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Scuttlebutt News:
The America's Cup on Trial
By John Rousmaniere

(October 23, 2007) The first thing that should be said about the hearing in the America’s Cup law suit on October 22 is that it provided solid evidence that, despite recent appearances, the world does not revolve around the cup and its travails. After we had piled into New York Supreme Court Justice Herman Cahn’s courtroom – the platoons of lawyers for Larry Ellison of Oracle and Ernesto Bertarelli of Alinghi, the four television cameras and their attached technicians and talking heads, and the crowd of interested spectators and journalists (like myself, reporting for a Swiss newspaper) – we had to temper our excitement for half an hour while the judge dealt with the ten other cases on his docket. Some were postponed, others had been settled, and, one, a dispute concerning a painting by Willem de Kooning, ended right there before our eyes when the judge dictated a ruling.

Then the America’s Cup case was announced. As the attorneys rushed forward from the spectator’s seats to their tables at the foot of the judge’s bench, the fellow next to me – a lawyer on a case involving construction of a building in lower Manhattan – leaned over and asked what this was all about.

I told him. “A rich guy in Switzerland, another rich guy in California, a sailboat race off the coast of Spain, and rules that were written 150 years ago – that’s what it’s about.”

He sat stunned for a few seconds, gazed up to heaven, and announced, “Is America a great place, or what?” “It certainly is,” I replied, for I knew that a few hours earlier, right here in America at the New York Yacht Club in midtown Manhattan, the two sides had finally put down their cannon and begun to try to talk about possibly making a settlement. The best anybody could say about the meeting was that it “was not too bad” (Tom Ehman, Ellison’s spokesman) and “constructive” (Hamish Ross, Alinghi’s general counsel).

After that hopeful gathering, the two sides in the second America’s Cup lawsuit to ever go to trial (after the 1989-90 catamaran-big boat dispute) went downtown to 60 Centre Street’s great courthouse to go head-to-head before a judge. The head that dominated was not attached to either the defendant (cup defender Alinghi and Societé Nautique de Genéve, SNG) or the plaintiff (Oracle and Golden Gate Yacht Club of San Francisco, GGYC). Rather, it was the round, white-haired head of Justice Cahn himself as he shoved aside the fluff and drove straight to the heart of the case. He made his mission very clear at the very beginning when a representative of an Italian yacht club tried to file a friend-of-the-court (amicus curiae) brief concerning the racing rules. The judge interrupted him, saying in his soft voice that the job before the court was to “determine the legitimacy of the challenging yacht club.”

As the oral arguments proceeded, the judge appeared to be especially interested in three issues. One was the by now well-known requirement in the cup deed of gift that a yacht club qualifies as a challenger by sponsoring an annual regatta. GGYC’s lead counsel, David Hille, began his discussion of the qualifications question without addressing this requirement. The judge interrupted: “Doesn’t it say that it has to have a regatta? When will it have that regatta?” The silence in the room was deafening. The lawyer quietly stated that there will be a regatta in November.

Another issue that attracted the judge’s and lawyers’ attention was the mechanism by which the challenger of record, Club Náutico Español de Vela (CNEV), had come into existence as a child of the Spanish Sailing Federation, which played a role in Alinghi’s decision to bring the America’s Cup races to Spain. GGYC argued that since the Federation is not a yacht club under the deed, it had created one to serve as challenger of record under the Federation’s control. Attorney James V. Kearney’s point was that CNEV, therefore, is not a true, independent, organized yacht club. Justice Cahn inquired how, “as a practical matter” (one of his favorite phrases), the distinction between the national federation and the local yacht club is important.

Kearney replied with a constitutional argument. There must be a “balance of power” between the defender and the challengers, and this requires that the challenger of record not only satisfy the deed’s qualification requirement perfectly, but be able and willing to fairly represent all the challengers and their interests without a conflict of interest. Here this balance of power would be compromised because CNEV is a captive of the Federation, which shares commercial interests with SNG. I was impressed by this argument.

Finally, the practical-minded judge was interested in when the next race would be held. He got two very different answers. GGYC promised that if it won the case and displaced CNEV as challenger of record, it would schedule a race between it and SNG for ten to 12 months after the decision was handed down. To my eye, this decisiveness impressed the judge. SNG was not so specific – in fact, they could not be. It is important to remember that GGYC-Oracle’s challenge is a so-called “deed of gift” challenge according to the steps laid out in the cup’s rules for a one-on-one match should the two sides not form mutual consent over the conditions. But SNG-Alinghi wants to hold a regatta under mutual consent with CNEV as challenger of record, and that involves several boats, all with scheduling and sponsorship problems. With every passing day, Alinghi’s hoped-for deadline of July 2009 becomes less likely, Ross told me. The distinction between a “deed of gift” and a “mutual consent” regatta is a fine one that is not wholly understood even by people who know the cup well. It could have been lost on the judge at this hearing. No doubt he will master it.

After about 30 minutes of lively discussion, the judge announced, “There will be a decision shortly.” Out in the lobby, nobody declared victory, but nobody declared defeat, either. Later, the two sides reserved a meeting room at the New York Yacht Club for Tuesday morning.

One of the great things about America is how effectively a little judicial pressure can bring sense and civility to even the most bitter disputes.

To read the actual Deed of Gift, click here

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