Spain Nets $1 Million in Fees in Sunken Treasure Case


     (CN) - A marine explorer who improperly claimed a $600-million treasure from a sunken Spanish warship must pay $1 million in fees and costs to Spain, a federal judge ruled.
     U.S. District Judge Steven Merryday in Tampa, Fla. entered the judgment in the 6-year long litigation Wednesday, finding that the company had acted in bad faith and had prolonged the dispute unnecessarily.
     In 2007, Florida-based Odyssey Marine Exploration, a world leader in deep ocean exploration and recovery, discovered 595,000 coins, 17 cannons and a number of other small artifacts on the seabed about 100 miles west of the Straights of Gibraltar.
     Odyssey claimed that the 17-ton treasure, estimated at $600 million, could not be traced back to any particular ship, despite knowing that it was most likely exploring the shipwreck site of a Spanish Royal Navy frigate, according to court filings.
     Nuestra Senora de las Mercedes sank in 1804 en route from Peru to Cadiz, Spain after being attacked by the British Royal Navy in what was later called the Battle of Cape Saint Mary.
     Odyssey dubbed its 2007 discovery the Black Swan, and asked the federal court in Tampa, Fla., for custody of the recovered artifacts.
     But Spain claimed the treasure Odyssey found was from the Spanish warship Mercedes, and asked the court to dismiss Odyssey's action and order it to return the salvaged cargo.
     It argued Odyssey's claim was barred under the Foreign Sovereign Immunities Act (FSIA), which provides that Spain's property is subject to sovereign immunity from all claims or arrest in the United States.
     The federal court in December 2009 ordered Odyssey to return the treasure to Spain under the United States' 1902 Treaty of Friendship with the nation.
     The 11th Circuit affirmed in 2011, agreeing that Odyssey had improperly seized the treasure from the Mercedes.
     After successfully contesting Odyssey's claim, Spain asked for reimbursement of attorney's fees and costs. It claimed that Odyssey had known from the beginning that the wrecked vessel was Mercedes, but it nevertheless denied the existence and the identity of the ship and withheld evidence that could have established its identity.
     Odyssey continued to resist federal and magistrate judges' orders even after it lost its bid to the treasure, Spain claimed in its motion.
     A magistrate judge had awarded Spain $158,102 in legal fees, but had denied its request for costs, finding that it lacked precision.
     But Merryday disagreed with part of the decision, and upped the award to $1,072,979.
     "This action presented from the outset not merely the dicey prospects of a damages action; this action presented a claim to ownership by a party holding-in-hand an enormous, historic trove of treasure, holding-in-hand riches 'beyond the dreams of avarice,'" Merryday wrote in the Sept. 25 order. "A contest for $600 million - winner take all - is plenty sufficient to endanger any boundary, to awaken any frailty, and to excite any temptation."
     The judge noted that Odyssey's conduct from the outset warranted sanctions, because the company had recovered the treasure and removed it to central Florida without authorization.
     Odyssey had asked Spain for permission to explore the sector of the ocean where the treasure was found, and went ahead even after Spain declined to participate or authorize exploration, according to the order.
     Merryday disagreed with the magistrate judge's decision to limit sanctions to Odyssey's refusal to comply with court orders after Spain succeeded on its claim.
     "In litigation, neither the meritless, nor the false, nor the frivolous, nor the vexatious should progress in safety and for free," Merryday wrote.
     Despite its knowledge, expertise and resources, Odyssey denied possessing evidence that would have confirmed the existence of a ship at the site, or its identity, and refused to comply with disclosure orders, according to the ruling.
     Odyssey knew that Mercedes was a Spanish warship that carried a huge cargo of silver specie from Peru to Spain to assist Spain's war effort. Nevertheless, the company characterized Mercedes as a ship that primarily transported mail, private passengers and merchant goods, according to the order.
     While Mercedes did carry some mail, the civilian family of a Spanish officer and their belongings, it was, as Odyssey knew, a military ship with a naval crew and an enormous cargo of silver on board. Odyssey's attempt to stretch the truth was bad faith conduct that cannot escape sanctions, Merryday concluded.
     "Odyssey went where it went because it knew full well where to go," Merryday wrote. "Odyssey found what it found because it knew full well what it was looking for; Odyssey withheld and deceived and deflected with respect to what it found because Odyssey knew full well why Spain was asking and knew full well the adverse consequence to Odyssey's financial aspirations if Spain discovered the answer. To come to court and deny the truth of these facts is, as stated earlier, an unacceptable enormity propounded and maintained in bad faith and for an improper purpose."
     The sanctions should be based on Odyssey's "campaign of obstruction and feigned ignorance and doubt" throughout the litigation, the order states.
     Had Odyssey admitted and announced the identity of the wrecked ship from the beginning, most of the litigation could have been avoided, according to the ruling.
     Merryday said it was impossible to determine what part of the action would have been avoided, but concluded that two-thirds of it arose from Odyssey's bad faith.
     The judge declined to sanction Melinda MacConnel, Odyssey's executive vice president and general counsel, personally, finding that the award against Odyssey was large enough to address her misconduct.
     MacConnel previously apologized for telling the media that "clearly, the political influences in this case overshadowed the law," according to a footnote in the order.
     Odyssey, which features a market capitalization around $240 million, and $10.1 million in cash as of March 2013, should be able to pay the award, the ruling states.
     And although Spain's expenditures might have warranted it, a larger award would have been unreasonable, Merryday concluded.
     Odyssey said it was considering an appeal.
     "Although the award is only one-third of the amount requested by Spain, it's disappointing that the court was apparently swayed by statements presented by Spain's witnesses during the merits portion of the case that we believe could have been proven false during cross examination of those witnesses in a trial," Odyssey CEO Greg Stemm said in a press release.
     "The court's findings do provide guidance in establishing considerations for dealing with shipwrecks in international waters in the future," Stemm added. "Odyssey's business requires us to work in geographical and legal areas without clear legal precedents and there were bound to be circumstances where lack of precedent could lead to adverse rulings. What is important is that we incorporate those lessons into future projects, which is what we have done. We are working cooperatively with other governments around the world and our recent successes have shown that this case was an aberration that will not have an adverse effect on the company's strategic plan going forward."
     In a separate ruling Thursday, U.S. District Judge Kenneth Marra of the Southern District of Florida vacated a default judgment giving another salvage company title to a sunken Spanish military frigate.
     St. Michael Publishing Co. had found an unidentified shipwreck off the coast of Palm Beach County in U.S. territorial waters and had recovered at least one artifact, according to the Sept. 26 order. The company asked for exclusive title to the shipwreck, which it assumed to be a Spanish military frigate wrecked more than 200 years ago.
     After the court appointed it as substitute custodian, St. Michael asked for, and obtained, a default judgment against Florida.
     The state contested the default in May, arguing that only Spain or Florida could be the owners of the ship. It claimed that it had not been properly served, and moved to dismiss St. Michael's action. Marra agreed that St. Michael had failed to comply with rules of service, and found that Florida's claims may have merit.