Gold

By Eric Benedict

Overview

On June 22, 2015, the Fourth Circuit issued its published opinion in the civil case, Recovery Limited Partnership v. Wrecked & Abandoned Vessel S.S. Central America. In Recovery Limited Partnership, the Fourth Circuit had to decide if an attorney who withdrew as counsel for a client could subsequently make a salvage claim, adverse to the client, after returning client documents. The Fourth Circuit held that attorneys who no longer represent their client have a pre-existing duty to return the documentation under the Rules of Professional Conduct and affirmed the District Court’s dismissal.

Recovery Partnership and the Hunt for Treasure

In 1857, the S.S. Central America Sank off the coast of South Carolina. The vessel was carrying a large quantity of gold when it sank, prompting a search for the wreckage. In 1980, Columbus-America Discovery Group (“CADG”), who was and agent for Recovery Partnership, located the wreckage and a federal court granted CADG salvage rights. During the course of the recovery, the Robol Law Office, LLC served as counsel for CADG and defended it against competing claimants. In addition, the firm leased space to a related business, EZRA Inc., which was tied to the salvage operation, to store documents and other materials relating to the salvage. EZRA would later default on the lease payments.

In 2013, some of the companies tied to the operation were placed into receivership, due to the disappearance of some of the recovered gold. The Receiver was ordered to collect the companies’ property from all parties, including attorneys. The Robol’s firm responded by giving the Receiver thirty-six file cabinets of documentation related to the companies. Robol later withdrew as counsel and filed an admiralty action for a salvage award.

Robol Claims a Right to a Salvage Award

Robol claimed that he was entitled to a salvage award. The Court explained that a Salvage Award is, “[C]ompensation to persons ‘by whose voluntary assistance a ship at sea or her cargo or both have been saved in whole or in part…” Robol claimed that because his firm voluntarily turned over the documentation in its possession, and because that information was valuable to the salvage efforts, he was entitled to the award. Robol asserted that the action was voluntary for a number of reasons. First, Robol claimed that CADG and EZRA owed past due attorney’s fees, which gave him a possessory interest in the documents through a retaining lien. Second, Robol claimed that because EZRA defaulted on the lease agreement, he was entitled to repossession of the contents of the leased space. Finally, Robol contended that he was instrumental in getting other parties to return documents to the Receiver. After the United States District court for the Eastern District of Virginia granted a motion to dismiss, Robol appealed to the Fourth Circuit for review.

The Fourth Circuit Rejects Robol’s “Voluntary” Acts

The Fourth Circuit reasoned that Robol was not entitled to a retaining lien, and therefore did not have a possessory interest in the documentation. Judge Niemeyer found two basis for rejecting the retaining lien claim. First, the relevant jurisdictions, Ohio and Virginia each maintain Rules of Professional Conduct that prohibit retaining liens and require a discharged attorney to turn over files to the client. Second, Judge Niemeyer observed that even if a retaining lien were available, it would not be appropriate “where doing so would cause foreseeable prejudice to the client.” Due to Robol’s testimony that the documents he provided saved the companies over $600,000, the court had little difficulty finding that withholding the documents would have caused foreseeable harm.

Next, the Court addressed Robol’s claim that the default on the lease gave him ownership of the documents. First, the court noted that, absent a clause providing for self-help in the lease, Robol had no legal right to self-help repossession. Second, Robol had completed an affidavit which admitted the documents were not his, but belonged to the companies. Next, the court noted that Robol willingly complied with the Receiver’s order to turn over the documents, without asserting any ownership rights. Finally the court emphasized that any claim under the defaulted lease was still subject to Robol’s duty to his former client.

Last, the Court refuted Robol’s argument that he convinced others to hand over important documentation. The Court, citing the record, concluded that the act was not voluntary because the conduct in question occurred while Robol was still counsel of record for the companies and because the documentation was already subject to the Receiver’s order.

In dicta, the Court also cast doubt on the appropriateness of Robol’s claim, citing the close relationship of an attorney with his or her client and the potential for a conflict of interest.

The Fourth Circuit Affirms District Court’s Dismissal

After a de novo review of the legal issues before them, the Circuit unanimously affirmed the District Court’s dismissal.

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