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LEGAL PROCEEDINGS
9 Months Ended
Sep. 30, 2014
Commitments and Contingencies Disclosure [Abstract]  
LEGAL PROCEEDINGS

NOTE 11 – LEGAL PROCEEDINGS

 

Since December 11, 2009, the Company, has been involved in a lawsuit where it was named as a Defendant, along with its CEO and transfer agent in Case Number 09-CA-030763, filed in the Circuit Court of Hillsborough County, Florida. The lawsuit was brought in the name of 31 individuals and 1 corporation. The lawsuit alleges that the Company, its CEO, and its transfer agent wrongfully refused to remove the restrictive legend from certain shares of the Company’s common stock that are collectively owned by the plaintiffs, which prevented the plaintiffs from selling or transferring their shares of the Company’s common stock. The plaintiffs allege that they have lost approximately $1,041,000 as of the date of the lawsuit. Such lawsuit continued to a hearing of the Plaintiffs’ motion for summary judgment against the Defendants including Seafarer, which was heard on September 1, 2011 and denied by the Court. Litigation of the matter has continued and the Company has presented evidence and arguments of law that the shares were distributed from their original recipient, Micah Eldred, in an illegal sale to another corporate entity. The Company further contends in its pleadings that such shares were then illegally purchased back by Eldred, then distributed in a manner by Eldred to others including the 31 other Plaintiffs to avoid reporting requirements under the Securities Act and as Eldred had a duty to report as a principal of a brokerage. The actions by Eldred, as pled by the Corporation, is that on or about October 8, 2008,  Eldred  gifted  most  of the  34,700,000   shares  to certain  friends,   family,  and  employees   (i.e.,  the  Plaintiffs   named  in this  Complaint),   and  kept ownership  of 4, 140,000  shares.

 

On September 11, 2013, the Parties attended a voluntary mediation, which ended in an impasse.

 

Some discovery had progressed to the point that Seafarer had, on September 25, 2013, filed a Motion to File Counterclaims and Third-Party Complaint (“Motion for Leave to File Counterclaim”) along with a proposed Counterclaim.  Such counterclaims were filed in December 2013.  Included in the counterclaim was an allegation of conspiracy between Eldred and Sean Murphy for the publication of false information which Seafarer sued Murphy for and received a judgment for libel against Murphy on April 1, 2011 for $5,080,000. Thus the counterclaim was filed against the Plaintiffs: Micah Eldred, Michael J. Daniels, Carl Dilley, Heather Dilley, James Eldred, Mary R. Eldred, Michole Eldred, Nathan Eldred, Toni A. Eldred, Diane J. Harrison, Ioulia Hess, Olessia  Kritskaia,  Anna Krokhina, George Lindner, Elizabeth Lizzano, Karen Lizzano, Robert Lizzano, Abby Lord, Jillian Mally, Ekaterina Messinger, Susan Miller, Michael Mona, Matthew J. Presy, Oksana Savchenko, Vanessa A. Verbosh, Alan Wolper, Sarah Wolper, and Christine Zitman. On April 23, 2014, the trial court ruled on the Counter-Claim Defendants’ motion to dismiss and ordered the dismissal of the claims for section 517.301 violations, conspiracy and fraud. The court ruled that the Corporation did not have standing and was not in privity with the counter-claim defendants at the time of their alleged actions so the company could not maintain the action, unlike private shareholders who could have standing. Thus the Company attempted to protect the shareholders by such suit, but was ruled against as not having standing to do so.

 

On October 18, 2013, the Plaintiffs filed a Notice of Removal to Federal Court in the Tampa Division of the United States District Court, citing the allegation that such lawsuit should be moved to Federal Court based upon the Defendants proposed counterclaims of Federal law. The pleading for removal contained the allegation by the Plaintiffs that they had the consent of all the listed Plaintiffs to remove the matter to Federal Court. On November 4, 2013, Seafarer filed a Motion to Remand back to State Court in the Federal Court, citing legal argument and the undisputed facts that removal to Federal Court was improper as having no basis in law, and asking for attorney’s fees from the Plaintiffs for such removal. On November 7, 2013, Judge James Moody of the United States District Court entered an Order granting the Remand Motion of Seafarer, finding that “Plaintiffs removed the case based on their assumption that the counterclaim would establish federal jurisdiction. Plaintiffs’ removal is patently without merit.” Judge Moody further held “Plaintiffs’ removal had no basis under the law or facts. Simply put, the removal was not objectively reasonable.”   Accordingly, the Court Ordered the case sent back to State Court and that the Federal Court would award Defendants [Seafarer] a reasonable amount of attorney’s fees and costs.” Seafarer collected such attorney’s fees through counsel. Such case was remanded to the Circuit Court in Hillsborough County, where Seafarer had the motion to file the Counterclaims and Third Party Claims heard and an Order Granting the filing and service of such claims was made by Circuit Judge Paul Huey on December 13, 2013. Seafarer filed such complaint and served such Counterclaim Defendants and Third Party Defendants during the months of December 2013 and January 2014. Such complaint included claims by Seafarer for damages including punitive damages against the Plaintiffs for their actions, which is alleged to have materially damaged the Corporation and its shareholders. Such litigation continues and the Company will continue to fight the release of such shares for sale. It is the position of Seafarer that due to the actions involved with such shares, they are tainted and should be ordered to be cancelled. Seafarer intends to continuously pursue this defense and will assist any shareholders with any claims they may have against the Plaintiffs who hold such shares as to their actions which may have harmed any shareholders who were shareholders at the time of the Plaintiff’s action.

 

In early October 2013, counsel for Seafarer was contacted by counsel representing the listed Plaintiff, CADEF: The Childhood Autism Foundation (CADEF), as to their being named in the lawsuit as Plaintiffs in the State Court action and the litigation being done in their name. Pursuant to those discussions, on November 5, 2013, Seafarer, Kyle Kennedy (individually), Cleartrust LLC and CADEF entered into a Settlement Agreement and Release from Litigation. CADEF agreed to surrender all rights to the 1,000,000 shares in its name, as well as causing dismissal of any such claims against the Seafarer, Kennedy and Cleartrust that had been brought in their name in the lawsuit. Specifically, CADEF agreed: “CADEF agrees that the following matters of fact exist based upon the knowledge of its Board of Directors and Principals: A) The Board of Directors of CADEF had no knowledge of the share certificate ever being issued for its benefit or the existence of such share certificate until recently in the month of October 2013 when such shares were sent to them. B) The Board of Directors of CADEF never authorized the filing of the lawsuit cited above or to be a party to such. C) Because of the above in B) CADEF’s Board of Directors was never advised of any settlement offer being made by the Defendants nor of the mediation held on September 11, 2013. On approximately October 30, 2013 CADEF delivered such 1,000,000 shares to counsel for Seafarer. Such shares were cancelled subsequently. Seafarer believes this pattern activity. Seafarer is currently conducting extensive discovery including depositions in the case. As well, Seafarer has filed a motion for sanctions and dismissal based upon spoliation (destruction) of evidence by the Eldred parties, as well as a motion for sanctions and dismissal based upon fraud on the court which alleges that the Eldred parties attempted to bribe outside parties to make claims against the Company. Such matters are currently ongoing and pending such motions for hearing as made by Seafarer.

 

In the ongoing litigation in the above case against Micah Eldred and associated persons to protect the interests of the shareholders, the Corporation followed up on its counter-claims against Eldred by the filing of a notice of appeal of the dismissal of such claims, to the Second District Court of Appeal for Florida on May 17, 2014.  On May 29, 2014, the Company was served a secondary lawsuit in Hillsborough County. The lawsuit by challenges the creation of the Preferred B Series of Shares and the increase in authorized shares. The lawsuit in the opinion of the Corporation and multiple counsel has no merit since the corporation’s articles of incorporation and Florida statutes allow for the creation of the preferred shares, and thus the increase in authorized shares. The Corporation is defending such lawsuit and seeking dismissal by motion.

 

On September 3, 2014, the Company filed a multi-count complaint against an internet poster, being an individual named Darrell Volentine of California. The complaint also called for an immediate and permanent injunction against Volentine for his internet postings on www.investorshub.com and other locations. After a hearing on such immediate injunction on October 1, 2014, Volentine consented and signed to a consent judgment against him, also agreeing to a permanent injunction. In such consent judgment agreement Volentine agreed that the actual damages due to Seafarer Exploration Corp. were stipulated and agreed to be ten million three hundred sixty thousand dollars ($10,360,000.00) under such stipulated final judgment which was to be entered in this matter. Volentine further agreed that such damage award of $10,360,000.00 shall remain enforceable for a period of seven and one half years which would be 90 months from the entry of such final judgment. In exchange for such judgment, Seafarer agreed that no collection of such judgment would proceed unless the personal assets of Volentine exceeded two million four hundred thousand dollars ($2,400,000.00) during any six month period during such 90 months after entry of such final judgment. When such proposed and completely executed judgment was set before the Court (Judge Martha Cook), Judge Cook found that Mr. Volentine was too unsophisticated to accept such a judgment, and further that she did not find enough evidence to support such a damage award. Seafarer, in response to the rejection of such judgment by the Court, has filed a motion for punitive damages, as well as a motion for sanctions and civil contempt against Mr. Volentine for his posting which did not cease as per the injunction entered. Seafarer, with the Judge interceding against the stipulation for an agreed to judgement now intends to fully pursue Mr. Volentine for actual and punitive damages, including collection of damages from Mr. Volentine if successful at trial.

 

On March 2, 2010, the Company filed a complaint naming, Sean Murphy as a Defendant who formerly provided services as a captain, diver, and general laborer to the Company as a defendant in the Circuit Court of Hillsborough County, Florida case number 10-CA-004674. The lawsuit contains numerous counts against the defendant, including civil theft, breach of contract, libel and negligence. On April 5, 2011, a six person jury in Hillsborough County, Florida found in favor of the Company and found that the Defendant was responsible for $5,080,000 in compensatory damages. In 2012, the Company attempted to schedule a trial for the punitive damages, but the Court cancelled the trial due to scheduling of priority cases. The Company is currently seeking final entry of not only the judgment, but will be exercising collection matters against the Defendant. The Company intends to pursue collection, no matter the ability of the Defendant to pay.

 

On June 18, 2013, Seafarer began litigation against Tulco Resources, LLC, in a lawsuit filed in the Circuit Court in and for Hillsborough County, Florida. Such suit was filed for against Tulco based upon  for breach of contract, equitable relief and injunctive relief. Tulco was the party holding the rights under a permit to a treasure cite at Juno Beach, Florida. Tulco and Seafarer had entered into contracts  in March 2008, and later renewed under an amended agreement on June 11, 2010. Such permit was committed to by Tulco to be an obligation and contractual duty to which they would be responsible for payment of all costs in order for the permit to be reissued. Such obligation is contained in the agreement of March 2008 which was renewed in the June 2010 agreement between Seafarer and Tulco. Tulco made the commitment to be responsible for payments of all necessary costs for the gaining of the new permit. Tulco never performed on such obligation, and Seafarer during the period of approximately March 2008 and April 2012 had endeavored and even had to commence a lawsuit to gain such permit which was awarded in April 2012. Seafarer alleges in their complaint the expenditure of large amounts of shares and monies for financing and for delays due to Tulco’s non-performance. Seafarer seeks monetary damages and injunctive relief for the award of all rights held by Tulco to Seafarer. As of March 24, 2014, Seafarer, through Counsel with the assistance of a licensed investigator, established there was no party or individual to be served from Tulco due to the death of the former Manager, and having no other legal person or entity to serve, has won a default judgment, and final judgment for award of all rights to such site for contractual and other rights held by Tulco. Seafarer gained a default and final Judgment on such matter on July 23, 2014. Seafarer is continuing to work with the State for the renewed permit to be in Seafarer’s name and rights only, with Tulco removed per the Order of the Court. Seafarer expects to be the sole holder of such permit and rights under the outcome of the case, with complete removal of all other parties from such rights. Seafarer expects the final award of such rights by the end of 2014.

 

In the legal action of Seafarer Exploration versus Blue Water Ventures, Inc. and Keith Webb, Sixth Circuit Civil Case No 11-05539-Cl-19 a comprehensive settlement agreement, without any admissions of fault was negotiated and executed in October 2014 by all parties, as to all claims and defenses raised in such action, which Agreement has been accepted by the Court with attendant Order entered otherwise ordering and directing defendants to strictly and timely comply with the same, which agreement by its terms be fully performed by all Defendants on or before April 10, 2015. The Company’s legal counsel for this action has received the first settlement payment in the amount of $7,500 from the Defendants.