Odyssey Marine Exploration (NASDAQ:OMEX) is now one step closer to resolving the last lingering Black Swan issue and moving forward with the pursuit of several lucrative projects. On Thursday, Nov. 15, 2012, U.S. magistrate judge Mark A. Pizzo delivered his report and recommendation concerning Spain's claim for attorney's fees from the Black Swan case. Odyssey's most recent 10-Q filing estimates its potential liability at $4 million and many naysayers have used the case to argue that Odyssey has a flawed business model and can't survive as a going concern.
Following the Black Swan case, Spain filed two more legal claims, each of which Judge Pizzo addressed in his report. First, Spain demanded the court sanction Odyssey for its conduct after Spain was awarded the Black Swan treasure. Second, Spain wants Odyssey to pay for all of Spain's attorney's fees and court costs from the Black Swan litigation.
On the issue of sanctions, Judge Pizzo essentially recommended that Odyssey be ordered to appear before the U.S. district court to determine if Odyssey should be held in contempt for its actions following the final ruling in the Black Swan case. At the commencement of the legal case in 2007, Black Swan artifacts were located in both Gibraltar and the U.S. In early 2007, Odyssey had attempted to move the Gibraltar artifacts to the U.S. to be under the U.S. court's jurisdiction. However, complex diplomatic issues regarding a Mutual Legal Assistance request by Spain effectively trapped the artifacts in Gibraltar and prevented Odyssey from bringing them within the jurisdiction of the U.S. court. Despite the fact that its own Mutual Legal Assistance request had been the reason for the artifacts remaining in Gibraltar, Spain asserted that Odyssey sought to obstruct the enforcement of the court's order to return the Black Swan artifacts held in Gibraltar.
More importantly, though, Judge Pizzo recommended that the district court dismiss Spain's suit for legal fees. Judge Pizzo based his decision primarily upon what is known in legal parlance as the "American Rule." The American Rule provides a default rule where each side pays its attorney's fees and court costs regardless of which side wins the case. This is different from the English Rule where the winner's fees are paid by the loser. Judge Pizzo's recommendation, while still subject to a final ruling by the district court, effectively removes the $4 million Sword of Damocles many naysayers have claimed overhangs Odyssey's corporate neck.
Although Judge Pizzo's report is merely a recommendation to the district judge, in many, if not most cases, the district judge will follow the recommendation of the magistrate judge. Judge Pizzo's recommendation that Odyssey not be forced to pay Spain's attorney's fees and court costs is incredibly good news for Odyssey's shareholders. Even if Odyssey is forced to appear before the district court and pay a small amount in sanctions or fees, Judge Pizzo's recommendation spares Odyssey from the exponentially larger attorney's fees involved in the entire Black Swan suit.
If the district judge adheres to Judge Pizzo's recommendations, then Odyssey will be able to put the controversial Black Swan case behind it and focus on its numerous short and long-term catalysts for growth. I discussed some of these in my last article, but they include the pending approval of recovery operations on the HMS Victory, the completion of the SS Gairsoppa and SS Mantola project in 2013, continued deep sea mining survey work such as with Chatham Rock Phosphate, its new commodity shipwreck program and pending agreements with sovereign governments to conduct exploration and recovery operations in their territorial waters.
Disclosure: I am long OMEX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.