After a 19-year battle involving airplane technology, Colombian drug cartels and federal forfeiture laws, an aviation company won a $16 million final judgment this week in a takings case against the U.S. government.
The plaintiff, Hong Kong-based Innovair Aviation, alleged that the government had not paid just compensation when it seized a licensing agreement, violating the takings clause of the Fifth Amendment. The company was represented by Hogan & Hartson partners Ty Cobb and H. Christopher Bartolomucci and counsel Audrey Moog in the U.S. Court of Federal Claims case. The government was represented by Justice Department lawyer Sheryl Ford.
"It was a great moment for us, when we got the judgment for them," said Moog. "Anyone who wants to bring a monetary claim against the U.S. government faces a battle requiring tireless persistence to make it to the day when you get a judgment."
According to court papers, the dispute began in the 1980s, when two businessmen got an idea to refurbish old DC-3 airplanes. The planes (known colloquially as "Gooney Birds") were built in the 1930s and 1940s, but have such strong airframes that the Federal Aviation Administration gives them an unlimited life span. They're still popular because they can operate in rough terrain with short runways.
But their piston engines require costly and frequent overhauls. The businessmen, Brian Carmichael and Barry Wilson, came up with the idea of replacing the old engines with turboprop engines and joined forces with a family-owned company, Basler Group, to develop the conversion.
They formed two corporations, Innovair and Basler Turbo Conversions, and secured an all-important certificate from the FAA stating the design was safe. Basler owned the FAA certificate, but made an exclusive technology licensing agreement with Innovair to use the design.
In 1988, the company agreed to sell four planes to Air Colombia. But soon after, the U.S. government seized the planes, charging that Air Colombia was a front for a drug cartel and that the planes were purchased with drug money.
After the government seized the planes, it went on to seize the licensing agreement. The idea to do so, according to the court opinion granting Innovair summary judgment, came from Basler, which had a falling out with Innovair. Basler told the government that Innovair used drug money to pay them for the licensing agreement. The government, however, never alleged Innovair knew or should have known where the Colombian money came from.
The government turned over the licensing agreement to Basler in return for a bond of $1,375,000.
Lawsuits followed between Basler and Innovair in Wisconsin (the case settled) and between Innovair and the government in federal court in Arizona. On appeal, the U.S. Court of Appeals for the 9th Circuit ultimately held that Innovair was an innocent owner and the licensing agreement should not have been forfeited under the Controlled Substances Act. It also held that the district court only had jurisdiction up to the amount of the bond—$1,375,000.
But Innovair countered that the licensing agreement was worth more than that and filed suit in 1996 in the U.S. Court of Federal Claims, alleging the government had not paid just compensation for the agreement.
The court in 2006 granted Innovair summary judgment as to liability. “The forfeiture of the [licensing agreement] resulted in a compensable taking for which Innovair is due just compensation,” wrote Senior Judge Loren Smith.
After a two-week trial for damages in 2007, Innovair on Wednesday obtained a final judgment of $16,100,741 from the government. A Justice Department spokesperson said the government is reviewing the court's decision and has made no decision whether to appeal the case.