I had a hard time copying this document. I had to cut and paste from a PDF to get it to copy. I don't know why some exhibits will copy and others don't work with cut and paste.
AFFIDAVIT OF BRUCE L. SILVERSTEIN, ESQUIRE
Bruce L. Silverstein, being duly sworn according to law, does hereby depose and state as follows:
1. My name is Bruce L. Silverstein, and I submit this affidavit in support of the opposition by JTR Enterprises LLC (“JTR”) to the Motion for Sanctions filed by Motivation, Inc. (“Motivation”) in Case No. 4:11-cv-10074-JLK, pending in the United Stated District Court for the Southern District of Florida (In Admiralty) (the “Admiralty Action”). I am an adult, of sound mind and body, and I make this affidavit based on my personal knowledge, except where I note that my knowledge is based on information obtained from others.
2. I apologize in advance for the length if this Affidavit. Unfortunately, I have no other opportunity to defend myself against the defamatory allegations made about me, personally, by Motivation and its counsel in the Admiralty Action. Specifically, Motivation’s Motion for Sanctions states that “Silverstein was an active and knowing participant” in a “fraudulent scheme.” (D.E. 123 at Opening Paragraph and ¶ 21). Motivation also asserts in its Reply to JTR’s Response to Motion to Compel Discovery that “Silverstein is an actor in the fraud and not a member of the audience.” (D.E. 137, at 7). Accordingly, I not only submit this Affidavit in support of JTR’s opposition to Motivation’s Motion for Sanctions, but I also submit this Affidavit as my sole opportunity within the Admiralty Action to clear my name in response to the defamatory assertions made by Motivation and its counsel. Additionally, I respectfully submit that the assertions are “immaterial, impertinent, or scandalous matter” that should be stricken from Motivation’s filings pursuant to Rule 12(f) of the federal rules of civil procedure.
A. Personal Background
3. I am a legal resident of the State of Delaware, and I am a Partner with the law firm of Young Conaway Stargatt & Taylor, LLP (“YCST”), where I have spent my entire career as an attorney since graduating law school more than twenty-five years ago, in 1986. I also am a member of the firm’s Management Committee. YCST employs more than 100 attorneys, and has its principal offices in Wilmington, Delaware, with other offices in Georgetown, Delaware and New York City. I am a member in good standing of the Delaware Bar, and have been since my admission thereto in December of 1986.1 I also am admitted to, and am a member in good standing of, the bars of the United States Supreme Court, the United States Court of Appeals for the Third Circuit, the United States Court of Appeals for the Fourth Circuit, and the United States District Court for the District of Delaware. I also have been admitted pro hac vice in other courts.
4. I graduated cum laude from Villanova Law School in 1986, where I was an Associate Editor of the Law Review and inducted into the Order of the Coif. I have been appointed to serve as Master in Chancery Pro Hac Vice by the Chancellor of that Court (see SICPA Holdings, S.A. v. Optical Coating Lab., Inc., 1996 Del. Ch. LEXIS 137 (Del. Ch. Oct. 10, 1996), and I have lectured with members of the Court of Chancery on litigation practice in that
Because I am Delaware counsel to JTR, Jay Miscovich (“Jay”), Steve Elchlepp, Jr. (“Steve”), and Scott Miscovich (“Scott”), I have not set forth herein information protected by the attorney/client privilege, except to the limited extent necessary to defend accusations in Motivation’s Motion for Sanctions (and other filings) that I have, somehow, assisted JTR in fraudulent conduct – which disclosure is expressly excluded from the scope of the privilege pursuant to Rule 502(d)(4) of the Delaware Uniform Rules of Evidence, which is titled “Accusations against a lawyer,” and provides, as follows: “There is no privilege under this rule: . . [a]s to communication necessary for a lawyer to defend in a legal proceeding an accusation that the lawyer assisted the client in criminal or fraudulent conduct.” To my knowledge, neither Florida law nor federal law has a similar provision. Fortunately for the other lawyers who represent or have represented JTR, Jay, Scott or Steve, however, I am the only one who Motivation and its counsel have seen fit to accuse of assisting the client in fraudulent conduct.
Court, as well as various substantive issues arising under the Delaware General Corporation Law. I am a member of the American Bar Association and the Delaware State Bar Association, and I am a former Associate Member of the Delaware Board of Bar Examiners. I also am a member of the Board of Advisors of the University of Pennsylvania Institute for Law and Economics. I have been recognized by The Best Lawyers in America for Corporate and Commercial Law for the past six years, and I also have been ranked by LawDragon as one of the top 500 lawyers in the country.
5. The primary concentration of my legal practice is in the field of corporate law, and I have counseled numerous clients and litigated numerous claims involving transactions involving many billions of dollars (per transaction or claim in many cases). As such, I have had the privilege and honor to work with, for, and against some of the finest lawyers and best businesspersons in the country (if not internationally). My legal advice in a transaction has never been found to have been flawed by any court, and I have rarely lost a litigation matter in which I was lead counsel.
6. In more than twenty-five years of practice, I have never had a motion for
attorneys’ fees filed against me, and I have never been the subject of any sanctions. I believe
that I have an impeccable reputation, and I am deeply offended by the claims of fraud that have
been asserted against me by Motivation and its counsel. The assertions are baseless, reckless and
defamatory, and I am in the process of investigating my avenues for judicial redress.
B. General Background of Emerald Case
7. As the Court is aware, Jay Miscovich (“Jay”) claims to have discovered tens of thousands of Colombian emeralds in International Waters in the Gulf of Mexico within 3,000 yards of a point located at coordinates 24°57.79” North Latitude and 81°55.54” West Longitude (the “Discovery Site”). As I understand matters, Jay first came across the Discovery Site in
January of 2010, and Jay and Steve Elchlepp, Jr. (“Steve”) salvaged tens of thousands of Colombian emeralds from the Discovery Site during numerous dives conducted over the course of the year that followed.
8. I have no personal knowledge of how Jay first came across the Discovery Site, as I had never met, or even heard of, Jay or Steve until January of 2011. I do, however, have personal knowledge that Jay and Steve, along with David P. Horan, Esquire, recovered numerous emeralds from the Discovery Site at various times in 2011, including one occasion in which I traveled with them to the Discovery Site, along with a crew of persons from CBS News and 60 MINUTES, and witnessed Steve and David Horan dive into the water and come up with a number of emeralds. More recently, I was told by JTR’s current lead counsel, John Siracusa, Esquire, that he also visited the Discovery Site with Steve, and that Mr. Siracusa personally discovered and salvaged a number of emeralds.
9. Despite my lack of personal knowledge of how Jay first came across the Discovery Site, I have come to believe that Jay has, in fact, made an amazing discovery. My belief is informed by, among other things, the fact that various researchers from CBS News investigated the discovery for more than a year (beginning in February, 2011) and ultimately prepared a segment for 60 MINUTES, which was broadcast in April, 2012, and which was a positive story about the discovery and not a story about a fraud or a hoax (as Motivation claims to be the case). I have no doubt that 60 MINUTES would have prepared a far different segment than the one that was broadcast if CBS News believed Jay had fabricated the story of his discovery. Indeed, I was told as much by the CBS News personnel working on the story.2
By stating that I have come to believe that Jay has, in fact, made an amazing discovery, I do not mean to suggest that I have no knowledge of any privileged information from which someone might attempt to make a contrary argument. I do, however, mean to state, under oath, that I honestly believe Jay has made an amazing discovery, and that Motivation’s claims that JTR is,
10. Additionally, since January of 2011, more than ten attorneys at my firm and at two other firms (in Hawaii and Massachusetts) have reviewed thousands of pages of source documents, conducted numerous interviews, and performed substantial research, and we have been unable to uncover any evidence that caused us to believe that Jay has fabricated the story of his discovery of the emeralds. Nor did the numerous attorneys representing the New York Investors ever assert such a claim. Again, however, I have to state that I lack personal knowledge of how Jay first came across the Discovery Site, as I did not know Jay at that time, and I certainly was not with him when he made the discovery.
11. Among the documents I personally have reviewed are (i) correspondence and photographs from a review of the emeralds by Jeff Post, the Curator of the National Gem and Mineral Collection at the Smithsonian Institution (the “Smithsonian”), with whom I also spoke by telephone to confirm the information in the correspondence, (ii) numerous “appraisals” from a laboratory in New York City, which reflect the opinion of the appraiser (who I later interviewed in person) that a group of less than 25 of the tens of thousands of emeralds in Jay’s possession have an estimated retail value in excess of $100,000, plus some specimens that the appraiser found too rare to value, and (iii) numerous e-mails between and among a group of former potential investors (the “New York Investors”) discussing their views of the emeralds. I also have spoken extensively with the investigators from CBS News who prepared the 60 MINUTES segment featuring Jay and his discovery, and I have witnessed an examination of the emeralds by various experts – including (i) the owner of a Colombian emerald mine, (ii) an internationally
somehow, committing a fraud on the Court are unfounded. My belief is informed, in large part, by the non-privileged information I discuss herein. If knew that JTR was committing a fraud on the court (as alleged by Motivation), I would take actions consistent with Rule 3.3 of the Delaware Lawyer’s Rules of Professional Conduct – titled “Candor toward the tribunal” – and I would not be submitting an affidavit such as this.
respected gem expert who has written a book about colored gemstones, (iii) a senior gemologist at Sotheby’s, and (iv) an appraiser trained by the Gemological Institute of America (the “GIA”) – all of whom have confirmed to me that the emeralds were mined in Colombia and include specimens that have substantial value. Indeed, I have been told by each of these individuals that some of the specimens are “museum quality.” Additionally, I understand that Jeff Post was interested in a display featuring some of the emeralds at the Smithsonian. As one of the New York Investors wrote in an e-mail after meeting with Mr. Post on July 13, 2010:
Just leaving Washington and the Smithsonian. It was a home run! Jeff Post who is the curator asked for a 5 year loan of a pile of emeralds for a major display near the Hope Diamond. he wants a permanent contribution as well. He said and I quote, “this has been a once in a lifetime experience for me”. This guy has seen everything.
There was one batch of the 5-30 carat emeralds that he knew had come from the Muzo mine but said that he had never seen before and thought that they could be the most rare type of emeralds he had ever seen. We have 20,000 of those emeralds. Jeff Post said that it is quite likely that those emeralds were specific to Columbia and were some of the first to come out of the mine. He again said, I don’t believe the Smithsonian has ever seen this type before.
Anyway, we were all taken aback at the enthusiasm. Jeff is taking this to the head of the entire Smithsonian, undersecretary position.
(E-mail from D. Barr to B. Toppe, dated July 13, 2010) (Exhibit A hereto). (See also e-mail from D. Barr to J. Post, dated July 13, 2010) (forwarding four color photos of Jeff Post examining the emeralds) (Exhibit B hereto).
12. At or following that meeting at the Smithsonian, Mr. Post asked Jay to provide additional samples of emeralds from the Discovery Site, which Mr. Post asked to be kept in sea water and sent that way to the Smithsonian for further analysis. Jay complied with this request, and sent the requested material to the Smithsonian on August 16, 2010. In a cover letter to Mr. Post, Jay wrote as follows:
IT WAS WONDERFUL MEETING WITH YOU AND YOUR STAFF! AS PER OUR CONVERSATION, ENCLOSED FIND 36 ROUGH EMERALDS, 18 CLEANED AND 18 UNCLEANED. . . . THE 18 UNCLEANED EMERALDS ARE ALL IN THE WATER SPECIMEN JAR WITH SAND, SHELLS, PLANT LIFE ETC. I MADE EVERY ATTEMPT TO COLLECT WITH PROPER SCIENTIFIC TECHNIQUE ... SO NONE WERE TOUCHED WITH HUMAN HANDS OR CONTAMINATED IN ANY WAY. [THEY WERE NOT WEIGHED SO NOT TO CONTAMINATE, BUT I SELECTED ALL OF VERY SIMILAR SIZE, STRUCTURE, PYRITE CONTENT, SHAPE, COLOR AND OPACITY COMPARED WITH THE CLEANED CONTROL GROUP.] I AM VERY PLEASED TO DONATE THESE FINE SPECIMENS IN THE HOPE THAT THEY CONTRIBUTE IN A SMALL WAY TO OUR KNOWLEDGE OF PAST NATURAL HISTORY!!
(Letter from J. Miscovich to J. Post, dated August 11, 2010) (Exhibit C hereto).
13. After Jeff Post examined the “uncleaned” emeralds Jay had provided, Mr. Post
sent the following e-mail to one of the New York Investors:
Dean, I had a chance yesterday to look a[t] a couple of the uncleaned emerald crystals on the analytical scanning electron microscope, and I attached a couple of images. The images show fine-grained mineral “debris” in cracks and crevices in the surface of the emerald crystal. Not surprisingly most of these grains are calcite, halite, quartz, etc., minerals common in marine sediments. The images were taken using a back-scattered electron detector, meaning minerals with heavier elements will appear brighter than those composed mostly of lighter elements. You will notice that in the center of image 002 there is a very bright (white) grain, which is clearly composed of heavy elements. Interestingly, the grain is gold with minor amounts of silver and copper. As I looked around on the crystal, I found numerous similarly bright grains, and all were gold with some amounts of copper and silver (e.g. see two small bright grains in image 003). So where is the gold from? I did not clean or prepare the sample in any way before putting it into the microscope, so I do not see how it could be contamination. As the gold grains (they are very small, ~1-6 microns in size) are always associated with fine-grained mineral grains filling in the cracks in the crystal and are not actually attached to or in the emerald crystal, I assume they must be in the sediments in which the emeralds are buried. Ocean sediments typically do not contain gold grains. Perhaps in the vicinity of the emeralds there are or were gold coins or other objects that have been slightly abraded by
being rolled around in the sand and sediments, and this causes tiny grains of gold to be removed and mixed into the sediments. Obviously gold is soft, and the 1-6 micron grain size is consistent with what might expect from an abrasive or erosional process.
This might not be all that exciting to you, but I certainly wasn't expecting to find tiny gold flecks on these emeralds. Their presence seems consistent with the idea that these emeralds were on the seafloor associated with gold objects for some period of time. There might be other and better explanations, but I haven’t thought of them yet. These are only preliminary results and I need to look at more crystals (and associated sediment) and do more thinking, but I wanted to let you know I found so far.
(E-mail from J. Post to D. Barr, dated Sept. 9, 2010) (Exhibit D hereto).
14. A few weeks later, a rift developed between Jay and the New York Investors,
which resulted in a “freeze” being placed on the safe deposit box in New York City in which the emeralds were being kept, and the New York Investors claiming the right to determine the best manner for seeking to obtain legal title to the emeralds.
C. The Delaware Litigation
15. I was first contacted to represent Jay and Steve on January 18 or 19, 2011. The contact came from Mark Davis, Esquire.3 Mr. Davis asked if I would be willing to represent Jay, Steve, and Jay’s brother, Scott Miscovich (“Scott”), in a lawsuit the New York Investors had commenced in the Delaware Court of Chancery (the “Delaware Litigation”).
Mark Davis is based in Hawaii, and has been recognized as one of the best trial lawyers in Hawaii and in the United States. Mr. Davis is listed in The Best Lawyers in America and was elected to membership by his peers in The American College of Trial Lawyers, The International Academy of Trial Lawyers, The International Society of Barristers, and The American Board of Trial Advocates. Mr. Davis also is one of only 100 lawyers in America who is a member of The Inner Circle of Advocates, and he is a twenty-year member of The Board of Governors of The American Association for Justice. For more information about Mr. Davis and the nature of his legal practice, see http://www.davislevin.com/markdavis.html. I have kept Mr. Davis apprised of all filings and all material developments and communications in the Admiralty Action (as defined later herein), and he has continued to provide legal advice and counsel to Jay, Scott and Steve in connection with their efforts to secure title and/or a liberal salvage award respecting the emerald discovery.
16. When I first learned that the litigation involved a discovery of thousands of emeralds in international waters, I was extremely skeptical. If the claims asserted against Jay, Steve, and Scott had been that they had misled the New York Investors into believing Jay had discovered a sunken treasure, I wouldn’t have touched the case with a ten foot pole. Instead, however, the claim asserted by the New York Investors was that Jay had, in fact, discovered a fortune in emeralds, and that Jay had wrongfully refused to cede control over the treasure to the New York Investors – who claimed to have a superior plan for how to obtain title to and monetize Jay’s discovery. The New York Investors and their counsel claimed that Jay’s emeralds were of historical significance and of extraordinary value. Values for the “discovery” (once fully developed and properly marketed) were bandied about in the hundreds of millions of dollars, and possibly exceeding a half a billion dollars or more. Inasmuch as the plaintiffs were wealthy, sophisticated business persons, represented by high-priced New York counsel, it appeared that there may well be something worth fighting over, and I decided it was worth taking on the case on a contingent-fee basis – as Jay, Steve and Scott lacked the funds to pay for their defense. As Mark Davis was then fond of saying, Jay, Steve and Scott were “emerald rich, and cash poor.”
17. The Delaware Litigation began with the New York Investors seeking a “Status Quo Order” – which is akin to a Temporary Restraining Order. Specifically, the New York Investors asked the Court of Chancery to enter an Order that would preclude Jay from exercising de facto control over the emeralds and/or conducting further salvage activity at the Discovery Site. In support of their motion for emergency relief, the New York Investors submitted a number of affidavits that made a number of scurrilous accusations about Jay, Scott and Steve. After a team of lawyers on our side interviewed Jay, Scott and Steve, poured through hundreds
of e-mails and other documentary evidence, and spoke with some other non-party witnesses, we prepared counter-affidavits for Jay and Scott, as well as Paul Sullivan (“Paul”), a friend and neighbor of Scott’s, who had a long-standing relationship with Mark Davis, and who was serving as an unofficial “advisor” to Jay, Steve and Scott in their efforts to determine, among other things, (i) the origin of the emeralds, (ii) the best manner of obtaining title to the emeralds, and (iii) the best manner of protecting Jay, Steve and Scott from the “sharks” that tend to swarm when treasure is found.4
18. As we stated in the Preliminary Statement to our brief in the Delaware Litigation:
[REDACTED] With the help of Jay’s brother, Scott Miscovich (“Scott”), and friend, Stephen Elchlepp, Jr. (“Steve”), Jay is in the process of developing plans to use his discovery for significant philanthropic purposes. If Jay, Scott and Steve are successful in their endeavors, their story [REDACTED] will show them to be honest, moral, hard-working individuals who do not remotely resemble the portrait painted by the reckless and slanderous allegations in Plaintiffs’ pleadings.
Brief of Defendant Jay Miscovich in Opposition to Plaintiffs’ Motions for Status Quo Order and Expedited Proceedings, at 2 (Jan. 31, 2011), filed in AZALP LLC v. Miscovich, Del. Ch., C.A. No. 6138-VCL (redacted copy attached hereto as Exhibit F).5
As set forth in an Affidavit filed in the Court of Chancery, Mr. Sullivan has been involved in government affairs and national politics since 1972, including service as (i) executive director of the Democratic National Committee, (ii)deputy administrator of the United States Small Business Administration, (iii) national campaign manager for George McGovern’s presidential campaign, (iv) deputy campaign manager for President Clinton, and (v) deputy political director in the Office of the President-Elect, during which Mr. Sullivan was responsible for helping select and vet nominees for senior government positions including the U.S. State Department. Mr. Sullivan also served in a variety of roles involving domestic public relations and international diplomatic relations, including assisting the United States Government to help in the rebuilding of Kuwait after the first Gulf War. Additional information about Mr. Sullivan’s background is set forth in his Affidavit in the Delaware Litigation, a redacted copy of which is attached hereto as Exhibit E.
An unredacted copy of the brief was filed “Under Seal” with the Court of Chancery, and can be submitted to other courts only pursuant to a Court Order compelling its production.
19. Among other things, the New York Investors based their claims on information supplied in an affidavit by Gerry Edwards, a convicted felon, who had an axe to grind with Jay and Steve. See Criminal Record of Gerry Edwards (Exhibit G hereto). Notably, Mr. Edwards also is one of Motivation’s affiants in the Admiralty Action.
20. Another convicted felon who has provided an affidavit to Motivation is Scott Wilding, a securities promoter who (i) has been found guilty of violating the federal securities laws, (ii) has been charged with multiple criminal offenses, (iii) was convicted of at least one felony, (iv) has a record of incarceration in the State of Florida, (v) has had a federal tax lien imposed on his real property, and who has been accused of various other improprieties. See Public Records Information Obtained by John Siracusa, Esquire (Exhibit H hereto); In the Matter of Research Investment Group, Inc., Scott Wilding, et al., File No. 3-11307 (S.E.C. Admin. Proceeding Feb. 17, 2004) (Order) (reproduced at http://www.sec.gov/litigation/admin/33-8387.htm).
21. Finally, to round out the trio of felons working to deny Jay his treasure, I understand that another source of information to both the New York Investors and Motivation is Edward Krajewski, a friend of Gerry Edwards, and another convicted felon. See S. Ritea, “Former Officer Found Guilty of 14 Charges Edward Krejewski Was Convicted of Conspiracy to Rob a Philadelphia Drug Dealer to Pay for a Treasure Hunt” (Oct. 10, 1996), reproduced at http://articles.philly.com/1996-10-10/news/25664878_1_treasure-hunt-police-force-philadelphia- drug-dealer.
22. After conducting a hearing, the Court of Chancery (i) declined to grant the relief requested by the New York Investors, and (ii) determined to hold a trial within 90 days on the merits of the “control contest.” Thereafter, the parties began to engage in discovery, which
included the disclosure of the location of emeralds held by the various parties and inspections
and inventories conducted by a Court-appointed Special Master.
D. CBS News Enters the Picture
23. On February 19, 2011, Armen Keteyian, the Chief Investigative Correspondent of CBS News, showed up at Jay’s home with Len Tepper, the Chief of Investigative Projects for CBS News, and attempted to interview Jay about the Delaware Litigation. Jay called me for advice on how to handle the situation, and I spoke with Messrs. Keteyian and Tepper over the telephone. I explained that the litigation was at a sensitive stage and that the emerald discovery was equally sensitive, and Messrs. Keteyian and Tepper agreed to hold off on publicizing the limited information they already had in consideration with our agreeing to meet with them at their offices in New York City to discuss the possibility of moving forward with CBS News on an exclusive basis.
24. Following the initial contact by CBS News, and after Messrs. Keteyian and Tepper learned more about Jay’s discovery, their interest in the Delaware Litigation waned, and they became more interested in investigating and reporting on Jay’s emerald discovery. Additionally, Len Tepper took the story of Jay’s discovery to 60 MINUTES, which expressed interest in the story. Accordingly, our meeting in New York was changed to a meeting with Bill Owens, the Executive Director of 60 MINUTES.
25. Paul Sullivan and I met with Len Tepper and Bill Owens in New York City on February 22, 2011. At that meeting, Mr. Owens expressed interest in having 60 MINUTES investigate and produce a segment respecting Jay and his discovery, and I thereafter negotiated an agreement with the Deputy General Counsel of CBS Broadcasting, which provided CBS News with broad access to Jay and the discovery, subject to an obligation by CBS to maintain
the story in confidence until sometime after an admiralty claim could be filed and the Discovery Site could be secured.
26. Thereafter, CBS News and 60 MINUTES launched an extensive joint investigation, which lasted for more than a year. In that time, CBS News and 60 MINUTES were provided virtually unrestricted access to Jay and Steve. I understand from CBS News and 60 MINUTES that they also contacted and interviewed numerous people, but they did not discuss the details of their investigation with me.
27. Significantly, the materials submitted by Motivation in support of its Motion for
Sanctions includes a short affidavit of Scott Wilding – a convicted felon and stock promoter who
the SEC has found guilty of violating the federal securities laws – in which Mr. Wilding claims
that Jay met with Mr. Wilding in June or July of 2010 and that Jay allegedly told Mr. Wilding
that “CBS news program 60 Minutes was going to do a story on this discovery and that ‘I better
get in now.’” (D.E. 123-3, at ¶ 5). I believe that Mr. Wilding is making this up. I say this both
because (i) Jay has denied that he ever made such statement to Mr. Wilding, and (ii) as discussed
herein, CBS News first contacted Jay on February 19, 2011, and 60 MINUTES did not become
involved until February 22, 2011, which is the day Paul, Ben and I met with the Bill Owens in
New York City. Thus, Mr. Wilding goes too far in seeking to guild the lily to make his story
sound credible and fit with Motivation’s conspiracy theory. The trouble with Mr. Wilding’s
story, however, is that 60 MINUTES was not in the picture until more than six months after Mr.
Wilding says he spoke with Jay.
E. Settlement of the Delaware Litigation and Decision to Pursue an Admiralty Claim
28. The parties to the Delaware Litigation reached agreement to settle the matter on March 29, 2011. The agreement was reached near midnight, following an all-day mediation session in New York City, which was facilitated by a former United States District Court Judge.
It was the second such mediation session in which the parties participated. Pursuant to the settlement – which was subject to the approval of the Court of Chancery – the New York Investors both (i) abandoned their claims to control the disposition of the emeralds, and (ii) confirmed that Jay had exclusive control over that issue
29. Thereafter, the Court of Chancery directed that Notice of the proposed settlement be provided to various non-parties having a potential interest in the dispute, and scheduled a hearing to consider the settlement on August 9, 2011 – which was later continued to August 19, 2011 on account of the Judge’s lack of availability resulting from a scheduling conflict.
30. In the months between the agreement to settle the Delaware Litigation was reached and the hearing on the proposed settlement was held, Jay formulated a plan of action for seeking to obtain title to his discovery. Jay was assisted in this planning by a number of legal and business advisors, as well as by friends and family. Among the legal advisors who worked with Jay during between March and August of 2011 was David P. Horan, who had called Jay in February, 2011, after learning of Jay’s discovery, and volunteered his services on a contingent fee basis.6 After substantial deliberation, the plan of action that ultimately was adopted was to wait for the Court of Chancery to approve the settlement, and then promptly commence an admiralty proceeding in the United States District Court in the Southern District of Florida. While various other alternatives were explored and considered throughout the summer, none appeared superior to allowing the United States Justice System to sort out the ownership issue.7
After being contacted by David Horan, Jay asked us to interview David to serve as admiralty counsel. Thereafter, David Horan was formally engaged on a contingency-fee basis, pursuant to a written agreement, dated March 15, 2011.
At one point, with the assistance of Paul Sullivan, Jay explored the potential of coordinating an Admiralty filing with a consensual intervention by Colombia. Depending on the outcome of the Admiralty action, and the ultimate determination of the history and value of the emeralds, it is still a possibility that JTR will pursue some form of charitable venture involving Colombia –
31. Jay would have preferred to commence the Admiralty proceeding sooner, but the
New York Investors were claiming (incorrectly we contended) that Jay had legally assigned,
transferred and relinquished whatever personal rights he had to assert a claim to the discovery to
an entity formed by the New York Investors, which they claimed to control. Moreover, the New
York Investors had engaged admiralty lawyers to provide extensive analysis of the legal issues
associated with seeking an award of title respecting Jay’s discovery, and the New York Investors
were against filing an Admiralty claim in United States District Court, and favored taking Jay’s
discovery off-shore. Accordingly, unless and until the Delaware Litigation was finally resolved,
Jay’s filing of an Admiralty claim risked liability to the New York Investors.
F. The “Ken Rose” Agreement / The “Kirby Site”
32. Needless to say, Jay and Steve were fairly restless waiting to learn whether the Court of Chancery would approve the proposed settlement of the Delaware Litigation. Accordingly, it was important for them to find something productive to do in the interim. While it would have been optimal if Jay and Steve could have spent the bulk of that time working at the Discovery Site, there was substantial concern that repeated visits to the Discovery Site might draw attention to its location. Because Jay was not yet in a position to commence an Admiralty action, and secure an injunction against other divers working the Discovery Site, it was determined that it would be best for Jay and Steve to work at a dive site other than the Discovery Site. In that connection, two different locations were considered: (i) the “Kirby Site” (also known as the “Ken Rose Concession”) – which had a number of wrecks, including a civil war era wreck that was of interest to Jay and Steve, and (ii) the Jupiter Inlet Site – where David Horan had good relations with the salvers-in-possession. Ultimately, the Kirby Sight was
especially the Muzo district, which is relatively impoverished and where many of the residents are in need of assistance.
selected as the better choice, and I was tasked with negotiating an agreement with Ken Rose and his counsel.
33. In June of 2011, I personally negotiated the agreement that would permit Jay and
Steve (through an entity named “J&S Keys”) to work at the Kirby Site. The Agreement
(i) authorized Jay and Steve to conduct exploratory work at the Kirby Site, (ii) provided for a
50/50 split with the Kirby Group of anything found through their efforts, and (iii) provided the
Kirby Group with “Observation Rights.” (A copy of the Agreement is attached hereto as
G. Visit to Sotheby’s
34. On June 8, 2011, I attended a meeting at Sotheby’s offices in New York City.
Also in attendance at the meeting were Ben Kincannon (a public relations professional),
Sotheby’s President, a senior in-house gemologist, and an in-house lawyer. Mr. Kincannon
showed the individuals from Sotheby’s a small sampling of the emeralds, and the Sotheby’s
gemologist expressed the opinion that just one of the various emeralds Mr. Kincannon had
brought to the meeting had an auction value of forty thousand dollars ($40,000.00). Notably,
this same emerald previously had been appraised by the laboratory in New York City at less than
twenty-five thousand ($25,000.00).
H. Second Thoughts & Last-Minute Butterflies
35. On Sunday, August 14, 2011, with the settlement hearing before the Court of Chancery scheduled for that coming Friday, a final decision was made to commence an action in the United States District Court promptly following the approval of the settlement.
36. Sometime in the following few days, Jay was advised that he should take the Recovered Material to a foreign country, and seek the aid of that country to obtain title (i.e., the same strategy that had been explored by the New York Investors). I disagreed with this new
advice, encouraged Jay to “steer the course that was set prior to the settlement hearing in Delaware” and proceed with an Admiralty Court filing promptly following approval of the settlement of the Delaware Litigation, and said that I would not continue to devote any further legal assistance with the matter beyond any “clean up work” needed to help comply with the settlement of the Delaware Litigation if Jay did not proceed with an Admiralty action. (E-mail from B. Silverstein to J. Miscovich, dated August 21, 2011) (Exhibit J hereto).
37. After considering his options, Jay reaffirmed his prior decision to put his faith in
the United States Justice System and proceed with an Admiralty filing in district court.
I. The Formation of JTR
38. On August 25, 2011, Jay, Scott and Steve formally contributed, assigned, and transferred all right, title and interest they may possess regarding the emeralds and other items discovered at the Discovery Site, including but not limited to their knowledge of the GPS coordinates of the Discovery Site, all items Jay, Steve and others working with or for them have salvaged from the site and all items they may salvage in the future to JTR, with the understanding that JTR would, shortly thereafter, commence an Admiralty action, seeking an award of title and/or a liberal salvage award respecting the emeralds and other items discovered at and salvaged from the Discovery Site.
J. The Admiralty Action
1. JTR’s Verified Claim
39. On September 6, 2011, JTR filed a Verified Complaint for Maritime Salvage in the United States District Court for the Southern District of Florida (in Admiralty), seeking an award of title or a liberal salvage award respecting certain emeralds, amethysts and quartz crystals that JTR’s Managing member, Jay Miscovich, discovered in International Waters in the Gulf of Mexico (the “Salvaged Material”). (D.E. 1). JTR’s Verified Complaint in the Admiralty
Action makes no assertion respecting the origin, quality or value of the Salvaged Material – all of which are issues JTR has been investigating and continues to investigate. Rather, the Verified Claim alleges only that (i) Jay discovered the Salvaged Material at the Discovery Site, (ii) the Salvaged Material was salvaged from the Discovery Site, and (iii) the Salvaged Material consists of emeralds, amethysts, and quartz crystals. (See generally D.E. 1).
40. On September 9, 2011, David Horan traveled to the Discovery Site with Steve Elchlepp, Jr. After returning to shore, David reported that he personally dove the site and salvaged some emeralds, which were added to the collection for which JTR is seeking an award of title. This gave me great comfort, as I lacked personal knowledge of the Discovery Site, and I was pleased that David Horan had provided first-hand verification that he had salvaged emeralds from the Discovery Site. I know that Paul Sullivan, and even Scott Miscovich, also were pleased – as neither of them had ever visited the Discovery Site, either.
2. Motivation’s Competing Claim
41. As is typical of the modern press, which is quick to publish sensational news without conducting appropriate investigation, the Key West Citizen published an article on October 9, 2011, which begins with the following sentence: “If you lost a cache of Colombian gems worth a reported half-billion dollars in shallow waters about 30 miles off Key West, now is the time to claim it.” (A. Linhardt, “Filing seeks sole ownership of treasure,” Key West Citizen (Oct. 9, 2011), reproduced at http://keysnews.com/node/35094). To the best of my knowledge, neither JTR nor anyone authorized to speak for JTR provided this putative valuation to the Key West Citizen. Certainly, there is no such value asserted in JTR’s Verified Complaint.
42. Relying on the Key West Citizen (and not the content of JTR’s Verified Pleading), Motivation injected itself into JTR’s Admiralty proceedings by filing a Verified Statement of Right and Interest and Claim on October 16, 2011. (D.E. 10). In that pleading,
Motivation alleged that the emeralds Jay had discovered were cargo from the Atocha, which had floated in a barrel until the barrel broke up and deposited the emeralds at the Discovery Site. (D.E. 10 at ¶ 15). This claims seemed preposterous inasmuch as the Discovery Site is 40 miles from the wreck-site of Atocha and 30 miles from the outer-most bound of the debris trail from the Atocha. Moreover, I understand that the prevailing currents would have been in the opposite direction that Motivation alleged the barrel had floated. Of even greater significance, the sole legal support for Motivation’s claim was a 1976 Order of this Court, which had been modified on appeal by the Fifth Circuit in a manner that contradicted Motivation’s claim that it owned the Atocha and its cargo wherever it might be found. (D.E. 10 at ¶ 8). See also Treasure Salvors, Inc. v. Unidentified Wreck & Abandoned Sailing Vessel, 569 F.2d 330, 335-36 (5th Cir. 1978) (“Treasure Salvors I”) (“In affirming the district court, we do not approve that portion of its order which may be construed as a holding that plaintiffs have exclusive title to, and the right to immediate and sole possession of, the vessel and cargo as to other claimants, if any there be, who are not parties or privies to this litigation.”); Treasure Salvors, Inc. v. Unidentified Wreck & Abandoned Sailing Vessel, 640 F.2d 560, 569 n.6 (5th Cir. 1981) (“[W]e think it impossible to understand Treasure Salvors I as saying anything other than that we disapproved the district court’s determination that Treasure Salvors had title to the Atocha and modified the judgment accordingly to omit any such decree.”). As such, even if the emeralds at the Discovery Site had once been cargo on the Atocha, Motivation still would lack any legally viable claim to them.
3. JTR’s Efforts to Persuade Motivation to Voluntarily Withdraw its Claim
43. Within days of the filing of Motivation’s competing claim to the emeralds, David Horan wrote a letter to Motivation’s counsel encouraging the voluntary withdrawal of Motivation’s claim. In his letter, Mr. Horan explained that the emeralds subject to JTR’s Admiralty claim “have nothing whatsoever to do with Atocha/Margarita.” (D.E. 123-1, at 2).
Among other things, Mr. Horan also wrote that Motivation’s failure to withdraw its baseless claim will force JTR “to spend considerable costs/fees defending what the Court will find is bad faith litigation.” (Id.).
44. The next day, Motivation’s counsel wrote back, and essentially conceded that they lacked a well-founded factual basis for Motivation’s Verified Claim, but that Motivation had directed them to file the Verified Claim to avoid criticism by Motivation’s investors. As Motivation’s counsel explained, “Motivation needed to file a protective claim . . . to be safe from a charge of neglect by investors; then we could get with you and resolve any due diligence concerns.” (D.E. 123-1, at 3). In other words, Motivation directed its counsel to file first, and figure out if they had a claim later.
45. In an effort to soften the blow of Motivation’s having asserted the only claim that would preclude JTR from otherwise obtaining a prompt judgment in its favor in the Admiralty Action (based on an absence of any opposition), and as a prelude to a conversation that would later occur with Kim and Sean Fisher (and which is discussed more fully in the Affidavit of Paul Sullivan), Motivation’s counsel volunteered that “should Motivation prevail in its claim, JTR Enterprises would be entitled to a substantial salvage award and, if that were the result, it might be a better solution than your current position.” (Id. at 4).
46. The next day, David Horan wrote again to Motivation’s counsel. Mr. Horan began the letter as follows:
Your October 20th letter was somewhat disappointing in a number of respects. First, I can only compare the Motivation claim to a fishing expedition. Your idea about the Fishers “speculation about whether the stones are, or are not, possibly related to the Atocha or (less likely) the Margarita” is precisely the reason that I sent my October 19th letter. Essentially, you are asking that my clients allow Motivation to challenge our extensive work on the emeralds. Simply put, you and I know that nobody should be able to file a
Verified claim in order to determine if there is any chance such a claim exists.
(D.E. 123-1, at 5) (emphasis in original).
47. Mr. Horan went on to explain, once again, how the emeralds did not, and could
not have, come from the Atocha or Margarita, and repeated his entreaty that Motivation should promptly withdraw its factually and legally unsupported claim. Additionally, Mr. Horan wrote:
In conclusion, if you have anything to justify the Verified Claim of Motivation other than the fact that some Colombian emeralds have been recovered from within a 5,000 square mile area of the Atocha injunctive area, we need to discuss it. If that is all you have, then there will be little we can agree on while the Motivation claim remains pending.
(Id. at 6) (emphasis in original).
48. Over the next couple weeks, counsel and representatives of JTR and Motivation
engaged in settlement discussions pertaining to the circumstances under which Motivation would agree to voluntarily dismiss its claim. Apparently believing that these settlement communications are admissible despite the provisions of Rule 408 of the Federal Rules of Evidence, Motivation attached certain of these settlement communications as exhibits to its Motion for Sanctions. (See D.E. 123-1, at 7-18). In the interests of providing a complete record, and because Motivation has “opened the door” to doing so, I discuss herein other such communications between and among the parties, and I attach certain of these communications as Exhibits hereto.
49. Despite Motivation’s attachment of various settlement communications to Motivation’s Motion for Sanctions, Motivation’s papers are conspicuously silent about what occurred during a teleconference involving, among others, Paul Sullivan, Kim Fisher and Sean Fisher. A summary of one of these teleconferences is set out in the Affidavit of Paul Sullivan, which is being submitted in opposition to Motivation’s Motion for Sanctions. As set forth more
fully in Mr. Sullivan’s affidavit, during those conversations, Kim Fisher or Sean Fisher twice advocated that JTR simply declare that the emeralds came from the Atocha so that Motivation and JTR could then jointly sell the emeralds as Atocha treasure. This suggestion by the Fishers is consistent with their counsel’s prior statement that “should Motivation prevail in its claim, JTR Enterprises would be entitled to a substantial salvage award and, if that were the result, it might be a better solution than your current position.” (D.E. 123-1, at 4).
50. On November 21, 2011, Duncan Mathewson, a marine archeologist who was working with JTR, reported to Jay and others that his research “under cuts [Motivation’s] current present position concerning the credibility of their belief that the emeralds came from [the Margarita] site,” and that “[t]he case being made for connecting the emeralds with the Atocha is even less plausible.” (E-mail from Duncan Mathewson to Jay Miscovich and others, dated November 21, 2011, at 1:12 am) (Exhibit K hereto). Mr. Mathewson’s e-mail provided details underlying his conclusions, and is entirely consistent with what JTR had been telling Motivation since Motivation first entered the picture in order to protect itself from potential investor ire, and without having investigated the acts or law pertaining to its claim.
4. JTR Moves to Dismiss Motivation’s Claim and for a Stay of Discovery Pending Resolution of the Dismissal Motion
51. On December 1, 2011, having failed to prevail upon Motivation to either withdraw its claim altogether, or at least agree to a process for an alternative dispute resolution, JTR moved for judgment on the pleadings and/or to dismiss Motivation’s claim.
52. Lacking any basis to respond to JTR’s dismissal motion, Motivation insisted that it be permitted to inspect the emeralds held by JTR in safe deposit boxes in Key West before responding to JTR’s dismissal motion. Under settled law, however, a claimant has no right to engage in discovery in search of a cause of action. (See D.E. 50, at 3-4) (citing cases).
5. JTR Volunteers to Allow Motivation to Inspect the Emeralds if Motivation Will Identify the Criteria for the Inspection
53. Despite Motivation’s lack of entitlement to conduct any discovery pending resolution of JTR’s dismissal motion, JTR volunteered to allow Motivation to inspect the emeralds if Motivation would first identify the criteria it would use to determine whether the emeralds had come from the Atocha. JTR made clear, however, that it would not voluntarily permit such an inspection without Motivation first disclosing the criteria it would use for the inspection. As David Horan explained to Motivation’s counsel:
Unless there is some indication that my client can agree on as to what criteria will satisfy Motivations inquiry as to whether the verified claim would be withdrawn there is no agreement to inspect prior to the court ruling on the pending motion to dismiss/ [judgment on the pleadings].
(E-mail from D. Horan to G. Lewis, dated December 15, 2011) (Exhibit L hereto)
54. Motivation refused to identify the criteria it would use for the requested inspection. Accordingly, JTR stood in its legal rights to refuse the requested inspection pending resolution of JTR’s motion for judgment on the pleadings, and JTR moved for a formal stay of
discovery. (D.E. 50).
6. The Court Schedules a Hearing to Determine Whether Motivation Should Be Permitted to Inspect the Emeralds
55. On December 28, 2011, the Court entered an Order, establishing a hearing date of January 10, 2011 to determine whether Motivation would be permitted to inspect the emeralds prior to the resolution of JTR’s pending motion for judgment on the pleadings. (D.E. 51).
7. JTR Makes Another Offer That Would Permit Motivation to Conduct a Prompt Inspection of the Emeralds
56. Despite JTR’s confidence that the Court would deny Motivation an opportunity to inspect the emeralds prior to the resolution of JTR’s pending motion for judgment on the
pleadings – especially without first disclosing the criteria Motivation intended to use to determine whether the emeralds came from the Atocha – JTR made another offer that would permit Motivation to conduct the inspection it sought. The proposal was that (i) Motivation should stipulate that JTR is entitled to a salvage award of 75% of the Salvaged Material, (ii) JTR would withdraw its dismissal motion and provide Motivation with prompt and unfettered discovery, including a prompt inspection of the emeralds, and (iii) the parties would then litigate the question of whether the emeralds came from the Atocha, and, if so, how much of the remaining 25% of the treasure should be awarded to Motivation. This proposal was premised on the assertion by Motivation’s counsel that “should Motivation prevail in its claim, JTR Enterprises would be entitled to a substantial salvage award and, if that were the result, it might be a better solution than your current position.” (D.E. 123-1, at 4).
57. Motivation has submitted copies of the written communications reflecting this proposal as exhibits to Motivation’s Reply in Support of its Motion to Compel. (D.E. 137-4). Citing these written communications, Motivation falsely claims that I “offered Motivation 25% of the recoveries if Motivation would drop its claim without inspecting the res.” (D.E. 137, at 7). Motivation is wrong. I never offered Motivation any percentage of the recoveries, and I did not ask Motivation to drop its claim without inspecting the emeralds. Rather, consistent with Motivation’s counsel’s prior concession that JTR would be entitled to a liberal salvage award even if Motivation’s claim has merit, the written communications clearly and unambiguously reflect that I proposed that Motivation stipulate to a 75% salvage award, and that:
JTR will withdraw its pending motion for dismissal and/or judgment on the pleadings, and consent to Motivation taking full discovery – i.e., not simply an inspection of the emeralds, but any other discovery that Motivation would be entitled to take in preparation for a hearing on the merits before Judge King.
JTR and Motivation will continue to litigate the issue of who is entitled to all or part of the remaining 25% of the recovered material – which will be resolved by Judge King at a final hearing on the merits if it is not otherwise settled before then.
(D.E. 137-4, at 8).
58. In support of the foregoing proposal, I offered the following explanation:
[W]e have tried to make an offer that provides a meaningful benefit to both Motivation and JTR, and we believe JTR has come up with a sensible offer that accomplishes that objective. Unless you believe that Motivation has a meaningful chance of obtaining an award in excess of 5% of the recovered material – which David has advised us to be all but inconceivable – Motivation is not being asked to give up anything of value in this settlement, and Motivation stands to gain the opportunity to “discover” a basis for a stronger claim than it currently has, and at less cost inasmuch as JTR will not be opposing that discovery or otherwise engaging in motion practice based on the facial defects in Motivation’s claim. By the same token, although JTR would be giving up the potential to have this matter promptly resolved on the pleadings and without discovery, by agreeing to the proposed partial settlement JTR will obtain quicker access to the portion of the recovered material that JTR ultimately will obtain without regard to how the litigation plays out.
The only way I could understand Kim’s position to make sense were if you were counseling him to believe that Motivation might, somehow, obtain an award of greater than 25% depending on the results of the inspection. If that is the case, perhaps you, David and I should have a further discussion, as David has assured us that such a position is contrary to settled law. As we understand things, Motivation has no realistic chance of obtaining an award of in excess of 25% of the recovered material, even if it were assumed (arguendo) that Motivation were legally correct about the effect of the Order obtained in the Atocha litigation and factually correct about the emeralds coming from the Atocha – both of which are highly dubious propositions (to put it mildly).
(Id. at 9-10).
59. Even after Motivation rejected JTR’s offer, I wrote again, as follows:
To be crystal clear about the partial settlement proposal, JTR would agree to withdraw the dismissal motion and not argue that Motivation’s pleading is facially deficient. What this means is that the case would proceed with free and open discovery of JTR’s discovery, and not simply discovery of the content of the safe deposit boxes at Centennial Bank.
If, as a consequence of the discovery and ongoing exploratory work at the Discovery Site, it should be determined that the emeralds came from the Atocha (which is something JTR does not believe to be the case, but would not [be] upset to learn), the litigation would remain open, and we could jointly approach the Court for a determination that benefits Motivation and JTR.
By contrast, without the proposed partial settlement, JTR will stand on its pending dismissal motion, seek to preclude any discovery by Motivation (now or in the future), and Motivation may never obtain a chance to find evidence to support the “belief” asserted in the pleadings (which JTR contends to be insufficient to state a legally viable claim).
(D.E. 137-4, at 4-5).
60. Motivation again rejected my proposal, and I made one last effort, writing:
It really is a shame we can’t get our clients past the current impasse. I thought I had an idea that gave everyone a benefit, but I guess I don’t understand the psychology of the Key West Treasure Community.
I still fail to understand how an inspection of the emeralds and other material can change anything we have been discussing. As this matter progresses, Jay Miscovich is becoming increasingly aggravated with Motivation, and pushing us to take an aggressive position in the litigation – including (i) seeking sanctions if the dismissal motion is granted, and (ii) possibly commencing a class action suit against Motivation on behalf of its current and prior investors (which Jay is one). We have been pushing back very hard to keep Jay calm, but he is extremely frustrated by the fact that Motivation’s claim (which he views as frivolous) is holding back JTR from moving forward with its efforts to monetize the discovery.
As I said yesterday, Jay would not be disturbed to find proof that the emeralds did, in fact, come from the Atocha (even though nobody at this end believes that to be the case), and would be willing to work cooperatively with Motivation to try to establish
that fact if we first had a partial settlement. Without such an agreement, however, JTR will aggressively pursue its dismissal motion, and will assert whatever objections to Motivation's discovery requests as are reasonably available to a litigant.
We would much prefer to find a quick and efficient way to resolve what may otherwise be protracted and expensive litigation (unless JTR’s dismissal motion is granted, in which case the litigation will be over fairly soon).
Again, I welcome an opportunity to speak with Kim, but I understand if he is not interested in speaking with me.
(D.E. 137-4, at 1-2).
61. Based on the foregoing e-mail communications, it is a mystery how Motivation
can claim, in good faith, that I “offered Motivation 25% of the recoveries if Motivation would drop its claim without inspecting the res.” (D.E. 137, at 7). Plainly, there was no offer of any recovery to Motivation, and there certainly was no effort to dissuade Motivation from inspecting the emeralds. To the contrary, I offered Motivation a quick and costless opportunity to inspect the emeralds and to thereafter engage in whatever other discovery they wished to pursue.
8. The Court Rejects Motivation’s Request to Inspect the Emeralds, Stays Discovery, And Directs the Parties to Submit Briefing on The Legal Issue Raised by JTR’s Dismissal Motion
62. On January 10, 2012, the Court held a hearing to determine whether Motivation should be permitted to inspect the emeralds, or otherwise engage in discovery, pending resolution of JTR’s motion for judgment on the pleadings. (D.E. 76)
63. In response to questioning by the Court, Motivation’s counsel made the odd argument that Motivation should be permitted to inspect the emeralds in order to confirm that Motivation did NOT have a legally viable claim. As Motivation’s counsel explained:
We are seeking to have discovery before we have to answer simply because if we determine these emeralds – if our experts say there is no way these could have been on the Atocha or the Margarita because they’re not of the era, or they haven’t been submerged
long enough, or whatever archival reason, we want to dismiss our claim and move on. That’s not our property. We are interested in what was Atocha’s cargo that could possibly be out there. There is no shipwreck associated with these emeralds, your Honor.
(D.E. 76, at 6:4-12).
64. After Motivation’s counsel admitted that Motivation lacked a factual basis to
support its verified claim that the emeralds were from the Atocha or Margarita (see D.E. 76, at 6:22-23), the Court stated:
What right does anybody out there, just generally speaking in terms of somebody makes a discovery somewhere, and let’s suppose that a gem collector in Pensacola that has a nice yacht, and he’s interested, and he says, “I’ll file a motion. I want to look at the emeralds.”
They don’t have a right to do that unless they assert a claim. The man in Pensacola who is interested in this stuff, he doesn’t have a claim. He just wants to look at the emeralds or the diamonds or whatever. Well, he doesn’t have a right to come in and do that. He must first file a claim. . . .
(D.E. 76, at 6:24 to 7:8).
65. After hearing from counsel for both Motivation and JTR, the Court ruled that
Motivation could not inspect the emeralds or otherwise engage in any discovery of JTR unless and until Motivation first established to the Court’s satisfaction that Motivation had stated a legally viable claim. As the Court explained:
The issue is what kind of discovery goes on at this point. It makes a certain amount of sense, logically, that a claimant should at least deal with what might be a total bar, and that is the law of the old Fifth Circuit and the reversal of Judge Mehrtens. If that case stands for the proposition that only the treasure brought up from the actual site that’s in court, in 1969 or ‘70 case, can be the subject of a claim.
It seems to me we ought to deal with that legal issue first. What I will do is get you all, on the motion to dismiss, brief the law. I’m talking about the Eleventh Circuit opinion, the case you talked about, Justice Stevens, as to whether or not any claim can be made
by not just your client, but anybody to something that comes from the Atocha site that wasn't brought up by the Treasure Salvors and their successor’s people. That’s an interesting legal issue.
In the meantime, until we get that resolved, that would be a legal impediment, if Mr. Horan is right, that would bar any claim at all. If you were right, then we’d go home. We will, in the meantime, impose a limitation on any discovery, the divers or anybody else.
I’ll let you both brief the matter of the legal part of whether a claim can or cannot be asserted, and we will have a hearing, and I will rule on that. Then, in the interim, I am going to deny and reverse, if I did extend. There is a whole broad area of the law when you're dealing with the Tort Claim Act. There is a body of law in the field that talks about discovery and suggests that yeah, go ahead and let them do some discovery.
To the extent that I have permitted discovery, let me set that aside, and we will have no discovery until we deal with this motion to dismiss, which will be done after you brief. . . .
(D.E. 76 at pp. 47:19 to 48:25) (emphasis added).
66. The Court later memorialized its oral ruling with an Order entered on February 7,
2012, which stated as follows: “It is further ORDERED, ADJUDGED, and DECREED that discovery is STAYED pending the Court’s rulings on the issues asserted by Claimant Motivation, Inc. in its October 10, 2011 filing (D.E. #10) against the defendant in rem in this action.” (D.E. 69).
9. The Court Directs Motivation to File an Amended Claim, Discovery Proceeds, And Motivation Abandons its Claim
67. After the Court denied Motivation’s efforts to pursue discovery – including any inspection of the emeralds – the case languished, while Motivation virtually ignored the matter. In an effort to press the case forward, JTR renewed its motion for judgment on the pleadings on April 5, 2012 (D.E. 78), which resulted in the Court ordering Motivation to file a response by May 9, 2012 (D.E. 81). On June 18, 2012, the Court heard argument on JTR’s renewed motion,
granted the motion without prejudice, and directed Motivation to file an amended claim (if it still wished to proceed) that asserted a basis for challenging JTR’s Verified Complaint other than Motivation’s barrel theory. (D.E. 92).
68. On July 3, 2012, Motivation filed an amended claim – alleging this time that a former diver employed by Motivation’s predecessor stole the emeralds from the Atocha wreck site sometime between April 2006 and January 2007. (D.E. 94, at ¶¶ 55-64). Although JTR could have moved to dismiss the amended claim and seek a further stay of discovery, JTR elected to defend the amended claim on the merits. (D.E. 97). Thereafter, the Court entered an Order that set a trial date and established a discovery schedule to prepare for trial. (D.E. 100).
69. After the stay of discovery was dissolved, the Court ordered both (i) that Kim Fisher submit to a deposition on August 21, 2012, and (ii) that Motivation be permitted to inspect the Salvaged Material on or before August 29, 2012. (D.E. 116, 117). Despite JTR’s right to deny Motivation an inspection of the Salvaged Material until after Kim Fisher’s deposition, JTR voluntarily permitted Motivation to inspect the Salvaged Material on August 14, 2012.
70. On August 17, 2012, Motivation filed a motion to voluntarily withdraw from these proceedings – thereby acknowledging, once and for all, that Motivation has no legally cognizable interest in any of the emeralds salvaged through that date. (D.E. 118). Motivation also sought leave to file a Motion for Sanctions within 60 days of the voluntary dismissal of its claim. (D.E. 118, at 4-5). While accepting Motivation’s concession that it had no claim against any of the Salvaged Material (which is what JTR has been saying for the past year), the Court declined to enter an Order that would allow Motivation to voluntarily dismiss its claim until such time as Motivation either presented or abandoned a motion for sanctions pursuant to Rule 11. Specifically, on August 21, 2012, the Court entered an Order, which states, as follows:
Motivation seeks dismissal without prejudice of its Amended Verified Claim (DE #94), but asks the Court to retain jurisdiction for sixty (60) days to entertain a possible Rule 11 motion for sanctions. In consideration of the foregoing, the Court finds that the Motion to Dismiss should be denied without prejudice to reconsider after the issue of sanctions has been resolved.
K. The “Enhancement” Issue
71. On or about November 9, 2011, David Horan’s office sent samples of emeralds salvaged from the Discovery Site to Ecole National Superieure de Geologie de Nancy (the “French Lab”) and Laboratoire Gemtec (the “Swiss Lab”) for the purpose of seeking to determine, with as much specificity as possible, the location where the emeralds had been mined and, if possible, when they had been mined.
72. On December 1, 2011, JTR learned that both the French Lab and the Swiss Lab were reporting that they had detected “enhancement material” on the emerald samples. Specifically, JTR learned that the French Lab was reporting that it had detected oil and/or one of two types of resin on seven of the ten emerald samples, and the Swiss Lab was reporting that it had detected epoxy resins on the samples it had analyzed. As of that date, JTR had not yet received written reports from the French Lab or the Swiss Lab. Rather, all that JTR received at that date was an e-mail from an associate of David Horan’s in Colombia, which set forth excerpts from e-mails he had received from the two labs. As discussed more fully below, JTR did not receive documents from either the French Lab or the Swiss Lab until February 12, 2012 – and even then the recipient of the reports, who provided those documents to JTR, described the documents as “raw reports” that were not yet final.
73. The information being reported by the French Lab and the Swiss Lab came as a complete surprise to me. I thereafter spent a good deal of time speaking with David Horan, Paul
Sullivan, Jay Miscovich, Scott Miscovich and Steve Elchlepp, Jr. in an effort to understand the possible explanations for the new information. Among other things, I determined that there were at least two explanations in which Jay’s account of the discovery and the information coming out of the French Lab and the Swiss Lab were consistent with one another. Those explanations were that (i) Jay and Steve had discovered emeralds of modern origin at the Discovery Site, or (ii) Jay and Steve had, somehow, “polluted” the emeralds through the process they used to clean them of salt from the sea. I believed then, and continue to believe, that the first explanation is most probably the correct explanation. Moreover, substantial further testing by Matco and Chemir tends to support my belief.
74. In order to help get to the bottom of this new mystery, it was decided that David Horan should visit the Discovery Site with Jay and/or Steve, retrieve some emeralds in sea water, and send them to the GIA for testing. It also was decided that Scott Miscovich (who had a good relationship with Jeff Post) should contact the Smithsonian and request that they to send the GIA the emerald samples that were provided to the Smithsonian in sea water back in August of 2010. Additionally, I recommended that we promptly bring the new information to the attention of CBS News and 60 MINUTES, and enlist their aid in investigating the issue. Accordingly, I called Len Tepper and Andrew Metz (an Associate Producer at 60 MINUTES), reported to them what JTR had learned about the analyses performed by the French Lab and the Swiss Lab, and asked them if CBS News or 60 MINUTES would investigate the issue. During my call with Messrs. Tepper and Metz, we discussed the plan to have David Horan visit the Discovery Site and retrieve further emeralds that could be sent directly to the GIA without being cleaned in any manner, so that the GIA could evaluate the emeralds to test them for the presence of epoxy resin or other modern substances. We also discussed the possibility of having Jeff Post send the GIA
the samples Jay previously had provided to the Smithsonian in sea water. Messrs. Tepper and Metz agreed that it was a good idea to ask the GIA to examine the “uncleaned” emeralds from the Smithsonian and from a new dive to be conducted by David Horan. Accordingly, CBS News / 60 MINUTES agreed to enlist the assistance of the GIA.
75. On December 21, 2011, Scott Miscovich sent an e-mail to the GIA in connection with the further analysis arranged by CBS News / 60 MINUTES. The e-mail included the following text:
Thanks for returning my call. Really appreciate your work on this interesting project. I will have 3 sets of samples sent to you in the next week or so. They include the following:
1) Smithsonian Emeralds sent directly from Jeff Post. As we discussed, these were sent directly from the ocean to Jeff without any cleaning.
2) A second new set from the ocean directly to you without cleaning, and handled with a verifiable chain of custody.
3) A random set from the Key West vault, selected and sent with a randomized protocol and verifiable chain of custody.
Please provide me with the best address and point of contact. Again, thanks for your professionalism and that of your organization in supporting this amazing endeavor.
(E-mail from Scott Miscovich to Tom Moses, dated December 12, 2011) (Exhibit M hereto).
76. On December 16, 2011, Paul Sullivan was copied on an e-mail to David Horan, which encouraged that there be prompt public disclosure of the results of the analyses performed by the French Lab and Swiss lab. (See e-mail from D. McAllister to D. Horan and others, dated December 16, 2011) (Exhibit N hereto). Because the e-mail had certain legal implications, Paul forwarded the e-mail to me and asked that I respond, which I did on December 18, 2011. The
main points of my response were the following:
[P]ursuant to a contractual agreement whereby Jay has agreed to work exclusively with CBS Broadcasting, CBS was informed of the probable results from the French and Swiss labs shortly after you reported those results to Paul. Specifically, we contacted the producers of CBS News and 60 minutes to make them aware of what we were told to be the probable results, and we requested their assistance in getting to the bottom of this “mystery.” Accordingly, you can be sure that it is Jay’s full intent, as you say, “to disclose publicly” all the facts when we are sure we have all the facts. Obviously, one does not work with CBS News and 60 minutes with any expectation that the results of that investigation would not be made public once the investigation is properly concluded.
[W]e also have contacted the Smithsonian and, with CBS’s help, the President of GIA. The Smithsonian has agreed to send their samples to the GIA for further testing. We also intend to send the GIA samples from the vault in Key West and other samples from the ‘Site’ when they are obtained. The GIA has agreed to test all the samples for “enhancements” expeditiously.”
Once we have all the facts, we intend to disclose them to the Court through an appropriate filing. Until that time, and until all the facts are in, it would be inappropriate for any of us to comment publicly.
(E-mail from B. Silverstein to D. McAllister, dated December 18, 2011) (Exhibit N hereto).
77. Unfortunately, the weather conditions in December, 2011 were not conducive to visiting the Discovery Site to obtain more emeralds. Accordingly, on January 6, 2012, JTR filed a “Status Report” with the Court, which provided disclosure about the ongoing testing that was
being performed. (D.E. 54). Among other things, JTR reported the following:
JTR has submitted samples of the emeralds for analysis by the Smithsonian Institute, the Gemological Institute of America (GIA) and laboratories in France and Switzerland. JTR is currently awaiting final reports of the analyses from France, Switzerland and GIA. The samples analyzed by the French and Swiss labs have been sent to GIA for further analysis. JTR is also sending further samples of the emeralds to the GIA once they are recovered by the undersigned firm from the Discovery Site. Samples previously sent to the Smithsonian Institute have been sent to GIA for analysis. Once all of these analyses are completed, and JTR is in possession of final reports from each of the GIA and the French
and Swiss labs, JTR intends to file a copy of those final reports with this Court in connection with a further Status Report.
(D.E. 54, at 3).
78. On January 18, 2012, the weather was conducive to visiting the Discovery Site.
Accordingly, on that day, David Horan and Steve Elchlepp, Jr. traveled to the Discovery Site, salvaged twenty-one emeralds, and sent the emeralds in sea water to the GIA for analysis. (See e-mail from P. Sullivan to G. Stemm, dated January 18, 2012) (Exhibit O hereto).
79. Also on January 18, 2012, CBS News / 60 MINUTES interviewed Gregg Stemm of Odyssey Marine Exploration, Inc. in connection with the ongoing investigation of Jay’s discovery. Mr. Stemm later informed JTR that he had been asked about the information received from the French Lab and Swiss Lab, and that Mr. Stemm had insisted that “until the final results on all the reports were in, everyone should avoid jumping to any conclusions.” (E-mail from G. Stemm to P. Sullivan, dated January 18, 2012) (Exhibit O hereto).
80. On February 12, 2012, Gregg Stemm forwarded to Paul Sullivan documents Mr. Stemm had received that day from the French Lab and the Swiss Lab. In his covering e-mail to Paul Sullivan, Mr. Stemm wrote: “These are yet to be included in a final report to us, but I wanted to get you the raw reports as soon as I received them.” (E-mail from G. Stemm to P. Sullivan and D. Horan, dated February 12, 2012) (Exhibit P hereto). The next day, Paul Sullivan forwarded the raw reports to CBS News / 60 Minutes. (E-mail from P. Sullivan to L. Tepper, dated February 13, 2012) (Exhibit Q hereto).
81. Thereafter, Mr. Sullivan worked with Matco to obtain more specific information about the material the French Lab and the Swiss Lab had reported finding on the emeralds. Mr. Sullivan also asked Matco to examine some randomly-selected emeralds with an electron microscope – as had been done by the Smithsonian – to determine if there was any trace of gold,
silver or copper. Like the Smithsonian, Matco did, in fact, detect the presence of silver and copper using an electron microscope. (D.E. 82, at 17-20).
82. On April 17, 2012, Matco sent a report of its analyses to JTR. (D.E. 82, at 16-48). The next day, JTR filed its Third Status Report with the Court. (D.E. 82). As stated therein, the purpose of the status report was “to apprise the Court of the status of tests and evaluations of emerald samples performed by the Smithsonian Institution and laboratories in France, Switzerland, New York City and Pittsburgh, Pennsylvania.” (D.E. 82 at 1).
83. The Third Status Report states that the GIA detected the presence of modern material on the uncleaned emeralds from the dive of January 18, 2012 (the “January 18 Dive”). (D.E. 82 at 4). I recently have come to understand, however, that this statement was in error. I now understand that the GIA did no testing after January 17, 2012. Of greater significance, further analyses of the “uncleaned” emerald samples from both the Smithsonian and the January 18 Dive, which were performed by Matco and Chemir following the filing of the Third Status Report, have confirmed that there is no epoxy resin or other modern substance on those emeralds. Reports from Matco and Chemir setting forth these results were filed with the Court on October 1, 2012, and are discussed more fully below.
84. In the months following the filing of the Third Status Report, Paul Sullivan continued to work with Matco and Chemir in an effort to get to the bottom of the question of whether there was any modern substance on the uncleaned emeralds from the Smithsonian or the January 18 Dive. Although the testing by Matco and Chemir was interrupted by their being required to return the emeralds they were analyzing on account of Motivation’s obtaining an Order requiring that all emeralds be brought back to Key West, before returning the emeralds Matco and Chemir analyzed fifteen (15) randomly selected samples of the uncleaned emeralds
from the Smithsonian and the January 18 Dive, and concluded that there is no modern material on any of those emeralds. As noted above, the Matco and Chemir reports were filed with the Court on October 1, 2012.
L. Material Factual Errors In Motivation’s Motion for Sanctions
85. Motivation’s Motion repeatedly refers to me as JTR’s “general counsel.” That is a mischaracterization. As I understand the term from my years of experience in the field of corporate law, the “general counsel” of an entity is an employee of the entity, appointed by the board of directors (or other governing body) to serve as the entity’s chief in-house legal officer. See, e.g., In re Grievance Proceeding, 2002 U.S. Dist. LEXIS 18417, at *9 (D. Conn. 2002) (“the general counsel by definition is a corporation lawyer”); China Mariners’ Assur. Corp. v. M.T. W.M. Vacy Ash, 1999 U.S. Dist. LEXIS 2674, at *19 (S.D.N.Y. March 9, 1999) (“A corporation's general counsel is an ‘officer’” ); see also Merriam-Webster On-Line Dictionary, at http://www.merriam-webster.com/dictionary/general%20counsel (defining “general counsel” as “a lawyer at the head of the legal department (as of a corporation or governmental subdivision)”).
86. JTR has no employees or officers who are lawyers. My firm (YCST) has been engaged by JTR, Jay Miscovich, Steve Elchlepp, Jr., and Scott Miscovich to serve as one of a number of firms that provide them with various legal services, and I am the principal attorney at my firm who provides the legal services provided to JTR by YCST. Specifically, I served as counsel of record to Jay, Steve and Scott in the Delaware Litigation, and I have provided general outside counsel services to JTR, Jay, Steve and Scott in connection with various other matters, including their dealings with David Horan, and now John Siracusa, in connection with the Admiralty Action. In that capacity, I have, among other things, helped JTR and Jay Miscovich
negotiate engagement agreements with David Horan and John Siracusa, and I have monitored the proceedings in the Admiralty Action and provided advice and guidance.
87. In Paragraph 9 of its Motion, Motivation claims that affidavits previously filed by the New York Investors in the Delaware Litigation (and earlier litigation in state court in Florida, which was dismissed, sua sponte, for lack of personal jurisdiction) “demonstrate that Jay Miscovich broke two promises to deposit the coordinates of his emerald find with an escrow agent, removed emeralds from the New York safe deposit box that the New York Investors had determined were of a high value despite his promise not to do so, and failed to deposit other emeralds that his brother Scott had brought to New York which Miscovich promised to do.” Motivation is wrong. The affidavits of the New York Investors do not “establish” anything. The affidavits of the New York Investors were hotly contested in the Delaware Litigation, and no Court has ever determined the veracity or accuracy of the assertions made in those affidavits. In fact, and as set forth in counter-affidavits and other papers filed on behalf of Jay in the Delaware Litigation (i) Jay did not agree to deposit the coordinates of the Discovery Site with an escrow agent, (ii) Jay did not remove the emeralds from the New York safe deposit box – even though he had every right to do so, and (iii) Jay did, in fact, deposit other emeralds that his brother Scott had brought to New York – even though he had no obligation to do so.8 Moreover, the New York Investors ultimately dismissed their claims in the Delaware Litigation with prejudice in consideration of a settlement that was approved by the Delaware Court of Chancery. In connection with the Settlement, Jay, Scott and Steve denied liability, and no contrary finding was made by the Court.
Jay and Scott submitted Affidavits under seal in the Delaware Litigation. The publicly available copies are heavily redacted, and difficult to understand on account of those redactions. Unredacted copies of the Affidavits can be submitted to other courts only pursuant to a Court Order compelling their production.
88. Paragraph 9 of Motivation’s Motion further states that “These affidavits also show that while in possession of thousands of emeralds Miscovich was still trying to raise money rather than file an admiralty claim so that he could obtain title to and sell the emeralds to raise money based on their intrinsic worth and provenance.” Again, Motivation is wrong. To the best of my knowledge, Jay has not tried to sell the emeralds. Rather, Jay has sought to sell ownership interests in an entity that would file an admiralty claim, and Jay sought such “investments” in order to raise funds that could be used to hire experienced counsel and other advisors who would (i) file an admiralty claim and otherwise work to secure title to the emeralds in a legally proper manner, (ii) help to protect the Discovery Site, and (iii) help to build a professional organization that would work to explore and ultimately salvage the Discovery Site and ultimately monetize the Salvaged Material after the proper legal formalities were pursued.
89. Paragraph 9 of Motivation’s Motion further states that the affidavits of the New York Investors demonstrate that “while in possession of thousands of emeralds, [Jay] was seeking contracts with Kenneth Rose to search for emeralds off Woman Key where Rose held an admiralty claim and permit to search the area.” Once again, Motivation is wrong. Jay never sought a contract with Kenneth Rose “to search for emeralds off Woman Key.” Rather, as explained earlier in my affidavit, Jay sought to perform exploratory and salvage work in the Woman Key area because Jay believed then, and continues to believe, that there is a Civil War era wreck in that area that is of historical significance. As such, Jay wanted to explore the Women’s Key area for reasons that are wholly separate and apart from his ongoing efforts to salvage emeralds and other material from the Discovery Site in International Waters in the Gulf of Mexico.
90. The only accurate statement in paragraph 9 of Motivation’s Motion is that “The verified complaint locates Miscovich’s Emerald Reef many miles from Woman Key.” That statement is 100% correct. The Discovery Site is, in fact, many miles from Woman Key.
91. In paragraph 10 of its Motion, Motivation asserts that “JTR’s resistance to facilitating an inspection – one that, if Horan’s claims were true, would promptly rid JTR of Motivation – was resisted because the inspection would, and did reveal, that the emeralds of value had been removed from the res in which Barr, Ash and Mactas and others had invested.” Once again, Motivation is wrong. JTR did not resist an inspection of the emeralds out of any concern about what Motivation would find. Rather, for the reasons JTR explained to this Court in JTR’s Motion to Stay Discovery, JTR resisted Motivation’s effort to inspect the emeralds because (i) Motivation had no legal right to conduct such an inspection, (ii) JTR did not trust Motivation, especially after Motivation had asserted a frivolous claim of ownership of the emeralds, and (iii) JTR was simply unwilling to voluntarily permit Motivation to engage in discovery to which it was not legally entitled. This was all addressed during oral argument before this Court, and the Court agreed with JTR’s position. (D.E. 76 at pp. 47:19 to 48:25) (Court ruling staying discovery); (D.E. 69) (Order staying discovery). Moreover, Motivation conveniently ignores the fact that JTR repeatedly offered to permit Motivation to inspect the emeralds if Motivation would provide JTR with the “criteria” that Motivation would use for the inspection in advance thereof, but Motivation refused to do so. Motivation also conveniently ignores the fact that JTR proposed to allow Dr. Eugene Lyon to determine whether the emeralds came from the Atocha, but Motivation rejected this proposal out of hand. In connection with this proposal, JTR specifically offered to allow Dr. Lyon to inspect the emeralds, visit the Discovery Site, and conduct whatever research Dr. Lyon deemed appropriate. As set forth in the Affidavit
of Paul Sullivan, however, Motivation was not interested in learning what Dr. Lyon determined. Instead, Motivation wanted JTR to simply agree that the emeralds came from the Atocha (despite the lack of any evidence to support such a view), so that Motivation could then sell the emeralds as “Atocha emeralds.”
92. Footnote 4 of Motivation’s Motion for Sanctions states that the Affidavit of Kenneth Rose [D.E. 94.11] “shows that Global Underwater Treasure Salvage, LLC, negotiated, through attorney Bruce Silverstein, a contract with Rose’s Kirby Group that divided finds 50-50 between GUTS and The Kirby Group, except GUTS would not have to share any emerald finds and excluded ‘Emerald Reef’ from the operation of the contact but did not define its location.” This is, yet again, another false and incorrect statement in Motivation’s filing. The Affidavit of Kenneth Rose does not state that I negotiated an agreement between Global Underwater Treasure Salvage, LLC (“GUTS”) and the Kirby Group. Mr. Rose’s Affidavit clearly states that the agreement with GUTS was formed on July 28, 2010. See Rose Affidavit at ¶ 11. I did not yet meet, and did not even know of, Jay Miscovich until nearly six months after that date. Moreover, in July of 2010, the New York Investors, and not Jay, were funding and in de facto control of GUTS – as is acknowledged in paragraph 13 of Mr. Rose’s affidavit. Contrary to Motivation’s distortion of the record, the agreement with GUTS that is discussed in the Rose Affidavit was negotiated by the New York Investors and their counsel, and not by Jay Miscovich. Moreover, it is indisputable that I had nothing to do with the agreement between GUTS and Mr. Rose’s organization.
93. As discussed earlier in this Affidavit, I did negotiate an agreement between the Kirby Group and J&S Keys, LLC (“J&S”), which in an entity formed for the benefit of Jay and Steve in the summer of 2011. Unlike the prior agreement negotiated by the New York Investors,
the agreement I negotiated with the Kirby Group, (i) made no mention, whatsoever, of emeralds (from any site), (ii) provided for a straight 50/50 split of anything Jay’s new entity might discover within the site subject to the Kirby Group’s admiralty claim, and (iii) provided the Kirby Group broad observation rights.
94. In paragraph 13 of its Motion, Motivation asserts: “It is apparent to Motivation that Miscovich, with the active assistance of Elchlepp and others, caused the filing of the instant proceedings in the belief that no party would assert a claim and that, without a claimant, no inspection by a disinterested expert would be conducted; and, that JTR would hope to obtain an adjudication of title which would lend a commercially valuable provenance to pedestrian modern-era Colombian emerald gemstones.” Motivation’s assertion is nonsensical. Plainly, JTR did commence the Admiralty Action with the hope JTR would obtain an adjudication of title and/or a liberal salvage award. JTR did not expect, however, that “an adjudication of title  would lend a commercially valuable provenance to pedestrian modern-era Colombian emerald gemstones.” An adjudication of title would do nothing more that establish that JTR owns whatever it is that JTR has salvaged from the Discovery Site. An adjudication of title does not change the character of what has been salvaged. The emeralds are what they are. If they are valuable, then they are valuable. If they are not valuable, then they are not valuable. An adjudication of title simple establishes to whom they legally belong.
95. Motivation asserts in paragraph 15 that the Admiralty action “was initiated in bad faith in an effort to utilize this Court to commit a fraud on the public and, per force, a fraud on the Court.” This could not be more false. The Admiralty Action was initiated in order that JTR might obtain an award of title and/or a liberal salvage award respecting the emeralds JTR placed within the Court’s jurisdiction when it filed its claim. There was no other reason for the fling of
the Admiralty Action. If JTR had believed it could consider itself to be the lawful owner of the emeralds without pursuing the Admiralty Action, JTR would never have commenced the action.
96. Compounding the frivolous nature of its claims, in paragraph 16 of its Motion, Motivation states: “JTR’s pleadings and resistance to facilitating an inspection that would promptly rid JTR of the only claimant against the res, Motivation, can only be explained as a continuing perpetration of a fraud upon the court.” Again, false. As previously explained, JTR’s resistance to permitting Motivation to conduct an inspection of the emeralds is because litigation is an adversarial process, and a litigant is not required to provide discovery voluntarily to an adversary – especially when the litigant believes the adversary is asserting a frivolous claim. Moreover, and as spelled out, in detail, above, (i)JTR repeatedly volunteered to allow Motivation to inspect the emeralds at a very early stage in the litigation if Motivation would first provide the criteria it intended to use for the inspection, and (ii) JTR proposed that Dr. Eugene Lyon inspect the emeralds and conduct any other investigation he deemed appropriate. These are not the proposals of a party with something to hide.
97. Paragraph 17 of Motivation’s Motion states that “JTR and its general counsel, Bruce Silverstein, and others knew as early as December 2011, when they filed their Motion for Judgment on the Pleadings or to Dismiss, that the alleged ‘Spanish colonial era emeralds from an ancient shipwreck’, as represented to investors and depicted on 60 MINUTES, were from the modern era; that many of the emeralds were chemically treated with compounds unknown until the mid-20th Century; and, that at least some of the emeralds were identified by one of the laboratories that had evaluated them as having come from a Colombian mine that had not been opened until 1999.” Again, Motivation is wrong. The fallacy of these assertions is explained throughout the body of this affidavit, and I will not waste time repeating that refutation here. It
should suffice to say that (i) I am not JTR’s “general counsel,” (ii) neither JTR nor Jay (nor I) represented to investors or 60 MINUTES that the emeralds are from the “Spanish colonial era” or “an ancient shipwreck” – though that still may turn out to be the case, (iii) neither JTR nor Jay (nor I) know that any of the emeralds are “from the modern era,” and (iv) I do not even know where Motivation comes up with the assertion about a mine that was not open until 1999. Moreover, in December of 2011, JTR had materially incomplete information about the modern substances identified by the French Lab and the Swiss Lab, and JTR was actively working with CBS News and 60 Minutes to investigate the issue.
98. Paragraph 20 of the Motion for Sanctions states that “Jay Miscovich caused JTR to initiate the instant litigation in bad faith and, with the support of Bruce Silverstein, maintained the litigation by means of directing JTR’s local counsel to engage in dilatory litigation and obstructive behavior.” Again, this is false. Not only has there been no “dilatory litigation and obstructive behavior,” but I lack the power to “direct” JTR’s local counsel to do anything such counsel does not believe to be appropriate. All I can do is recommend how to proceed. In the end, only the client has the power to “direct” an attorney of record to take action or refrain from taking action, and, in the end, the attorney of record has the right to withdraw from the representation if the attorney disagrees with the client’s litigation strategies (so long as the attorney does so in a manner consistent with his or her professional responsibilities to the client).
99. Paragraph 21 of Motivation’s Motion for Sanctions makes the outrageous assertion that I “was an active and knowing participant in Miscovich’s fraudulent scheme and bad faith litigation” based on the content of the 2010 agreement between GUTS and Ken Rose. This paragraph is probably the best example of the reckless and defamatory nature of Motivation’s Motion. It is indisputable that I did not have anything to do with
the GUTS contract that Motivation claims to prove my complicity in a fraud. That contract was negotiated months before I ever met, or even heard of, Jay Miscovich or the emerald discovery.
100. Paragraph 21 of Motivation’s Motion for Sanctions also makes the reckless and false assertions that I “instructed local counsel to convey a threat to sue Motivation and its undersigned counsel in the State of Delaware for defamation and for tortious interference with an advantageous business relationship despite the litigation privilege; to later instruct local counsel to send Motivation and its undersigned counsel with the 21-day safe harbor letter threatening Rule 11 sanctions unless Motivation withdrew its claim prior to inspecting the emeralds.” These assertions are demonstrably false – and, again, show that Motivation has no compulsion from making reckless allegations for which it has no factual basis. Although I do believe that Motivation should be sanctioned pursuant to Rule 11 and held liable for defamation and other tortious misconduct, the fact is that I discouraged JTR from sending the letter about which Motivation complains, but I was overruled by both the client and counsel of record. Attached as Exhibit R is my e-mail of May 21, 2012, by which I sought to discourage the sending of the letter Motivation claims I “instructed” JTR’s counsel of record to send. This e-mail also proves my point that I lack the power to “direct” the Admiralty action, and can only make recommendations of what I believe to be the appropriate cause of action.
101. Paragraph 21 of Motivation’s Motion for Sanctions also states that I “threatened The Kirby Group’s Kenny Rose with litigation over a bogus claim for lending assistance to Motivation’s endeavor to find the truth of this matter.” Of course, Motivation provides no evidence to support this baseless assertion. I have not sought to dissuade Mr. Rose from
cooperating with Motivation in the Admiralty Action, much less threatened Mr. Rose with litigation if he were to do so. Indeed, since the Admiralty Action was commenced, the only communications I have had with Mr. Rose or his counsel and business partner, Mr. Wells, have been (i) early in the Admiralty Action (before Motivation asserted a claim), when I received information that an attorney named Peter Hess intended to file a claim in the Admiralty Action on behalf of Mr. Rose – which Mr. Wells denied when I spoke with him, and (ii) when I contacted Messrs. Rose and Wells (by e-mail) to see if we might revive the agreement for J&S to perform salvage activity at the Kirby Site. To repeat, I have never sought to discourage Mr. Rose from cooperating with Motivation in the Admiralty Action (or otherwise), and I certainly have never made any threat to discourage Mr. Rose from cooperating with Motivation. Motivation is just plain paranoid.
102. Finally, paragraph 21 of Motivation’s Motion states that I “earlier threatened [Ken] Rose with exhaustive and expensive litigation when Rose sought to assert a colorable claim in the Delaware involving Miscovich and the Intervenors.” Aside from the fact that my actions in the Delaware Litigation cannot possibly serve as a basis for imposing sanctions in the Admiralty action, the fact is that (i) Peter Hess filed a motion to intervene in the Delaware Litigation on behalf of Mr. Rose and based on an assertion that Jay had stolen the emeralds from the Kirby Site, (ii) I informed Mr. Hess that Jay would seek sanctions in the Delaware Litigation if Mr. Rose did not recant his frivolous assertions that Jay had stolen the emeralds from the Kirby Site, (iii) the Delaware Court of Chancery denied the intervention sua sponte before I even filed a response in opposition to the motion, and (iv) and Mr. Rose’s counsel and business partner, Ed Wells, later admitted to me that Mr. Hess was not authorized to make a filing on Ken Rose’s behalf in the Delaware proceedings, and Ken Rose admitted to me that he had been
misled into believing that Jay had stolen emeralds from the Kirby Site by persons who had an axe to grind with Jay, and that the entire episode was a big mistake and was very embarrassing. As was reported by Reuters after the Court of Chancery threw out Mr. Rose’s claim:
Just this week, Kenneth Rose, the owner of a treasure site near Woman Key, west of Key West, sought to intervene in the Miscovich case. Rose discovered an emerald he describes as the size of a chicken egg on a claim site he has held near Woman Key for decades.
He at first suspected the emerald might be part of the trove the Miscovich brothers are claiming, which would suggest that their gems actually belonged to Rose. But after hiring a lawyer to intervene, Rose concluded that someone had likely placed the egg- sized emerald on his claim in a bid to stir up trouble.
“Treasure hunters are only one step above drug dealers,” said Rose, who carefully described himself as an “opportunist.”
T. Hals, “Sunken Treasure Sparks Legal Tussle” (Aug. 19, 2011), reprinted at http://www.reuters.com/article/2011/08/19/us-sunkentreasure-idUSTRE77I4U020110819.
103. I believe that there are many other material factual errors in Motivation’s Motion for Sanctions, but the specific errors discussed herein are the errors with respect to which I have personal knowledge. I would be remiss, however, if I did not note that much of Motivation’s Motion for Sanctions is devoted to repeating and reaffirming Motivation’s frivolous allegations that Jay’s emeralds are from the Atocha – even though Motivation explicitly abandoned that theory in Motivation’s Motion to Voluntarily Dismiss its Claim. This inconsistency makes absolutely no sense to me, and I do not understand how Motivation can continue to advance such allegations in good faith.
M. Motivation’s Request That I Be Sanctioned And Held Liable For Attorneys’ Fees
104. Motivation’s Motion for Sanctions includes a specific request that I be held liable for Motivation’s attorneys’ fees. I am not aware of any legal or factual basis that would support this claim.
105. As a factual matter, Motivation identifies no conduct on my part that is remotely close to being sanctionable or providing a basis for holding me liable for an award of attorneys’ fees. I believe that my conduct (all of which has been outside of the context of the legal proceedings in this case) has been professional, civil, and responsible at all times, and I expect the Court will agree.
106. As a legal matter, my own research has failed to uncover any decision in which an award of attorneys’ fees was made (or, if made, survived appellate review) against an out-of- state attorney to a party that was represented by other counsel of record in the litigation in which attorneys’ fees were sought.
107. I am not an attorney of record in the Admiralty Action, and I have not signed any pleadings or papers in that action. Nor do I have the authority to “direct” what is filed in the Admiralty Action. As out of state counsel, I can only provide the best guidance I am capable of providing, and hope that JTR and its counsel of record will agree with and follow my guidance – except in those situations where they persuade me otherwise, which has happened from time-to- time. Indeed, JTR and its counsel have not always followed my guidance (often to my chagrin). As noted, however, that is their prerogative. Although David Horan did, from time-to-time, invite me to seek admission pro hac vice in the Admiralty Action, I declined to do so on account of my lack of experience with admiralty matters for which Mr. Horan, and later Mr. Siracusa, were engaged by JTR to provide their experienced counsel and representation.
108. In Leventhal v. New Valley Corp., 148 F.R.D. 109 (S.D.N.Y. 1993), the Court declined to impose sanctions on an attorney pursuant to Rule 11, 28 U.S.C. § 1927, or the court’s inherent powers, based on the court’s view that an attorney may not be held liable for sanctions unless that attorney personally appeared in the litigation and signed the papers giving rise to the sanctions. See id. at 111-12. See also Bakker v. Grutman, 942 F.2d 236, 239 (4th Cir. 1991) (“Rule 11 sanctions may not be imposed upon those attorneys who do not actually sign the papers at issue.”). As the Seventh Circuit has explained:
Andersen asserted that the lack of a signature is irrelevant – that any lawyer who played a “substantial role” in the preparation of the paper may be sanctioned, even if he did not sign it. Nothing in Rule 11 supports this position.
Kale v. Obuchowski, 985 F.2d 360, 363 (7th Cir. 1993).
109. The obvious reason for this rule is that counsel of record is the “gate keeper” with
the ultimate responsibility to refrain from taking positions or filing papers that such counsel does not stand behind. If counsel of record is directed by a client or other counsel to take action that counsel of record believes to be improper, counsel of record can and should refuse to do so. Counsel of record cannot, however, simply “follow orders” and avoid responsibility for his or her actions. See Long v. Quantex Resources, Inc., 108 F.R.D. 416 (S.D.N.Y. 1985) (holding, for sanctions purposes, that counsel of record, and not out of state counsel, is accountable for the conduct of the litigation, even if out of state counsel is primarily responsible for the preparation of the motion papers at issue), aff’d, 888 F.2d 1376 (2d Cir. 1989); see also In re De Lorean Motor Co. Litigation, 59 B.R. 329, 339 (E.D. Mich. 1986) (instructing that there is no “just following orders” defense; and that “accountability already lies with the signer, even if it means informing a superior that the proposed pleading is either factually unsound or not substantiated by the existing state of the law”).
110. Motivation claims to find support for its application for sanctions against me in Corder v. Howard Johnson & Co., 53 F.3d 225 (9th Cir. 1994). Motivation is wrong.
111. In Corder, the Ninth Circuit reversed the district court’s grant of attorneys’ fees against Gary Baugh, who was a defendant in an action for breach of fiduciary duty in his capacity as a trustee of a pension plan. In the action, Mr. Baugh caused the pension plan to assert a third-party complaint against Howard Johnson & Co. (“HJ”), which later obtained a summary judgment of dismissal of the claims against it. In connection with its grant of summary judgment to HJ, the district court awarded attorneys’ fees to HJ, and held Mr. Baugh jointly and severally liable for those fees with, among others, the pension plan. See id. at 229. Mr. Baugh appealed the award of attorneys’ fees as against him, and the Ninth Circuit agreed that the award was inappropriate. See id. at 232-33.
112. In dictum, the Ninth Circuit also addressed an additional argument by Mr. Baugh that he could not be held liable for HJ’s attorneys’ fees because he was not a named party in the claim against HJ (even though he plainly was a party in the underlying litigation). Although the Ninth Circuit held that the award of attorneys’ fees against Mr. Baugh was unwarranted, the Court expressed the following dictum:
[E]ven in the absence of statutory authority, a court may impose attorney’s fees against a non-party as an exercise of the court’s inherent power to impose sanctions to curb abusive litigation practices. See Roadway Express, Inc. v. Piper, 447 U.S. 752, 100 S. Ct. 2455, 2463, 65 L. Ed. 2d 488 (1980) (a court may assess attorney’s fees against counsel who willfully abuses judicial processes). In addition, a court may impose attorney’s fees to sanction a non-party whose actions or omissions cause the parties to incur additional expenses. See SECO Nevada v. McMordie (In re Holloway), 884 F.2d 476, 477 (9th Cir. 1989) (per curiam) (sanctioning a court reporter for “repeated and flagrant failures to meet court-imposed deadlines” that resulted in “severe prejudice to both the parties and the court”); see also Moten v. Bricklayers, Masons and Plasterers International Union of America, 543 F.2d
224 (D.C. Cir. 1976) (per curiam) (imposing 50% of the fees and costs upon a non-party who unsuccessfully sought to become a party, thereby incurring additional expenses for the fee petitioner).
Id. at 232.
113. As is evident by the decisions cited by the Ninth Circuit (and the parenthetical
explanations thereof provided by the Court), the Court’s reference to “non-parties” who may be held liable for attorneys’ fees was meant to be limited to persons who were active participants within the litigation before the Court – either as (i) parties to related claims (as was Mr. Baugh, who was both a defendant in the litigation and the trustee of the pension plan that asserted the claim against HJ), (ii) counsel of record (as in Roadway Express, Inc.), (iii) a court reporter or other court officer (as in SECO Nevada), or (iv) a party who had filed an unsuccessful motion to intervene (as in Moten). In that sense, the Ninth Circuit’s dictum makes perfect sense. The Ninth Circuit did not hold, or even imply, that attorneys’ fees may be imposed on an out-of-state lawyer who did not enter an appearance in the subject litigation in which the party accused of bad faith was represented by counsel of record.
114. On page 7 of Motivation’s reply in support of its Motion to Compel (D.E. 137), Motivation advances the following assertion:
Had counsel looked for other cases citing Corder for the point, they might have found that “[E]ven in the absence of statutory authority, a court may impose attorney's fees against a non-party as an exercise of the court's inherent power to impose sanctions to curb abusive litigation practices.” Roadway Express, Inc. v. Piper, 447 U.S. 752, 764, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980).
115. This statement makes absolutely no sense, as Roadway Express pre-dates Corder by fourteen years. Moreover, the quote that Motivation attributes to the United States Supreme Court is nowhere to be found in Roadway Express – which involved the question of the propriety
of the imposition of attorneys’ fees on a party’s counsel of record in the litigation giving rise to the appeal.
116. Presumably, Motivation meant to say that Corder, itself, states that “even in the absence of statutory authority, a court may impose attorney's fees against a non-party as an exercise of the court's inherent power to impose sanctions to curb abusive litigation practices.” Thereafter, Corder cites to Roadway Express, and offers the following parenthetical explanation of the United States Supreme Court’s holding therein: “a court may assess attorney’s fees against counsel who willfully abuses judicial processes.” See Corder, 53 F.3d at 232. As explained above, however, Roadway Express simply stands for the non-controversial proposition that sanctions may be imposed upon counsel of record in a matter.
117. In any event, and as noted above, Motivation’s Motion for Sanctions identifies no
conduct on my part that is anything other than professional and appropriate.
N. JTR’s Final Effort to Amicably Resolve the Motion for Sanctions
118. On October 4, 2012, I made one final effort to encourage an amicable resolution of Motivation’s Motion for Sanctions and continued interference with JTR’s Admiralty Action. On account of Motivation’s repeated discussion and attachment of settlement communications in Motivation’s various filings with the Court, I believe it is appropriate to include the latest discussions to round out the record. Additionally, I believe they are appropriately considered by the Court pursuant to Rule 408(b) of the Federal Rules of Evidence, which permit consideration of settlement communications if they are introduced for the showing bias on the part of a witness or negating a contention of undue delay.
119. Specifically, I made the following proposal to Motivation’s counsel: Mr. White:
I writing in an effort to bring the ongoing litigation between JTR Enterprises LLC (“JTR”) and Motivation, Inc. (“Motivation”) to a halt – which I believe to be in everyone’s best interests.
As things now stand, Motivation has abandoned its claim to the emeralds salvaged thus far by JTR, and Motivation has sought leave to voluntarily dismiss its claim without prejudice. Additionally, Motivation currently has pending both (i) a motion for sanctions, and (ii) a motion to compel discovery. JTR is currently scheduled to file its response to the motion for sanctions next week, and you can be certain that Motivation will not like what JTR has to say in that response. Additionally, JTR intends to file a motion for sanctions, by which JTR will be seeking to recapture hundreds of thousands of dollars of attorneys’ fees. As much as JTR would like [to] pursue its sanctions claim, we have managed to prevail upon JTR to see the benefit of terminating the ongoing hostilities between Motivation and JTR, so that JTR may move forward with its underlying claim for title and/or a liberal salvage award. Accordingly, we have persuaded JTR to make the following proposal:
If Motivation will withdraw its pending motions, and acknowledge in the withdrawal that Motivation has learned that it has been misled by various persons who have an axe to grind with Jay Miscovich, JTR will (i)consent to Motivation’s voluntary dismissal of its claim without prejudice to any future recoveries JTR might make, (ii) promptly pursue its claim of title and/or a liberal salvage award, and (iii) refrain from asking Judge King to impose sanctions against Motivation.
Inasmuch as JTR still has much work to do to prepare its response in opposition to Motivation’s pending motion for sanctions, this proposal will remain open only until the close of business tomorrow. After that, JTR will proceed full speed ahead, and we are confident that the results will not bode well for Motivation.
We are hopeful that Motivation will see the wisdom and benefit of agreeing to JTR’s proposal, and that we might put this matter to rest. If you wish to speak about this proposal, please let me know, and I will arrange a conference call.
Before closing, I would be remiss if I did not comment on your repeated, defamatory and baseless accusations that I am involved in perpetrating a fraud on the Court, your clients, and others. I have been practicing law for more than twenty-five years, have an un[t]arnished reputation, and have not participated, and never will participate, in any fraudulent activity. Indeed, if I knew that JTR
was engaged in a fraud on the court, I would come forward (along with David Horan and others) and say so. In fact, however, I have no such knowledge. I strongly encourage you to refrain from making any further reckless and baseless defamatory statements in your pleadings. As I am sure you are aware, there is a limit to the qualified immunity from liability for defamation for what is stated in legal filings, and I am fairly confident that you have crossed that line.
(E-mail from B. Silverstein to M. White, dated Oct. 4, 2012) (Exhibit S hereto).
120. The next day, I received a reply that not only rejected my proposal, but branded it a threat, repeated Motivation’s defamatory allegations that I am acting as a “co-conspirator” in a “fraud,” and set forth a diatribe of allegations that were mainly inaccurate and otherwise supported by nothing more than massive speculation (if not paranoia). (See e-mail from M. White to B. Silverstein, dated Oct. 5, 2012) (Exhibit S hereto).
121. Following some further communications, Motivation’s counsel agreed to call me on October 6 to discuss my proposal. In advance of that call, I sent Motivation’s counsel a point- by-point response to the items raised in his reply e-mail, which I reproduce herein below. The assertions of Motivation’s counsel are in black, and my responses are in red:
Bruce: On January 6, 2012, you emailed me and offered Motivation a settlement where Motivation would agree to a consent order that JTR would be entitled to a 75% salvage award and Motivation would be entitled to litigate the issue of whether it was entitled (as owner) to the remaining 25% of the finds and JTR would allow Motivation to conduct full discovery. Discovery or not, your offer would have prevent Motivation from contesting JTR’s claim no matter what discovery showed. Under your proposal if the discovery revealed JTR’s claim was a scam or a penny stock play Motivation could be considered to be a co- conspirator. Your offer was essentially the same as had been discussed and rejected multiple times since early November with Kim, Sean, Gary, Bill VanDercreek and ourselves, Paul Sullivan and Dave Horan on the calls. As you acknowledged in your January offer, Kim Fisher’s consistent position throughout was that he would make no deals prior to inspection. [My offer is in writing, and is plain and unambiguous. I did not offer that JTR would agree that Motivation
was the “owner” of anything. The offer was that (i) Motivation would stipulate that JTR was entitled to a salvage award of no less than 75%, and (ii) JTR and Motivation would then litigate the questions of (a) whether Motivation was the owner of the emeralds, and (b) if so, what percentage, if any, of the remaining 25% should be awarded to JTR as a salvage award. If Motivation failed to prove ownership and/or later withdrew its claim based on its acceptance that Motivation had no claim to the emeralds (as JTR has been saying along), JTR would then have applied to the Court for an award of title and/or a salvage award of the remaining 25%. Even if it were assumed (arguendo) that there were any merit to Motivation’s current assertions that the Discovery is a fraud (which it is not, so far as I know), Motivation’s acceptance of the offer would not have caused Motivation to be viewed as a co-conspirator]
By January 2012, Motivation’s own investigations had raised a number of red flags:
• Miscovich claimed to have recovered some 65,000 plus emeralds sitting in plain view on the bottom some 30-40 miles out in the Gulf of Mexico in January 2010. [This is incorrect. Jay claims to have recovered 65,000 plus emeralds over a period of 12 to 18 months, commencing in January, 2010, during which time Jay and Steve claim to have made numerous trips to the Discovery Site, which is within the coordinates identified in JTR’s Verified Claim] Dr. Baer, a consultant to GUTS reported Jay said he recovered these emeralds with the assistance of two Mexican divers. [So far as I know, Dr. Baer is mistaken. I have never heard this “story” from anyone else – not ever. I know of no “Mexicans” who have anything to do with Jay and his discovery, and I have never seen any evidence to support Dr. Baer’s alleged account of the facts. Additionally, as discussed below, Jay was not in control of GUTS prior to August 19, 2011] We have reason to believe the “Mexicans” were Elschlepp and Kent Van Raalte. [So far as I know, the first time Kent ever visited the Discovery Site was in late 2011, when he accompanied Jay, Steve, and various persons from 60 MINUTES. I, too, was on that trip. I spoke to Kent, who appeared ecstatic by what he saw, and he told me he had never been there before. I have heard this from others, as well.] Plus, they did all of this in 20-30 dives. That is preposterous according to every diver Kim Fisher knows and every diver known to Kenny Rose. First, that is not the way nature handles things out in the Gulf (or Atlantic); second, just do the math. That is an average of over 2,200 to 3,200 emeralds per dive. [I have been told that there were at least 20 or 30 trips to the site, during which each trip at least two people each made two two-hour dives.9 Although I have
I was mistaken. I understand that there were between 60 and 80 trips to the Discovery Site between January, 2010 and the time Jay and Steve had collected 65,000 emeralds – not just 20 to
no diving experience, it is perfectly conceivable to me that thousands of these stones could be collected in a single trip to the Discovery Site, in which between eight and twelve hours were spent salvaging the emeralds – i.e., two hours per diver, times two trips, times two or three divers, none of which was Kent. Indeed, I was at the site with 60 MINUTES when three divers went into the water for less than an hour and came up with what seemed to be more than a hundred emeralds – even though they had to devote substantial time to showing a photographer what they were doing, and fending off a shark] The Fishers have been recovering Muzo emeralds on the Atocha for some 27 years, using modern equipment and air-lifts and recoveries are less than 3,000 stones for the entire period and none were found laying on the sea floor unless forced up by air-lifts. [This fact proves nothing. The Fishers have been salvaging the remains of the Atocha, which I understand did not even list emeralds on its manifest. From what I know, Jay’s discovery is not the Atocha. For all we know, Jay’s discovery is from a ship that was carrying hundreds of thousands of emeralds. The fact that it has taken many years to find 3,000 emeralds at the Atocha site is entirely immaterial to the question of how long it would take to find 65,000 emeralds at a different site involving a different ship. It is logical folly to contend otherwise. Suppose for example, I were to scour the junk yards in Key West, and it took me 10 years to find a Rolls Royce engine. Would that mean that a friend of mine who scours the junk yards of London would be lying if he told me that he found 10 Rolls Royce engines in one day at the first junk yard he visited? This is precisely the type of argument you are making. The Fisher’s experience at the Atocha wreck site is anecdotal and has no bearing on another salver’s experience at an entirely different site. Similarly, the fact that Odyssey found hundreds of pounds of gold is not lacking in credibility simply because the Fishers found mainly silver.] By Jay’s own admission, they recovered these stones and colonial era pottery using just scuba gear. [To my knowledge, Jay does not claim to have recovered colonial era pottery at the Discovery Site. Jay claims that someone else found colonial era pottery at the site, and brought it to Jay’s attention before Jay ever visited the site. Jay said as much during the 60 MINUTES segment] The hundreds and perhaps thousands of very small emeralds shown to Marcial on August 14 were by Jay’s admission in front of John Siracusa, Dave Horan and Eric Williams (and Sean and Gene and Manuel) recovered using a kitchen or baker’s type sieve! [That is
30 trips. I also understand that there were two or three dives each trip (per diver), and that most of the dives lasted approximately one hour each. I corrected my mistake when I spoke with Mr. White the following afternoon.
consistent with what I have been told. If you have evidence that this is untrue and/or cannot be true, I would be interested to learn about it]
• We also learned after filing Motivation’s claim that Jay had approached some of the IR guys at the Fisher’s in 2009 with a scheme to assist him in raising funds to develop a huge (300 pounds or more) cache of Colombian emeralds he and Elschlepp had located off the coast of Equador. [I have no personal knowledge about this. I have heard a story about an ORRV expedition, in which Scott Heimdal was working with the Ecuador government, and which ended with Mr. Heimdal being arrested and/or chased away by the military. I also am not sure you have the right year, but you might. I have no reason to believe that this has anything to do with Jay’s claimed discovery in January, 2010] This was later posted on ORRV blogs. During this period Jay and Elschlepp dove with Kenny Rose in his permitted area off Woman Key. [So what? I understand that there a number of potentially interesting wrecks within the “Kirby Site,” including a civil war era wreck that is of interest to Jay and Steve] Miscovich attempted a similar push with Scott Hemidal and Peter Tobias for investors in 2010 this time touting the emeralds as coming from the Atocha. [I have no knowledge of any claim by Jay that the emeralds came from the Atocha. I do know that Jay has denied this claim since the first day that Motivation asserted it. The only “evidence” I have ever seen of this assertion is the affidavit you procured from Scott Wilding, which I personally know, for a fact, to contain inaccurate information – which I will explain in my Affidavit if Motivation does not withdraw its Motion for Sanctions. We also have information about Mr. Wilding that is, to say the least, less than flattering]
• Emerald Reef and GUTS brought Scott Heimdal, Tobia, Jay and other ORRV players into the picture in early 2010. Jay received 25,000,000 shares in April 2010 per SEC reports. [I investigated this issue during the pendency of the Delaware Litigation. As I understand matters, the shares in question were never issued to Jay. Rather, the reports state that the[s]e shares are being held by ORRV in trust for Jay, and I understand that Jay has disputed these reports and has disclaimed any ownership of these shares.]
• The prime red flag, though, was that in early 2010, Eschlepp and Peter Tobias approached Brent Bisbane, the then new owner of the 1715 wrecks off Vero Beach, and proposed they subcontract on one of admiralty court approved wrecksites where they anticipated finding a substantial find of Colombian emeralds. [I know nothing about this. Perhaps, you can provide me with evidence that I can
review and consider its implications] At about the same time in 2010 GUTS entered into an agreement with Kenny Rose for an area off Woman Key that would exclude any emerald finds or the non-defined “Emerald Reef” from the normal owner- subcontractor split in the industry of 50-50. [The “GUTS” Agreement with Ken Rose was negotiated by the “New York Investors” and their lawyers. Jay was not in control of GUTS at the time the Agreement was negotiated and formed. By the time Jay was put in control of GUTS, Ken Rose already had purported to terminate the Agreement. I have my suspicions about that Agreement, but I have seen no evidence that Jay was behind the Agreement.] Subsequently you negotiated a deal with Rose for Jay and Steve (J&S Keys, LLC) which did not include the tell-tale exclusion of emeralds clause. [You are 100% correct. I can, and will, explain this Agreement in my Affidavit. Your suspicions about the Agreement are entirely unfounded. Moreover, as you correctly note, there is no exclusion for emeralds. Indeed, there is no mention of any emeralds in the agreement I negotiated. The Agreement provided for (i) a straight-up 50/50 split of anything found at the Kirby Site, and (ii) Ken Rose had broad observation rights. As I understand matters Jay had no expectation of finding any emeralds at the Kirby Site, and was interested in exploring a civil war era wreck known to be within that area.]
• All of this activity we now know was happening after the alleged 2009 Equador finds as well as the alleged January 2010 Emerald Reef recoveries.
The April 22, 2012, 60 Minute documentary did nothing to dispel the above concerns and indeed increased inflow of information to Motivation disputing Jay’s claims.
Newspapers had reported that court documents showed the emeralds had a value of nearly a half a billion dollars. [You should not believe everything you read in the press. This was a sensational report that was not supported by the pleadings in the Admiralty Action.] These estimates, at least in the Key West Citizen, no doubt, came from Miscovich. [I do not believe that the reporter got this value from JTR, Jay, or anyone authorized to speak for JTR. If you have contrary evidence, as opposed to speculation, I look forward to learning what it is.] Since Miscovich had already worked a stock deal with ORRV by then and brought ORRV principals into Emerald Reef LLC and GUTS, ORRV appears to have tried to capitalize on its own 5.17% interest in JTR above the Emerald Reef shares owned by insiders. [As discussed above, your information about Jay’s relationship with ORRV is inaccurate. After JTR filed its admiralty claim, Scott Heimdal (a principal of ORRV) threatened to file a claim against the emeralds. Personally, I thought the claim had no merit, and was unconcerned about JTR needing to litigate against Mr. Heimdal. Other advisors to JTR had a
different view, and a settlement was reached with Mr. Heimdal (and not ORRV), which has been misdescribed in internet postings, and about which I have complained.]
Manuel Marcial’s inspection revealed that, except for one or two stones, the entire balance of the emeralds (which Miscovich represented as being the totality of the finds) was of non commercial quality and had a value of much less than the $100,000,000 Jay touted on 60 Minutes and a far cry from the $500,000,000. [You should watch the 60 MINUTES segment again and/or review the transcript attached to Motivation’s Motion for Sanctions. Jay never volunteered any belief respecting the value of the emeralds. 60 MINUTES does claim that Jay believed the emeralds were worth hundreds of millions of dollars, but you will not see or hear Jay saying so in the segment (or in the transcript). Don’t you think 60 MINUTES would have shown Jay saying this if he had done so? In any event, Jay does believe the emeralds are worth hundreds of millions of dollars. Jay may be right if it turns out that the emeralds are from a colonial era wreck – which Jay also continues to believe. Alternatively, Jay’s belief may turn out to be woefully misplaced. Whatever the emeralds turn out to be worth, Jay is entitled to his beliefs. Indeed, Jay has a constitutional right to believe whatever he wants to believe. Significantly, nowhere in any of the Admiralty filings has Jay expressed any belief respecting the value or origin of the emeralds. That has all been made up by the press, the rumor-mill, and others] Miscovich has, according to his own accounts, had possession of the gemstones for almost 2 years prior to filing and had plenty of opportunity to obtain a valuation of the bulk of his “finds.” [Jay had possession of certain emeralds for 1 year and 8 months prior to the admiralty filing. For much of that time, however, a great number of the emeralds were “locked up” in a safe deposit box to which Jay had no access – which was the subject of the Delaware litigation. With respect to the emeralds that were accessible to Jay, there were various valuations obtained before the Admiralty action was commenced. If those valuations are to be believed, they would support the view that the entirety of the discovery may be worth hundreds of millions of dollars. Mr. Marcial is entitled to his opinion, but it is different from the opinions expressed by other folks. And – they were all viewing the same emeralds. There has been no “swit[c]heroo.”] Some 3 dozen gemstones were shown to the Investors and the Smithsonian Institute and they presumably had real value. [To the best of my knowledge, this is very true. To the best [o]f my knowledge, these very same emeralds were made available for Mr. Marcial’s inspection. I also have seen these same emeralds inspected by other “experts.”] We still wonder where they and the emeralds in the December 9, 2010, appraisal at Doc 131-8 are located and so should you. [It is my understanding – which can be corroborated by John Siracusa – is that all of these emeralds were included among the emeralds that were made available to Mr. Marcial for his inspection. Indeed, it is my understanding that every single emerald in JTR’s custody was made available for Mr. Marcial’s inspection. I know you find this hard to believe, but it is true to the best of my knowledge, and I am prepared to so testify. I also witnessed a number of these emeralds being inspected by a Colombian mine owner who was brought in by 60 MINUTES. I have consulted with other
“experts” as well. I have heard all sorts of differing valuations of the very same emeralds – which makes me scratch my head and wonder whether these so-called experts really know what they are doing. Again, I would be pleased to talk to you about this.]
It is clear to us that “Doctor Jay” Miscovich has lied about his professional employment and has told conflicting and improbable tales about buying a map, finding the emeralds at the coordinates stated and getting a top NYC admiralty lawyer’s advice. [I think you are going to be very surprised! The truth will set you free – but it may well come at a substantial cost.]
It is clear to us (and outside counsel with whom we consulted) that had Kim agreed to the January 6 offer, Kim and Motivation (and the Lewis & White law firm) would be co-conspirators in a fraud scheme if our suspicions are correct – and we have no evidence to the contrary. [This is discussed above. Also, I note that I repeated[ly] asked to speak to Kim in January, and he refused my invitations]
While you are ethically required to represent your client, the Advisory Committee Notes to Rule 11 amendments in 1983, called to our attention by John Siracusa, admonishes that, although “the rule is not intended to chill an attorney's enthusiasm or creativity in pursuing factual or legal theories... [t]he court...should test the signer's conduct by inquiring what was reasonable to believe at the time the pleading, motion, or other paper was submitted.” Of course, this does not apply to you directly because you are not counsel of record but you are the strategist and call the shots. [I did not “call the shots.” I simply provided legal advice, which was often followed, and sometimes disregarded. Also, I am glad to see that you now acknowledge that Rule 11 does not apply to me.] The point is, though, that by January 2012, you knew or should have known that the French lab was angry at being asked to analyze a bunch of enhanced, modern era gemstones unlikely to be from any shipwreck; likewise, the Swiss lab. [I do understand that the two labs were upset. I also believe that there is a logical explanation for their findings, which I would be pleased to discuss with you if you really want to talk about it, and have not closed your minds to the possibility that you have made a huge mistake in the positions you have taken in this litigation] We are sure that you had other indicators by then. [I disagree, but I suppose reasonable minds might differ on what constitutes an “indicator.” Personally, I have been vigilant to investigate every allegation that has been leveled against Jay, and I have tried to remain skeptical of his claims. I have yet to find any evidence that persuades me that Jay is engaged in a fraud. If I were persuaded of that fact, I would withdraw as counsel, and I would get in line with your client in making claims against JTR and Jay] You should have launched a thorough inquiry after having so many negative reports. [We did launch a thorough investigation – which commenced within days of receiving the very first indications from the French and Swiss Labs that they had found modern materials on the emeralds. The investigation involved CBS News, the GIA, Matco, and Chemir. Additionally, we caused JTR to obtain new samples – under the supervision of counsel of
record in the admiralty proceeding. Thus far, all indications are that the reports from the French and Swiss Labs can be explained, and it remains possible that the emeralds are from a colonial era wreck and/or a WWII wreck. Again, I am happy to explain, and will be doing so in my Affidavit. Again, I believe you are making a huge mistake and jumping to unwarranted conclusions that are contrary to the actual evidence – much of which you know nothing about, and other of which you have simply ignored or misunderstood.]
Yet you threatened a class action suit against Motivation on behalf of its current and prior investors (Jay is one) if Motivation did not drop its claim prior to the January 10, 2012, hearing. [I truthfully told you that Jay was threatening to bring such an action, and that I was doing my best to dissuade him from doing so. The exact quote is as follows: “As this matter progresses, Jay Miscovich is becoming increasingly aggravated with Motivation, and pushing us to take an aggressive position in the litigation – including (i) seeking sanctions if the dismissal motion is granted, and (ii) possibly commencing a class action suit against Motivation on behalf of its current and prior investors (which Jay is one). We have been pushing back very hard to keep Jay calm, but he is extremely frustrated by the fact that Motivation’s claim (which he views as frivolous) is holding back JTR from moving forward with its efforts to monetize the discovery.”] According to John Siracusa or Joe Janssen you spent a lot of money gathering documentation relative to Motivation’s business. [If John or Joe told you this, they are mistaken. I have not spent any money gathering any documentation relative to Motivation or its business.] Through John and Joe you threatened us with Rule 11 sanctions in July. [This is an example of where my advice was not followed. I was against making such a threat, and preferred to make another effort to extend an olive branch to see if a settlement might be reached. My “strategy” was over-ruled, and the Rule 11 letter was sent. It did not come from me, and was sent over my objection. I have contemporaneous documentation to prove this. Motivation’s allegations to the contrary are insulting] You have threatened Kenny Rose for cooperating us and, in the Delaware case, threatened Rose that you would break him financially if he tried to maintain his claim in those proceedings and have threatened others as well. [I have never threatened Mr. Rose with anything and I certainly never threatened to “break [Mr. Rose] financially.” When Peter Hess filed a motion to intervene in the Delaware Litigation on behalf of Mr. Rose, I did inform Mr. Rose’s counsel that Jay would seek sanctions in Delaware if Mr. Rose did not recant his frivolous assertions that Jay had stolen the emeralds from the Kirby Site. Mr. Rose’s counsel and business partner, Ed Wells, later admitted to [me] that Mr. Hess was not authorized to make a filing on Ken Rose’s behalf in the Delaware proceedings, and Ken Rose admitted to me that he had been misled into believing that Jay had stolen emeralds from the Kirby Site by persons who had an axe to grind with Jay, and that the entire episode was a big mistake and was very embarrassing. I have not threatened Mr. Rose or otherwise made any effort, whatsoever, to refrain from cooperating with Motivation in the Admiralty proceedings. Indeed, since the Delaware Litigation was concluded, the only communications of any sort I have had with Mr. Rose [or] Mr. Wells have been (i) early in the process when we
received information that Mr. Hess intended to file a claim on behalf of Mr. Rose – which Mr. Wells, denied, and (ii) when I contacted them to see if we might revive the agreement for Jay to perform salvage activity in the Kirby Site]
Now you are again threatening us if we don’t withdraw our motion to compel. [I am making no threat of any sort] If JTR has nothing to hide, why is it that the production we seek is driving you to make another Rule 11 threat? The fact that you are making such threats over Motivation’s request for a relatively few documents, should be an alert to yourself that you must have too much invested in this deal because your judgment is getting poor. [In 25 years of practice, I have always advised my clients to resist discovery that they are not required to produce. No good ever comes from producing discovery that is not required by applicable law – even when one has nothing to hide. Providing discovery is a costly and one-sided affair. The other side always seeks to distort whatever discovery they obtain. Motivation has no right to discovery at this time, and its pending motions to compel and for sanctions are, themselves, sanctionable in my view.]
You may not view yourself as a knowing co-conspirator to perpetuate a fraud on the court; but, through your persistence in closing your eyes to the glaring truth that the financially desperate Miscovich cooked-up a scheme to defraud the gullible public who buy penny stocks by, first, and then when that did not succeed, hit upon an admiralty action as a way to increase the value of his pedestrian emeralds by defrauding a federal court. [I certainly do not view myself as a co-conspirator in any fraud, and I find Motivation’s (and now you[r] accusations to the contrary defamatory]
You could show us a least some indication of your sincerity about not being a part of a scheme to defraud the public and to defile Judge King’s court, if you would conduct a reasonable investigation about Dr. Jay’s assertions and his conduct, .e.g. have you seen evidence of a $50,000 payment to a diver (other than Steve Elschlepp or Kent Van Raalte) [I have seen such evidence, and well prior to the filing of the admiralty action] and evidence that Miscovich engaged a top NYC admiralty lawyer [I have seen such evidence, and well prior to the filing of the admiralty action]. Have you investigated the basis for the rumor that the “finds” were worth nearly a half-billion dollars.[I have seen evidence that Jay’s discovery may be worth hundreds of millions of dollars, and possibly as much as a half billion dollars or more, and well prior to the filing of the admiralty action. Nonetheless, no such allegation was made in the Admiralty action. Nor, to my knowledge, has any such assertion been made to the press by JTR, Jay or any other person authorized to speak on JTR’s behalf] Have you insisted that, since JTR has nothing to hide, JTR should willingly comply with Motivation’s request for production before being ordered. [Absolutely not. An adversary is entitled only to such discovery as the law permits. Motivation is not entitled to any discovery at this point in time, and I will not insist that JTR provide such discovery voluntarily – although I would consider recommending that JTR share such information with Motivation if Motivation were acting responsibly and not
pursuing sanctions and otherwise seeking to interfere with JTR’s admiralty claim.]
We decline your offer and threat. Please govern yourself accordingly. [Again, I have made no threat, and I look forward to discussing this with you tomorrow]
(E-mail from B. Silverstein to M. White, dated Oct. 6, 2012) (Exhibit T hereto).
122. I spoke with Mr. White for approximately forty-five minutes on the afternoon of October 6. Mr. White told me that he viewed Motivation as having the right and responsibility to continue to pursue this action, despite the fact that Motivation has abandoned its claim to the emeralds, because Motivation has an obligation to “police” the treasure hunting community. I couldn’t disagree more. My understanding of the civil justice system is that Motivation has no right to serve as a private attorney general. If Motivation truly believes that JTR is truly involved in a fraud, Motivation should bring it to the attention of the appropriate authorities.
Motivation lacks standing to remain in this case to serve as the treasure police.
123. On October 7, Mr. White informed me that Motivation was unwilling to withdraw its pending motions and continued opposition to JTR’s obtaining an award of title, but that JTR’s filings in response to Motivation’s Motion for Sanctions might provide a basis for revisiting the
decision. (E-mail from M. White to B. Silverstein, dated Oct. 7, 2012) (Exhibit T hereto) O. Concluding Remarks
124. In more than twenty-five years of practicing as an attorney, I have seen a lot of excellent lawyers and I have seen some very poor lawyering. Throughout the course of my representation of Jay, Scott and Steve, however, I have witnessed the most frivolous, defamatory and vexatious filings I have ever seen – and the worst of them have been made by Motivation in the Admiralty Action. I have heard that the “trouble with treasure” is that it brings all sort of vermin out from under the woodwork – such as the trio of felons (Edwards, Wilding and Krajewski) who are aiding Motivation in its efforts. I would not, however, have believed that
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