Odyssey Marine Exploration, Inc. v. The Unidentified Shipwrecked Vessel

Filing 230

OBJECTION to 209 Report and Recommendations by Odyssey Marine Exploration, Inc. (Morello, Gianluca) Modified on 7/22/2009 (AG).

Odyssey Marine Exploration, Inc. v. The Unidentified Shipwrecked Vessel

Doc. 2

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION IN ADMIRALTY ODYSSEY MARINE EXPLORATION, INC., Plaintiff, v. THE UNIDENTIFIED, SHIPWRECKED VESSEL, if any, its apparel, tackle, appurtenances and cargo located within a five mile radius of the center point coordinates provided to the Court under seal, Defendant; in rem and THE KINGDOM OF SPAIN et al., Claimants. / PLAINTIFF ODYSSEY MARINE EXPLORATION, INC.'S OBJECTIONS TO THE MAGISTRATE JUDGE'S JUNE 3, 2009, REPORT AND RECOMMENDATION Case No: 8:07-cv-614-T-23MAP ORAL ARGUMENT REQUESTED

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TABLE OF CONTENTS BACKGROUND ...................................................................................................................... 1 OBJECTIONS........................................................................................................................... 4 SUMMARY OF OBJECTIONS ............................................................................................... 4 ARGUMENT ............................................................................................................................ 5 I. THE R&R APPLIES THE WRONG STANDARD OF REVIEW AND TAKES SEVERAL CRITICAL STEPS THAT ARE PRECLUDED BY THE APPLICABLE RULE 56 STANDARD OF REVIEW.......................................................................... 5 A. The Rule 56 Standard Applies Because Jurisdictional Issues Are Intertwined With The Merits Of Odyssey's Claims, And The R&R Impermissibly Resolves Disputed Material Facts ..................................................................... 7 1. 2. Ownership Of The Res .......................................................................... 9 Assuming The Res Came From The Mercedes, Whether She Was Engaged In Commercial Activity ....................................................... 12 a. b. B. II. III. Record Evidence Shows The Mercedes Was Engaged In Commercial Activity............................................................... 14 Historical Context Is Consistent With The Mercedes' Participation In Commercial Activity ..................................... 17

The R&R Impermissibly Resolves A "Battle Of The Experts" ...................... 19

THE R&R'S RECOMMENDATIONS ARE BASED ON AN ADDITIONAL, CRITICAL, AND INCORRECT FACTUAL FINDING REGARDING THE RES .. 21 THE R&R'S CONCLUSIONS ARE PREMISED ON ERRORS OF LAW ............. 22 A. The R&R Incorrectly Concludes All Of The Res Enjoys Sovereign Immunity Under Section 1609 Of The FSIA .................................................................. 22 1. The R&R's Conclusions Are Based On An Incorrect Application Of International Agreements And Principles Of International Law ........ 22 a. None Of The Res Is Protected By Sovereign Immunity Because Relevant International Agreements Do Not Extend Immunity To Vessels Engaged In Commercial Activity......................... 23

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b.

The Res Does Not Enjoy Sovereign Immunity Under International Law, And Principles Of Comity Do Not Support The R&R's Conclusions ......................................................... 25

2.

The R&R Ignores That Under Section 1609 Only "Property of a Foreign State" Is Immune And The Majority Of The Res Is Not Property Of Spain ............................................................................... 30 a. b. The Majority Of The Res Is Not Property Of Spain Because It Is Commercial Cargo That Belongs To Others....................... 30 The Cargo Components Of The Res Are Severable From The Vessel For The Purpose Of Determining The Scope Of Any Claimed Immunity .................................................................. 30 (1) (2) U.S. Admiralty Law Routinely Separates Cargo From Vessels ........................................................................ 33 The FSIA And Other Sovereign Immunity Principles Establish That The R&R Incorrectly Refused To Separate Rights To A Vessel From Rights To Its Cargo ..................................................................................... 35 Pimentel Does Not Preclude Jurisdiction Over The Res ..................................................................................... 40

(3) 3.

The R&R Incorrectly Concludes That Under The FSIA, A Foreign Sovereign Need Not Have Possession Of Property To Assert Sovereign Immunity Over It ............................................................... 42

B. IV.

The R&R Erroneously Rejected The Court's Alternative Basis For Subject Matter Jurisdiction Under Section 1605(b)..................................................... 44

THE R&R ERRONEOUSLY RECOMMENDS THE "RETURN [OF] THE RES TO SPAIN" ....................................................................................................................... 45

CONCLUSION ....................................................................................................................... 47

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On June 3, 2009, the Honorable Mark A. Pizzo filed a report and recommendation (the "R&R") (Doc. 209) on Spain's motion to dismiss or for summary judgment (Doc. 131). As plaintiff Odyssey Marine Exploration, Inc. ("Odyssey") shows in these Objections, the R&R erroneously concludes that, although the majority (if not all) of the res underlying this case has never belonged to Spain, it somehow enjoys Spain's sovereign immunity. This unprecedented and unsupported application of sovereign immunity to the property of private interests, along with other incorrect legal conclusions, is based on (1) incorrectly applied standard of review and legal principles and (2) impermissible and wrong factual determinations. In essence, the R&R makes three critical mistakes: · · it applies the wrong standard of review; it fails to recognize that the bulk of the cargo aboard the Nuestra Senora de las Mercedes (the "Mercedes") when she exploded was commercial in nature and belonged to parties other than Spain; and it fails to distinguish between the cargo and other property that are the subject of this case, on the one hand, and the vessel from which they came, on the other (which the R&R concludes is the Mercedes).

·

"Sovereign immunity is a derogation from the normal exercise of jurisdiction by the courts and should be accorded only in clear cases." Victory Transport Inc. v. Comisaria General de Abastecimientos y Transportes, 336 F.2d 354, 360 (2d Cir. 1964). This is not one of those cases, and thus Odyssey's objections should be sustained and the R&R's findings and conclusions should be rejected. BACKGROUND This action involves Odyssey's assertion of claims for ownership under the law of finds or, in the alternative, for a salvage award in connection with property (the "res")

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recovered from and located in international waters of the Atlantic Ocean at a depth of approximately 1,100 meters and within a five-mile radius of center-point coordinates previously provided to the Court under seal (the "site"). (A photomosaic of the site is attached as Exhibit A, Annex 2 to the Affidavit of Dr. Sean A. Kingsley ("Kingsley Aff.") (Doc. 138-5).) Notably, although a significant amount of res was recovered, including artifacts primarily consisting of silver and gold coins, Odyssey's analysis and recovery efforts did not locate any vessel. They also did not locate any human remains. Odyssey commenced this case as an admiralty in rem action on April 4, 2007, in full accord with the admiralty and maritime practice and procedure of the Court. Odyssey filed its verified complaint under Rules C and D of the Supplemental Rules for Certain Admiralty and Maritime Claims (Doc. 1), obtained orders for a warrant of arrest (Doc. 5) and appointment of Odyssey as substitute custodian (Doc. 8), and published notice of the action (Doc. 10), all in accordance with Local Admiralty Rule 7.03. The warrant was executed by the Marshal by arresting an artifact from the site (Doc. 24). Additional res, including artifacts and cargo, was also brought into the district; the Court obtained actual jurisdiction over all property brought into the district and constructive jurisdiction over the entire res. On August 7, 2007, Odyssey filed an amended verified complaint (the "Amended Complaint") (Doc. 25), which is the operative complaint. The Amended Complaint included claims for possession and ownership of the res under the law of finds (Count I); an alternative claim for a salvage award (Count II); and claims for injunctive relief (Count III); declaratory judgment (Count IV); equitable relief under quantum meruit, unjust enrichment, and other theories (Count V); and damages (Count VI). With respect to its claim for a

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salvage award, Odyssey has complied with the requirements of 28 U.S.C. §§ 1605(b)(1) and (2). Before Odyssey filed the Amended Complaint, Spain appeared and filed a verified claim (Doc. 13) purporting to reserve its rights in "sunken vessels of . . . Spain, in vessels sunk while in the service of . . . Spain, and in cargo or other property of . . . Spain on or in sunken vessels." Claims to portions of the res based on ownership or other interests also were asserted by the Republic of Peru and 25 individuals (Docs. 120, 164, 168, 169, 175, 176). On motion of Spain (Doc. 37), Counts III through VI were dismissed by order entered March 6, 2008 (Doc. 91). On September 22, 2008, Spain filed its motion to dismiss the remaining counts for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure or, in the alternative, for summary judgment under Rule 56 of the Federal Rules of Civil Procedure ("Spain's Motion") (Doc. 131), and also moved for an order to show cause why the arrest should not be vacated (Doc 132). On November 17, 2008, Odyssey filed its response to Spain's Motion ("Odyssey's Response") (Doc. 138). On January 26, 2009, Spain filed its reply to Odyssey's Response ("Spain's Reply") (Doc. 163). On February 13, 2009, Odyssey filed its response to Spain's Reply (Doc. 179). Spain's Motion and motion for an order to show cause were referred to Magistrate Judge Pizzo for a report and recommendation (Doc. 134). Based solely on the parties' submissions and without a hearing (evidentiary or otherwise), on June 3, 2009, the Magistrate Judge issued his R&R. The R&R recommends that Spain's Motion should be granted; the Amended Complaint should be dismissed; the

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warrant of arrest should be vacated; all claims against the res should be denied; and Odyssey should be directed to "return" the res to Spain. For the reasons discussed below, Odyssey requests the Court to reject the R&R, deny Spain's Motion, accept jurisdiction of this matter, and enter an appropriate scheduling order and set this matter for trial on the merits. OBJECTIONS SUMMARY OF OBJECTIONS First, the R&R applies the wrong standard of review on Spain's Motion. Because factual issues related to the resolution of Spain's challenge to the Court's subject matter jurisdiction are intertwined with the merits of Odyssey's claims, the appropriate standard of review is the standard for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. Nevertheless, the R&R proceeds under the more liberal standard of Rule

12(b)(1), and, in violation of the Rule 56 standard, rather than recognizing genuine issues of material fact requiring resolution at trial, resolves material factual disputes and competing expert opinions in reaching its conclusions. Indeed, it accepts virtually all of Spain's factual assertions and either dismisses or ignores Odyssey's competent evidence, frequently with little more than a declaration that it is "without merit" or "not persuasive." Most

significantly, the R&R fails to address meaningfully the dispositive evidence submitted by Odyssey that the Mercedes ­ the vessel that Spain claims is located at the site ­ was engaged in commercial activity on her final voyage and the large majority of her cargo was privately owned commercial property. Those facts are critical to the correct resolution of Spain's Motion because they preclude application of Spain's claimed sovereign immunity under the Foreign Sovereign Immunities Act (the "FSIA"), 28 U.S.C. §§ 1602 et seq.

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Second, the R&R fundamentally misapplies the relevant statutory and international legal principles that govern this case. Section 1609 of the FSIA was not intended to apply to a case such as this, and even if it cloaks part of the res with immunity, it does not apply to the majority of res because it is not Spain's property. Further, contrary to the R&R's assertions, nothing in the FSIA, admiralty law, or the rules of civil procedure supports the R&R's failure to separate the vessel and her cargo for the purpose of adjudicating rights claimed by different owners. The R&R treats the fact that private property is part (and actually the majority) of the res as a consideration that is subsidiary to the misperceived greater interests of comity and Spain's expansive immunity claim. But Congress did not write the FSIA to achieve that result; no court has adopted such an inequitable approach; and, in any event, jurisdiction over this matter is entirely consistent with applicable principles of comity. The R&R also summarily and erroneously concludes that FSIA Section 1605(b) does not provide an alternative basis for the Court's jurisdiction over Odyssey's claim for a salvage award. Third, the remedy proposed by the R&R ­ awarding to Spain the res that is in the United States today ­ is inequitable and operates as a judgment on the merits, and thus is inconsistent with the R&R's conclusion of lack of subject matter jurisdiction. ARGUMENT I. THE R&R APPLIES THE WRONG STANDARD OF REVIEW AND TAKES SEVERAL CRITICAL STEPS THAT ARE PRECLUDED BY THE APPLICABLE RULE 56 STANDARD OF REVIEW In resolving Spain's Motion, the R&R applies the wrong standard of review and impermissibly resolves factual disputes and a classic "battle of the experts." As a general rule, district courts in this Circuit may "independently weigh facts" when resolving a factual

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attack on subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure. See Morrison v. Amway Corp., 323 F.3d 920, 925 (11th Cir. 2003). However, there is an important exception: if the facts necessary to decide jurisdiction are intertwined with the merits of the plaintiff's claim, the jurisdictional challenge must be resolved under the Rule 56 summary judgment standard. See Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir. 1990); Turcios v. Delicias Hispanas Corp., 275 Fed. App'x 879 (11th Cir. 2008); Garcia v. Copenhaver, Bell & Assoc., M.D.'s, P.A., 104 F.3d 1256, 1258 (11th Cir. 1997); see also Morrison, 323 F.3d at 930 (reversing district court's Rule 12(b)(1) dismissal

because it resolved disputed issues of fact and thus "erroneously invaded the province of the jury"). One Circuit apparently endorsed a different rule. In Moran v. Kingdom of Saudi Arabia, 27 F.3d 169, 172-73 (5th Cir. 1994), the Fifth Circuit adopted a "limited exception to the general rule requiring the application of a 12(b)(6) or summary judgment standard to resolve issues dispositive of both subject matter jurisdiction and the merits" only for jurisdictional challenges under the FSIA. Cf. Montez v. Dept. of the Navy, 392 F.3d 147, 150 (5th Cir. 2004) (distinguishing Moran and noting either Rule 56 or Rule 12(b)(6) standard applies to jurisdictional challenge under Federal Tort Claims Act). However, neither the Eleventh Circuit nor any district court in this Circuit has applied the unprecedented Moran exception to FSIA jurisdictional challenges. Applying the narrower, Rule 56 standard to jurisdictional challenges under the Federal Tort Claims Act while applying the broader, Rule 12(b)(1) standard to jurisdictional challenges under the FSIA would unjustifiably extend far

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more deference to a foreign state than to the United States. In any event, for the reasons discussed in these Objections, Spain's Motion should be denied under any standard. Here, the R&R cited the general rule as well as the exception but improperly analyzed and applied only the general rule. (See generally R&R at 4-5.) Spain's Motion is governed by the Rule 56 standard because the facts underlying Spain's jurisdictional challenge are intertwined with the merits of Odyssey's claims. Under the applicable standard, the presence of genuine issues of material facts precludes dismissal of Odyssey's claims (and precludes summary judgment in favor of Spain).1 A. The Rule 56 Standard Applies Because Jurisdictional Issues Are Intertwined With The Merits Of Odyssey's Claims, And The R&R Impermissibly Resolves Disputed Material Facts

As noted above, a Rule 12(b)(1) challenge to subject matter jurisdiction that is intertwined with resolution of the merits of the underlying claim must be resolved under the Rule 56 summary judgment standard. See Lawrence, 919 F.2d at 1529; Palma v. Safe Hurricane Shutters, Inc., 615 F. Supp. 2d 1339, 1343 (S.D. Fla. 2009). Under that standard,

1

Even assuming arguendo the R&R followed the correct standard of review, it still must be rejected because the Magistrate Judge did not hold an evidentiary hearing on Spain's Motion. See Fleischman v. Potts, 2006 WL 1737181, *1 (N.D. Fla. June 23, 2006) ("A district court may address its lack of subject matter jurisdiction in two ways: the court may find insufficient allegations in the pleading, viewing the alleged facts in the light most favorable to Plaintiff, similar to an evaluation pursuant to Rule 12(b)(6), or, after an evidentiary hearing, the court may weigh the evidence in determining whether the facts support the jurisdictional allegations. (emphasis added)); Reiss v. Societe Centrale du Groupe des Assurances Nationales, 246 F. Supp. 2d 273, 277 (S.D.N.Y. 2003) (finding evidentiary hearing is required when resolution of whether commercial-activity exception to FSIA immunity applies involves factual dispute); see also Chalwest (Holdings) Ltd. v. Ellis, 924 F.2d 1011, 1014 (11th Cir. 1991) ("If the issue is contested and there is conflicting evidence, the court must either deny the motion and postpone any further jurisdictional challenge until trial, or hold a preliminary evidentiary hearing.").

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"a party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986) (citations omitted). "If the moving party shows the absence of a triable issue of fact . . . , the burden on summary judgment shifts to the nonmoving party, who must show that a genuine issue remains for trial." United States v. Four Parcels of Real Property in Greene & Tuscaloosa Counties in State of Ala., 941 F.2d 1428, 1438 (11th Cir. 1991). Under the Rule 56 standard, the Court cannot (a) accept the testimony of only Spain's experts or (b) resolve issues of material fact. See Webster v. Offshore Food Srvc., Inc., 434 F.2d 1191, 1193 (5th Cir. 1970); Lawrence, 919 F.2d at 1530; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The R&R does both. Further, "[i]t is a hornbook principle that it is not proper for a district court to assess witness credibility when consider[ing] a motion for summary judgment" as such determinations are reserved for the fact-finder. Allen-Sherrod v. Henry County School Dist., 248 Fed. App'x 145, 147-148 (11th Cir. 2007). Despite this unequivocal rule, the R&R also does this. Here, Odyssey seeks ownership of or a salvage award in connection with its recovery of maritime property under the law of finds and of salvage, respectively. (Am. Compl. Counts I & II (Doc. 25).) A claim of ownership under the law of finds requires: (1) intent to reduce property to possession; (2) actual or constructive possession of the property; and (3) that the property is either unowned or abandoned. Smith v. The Abandoned Vessel, 610 F.

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Supp. 2d 739, 753 (S.D. Tex. 2009). A claim for a salvage award requires: (1) a marine peril, (2) service voluntarily rendered when not required as an existing duty or from a special contract, and (3) success in whole or in part or that the service rendered contributed to such success. The "Sabine," 101 U.S. 384, 384 (1879); see Margate Shipping Co. v. M/V JA Orgeron, 143 F.3d 976, 984 (5th Cir. 1998) ("An award of salvage is generally appropriate when property is successfully and voluntarily rescued from marine peril."). A salvage award claim cannot succeed if the salved property owner rejects the salvor's services. See

Consolidated Towing Co. v. Hannah, 509 F. Supp. 1031, 1036 (W.D. Mo. 1981). However, a salvor can overcome this defense if it shows the salved property has no "owner" (for example, if the property was abandoned). The Omaha, 71 F. Supp. 314, 317 (D. P.R. 1947). In turn, Spain's Motion asserts lack of subject matter jurisdiction to decide Odyssey's claims. (See generally Spain's Mot. (Doc. 131).) A jurisdictional challenge is "inextricably intertwined" with the merits of the claims when "a decision of one would effectively decide the other." Lawrence, 919 F.2d at 1529. Here, Spain's jurisdictional challenge is intertwined with the merits of Odyssey's claims because the challenge is based, in relevant part, on the following (disputed) fact questions, the resolution of which also would effectively decide the merits of Odyssey's claims. See Palma, 615 F. Supp. 2d at 1343-44. 1. Ownership Of The Res

The facts that determine who owned the res2 when the transporting vessel perished, and who now owns it, are relevant to determining the Court's jurisdiction, Odyssey's claims,

2

The R&R repeatedly refers to the vessel and its cargo as "the res." However, even assuming the pertinent vessel is the Mercedes, the vessel no longer exists, and, as shown in

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and Spain's defenses. A prerequisite for resolving ownership in this case is determining whether the res came from the Mercedes. If the res did not come from the Mercedes, then based on the current record Spain has no claim to any part of it. As an initial matter, the R&R acknowledges that whether the res came from the Mercedes implicates jurisdiction and the merits: "The success of Odyssey's lien against Spain's claim of sovereign immunity, not to mention the fate of any claims against the res, has always hinged on the wreck's identity or its lack of any discernable identity." (R&R at 30.) Further, as noted in the previous section, ownership of the res ­ including whether it is deemed abandoned3 ­ is an element of Odyssey's claim under the law of finds and relevant to the merits of its salvage claim. Thus, a determination of whether the res came from the Mercedes, and, more broadly, who owned the res when the related vessel sank (and whether it was abandoned at sea), are necessary components of the merits of Odyssey's claims. Notably, no claimant other than Spain has attempted to reject Odyssey's salvage of the res. The R&R adopts Spain's arguments regarding the identity of the vessel supposedly associated with the site and concludes the site relates to the Mercedes. (Id. at 12.) The R&R reaches this conclusion despite a clear record of disputed material facts.4 (A definitive

Section III.A.2.b below, the vessel and her cargo must be separated. Indeed, what constitutes the "res" is central to resolving this dispute.
3

See Treasure Salvors, Inc. v. The Unidentified Wrecked and Abandoned Sailing Vessel, 569 F.2d 330, 337 (5th Cir. 1978) ("Disposition of a wrecked vessel whose very location has been lost for centuries as though its owner were still in existence stretches a fiction to absurd lengths.").

To the extent the parties made differing inferences based on undisputed facts, the Rule 56 standard still precludes the R&R's adoption of Spain's conclusions. See Lawrence, 919 F.2d at 1530 (noting that genuine dispute precluding summary judgment exists when

4

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identification certainly was not possible from Odyssey's initial site survey and cargo recovery and still is not possible from the evidence gathered to date, especially since no meaningful evidence of any vessel has been recovered.)5 The R&R dismisses without

meaningful or adequate explanation the following (and other) evidence submitted by Odyssey: · Several eyewitness accounts, including that of Diego de Alvear y Ponce de Leon, the second-in-command, a noted geographer, and keeper of the Mercedes' Diary of Navigation, observing the Mercedes perished within view of land. (See Decl. of Teodoro de Leste Contreras ("de Leste Decl.") Annex 16 at 7 (Doc. 131-5).) This proximity to land is also mentioned in other documents submitted by Spain. (See Decl. of Hugo O'Donnell ("O'Donnell Decl.") Annex 6 at 66 (Doc. 131-8).) The site is not within view of land. (Aff. of Gregory Stemm ("Stemm Aff.") ¶ 11 at 5 (Doc. 138-30).) Records showing the Mercedes was carrying somewhere between 33 and 50 cannon when she exploded. (Kingsley Aff. ¶ 7 at 25-28 (Doc. 138-3).) Only 17 or 18 cannon were found at the site, a contained area with a hardpan floor and minimal mobile sediment, thus precluding the possibility of a hidden hull. (Id. ¶ 4 at 14-16.) Cannon are heavy and will not drift away. Evidence that two culverins at the site, upon which the R&R heavily relies to conclude the site relates to the Mercedes (see R&R at 10), are not reliable indicators: one is buried in mud and not sufficiently visible to provide meaningful information and the other one has no identifying marks that associate it with the Mercedes. (See Kingsley Aff. at 23-25 (Doc. 138-3).)

·

·

there are "conflicting factual inferences that could be drawn from the facts before the court"); Impossible Elec. Tech. v. Wackenhut Protective Sys., Inc., 669 F.2d 1026, 1031 (5th Cir. 1982) ("Summary judgment may be inappropriate even when the parties agree on the basic facts, but disagree about the factual inferences that should be drawn from these facts. If reasonable minds might differ on the inferences arising from undisputed facts, then the court should deny summary judgment." (citations omitted)).
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Notably, Spain's own hostile actions against Odyssey's ships, in part based on a mistaken belief that the site lay within its territorial waters, precluded Odyssey from finishing its site investigation. (See, e.g., Statement of M. Rogers (Doc. 53-3) (describing Spain's seizure of Odyssey's Odyssey Explorer search vessel following its earlier lengthy seizure of Odyssey's Ocean Alert search vessel).)

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Further, these were cannon that were common to many ships of the period. (See id.) · Evidence showing that there was no trace of burning among the archaeological assemblages or artifacts, which is inconsistent with an exploded shipwreck, and thus the opposite would be expected for the Mercedes. (See id. at 16-22.) Evidence that in 1997 Claudio Bonifacio, a noted naval historian, author, and shipwreck explorer, concluded that a wreck found in 1982 off the coast of Portugal much closer to shore was the Mercedes. (Id. at 65.) Despite Bonifacio's published experience in this field and supporting news reports, the R&R summarily dismisses this evidence as an "offhand contention" without any discussion. (R&R at 8.)

·

Clearly, at a minimum this record evidence raises significant factual questions about the identity of the vessel related to the site, and thus the R&R's finding that "the evidence as to the res' identity is so one-sided that Spain would prevail as a matter of law" is wrong. (Id. at 12 n.10.) 2. Assuming The Res Came From The Mercedes, Whether She Was Engaged In Commercial Activity

A second question relevant to determining jurisdiction and which requires consideration of facts that are intertwined with the merits of Odyssey's claims is whether, assuming arguendo the vessel from which the res came was the Mercedes, she was engaged in commercial activity when she exploded. As discussed in detail in Section III below, that question is directly relevant to jurisdictional considerations under Sections 1609 and 1605(b) of the FSIA. Similarly, it is relevant to the merits because it is another component of the broader question of who owns the res. Specifically, if the transporting vessel was engaged in commercial activity when she perished, then all or parts of her cargo would have been owned by private parties instead of the vessel's owner.

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Without factual support, the R&R summarily concludes the "Mercedes clearly was not engaged in any commercial activity at the time of its demise . . . ." (R&R at 27.) The R&R reaches this conclusion despite a clear record of undisputed (let alone, disputed) facts showing the opposite as well as conflicting expert opinions. Based on the record evidence, that conclusion is simply and very clearly wrong ­ under any standard of review ­ and leads to the incorrect conclusion that sovereign immunity applies. According to the FSIA, commercial activity is "either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose." 28 U.S.C. § 1603(d). In Saudi Arabia v. Nelson, 507 U.S. 349, 360 (1993), a case cited in the R&R (see R&R at 27), the Supreme Court explained, [A] foreign state engages in commercial activity . . . only where it acts "in the manner of a private player within" the market. We emphasized in [Republic of Argentina v.] Weltover [, Inc., 504 U.S. 607 (1992),] that whether a state acts in the manner of a private party is a question of behavior, not motivation: Because the Act provides that the commercial character of an act is to be determined by reference to its "nature" rather than its "purpose," the question is not whether the foreign government is acting with a profit motive or instead with the aim of fulfilling uniquely sovereign objectives. Rather, the issue is whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in "trade and traffic or commerce." We did not ignore the difficulty of distinguishing "`purpose' (i.e., the reason why the foreign state engages in the activity) from `nature' (i.e., the outward form of the conduct that the foreign state performs or agrees to perform)," but recognized that the Act "unmistakably commands" us to observe the

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distinction. Because Argentina had merely dealt in the bond market in the manner of a private player, we held, its refinancing of the bonds qualified as a commercial activity for purposes of the Act despite the apparent governmental motivation. Saudi Arabia, 507 U.S. at 360 (selected citations omitted; emphasis in original). In short, it is the nature of the activity, and not its purpose, that determines whether it is commercial. The transport of commercial cargo in exchange for payment of freight charges and the transport of paying civilian passengers between the American Viceroyalties and Spain ­ as the Mercedes was doing at the time she perished ­ is precisely the same activity performed by private parties engaged in "trade and traffic or commerce," and thus is "commercial activity" under Section 1605(b). See, e.g., Victory Transport Inc., 336 F.2d at 361-62 (showing that shipping is not peculiar to a sovereign). That the Mercedes was a stateowned vessel does not change the commercial nature of its final voyage. See Olavarria & Co. v. United States, 56 F. Supp. 758, 763 (S.D. Ala. 1944) ("This Court cannot escape the conclusion that under the Suits in Admiralty Act, the sovereign was placed on the same plane with the private operator whenever it entered the business of operating ships in the Merchant Service."). a. Record Evidence Shows The Mercedes Was Engaged In Commercial Activity

The record shows that, although a Spanish navy frigate, the Mercedes was engaged in commercial activity when she perished. Specifically, she was transporting to Spain private merchants' commercial property for freight charges and paying passengers. The relevant record entries include the following: · Historical documents showing the Mercedes was serving as a commercial transport vessel for the Correos Maritimos, the maritime mail service,

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carrying goods and passengers for freight on her final voyage. (Aff. of William H. Flayhart, III ("Flayhart Aff.") ¶ 13 at 20-23 (Doc. 138-31).) · 173 receipts for cargo shipments signed by a civilian "silver master" showing that roughly 75% of these consignments were private commercial property shipped at the standard 1% freight fee levied by the Correos Maritimos.6 (Aff. of Rodney Carlisle ("Carlisle Aff.") ¶¶ 16-18 at 26-28 (Doc. 138-31); Flayhart Aff. at 12, 13 (Doc. 138-64).) Cargo registries showing that on her final voyage, the Mercedes freighted the same type of commercial cargo freighted by merchant vessels that were at Callao and Montevideo contemporaneously with the Mercedes (including "Trade Frigates" Asia, Astigarraga, Los Dos Amigos, and Castor). (Carlisle Aff. Annex 31 (Doc. 138-62) (translations and versions reduced to fit on one page are attached as part of Composite Exhibit 4 to the Morello Declaration).) Claims to an interest in the res filed by 25 individuals. (Docs. 164, 168, 169, 175, 176.) Contrary to the R&R's observations, these claimants are not "descendants of those aboard the Mercedes." (R&R at 3.) Instead, they primarily base their claims on asserted descendancy from persons who privately owned and commercially shipped cargo aboard the Mercedes. Most of the individual claimants purport to descend from individuals heavily engaged in the commerce between the Americas and Spain and who represented very powerful and wealthy merchant companies. These were private commercial operations and they routinely shipped to Spain enormous sums of money to purchase goods, settle debts, or repatriate profits. Paying passengers were aboard the Mercedes when she perished, and her gun decks had been reconfigured to carry these passengers. (See Carlisle Aff. at 20 (Doc. 138-31).)

·

·

·

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The spreadsheet referenced by Dr. Carlisle (see Doc. 138-31 ¶ 18 at 28), which meticulously analyzes the 173 receipts for items consigned for shipment aboard the Mercedes on her final voyage, is attached to Dr. Carlisle's affidavit. (See Carlisle Aff. at 11-23 (Doc. 138-62).) A color copy of that spreadsheet is attached as Exhibit 1 to the Declaration of Gianluca Morello in Support of these Objections ("Morello Decl."), which is being filed along with these Objections. The spreadsheet is color-coded to reflect cargo that belonged to Spain or the vessel's officials (in blue) and cargo that belonged to private interests (in one of two shades of green). As the spreadsheet shows, the overwhelming majority of cargo aboard the Mercedes belonged to merchants and other private interests and not to Spain. A copy of a sample of consignment receipts is attached as part of Composite Exhibit 2 to the Morello Declaration. A copy of the original abbreviated cargo manifest is attached as part of Composite Exhibit 3 to the Morello Declaration.

15

At a minimum, the record evidence shows a disputed material fact question of whether the Mercedes was engaged in commercial activity, and under the Rule 56 standard, certainly does not permit the R&R's summary conclusion that the Mercedes "was not engaged in any commercial activity" when she perished. Notably, the official investigation of Spain's own federal officials as well as additional evidence recently uncovered by Odyssey confirm the Mercedes was transporting commercial cargo on her final voyage.7 A report prepared for the Spanish Guardia Civil (a Spanish federal police agency that is part of the Spanish Ministry of the Interior) in connection with its investigation of Odyssey's actions notes the majority of the Mercedes' cargo was owned by private interests. (See Technical Report on Possible Undersea

Archaeological Sites in the Operating Areas of the Odyssey and the Ocean Alert (the "Police Report"), attached as Composite Exhibit 5 to the Morello Declaration).) Specifically, the Police Report notes the Mercedes and the frigates that accompanied her on her final voyage were carrying 1,307,634 strong pesos for the King of Spain and 3,428,519 strong pesos for private interests. (See Police Report at 10; see also id. at 16 (noting the Mercedes carried "treasures and goods of private interests.").) Further, Odyssey uncovered additional evidence of the Mercedes' involvement in commercial activities. That evidence includes the following: · 18 of 23 merchants listed in a scholarly analysis of commercial shipping in 1803 between colonial Peru and Spain aboard Spanish ships, including "warships," also shipped commercial cargo aboard the Mercedes on her final voyage. Compare Patricia Marks, Deconstructing Legitimacy: Viceroys,

7

Consistent with Odyssey's protocol for investigating shipwrecks, it has continued to study the res and information relating to it.

16

Merchants, and the Military in Late Colonial Peru (2007) at 39 Table 2 (relevant pages are attached as Exhibit 6 to the Morello Declaration) with consignment receipts spreadsheet (Morello Decl. Ex. 1) (listing names of individuals who had private cargo aboard the Mercedes when she perished). · An official Spanish document which identifies commercial losses suffered at sea by a merchant guild in Cadiz. (See Dossier/File On Seizures/Arrests of 1804 & 1805, Archivio General de Indias, Consulados 94, Expedientes 22 (attached as part of Composite Exhibit 7 to the Morello Declaration).) The third page of the document itemizes those merchants' losses from the Mercedes. b. Historical Context Is Consistent With The Mercedes' Participation In Commercial Activity

Similarly, the historical context perceived and relied upon by the R&R in determining the nature of the Mercedes' final voyage is clearly disputed by record evidence and historical accounts. The R&R reaches an erroneous conclusion about the state of political affairs around the pertinent time. Essentially, the R&R concludes that Spain had an expectation of imminent war at the time of the Mercedes' final voyage, and uses this conclusion to support two findings: first, that because Spain anticipated imminent war, the Mercedes would have been on a war footing; and second, that all currency and similar valuable cargo aboard the Mercedes would have been en route to Spain to fill its coffers in preparation for war. (R&R at 6.) These conclusions and findings form the pivotal backdrop for the R&R's implicit conclusion that the Mercedes' cargo belonged to Spain rather than to private interests. In reaching these conclusions and findings, the R&R adopts Spain's position even though it is competently contradicted by evidence. Record evidence reveals that Spain had no expectation of imminent war in October of 1804 and the Mercedes was not anticipating imminent conflict. (Carlisle Aff. Ex. E ¶ 12 at 18-20 (Doc. 138-31).) Indeed, Spain's own expert, Hugo O'Donnell, wrote:

17

To the already mentioned Spanish disadvantages, other negative factors that would decide the fight were added: the Spanish ships not being duly forewarned considering themselves to be in time of peace, and not being able to put into effect an effective combat plan since the frigates were loaded with bundles of goods that presented obstacles to fire in the battery and combat on deck . . . . "[W]e never thought that they were trying to do anything but reconnoiter us, being certain that the neutrality between the two nations continued, as we had been assured by several other foreign vessels we had reconnoitered for this purpose" stated the Spanish commander in his report. (Decl. of Hugo O'Donnell in Support of Spain's Reply ("O'Donnell Reply Decl.") at 37 (Doc. 163-9).) Indeed, record evidence shows the Mercedes carried far less armament than would be carried by a warship expecting to encounter resistance or attack. (Carlisle Aff. at 24 n.48 (Doc. 138-31).) In light of record evidence of no imminent expectation of war, the R&R's adoption of Spain's position and its conclusions that the Mercedes was prepared for war at the time of her dispatch, that Spain undoubtedly anticipated a conflict with the British, and thus the Mercedes was on a war mission are plainly wrong. (See R&R at 6.) Similarly, noted Spanish historians, economic historians, and the record evidence do not support the R&R's conclusion that the Mercedes' final voyage was meant to fill Spain's official coffers in preparation for war. (See Carlisle Aff. Ex. E ¶¶ 16-18 at 26-28 (Doc. 13831); Flayhart Aff. Ex. F at 5, 6 (Doc. 138-64).) As the undisputed evidence discussed above shows, the majority of the cargo was owned by private interests who paid freight charges to ship their property aboard the Mercedes. Further, a crucial source of Spain's wealth was the wealth of the merchants and traders and the successful restoration of the Atlantic trade during the peace of Amiens, which promised Spain growing tax and duty revenues. See generally Jacques A. Barbier & Herbert S. Klein, Revolutionary Wars & Public Finances: The Madrid Treasury, 1784-1807, J. Econ. History, Vol. 41, No. 2 (June 1981) at 315-339 (attached as

18

Exhibit 8 to the Morello Declaration). In short, when the Mercedes perished, Spain was intent on continuing to restore its commercial growth, and that growth depended in large part on private commerce and trade with the colonies. Indeed, to support that commerce, and to deliver vital supplies to sustain private mining and commerce in South America, the Correos Maritimos was reconstituted as a regularly-scheduled commercial freight service between the Americas and Spain. B. The R&R Impermissibly Resolves A "Battle Of The Experts"

Summary judgment is "often inappropriate where the evidence bearing on crucial issues of fact is in the form of expert opinion testimony." Webster v. Offshore Food Srvc., Inc., 434 F.2d 1191, 1193 (5th Cir. 1970); see also Lexar Media, Inc. v. Fuji Photo Film USA, Inc., 2007 WL 677166, *3 (N.D. Cal. 2007) ("Summary judgment is improper when there is a conflict between expert opinions . . . ."). "[O]nce `the court admits (expert)

testimony, then it is for the jury to decide whether any, and if any what, weight is to be given to the testimony.'" Webster, 434 F.2d at 1193 (citing Sartor v. Arkansas Nat. Gas Corp., 321 U.S. 620, 627 (1944)); see also United States v. Continental Ins. Co., 44 F.R.D. 354, 355 (E.D. Penn. 1968) ("Rule 56 does not permit the Court to assess [an affiant's] credibility on a motion for summary judgment."). In other words, a "battle of the experts" precludes

summary judgment. See, e.g., Abilene Retail No. 30, Inc. v. Board of Comm'rs of Dickinson County, Kan., 492 F.3d 1164, 1188 (10th Cir. 2007) ("The battle of the experts that the parties present to us requires a trial and a trier of fact to resolve."); Edwards Sys. Tech., Inc. v. Digital Control Sys., Inc., 99 Fed. App'x 911, 921 (Fed. Cir. 2004).

19

Here, the R&R's findings of fact align entirely with the conclusions reached by Spain's experts, and, with no meaningful explanation, the R&R rejects those reached by Odyssey's experts. (See R&R at 5-12.) For example, as discussed in the previous section, the parties presented conflicting historical accounts regarding the Mercedes and its final voyage. (See generally de Leste Decl. (Doc. 131-3) & O'Donnell Decl. (Doc. 131-8); Carlisle Aff. (Doc. 138-31) & Flayhart Aff. (Doc. 138-64).) Spain's historians, de Leste and O'Donnell, concluded (1) the Mercedes was a warship and (2) that, in turn, the site is subject to sovereign immunity. (O'Donnell Decl. ¶¶ 14-16 (Doc. 131-8); de Leste Decl. ¶¶ 7-11 (Doc. 131-3).) Odyssey's historians, Carlisle and Flayhart, concluded (1) the Mercedes was not engaged in an exclusively noncommercial mission when she perished and (2) thus, the site is not subject to sovereign immunity. (Carlisle Aff. at 2-4 (Doc. 138-31); Flayhart Aff. at 3 (Doc. 138-64).) Despite this classic "battle of the experts," in concluding that all of the res is cloaked by sovereign immunity, the R&R impermissibly accepts Spain's contentions and finds the Mercedes was a warship that set sail contemporaneously with an on-going war between France and Britain and in anticipation of Spain's imminent entrance into the Napoleonic War. (R&R at 5-7.) Similarly, by concluding the site relates to the Mercedes (see supra Section I.A.1), the R&R improperly resolves other disputes between the experts in Spain's favor, including: · the archaeological standards relied upon by the experts (compare Decl. of James P. Delgado in Support of Spain's Reply ("Delgado Reply Decl.") ¶¶ 42-45 (Doc. 163-2) with Aff. of James J. Sinclair ("Sinclair Aff.") ¶¶ 4-5, 9-11, 16 (Doc. 138-28)); the amount and quality of evidence required to identify the site (compare Decl. of James P. Delgado ("Delgado Decl.") ¶ 137 (Doc. 131-9) with Kingsley Aff. ¶ 59 (Doc. 138-3)); and

·

20

·

the extent of investigation required to identify the site (see Sinclair Aff. ¶ 19 (Doc. 138-28); Aff. of Carol L. Tedesco ("Tedesco Aff.") at 6 (Doc. 138-91)).

In sum, the R&R's adoption of the contentions and conclusions of Spain's experts and its rejection of those of Odyssey's experts necessarily involve impermissibly assessing and weighing the respective experts' credibility. This resolution of the classic "battle of the experts" requires rejection of the R&R's recommendations.8 II . THE R&R'S RECOMMENDATIONS ARE BASED ON AN ADDITIONAL, CRITICAL, AND INCORRECT FACTUAL FINDING REGARDING THE RES Applying the wrong standard of review, the R&R impermissibly makes another outcome-determinative factual finding. It finds the res is a vessel, and specifically that "the res is the Mercedes." (R&R at 12.) This factual finding is made despite a genuine dispute in the record (and despite dispositive evidence showing no vessel at the site). Because it underlies the R&R's central conclusion that the res is immune under the FSIA from Odyssey's claims (see id. at 4), that conclusion is wrong. In reality, there is neither a vessel nor cohesive remnants of a vessel's hull at the site.9 The absence of a vessel has been acknowledged by Spain (see Spain's Reply at 11-12 (Doc. 163)). Yet the R&R ignores the lack of a vessel and equates the entire res with the

Mercedes. In doing so, the R&R fails to appreciate this action's unique facts, which involve
8

As noted in the Background section, the Magistrate Judge did not hold an evidentiary hearing despite the large record and the importance of the evidence to the resolution of Spain's Motion. Rather, as shown in this section, he impermissibly weighed the evidence and assessed its credibility to resolve that motion without any testimony. For this reason, Odyssey amended its complaint to make the subject of this suit, in relevant part, the "Unidentified Shipwrecked Vessel, if any." (See Am. Compl. at 1, 5-7 (Doc. 25).)

9

21

a large volume of cargo remains scattered on the ocean floor with no meaningful association with a vessel. Under these circumstances, the conclusion that Spain's ownership of the Mercedes cloaks all res at the site with sovereign immunity ­ even recovered cargo over which Spain has neither shown nor asserted any property rights ­ is wrong. The lack of vessel also undermines Spain's Motion's pervasive portrayal of the site as a graveyard (see, e.g., Spain's Mot. at 3, 16, 17, 22 (Doc. 131)) and the R&R's acceptance of that portrayal (see R&R at 33). Aside from the lack of vessel, no human remains were found. III. THE R&R'S CONCLUSIONS ARE PREMISED ON ERRORS OF LAW Compounding the R&R's application of the wrong standard of review and impermissible (and incorrect) factual findings, the R&R also relies on several additional fundamental errors of law that compel rejection of its recommendations. Notably, no court has ever found the FSIA divests it of subject matter jurisdiction over admiralty claims relating to cargo recovered from the ocean floor. A. The R&R Incorrectly Concludes All Of The Res Enjoys Sovereign Immunity Under Section 1609 Of The FSIA

The R&R errs in its application of Section 1609 of the FSIA to the unique circumstances of this case in several respects, each of which is discussed below. 1. The R&R's Conclusions Are Based On An Incorrect Application Of International Agreements And Principles Of International Law

Even assuming arguendo the site relates to the Mercedes, the vessel (or other res subject to this suit) is not immune under international agreements and law. The R&R ignores or incorrectly applies these agreements or legal principles in two significant ways. First, although it recognizes that international agreements existing when the FSIA was enacted may

22

limit a foreign sovereign's immunity under Section 1609, it ignores the plain language of pertinent agreements. See 28 U.S.C. § 1609 (availability of sovereign immunity is "subject to existing international agreements to which the United States is a Party"). Second, the R&R relies heavily on a misperception that "comity" and other international legal principles somehow require that this Court deny jurisdiction. (See R&R at 14-15.) Pertinent here, international law does not immunize a foreign sovereign or its vessels from suit when the vessels are engaged in commercial activity, as was the Mercedes. Thus, rather than

supporting dismissal for lack of jurisdiction, international agreements and longstanding principles of international law and comity are entirely consistent with the Court's exercise of jurisdiction over this matter. a. None Of The Res Is Protected By Sovereign Immunity Because Relevant International Agreements Do Not Extend Immunity To Vessels Engaged In Commercial Activity

Under relevant international agreements in force at the time of the FSIA's enactment, Spain's sovereign immunity extends only to vessels that are on "noncommercial service" when they sink and does not extend to vessels on voyages that are commercial in nature, such as the Mercedes' final voyage. The 1958 Geneva Convention on the High Seas (the "Geneva Convention"),10 to which both Spain and the United States are parties and which predated the FSIA, states that "[s]hips owned or operated by a State and used only on government noncommercial service shall, on the high seas, have complete immunity from the jurisdiction of any State other than the flag State." Geneva Convention, Art. 9 (emphasis added). This and

10

See Geneva Convention on the High Seas, Apr. 27, 1958, 13 U.S.T. 2312, 450 U.N.T.S. 82.

23

other provisions of the Geneva Convention are "generally declaratory of established principles of international law." Id., Preamble. They are copied verbatim in the correlating provisions of the 1982 U.N. Convention on the Law of the Sea ("UNCLOS"),11 which has been ratified by Spain but not signed (or acceded to) by the United States. See UNCLOS, Arts. 29, 95, 96. Further, and assuming arguendo it applies here, the 1902 Treaty of Friendship and General Relations between the United States and Spain (the "1902 Treaty")12 accords Spanish vessels the same rights accorded to U.S. vessels under similar circumstances. See 1902 Treaty, Art. X ("In cases of shipwreck, damages at sea, or forced putting in, each party shall afford to the vessels of the other, whether belonging to the State or to individuals, the same assistance and protection and the same immunities which would have been granted to its own vessels in similar cases."). Thus, Spain's sovereign vessels are entitled to the same immunities as U.S. vessels ­ no more and no less. Relevant protections accorded to U.S. vessels under U.S. law are codified in the Sunken Military Craft Act (the "SMCA").13 That statute extends specified protections to "sunken military craft," including sovereign immunity, abandonment only by express divestiture of title, and a blanket refusal of salvage. SMCA §§ 1401, 1402.
11

See 1982 U.N. Convention on the Law of the Sea, Dec. 10, 1982, 1833 U.N.T.S. 3 (entered into force on Nov. 16, 1994). See Treaty of Friendship and General Relations, signed at Madrid July 3, 1902, entered into force April 13, 1903, 33 Stat. 2105, T.S. 422, 11 Bevans 628. Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, Pub. L. No. 108-375, Div. A, Tit. XIV, 118 Stat. 2094 (passed Oct. 8, 2004) (signed into law Oct. 28, 2004) (codified at 10 U.S.C. § 113 notes).

12

13

24

Notably, the R&R ignores that the SMCA does not apply to all military craft. Although the R&R quotes part of the definition of a "sunken military craft" (R&R at 25 n.20), it inexplicably fails to address or otherwise acknowledge the part of the definition that is most critical here. That part defines a craft entitled to these protections, including to sovereign immunity, as a "sunken warship, naval auxiliary, or other vessel that was owned or operated by a government on military noncommercial service when it sank." SMCA

§ 1408(3)(A) (emphasis added). The Mercedes, which, as discussed in detail in Section I.A.2 above, was transporting a large volume of merchants' and other private interests' commercial cargo for freight charges, was not on "military noncommercial service" and thus would not have qualified for various protections ­ including immunity ­ under the SMCA if it were a U.S. vessel. As a result, under the 1902 Treaty the Mercedes is not immune from this suit, and thus cannot be immune under the FSIA because Section 1609 conditions immunity on earlier agreements.14 b. The Res Does Not Enjoy Sovereign Immunity Under International Law, And Principles Of Comity Do Not Support The R&R's Conclusions

More broadly, other relevant international agreements and expressions of U.S. policy also uniformly except vessels engaged in any level of commercial activity from sovereign immunity. Although Odyssey addressed them in its briefing on Spain's Motion, the R&R

14

The R&R cites Sea Hunt, Inc. v. Unidentified Shipwrecked Vessel or Vessels, 221 F.3d 634, 638 (4th Cir. 2000), upon which Spain relies heavily. That case was very clearly distinguished in Odyssey's Response. (See Odyssey's Resp. at 30-31 (Doc. 138).) Further, Sea Hunt actually supports Odyssey's position of jurisdiction, as neither the trial court nor the appellate court relinquished jurisdiction despite finding that the property at issue belonged to Spain.

25

ignores them. These agreements and policies are consistent with international law and demonstrate that, contrary to the R&R's conclusion, comity does not warrant a finding of immunity in this case. In fact, the opposite is true: it requires a finding that neither the Mercedes nor her cargo is immune. Both Spain and the United States are parties to the International Convention on Salvage.15 Article 4(1) of that convention recognizes sovereign immunity for "warships or other non-commercial vessels" (emphasis added). Spain's Motion cited that convention but omitted the underlined language, and the R&R does not cite or otherwise address it. Similarly, the 2001 UNESCO Convention on the Protection of Underwater Cultural Heritage, 41 I.L.M. 40 (2002), to which Spain is a party (but the United States is not), defines "state vessels and aircraft," subject to special treatment under the Convention, as "warships, and other vessels . . . that were owned or operated by a State and used, at the time of sinking, only for government non-commercial purposes, [and] that are identified as such . . . ." Id. Art. 1(8) (emphasis added). Finally, the Brussels Convention for the Unification of Certain Rules Concerning the Immunity of State-Owned Ships (the "Brussels Convention"), and its Additional Protocol,16 which Spain has signed (but not ratified), is consistent with all other relevant agreements. Article 1 of the Brussels Convention states: Sea-going ships owned or operated by States, cargoes owned by them, and cargoes and passengers carried on State-owned ships, as well as the States
15

International Convention on Salvage, Apr. 28, 1989, S. Treaty Doc. No. 102-12, 1953 U.N.T.S. 165. Brussels Convention for the Unification of Certain Rules Concerning the Immunity of State-Owned Ships, Apr. 10, 1926, 176 L.N.T.S. 199; Additional Protocol of May 24, 1934, 176 L.N.T.S. 1934, 26 Am. J. Int'l L. Supp. 566 (1932).

16

26

which own or operate such ships and own such cargoes shall be subject, as regards claims in respect of the operation of such ships or in respect of the carriage of such cargoes, to the same rules of liability and the same obligations as those applicable in the case of privately-owned ships, cargoes and equipment. Brussels Convention, Art. 1. This provision does not apply to "ships of war, State-owned yachts, patrol vessels, hospital ships, fleet auxiliaries, supply ships and other vessels owned or operated by a State and employed exclusively at the time when the cause of action arises on Government and non-commercial service." Id. Art. 3(1) (emphasis added).17 Compilations of U.S. practice in international law also confirm the crucial distinction between warships on military or government service and their official cargo, on the one hand, and government vessels transporting any commercial cargo, on the other. See DIGEST U.S. PRACTICE
IN OF

INT'L LAW 1980 at 999 (Marian Nash Leich, ed., 1981) (Dec. 30, 1980, For

letter from James H. Michel, Deputy Legal Adviser, U.S. Department of State).

example, a July 13, 1989, memorandum of the Office of the Legal Adviser of the U.S. Department of State analyzed the immunities of the Uruguayan state vessel, the Presidente Rivera. Reprinted in DIGEST
OF

U.S. PRACTICE

IN

INT'L LAW (1989-90). The Presidente

Rivera was an "auxiliary ship of the Uruguayan Navy, one of its two oil tankers that operate under charter to the state-owned oil company (ANCAP)." Id. at 1. The State Department concluded the Presidente Rivera was not "entitled to the sovereign immunity of a warship or other ship owned or operated by a State and used, for the time being, only on government
17

Notably, even if a ship falls into this category and there is a "claim in respect of salvage," under the Brussels Convention "the State shall not be entitled to rely upon any immunity as a defense." Brussels Convention, Art. 3(1). "The same rules shall apply to State-owned cargoes carried on board any of the above-mentioned [classes of] ships." Id. Art. 3(2).

27

non-commercial purposes . . . ." Id. Because the Presidente Rivera's cargo of oil was destined for commercial customers in the United States, the State Department concluded that it was "clearly a government tanker, on commercial service," and not entitled to immunity. Id at 3. All of these international conventions, and other customs consistent with those relevant provisions, evidence the relevant principles of the jus gentium, or the customary law of the sea, which "enjoy[s] international comity" and acceptance. R.M.S. Titanic, Inc. v. Haver, 171 F.3d 943, 960, 966 (4th Cir. 1999) ("Titanic I") (citations omitted) ("When nations agree on law to apply on the high seas, they agree to an order even beyond their sovereign boundaries . . . ."); see United States/Eemshaven Port Authority, Supreme Court of The Netherlands, 12 Nov. 1999, at 228, 229 (attached as Exhibit 9 to the Morello Declaration) (holding that under "unwritten rules of public international law," a U.S. Navy vessel enjoys immunity if at the time the claim arose it "had the status of a warship or military supply ship and was exclusively used in the fulfilment of military (i.e., noncommercial) government tasks." (emphasis added)). Court rulings that are consistent with the jus gentium cannot offend comity. As such, the Court has subject matter jurisdiction over this matter because the Mercedes (or Spain) does not enjoy immunity. Despite this, the R&R appears heavily influenced by its incorrect analysis of comity and its misperception that the site is a graveyard. (See R&R at 14, 33.) Although Odyssey is mindful of sensitivities associated with shipwrecks, even if a site featuring the hull of a shipwreck and human remains were discovered, the R&R identifies no authority requiring any different treatment of such a site under applicable legal principles. Indeed, Odyssey's

28

claims in this case, if successful, would yield a result that is no different than Spain's own current, publicized efforts to recover gold reserves from shipwrecks. See CommodityOnline, Spain Hunts for Gold Treasure in Sea, Jul. 14, 2009 (noting that if successful, efforts would improve Spain's economic health); Mirror, Spain Seeks Sunken Treasure, Jul. 13, 2009 (same); Atenea, The Value of the Sunken Gold in Spanish Waters Tops the 100 Billion Public Deficit, June 17, 2009 (same); El Mundo, Over 100 Billion in Gold and Silver Sitting at the Bottom of the Sea, June 21, 2009 (same).18 And in any event, no human remains were found during the detailed archaeological exploration of the site ­ a fact that is not disputed by Spain. In short, comity requires conduct consistent with the principles discussed above; it does not require (or permit), as the R&R recommends, favoring one sovereign at the expense of others, including another sovereign. In short, the R&R has no basis for effectively disregarding the true nature of the Mercedes' final voyage in determining whether she enjoys immunity. The course followed by the R&R would allow any sovereign ­ including one with nefarious intentions ­ to transport any item on its vessels with impunity under the protection of sovereign immunity. This is not a reasonable interpretation of the FSIA or other pertinent laws and treaties.

18

Each of these articles is attached as part of Composite Exhibit 10 to the Morello Declaration.

29

2.

The R&R Ignores That Under Section 1609 Only "Property of a Foreign State" Is Immune And The Majority Of The Res Is Not Property Of Spain a. The Majority Of The Res Is Not Property Of Spain Because It Is Commercial Cargo That Belongs To Others

The R&R also incorrectly concludes that all of the res in this case is immune from suit under Section 1609 because even assuming the Mercedes enjoys sovereign immunity, as discussed above in Section I.A.2, record evidence establishes, at a minimum, an issue of material fact with respect to whether the majority of cargo aboard the Mercedes when she perished was private commercial property, and thus not "property . . . of a foreign state." Even assuming the res came from the Mercedes, the majority of the res, including the majority of property recovered from the site and transported to the United States by Odyssey in compliance with all applicable laws, is private commercial cargo and thus not subject to Spain's claimed immunity. That cargo was not the property of Spain, and neither any record evidence nor legal principle establishes that it ever became its "property." As a result, the R&R incorrectly concludes the recovered property meets the threshold requirement for immunity under Section 1609, which by its terms applies only to "property of a foreign state." b. The Cargo Components Of The Res Are Severable From The Vessel For The Purpose Of Determining The Scope Of Any Claimed Immunity

The private cargo at and recovered from the site is legally distinct from any vessel that transported it, regardless of whether the vessel was the Mercedes, was owned by Spain, or is immune from suit. Because Spain has not shown (and cannot show) that it owns or ever owned all (or even a majority) of that cargo (including the large quantity of coins and other

30

artifacts that are in this District), its claimed sovereign immunity cannot extend to that property. Indeed, Spain's claim filed in this case purports to reserve rights only with respect to "sunken vessels[,] . . . cargo or other property of . . . Spain on or in sunken vessels." (Spain's Claim at 1 (Doc. 13).) As such, the Court has subject matter jurisdiction over Odyssey's claims as to the portion of the res to which Spain has no claim.19 The R&R recognizes the plain text of Section 1609 does not extend immunity to property that is not Spain's. (R&R at 27-28.) Nevertheless, the R&R misapplies two theories to extend the Mercedes' purported immunity to private commercial cargo she was carrying: first, by concluding the vessel and her cargo are legally inseparable; and second, by concluding that even if the cargo is separable from the vessel, the Court's jurisdiction over private cargo would "frustrate the FSIA's goals" and necessarily prejudice Spain's interests as an immune "foreign state." (Id. at 22.) Both theories are legally wrong and, notably, the R&R's blanket extension of any immunity enjoyed by the Mercedes to all of her cargo without any (let alone undisputed) proof that Spain has an ownership interest in all of it has far-reaching prejudicial ramifications