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Recovery Limited Partnership v. The Wrecked & Abandoned Vessell

United States District Court, E.D. Virginia, Norfolk Division

August 31, 2016



          Rebecca Beach Smith Chief Judge.

         This matter comes before the court on the Motion for Salvage Award ("Motion") and accompanying Memorandum in Support, filed by the Plaintiff, Recovery Limited Partnership (''RLP"), on January 29, 2016. ECF Nos. 206, 207.


         This in rem action, involving the wreck of the S.S. Central America ("Central America"), was commenced in 1987 by RLP's agent, Columbus-America Discovery Group, Inc. ("CADG"). The numerous prior opinions and orders in this case thoroughly review the relevant factual and procedural history, and that history will not be repeated in detail here.

         The Central America was traveling from Aspinwall, Colombia, to New York City, with a stop in Havana, Cuba, when it sank in 1857. It left Havana on September 8, 1857, carrying approximately 580 people and commercial gold worth over $1.2 million (1857 value), along with an unknown quantity of personal passenger gold. The vessel sank off the coast of South Carolina on September 12, 1857, taking with it approximately 425 people, the personal and commercial gold, and hundreds of bags of mail. Initial efforts to locate the shipwreck and salvage the gold were unsuccessful.

         CADG filed this action in 1987, after locating what it believed was the Central America. That wreck turned out to be the wrong ship, but two years later, CADG discovered the actual Central America, approximately 160 miles off the coast of Charleston, South Carolina. CADG was then awarded the status of first salvor, entitled to salvage the Central America without interference, by the court's Order of August 18, 1989.

         Several insurance companies filed claims to the recovered gold, alleging they had insured the commercial gold shipments and paid for the losses. On August 14, 1990, the court found that the insurance companies had abandoned any right or claim to the gold, and CADG was entitled to and vested with the sole ownership of the gold. Columbus-Am. Discovery Grp. v. Unidentified, Wrecked & Abandoned Sailing Vessel, 742 F.Supp. 1327, 1344-48 (E.D. Va. 1990) ("CADG I") . On appeal, the Court of Appeals for the Fourth Circuit held that the district court erred in applying the law of finds, rather than the law of salvage, to the gold recovered from the wreck. Columbus-Am. Discovery Grp. v. Atl. Mut. Ins. Co., 974 F.2d 450, 468 (4th Cir. 1992) ("CADG II").

         On remand, the court found that CADG was entitled to a salvage award of ninety percent (90%) of the recovered gold, and directed the parties to develop a marketing plan for the gold. Columbus-Am. Discovery Grp. v. Unidentified, Wrecked & Abandoned Sailing Vessel, No. 87-363-N, 1993 WL 580900, at *32-33 (E.D. Va. Nov. 18, 1993) ("CADG 111"). The Fourth Circuit affirmed this decision, but instructed the district court, on remand, to decide whether the insurance underwriters as a whole were entitled to the remaining ten percent (10%), and whether each insurance underwriter actually owned the gold it claimed. Columbus-Am. Discovery Grp. v. Atl. Mut. Ins. Co., 56 F.3d 556, 562, 576 (4th Cir. 1995) ("CADG IV") . CADG and the insurance underwriters eventually agreed to a settlement, which divided the gold in specie and dismissed all claims of the parties, including "the possibility of claims between the parties over future salvage." Columbus-Am. Discovery Grp. v. Atl. Mut, Ins. Co., 203 F.3d 291, 297, 300 (4th Cir. 2000) ("CADG V").

         There were then only infrequent filings in this case, until RLP moved to be substituted as the real-party-in-interest for CADG on January 3, 2014. ECF No. 1.[1]On April 17, 2014, RLP filed an In rem complaint against the Central America, which opened a new civil action, Case No. 2:14cvl60.[2] ECF No. 1 ("2014 Case") . The court ordered a warrant for the arrest of portions of and artifacts from the ship, and directed RLP to publish notice of the action and arrest of the Central America for four successive weeks. Order to Issue Warrant of Maritime Arrest at 1-2, ECF No. 4 (2014 Case). RLP complied with the court's Order, and four parties filed timely claims, asserting a right and interest in the Central America: (1) CADG, ECF No. 16 (2014 Case); (2) Richard T. Robol and the Robol Law Office ("Robol"), ECF No. 76 (2014 Case); (3) Collette Davidson ("Davidson"), ECF No. 8 4 (2014 Case); and (4) Milton T. Butterworth Jr. ("Butterworth"), ECF No. 85 (2014 Case).

         On July 9, 2014, the court granted RLP's Motion to Substitute Party, and named RLP as the salvor-in-possession of the Central America. Mem. Op. & Order at 26, ECF No. 92. Accordingly, the court denied CADG's claim to the Central America. Mem. Order at 7, ECF No. 94 (ECF No. 95 (2014 Case)) . The court also reopened Case No. 2:87cv3 63, and consolidated Case No. 2:14cvl60 with Case No. 2:87cv363. Mem. Order at 6, ECF No. 94 (ECF No. 95 (2014 Case)). Further, on August 8, 2014, the court dismissed, for failure to state a claim under salvage law, the claims of Robol, Davidson, and Butterworth. Mem. Order at 1-2, ECF No. 114. Robol, Davidson, and Butterworth each filed a notice of appeal, and the Fourth Circuit affirmed the district court's judgment on each claim. See ECF Nos. 173, 181, 187. Therefore, RLP was left as the only party asserting an interest in the Central America.

         On September 5, 2014, RLP filed a Motion for Award of Title. ECF No. 139. Robol, whose claim the court dismissed in the Memorandum Order of August 8, 2014, filed a Response, opposing RLP's motion because "it does not acknowledge [Robol's] right to a salvage award." Resp. at 1, ECF No. 143 .[3] RLP filed its Reply on September 15, 2014. ECF No. 156. The Motion for Award of Title became ripe on July 31, 2015, after the Fourth Circuit decided the appeals of this court's dismissal of the third-party claims brought by Robol, Davidson, and Butterworth. See ECF No, 191 (Fourth Circuit Mandate on last pending appeal). By Opinion of August 11, 2015, the court denied the Motion for Award of Title, finding that the admiralty law of salvage, not the common law of finds, applies to the Central America wreck. Op. at 17, ECF No. 192. The court advised RLP that it could move for a salvage award under maritime law, and detailed the factors to be considered for a salvage award. Id. at 16-17.

         On January 29, 2016, RLP filed the instant Motion and Memorandum in Support. RLP requests a salvage award of not less than one hundred percent (100%) of the value of the salvaged items recovered in 2014, to be made in specie by conveying title to the salvaged items, and prejudgment interest on RLP's expenses in planning and conducting the salvage. Mem. Supp. at 3-4. No responses to the Motion were filed.

         The court held a three-day evidentiary hearing on the Motion, and directed that RLP file any supplemental brief by July 25, 2016. RLP filed its Supplemental Memorandum in Support on July 25, 2016. ECF No. 228. It attached Proposed Findings of Fact and Conclusions of Law ("Proposed Findings"). ECF No. 228-1. This matter is ripe for decision.


         A. Determination of Salvage Award

         A salvage award is "a reward given for perilous services, voluntarily rendered, and as an inducement to seamen and others to embark in such undertakings to save life and property." The Blackwall, 77 U.S. (10 Wall) 1, 14 (1859). To encourage salvage operations, a salvor is entitled to "liberal compensation." Id. Rather than obtaining title to the salvaged property, a salvor acts on behalf of the property's owner, thereby obtaining a lien against Che property saved. The "Sabine", 101 U.S. 384, 386 (1879). The salvor's lien is exclusive and prior to all others, and grants the salvor a possessory interest in the res, pending satisfaction of the lien. R.M.S. Titanic, Inc. v. Haver, 171 F.3d 943, 963 (4th Cir. 1999}. A salvor may enforce its lien on the salved property by pursuing an In rem action. Id.

         The salvor must establish three elements to prove entitlement to a salvage award: (1) that the salved property faced a marine peril; (2) that the salvor's services were voluntarily rendered without an existing contractual duty; and (3) that the salvage efforts were successful, in whole or in part. The "Sabine", 101 U.S. at 384.

         Once the court has determined that a salvor is entitled to a salvage award, there are seven factors to consider in determining the amount of the award. The first six factors have been described by the Supreme Court as the "main ingredients" in determining the amount of an award for salvage. The Blackwall, 77 U.S. (10 Wall) at 13-14. These six factors are; (1) the labor expended by the salvors in rendering the salvage service; (2) the promptitude, skill, and energy displayed in rendering the service and saving the property; (3) the value of the property employed by the salvors in rendering the service, and the danger to which such property was exposed; (4} the risk incurred by the salvors in securing the property from the impending peril; (5) the value of the property saved; and (6) the degree of danger from which the property was rescued. Id. at 14. In this case, the Fourth Circuit added a seventh factor: the degree to which the salvors have worked to protect the historical and archaeological value of the wreck and the items salved. CADG II, 974 F.2d at 468.

         When calculating a salvage award, the court of admiralty becomes a court of equity, and the award may ''be increased, diminished, or wholly forfeited, according to the merit or demerit of the salvor." Id. (quoting W. Marvin, A Treatise on the Law of Wreck and Salvage § 218, at 226 (1858)). The amount of the award is "primarily a matter of judgment to be exercised" by the court. CADG IV, 56 F.3d at 569 (quoting Waterman S.S. Corp. v. Dean, 171 F.2d 408, 411 (4th Cir. 1948)). However, an award typically cannot exceed the market value of the property; even if it does, the judgment is limited to the value of the property because the action is against the property itself. R.H.S. Titanic, Inc. v. Wrecked & Abandoned Vessel, 286 F.3d 194, 204 (4 th Cir. 2002); All seas Maritime, S .A. v. M/V Mimosa, 812 F.2d 243, 246 (5th Cir. 1987).

         B. Grant of Award In Specie

         If no owner comes forward to claim the recovered property, "the salvor is normally awarded its total value." CADG II, 974 F.2d at 459. In such a case, after determining the salvage award, the court may sell the property and pay the salvor from the proceeds. R.M.S. Titanic, Inc., 286 F.3d at 203-04. If the sale yields too little to satisfy the salvor's lien, the judgment is limited to the value of the property. Id. at 204. However, if the court determines that "the proceeds of any sale would clearly be inadequate to pay the salvor its full reward, " the court may, as a matter of discretion, award title to the property instead. Id.; see also Cobb Coin Co. v. Unidentified, Wrecked & Abandoned Sailing Vessel, 52 5 F.Supp. 186, 198 (S.D. Fla. 1981) (stating that the salvaged items are normally sold to satisfy the judgment, but if the "'proceeds' of the salvor's find are items uniquely and intrinsically valuable beyond their monetary worth, an award in specie is more appropriate"). An award of title should be granted, only if the sale of the property would prove insufficient to fairly compensate the salvor. Haver, 171 F.3d at 966. In sum, the court must first determine the amount of any salvage award, and then determine how it should be paid. See R.M.S. Titanic, Inc. v. Wrecked & Abandoned Vessel, 742 F.Supp.2d 784, 795 (E.D. Va. 2010).

         C. Prejudgment Interest

         The awarding of prejudgment interest in maritime law "is the rule rather than the exception." U.S. Fire Ins. Co. v. Allied Towing Corp., 966 F.2d 820, 828 (4th Cir. 1992). Typically, prejudgment interest serves "as compensation for the use of funds to which the claimant was rightfully entitled." Noritake Co., Inc, v. M/V Hellenic Champion, 627 F.2d 724, 728 (5th Cir. Unit A 1980). The prejudgment interest generally accrues from the date of the loss, or the time at which the salvor became entitled to a salvage award. Platoro Ltd., Inc. v. Unidentified Remains of a Vessel, Her Cargo, Apparel, Tackle, & Furniture, in a Cause of Salvage, Civil & Mar., 695 F.2d 893, 906-07 (5th Cir. 1983). However, a district court may decline to award prejudgment interest, when "peculiar circumstances" would render such an award inequitable. Orduna S.A. v. Zen-Noh Grain Corp., 913 F.2d 1149, 1157 (5th Cir. 1990).

         III. ANALYSIS

         A. Factors in Salvage Award Calculation

         There is no doubt that RLP has established the three threshold requirements for a salvage award: a marine peril, voluntary rendering of the salvor's services, and success of the salvage efforts. The Central America lies 7, 200 feet below the surface, placing it and its cargo in maritime peril. See CADG IV, 56 F.3d at 572-73. RLP's salvage efforts were voluntary, in that it owed no contractual duty to perform the salvage. Lastly, RLP's efforts have been successful in recovering approximately 16, 000 artifacts from the wreck site in an archaeologically sensitive manner.[4] Thus, having determined that a salvage award is appropriate, the court must now determine the amount of that award. The seven Blackwall/Columbus-America factors are discussed in turn.

         1. Labor Expended by the Salvors

         RLP contracted with Odyssey Marine Exploration ("Odyssey") to perform the at-sea recovery operations, using Odyssey's research vessel, the Odyssey Explorer, and its remotely operated vehicle ("ROV"), Zeus. Together, the professionals at RLP and Odyssey spent an impressive amount of time, money, and energy in the 2014 salvage efforts, as detailed below. The labor expended has been thorough and commendable at every stage, from the initial planning of the operations through post-salvage storage and conservation.

         During recovery operations, the Odyssey Explorer carried seventeen ship crew members, and a technical crew of up to eighteen individuals. RLP Evid. Hr'g Ex. 1A (Deposition of Andrew Craig}.[5] The crew worked two, twelve-hour shifts to maintain twenty-four-hour ship operations. Id.; RLP Evid. Hr'g Ex. 47 at 7. The shifts often lasted longer; for example, crew members worked extra hours as needed to finish processing artifacts and complete daily reporting. RLP Evid. Hr' g Ex. 47 at 7 .

         Before starting any recovery work, the team created a photomosaic of the entire wreck site, composed of approximately 12, 500 individual high-resolution images spliced together to create one detailed image. Second Report on Activities at S. S, Central America Shipwreck Site at 1, ECF No. 90 (2014 Case) (RLP Evid. Hr'g Ex. 7). Pre-disturbance work also included a multi beam sonar survey of the site, producing images of the topography of the wreck site and surrounding seafloor. Id. After the site surveys, the crew commenced the exacting work of clearing sediment and coal from the ship's keel and collecting artifacts, coins, and ingots, one-by-one. Over the course of 129 days at the wreck site, the crew performed eighty-three dives, for a total of 2, 093 hours of dive time. RLP Evid. Hr' g Ex. 4 7 at 36. The longest dive lasted over 129 hours. Fifth Report on Activities at S. S. Central America Shipwreck Site at 1, ECF No. 163-1 (RLP Evid. Hr'g Ex. 10). During these dives, the crew excavated 2, 614 square meters of the wreck site, moving 1, 307 cubic meters of sediment to reach additional items of treasure. RLP Evid. Hr'g Ex. 47 at 36.

         RLP spent approximately $7.6 million in direct expenses on the 2014 at-sea recovery operations and post-recovery storage and conservation of the salvaged items. RLP Evid. Hr'g Exs. 24-33.[6] The court recognizes the magnitude of resources and manpower devoted to the salvage of the Central America since 2014. In determining the amount of an appropriate salvage award, the labor expended by RLP weighs greatly in its favor.

         2. The Promptitude, Skill, and Energy Displayed in Rendering the Service and Saving the Property

         Recovering treasure located over a mile below the surface of the Atlantic Ocean, and covered with 150 years of accumulated sediment, unquestionably requires great skill. As with its initial recovery operations beginning in the late 1980s, RLP has again assembled a highly experienced team to perform the 2014 recovery operations. It gathered experts in marine archeology, marine salvage, geology, engineering, conservation, and numismatics, among other disciplines. A key step in assembling these professionals was RLP's thorough selection process to find a partner to perform the at-sea operations. See RLP Evid. Hr'g Ex. 47 at 2-4. It ultimately selected Odyssey as the company best able to perform the required work, given Odyssey's deep-sea archeology experience and technological capabilities.[7]

         Odyssey brought experienced personnel and sophisticated equipment to the salvage efforts. The Zeus ROV is specially designed for deep-sea archaeological survey and recovery operations, with advanced positioning technology, photographic and video equipment, and deep-sea excavation and artifact recovery tools. First Report on Activities at S.S. Central America Shipwreck Site at 1, ECF No. 21-1 (2014 Case) (RLP Evid. Hr'g Ex. 6). These recovery tools include two manipulator arms, a limpet suction device that attaches to a manipulator arm, and the proprietary Sediment Removal and Filtration System. See Id. at 1-2; RLP Evid. Hr' g Ex. 3. Operating the ROV to excavate portions of the wreck site and collect gold and cultural heritage items in an archaeologically-sensitive manner required great skill and dedication by the crew.

         When these existing tools were not sufficient to collect specific items or remove obstacles, the crew designed and constructed new tools, using the onboard mechanical/welding shop. See Third Report on Activities at S.S. Central America Shipwreck Site at 1-3, ECF No. 110-1 (RLP Evid. Hr'g Ex. 8); RLP Evid. Hr' g Ex. 4 at 9. For example, the crew fabricated a spatula-type tool to collect a sextant without damaging it, and experimented with various tools, constructed while at ...

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