Hener v. United States, 81 Civ. 3857.

• Citation: 525 F. Supp. 350
• Decision Date: 15 October 1981
• Docket Number: No. 81 Civ. 3857.,81 Civ. 3857.
• Parties: Donald HENER, Michael Mazzei, Charles Reisinger, Jerome Morici, and Ocean Salvage, Inc. and Associates, Plaintiffs, v. UNITED STATES of America, American Commercial Divers, Inc., British and Foreign Marine Insurance Company, Ltd. and Chubb & Son, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

525 F. Supp. 350

Donald HENER, Michael Mazzei, Charles Reisinger, Jerome Morici, and Ocean Salvage, Inc. and Associates, Plaintiffs, v. UNITED STATES of America, American Commercial Divers, Inc., British and Foreign Marine Insurance Company, Ltd. and Chubb & Son, Inc., Defendants.

No. 81 Civ. 3857.

United States District Court, S. D. New York.

October 15, 1981.

Hill, Betts & Nash, New York City, for plaintiff Ocean Salvage; Mark M. Jaffe, New York City, of counsel.

Hynes, Diamond & Reidy, P.C., New York City, for plaintiffs; Robert J. Gogick, New York City, of counsel.

Donovan, Maloff, Walsh & Kennedy, David L. Maloof, New York City, for defendants American Commercial Divers, Inc., British and Foreign Marine Insurance Co., Ltd. and Chubb & Son, Inc.

John S. Martin, U. S. Atty., S. D. N. Y., New York City, for U. S. Dept. of Justice Torts Branch — Civ. Div.; Janis G. Schulmeisters, New York City, of counsel.

Lord, Day & Lord, J. Bond Smith, Jr., New York City, for American Smelting & Refining Co.

SOFAER, District Judge:

On September 27, 1903, at approximately two o'clock in the morning, the barge Harold, carrying 400 tons of lead and silver bullion, pitched violently in the waters of the Arthur Kill, off Staten Island, and dumped most of its cargo. The cargo consisted of 7,678 ingots (or "pigs") of silver, each about eighteen inches long. At the time, the Harold was being towed to the cargo owner, American Smelting and Refining Company ("ASARCO"), in Perth Amboy, New Jersey. ASARCO informed its underwriters, Chubb & Son and British Marine Insurance Company (the "Underwriters"), of the loss, and a dredging and diving operation was immediately commenced. Before the operation was terminated on October 16, 1903, an estimated 85% of the silver was salvaged from an area known as Story Flats, between Sewaren, New Jersey, and Staten Island. The unrecovered cargo is assumed to have been left on the bottom of the Kill.

When the Harold silver fell into the Arthur Kill in 1903, the value of the entire cargo was approximately $100,000. N.Y. Times, Oct. 17, 1903, at 1, col. 3. At the high price reached by silver about a year ago, the value of the unrecovered cargo alone was estimated to be between $80 and $100 million, and the parties believe that, even at current prices, the unrecovered cargo is worth between $10 and $20 million. As silver prices have increased, both commercial and amateur divers in the United States have taken an increased interest in diving for the treasure. The Treasure Divers' Guide, published in 1972, contains a description of the Harold incident drawn from an article in the New York Times of October 17, 1903, and from other publicly available sources. J. Potter, Treasure Divers' Guide 480-81 (1972).

This case involves a dispute among three separate groups of divers for the right to attempt to salvage any remaining silver from the Harold cargo. The Underwriters, ASARCO, and perhaps others may, at a future time, dispute title to whatever silver is recovered. At present, however, the parties agree that ownership of the silver is irrelevant. The competing groups all base their claims on the maritime law of salvage.

The plaintiffs who commenced this suit — referred to collectively as the "Hener Group" — are amateur divers who sought to enjoin the United States Coast Guard, and, more generally, the United States, from enforcing a safety zone that precluded them from diving operations on and near Story Flats. The intervenor-plaintiff, Ocean Salvage, Inc., comprises divers and investors led by Robert P. Hooper (the "Ocean Group") who also have been prevented from diving in the Coast Guard's safety zone. The intervenor-defendant, American Divers, Inc., is a company recently formed by a third group of divers and investors (the "American Group"), who seek to recover the Harold silver from a stretch of the Arthur Kill that encompasses Story Flats. Although the Coast Guard established the safety zone at the request of the American Group, it asserts that doing so was necessary and within its discretion and disclaims any interest in who may dive or who owns any silver that is recovered. The Coast Guard has joined the parties in asking this Court to answer the underlying questions of maritime law (salvage and ownership), after which it will reexamine its maintenance of the safety zone with a view toward implementing the Court's decision. Transcript of Hearing 14-15 (June 26, 1981).

The Hener Group originally sought a preliminary injunction to prevent the Coast Guard from interfering with its operations. The Ocean Group, seeking to protect its own operations, eventually joined this application; the American Group opposed it. Because the Coast Guard has agreed to the zone's modification to accommodate the judicially declared rights of the parties, however, it was unnecessary and inappropriate to review the legality of plaintiffs' exclusion from the safety zone before determining the rights of the three competing groups.

A several-day hearing was held to afford all interested parties a full opportunity to present testimony and documentary evidence. At its conclusion, the parties agreed to treat the record as complete for a final adjudication of which groups are entitled to attempt to salvage the silver. Transcript of Hearing 876 (July 15, 16, 17, & 22, 1981) hereinafter cited "Tr.". See Fed.R.Civ.P. 65(a)(2); SEC v. North Am. Research & Dev. Corp., 511 F.2d 1217, 1218 (2d Cir.), cert. denied, 423 U.S. 830, 96 S.Ct. 49, 46 L.Ed.2d 47 (1975). On the basis of the findings and conclusions set forth below, the Court entered an order on August 17, 1981, that declares that the Ocean Group is entitled to search for silver at the site believed by Robert Hooper to be the original excavation (the "Hooper site") and that the American Group is entitled to act as salvor everywhere else in the Coast Guard's safety zone, except for a buffer zone extending 300 feet in all directions from the Hooper site.

I. Jurisdiction

The Hener Group's original complaint challenged the Coast Guard's enforcement of a safety zone that excluded Hener from diving in the vicinity of Story Flats. When the complaint was filed, the propriety of reviewing a discretionary Coast Guard order prior to exhaustion of administrative remedies seemed doubtful. Since then, two developments have dispelled any doubts about jurisdiction. First, the Coast Guard has itself sought to have this Court adjudicate the disputes among the competing divers and meanwhile has suspended its own administrative processes. Second, the Ocean Group intervened, filing a complaint that rests jurisdiction squarely on 28 U.S.C. § 1333 (1976), which grants federal courts jurisdiction over all cases that involve admiralty or maritime claims. In the absence of any exhaustion bar, section 1333 supports jurisdiction here. As Judge Randall reasoned in Treasure Salvors, Inc. v. Unidentified Wrecked and Abandoned Sailing Vessel, 640 F.2d 560, 566-68 (5th Cir. 1981) ("Treasure Salvors III"), jurisdiction lies in federal court to adjudicate a maritime salvage dispute between would-be salvors who submit themselves to the court's in personam jurisdiction. Under Treasure Salvors III, this Court would have jurisdiction even if the cargo sought to be raised were beyond the territorial limits of the United States: although rights to the cargo "may be the subject of the dispute, the adverse parties in this situation are the competing salvors." Id. at 567. In any event, the cargo here is well within this nation's territorial waters, within the control if not the geographic area of this District, and hence within the jurisdiction of this Court. Cf. State of Florida, Dep't of State v. Treasure Salvors, Inc., 621 F.2d 1340, 1346-47 (5th Cir. 1980) ("Treasure Salvors II") (admiralty in rem jurisdiction generally requires res to be in district but ancillary process available if major portion of res within court's "control").

II. Governing Legal Principles

All the parties contemplate a three-step process for deciding the issues in the case. First, they suggest, this Court should decide who is entitled to salvage the silver, and where in the Kill and under what conditions those who are entitled to salvage may do so. Each of the three competing parties of salvors claims to have been the first salvor, and each claims an exclusive right to search and salvage from part or all of the area known as Story Flats. The Court's salvage decision would be followed by a period during which the parties permitted to salvage would, under judicial and other governmental supervision, attempt to recover the cargo. When salvage operations cease, or at any other time specified by the Court, a second trial would be held, this one limited to the issue of who owns any recovered property. If the Court then found that the property was abandoned, it would distribute the property to its finders. If the Court found that title to the property remained in its prior owner, it would identify and return the property to that owner and go on to determine the appropriate salvage fees. Both the parties that claim title to the silver — the Underwriters and ASARCO — are satisfied to allow the three would-be salvors to compete for the right to salvage; neither attempts to assert its alleged title as a bar to salvage, the Underwriters having expressly abandoned an earlier effort to do so. See Brief on Behalf of Applicants-Interveners at 11-15 (June 26, 1981); Transcript of Hearing 6-7 (July 8, 1981).

The contemplated procedure, under which competing salvage claims are adjudicated before title to the silver is determined, is in fact the proper method for handling this novel case. The propriety of the suggested procedure, however, is far less certain than the parties assume. The law of salvage and the law of finds, not always distinguished by admiralty courts, lead to different results in this case. As a consequence, it is essential to...