Tenth District: Marketing Firm Retains Right to Sell Disputed Shipwreck Treasure
As a Florida judge considers sending a fugitive treasure hunter to Columbus to account for the whereabouts of gold from an historic shipwreck, a state appeals court ruled Tuesday that the investors must keep their deal with the firm contracted to sell the treasure that is still being brought up from the sea.
The Tenth District Court of Appeals reversed a Franklin County Common Pleas Court decision that authorized a receiver for the investors to cancel its contract with California Gold Marketing Group. California Gold signed a deal with the treasure hunters in 1998 to market and sell what was brought up from the shipwreck. Investors raised concerns about the profitability and desirability of having California Gold involved in the next round.
A U.S. District Court in West Palm Beach has scheduled an extradition hearing Wednesday for Tommy Thompson, who was arrested last week for failing to appear in an Ohio federal court to explain what happened to all the gold he recovered from the 1857 wreck of the S.S. Central America.
Thompson formed two companies, Columbus Exploration LLC and Recovery Limited Partnership (RLP), to manage the recovery. More than 160 investors, including the Dispatch Printing Company, invested more than $12 million to fund the exploration. In 1998, RLP and Thompson entered into a marketing agreement with California Gold to market and sell the treasure. RLP sold the treasures to California Gold, which in turned sold it for a profit. The investors alleged Thompson never returned any of the estimated $52 million sale proceeds to them.
Concerned that Columbus Exploration and RLP were nearing bankruptcy, the investors filed suit in Franklin County in 2005, and won the right to have a court-appointed receiver take over the management decisions of the exploration companies. The investors are in the process of bringing up more gold from the ocean and pursuing Thompson to find other existing treasure that has not been sold.
Thompson’s team found and recovered gold, silver and other artifacts from the Central America between 1986 and 1992. The team brought up a reported three tons of treasure but another ton is estimated to still be on the ocean floor in the wreckage.
Receiver Ira O. Kane raised concerns about the marketing contract with California Gold, and, as receiver, he has the right to seek the cancellation of any contracts that might be undesirable or unprofitable to the investors. In May 2014, the trial court approved Kane’s motion to repudiate the contract with California Gold to sell the rest of the items, which are described in their agreement as the “Down treasure.” The marketing firm appealed the decision to the Tenth District.
The items originally brought up and sold were named the “Up treasure.” RLP and California Gold revised their 1998 agreement in 1999 with new terms regarding the pending sale of the Up treasure and the future sale of the Down treasure. According to the appeals court, California Gold conducted an extensive marketing campaign that included producing a documentary about the wreck and the recovery that aired on the History Channel, published a book, constructed a 40-foot replica of the Central America that toured the nation and developed a touring museum exhibit. The success of the sale of the Up treasure established the commission California Gold would receive on the future sale of the Down treasure.
Kane argued the contract was undesirable because the 1999 agreement left the investors “no control whatsoever with regard to the marketing of the Down treasure” and it allowed California Gold to escape any liability if there were future claims or litigation regarding the sale of the treasure. California Gold produced experts in the rare coin industry who heavily praised its work on the Up treasure sale and countered that it had no immunity from lawsuits as part of the agreement. Further, California Gold said its control was limited and that the investors controlled when and whether to sell the treasure, the price to sell, and the ability to accept or reject any sales offers. It warned that replacing it with another marketing firm would do more harm than good to the investors.
Writing for the court, Judge John A. Connor concluded the receiver incorrectly interpreted the provisions of the 1999 agreement and that the receiver has every right to control the disposition of the Down treasure. He wrote that the agreement, as with all contracts, prevents the parties from doing anything to financially harm each other.
“Thus pursuant to the implied covenant of good faith and fair dealing, the receiver will have a breach of contract claim against California Gold if California Gold does anything to injure the receiver’s right to receive the benefits of the marketing contract,” he wrote.
Additionally, the appeal court sided with California Gold and found that the original clause holding the company liable for any errors on its part remained in the updated agreement, and that the trial court wrongly concluded it was exempt.
Judges Lisa L. Sadler and Julia L. Dorrian concurred in the decision.
Dispatch Printing Co. v. Recovery Ltd. Partnership, 2015-Ohio-381
Civil Appeal From: Franklin County Court of Common Pleas
Judgment Appealed From Is: Reversed
Date of Judgment Entry on Appeal: Feb. 3, 2015
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