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The Settlement of the Brother Jonathan Case When Judge Louis C. Bechtle convened his court on Wednesday March 10, 1999 in San Francisco for the trial of Deep Sea Research, Inc. v. the Brother Jonathan, the parties were ready to proceed, but there would be no trial. Attorneys for Deep Sea Research (DSR) and the California State Lands Commission had reached an agreement and the other claimants, the United States of America, Wells Fargo and Company, Louis Barrows, Regina Phelan and the other heirs of Janette Lee had been accommodated. The Judge accepted the stipulation of the parties, spent some time reviewing and discussing its terms, then incorporated it in his judgment. He concluded the hearing with a moment of silence in memory of the more than 200 persons who had perished in the disaster some 130 years earlier.
With the Judge’s order, nine years of litigation ended. The case had been to the United States Supreme Court, who after hearing arguments from the parties on many of the significant legal issues facing historic shipwreck preservation, chose to consider and decide only one. That issue was the right of a state to impose its 11th Amendment immunity in an in rem admiralty action to prevent a Federal Court from litigating its property rights to a historic shipwreck. The Supreme Court agreed that the State had such a right, but it did not agree that the right could be used in this case because the State did not have possession of the shipwreck. The Court held, “that the 11th Amendment does not bar the jurisdiction of a federal court over an in rem admiralty action when the shipwreck is not in the State’s possession.”
The Court declined to address the constitutionality of the Abandoned Shipwreck Act, although DSR challenged it. It suggested that abandonment under the Act had the same meaning attributed to that term in admiralty law, but did not offer a clearer definition. It also chose not to consider whether the ship and cargo must to be treated as one (a unified res) for the purposes of abandonment, or whether the passage of time necessary to prove intent to abandon is tolled during a period of time when the technology to salvage a ship is not available. It left these issues to be tried, considered and decided by the District Court.
Why settle a case with so many significant issues pending? Time and money. Once the Supreme Court entered its order that, “the judgment of the Court of Appeals assuming jurisdiction over this case is affirmed, its judgment in all other respects is vacated, and the case is remanded for further proceeding consistent with this opinion” the parties had to either go to trial or settle. Most persons aware of the litigation have assumed that there was a trial prior to the Supreme Court appeal, but no trial was ever held. It was the denial of the State’s original motion, challenging the courts jurisdiciton, that led to the Supreme Court’s decision.
Before proceeding with a trial in which both parties had a lot to lose, it seemed reasonable to consider settlement. After some serious discussion, it became clear that each party had certain objectives to which the other party could accede without compromising their own goals. DSR confirmed that their real interest was in the gold coins. They also sought settlement to limit further legal costs, having expended significant sums of money for the litigation. Additionally, DSR’s investors were anxious to share in the recovery. California’s major interest was in obtaining the Courts’ acknowledgment of certain legal principles, namely, that the Brother Jonathan was abandoned and owned by the State, that the State had the authority to control any recovery operations and that the artifacts recovered as well as those which remained on the sea floor belonged to the State. The other major player in the case, the United State, conceded that it did not own any of the coins or artifacts and only wished to reserve its right to claim items recovered in the future. Believing all parties were in accord, Deep Sea Research published the final notice to claimants as required by the law.
Three additional claimants surfaced. Wells Fargo and Company made a claim to any property that was demonstrably theirs. They settled for a padlock labeled “Wells Fargo and Company,” the right to claim items in the future, and the loan of five gold coins for their San Francisco museum. Louis R. Barrows, a pharmacologist and faculty member of the University of Utah, had requested a permit from the State Lands Commission during a brief hiatus in the lawsuit in 1992. Although the permit process began, it was never issued. Mr. Barrows filed a claim in a belief that as a permittee he had a claim. He and his attorneys were convinced otherwise and his claim was withdrawn. The third claimant was Regina Phelan, a retired teacher and author. She was the heir and successor of Janette Lee, the wife of Henry C. Lee who owned a small traveling circus popular in California in the 1850's. Mrs. Lee and her infant son lost their lives when the Brother Jonathan sank . Regina Phelan claimed Janette Lee was carrying a payroll for the circus when she boarded the Brother Jonathan for its fateful trip in July 1865.
With no evidence other than hearsay, that Mrs. Lee was carrying a circus payroll, her counsel argued that continued salvage of the ship would be likely to provide hard evidence that some or all of the coins recovered were part of the circus payroll. He therefore requested the Judge withhold division of the recovered items until further salvage could be conducted by Deep Sea Research. The Judge declined. DSR also pointed out that without the salvage award, they would not have funds to continue salvage operations. As an accommodation of Ms. Phelan’s claim, the State, which under the settlement received 200 of the gold coins, agreed that if evidence was discovered that proved the coins were circus payroll, Regina Phelan could claim up to $100,000 against the State. There is little likelihood that such evidence will ever being found.
With all claimants now satisfied, the Judge entered an order that provided 1007 of the gold coins to Deep Sea Research, Inc. as a salvage award. They were recently sold at auction in Los Angeles for a reputed $4.5 million. The State received title to the ship and all the non-monetary artifacts as well as 200 of the coins. The artifacts, cargo and ship’s equipment, approximately 325 items, are being conserved by the Del Norte County Historical Society at a facility in Crescent City, California and will be displayed in various exhibits around the State. The State Lands Commission created a web site which can be accessed at (http://shipwrecks.slc.ca.gov). Deep Sea Research, Inc. after filing an application and presenting a research design, will be permitted to continue operations in 1999 under the supervision of the Commission. Their permit is limited to the recovery of additional coins, money and jewelry. Recovery of non-treasure items will be only with consent of the State’s on site monitor. The Del Norte County Historical Society will retain most of the artifacts for its museum exhibit on the Brother Jonathan.
Peter Pelkofer, June 21, 1999 An Adobe PDF version of this file can be found at: BroJonSettlement1.PDF |