with the FAA relating to their aircraft.  Many aircraft owners face issues relating to FAA lien filings that create a “cloud” on the title to their aircraft.  Often, such a cloud arises when vendors that have provided services relating to the aircraft file a notice of lien with the FAA due to alleged unpaid sums that the vendor is owed.  These clouds are often discovered by aircraft owners when a title search is performed in connection with the sale of their aircraft, by a commercial lessor of the aircraft, or by a lender seeking to perfect its lien on the aircraft in connection with making a loan to the owner.

Many states have statutes permitting persons who provide storage, repairs, maintenance or other services relating to an aircraft the ability to create a lien on the aircraft for amounts owed, provided that they have met the requirements of the statute permitting the lien.  Federal law permits those persons to file notices of the existence of such liens with the FAA aircraft registry.  Although, under appropriate circumstances, such liens serve a valid purpose such as ensuring that mechanics and other aircraft service providers are compensated for services they performed at the request of an aircraft owner or operator, the ability to file such liens can pose a threat to aircraft owners and lessees.

In filing a mechanics’ lien on an aircraft, a mechanic or other service provider creates a cloud on the aircraft’s title, thereby impeding the aircraft owners’ ability to sell (or in some cases refinance) the aircraft until the lien has been released.  Such liens also may cause an aircraft lessee to be in default under its lease of the aircraft.  Recognizing the tremendous leverage that such liens afford them, some service providers file liens in excess of the amount validly owed, or file liens that do not comply with the requirements of state lien laws, knowing that an aircraft owner may feel compelled to pay to release the lien in order to permit an aircraft sale or loan to move forward, even though the lien is invalid. 

An aircraft owner or lessee has several defenses that it may assert against such liens.  Among the possible defenses that may be asserted by an aircraft owner or lessee are the fact that: 1) the vendor did not provide services that fall within the scope of the state lien statute under which the vendor asserts the existence of the lien; 2) the vendor did not provide the aircraft related services in the state where the liens are being asserted; 3) the lienholder has not complied with the state’s possessory lien requirements; and/or 4) the services were not provided with the aircraft owner’s consent.

In addition, an aircraft owner or operator can take certain precautionary measures to minimize the risk posed by such liens.  These include ensuring that there is a written agreement with the service provider specifying the exact nature and costs of the services to be provided.  Such written communications should preclude the service provider from later submitting an invoice, and asserting a lien, for an amount in excess of the amount that the aircraft owner or operator agreed in writing to pay to the vendor.  

Private aircraft ownership and operations periodically result in commercial disputes.  These disputes may arise in connection with the purchase or sale of an aircraft, the lease of the aircraft, the adequacy of repairs performed on the aircraft, and/or disputes regarding who has assumed responsibility for such maintenance and repairs.  GKG Law’s extensive experience in all aspects of the business aviation marketplace makes it particularly suited to authoritatively protect your rights in such commercial disputes.  Please contact Brendan Collins at GKG Law if you would like to discuss any potential aircraft related disputes.  Brendan may be reached by telephone at (202) 342-6793 or by email at bcollins@gkglaw.com.  

Risks to Private Aircraft Owners Posed by Service Providers