Argued: June 14, 2013
Appeal from the United States District Court for the Southern District of Ohio at Columbus. No. 2:06-cv-00292—Edmund A. Sargus, Jr., District Judge.
Christopher L. Trolinger, FARLOW & ASSOCIATES LLC, Dublin, Ohio, for Appellants.
Michael J. Frevola, HOLLAND & KNIGHT, LLP, New York, New York, for Appellees.
Christopher L. Trolinger, FARLOW & ASSOCIATES LLC, Dublin, Ohio, for Appellants.
Michael J. Frevola, HOLLAND & KNIGHT, LLP, New York, New York, Michael R. Szolosi, Sr., MCNAMARA AND MCNAMARA, L.L.P., Columbus, Ohio, for Appellees.
Before: BOGGS and SUHRHEINRICH, Circuit Judges; and MURPHY, District Judge. [*]
BOGGS, Circuit Judge.
This appeal is the latest skirmish in the legal battle over the treasures recovered from the of the 19th-century steamship S.S. Central America, a battle that has spanned three decades and numerous courts. Dubbed the "Ship of Gold, " the Central America sank in the Atlantic Ocean in September 1857, taking over 400 passengers and many tons of gold with her. Her wreckage was discovered over 130 years later by a group of explorers led by Thomas Thompson, in what remains one of the most significant finds in maritime history. One jurist described the feat as "a paradigm of American initiative, ingenuity, and determination."
Ominously, the same jurist opened his opinion with words that are equally fitting: "Quid non mortalia pectora cogis, Auri sacra fames!" The individuals who dedicated their time and talent to the recovery of the Central America have not seen a dime of their promised share of the spoils; Thompson is a fugitive from the law, actively pursued by United States Marshals; and the vast wealth representing the ship's golden cargo is as lost today as it was before September 1988.
The instant consolidated appeal concerns a suit brought by a group of plaintiffs who assisted Thompson in locating the wreckage of the Central America. All signed non-disclosure agreements with Thompson, through his business entities, promising to hold his projects and ideas in confidence in exchange for a percentage of the net recovery of the Central America. All claim to have upheld their respective ends of the bargain, yet none have received payment. The business entities respond by asserting a two-year statute of limitations for actions in salvage and three counterclaims. The district court rejected the business entities' time-bar argument and granted summary judgment against all of their counterclaims. The defendants took an interlocutory appeal of that decision. During the pendency of that appeal, the district court granted a motion for prejudgment attachment and an injunction against one of the business entities and Thompson, forbidding them from divesting certain assets. The two defendants took an interlocutory appeal of that order as well. We consolidated the two appeals.
This appeal requires us to resolve several complex questions of federal jurisdiction and admiralty law. We must first decide which issues we have jurisdiction to hear. In response to the parties' jurisdictional motions in the two appeals, we will assert jurisdiction over the time-bar issue, all of the entity defendants' counterclaims, and the injunction defendants' appeal of the attachment and injunction order insofar as the district court issued a preliminary injunction. As to other issues, we refuse to entertain the appeal for want of jurisdiction.
We must then turn to the substantive issues over which we have jurisdiction. We must first determine whether or not the plaintiffs' action is time barred. We hold that the time bar does not apply. Next, we must address the district court's grant of summary judgment against the entity defendants' counterclaims. As the entity defendants have failed to raise an issue of fact material to the disposition of the case, we affirm the district court's order. Finally, we must assess whether or not the district court abused its discretion in granting a preliminary injunction against Thompson and one of the business entities. We hold that it did not. For the reasons discussed in detail below, we affirm the district court in full as to all issues over which we have jurisdiction.
The tale of the last days of the S.S. Central America has been retold many times by many courts throughout the many years of litigation in this case. None, however, match the excellence of the narrative given by the late Judge Donald Russell of the Fourth Circuit:
The year 1857 is justly famous in American history for its many notable events. Among these was the beginning of a fairly serious financial decline, the aptly named Panic of 1857. Associated with the Panic, and another reason why the year is so famous, is one of the worst disasters in American maritime history, the sinking of the S.S. CENTRAL AMERICA.
The CENTRAL AMERICA was a black-hulled, coal-fired, three-decked, three-masted sidewheeler with a cruising speed of eleven knots. Built in 1852, and launched the following year, she carried passengers, mail, and cargo between Aspinwall, Colombia (on the Caribbean side of the isthmus of Panama), and New York City, with a stopover in Havana. Most, if not all, of her passengers were headed to or from California, the route being one leg of the then quickest way between the west coast and the eastern seaboard-from California to the Pacific side of the isthmus of Panama aboard a steamship, across the isthmus on the Panama Railroad, and then from Aspinwall to New York aboard another steamship. Owned by the U.S. Mail and Steamship Company and originally named the S.S. GEORGE LAW (until June 1857), the CENTRAL AMERICA completed forty-three voyages between Panama and New York in her four years of operation. During this period, the California gold rush was in full swing, and it has been said that the ship carried one-third of all gold shipped at that time from California to New York.
In August of 1857, over four hundred passengers and approximately $1, 600, 000 (1857 value) in gold (exclusive of passenger gold) left San Francisco for Panama aboard the S.S. SONORA. Many of the passengers were prospectors who had become rich and were returning home, either for good or to visit. Also on board were California Judge Alonzo Castle Monson, who resigned from the bench after losing his house and all his money in a famous poker game, and Mrs. Virginia Birch, a.k.a. "the notorious Jenny French, " a former dance hall girl well known in San Francisco. As for the gold, it was being shipped by California merchants, bankers, and express companies, including Levi Straus and Wells Fargo, to New York banks, the banks wanting specie to stave off the effects of the financial downturn.
The travellers and the cargo reached Panama without incident, and they crossed the isthmus by rail. On September 3, over six hundred people came aboard the CENTRAL AMERICA, as well as $1, 219, 189 of the gold shipped on the SONORA, the remainder being shipped to England aboard a different vessel. The CENTRAL AMERICA first headed for Havana, which was reached on September 7. There, the ship lay over for a night, and some of the passengers debarked to catch another vessel for New Orleans. On September 8, under clear skies, the CENTRAL AMERICA left Havana for New York, carrying approximately 580 persons and her golden treasure.
On the second day out of Havana, the weather changed and a mighty storm came up. What the passengers and crew could not know was that they were headed directly into the teeth of a ferocious hurricane. As the storm worsened around the CENTRAL AMERICA, a leak developed and soon water was rushing into the boat. The water extinguished the fires in the ship's boilers, and this in turn caused the ship's pumping system to fail. All able male passengers began a systematic bailing of water out of the ship, but it was to no avail; after thirty frantic hours, the boiler fires would still not light and the water level continued to rise.
Knowing the situation was hopeless, Captain William Lewis Herndon managed to hail a passing ship, the brig MARINE, and one hundred persons, including all but one of the women and children aboard, were safely transferred to the other ship. Time and conditions would not allow for any more transfers, however, and shortly after 8 p.m. on September 12, the CENTRAL AMERICA began making its quick descent to the bottom of the ocean.
After being flung into the sea, many of the men managed to come to the top and float there, desperately holding onto any buoyant material available. Six to nine hours after the sinking, fifty of these men were rescued by the Norwegian bark ELLEN. Earlier, a small bird had thrice circled the ELLEN and flown directly into the face of the ship's captain. Taking this as a sign, the captain changed his course to follow from whence the bird had come, and in so doing discovered the fifty floating survivors. Three other men were also rescued when, nine days later and 450 miles away, a ship spotted their lifeboat, which had been riding the Gulf Stream.
In all, 153 persons were rescued, while approximately 425 lost their lives. Also lost were hundreds of bags of mail and the $1, 219, 189 in gold. At the time, there were rumors that other commercial shipments of gold were aboard, but these were quickly discounted. It is true, though, that a significant amount, probably several hundred thousand dollars worth (1857 valuation), of passenger gold was lost. Many passengers had with them their earnings from several years' labor in the California gold fields. Some kept this gold on their person, while others carried it in carpetbags or trunks. Also, passenger gold could have been checked with the ship's purser, although these records were lost with the ship. Captain Thomas W. Badger is one example of a passenger carrying gold, he having lost $17, 500 of it stored in a carpetbag. Also, the newspapers reporting the disaster contained vivid accounts of men flinging down their hard earned treasure in disgust upon realizing their impending doom.
Needless to say, for the next several weeks newspapers around the country devoted much space to the disaster which befell the CENTRAL AMERICA. While people mourned the over four hundred persons who had valiantly lost their lives, they also feared that the loss of such a large amount of specie would exacerbate the country's already serious financial situation. The commercial shipments of gold had been insured, though, and the insurance underwriters began advertising in the newspapers that they would pay off their commitments upon the proper proofs being presented. Approximately one-third of the treasure had been underwritten by New York insurers while the rest was underwritten in London. Without doubt, most, if not all, of the claims were promptly paid off by the underwriters.
Under applicable law, then and now, once the underwriters paid the claims made upon them by the owners of the gold, the treasure became theirs. Thus, less than two weeks after the disaster, the underwriters began negotiating with the Boston Submarine Armor Company about possibly raising the ship and her cargo. Also, on June 28, 1858, two of the underwriters (Atlantic Mutual Insurance Company and Sun Mutual Insurance Company) contracted with Brutus de Villeroi, a Frenchman then living in Pennsylvania, to salvage the gold. The contract states that de Villeroi, "by means of his Invention of a Submarine boat" and at his own expense, would raise the treasure and receive a salvage award of seventy-five percent. At this time, though, no one was quite sure where the boat had gone down, or in how deep of water. At first, some estimated the ship was in only twenty-eight fathoms of water (168 feet), when in fact it was over 8, 000 feet below the surface. As would be expected, nothing came of the salvage attempts in the late 1850s, and the issue, and the gold, would lie dormant for over a hundred and twenty years.
Columbus–Am. Discovery Grp. v. Atl. Mutual Ins. Co. [CADG I], 974 F.2d 450, 455–57 (4th Cir. 1992).
Advances in sonar-search and deep-sea-recovery technology brought renewed interest in locating the Central America in the late 1970s and 1980s. Thomas Thompson incorporated the Columbus–America Discovery Group in order to lead the efforts to recover the ship and her golden payload. Through a related business entity, Recovery Limited Partnership, Thompson began soliciting investors to back his venture and assembling a crew to help him locate the Central America. Relevant to this matter, Thompson executed two documents with each employee—an employment contract and a non-disclosure agreement. The employment contracts were fairly standard, promising a modest daily wage in exchange for services rendered. The non-disclosure agreements, on the other hand, were far more valuable. In exchange for maintaining the secrecy of Thompson's operations, theories, work product, and the like, each employee was to receive a share of the "net recovery" of the venture. In addition to employing the crew, Recovery Limited rented a side-scan sonar from plaintiff International Deep Sea Survey, Inc. Again, the parties executed a lease agreement and a separate non-disclosure agreement.
Thompson and his colleagues located the Central America in September 1988 off the coast of South Carolina. Using a submersible robot invented by Columbus–America, they began removing millions of dollars in gold coins, ingots, and bars from the wreckage. As one might expect, however, the discovery of such a vast sum of wealth inevitably attracted unwanted attention: dozens of attorneys descended upon Columbus–America, hoping to secure a piece of the golden booty for the numerous insurance companies, underwriters, and banks that claimed title to the ship and her payload. Thus began the first round of litigation over the treasures of the S.S. Central America.
The insurance companies initially succeeded in establishing ownership over the gold in the face of Columbus–America's claim under the law of finds. CADG I, 974 F.2d at 468. The case was remanded back to district court to determine a proper award for Thompson and his colleagues under the law of salvage. Ibid. The court indicated in no uncertain terms that Columbus–America should receive "by far the largest share of the treasure" as just compensation for their efforts. Id. at 468–69. Indeed, the group did receive the largest share—90% of a golden haul that remains today one of the largest treasure finds in history. CADG II, 56 F.3d at 562. As a salvor, Columbus–America never took title to the gold, but it remained in possession of the entire haul as the central marketing authority responsible for liquidating the treasure. Id. at 574–75. The Fourth Circuit closed this chapter of the litigation by applauding Thompson's efforts: "What Thompson and Columbus–America have accomplished is, by any measure, extraordinary. We can say without hesitation that their story is a paradigm of American initiative, ingenuity, and determination." Id. at 576.
One might have hoped that the Fourth Circuit's 1995 opinion would have marked the end of the litigation over the Central America. Alas, efforts to market the treasure generated further legal woes. Thompson initially tried to sell the gold through Christie's New York. These efforts failed and resulted in a lawsuit. Thompson looked next to the West Coast, signing an agreement in 1999 with California Gold Marketing Group, LLC on behalf of Recovery Limited and Columbus–America. By this time, Thompson's crew had grown ...