Dispatch Printing Co. v. Recovery Ltd. P'ship
| Decision Date | 03 February 2015 |
| Docket Number | 14AP–475.,14AP–474,Nos. 14AP–473,s. 14AP–473 |
| Citation | 28 N.E.3d 562 |
| Parties | The DISPATCH PRINTING CO. et al., Plaintiffs–Appellees, v. RECOVERY LIMITED PARTNERSHIP et al., Defendants–Appellees, (California Gold Marketing Group, LLC, Appellant). The Dispatch Printing Co. et al., Plaintiffs–Appellees, v. Gilman D. Kirk et al., Defendants–Appellees, (California Gold Marketing Group, LLC, Appellant). Michael H. Williamson et al., Plaintiffs–Appellees, v. Recovery Limited Partnership et al., Defendants–Appellees, (California Gold Marketing Group, LLC, Appellant). |
| Court | Ohio Court of Appeals |
Kushner & Hamed Co., LPA, Philip S. Kushner, Michael R. Hamed and Christian J. Grostic, Cleveland, for appellee receiver Ira Owen Kane.
James E. Arnold & Assocs., LPA, James E. Arnold, Gerhardt A. Gosnell II, and Damion M. Clifford, Columbus; Rutan & Tucker, LLP, Richard K. Howell and Caroline R. Djang, for appellant.
{¶ 1} Appellant, California Gold Marketing Group, LLC (“California Gold”), appeals from a judgment of the Franklin County Court of Common Pleas sustaining the motion of appellee, Ira O. Kane, in his capacity as the receiver for Columbus Exploration, LLC (“Columbus Exploration”) and Recovery Limited Partnership (“RLP”), to repudiate the exclusive marketing contract entered into between RLP and California Gold. California Gold assigns the following sole assignment of error for our review:
The Court of Common Pleas, Franklin County Ohio (the “Trial Court”) erred in sustaining the Appellee–Receiver's Motion to Repudiate Contract with Appellant California Gold Marketing Group, LLC.
{¶ 2} Because the trial court abused its discretion in granting the receiver's motion to repudiate, we reverse.
{¶ 3} These consolidated cases concern two Ohio businesses, Columbus Exploration and RLP, which are currently in receivership. The events which brought these companies to their current state of financial crisis began in 1977, when Thomas G. Thompson, a researcher at the Battelle Memorial Institute in Columbus, Ohio, began researching deep ocean shipwrecks and the methods and technologies for locating them. Thompson became interested in attempting to recover the S.S. Central America, a United States mail steam-ship that sank off the coast of South Carolina on September 12, 1857 during a hurricane. The S.S. Central America was carrying several tons of gold from the California gold rush when it sank.
{¶ 4} In the mid–1980s, Thompson organized RLP to fund the search-and-recovery project. Thompson sought, and obtained, investments for the recovery project from several central Ohio businesses, including the Dispatch Printing Co. From 1986 to 1992, Thompson, along with a team, found and recovered portions of the S.S. Central America. Thompson and his team were able to recover more than a ton of gold and silver, as well as numerous artifacts from the shipwreck. Although this initial recovery was substantial, another ton of gold and silver still remained on the ocean floor. In 1987, Thompson organized Columbus–America Discovery Group, Inc. (“CADG”) to act as RLP's “agent with respect to the management of the Partnership's business, the conduct of recovery operations, and legal proceedings and press relations incidental thereto.” (Motion to Substitute, exhibit A, Agency Agreement.)
{¶ 5} Upon discovering the S.S. Central America, Thompson initiated an admiralty action in the United States District Court for the Eastern District of Virginia to establish ownership of the shipwreck and all of its contents. The federal court held that CADG, as RLP's agent, owned 92.5 percent of the salvage rights to the S.S. Central America. The federal court awarded 7.5 percent of the salvage rights to several insurance companies who established that their predecessors had insured certain portions of the gold on board the S.S. Central America when it sank.
{¶ 6} Although there are several aspects to the litigation surrounding the receivership entities, we will focus on the facts which are most relevant to the instant appeal. Particularly important to the instant case are two contracts entered into by CADG and RLP in the late 1990s. In 1998, CADG entered into a contract with California Gold (the “1998 Agreement”), whereby the parties defined the terms and conditions under which California Gold would purchase the portion of the treasure which CADG had already recovered from the S.S. Central America (the “Up treasure”). Section 1 of the 1998 Agreement noted that Christie's International PLC held a lien against the Up treasure, that California Gold had offered to pay $36 million for the Up treasure, and that California Gold would use the offer money to obtain “a release of Christie's entire right, title, claim and interest, of any kind, in the Recovered Gold Collectibles [i.e. the Up treasure].” (1998 Agreement, Section 1(b).)
{¶ 7} In Section 2 of the 1998 Agreement, CADG granted to California Gold “the exclusive right to market any gold and silver coins and numismatic items (including, without limitation, bars) [CADG] * * * recover[s] and own[s], or ha [s] the legal right to market, from the SS Central America at any time following the date of this Agreement (the ‘Other Gold Collectibles').” (1998 Agreement, Section 2, referred to herein as the “marketing contract”.) “Other Gold Collectibles” thus described the other ton of treasure which remained on the ocean floor at the time the parties entered into the 1998 Agreement (the “Down treasure”). Section 2 of the 1998 Agreement also set forth the commission California Gold would receive for each item of Down treasure it successfully marketed and sold. The agreement stated that, if California Gold was successful in purchasing the Up treasure, its commission for the sale of an item of the Down treasure would be five percent of the bullion/melt value of the item sold plus 20 percent of the amount by which the sale price exceeded the bullion/melt value. The 1998 Agreement was later amended to add RLP as a party to the agreement.
{¶ 8} In 1999, CADG, RLP, and California Gold entered into an Asset Purchase Agreement, whereby California Gold purchased the Up treasure from CADG and RLP (the “1999 Agreement”). In the recitals section of the 1999 Agreement the parties stated that the 1998 Agreement had expired, that the 1999 Agreement concerned “only” the Up treasure “and supercede[d] all prior agreements concerning the” Up treasure, and that the provisions of the 1998 Agreement “which concern[ed] solely the [Down treasure]” would “continue to survive” and would be “made a part of” the 1999 Agreement. (Recital B, 1999 Agreement.) The remainder of the 1999 Agreement detailed the terms and conditions by which California Gold would purchase the Up treasure.
{¶ 9} Following the 1999 Agreement, California Gold exhibited and marketed the Up treasure for sale. It conducted an impressive marketing campaign which included, among other promotional endeavors, producing a documentary regarding the shipwreck which aired on the History Channel, publishing a book titled A California Gold Rush History, constructing a 40–foot replica of the S.S. Central America which toured the United States, and creating a museum exhibit titled Gold! Gold! which toured museums world wide and featured the 80 pound Eureka Bar from the S.S. Central America, the largest and heaviest gold numismatic item known to exist. As a result of its extensive marketing campaign, California Gold achieved “exponential sale price[s] over the melt value of [the] gold.” (Memo in Opposition to Motion to Repudiate, 13.)
{¶ 10} In 2005, the Dispatch Printing Co. and Donald C. Fanta filed separate actions against the directors of Columbus Exploration and the partners of RLP. The plaintiffs noted that Thompson had organized Columbus Exploration in the late 1990s to take over from RLP the recovery and marketing of the treasure. RLP's partners were granted ownership interests in Columbus Exploration based on their respective ownership interests in RLP. The complaints alleged that the companies had not provided their investors with any return on their investments, and further alleged that the businesses were refusing to provide the investors with any financial information regarding the businesses.
{¶ 11} The plaintiffs eventually filed a motion asking the court to appoint a receiver for Columbus Exploration and RLP. On June 14, 2013, the court granted the motion and issued an entry appointing a receiver for Columbus Exploration and RLP. In the entry, the court found the appointment of a receiver necessary, as RLP and Columbus Exploration were in a state “of great disarray and insolvency, coupled with a lack of functional management.” (Entry Appointing Receiver, 2.) The court appointed Mr. Kane to serve as receiver for the two entities. The court stated that the receiver's powers would be derived from R.C. 2735.04 generally, as well as Loc.R. 66 of the Franklin County Court of Common Pleas, and Ohio common law.
{¶ 12} On June 20, 2013, the receiver accepted his appointment. On September 30, 2013, the receiver applied to the court for approval of the receiver's initial receivership plan and report, which the court ultimately approved. In the plan, the receiver stated that the ultimate goal of the receivership was “the recovery, conservation and successful monetization of the Down Treasure.” (Receiver's Initial Receivership Plan and Report, 2.) The receiver also noted in the plan that “[e]xecutory contractual obligations will be reviewed by the Receiver to determine whether such contractual obligations are unprofitable or undesirable and, based on that determination, to affirm or repudiate such agreements accordingly, subject to the approval of the Court.” (Receiver's Initial Receivership Plan and Report, 11.)
{¶ 13} On November 20, 2013, the receiver sent a letter to California Gold's president, Dwight Manley, asking California Gold to submit a proof...
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