Strongbow Holdings, LLC v. RMS Titantic, Inc.

• Docket Number: 22-cv-5680 (ER),22-cv-5685 (ER)
• Decision Date: 01 August 2023
• Parties: STRONGBOW HOLDINGS, LLC, Plaintiff, v. RMS TITANTIC, INC., Defendant. RMS TITANIC, INC., Plaintiff, v. MOBILE GROCERS OF AMERICA, LLC, STRONGBOW HOLDINGS, LLC, MAUREEN DALEY, JOHN DOES 1-5, JANE DOES 1-5, and ABC CORP., Defendants.
• Court: U.S. District Court — Southern District of New York

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STRONGBOW HOLDINGS, LLC, Plaintiff, v. RMS TITANTIC, INC., Defendant.

RMS TITANIC, INC., Plaintiff, v. MOBILE GROCERS OF AMERICA, LLC, STRONGBOW HOLDINGS, LLC, MAUREEN DALEY, JOHN DOES 1-5, JANE DOES 1-5, and ABC CORP., Defendants.

Nos. 22-cv-5680 (ER), 22-cv-5685 (ER)

United States District Court, S.D. New York

August 1, 2023

OPINION AND ORDER

Edgardo Ramos, U.S.D.J.

These related cases pertain to the ownership of four artifacts recovered from the wreckage of the historic luxury passenger liner R.M.S. Titanic (the “Titanic”). To resolve its claim of ownership, RMS Titanic, Inc. (“RMST”) originally brought an action against Strongbow Holdings, LLC (“Strongbow”) in New York County Supreme Court on July 3, 2022. Two days after it was filed, Strongbow brought another action in this Court, Case No. 22-cv-5680 (the “Strongbow action”), against RMST to resolve its claim of ownership over the same four items and simultaneously removed the state action filed by RMST, Case No. 22-cv-5685 (the “RMST action”) to this Court.

Now before this Court are (1) RMST's motion to remand the RMST action to state court for lack of diversity jurisdiction; (2) RMST's motion to dismiss the Strongbow action pursuant to the first-filed rule, or in the alternative, to stay the Strongbow action pending the adjudication of the state court action; and (3) Strongbow's claim for disciplinary sanctions pursuant to 28 U.S.C. § 1927.^[1]

For the reasons set forth below, the motions are DENIED.

I. BACKGROUND

His case concerns four artifacts recovered from the Titanic which tragically sank in the North Atlantic Ocean on April 14-15, 1912 during her maiden voyage. Compl., Doc. 1 ¶¶ 1, 15. After the wreckage of the Titanic was found, thousands of artifacts were recovered over the course of seven expeditions that took place between 1987 and 2004.^[2] Id. ¶¶ 17-18. He four artifacts in dispute here are: one 1912 gold coin and two $5 bills recovered in the 1987 expedition, and one piece of coal recovered in the 1994 expedition (collectively the “Four Items”). Id. ¶¶ 1, 21.

A. Ownership of the Four Items

He first expedition to the Titanic in 1987 was a joint expedition. Id. ¶ 17. It was led by filmmaker and explorer, D. Michael Harris, through his company Titanic Ventures Limited Partnership (“TVLP”) in partnership with a French firm by the name of the Institut frangais de recherche pour l'exploitation de la mer (“IFREMER”). Id. ¶ 16; R.M.S. Titanic, Inc. v Wrecked & Abandoned Vessel, 742 F.Supp.2d 784, 788 (E.D. Va. 2010) (“Titanic 2010”). All artifacts from this expedition were brought to France, and titled to France. Ex. 1 to Segal Decl., Doc. 281 at 5, ¶ 18. But in 1993, France awarded title to TVLP for all the artifacts which had not been claimed.^[3] Ex. 3 to Segal Decl., Doc. 28-3. foen that same year, all of TVLP's assets and liabilities, including its interests in the Titanic wreckage, were acquired by RMST when it filed an action with the United States District Court for the Eastern District of Virginia (“Virginia federal action”), requesting that the court award it exclusive salvage rights over the Titanic. Compl. ¶¶ 20, 23. Approximately one year later, in June 1994, the court conferred exclusive “salvor-in-possession” status to RMST.^[4] Id. ¶ 24; see also R.M.S. Titanic, Inc. v. Wrecked & Abandoned Vessel, 920 F.Supp. 96, 97 n.1 (E.D. Va. 1996) (citing the court's 1994 order conferring salvor-in-possession status to RMST).

After its final expedition to the wreck site in 2004, RMST moved for a salvage award in the Virginia federal action, requesting full, unencumbered title to all of the artifacts it recovered. Compl. ¶ 26. foe court denied RMST's motion for full title to the recovered artifacts at that stage of the proceedings,^[5] and the Fourth Circuit affirmed. See R.M.S. Titanic, Inc. v. Wrecked & Abandoned Vessel, 323 F.Supp.2d 724, 744-45 (E.D. Va. 2004), aff'd in part, vacated in part, remanded sub nom. R.M.S. Titanic, Inc. v. The Wrecked & Abandoned Vessel, 435 F.3d 521, 524 (4th Cir. 2006) (“[W]e vacate the district court's order in this case to the extent that it seeks to exercise in rem jurisdiction over the 1987 artifacts or declare a right of title in them. We affirm the district court's order denying RMST's request to seek to change its role from that of salvorin-possession to that of a finder.”).

In 2007, RMST moved again for a salvage award with the Virginia district court, along with several volumes of exhibits, seeking a salvage award for its efforts salvaging the Titanic through December 31, 2006.^[6] See Titanic 2010, 742 F.Supp. at 791-92. Upon request, the court granted the United States leave to submit its views on the motion and subsequently granted an extension of time which pushed the motion to 2008. Id. at 792. From 2008 to 2009, RMST and the United States deliberated on proposed covenants and conditions for a potential salvage award. Id. at 793.

On August 12, 2010, RMST was finally granted a salvage award in the Virginia federal action, but the court reserved the right to determine the manner in which to pay the award.^[7] See Titanic 2010, 742 F.Supp. at 809. A year later, when no buyer with an interest in purchasing the artifacts came forward, the court granted RMST title to all artifacts except for the those recovered during the 1987 expedition.^[8] See Compl. ¶ 29; R.M.S. Titanic, Inc. v. Wrecked & Abandoned Vessel, Its Engines, Tackle, Apparel, Appurtenances, Cargo, Etc., 804 F.Supp.2d 508, 509 (E.D. Va. 2011). As a critical component of its salvage rights, the court directed RMST to serve as the steward and custodian of the wreck to protect and preserve the site and its artifacts. Ex. 1 to Segal Decl., Doc. 28-1 at 6 ¶ 21; see also Titanic 2010, 742 F.Supp.2d at 788. 'Ihis required that RMST comply with certain conditions. Ex. 1 to Segal Decl., Doc. 28-1 at 6 ¶ 22. For example, RMST had a duty to notify the court whenever it learned of actions that could violate its salvage rights or any of the court's prior orders, and the collection of post-1987 artifacts had to be kept together. Id. ¶¶ 21-22. Additionally, the only portion of the collection that could be sold commercially were the lumps of coal that were recovered. See id. ¶ 22; see also R.M.S. Titanic, Inc. v. Wrecked & Abandoned Vessel, 742 F.Supp.2d 784, 811 (E.D. Va. 2010) (“[T]he Subject TITANIC Artifact Collection does not include [] lumps of coal recovered from he RMS TITANIC wreck site . . . .”).

i. foe First Transfer

Strongbow alleges that the first transfer of the Four Items took place on August 15, 1997, when then-president of RMST, George Tulloch, gifted them to G. Michael Harris (“G.M. Harris”), an RMST shareholder and the son of D. Michael Harris, the leader of the first expedition.^[9] See Ex. 5 to Segal Decl., Doc. 28-5 at 13. In a letter addressed to G.M. Harris, Tulloch wrote, “[t]o be completely clear, from this point forward[,] [RMST], TVLP & [Oceanic Research & Exploration Limited] have no claim of ownership to the above artifacts nor have these artifacts ever been a part of the Federal Courts in Norfolk, Virginia.” Id. RMST calls into question the authenticity of the letter.^[10] See Memo. in Supp., Doc. 29 at 7.

ii. He Transfer to Packwood Investments, LLC

At some time in July 2014, Strongbow alleges that G.M. Harris borrowed $25,000 from a friend, Douglas Prescott, and pledged the Four Items as collateral. Compl. ¶ 31. Approximately two years later, in 2016, G.M. Harris borrowed $2 million from Packwood Investments, LLC (“Packwood”), and again pledged the same Four Items as collateral. Case No. 22-cv-5685, Daly Decl., Doc. 12 ¶ 2; see also Compl. ¶ 32. Maureen Daly is the sole member of Packwood. See Case No. 22-cv-5685, Daly Decl., Doc. 12 ¶ 2.

In July 2017, Packwood filed a UCC-1 financing statement indicating that it held a lien on the Four Items. Compl. ¶ 32. However, RMST alleges that it did not have knowledge of the transfers until January 2018, when Brian Wainger-long-time Virginia counsel for RMST- received a call from an attorney representing Maureen Daly and her entity, Packwood. Segal Decl., Doc. 28 ¶ 10. During this call, counsel for Daly and Packwood advised that G.M. Harris had pledged the Four Items as collateral in connection with a $2 million loan and that they intended to foreclose on the Items. Id. Wainger advised Packwood's counsel that RMST did not believe G.M. Harris was the lawful owner of the Four Items, and further underscored that RMST disputed Packwood's ability to foreclose on the Items. Id. ¶ 11.

On February 20, 2018, Wainger followed up in writing, advising that RMST contested the claims of ownership and lawful possession by G.M. Harris, and objected to any attempt to repossess or sell the Four Items. Ex. 5 to Segal Decl., Doc. 28-5 at 17. Moreover, in compliance with its obligations pursuant to the Virginia federal action, RMST notified the court of Packwood's alleged lien on April 5, 2018. Segal Decl., Doc. 28 ¶ 12. Nevertheless, it is alleged that Packwood did not attempt to foreclose on its lien, and thus, there was no further action taken on behalf of RMST. Id. at ¶ 13. RMST also underscores that Daly, as an officer of Packwood, has had knowledge of RMST's claim of ownership over the Four Items since at least January 2018. Ex. 1 to Segal Decl., Doc. 28-1 ¶ 33.

iii. foe Sale to Mobile Grocers of America, LLC

In September 2019, G.M. Harris could not repay his debts and filed a voluntary petition under Chapter 7 of the Bankruptcy Code in the Middle District of Florida, therein listing the Four Items as part of his assets. See Compl. ¶ 37; Ex. 1 to Segal Decl., Doc. 28-1 at 8 ¶ 34; Ex. 8 to Segal Decl., Doc 28-8. foe Four Items were sold during a bankruptcy sale on December 29, 2021 by...