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A Perpetual Cup for Not So Friendly
Competition Between Lawyers
It was after the 32nd America's Cup when Defender Ernesto Bertarelli's Alinghi team and his club Société Nautique De Genève laid out the Protocol in July 2007 which found little support within the sailing community. What followed has been a legal traipse in the New York Supreme Court... unfamiliar territory for sailing journalists.
Thankfully, NY lawyer Cory Friedman, who is familiar with the law, the court, and the sport, has partnered with Scuttlebutt to provide the sailing public with commentary that is accurate and unbiased, and full of insight and predictions based on his extensive experience in this arena. Here are his reports:
33rd America's Cup
Part 1 - Part 2 - Part 3 - Part 4 - Part 5 - Part 6 - Part 7 - Part 8 -
Part 9 - Part 10
Part 11 - Part 12 - Part 13 - Part 14 -
Part 15 - Part 16 - Part 17 - Part 18
Part 19 - Part 20 - Part 21 - Part 22 - Part 23 - Part 24 - Part 25 - Part 26
Part 27 - Part 28 - Part 29 - Part 30 - Part 31 - Part 32 - Part 33 - Part 34
Part 35 - Part 36 - Part 37 - Part 38 - Part 39 - Part 40 - Part 41 - Part 42
Part 43 - Part 44 - Part 45 - Part 46 - Part 47 - Part 47a - Part 48
Part 49 - Part 50 - Part 51 - Part 52 - Part 53 - Part 54 - Part 55
Part 56 - Part 57 - Part 58 - Part 59 - Part 60
34th America's Cup
Part 61 - Part 62 - Part 63
© 2007-2012 Cory E. Friedman
Any reproduction of the information herein
must credit as follows:
Cory E. Friedman/Scuttlebutt
Part 63 - Not exactly a French Kiss on the bay
“No good deed goes unpunished.” Claire Booth Luce, or maybe Billy Wilder, Andrew W. Mellon, or Oscar Wilde.
(October 28, 2012) - From the standpoint of maritime law and practice, Todd Tholke’s salvage claim against Energy Team’s AC45 could not be more plain vanilla. He found a boat adrift, unmanned, and in peril, removed it from the peril and towed it back to its home port. He gets a salvage award based upon the factors set forth in well settled law, unless Energy Team negotiates a better deal. Tholke gets less than he wants and Energy Team pays more than it wants. Business as usual.
Nevertheless, it has generated the most extraordinary heat and venom in the sailing community. I am a lawyer, not a shrink, so I will stick to the legal dispute, but if any ‘butthead out there is a qualified shrink and can explain the craziness, please do.
Despite what some of the most vocal ‘buttheads seem to think, the U.S. Coast Guard is not the careless boater’s nanny. That is not their job. Indeed, although, the Coast Guard traces it lineage to the Revenue Cutter Service founded under Alexander Hamilton as Treasury Secretary in 1790, the U.S. did not even get into the lifesaving business until the United States Life-Saving Service was founded in 1848. The two were not merged to create the U.S. Coast Guard until 1915.
Thus, according to Wikipedia: “The Coast Guard has roles in maritime homeland security, maritime law enforcement (MLE), search and rescue (SAR), marine environmental protection (MEP), and the maintenance of river, intracoastal and offshore aids to navigation (ATON).” If your life or health is in danger on the water, or you see impending environmental damage, or you discover a terrorist or smuggler, call the Coast Guard and they will be there. If there is no wind, you run out gas, let your boat drift away or run out of beer, don’t bother calling them, you are on your own. (They will, however, be glad to relay a call to your mommy and daddy to come get you.)
So, who’re you gonna call if you buy a boat for well over $1 million and carelessly moor it so it floats away into San Francisco Bay at night? Well, that is not Coast Guard’s problem, and where government steps out, private enterprise steps in. If you are paying attention, you can call a commercial service you find on www.sfmx.org. What if you are so careless that you do not even know your boat is gone? That is where maritime salvors come in.
Back in the days of wooden ships and iron men, centuries before the Coast Guard was even a gleam in Alexander Hamilton’s eye (amongst many a gleam it turned out), international maritime law developed the practice of marine salvage. In a day of pure private enterprise and little if any government, there was no duty to assist distressed mariners. If you saw a ship about to sink with all hands, you could simply sail on by. An abandoned ship could be left to its fate. The solution to this economically wasteful state of affairs was simple; give marine salvors an economic motive to help: marine salvage awards.
Indeed, so favored are marine salvors that by the time the U.S. Supreme Court decided The Blackwall, 77 U.S. (10 Wall.) 1 in 1869, the Court was at pains to point out the settled law that marine salvors are entitled to “liberal” awards in order to motivate the beneficial practice. ‘Buttheads who lament that marine salvors should act as Good Samaritans without pay should recall that in their own jobs and businesses they probably follow the rule that “In God we trust, all others pay cash.” In this world, profit is the primary motivator of activity, not charity. Perhaps men and women should be saints, but generally they are not.
Three sets of legal papers have been filed. 1) Tholke’s papers initiating the arrest of Energy Team’s AC45; 2) Energy Team’s motion to vacate the arrest or fix security; and 3) Tholke’s response.
First of all, there is something a little weird going on. SPOILER ALERT. Anybody fairly sophisticated knows that Tholke’s $200k+ demand is just the starting point for a negotiation (it never hurts to ask). He is not going to get that much. The demand requires a bond of up to twice the amount demanded in order to release the arrest. While a bond ordinarily requires liquid collateral to back up the bond, which can be a show stopper for private parties, insurance companies need only provide a letter of undertaking to satisfy the bond requirement.
Thus, a maritime insurer with a hull and machinery policy covering the vessel would know the dance, provide a letter of undertaking and proceed to the main event - resolving the claim, usually by a settlement. Tholke’s lawyers know what they are doing. They undoubtedly know what his claim is really worth. A sophisticated maritime insurer would as well. They would not be that far apart. That is not to say that the claim automatically would be settled, but they would not be fighting over the amount of the bond.
Which raises the suspicion that Energy Team does not have the correct hull and machinery insurance, so the insurer is not stepping up with a letter of undertaking and also why the parties are up to their ears in litigation and running up legal fees, rather than putting the money into a settlement.
If Energy Team does not have correct insurance, or the insurer has disclaimed for some reason, that could be a huge problem as Energy Team probably does not have the liquid collateral to secure a bond in any reasonable amount. That would mean that Energy Team’s boat is not going anywhere until the matter is finally resolved. If the deal is that all the boats are transported together to the next event (assuming there will be a next event, which is not so certain), unless somebody comes up with some collateral, Energy Team’s boat may literally miss the boat.
While the parties dispute just about all the facts and, if there is no settlement, the federal judge will have to sort it out (admiralty and maritime claims like this one are not suits at common law entitled to jury trials under the 7th Amendment), it is pretty clear that Energy Team carelessly moored their boat and did not even know it had floated away. While the details are a little complicated, involving underwater debris somebody should have known about, and some of the blame may fall on AC Event Authority and/or AC Race Management for providing a shoddy mooring with an inherent defect, it is clear that the mooring, tackle and line(s) were inadequate. Moreover, security was non-existent, as nobody knew the boat had floated away.
Nevertheless, even Energy Team admits it was a mooring failure and has not jumped on the “lawyers are the cause of everything” bandwagon claiming that Tholke’s lawyer had him set the boat adrift so that the lawyer could claim a fee. Naturally, Energy Team acts like this multiple screw up just happened without any prior warning or anyone being careless, as if the boat was struck by an asteroid.
‘Buttheads looking for a reason to hate lawyers need look no further than Energy Team’s papers. They are truly awful. First of all they are so unprofessionally overheated and over the top that they read like the clips from cable news The Daily Show skewers for yucks. (Full disclosure, I do not watch TV or even get cable, so Jon Stewart, who I occasionally watch on the web, could be making up the clips he shows for all I know.)
According to Energy Team’s papers everything is fraud or worse - much worse. In support of these fevered allegations they consistently cherry pick, distort and misrepresent the very facts, admiralty rules and the law that they themselves present, as if nobody with a functioning brain was going to read what they submit. Much of the “evidence” they submit is either not proper or not in proper form. Altogether it is the kind of performance that drives responsible lawyers nuts and gives the whole profession a bad name. Passionate advocacy is laudable; sleaze is not. The tiny amount of security they propose is not constructive and will not help the Court resolve the case. Anything can happen, but they are not likely to have much credibility with the Court.
In contrast, Tholke’s lawyers do a very professional, workmanlike job and are obviously dealing straight with the Court about the facts they are prepared to prove and the law. They actually have relevant evidence. They even make a responsible, constructive offer of reduced security. They do not have too much difficulty punching large holes in Energy Team’s evidence and demolish Energy Team’s version of the law. They are likely to have plenty of credibility with the Court.
There is an interesting argument about the value of Energy Team’s boat which Tholke seems to have the better of on the facts and the law, given the $1+ million purchase price. What nobody touches is where the boats for the Youth Series are supposed to come from. Is there a deal to buy them back after the AC World Series? Is anybody really likely to donate them? Obviously, that has a bearing on what they are worth.
What happens next? Hard to tell given that Energy Team is doing the Funky Chicken instead of behaving normally. Sometimes a left hook out of the blue works, but you have to land it on the other guy, not yourself. Federal judges are busy and generally do not have much time for theatrics. Judge Richard Seeborg, who has the case, has an impressive resume (Yale, Columbia Law, federal clerkship, Morrison & Foerster, Assistant U.S. Attorney, MoFo partner) and served as a U.S. Magistrate Judge for eight years before taking the bench in 2009. It is highly likely he knows what he is doing and what the law requires. (Conspiracy oriented ‘buttheads should note he was appointed by President Obama and was born in Germany.)
The way this is going, there is likely to be a hearing in the near future. I am not flying to SFO to attend. If there is a SFO ‘butthead litigator out there who can attend, even if he or she has no maritime experience, it might make sense to attend and we can collaborate on a report for a future Scuttlebutt. Any takers? And don’t forget - any shrinks out there?
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Part 62 - Just in time for winter
"Just when you thought it was safe to go back in the water...," - Jaws 2, Universal Pictures 1978.
“Hegel remarks somewhere that all great world-historic facts and personages appear, so to speak, twice. He forgot to add: the first time as tragedy, the second time as farce.” - Karl Marx, 18th Brumaire of Louis Bonapatre, Chapter 1.
(December 18, 2011) - ‘Buttheads who look back with nostalgia at the epic courtroom battle between Golden Gate Yacht Club (GGYC) and Société Nautique De Genève (SNG) in AC 33, if only because it gave them an ongoing opportunity to rail against lawyers ruining sailing along with every other facet of Western Civilization, are in luck. The lawyers are back! And I’m back to tell you about it. Better yet, last time they were deadly serious and the litigation ended with a judgment. This time, as we shall see, it is more likely to end as farce.
As has been reported, African Diaspora Maritime Corporation (ADM), (yes, that African Diaspora Maritime Corporation) has filed a complaint in the Supreme Court of the State of New York, New York County, alleging, inter alia, that GGYC has improperly prevented it from entering the AC World Series for AC 45’s and from competing with Oracle Racing for the right to defend the Cup on behalf of GGYC, the defending yacht club.
Because of all of GGYC’s alleged bad behavior, ADM is basically nowhere in its plan to defend the Cup, which ADM dubiously claims is true of every challenger before accepted, when the cash miraculously falls from the sky like manna. As a result, it needs a host of delays in the Cup schedule, as well as damages from GGYC, in order to prepare for the Cup.
Oh, and because GGYC has been so mean to ADM, and GGYC and Larry Ellison have been engaging in all kinds of self-dealing and other breaches of fiduciary duty, GGYC should be removed as trustee. ADM claims that as soon as the Court grants the requested relief its team of world class African-American sailors and African-American backers immediately will be able to secure the backing which will allow ADM to knock off Larry’s Oracle Racing in defender trials.
It all sounds plausible. Right? Of course the lamentable fact is that world class sailing, or even youth sailing for that matter, has fewer African-Americans participating than just about any sport, except possibly whatever Sami kids in Lapland play when they aren’t herding reindeer. Sailing certainly needs a Jackie Robinson, but before he set foot on Ebbets Field Jackie Robinson was a great ball player - and a great youth ball player before that. He was inspirational not just because he was there, but because he was there and great.
Starting at the AC level does not sound like the ideal plan for developing African-American sailors, but that is for African-Americans to decide. Who and/or what ADM really is and what its agenda really is remains to be seen. It does not have much of a track record.
The fact is that sailors with Olympic medals and World Championships and accepted challengers cannot find sponsorship, or even a ride, in the worst rolling worldwide financial crisis and economic slump since the Great Depression. Moreover, Jimmy, Russell, Fresh, Tugboat, JK, Cheese and the rest of Larry’s team are not exactly low hanging fruit ready for the picking by the likes of ADM. Grant Dalton and Paul Cayard know that.
Given the discretion granted GGYC by the Protocol to accept or reject entrants, ADM will have to prove that GGYC unreasonably exercised its discretion, a tall order. Sports leagues and events typically have discretion to limit participation. You cannot just put together a team and demand to play in the NFL, NBA or MLB. ADM’s claim is counter-intuitive, as GGYC needs as many entrants as possible and needs a competitive defense challenge to ensure the kind of competition that produces the best defense. While a sparring partner would be handy, Oracle Racing is unlikely to fear ADM enough to bar a viable competing team.
The gravamen of ADM’s self-dealing and breach of fiduciary duty claim is that the Event Authority has negotiated deals with San Francisco for development rights to piers that do not get shared with all the competitors, but, rather, flow to the Event Authority’s assign - Larry. While that claim sounds sexy, it overlooks one essential fact, namely that Larry has been shoveling huge amounts of cash into getting AC 34 off the ground in the face of an economic typhoon.
While deal structure is usually driven by tax considerations, it would be entirely plausible and ordinary if Larry’s cash advances are structured as loans secured by the development rights in the piers, which of course are merely the right to chase permits, fight with anti-everything activists and throw additional piles of cash into the Bay. ADM wants an “independent” trustee, but does not suggest one willing to fund at the rate Larry is funding. This is hardly the stuff of a big recovery by ADM.
The real kicker is that, despite the fact quick relief is necessary for ADM to compete at all, there is no accompanying order to show cause and motion for preliminary relief -- a temporary restraining order or preliminary injunction -- that potentially quickly would get ADM in the game. The Complaint is simply sitting there in the New York County Clerk’s office waiting for GGYC to do something. Until a motion requires that a Request for Judicial Intervention (RJI) be filed, the Supreme Court does not pay any attention to the Complaint, no Justice will be assigned, and the action is not even on the Supreme Court e-Courts computer. Unlike federal courts in which a judge immediately is assigned, who is under the gun to move cases along, an action can stay in limbo for decades in New York State Court if no one files an RJI.
Absent a request for preliminary relief, cases generally proceed on a geological epoch time schedule. GGYC may be tempted to seek a quick resolution - which would give ADM publicity and make the action seem more important than it is. A less than sure thing motion to dismiss would possibly give ADM a victory and plenty of publicity in the hiatus with no racing. I do not see a sure thing motion.
Many cool headed defendants in cases like this would opt for a customary extension of the time to answer, an answer denying everything served with a notice to take the deposition of ADM (to preserve priority - don’t ask), and protracted (and expensive) discovery, as racing resumes, the case drops off everyone’s radar and ADM’s financial backer’s bills mount with little evident bang for the buck. (Santa, keep the iPad and the other toys, a ticket to the deposition of ADM’s principal is my number 1 Christmas wish. The concession to sell tickets would be even better, but, Santa, I don’t want to be a greedy little boy.) Every sponsor worth having has an inventory of grandiose nuisance suits perking along out of the public eye and knows that they have no effect on business.
So, we have an implausible plaintiff with implausible claims, no plausible money and no evident plan for accomplishing anything through litigation. Even if GGYC accepted ADM, the likelihood that it could mount a successful campaign is remote.
Yet, ADM is represented by McDermott Will & Emery LLP a large international second tier (Vault ranked 56 in the U.S.) law firm. Given the thin gruel McDermott Will had to work with, the 32 page Complaint is nicely done, as if this was a real case. It lists three lawyers, including one of its litigation heavy hitters and, as of counsel, Henry Christensen III, a world class trusts and estates lawyer and lion of the New York bar. With a team like that the meter ticks over like your electric meter when you turn on the self-cleaning oven, all the air conditioning and the pool heater – a blur.
There is no way McDermott Will would take this case on contingency, given the economics. One third of not much is not much. Nor is there any likelihood that McDermott Will would take this case pro bono, even with the African-American angle. Large firms do cause oriented pro bono cases to make changes in the law and/or for the benefit of large disadvantaged groups. The only time they typically represent individuals pro bono is in death row cases which, of course, are cause oriented cases.
So, what is going on here? Who is paying the bills? As they say, the plot thickens.
Back on March 21, 2011, just 10 days before the March 31, 2011 deadline for challenger applications, GGYC received a letter from none other than Henry Christiansen III on behalf of an unnamed foreign yacht club asking four single spaced pages of highly detailed questions regarding the finances of AC 34. Many courts limit a litigant to 30 interrogatories, including subparts, (and provide at least 30 days for a response), but I counted more than 30 question marks in those 4 pages of extremely dense questions. Obviously, the letter was written on behalf of a foreign yacht club that had done its homework, knew its way around AC finance, and had the resources to call upon Christiansen. Who was this knowledgeable foreign yacht club? By then all the usual suspects (including some that ultimately did not challenge or were late challengers) had been rounded up and were accounted for - except SNG. (The letter, although interesting, only became significant in light of the Complaint.)
Once again, the plot thickens. Henry Christiansen is a super heavy hitter in international estate planning, an area that might interest a Swiss billionaire like Ernesto Bertarelli. A firm would do a lot to land and/or keep such a client, including handling a case it ordinarily would not be interested in.
Whatever the case may be, McDermott Will, perhaps inadvertently, left a clue in the ADM Complaint. With typical large firm thoroughness (compulsiveness?), the ADM Complaint, in an attempt to lay out the entire chain of AC 34 finances, quotes from the “Assignment and Acceptance” and “Undertaking” between SNG and GGYC which were signed on April 20, 2010 transferring the stock of America’s Cup Properties, Inc. (ACPI) which holds the America’s Cup intellectual property rights. While initialed, but unsigned, copies of those documents are attached to the settlement agreement submitted to Justice Kornreich at the end of the previous month, it appears that only GGYC and SNG have the final versions executed the following month. (I could be wrong. If anyone has copies of the final versions, I would like to see them.) It would be unusual for a firm like McDermott Will to quote from a document without seeing the final version. Nor would they know the execution date without access to the final versions or access to someone with access.
GGYC would have no reason to provide those documents to McDermott Will. That leaves only SNG, unless someone else has the documents.
Does this add up to more than circumstantial evidence of a Swiss connection? No, but as Lord Mansfield famously said: “If it walks like a duck and quacks like a duck, and files complaints like a duck . . . .” Of course, it could be just an amazing coincidence. A link to an Argo Challenge proponent who actually funded ADM’s belated $25,000 entrance fee (subsequently refunded) has been posited, but, given large firm economics, while she may be involved (along with anyone else that doesn’t like Larry or his team), that would not add up to a likely McDermott Will engagement with this kind of staffing.
In the end, this litigation may be little more than an attempt to give Larry and Russell wedgies for old times’ sake. After all, Larry, Russell and Ernesto used to be friends. What are friends for?
As Karl (not Groucho) Marx, of all people, predicted:
“Live from New York, it’s Saturday Night!”
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Part 61 - Charlie Sheen to challenge for the America’s Cup
(April 1, 2011) - Charlie Sheen has announced that one of the confirmed/confidential AC challenger teams is the one he will be leading through the Royal Titicaca Yacht Club. When asked about the Deed of Gift requirement that a challenger have an annual regatta on an ocean course on the sea or an arm of the sea, Lake Titicaca being 3,811 meters above sea level, his attorney, former Société Nautique De Genève (SNG) counsel Barry Ostrager, responded that for Mr. Sheen that is “not high at all.”
Ostrager continued that Mr. Sheen indeed has an annual regatta cruise in the arms of Amber Buttafuoco, a mermaid porn star. Mr. Ostrager went on to say that in Amber’s arms was good enough under the Deed. He suggested that “if you don’t believe me, try it.” Mr. Ostrager further reported that Mr. Sheen found himself in Amber’s arms “because he loves his country so much that Amber and the Cup happened in his life.”
Hamish Ross, ACM legal counsel is on his way to Lake Titicaca with the latest ultra-sensitive NASA equipment to check tides and salinity. He soon will have to determine whether rejecting Mr. Sheen’s challenge would violate laws barring discrimination against mermaids under the civil rights laws, the Marine Mammal Protection Act, the Fish and Wildlife Act, the Endangered Species Act, or all of the above.
Mr. Sheen initially had the enthusiastic support of Ernesto Bertarelli and Fred Meyer to challenge through the Societe Nautique de Geneve (SNG), a former trustee. Mr. Meyer even offered to chair the race committee, “just to make sure everything is perfectly fair and by the book, as always when SNG is involved.” New Zealand’s Graham McKenzie offered to serve as Chief Judge, “In order to bring the highest level of ISAF judging to the event.” On behalf of ISAF, David Kellett offered to look the other way.
However, when asked to return as IPRO with Mr. Meyer’s team, Harold Bennett exclaimed, “Crikey!” and was seen running away at top speed. Lucien Masmejan, Mr. Bertarelli’s personal attorney, declined to comment on reports that SNG’s participation was scotched when Mr. Bertarelli’s wife, Kirsty, informed him that Amber better not be seen so much as buying a cuckoo clock anywhere near Switzerland.
Tom Ehman, Oracle Racing Director of Affair Affairs, said that there might be some issues with Mr. Sheen’s challenge, but he was confident he could jimmy the rules to deal with them. One of the potential problems is Mr. Sheen’s alleged substance abuse. Luckily, Mr. Sheen has also retained noted New Zealand barrister James Farmer, Q.C.
Although lie detector tests are almost universally inadmissible in courts because of their notorious unreliability and the ease with which they routinely can be fooled even by the likes of Aldrich Ames and Robert Hanssen, Mr. Farmer has an expert who administers lie detector tests that prove to a virtual 100% certainty that everyone is telling the truth when they say they never knowingly used a controlled substance.
Mr. Farmer reported that Mr. Sheen passed with flying colors when he stated that the white powder found all over his face was really Jake’s powdered milk used in his show Two and a Half Men, and that somebody else put it there at a cocktail reception in a men’s room stall, because he had mislaid his clothes and the ladies he was with had mislaid theirs as well.
If any court appearance is necessary regarding the lie detector results, Mr. Farmer, as a Queen’s Counsel or “silk,” is entitled to appear wearing nothing save a very sheer, black silk robe and a powdered horsehair wig. Mr. Farmer was unavailable for comment, as he is currently huddled with Grant Dalton and David Boies preparing litigation over a contract pieced together out of e-mails, chats, txts, tweets and belly button lint.
Dyer Jones expressed complete confidence in Mr. Farmer’s lie detector testing: “It’s tip top. Indeed, we plan to induct Mr. Sheen into the AC Hall of Fame. He will fit right in. We think that if Amber comes with him it will really goose attendance at the induction dinner.”
Mr. Ehman reported that there were other issues that needed to be resolved as well. A major one being whether Amber really is a genuine mermaid, so that Mr. Sheen’s annual regatta qualifies as in the arms of the sea. Mr. Ehman reports that there are significant plumbing issues and that he is having dinner with the Pope, former ISAF President Paul Henderson, to involve him in using his hands-on professional expertise to help sort out those plumbing issues.
However, when queried, the Pope cryptically responded: “Another dinner with Ehman? He’d better bring a food taster.” He refused to elaborate. When reached for comment, Cardinal Tom Webster, the Papal Secretary of State, reported that the sailing Curia is preparing guidance for the sailing faithful regarding the Pope’s teaching on the subject.
Current ISAF President Göran Petersson is unable to help as he has been AWOL for so long that nobody is looking for him anymore. He was last seen during AC 33 in Tora Bora and is now believed to be engaged in a top secret hands-on IOC evaluation of whether Olympic women’s beach volleyball uniforms can be reduced in size while still keeping the action in bounds. U.S. Sailing President Gary Jobson has promised to do anything he can to help get into the picture.
Larry (“Harold Vanderbilt”) Ellison, head of Oracle Corporation and Oracle Racing, was too busy acquiring a Lockheed Martin F-22 Raptor to top Paul Allen’s recently acquired MIG-29 to comment. His Oracle Corporation second in command, former Hewlett-Packard CEO Mark Hurd, volunteered that, being naturally shy, he was looking forward to attending conferences with Amber to introduce him, which would also give him the opportunity to check out at first hand whether Amber’s 38 DDDD’s were hiding any pirated Oracle enterprise software.
“There seem to be quite a pair of databases there,” Hurd noted. In that regard, Louis Vuitton representative Bruno Trouble was heard noting: “Oooh la la, zoze fill zee Louis Vuitton Cups,” to which Alleged Challenger of Record head Vincenzo Onorato responded: “Mama mia! I knew being Alleged Challenger of Record was worth it.” Paul Cayard, Artemis Racing CEO, having shaved his moustache and entered the Federal Witness Protection Program, could not be located for comment.
Also in that regard, patent counsel for Oracle Corporation, David Boies, reached at his DUMBO New York patent litigation office, reports he has prepared discovery and inspection notices pursuant to Federal Rule of Civil Procedure 34(a)(1) and a motion for a physical inspection of Amber pursuant to Rule 35(a)(1). While Mr. Boies, the firm’s rain maker, has been accused of seldom lifting a finger on actual legal work, in the case of Amber he will make an exception and is limbering up his fingers. As to the rest of the news, Mr. Boies, Golden Gate Yacht Club (GGYC) counsel in the AC 33 litigation, responded: “America’s Cup? What’s the America’s Cup?”
Oracle Racing CEO Russell Coutts declined to comment, reporting that he was too busy preparing for AC 35, reportedly to be sailed in solar wind winged kite powered Mach 1+ anti-matter anti-gravity foilers. “With skeptic Richard Gladwell falling off his seahorse as a result of a blinding light reflected from the Three Blonds in a Boat and evangelizing for AC 34, and even Tom Leweck coming around to AC 34, I have to think way outside the box and ahead of the curve to really tick off the traditionalists,” he reported.
“As we speak, Fresh, Tug and Peter Harken are in the pub across the street doing the math to engineer the hardware,” offered Coutts. “At least that’s what they tell me they’re doing there. Richard Slater is busy getting rid of the rules. We’re down to one rule, first across the finish line wins. At these speeds, self-preservation will take care of the rest. Just look at Formula 1 and NASCAR.”
Oracle skipper Jimmy Spithill also begged off: “Blimey, being GGYC’s legal spokesman outside the Court of Appeals in Albany after the appeal was hard. After Ehman took off with Maureen Mahoney and left JK and me standing there with the press, that was enough for me.” Inquiries to Leslie Ehman were met with confusion: “Hmm….Tom Ehman??? ….Tom Ehman? …, that name sounds vaguely familiar, but I can’t put a face on it. Is that the guy whose frequent flyer statements keep piling up, along with every new Apple toy Steve Jobs thinks up?” Oracle Racing’s public relations team is currently fully occupied distributing press releases to sightless invertebrates at the bottom of the Marianas Trench.
When cornered on Skype, Scuttlebutt Supreme Editor in Chief Craig Leweck would only say: “What me worry? It’s bound to increase web traffic.” Mr. Leweck may, however, have a tussle for media coverage on his hands. Roger Ailes, Fox News honcho, reportedly said: “These fair and unbalanced sailing wackos will fit right in with Beck.”
On the literary front, Bob (“Fish”) Fisher reports that, while AC 33 was not worth a book, this news was much more “stimulating” and warranted full length treatment. Fish further remarked, “I’m very keen to meet Amber. My dear Mum always said that we had mermaids on her side of the family, hence my nickname, and I’m looking forward to a sort of family reunion.” Not to be outdone, noted AC author John Rousmaniere reported that he was hard at work on a book and that he thought he could beat Fisher to press, “given that Fish is usually in the tank.”
One of the key issues is whether Mr. Sheen’s challenge will result in yet more AC litigation. “Clean”, a noted member of the California Bar was tracked down, thanks to the intercession of Peter Huston, renowned sailing forum denizen. Mr. Clean reports: “I was a little dusty during torts and constitutional law in law school, especially when I’m told we studied defamation per se, New York Times v. Sullivan, actual malice and some other law thingies, but I can state as fact that everyone involved is a polo shirt collar criminal, even if I am absolutely certain that none of them has ever been convicted of anything - except maybe Sheen, but he’s a celebrity, so that doesn’t count. The Constitution absolutely says I can say that - doesn’t it?”
New York Supreme Court Justice Shirley Werner Kornreich refused to comment about the prospect of further litigation, but sources close to the court report that she was overheard telling her law clerks that, “If those crazy yachties come back again, I’m quitting and going back to working for Legal Aid. Herman Cahn retired rather than deal with them anymore. He’s no dummy.”
In a joint press conference Chief Judge of the New York Court of Appeals Jonathan Lippman, New York Governor Andrew Cuomo, New York Senate Majority Leader Dean Skelos and New York Assembly Speaker Sheldon Silver, in a rare show of bipartisan unity, announced that emergency legislation was being prepared to strip New York courts of jurisdiction over anything having to do with sailing or sailboats and that court officers had been instructed to arrest anyone attempting to pass through security while wearing a blue blazer.
Chief Judge Lippman noted: “There are almost 19 million people in New York. Many of them have real problems. In this time of budget constraints we can’t keep wasting our time on billionaires with nothing better to do with their time than fight over a kitschy Victorian pickle dish.”
On the national scene, President Obama’s press secretary, Jay Carney, was uncharacteristically tight lipped: “Talk to Bob Gates. With Afghanistan, Iraq, Libya, the rest of the Middle East, and Michele Bachmann, how many crazed fanatics do you think we can handle at the same time?”
An attempt to reach Scuttlebutt Legal Correspondent Cory E. Friedman for comment was unsuccessful. An inquiry was answered by his wife, Kathe, who reported that Mr. Friedman, an avid fly fisherman, had always wanted to fish Kamchatka in eastern Siberia, home of record trout and salmon. She further reported that, as soon as she got wind of the possibility of more AC litigation, she bought him a deluxe Orvis guided expedition to Kamchatka for an early birthday present.
After Friedman left, however, Russian Prime Minister Vladimir Putin, also an avid fisherman, announced: “Friedman? Nyet way. We do have standards here, you know. The inmates in our Siberian prisons would never stand for it. I’ve instructed the Director of the FSB (successor to the KGB) to be on the lookout for him.” Last word is that the fishing is great and no one remembered the satellite phone charger. Retired long time Alaska Governor Sarah Palin will also be keeping an eye out for Mr. Friedman from her front porch.
Attempts to reach George Schuyler for comment were also unsuccessful, reports Madam Olga, a certified medium, who said that when she attempted to communicate with him, he laughed out loud. Reliable sources report that Mr. Schuyler has a very substantial wager with St. Peter on the outcome of AC 34. Whether another silver ewer is a bonus on the bet is unknown.
Finally, when queried, Amber would only say: “Sailors, such silly little boys, I’ve had enough of this fish tale,” as she jumped in the water and swam away. The one that got away.
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Part 60 - To pursue, or not to pursue
“The King is dead. Long live the King.” Traditional.
“It has been a damned nice thing - the nearest run thing you ever saw in your life, by God!” Arthur Wellesley, 1st Duke of Wellington, on the Battle of Waterloo.
“Tessio: Forgive me, Godfather, but with you gone me and Pete [Clemenza] will come under Barzini's thumb sooner or later.” The Godfather, Paramount Pictures 1972.
(March 1, 2010) - As faithful America’s Cup followers may recall, Golden Gate Yacht Club’s (GGYC) Constructed in Country motion (CIC) and Société Nautique De Genève’s (SNG) cross motion were not decided the week before the 33rd America’s Cup Match was scheduled to commence, and were originally scheduled for February 25, 2010. They have since been continued to March 10, 2010. GGYC breach of fiduciary duty (BFD) action remains pending, with SNG’s response yet to be filed. With the Match over, all the litigation will go away. Right? Maybe not.
The Mutiny on the Race Committee (RC) boat was the straw that broke the camel’s back and may have changed the litigation landscape. By any objective measure, from the CNEV charade onward, SNG devoted unremitting effort and left no stone unturned in its attempt to be the worst trustee in AC history. Only New York’s judges prevented it from succeeding in wrecking the Cup for good. Alinghi skipper Brad Butterworth signed a letter that said it best: “For those who seek a level playing field, go and race in any of the numerous competitions that exist in the world.” The Mutiny was the icing on the cake, and only PRO Harold Bennett’s Horatio at the AC gate quick action prevented the AC from being fixed as surely as the 1919 World Series was fixed in the infamous Black Sox scandal.
In any self respecting sport, or business, or anything else self respecting, Bennett’s report of the Mutiny would inevitably result in a thorough investigation and, if the alleged facts turn out to be true, everyone in the chain, from the onboard boat owner, to the portly skipper on the phone on the boat, to the SNG observer on the phone on the RC boat, to the RC, would be banned from sailing for life. Perhaps ISAF will do what it should. But, given ISAF’s past behavior, from the secret agreement on, what are the odds?
If ISAF sweeps the matter under the rug, perhaps on the hockey rationale that the fouled player scored anyhow, so no foul is called, the BFD is an avenue for at least cleaning up the AC.
The upside of ending the litigation is that the alleged Chief Mutineer - Ernesto Bertarelli - has said he may participate in AC 34 if GGYC stops suing him.
The downside of ending the litigation is that the alleged Chief Mutineer has said he may participate in AC 34 if GGYC stops suing him.
The reality is that, had it not been for Larry Ellison, the Cup would now be the Alinghi Cup, the rules would be jimmied, the result fixed, and no one would ever be able to pry it out of SNG’s grip. Larry had plenty of help from an incredible organization and obviously could not have done it alone, but without him the Cup would have been a goner. While Larry looks trim and fit, if anything were to happen to him, what team would be in a position to keep the Cup out of SNG’s hands for good? A successful conclusion in the BFD would end the threat to the Cup. No one involved in a breach of fiduciary duty could be the trustee again -- or a challenger, as a challenger must be a potential trustee.
There is also the little issue of money (as SNG well knows). SNG’s outrageous behavior cost GGYC and BMW Oracle Racing a lot of money – indeed, far more than an honest trustee would have cost them. While there is plenty more where that came from, it is money Larry made himself, not the result of golden genes. He did not make it by letting himself be ripped off by any fool that chooses to try. Letting the alleged Chief Mutineer get away with it is simply bad for business – in addition to being bad for the Cup.
Of course, if GGYC pursues the BFD, SNG will probably pursue its ultra bogus CIC/sloop/wings are not sails cross motion. Justice Kornreich is not going to undo the result on the water because of that foul stew. While GGYC’s CIC motion is moot, it would not be moot if the cross motion continues, because, theoretically, the result might be both boats are DSQed.
Would continued litigation cast a pall over preparations for AC 34? Not very likely. The on the water result in AC 33 is not going to be overturned. The only issue will be the alleged Chief Mutineer’s participation. How much of a pall will that cast?
Undoubtedly, there will be appeasers who argue that statesmanship and sportsmanship require that the Cup is best served by letting bygones be bygones and welcoming the alleged Chief Mutineer back into the game. After all, the Cup needs people willing to spend big bucks on boats and teams and there are not that many of them in this economy. Why keep one of them out? Perhaps the alleged Chief Mutineer has learned his lesson. Perhaps -- or perhaps he has learned not to make the CNEV blunder the next time.
The future of the Cup is in GGYC’s and Larry Ellison’s hands. There lies the fiduciary duty that will guide the future of the Cup. The recent talk about consulting with all the potential challengers and all the potential participants in defender trials is all well and good, but the trustee has a fiduciary duty to do the fiduciary’s best in administering the Cup, which may or may not be the popular thing. Democracy has its limits. After all, it was none other than George Schuyler himself who amended the Deed with the specific intent of keeping Canadian Captain Cuthbert out of the Cup – for the good of the Cup. Sometimes a trustee has to take tough action to preserve the corpus of his trust for future generations.
If there is anything I have learned in covering AC 33, it is that, while most of us struggle to play chess in two dimensions, Larry plays in three and perhaps four dimensions, so I am not making any predictions.
For many professional sailors the last two and a half years has been a dark age, as the economic climate and the AC 33 controversy have sidelined many of them. Once busy teams have become shadowy vestiges like phantom websites. Add to that uncertainty developments like superfluous grinders and possible nationality rules and the outlook has been pretty discouraging.
Yet, just as small groups of enthusiasts kept the flame of learning alive between the fall of the Western Roman Empire and the eventual revival, Bruno Troublé, Louis Vuitton’s Monsieur America’s Cup, is keeping the America’s Cup hopes of America’s Cup sailors and teams not involved in AC 33 alive. At a three star luncheon in Valencia on February 9, 2010, Bruno rolled out the latest developments in the World Sailing Teams Association (WSTA), which competes for the Louis Vuitton Trophy.
The founding members are BMW Oracle Racing (USA), Artemis (Sweden), Synergy (Russia), Emirates Team NZ (New Zealand), and TEAMORIGIN (GB), plus members All4One (France), Mascalzone Latino (Italy) and associates Azzurra (Italy) and ALEPH (France).
The officers are Paul Cayard (President) and Laurent Esquier (CEO), along with Louis Vuitton representatives Christine Belanger and Bruno Troublé.
The first regatta in the series starts in Auckland on March 9 and runs through March 21. After Auckland, La Maddalena, Italy gets a regatta from May 22 through June 6, followed by Dubai, November 13-28, and the UK from January 9-23, 2011. Each regatta will be sailed in closely matched last generation AC monohulls and stands on its own, with the winner taking the Louis Vuitton Cup until the next regatta.
In addition to keeping the flame burning, the WSTA is a bridge to the challengers for AC 34. Indeed, Mascalzone Latino, the new Challenger of Record for AC 34, is an important member of the WSTA and in a position to serve as liaison.
So, hats off to Bruno Troublé and Louis Vuitton, a genuine class act.
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Part 59 - Bennett rises above riff
(February 14, 2010) - By now many ‘Buttheads know that challenger USA 17 crushed defender Alinghi 5 in both races to win the 33rd America’s Cup (on Feb. 12 and 14). However, reliable sources tell Scuttlebutt that even when you thought it could not get any worse - it did. The defense club - Société Nautique De Genève’s (SNG) - had their Race Committee actually go on strike and refuse to start Sunday’s race ordered by ISAF approved PRO Harold Bennett. To begin the second race of the Match, Bennett was forced to draft Golden Gate Yacht Club (GGYC) observer Tom Ehman and a Guardia Civil cop (Edit: Paco Quinonero, the committee boat driver) on board the RC boat and ordered them to run the flags as Bennett counted down himself.
Sunday was the last day a race could be run before several days of strong winds and dirty weather struck. Unlike previous days, even though conditions were not suitable for a race, Bennett got the boats out early and they sat on the course all day with the 4:30 pm cut off for a start looming. Around 4 pm the wind had shifted and filled in and Bennett started preparing for a start. SNG’s race committee just did not want to start, claiming that the waves were in excess of 1 meter – Alinghi’s sea state tolerance. Bennett ordered the AP down and the Race Committee flat out refused. A major row ensued and both sides held their ground.
Luckily, prior to the first race, with questions about SNG’s RC’s ability to overrule Bennett swirling, Bennett had requested an observer from GGYC. GGYC appointed Tom Ehman, SNG bête noire, which lit SNG up and the solution was to bring along an SNG observer and minder for Ehman. Bennett lived up to his reputation for even handed officiating in Race 1, when he resisted SNG’s pressure to start the race before the wind filled in.
In the face of the SNG RC’s intransigence, Bennett’s solution was to draft Ehman and the Guardia Civil cop and order them to run the flags. The race was started at 4:25, just 5 minutes before the deadline and over the SNG RC’s strike. Without Bennett’s decisive action, the Cup would still be on hold for days, if not weeks. The result is history as USA crushed Alinghi and brought the Cup home to the United States of America.
More details to follow in subsequent reports – right now it’s party on.
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Part 58 - Is this a Deed of Gift Match or what?
(February 10, 2010) - This regatta is beginning to shape up as the America’s Cup ClusterSail of 2010. Nothing happened Wednesday in the AC in Valencia and ‘Buttheads are probably wondering why. Strong Mistral winds on Tuesday resulted in a forecast of lumpy seas Wednesday. Tuesday night the RC postponed the start from 10:06 to no earlier than 12:30. The start was further postponed and blown off early in the afternoon.
Alinghi claimed the conditions were “heinous.” USA Skipper Jimmy Spithill supported PRO Harold Bennett’s call, but said USA would have been happy to sail and did not consider the conditions unsafe. Although there was only about 16 knots of breeze, the reason was “sea state” - supposedly boat-breaking left over swells of one to two meters.
How did we get here?
We got to Valencia because, after Justice Cahn’s original decision DSQing Société Nautique De Genève (SNG) came down, the parties wrangled over an order implementing that decision, which apparently left him believing (correctly or incorrectly - it makes no difference) that there was consent to a winter regatta in Valencia, even though it is in the Northern Hemisphere.
When his resulting order was affirmed by the Court of Appeals, Société Nautique De Genève (SNG) was convinced that it could choose any venue it wanted, regardless of the hemisphere rule in the Deed, in addition to Valencia. It designed and built a boat for ultra light air and flat water, which Ernesto Bertarelli was familiar with from lake sailing multihulls, and chose Ras Al Khaimah (RAK) as the venue.
Justice Kornreich upended RAK at Golden Gate Yacht Club’s (GGYC) request and, because the August 8, 2009 deadline set under Justice Cahn’s order had long since passed, the only option left without mutual consent was Valencia. The Appellate Division, First Department affirmed. Although attempts were made to mutually consent to southern hemisphere locations, such as the Northeastern coast of Australia, like all other attempts to reach consent in AC 33, they went nowhere and Valencia remained the default.
No one has ever argued that Valencia is the ideal location for a February event. It is generally too cold for a sea breeze to develop and the wind is generally pretty variable, as it is front driven and frequently too extreme at either end of the scale to sail. Add to that the Deed’s schedule of alternate day racing and acceptable conditions can be hard to come by. Indeed, Harold Bennett, the PRO hired by SNG and approved by ISAF, said today that in three weeks there had been five or six acceptable race days.
The real problem right now is that it is not clear what sort of event PRO Harold Bennett thinks this should be. The Deed specifies that the challenger chooses the match dates and “All such races shall be on ocean courses, free from headlands...” The races are subject to a seven hour time limit. In short, it is the responsibility of the defender to start a race on the day selected by the challenger, set on a course that is 20 miles to the windward mark and return, and score boats that complete the course within 7 hours. The first boat that finishes within 7 hours wins. The only weather restriction in the Deed is the 7 hour time limit. Moreover, that is not a limit on starting a race. It is only a limit on scoring a race. Indeed, there is no authority in the Deed for stopping a race before the 7 hour time limit or not starting a race, absent mutual consent.
While the Deed specifies that the course be 20 miles to windward, nothing says the wind has to be steady, stabile or not subject to the shifts and bends common on ocean courses. The windward mark has to be to windward at the start, but not thereafter. If the wind shifts or bends, it shifts or bends. If that is not acceptable to the teams, they can mutually agree to something else.
A DoG match under the Deed is not an inshore race and it is not the responsibility of the PRO to look out for the boats. Under RRS 4, the decision to race is for each boat. Obviously, there is no reason why the teams cannot mutually consent to call off racing in unsuitable condition. Absent such mutual consent, the RC should start the race and wait for the finish.
This regatta went off the rails when the RC started deciding whether the wind and seas were too much for the boats. That is simply not the RC’s problem. It is the problem of the teams. If they do not want to agree amongst themselves, they take their chances. If a boat breaks, that is a lesson for future builders. The idea that failures are always a safety issue or that the only safety issue is failure cannot be correct. Sailors are hurt all the time without any gear failure and catastrophic gear failures like USA’s mast failure in San Diego do not always cause injury.
That may sound harsh and callous, but it is not the job of the RC in a DoG Match to baby unseaworthy boats or the professional sailors who chose to go to sea on ocean courses in them. If it is the RC’s responsibility, then a good place to start would be requiring PFD’s all around - not to mention scantlings. Similarly, it is not the responsibility of the RC to baby anyone who goes out to observe the races. Nobody is forcing anyone onto the water. The Spanish Coastguard equivalent is issuing plenty of warnings to watch your step.
The RC’s decision to excuse the teams from the responsibility of deciding whether to race is perversely taking away any incentive for mutual consent. If the RC would just run the races, the teams would be forced to negotiate whether to sail and other issues as well. Instead, having the RC act as their nanny allows them to act as immaturely as they please, knowing that the RC nanny will protect them from their folly. It also undermines sound boat design and undermines the need to build in a margin for safety. If the RC nanny is going to save you from the consequences of sailing an unseaworthy boat, why build a seaworthy boat? Everyone knows by now that a sailor is responsible for a seamanlike mark rounding. Why should not a sailor be responsible for building a seaworthy boat?
New York’s Courts have repeatedly ruled that this is an all-out technology regatta. It is not an all-out technology regatta for the playground set. An essential element of an all-out technology regatta is engineering a boat that can finish an ocean course. If your boat breaks, that is the best evidence that your technology is not up to snuff. The Deed, as an embodiment of late 19th century thinking, sets up a Darwinian contest. The strong technology survives and triumphs and the weak technology is eliminated.
Thus, the RC’s decision to baby the weakest boat flies directly in the face of the Deed and undermines Schuyler’s intent of fostering the advance of sailing technology. Such a view may not be politically correct in the 21st century, but this is the AC. Anyone who wants a more inclusive, non-judgmental, user friendly regatta should go for a Participant ribbon in some other event.
To add near comedy to the mess, SNG is not even providing an adequate RC boat in this premier event. While the RC boat was adequate for AC 32, which was always near shore, it is an inadequate platform 26 miles out. The RC and observers for the teams are getting badly beaten up and becoming pretty green around the gills. Obviously, the tub is a not very subtle way of convincing the RC that conditions are too rough and provides an incentive to call the race and get back to terra firma.
There are some truly bogus (or boooooogus as Car Talk’s Tom and Ray Magliozzi would say) claims floating around. One is that there are liability issues involved. Leaving aside RRS 4 and the waivers and releases that have been signed on the advice of counsel, there has been the claim that SNG only has insurance for winds below 15 knots. The simple fact is that Doug Holm, former Commodore of St. Francis Yacht Club and insurance broker supremo, has obtained a binder for a super jumbo policy naming every player, including the city of Valencia, as additional insureds, with no wind limit and a much lower premium. SNG refused it.
While the fear of liability is pretty farfetched under governing law, with a policy like that, it really is not worth arguing, as the insurance would pick it up, including defense costs. Moreover, the teams have to have insurance covering any conceivable liability or claim as well.
Another truly bogus claim is that the Defender has the right to tip the scale to his benefit. Leaving aside fiduciary duty issues, the fact is that the DoG default, as interpreted by New York courts, is pretty neutral and not terribly defender friendly. Indeed, it is not a very defender or challenger friendly format. It is simply a club to motivate defenders and challengers to mutual consent as a way to escape the DoG Match format – a club that has worked on all but two occasions.
There is folklore that NYYC benefitted from rule bending in its favor, but most of that seems pretty overstated. The corollary of the folklore is that a defender is entitled to the same rule bending. That is simply not so. The Deed does not so provide and the evidence of past abuse is both irrelevant and overstated.
Where ISAF stands is really pretty hard to tell. Apparently, President Gören Petersson, when not on an IOC frolic, is safely incommunicado in Dick Cheney’s former secure undisclosed location. Everybody else from ISAF discretely murmurs polite expressions of sympathy and exchanges knowing glances, but does nothing, hiding behind “advice of counsel” and vague (and ludicrous) claims of feared liability.
The final garnish and seasoning for this pot of nonsense is a world class rumor mill far more active than the racing yachts. The latest one was a rumor that the NOR had been amended to provide that, if the Match is not completed by the end of the month, the regatta is over and SNG gets to keep the Cup. Of course, none of the rumor mongers bothered to look at the latest version of the NOR, available on the event website, which has no such provision -- which would violate the Deed in any event.
So, we are here in Valencia waiting for a day when the boys will not be able to break their big shining toys no matter how they play with them. We may get a regatta completed someday – hopefully before opening day of the baseball season.
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Part 57 - Day of reckoning has come
“If we see light at the end of the tunnel, it is the light of the oncoming train.” - Robert Lowell.
“No two objects can occupy the same space at the same time.” Wolfgang Pauli.
(February 7, 2010) - By the time many ‘Buttheads read this, the first race of 33rd America’s Cup may be over and the representatives of the teams may be in the room. Certainly everything we have seen (and especially what we have not seen) indicates that even though one of the key participants is from the Bay area, this is not a rerun of the 60’s “Summer of Love.”
Indeed, Ernesto Bertarelli (Société Nautique De Genève (SNG/Alinghi)) and Larry Ellison (Golden Gate Yacht Club (GGYC/BMW Oracle Racing (BOR)/USA)) cannot even occupy the same room at the same time for a press conference or anything else. Who e-mailed what to whom and who is at fault is a major buzz topic, but does not really matter, because it looks like the boats are finally headed for the starting area.
But, this being AC 33, first a report from the room. The International Jury has finally handed down its final decision on measurement and it is not hard to see why it took so long. Indeed, when I saw the Jury driving out of their headquarters on Saturday, I was surprised they were not still holding their noses. The bottom line is that, although Justice Kornreich ruled, based on the recommendation of three of the Jury members, that the boats had to be measured with water ballast on board, the Jury has ratified an absurd measurement procedure that turns Justice Kornreich’s decision on its head. How does that work? The Jury has ruled that, although water has to be distributed equally from side to side, it does not have to be equally distributed fore and aft.
Thus, Alinghi can pump all its water ballast to specially constructed stern tanks, which will then sink the stern until the boat does a wheelie and the LWL is brought under 90 feet. Of course, the boat could never sail in that trim under any race condition and the stern tanks will probably not be used to any substantial extent while actually sailing. Clearly, this is not a case of exploiting a loophole in a rule. It is an example of ratifying breaking any rational understanding of the way to implement the rule in order to produce the exact opposite of the rule.
Why? Alinghi cannot comply with the Deed with any water ballast and cannot sail without water ballast. The Jury is simply not going to force Alinghi to comply with the Deed, knowing that it would decide the Match. It would have been simpler to just come out and say that, regardless of Justice Kornreich’s ruling, Alinghi can measure without water ballast and then add water while racing. Sailors should think twice before complaining about Supreme Court justices running this game, rather than sailors. The inmates cannot seem to run the asylum very well either.
And the Jury’s reward for such extraordinary largess? Harold Bennett was approved by ISAF as PRO and has pledged impartiality. Of course, the Race Committee is SNG’s and made up of Bennett, Fred Meyer from SNG and another SNG member. The kicker is that all decisions are to be made by majority vote, so Bennett’s impartiality and expertise could mean nothing at all as all decisions may be made by SNG. Nice. How this sorts out is up to ISAF, Bennett, and the Jury and a complete travesty is one of the alternatives. Bennett says he is in charge and does possess the nuclear option – he can simply walk. The latest breaking news is that Tom Ehman, eminence grise and all around AC resource of BOR, will be USA’s representative on the RC boat. Hopefully, he will not “fall” overboard.
I have not previously been to Valencia, but AC 33 has to be different from AC 32. The city and the teams have done a remarkable job of throwing this together in just a couple of months. For most of the working men and women of this small city, the event seems to have little impact other than a destination for a Sunday stroll with the family. Although there are plenty of sailors around and beer is flowing, I have not seen any sign of glitterati.
The fact that the teams already had bases and knew the city is a major factor. When you see the facilities and personnel, it seems unimaginable that this could have been brought off in Ras Al Khaimah or in any random bidder on the east coast of Australia on such short notice.
The first thing that impresses is the sheer size and depth of the organizations. I have gotten a better view of BOR, which an industrial organization. There is a team of specialists handling each and every aspect of this event from arranging schools for children of team members, to communications technology, to designing and fabricating carbon fiber components, to weather modeling, to dealing with the RRS, and on and on and on. The sailors and PR components are merely the tip of the iceberg, supported by an amazingly knowledgeable array of experts. I am sure that, although I have not seen as much, Alinghi has a comparable organization.
We have now gotten to the end of practice and to the point where no one wants to break anything. The wing is hard to believe. It is so big and so exquisitely constructed that although it is compared to the wing of a jumbo jet, up close, a jumbo jet wing looks like a blunt instrument by comparison. One could almost shave with the trailing edge. Somebody must have gotten an idea from the spam e-mails we all get, because the wing has added another section and has grown to some 223 feet above the water. Indeed, if the Cup comes to the Bay area, USA cannot sail under the Golden Gate Bridge at mean low tide. Once USA begins to fly two hulls and the wing is canted to vertical, it is taller still.
There have been three news conferences, one by each team and one run by the organizer (the “owners” press conference) that wound up as another Alinghi news conference because of the spat that resulted in Larry Ellison not attending. Altogether they have been pretty much content free, although, in case you did not already know it, Ernesto is not very happy with Larry. Larry is not responding in kind, but the feeling may be mutual.
Even the coin toss to determine the entry side for the start turned into an unconscious parody. Both sides wanted starboard and the winner of the toss would get it. When asked which side (of the coin) he wanted, SNG’s Commodore called “starboard,” and had to be told the only choices were heads or tails. He then called heads. After turning the coin over to look at both sides (but not biting it), Harold Bennett flipped it and many people thought he announced heads, but GGYC’s Commodore won the toss and chose starboard for races 1 and 3. Go figure. The teams were brought out and BOR may be the first AC crew in history with its general counsel in the lineup. It has been that kind of Match.
After the BOR news conference, which was streamed live, a bunch of us got to talk with Russell Coutts and that was fascinating and content rich. Highlights cannot do justice to everything he had to say, but here is an attempt. Please do not think that these comments capture the depth of the discussion and the evident thought behind the answers.
From the start of the campaign Russell decided that he could not handle both the CEO and onboard skipper duties and have the time or focus to do either well. Thus, Jimmy Spithill got the wheel and Russell has concentrated on overseeing and bringing the campaign together. Although an engineer (former he claims), he is quite self deprecating about his ability to get into the work the specialists on the team are doing at the bleeding edge.
Jimmy has been made Skipper and he will decide whether Russell or Larry get a ride or not, depending on what they can contribute on board. Before you chortle about Larry owning the boat, they sound on the level. Although Larry said that he might be on the boat (citing “the weight limit,” although he looked pretty fit), that would likely only be in the second race if the first race was well in hand. On the Alinghi side, Ernesto will be on the boat and sharing the helm with Loick Peyron.
Russell thinks that this competition, unlike previous events, is 95% technology. The design programs are so advanced that they can now link aerodynamics with hydro dynamics and have made tank testing obsolete. Rather than fighting to gain a nearly infinitesimal increase in performance, the teams are fighting to harness the power of machines the designers and builders have handed them. The learning curve is almost vertical and every advance produces huge leaps in performance. Although he did not say it, it is evident that there is plenty of potential that they have not had time to unleash. He thinks that, given the technology involved there is a 30% chance that one of the boats will suffer a breakdown of some magnitude.
He thinks the Match odds are 50/50, which I am told is about where the bookies are. Given that no challenger has ever won a DoG Match, he likes those odds, although, of course, there has only been one previous DoG Match. The really interesting point is that, although everyone is talking about Alinghi being faster in light air and USA in greater than light air, it is much more complicated. First of all, the cross over point differs according to point of sail and sea state, as well as wind velocity. Given the size of the courses (40 nautical miles, 39 and 40) the boats will have to sail by the predictions of their weather programs, rather than simply covering the other boat, and base what they are doing on what they will need to do further around the track.
In fact, ‘Buttheads probably will not see close or even loose covering if the weather programs advise against it. According to Philip L. Rogers, the father of USA’s Racer’s Edge hand held laser wind analysis device, the device interacts with the weather program and shows wind bends, shifts and velocity a kilometer ahead, augmenting and double checking the information the crew receives. (I will be interviewing the Racer’s Edge team for ‘Buttheads this week.)
Throw into the mix Alinghi’s claim that it is unsafe to sail in more than 15 knots at 60 meters above the water (perhaps 12 knots on the water) or waves more than 1 meter and the Sailing Instruction provision that the RC “may” abandon if there is a 30% shift on the upwind leg, which is certain to happen at least once and perhaps several times and you have some pretty extreme choices to be made – with a 9 figure campaign riding on the outcome.
One of the big open questions is how aggressive demon match racer Jimmy Spithill will be at the start. USA seems to have a major advantage tacking, maneuvering, stopping, accelerating and possibly backing down. Of course, neither boat has ever started against a boat like its opponent. How they will handle the start remains an unknown.
Right now, the weather is not very promising, as light air training on the eve of the Match was halted with the wind completely died and the day was over. So stay tuned. Watch the race, which will be streamed, if actually started. I will be reporting on anything that seems relevant, especially if the parties wind up in the room.
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Part 56 - International Jury gets first test
“Plus ça change, plus c'est la même chose.” Proverb.
(February 3, 2010) - As part of my Valencia coverage I am reporting on the International Jury’s February 2, 2010 decision on USA’s five requests for redress. An additional request for redress on measurement has been heard and a preliminary ruling handed down, but the final decision has not been issued. Some of the decision is based upon the legal developments on which I have reported and some are pure Racing Rules of Sailing (RRS) issues. On the RRS issues, feel even freer to take pot shots at me as, although I passed the US SAILING judge’s course with a grade that was not too shabby, I am not a judge.
Interestingly, Société Nautique De Genève (SNG) seems to like lawyers a lot. USA was represented by Richard Slater, GGYC’s rules advisor (an International Judge and Umpire), and Skipper Russell Coutts (an engineer). SNG was represented by Hamish Ross, a NZL barrister (a former partner of Jury member Graham McKenzie) and Skipper Brad Butterworth. Astoundingly, Ross represented not only SNG as Organizing Authority and Alinghi, but also the Race Committee.
While the Race Committee is technically SNG’s race committee, Harold Bennett, the PRO, was approved by ISAF and has to answer to ISAF. Moreover, Bennett has made a point of proclaiming his independence. Obviously, in the small world of top level officialdom, being perceived as in anyone’s pocket would not be very good for business. Thus, although this is not a legal proceeding and a potential conflict can be waived, a prudent US lawyer would ordinarily make sure that the Race Committee had friendly independent counsel so as not to impair the credibility and business interests of one of his or her clients.
Ross objected to the requests as premature, as USA’s score had yet to be affected. While Bob Giuffra won a tactical victory before Justice Kornreich on procedural issues, Ross went down in flames as the Jury ruled that RRS 62.1 explicitly provides that redress may be granted when there is “the possibility that the boat’s score” will be affected, i.e., before the race. Oops. It pays to read the RRS.
Request 1 was based upon SNG’s placing the Notice of Race (NoR) and Sailing Instructions (SI) above the RRS in order of authority below the Deed. The potential harm was that the NoR and SIs could overrule the RRS and allow mischief, so this was not just nit picking. Once again, this was a gimme for USA, as the Jury ruled that the RRS explicitly provide that the RRS take precedence over the NoR and SIs which, of course, are creatures of the RRS, which authorize them. So SNG’s NoR and SI order went out the window and a simple provision providing that Deed takes precedence was substituted. Another example of why it pays to read the RRS.
Request 2 dealt with SNG’s attempt to ban USA’s Racer’s Edge Laser Wind Sensor, which allows USA to measure wind and shifts accurately a kilometer away. This proposed ban was so obviously in conflict the New York Courts’ interpretations of the Deed that a recess was called and SNG caved, substituting non-objectionable language in the NoR. Racer’s Edge has generously offered to show me how the device works on Tuesday in Valencia and I will report on what sounds like a really nice (@$149,500) gadget. Luckily, I will not be tempted to put one on my plastic, as the Laser Class bans any electronics beyond watches. Good thing. I would never hear the end of it when I got home.
Request 3 dealt with USA’s claim that the Deed requires that the Race start time be mutually agreed. SNG wants to start at 1006. USA argued that a better race could be held with a later start and that AC races had ended in darkness with no problem. Bennett agreed that a 1006 was not ideal but “doable” and that nighttime racing raised safety issues. That pretty much cooked USA’s goose, as there was no way the Jury was going to overrule the PRO on a safety issue. The Jury backed into a decision by reasoning that Justice Kornreich had ruled that in the absence of mutual consent, which was not going to happen, the default was SNG’s rules and that 1006 was reasonable and not improper.
The bottom line is that the burden falls on Bennett to either start or postpone at 1006, as the call is his. Once again, his reputation is on the line and the Jury is leaving the responsibility with him. Although SNG is claiming a victory, the effect of the ruling remains to be seen. The only practical result may be some sitting around on the water until the wind fills in the afternoon, with the likelihood that, if it does, the race will be over before dark. Sounds like some of the regattas in which I have sat around on the water for hours waiting for the AP to come down. Presumably, both boats will be prepared with navigation lights.
Request 4 dealt with wind and wave limits. The 15 knot at 60 meters wind limit and 1 meter wave limits are so patently contrary to the Deed that again redress was granted and the limits are out. Once again, the responsibility falls upon the PRO, who has plenty of discretion under the RRS. Interestingly, USA argued that 15 knots at 60 meters would be less than 12 knots at sea level. Tom Schnackenberg for SNG argued that a 15 knot wind at 60 meters would result in loads equivalent to 23 knots at 10 meters for the old AC boats. Coutts’ response boiled down to hey, learn to sail your boat. The interesting question I have not seen an answer to is how anyone measures wind at 60 meters. If you mounted a wind gauge at the top of a 60 meter mast on the committee boat, just the rocking and pitching alone would probably generate 15 knots of wind at the gauge.
Apparently, SNG made the bizarre argument that the wind restriction is necessary because of liability and insurance concerns and some fear of US litigation. There seems to be no colorable basis for such concerns. US courts enforce forum non conveniens and situs rules in maritime and admiralty cases that would almost certainly send any litigation filed in the US back to Spain. Obviously, USA would be in no position to sue if someone were hurt. Spectator boats have to meet winter safety rules to operate that far off the coast in February, so it is hard to see how anyone could have a claim for being lured out there in dangerous condition, i.e., the kind that Optis sail in. Anything can be insured if you want to pay the premium, so that does not seem terribly real.
Unfortunately, the Jury made the gratuitous statement that “The Jury recognizes that the RC has the obligation to comply with appropriate safety and legal obligations when making a decision to start or continue a race.” This is an adult race, not a kid’s race, and the decision to race is, under RRS 4, the responsibility of each boat. Such an unnecessary statement just encourages a lot of sealawyering over the radio threatening lawsuits if the RC starts or continues a race. If the wind pipes up, expect to hear more about this.
Request 5 involved skin friction reduction and whether the anti-trash SI could overrule the Deed and Justice Kornreich’s decision that RRS 53 does not apply. As SNG submitted no evidence that anything bad was being released, the Jury did not even listen to an in-camera presentation offered by USA regarding the technology. The Jury ruled that as long as all environmental laws and regulations were complied with, whatever USA is releasing is not trash, so RRS 53 is not reinstated and, as USA has nothing to complain about, the request is denied. SNG gets to claim a win and USA gets to use its skin friction reduction system. Everybody is a winner.
As of this writing, the Jury has not issued its final decision on the measurement request for redress, which boils down to where Alinghi has to place its water ballast for measurement and where it can move it while (whilst for Brit ‘Buttheads) racing. Just as Justice Kornreich did not want to award the Cup before a Match was sailed, it does not appear that the Jury wants to either. The preliminary decision appears to duck the issue and put the onus on SNG’s measurer, although it is sufficiently ambiguous that the better part of valor is to await the final decision. Amazingly, it appears GGYC is not allowed to observe Alinghi being measured.
Stay tuned. Although I was not yet in Valencia for these hearings, I hope to be there for the next, and the next, and the next.
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Part 55 - Focus shifts from NY Courts to International Jury
“If you have to ask, you can’t afford it.” J.P. Morgan (on the subject of yachts and yachting).
“If Hitler invaded hell I would make at least a favorable reference to the devil in the House of Commons.” Winston S. Churchill.
(January 31, 2010) - Golden Gate Yacht Club’s (GGYC) reply papers on its Constructed in Country (CiC) motion to DSQ Société Nautique De Genève (SNG) and in opposition to SNG’s CiC Cross Motion to DSQ GGYC were very well done on the merits. Nevertheless it did not make any difference at this point, because, as I discussed in my last piece, SNG raised a series of procedural deficiencies that apparently convinced Justice Kornreich that the CiC issue could not be decided before the February 8, 2010 Match.
Between bouts of trying to pound the principles and rules of civil procedure into our thick skulls, one of my law school civil procedure professors observed that, while anyone can learn the substantive law, which is essentially common sense, a real lawyer understands procedure and evidence. Rather than railing on Larry Ellison’s supposed attempt to use his billions to steal the Cup, Bob Giuffra skillfully used procedural issues raised by GGYC’s CiC motion to put the motion on hold. For SNG’s purposes, that was good enough. That is not to say that the CiC issue is dead, or that GGYC has lost or SNG has won. It simply means that Justice Kornreich is not going to conduct the awards ceremony in her courtroom at this time or delay the Match after spending so much time and effort making sure it goes off next Monday.
If the time for a decision ever comes, GGYC’s papers show that it can make a very strong case that sails are an essential element of a sailboat (no surprise there) that have to be CiC, that Alinghi 5’s sails were probably built in three panels in Minden, Nevada, where between 91% and 98% of the work was done, with joining the three panels and minor finishing performed in Switzerland. GGYC successfully turned John Rousmaniere’s Report, submitted by SNG, back on SNG.
On the cross motion, GGYC did a convincing job of demonstrating that the wing is a sail and that USA is sloop (no surprise there either). While GGYC had a detailed explanation of the U.S. construction of its hydraulic system, it completely ducked the national construction of its engine, which Andrew English writing for the Telegraph concluded, based upon “hints” in an interview with Stefan Neuberger of BMW Motorsport, is a BMW four cylinder turbodiesel. Perhaps. If the CiC motion and cross motion come back to life, discovery will be necessary to sort through exactly where all the respective pieces were actually built, but that is for another day – or never, depending on the outcome of the Match. The conventional wisdom in the general press is that further litigation will inevitably follow the Match. I am not convinced. While some Match outcomes might lead to litigation, others would probably make it unlikely. Only time will tell.
While the action now shifts to Valencia and the fighting moves from Justice Kornreich’s courtroom to the International Jury (IJ), some of the issues carry over. Justice Kornreich charged the IJ with making sure that the NOR and SIs are fair. The IJ also has to ensure that the NOR and SIs are not in conflict with the Deed. Both Judge Rubin’s concurrence in Mercury Bay and Justice Kornreich’s Rules 49-54 decision are based upon the principle that a DoG Match is a wide open unlimited technology competition with the victory going to the most innovative boat – and the deepest pockets and widest design and engineering bandwidth.
Unlike the report of the three wise men which was preceded by submissions by the parties, USA’s request for redress is being done the old school way. Show up on February 1. Speak your piece and show your evidence. Take your medicine.
Many of the NOR and SI provisions in dispute on USA’s request for redress certainly seem to conflict with the Deed, as interpreted by New York courts. Thus, regardless of whether SNG’s last minute NOR change to ban USA’s Racer’s Edge Laser Wind sensor (at a reported $149,500 – are batteries included? – a mere bagatelle) is unfairly late, any ban is clearly a restriction on technology and in conflict with the Deed. I am not even sure what SNG’s problem is. Racer’s Edge advertises on the web. Presumably they are in the business of selling the thing.
Similarly, the wind and wave limitations in the NOR have the clear effect of imposing design restrictions on the boats in conflict with the Deed. Those limitations favor a boat meeting certain design parameters over others despite the fact that the Deed provides for a competition between different design philosophies (“models”) to see which model is superior. Wind and wave limitations put a thumb on the scale favoring one model and conflict with the Deed.
Everyone now is used to SI restrictions on throwing trash overboard while racing. Such provisions merely reinforce existing legal prohibitions and typically add no new restriction. To violate such SI restrictions you have to be jettisoning trash – something that is not permitted. (On Lake George the issue is traditional dinghy sailor jettisons.) Apparently, SNG is attempting to use such a provision in the SIs to restrict USA’s skin friction reduction system, which is specifically permitted by the NOR and Justice Kornreich’s decision – at SNG’s request – that the Deed bars Rule 53. SNG claims USA is defiling the environment on an apocalyptic scale. Naturally, BOR Racing is being very cagey about the nature of the system and what, if anything, it releases. Its statements claim that the system is “green,” which any shopper knows is as meaningless as terms come. The bottom line is that, if USA is not releasing anything that violates applicable environmental regulations, the IJ should give its system a clean bill of health, because to do anything else would conflict with the Deed.
Apparently, USA has filed another request for redress based upon SNG’s measurement procedures. Justice Kornreich has made herself pretty clear on measurement and the Deed and, whatever the other deficiencies of the measurement procedure may or may not be, measurement has to conform to the Deed and Justice Kornreich’s decisions, which basically boil down to no game playing with measurement.
USA is also seeking redress regarding SNG’s unilateral determination of the start time for the first race, which appears to be a flat violation of the Deed, which requires agreement. Apparently, there are restrictions on leaving the port. The problem is that the race has to start sometime and there are not too many choices. As it stands, the start is at 1006. The problem is that the time limit under the Deed is 7 hours and sunset is at 1728. If they start later (or even if there is a postponement) they could wind up drifting under navigation lights. If they start earlier, they may well wind up postponing because of lack of stable wind anyhow. But, of course, the Deed requires agreement and there should be an attempt, although the Deed does not provide an answer if there is no agreement. Perhaps the IJ can mediate this issue.
Which leads to the last issue. The Singapore agreement fell apart with finger pointing all around. Nobody is talking about its contents, other than that it would have resolved all outstanding issues and would have delayed the Match one month. Whether the agreement can be salvaged in some form at this point remains open. A one month delay with a week to go seems a non-starter. Indeed, at the end of the redress hearing, with CiC issues out of the way for now, the parties may find themselves in much, but not entirely, the same place the Singapore agreement would have left them.
Regardless, there must be non-controversial provisions of the agreement that would make this a better regatta without either side “giving up” anything. Of course, the fact that no one is giving up anything means that no one is getting anything (which lessens the desire to do anything), except, perhaps, a better regatta. Even if the parties cannot agree on anything of substance, they ought to consider agreeing on non-controversial issues that might result in a better regatta. I am not so naïve as to suggest that any agreement would be contagious and amity would break out, but a better regatta would be nice even if the current level of rancor continues.
Finally, I would like to thank all those who have contributed to the expenses of my Valencia coverage. Your appreciation is what keeps me going and makes it all worthwhile.
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Part 54 - The gift that keeps giving, and giving, and giving
“Make smoke.” Command for a defensive destroyer tactic.
(January 24, 2010) - We have Société Nautique De Genève’s (SNG) papers in opposition to Golden Gate Yacht Club’s (GGYC) Constructed in Country (CiC) motion to DSQ SNG and SNG’s CiC Cross Motion to DSQ GGYC (surprise, surprise). First of all, what is going to happen on the return date, January 28, 2010? Not much. The clerk will call the calendar in Room 130 (not room 148 as appears on the papers). If the law firms’ paralegals get to the right room, they will hand up the papers the law firms previously served on each other, the clerk will take the papers, check the affidavits of service, and put them in a folder. That is it. The folder for these motions will then be logged in and eventually sent to Justice Kornreich’s chambers, which will then instruct the clerk that oral argument should be scheduled (oral argument is mandatory in the Commercial Division).
Almost certainly, because of the February 8, 2010 Match date, Phil Bowman from David Boies’ law firm (for GGYC) will be on the phone with Justice Kornreich’s law clerk requesting an early hearing rather than the normal wait of about two weeks. Based upon the papers thus far, Bob Giuffra of Sullivan & Cromwell, SNG’s latest law firm is not likely to be in any hurry for a hearing, so it is entirely possible that nothing will happen before February 8. Indeed, unless GGYC’s papers are a walk off home run, the chances of any decision before February 8 are pretty slim.
So, what is Giuffra up to? Standard top quality large firm defense. SNG’s combined papers have four broad elements: 1) GGYC’s Motion is procedurally improper; 2) as Justice Ciparick ruled back in the day in Mercury Bay, the parties should go race and bring any complaints to the court when they are done; 3) Alinghi 5 is CiC and fully Deed compliant, and 4) USA is not CiC, not compliant with its challenge, and not Deed compliant. Elements 1 and 2 could be written on a picture post card and decided pretty quickly on another picture post card. Points 3 and 4 are the ones that make your hard drive sag and are designed to prevent a quick decision.
All of the motions in this case have been “at the foot of the judgment,” (to enforce the judgment) handed down by Justice Cahn and affirmed by the Court of Appeals. Essentially, they enforced the provisions of the judgment setting the date and venue and prevented SNG from DSQ’g USA and aborting the Match. SNG’s previous counsel never questioned the propriety of the procedure, apparently believing that rants would carry the day under any procedure. Giuffra is a lot smarter and is acting like a lawyer, by raising procedural issues, rather than a brawler. He argues that a new action, or at least a full blown proceeding with discovery, witnesses and a trial is necessary, rather than this motion to enforce the judgment. Unfortunately for GGYC, the CiC issue is getting pretty far from Justice Cahn’s judgment. Even worse for GGYC, the motion seeks to DSQ Alinghi 5 and/or delay the Match, the opposite of the previous decisions.
However, to get past a prompt resolution, Giuffra has shown that there are real fact issues to be decided on the CiC issues and that former Justice (now Judge) Ciparick’s Mercury Bay decision to put disputes off until after the Match should be followed. That is where issues 3 and 4 come into play and why the papers are so voluminous and attempt to raise so many issues. Against him is GGYC’s argument that the CiC issue should be decided now to avoid a pointless Match and a do over.
GGYC’s job on its reply on its motion and answer to SNG’s cross-motion is to cut though those papers and show why there is really nothing there. Although difficult, the job is not impossible as, rather than being like a cake (the current reigning CiC metaphor), SNG’s papers are more like whipped cream or cotton candy – a little bit of substance and a lot of air.
Considering the motions requires remembering the basics. First of all, it is the words within the four corners of the Deed that count. On these motions, nobody has argued that any of the relevant words are ambiguous, so the only way that practice in 1887 is relevant is if there is any dispute about the definition of the words. The word constructed is not exactly archaic. Secondly, Justice Kornreich ruled on the Rules 49 – 54 motion that this is a wide open technology competition and, unless prohibited by the Deed, any technology goes. Thirdly, the relevant term is “constructed,” not designed, and certainly not patented or invented.
A substantial portion of SNG’s papers attempt to capitalize on an extremely dumb, rookie mistake GGYC made in its paper. For some reason I cannot fathom, GGYC raised a 1980’s NYYC interpretation of the Deed which sought to include design within CiC. Not only is that interpretation clearly wrong, but SNG itself repealed it, so SNG is in no position to raise it. Nevertheless, given the multinational design process of both boats (apparently none of Alinghi 5’s designers are Swiss nationals and who knows where anyone was actually sitting every time they had an idea), bringing up the irrelevant design issue is like dropping your pants in court. Experienced lawyers make sure they do not raise their own red herrings and will omit an argument if there is a possibility it can be either turned against them or used as a distraction.
The end result is that SNG submits affidavits and pages of legal argument beating the design issue to a bloody pulp in an attempt to gin up a real issue from GGYC’s mistake. The issue should not count and it is GGYC’s job to put it to bed convincingly if it wants a prompt ruling on the motion.
The real meat of SNG’s argument is a 19 page (plus exhibits) declaration from my good friend John Rousmaniere, the dean of AC writers, laying out the history of sails in the AC, going back to the original pre-AC race in which the NYYC won the Cup in the first place. By and large that is a history of gentlemanly “friendly competition between foreign nations,” in which allowances were made so that a reasonably fair match could be sailed. Of course, given the heavy betting on the matches by the gentlemen involved, NYYC ran them pretty much the same way the casinos operate at Las Vegas, Atlantic City or anywhere else. The challengers were given enough of a chance to induce them to come and bet, but not enough of a chance to actually win – until 1983 when the house actually had to pay off.
John’s declaration also discusses how the friendly competition was concerned with the “model” (hull shape) favored by Americans versus the markedly different “model” (hull shape) favored by the Brits. Knowing John’s expertise, I am sure his discussion in on the mark. However, for the Court’s purposes, it is the wrong mark. The practice was clearly designed to produce a decent Match, just as Michael Fay argued in Mercury Bay, but Fay lost in the Court of Appeals (and previously in the Appellate Division, First Department), because, under New York law only the words of the Deed count. The Deed specifies that the competing vessels propelled by sail alone (i.e., not by stored power or mixed stored power and sails, as was common) must be CiC. If that was not the practice of the day, in that nobody cared whether sails were CiC, that practice does not make any difference. Indeed, SNG’s quotes from John’s declaration that “a ‘fundamental idea’ underlying the 1882 [1887?] Deed of Gift is that ‘The America’s Cup cannot survive without good, close racing.’” That was exactly the position rejected by the Court of Appeals when it ratified one of the biggest blow outs in sailing history because the Deed did not provide for anything of the sort – unless the parties were smart enough to work it out through the mutual consent process.
Indeed, until Michael Fay appeared on the scene, there had never been a default DoG Match. Every one had been by mutual consent. If anything, the fact that sail provenance eventually became an issue even in mutual consent matches in the late 20th century tends to indicate that the CiC issue regarding sails had always been lurking, but nobody cared until the foreign nations started getting good enough to be a real threat. Thus, it is the words of the Deed that count, regardless of how that jibed with practice in 1887 or thereafter.
If sails do have to be CiC, and the language of the Deed seems to say so, SNG’s evidence that they are Swiss is pretty thin. First of all, its affidavits are almost wholly conclusory – a pejorative term used by lawyers and judges to describe affidavits which set forth conclusions without detailing the evidentiary basis, based upon personal, firsthand knowledge, for those conclusions. For example, the evidence on sail construction is studiously vague. It boils down to the claim that the sails were built in pieces in Minden and shipped to Switzerland for seaming and finishing. Amazingly, the affidavits do not even say how many pieces we are talking about. One can only assume that it may be only two or three, which were then combined to produce the finished sail. That sounds a lot like constructed in the USA. Nothing is stated about the number of man hours expended in Minden, Nevada or the number of hours it would have taken to finish them in Minden. It might well be that 90% of the man hours necessary to complete the sails in Minden were performed in Minden. Again, the Court is not told.
SNG also submits affidavits detailing that the Swiss government (or some Canton’s government) certified the sails as constructed in Switzerland. Please. Every time I open up a Made in USA product I find a collection of Chinese or other nation’s pieces. Governments accommodate their industries with Made in Whatever policies dreamed up by lobbyists. That is fine for those purposes, but has no relevance to this inquiry. Besides, does anyone really believe that, if asked, the Swiss authorities would DSQ SNG’s boat?
While SNG’s papers are generally well done, given the facts Giuffra has to work with, jumping into a complicated subject matter this late in the game begins to show in the cross motion. Other than a recent letter to the Scuttlebutt editor stating that Dennis Connor’s wing was protested by New Zealand and Okayed by the International Jury, I have never heard anyone argue that a hard sail is not a sail – until now. The fact is that hard and soft sails are simply foils designed to generate lift, just as soft hang glider wings and hard F-22 Raptor wings are foils designed to generate lift. (SNG has an incomprehensible sentence trying to differentiate marine from aero applications which is simply factually wrong.) The only differences between hard and soft foils is that hard foils are much more efficient and that, until the late 20th century, materials allowing the engineering of foils that could reverse the direction of the lift generated, so that a sailboat could sail on both tacks, were not available. USA’s foil is only unprecedented in size and engineering execution. Being two, rather than three elements, it is actually pretty basic as hard sails go.
SNG also has a really silly argument that sails have to be of flat, woven, foldable material, based upon some old dictionary definitions of sail (woven) and the AC 32 protocol (foldable). I am sure one can find a 19th century dictionary stating that boats are made from wood, iron or steel. So what? And what does the AC 32 protocol have to do with anything? Justice Kornreich has ruled that this is a wide open technology competition – a wide open 21st Century competition. If aerodynamic film works better that cotton duck, so be it. The result is still a sail. Besides, although the term woven, which weaves in and out of SNG’s papers (with more time they probably would have cut it out), the fact is that 3DL sails are not woven at all and certainly are not built out of flat pieces. The fibers cross each other, but are not woven into a warp and woof. They are built curved. So the argument hurts SNG as much as it helps SNG.
In an example of the fact that no bad idea ever goes away, the keel yacht issue has once again reared its ugly head, this time in its sloop rig incarnation. Sloop is as irrelevant as keel was. For those that have forgotten, GGYC’s Notice of Challenge was copied in haste from Michael Fay’s New Zealand challenge. Keel was unnecessary surplussage ruled not to matter. The Deed allows one and two masted vessels and requires that the challenge specify the Challenger’s “rig.” It does not specifically require that the number of masts be specified – which is the important piece of information. Obviously, “rig” is shorthand for the number of masts, which otherwise would not be specified. How that mast is rigged does not make any difference. For all the Deed requires, it could be square rigged, lateen rigged, sloop rigged or cat rigged. It does not make any difference. One mast in the challenge gets you 90 feet LWL and two masts gets you 115 LWL. That is all that counts.
SNG brings the silliness to the next level by claiming that a sloop must carry a headsail at all times upwind. Really? Has anyone ever seen a sloop DSQ’d for dropping its jib before it hoists its chute? Has anyone ever seen a sloop rigged dinghy DSQ’d for dropping its jib when it was badly overpowered or its jib halyard broke. Indeed, has anyone seen a ruling that a Laser or Finn is not a sloop?
If that were not enough, SNG argues that USA is not a sloop because the hard sail is not a mainsail. At least they are consistent. Of course, a standard technique in survival conditions is to run home under jib alone. Indeed, when things get really out of hand, some dinghies can plane and surf downwind on jib alone. It is not very pretty, but they are not DSQ’d.
In any event, surplussage does not count. Many years ago the U.S. Supreme Court was presented with a case in which the defendant was accused of a crime that required that the Government prove elements A, B and C for a conviction. In an excess of prosecutorial zeal, the indictment charged that the defendant’s acts included A, B, C and D. D was pretty nasty, but not an element of the crime. The government proved A, B and C, but could not prove D, so the defendant asked that his conviction be reversed. He stayed in jail. The Supremes ruled that D was surplussage and did not need to be proved. Sloop, like keel yacht is surplussage and irrelevant.
In line with its people who live in glass houses argument on the cross motion, SNG claims that USA uses an engine that is not CiC and a hydraulic system that is constructed in Italy. The evidence is pretty thin. Although the AP article cited by SNG says that the engine is a BMW engine, none of the quotes from Jimmy Spithill and Russell Coutts identify the brand of the engine. Indeed, while BMW sells marine diesels, BMW Oracle Racing and BMW have been silent on the subject of the engine. BMW builds vehicles in South Carolina, but does not build engines or transmissions there. While BMW could assemble an engine in the U.S. (or get my neighbor to do it in his garage), it probably cannot build an engine from scratch in the U.S. But, of course, the silence all around would make sense if the engine is built in the U.S., but not by BMW – not exactly something to trumpet on a BMW Oracle Racing boat. In any event, SNG’s evidence barely rises to the level of insinuation.
Giuffra also seems to have fallen into the trap of the right hand not knowing what the left hand is arguing. In the response to GGYC’s CiC motion, SNG argues that the Alinghi 5’s sails are not part of the vessel because the U.S. government says that the engines on U.S. vessels do not have to be built in the U.S. The equivalence between sails and engines is clearly not in the statute or regs, but only by analogy. But, of course, if SNG is right, then GGYC gets a free ride on its engine.
As to the hydraulic system, the only evidence is some Cariboni web pages and some pictures of boxes that were shipped to Anacortes, Washington in June 2008 from Cariboni in Italy. There is no evidence that those parts are on USA or were even destined for USA (Larry Ellison and BMW Oracle Racing do have a couple of other boats). The web pages are entirely consistent with Cariboni parts in other BMW Oracle Racing boats and design work on the hydraulic systems on USA. The whole point of building boats in Anacortes is that virtually any high tech part can be built by the aerospace shops in the neighborhood. It is like Canal Street in New York’s Chinatown on steroids. They can knock off anything you want – especially if you have the designer’s permission and, better yet, drawings.
That is not to say that SNG is wrong on the engine or the hydraulic systems. It just has not come forward with anything at this point. Presumably, GGYC is lying in the weeds ready to slam-dunk SNG on these issues and thereby argue that SNG’s claims are not worthy of discovery or any consideration at all. On the subject of bad ideas, GGYC needs to ditch the term “off the shelf,” which is surpassingly meaningless, being both over and under inclusive. After all, one can buy an off the shelf race ready Farr 40.
So, will SNG succeed in pushing these motions off until the Match has been sailed? That depends on what GGYC has to say in response. Stay tuned. This case is the gift that keeps giving, and giving, and giving.
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Part 53 - Betting the farm
“And there’s more.” Late Night Infomercial.
“The lady doth protest too much, methinks.” Hamlet Act 3, scene 2, 230.
(January 13, 2010) - Once again America’s Cup defender Société Nautique De Genève’s (SNG) bizarre strategy has landed it back before New York Supreme Court Justice Kornreich.
Apparently, the SNG contingent of skipper Brad Butterworth and Hamish Ross met with Tom Ehman and Richard Slater for Golden Gate Yacht Club (GGYC) in Singapore on January 12, 2009. Adult supervision was provided by Aussies David Tillett, the incoming chair of the AC 33 International Jury (IJ), and David Kellett, representing ISAF. The first day was sufficiently productive that everyone stuck around for another to wrap up a global deal resolving substantially all the outstanding disputes and paving the way to a civilized AC 33 showdown on the water. Needless to say, in what will not be a surprise to ‘Buttheads, somebody overruled the SNG representatives and blew the whole thing up, prompting GGYC to serve its Constructed in Country (CiC) motion on SNG. SNG claimed bad faith and unleashed a stream of abuse in Brad Butterworth’s name.
The Deed provides the Challenger a: “match for this Cup with a yacht or vessel propelled by sails only and constructed in the country to which the challenging Club belongs, against any one yacht or vessel constructed in the country of the Club holding the Cup.” While GGYC has claimed that Alinghi 5 has several CiC problems, the motion only concerns Alinghi 5’s sails. GGYC claims that they are 3DL sails constructed by North in Minden, Nevada and, therefore cannot be CiC in Switzerland. SNG previous response is that sails are not part of the “vessel,” and that, if they are, they were constructed in Switzerland. Presumably, based upon their press releases, SNG will also claim that the issue is not ripe for consideration because it has not started a race with any sails, does not even have to designate a boat until the first race, and that the issue should go to the IJ, not to court. Given that SNG keeps talking about 3DL being a subject to intellectual property rights held by Swiss nationals, expect to hear about that as well.
So, does this dispute belong in court or before the IJ? Clearly, it belongs in court. Construction (no pun intended) of the Deed is a legal issue for the Court, not a sailing issue for the IJ. Indeed, as the Deed is sui generis, although evidence of practice in Schuyler’s day may be relevant, there is nothing “boaty” about the issue. Neither IJ’s, nor sailors, have any special expertise regarding what the CiC requirement means.
Is this motion unripe (premature in legal lingo)? No. Although GGYC did not get around to citing any law, this dispute is clearly imminent enough and concrete enough that relief in the nature of declaratory relief is appropriate to get this issue out of the way and allow a Match that will actually count, rather than a Match that potentially will actually be decided in subsequent litigation. Justice Kornreich has repeated ruled on issues in advance, so there is no reason to believe she will decline this one. Although measurement is still in the future, the Appellate Division affirmed her measurement decision regarding rudders. In any event, GGYC is only trying to bar the use of 3DL sails, not determine what sails SNG may use.
A much bigger problem for GGYC is created by the calendar. GGYC is a sucker for delay necessary to prove its good faith in a pointless PR war that was already a waste of time years ago. Judges do not care about who is a nicer guy and pay no attention to such atmospherics. There cannot be a single sailor left on the planet who has not made up his or her mind. Thus, GGYC wasted more than a week waiting for and attending the Singapore (bull) sling. As a result, the return date of GGYC’s motion is January 28, 2010, with oral argument some time thereafter. The Match is February 8. Given the parties’ demonstrated inability to agree on anything, Justice Kornreich will no doubt be delighted to be time crunched because of pointless PR games.
Are sails parts of a sailboat? Is the Pope Catholic? While GGYC makes a number of arguments for the obvious proposition that sails are a key component of a sailboat, they curiously overlook the actual language of the Deed, which should settle it: “a yacht or vessel propelled by sails only and constructed in the country.” No commas, no dependent clauses, no qualifications. There is one single unitary requirement that the Challenger field a vessel that is propelled by sails only and CiC. Thus, the Deed itself makes the vessel and its sails unitary and requires that they be CiC. Before anyone from the gottcha brigade jumps in to argue that “propelled by a sails only” is not included in the reference to the defender’s boat, do we really want to go there? If it is not obvious that propelled by sails only is integral to the defender’s boat, do we want the defender’s boat propelled by engines? I think not.
So, what does constructed mean anyhow? GGYC offers contemporaneous evidence regarding the CiC amendment to the Deed in 1887 that the amendment was intended to prevent the challenger from assembling his boat from components fabricated in the defender’s country. Spelling that out for the defender would never have occurred to a man of Schuyler’s day and class, who would have presumed that no proper defender would have a CiC problem. Indeed the imposition of the CiC requirement to bar Captain Cuthbert, the Canadian challenger the NYYC considered a pest, demonstrates that, for better or worse, the Deed is clearly not politically correct by modern standards. If the CiC requirement makes it impossible for spunky little countries to challenge for the Cup without mutual consent of the defender – tough. Those little countries will just have to grow up, become the equals of the U.S. and Britain, and CiC their boats. Until then, they can compete elsewhere for lesser trophies.
Thus, the argument that constructed means assembled is simply not consistent with the Deed and is exactly what Schuyler would have abhorred. The Cup was a competition between nations, designed to be decided by national character, as demonstrated by the swiftness of the yachts the countries CiC using their respective national resources. If some insignificant little country could order a bunch of parts built in other countries and assemble them, the Cup would be meaningless. Somalia, Yemen or Zimbabwe could challenge with a boat assembled from parts built in the US and elsewhere.
So, where are 3DL sails constructed? North is the only vendor, with factories in Minden, Nevada and Sri Lanka. 3DL sails are not your father’s sails. Indeed, they are not really fabric at all. For the details, take a look at http://www.na.northsails.com/SailProducts/RacingSails/3DL/tabid/1919/Default.aspx. Essentially, North builds a male mold to the customer’s specifications, laminates resin and unidirectional fibers and then vacuum bags and heat cures the brew into a fully formed final product. In essence, it is the reverse of the process of building a hull in a female fold and is flexible, rather than rigid, like a hull. It may be that AC sails are simply too big to build in one piece, but even if they have to be built in two or more pieces that are seamed, they are clearly constructed in North’s plant. Seaming these Nevada constructed products in Switzerland does not make them constructed in Switzerland any more than dropping a Ferrari engine into a Ferrari chassis makes the end product constructed anyplace other than Italy.
The fact that the 3DL process is based upon patents originally granted to Swiss nationals is irrelevant. Everything today is subject to somebody’s patents. Licensors and Licensees are frequently of different nationalities. Moreover, as North is believed to be the exclusive licensee, North is the sole holder of the right to actually practice the patents. In any event, although any rights have lapsed, some Neolithic hunter gatherer invented the boat and his or her nationality is irrelevant on this issue, as is the patent holder for the 3DL process. Besides, the rule is CiC, not invented or imagined in country.
The fact that no other country produces 3DL sails (unless Sri Lanka challenges), would have cut no ice with Schuyler in the absence of the kind of sportsmanship that produces mutual consent. Real countries build real yachts – including real sails. If you want to play hard ball default DoG match racing, do not complain if the only Louisville Sluggers are CiC in the US.
If GGYC’s argument has a weakness, it is the failure to articulate a rule that a judge would feel comfortable applying. GGYC flirts with terms like interchangeable and “off the shelf,” which are not very helpful, because they are not common legal terms. “Off the shelf,” which originated in previous AC’s is poorly defined and both under and over inclusive. One can presumably buy an off the shelf Farr 40. Obviously, GGYC has decided that, wherever you draw the line, SNG’s sails are on the wrong side, so pinning the line down is unnecessary and potentially a two edged sword. Nevertheless, Justice Kornreich may want a rule. A more useful rule would be something along the lines of fungible commodities not primarily used for sailing are free and everything else has to be CiC. Thus, fiber, resin, commodity fasteners, semiconductors, gasoline, diesel fuel, etc. would be free. Whatever you make of them would have to be CiC. That may not be the right rule – and even GGYC, which has been pretty diligent in its effort to comply, might not comply -- but at least it uses concepts and terms judges are familiar with.
We will see what SNG’s response is. Bob Giuffra at Sullivan & Cromwell has the ball in his court and we will see what he does. The interesting question is whether he will resist the pressure to serve as a mindless mouthpiece for ludicrous arguments, dressed up in fancy finery. If he hopes to better the disastrous record of his predecessors, he will have to. Good luck. Once again, his client has failed to grab the certainty of a settlement on reasonable terms and has embraced a very dangerous litigation path. GGYC has nothing to lose. SNG is betting the farm.
Giuffra must have a pretty cranky client. Rather than playing the game with sponsor and TV money, Ernesto has probably laid out nine figures in US dollars of his own money with no significant sponsorship and no media deals or prospects. Any side deals with RAK have gone up in smoke and Valencia has no reason to do anything for him. GGYC’s wing looks awfully fast and maneuverable. That is a lot to be cranky about. Do not expect any handshakes or smiles for this event. It will only get worse.
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Part 52 - Catching the ripe fruit
(December 15, 2009) - “Once again BMW Oracle's strategy to try to win the America's Cup in court instead of on the water has been successful. For the first time in the history of the America's Cup the Defender has been stripped of its fundamental right to select the venue.” Fred Meyer, SNG vice-commodore.
Fred Meyer has it backwards. Once again Société Nautique De Genève’s (SNG) strategy to lose the America’s Cup in court has been successful. Golden Gate Yacht Club (GGYC) simply had to stand there and let the ripe fruit fall into its hands. As most ‘Buttheads know by now, the Appellate Division, First Department, affirmed Justice Kornreich’s decisions ruling out RAK as the Match venue and excluding rudders from measurement of Load Water Line (LWL) in a four to zip unanimous unsigned decision - only one step less dismissive than a simple “affirmed.” Regardless of whether there is any mechanism for an appeal as of right now (I am skeptical), the Appellate Division is not likely to grant leave to appeal a four to zip unanimous unsigned decision. It looks like SNG is resigned to Valencia on February 8, 2010.
Because the attorney - client privilege seals the SNG lawyer’s lips, we probably will never learn exactly who the architect of this string of legal debacles was. Every lawyer for SNG, both in house and out house, with the possible exception of Bob Giuffra, handed the wheel as only the bridge remained above water, is presumed guilty until proven innocent. No one was able to counsel steering away from disaster or stepped off voluntarily. In the end, while GGYC sailed through the court conservatively, playing the shifts up the legal middle, SNG banged every legal corner and found legal headers to sail on that no one else could have found. What will happen on the water is unknown, but just as in court, SNG has pursued a fairly extreme design, while GGYC has designed its boat more conservatively. The wing may be unprecedented, but, with two elements, rather than three, it is conservative for a wing.
The First Department’s decision is straightforward, holding that Justice Cahn’s order carved out Valencia from the hemisphere rule, but left the hemisphere rule in place as to any other venue. Any other venue has to be Deed compliant. If you are wondering whether it was consent or something else that allowed him to carve Valencia out, keep wondering, because the First Department is not telling. “The motion court [Justice Kornreich] correctly rejected SNG’s selection of RAK.” “Because I said so,” rather than an explanation, usually cuts off further argument.
Curiously, in its statement, SNG claims it “has been stripped of its fundamental right to select the venue.” Of course, no defender has ever had a “fundamental right” to select a non Deed compliant venue. The “fundamental right” to select RAK, a non Deed compliant venue, was simply created by SNG from a fundamental misinterpretation of Justice Cahn’s order, which was rejected by the First Department.
The First Department seems to have a soft spot for ambiguity, as it held that Load Water Line (LWL) is ambiguous as to rudders and then held that Justice Kornreich “properly relied upon undisputed extrinsic evidence, including New York Yacht Club rules extant at the time the 1887 Deed was settled,” to find that rudders do not count. Although LWL probably is not ambiguous, the First Department seems to have found that to be the easiest tack to the mark.
While the jury, applicable rules and the NOR have, apparently, not been put to bed and conceivably could wind up back before Justice Kornreich, and some new unforeseen dispute could arise, it looks like the litigation is winding down. Only the breach of fiduciary duty action remains, but what it might achieve now that GGYC has won just about everything is unclear. The only thing GGYC lost was the Rules 49-54 motion, which was a must win for SNG, but ultimately seems to have benefitted GGYC at least as much, if not more.
Can the litigation restart after the Match? SNG has had its days (and days and days) in court and probably has no case if GGYC wins. Barring some new wrinkle, GGYC has won everything it cares about and should have no case if SNG wins. But, of course, as long as there are lawyers who will only ask “how high” when told to “jump,” there is always hope for more litigation.
Much has been written about how the Deed needs to be updated, but New York’s courts have demonstrated that the Deed is just fine as it is. The body of precedent this litigation has created has applied the Deed in a thoroughly fair and modern way. Given the behavior of ISAF and many of the challengers who filed Amici in the Court of Appeals, it is hard to see what sailing organization could do a better job of overseeing the America’s Cup than the Courts of New York. Except for Rules 49-54, where GGYC’s lawyers clearly dropped the ball, the courts faithfully followed the Deed and created a roadmap for future matches - even when the lawyering did not provide much help to the courts. Of course it would not hurt if everyone took a deep breath and went back to acting like ladies and gentlemen, but if they do not, there is a remedy.
We now get to see two spectacular, state-of-the-art, sailing machines go at it. These are the greatest Cup boats since Reliance in 1903 and, like Reliance, are almost certainly an economically unsustainable model. We will see some spectacular sailing and then, in all likelihood, see a return for AC 34 to dead slow lead mines plodding around a course in close company in the “exciting” pursuit of an imperceptible advantage. Enjoy it while we can.
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Part 51 - An endless supply of kamikaze lawyers
“When you eliminate all thoughts about life and death, you will be able to totally disregard your earthly life. This will also enable you to concentrate your attention on eradicating the enemy with unwavering determination,” Excerpt from a kamikaze pilots' manual.
"I'm benching myself, Joe, . . . for the good of the team." Lou Gehrig to Yankee Manager Joe McCarthy, May 2, 1939.
(November 29, 2009) - To cut to the chase, oral argument last Wednesday (Nov. 25) before the Appellate Division, First Department, on Société Nautique De Genève’s (SNG) appeal from Justice Kornreich’s decision ruling out RAK as the Match venue and excluding rudders from measurement of Load Water Line (LWL) was a waste of the Court’s time.
This appeal is a “non-enumerated” appeal, which means that it is an appeal for which no oral argument is permitted, unless the parties request argument time and the Court grants the request. Many lawyers take the hint and submit without argument. That does not suit the peacocks of the bar, who believe that, no matter how brilliant their briefs, their dulcet tones will bring the Court a giant step closer to Nirvana. Naturally, SNG’s lawyers asked for argument time and Golden Gate Yacht Club’s (GGYC) lawyers generously acceded to their request.
SNG has an endless supply of kamikaze lawyers willing to crash themselves into anything SNG wishes. Robert J. Giuffra, a rising star at Sullivan & Cromwell, is the latest to embody the Bushido Code for SNG, after Barry Ostrager at Simpson Thacher failed to even dent anything he crashed himself into. The purpose of argument is to help the Court reach the result your client requested in its briefing with as simple, clear and focused a presentation as possible. Of course a lawyer can also chose the path of confusing the Court by playing to his or her client in the grandstands. Giuffra chose the latter path, evidently because SNG may not be ready by February 8, 2010.
Thus, instead of sticking to a concentrated version of what was argued in SNG’s briefs, he went on to argue that the Match should be postponed to May so that it could be sailed in RAK and not conflict with the Deed. The major problem with this argument is that it is not in SNG’s briefs, nor is anything remotely like it. Such an argument is pointless, as the issues presented for appeal are limited by the briefs, but SNG obviously loved it. This leap completely off the playing field into some extra-terrestrial orbit left the Court baffled.
On the rudders issue, Giuffra continued the absurd claim that BOR 90’s 113-foot overall length (not including its bowsprit) makes it the longest AC boat ever. Of course, not only was Reliance’s 144 foot hull a tad longer, as were plenty of J Boats, but so is Alinghi 5, believed to be 115 feet long. There may be some convoluted explanation for this gross misrepresentation, but it is not apparent. Back in the day, white shoe firms did not engage in anything that could even remotely be seen as a misrepresentation, let alone an outright falsehood, but that was then and this is now. Giuffra charged at a good clip. The only thing that slowed Giuffra down was Justice Sheila Abdus-Salaam’s question/statement that she did not see how a rudder affects speed. Smart lady. Giuffra had no real response.
While Giuffra was prepared and articulate, David Boies for GGYC was anything but. Boies is simply not the advocate who battled Microsoft or argued Bush v. Gore almost a decade ago. The famous photographic recall of everything in a case is gone. He was totally unprepared. Not only that, but rather than an articulate and forceful advocate, he was unfocussed and unable to stick to the important points or bring the Court back to the positions presented in SNG’s brief. He should have benched himself.
Someone at GGYC had given him a palm card with the dimensions of Reliance and the J’s to point out how wrong the BOR 90 being the longest AC boat canard is. Instead of forcefully arguing that the Court should take judicial notice of those dimensions in order to paint Giuffra as a liar, he lamely started out his argument by saying essentially, “Of course this is all outside the record,” and then proceeded to mumble the numbers in no apparent order or to any apparent purpose. The expressions on the panel’s faces indicated that, for all they could tell, he was reading random phone numbers from the Manhattan White Pages.
While the rudders/LWL issue was probably more dangerous and, therefore, more important to GGYC than the RAK issue, it was also the least likely to be reversed, as GGYC is on very strong ground. Nevertheless, in apparent response to the fact that rudders were the last thing Boies had heard from Giuffra, Boies grabbed the issue, rather than the main issue, RAK, and wandered with it, hammering obvious points to a pulp. At one point, Boies was mumbling so confusingly that the Court had to instruct him to speak up - which is pretty unusual in appellate practice. Giuffra had strangely talked about BOR 90’s wings, presumably referring to its cross members and amas, not its new hard sail, and Boies picked up this misnomer and stumbled with it, to the utter mystification of the Court, which had not read anything about wings in the briefs. Meanwhile, Boies’ clock was ticking.
In its reply brief, SNG had claimed that it had announced it would sail in Valencia because it somehow was in danger of being held in contempt if it had not announced Valencia. Boies attempted the difficult job of proving that wrong without anything in the briefs for the Court to refer to. Rather than simply arguing that there was no possibility of contempt under the terms of the outstanding orders, Boies launched into an explanation of dates and orders, which might have worked on paper, but was almost impossible to follow when presented orally.
Compared to Maureen Mahoney’s stellar argument for GGYC in the Court of Appeals, Boies’ argument was simply awful. Although Boies had convinced GGYC to ditch Mahoney’s firm and hire him, he obviously had not bothered to prepare for the argument to the extent of learning the basics of the case. Thus, he was unable to counter Giuffra’s argument that the Match should be rescheduled to May to meet the hemisphere requirement in the Deed, because he apparently did not know that precise argument was rejected by Justice Cahn in the very order this appeal concerns, which was affirmed by the Court of Appeals. Nor did he appear to know that when Justice Cahn handed down the order it would have resulted in a Match during the northern hemisphere winter. It is one thing to pinch another lawyer’s client. It is another to then botch an argument for the client because you either cannot prepare or cannot be bothered.
Does anything in this fiasco matter? Probably not. Both lawyers were allowed to keep talking far past the red light ending their time, as the Court struggled to follow what the lawyers, who had left the arguments in the briefs far behind, were talking about. Eventually, the Court simply gave up. Thus, the appeal will likely be decided on the briefs and the bench memo and proposed memorandum decision prepared by court (staff) lawyers before argument is heard.
The internal procedures of the Appellate Division, First Department are incredibly arcane and verge on institutionalized ritual. The makeup of the panel is decided months before argument (in this case before the appeal was even filed) and the reporting justice, who takes the point on the appeal, is chosen by the clerk on the day of the argument based upon recent reporting designations and seating position, which, in turn, is based upon seniority, in a highly formulaic way. It is entirely possible that the reporting justice was able to hammer out a decision at the conference after the close of argument, based upon the proposed memorandum decision prepared by the court attorney and reviewed by the supervising court attorney. If not, the process will take additional time to work itself out. The vast majority of appeals result in affirmances, but, of course, there are reversals and modifications as well. The First Department botched the last appeal, but on this appeal, it does not appear that the Court of Appeals can ride to the rescue.
While the RAK and rudders appeal has attracted a lot of attention, and those issues may have a decisive effect on the outcome of this AC Match, Justice Kornreich’s decision on the rules dispute will have a much more far reaching effect on the Cup itself. The rules decision was the one she decided based upon the report of the three wise men [Graham McKenzie (NZL), David Tillett (AUS) and Bryan Willis (GBR)]. Far more important than her decision that Alinghi 5 would have to be measured with movable ballast stowed on board, which hurts SNG and helps GGYC, was her decision that the impartial International Jury (IJ) to be appointed shortly by ISAF will have full authority to grant redress regarding any provision of the rules or the NOR, including measurement. Thus, with the stroke of a word processor, the Cup Match was changed from a game with dice loaded by the defender into a standard regatta with a neutral NOR and neutral rules. That is a real game changer, as the defender will not be able to jimmy the NOR or the rules in its favor. For example, if the IJ determines that a fair and safe race can be sailed in winds in excess of the 15 knot limit or 1 meter wave limit of the NOR, and that the NOR limit favors the defender, the IJ can presumably erase the limits.
Combined with the decisions confirming that the challenger need only specify the maximum dimensions which may not be exceeded, the right of the challenger to modify its boat up to very shortly before the Match and modern communications (including intelligence techniques), the challenger and defender are now on a level playing field (except for venue games - another story). That is revolutionary. The game has changed.
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Part 50 - AC litigation is back -- weirder than ever
Michael [Corleone] (Al Pacino): “My father made him an offer he couldn't refuse.”
Kay Adams (Diane Keaton): “What was that?”
Michael: “Luca Brasi held a gun to his head, and my father assured him that either his brains or his signature would be on the contract.” - The Godfather, Paramount Pictures 1972.
(November 15, 2009) - Just when everyone thought the Cup was moving from the Commercial Division of the Supreme Court of New York on 60 Centre Street in Manhattan to Valencia for a showdown on the water, it turns out that the AC litigation is back -- weirder than ever. So here is the Golden Jubilee 50th Report on the Cup litigation that is the gift that keeps giving.
Société Nautique De Genève’s (SNG) filed its opening brief on its appeal of Justice Kornreich’s decision ruling out RAK as the Match venue, along with a motion for an expedited appeal and a request for a stay of the RAK decision on November 4, 2009. Justice Helen Freedman denied the request for a stay and granted the motion for expedition. The denial of the stay looked like the end of the ball game. On November 10, 2009, SNG announced that the Match would be held in Valencia -- without any qualification or reservation. That seemed to be confirmation that the appeal and the game was over. Then it started to get really squirrely.
It seems that SNG thought it could love and leave RAK, just like it had loved and left Team New Zealand (TNZ) after TNZ jumped in the sack for bucks it never got to bolster the aborted CNEV version of AC 33. What SNG did not seem to expect was that hell hath no fury like an Emirate scorned. It seemed that there was the little matter of the $120 million that RAK invested, based upon SNG’s representations that the Match would be held there. Apparently the Sheik of RAK cannot take a joke, as one of the Gulf media published a report that RAK was “considering its options.” That is U.S. lawyer speak for “we are not taking this lying down.”
Being an absolute monarchy with no rule of law at all other than the Sheik’s whim tends to broaden the “options” when the guy who done RAK wrong and plans on moving on to a new Spanish lover happens to have a very expensive racing catamaran and lots of other goodies parked in RAK’s garage -- and the Sheik has the only key to the garage. The possibilities for self-help are far beyond the limits applicable in the U.S., other common law countries, or the EU. After all, on the RAK motion, SNG argued that RAK is safer from terrorists and criminals because nobody has any rights in RAK. Ouch. The export documents for the boat? It is very complicated. There are many details. We are working on it. The person who is working on it is not available at this time. We do not know when he will be available. Oh, you are not going anywhere either.
The result was that SNG suddenly started acting like it had been made an offer it could not refuse. The appeal was not off at all. Valencia? That is only if we lose the appeal. Oh, by the way, we have new counsel, Sullivan & Cromwell (S&C), a top drawer firm, for the Reply Brief. Celebrity counsel is often brought in to argue an appeal, but seldom is a new law firm brought in for a reply brief. And in this case S&C did not just sign the brief, it is their product through and through.
So what is going on here? RAK must have received assurances that the RAK venue choice would stick or it never would have invested $120 million in the venture. Justice Kornreich’s RAK decision and SNG’s Valencia announcement must have been a rude awakening that shook its faith in SNG’s strategy, SNG’s counsel and SNG’s commitment to salvaging its $120 million. It must not have liked what it saw in SNG’s opening brief. Enter new blue chip counsel to try to salvage the appeal and the $120 million. Will it work? Probably not, but you can never tell until the decision is handed down. Of course, everyone will deny that anything of the sort is going on and some deal will probably be reached before the Match.
One thing that a new law firm for the reply brief may add turns out to be inside baseball. Some justices -- including Justice David B. Saxe who sat on the first Appellate Division panel in this case -- are reverse readers. They read the briefs in reverse order, i.e., the reply brief first. For those justices, SNG’s reply brief, prepared by S&C, is far more important than its opening brief prepared by Barry Ostrager’s Simpson Thacher. Indeed, S&C’s reply brief is constructed with reverse readers in mind. In addition to the RAK decision, SNG is also appealing Justice Kornreich’s decision that rudders do not count for measurement purposes.
Because of the Valencia fandango, Golden Gate Yacht Club (GGYC) hits as hard as it can on the argument that the appeal is moot, i.e. that there is no live dispute anymore, (what everyone thought), after Valencia was announced as the venue. A mootness argument is always appealing to an appellate court, as it cuts down the work load. S&C responds for SNG with a rather unconvincing argument that SNG only announced Valencia to avoid potentially being held in contempt. As no one even raised contempt at the time, that is a world class stretch. Induced buyer’s remorse seems like a more likely explanation. Even if the Appellate Division does not rule that the appeal is moot, SNG’s flip flop is not likely to endear itself to the court.
The substance of the RAK argument boils down to the same basic argument Justice Kornreich decided. SNG argues that “[T]he location of the match shall be in Valencia, Spain or any other location selected by SNG,” overrides the hemisphere restrictions of the Deed. Justice Kornreich ruled and GGYC argues that the clause has to be harmonized with the Deed and the location has to be Deed compliant unless GGYC consents, as it has regarding Valencia. The arguments, including rules of construction with long Latin names, go on for many pages and kill many trees, even when printed on the required recycled paper. Curiously, although the parties go on at length about the equitable powers of the court which allow it leeway to make adjustments to legal relationships to do justice, GGYC never argues that Justice Cahn probably did not have that equitable leeway regarding the Deed’s requirements. That is because those requirements affect other potential parties that were not before him. The proper mechanism for such an adjustment would have been a separate cy pres proceeding on notice to any potentially affected party.
On balance, GGYC has the stronger argument. Finding an implicit override of the Deed is a pretty tough when the alternative is harmonizing Justice Cahn’s Order with the Deed. After all, the presumption is that judges do it the right way, not the wrong way. While appellate courts will reverse if the lower court has clearly misapplied the law, there are so many conflicting currents and cross currents on the RAK decision that there will be a strong tendency to defer to the lower court which is living with the case if at all possible. The fact that the February 8 Match is almost upon the parties is an additional reason not to interfere.
RAK filed an amicus brief arguing that it will be harmed to the tune of $120 million, plus untold lost opportunities, if Justice Kornreich’s RAK order stands. That is a pretty silly argument. They may have a breach of contract or other beef with SNG, but GGYC has nothing to do with it. GGYC had a perfect right to take the action it took and RAK has nothing to complain about. RAK makes an even sillier comity argument that the Appellate Division should not rule in GGYC’s favor because that would be an endorsement of the mean things GGYC said about it. Please. Sticks and stones ….
The rudder issue is probably easier, although GGYC has tried to be just a little too cute on the issue. The dispute boils down to what the term “load water line” means. Does it include rudders or not. A term like LWL cannot be ambiguous any more than the term dog can be ambiguous. Dog means canis domesticus and cannot mean felis catus (housecat) or anything else. Of course, if you tell your kid to walk “the dog” and do not tell him or her whether you mean Fido or Spot, you have created an ambiguity regarding which dog you mean, but not about what a dog is. To find out what LWL means, the court consults the relevant authorities, be they the dictionary or practice at the time the Deed was written, and decides what the term means. Justice Kornreich did that, found that there was only one answer - rudders do not count - and ruled that way. That is a pure issue of law. Of course, going back to the dog walking example, had she decided that the dog to be walked was Spot, because Spot was anxious and pawing the door and Fido was sound asleep, that would be an issue of fact.
The difference is that appellate courts are much more deferential to lower courts regarding issues of fact than they are on issues of law, which they can decide for themselves just as well. So GGYC decided to get cute and primarily argue that LWL is ambiguous and a mixed issue of law and fact to get the more deferential standard on review. That is obviously wrong. It probably will not make any difference, as the difference seems to be lost on most lawyers and judges, including the last Appellate Division majority, but Justice Kornreich was clearly correct when she ruled that rudders do not count when measuring LWL.
This appeal is probably the end of the road for the RAK and rudder issues. An appeal to the Court of Appeals requires an order which finally determines an action. The problem is that this action was finally determined by the Court of Appeals months ago. The RAK and rudder motions were to enforce that final determination. An action cannot be finally determined after it already has been finally determined. The odd posture of this post judgment relief may provide an exception that would allow a trip to Albany, but if there is such an exception, I am not aware of it.
There is one wild card floating around that will need clarification from the clerk’s office this week. Apparently, whether there will be oral argument on this appeal is an issue. While oral argument will likely not make any difference to the outcome, it will have a major impact on timing. Without argument, there could be a decision within a week or two. Argument could easily add a month or more to that. These boats will not fit in the overhead bin. They have to travel by ship, which takes time and involves many logistical challenges. Even the existing Valencia bases will require significant modifications to accommodate these boats. RAK is not going to throw more money into infrastructure with everything up in the air. Not knowing where the Match will be when December rolls around could be a major problem. I certainly would not want to bet the farm on the outcome of this appeal.
Other than the RAK and rudder issues, the only outstanding issues AT THIS TIME are the rules issues which the three expert judges have reported on to Justice Kornreich. Expect that decision in the near future, as well as the appointment by ISAF of an International Jury.
There is one issue where Justice Kornreich did misstep, which is not before the Appellate Division. That is calling GGYC “unsportsmanlike.” Both parties have been playing hardball since this litigation began. This is a championship event. Hardball is the name of the game. While the general public might think it is unsportsmanlike for a sailor to match race and sail an opponent down and off the podium in an Olympic medal round to ensure a podium finish for himself or herself, that is just the way the game is played and is not unsportsmanlike. As we all know, “unsportsmanlike” is Rule 69 talk and should be used sparingly. Nobody has punched anyone - yet. Not being a sailor, Justice Kornreich would not know that, but her use of the term is unfortunate and the constant repetition by SNG may be acceptable litigation hardball, but is unworthy of a Cup holder.
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Part 49 - An unexpected surprise
“Today I settle all Family business, so don't tell me you're innocent, Carlo.” Michael Corleone (Al Pacino), The Godfather, Paramount Pictures 1972.
(November 1, 2009) - Every once in a while you see a move so deft and unexpected that you can only stand back and marvel. After confessing near complete bafflement as late as October 27, 2009, Justice Kornreich’s October 30, 2009 order on at Golden Gate Yacht Club’s (GGYC) rules motion is just such a move. The beauty of her order is that it appeal proofs her ultimate decision. While Justice Kornreich made a point of facilitating an appeal of her RAK decision, that decision, anchored firmly in the Deed, is safe from appeal. The rules motion raised a bunch of thorny issues, however, and her solution will deal with all of them in a way that no appellate court will touch.
What is equally remarkable is that Société Nautique De Genève (SNG), which finished AC 32 a two time winner at the top of the sport has taken a series of legal drubbings with few parallels in the history of litigation. Thanks to extraordinarily poor judgment, it stands to end up far worse off than if it had chosen to settle at any point in this litigation. How anyone could take this many losses and not realize that something is awry in the decision making process is beyond me. Making wild claims that easily will be shown up, like the claim that Valencia is dangerous in February, are not going to improve its record.
As I previously have written, motions to renew or reargue are always difficult. Rather than going out on that limb, Justice Kornreich achieved an even better result for GGYC with a little subtlety. She simply ruled that her previous rules decision only dealt with Rules 49 – 54, and that everything else about rules changes was dicta. Dicta, the plural of dictum, is legal Latin for never mind -- that was just discussion which was not essential to the decision about Rules 49 -- 54 and does not count. She then wrote that she will “take SNG at its word” about not using measurement to DSQ GGYC (which her subsequent ruling on rudders shows was exactly what SNG had tried to do), and anticipates that it will not issue rules or SI’s inconsistent with “friendly competition between foreign countries.” If you do not remember SNG saying anything to justify such anticipation, join the club, but if you were SNG, would you want to do anything contrary to the Court’s anticipation? You sure would not -- which is not to say that, given its track record, SNG will not. If it does, stand back and stay out of the line of fire.
She then went on to the rudder issue. Properly relying upon the Deed, “substantial evidence” of practice, including when the Deed was drafted and the fact that “SNG has not submitted any persuasive contrary evidence,” she held that GGYC’s rudders do not count for measurement of LWL. The lack of “persuasive contrary evidence,” is the key to appeal proofing the ruling. Appellate courts are loath to upset trial court determinations of credibility, even when the credibility determination does not involve live testimony. By basing her decision upon the credibility of the evidence before her, she raised the slope of the hill SNG must climb on appeal to nearly vertical.
If that were not enough, the hearing set for Wednesday, November 4, 2009 is a masterstroke. I suggested in my last piece that a court expert would be very helpful, but a panel of three former AC jury members is orders of magnitude better. Each side designates one member of the panel and those two members chose the third member. If Justice Kornreich bases her determination of the remaining issues based upon the Deed and the recommendations of that panel, there is no appellate court on this planet that will reverse her.
The questions to be determined include determining LWL and whether movable ballast must be stowed on measurement, the safety of Valencia in February, when the NOR and rules are issued and frozen, when the jury is usually appointed and whether the ISAF Agreement provides for an independent jury, and subject to what rules. Those questions will probably expand in the course of the hearing.
Obviously, it will be hard to get this together on such short notice, but there is no reason to doubt that it can be done. Even with the impressive resumes of the likely candidates, serving on this panel would be a singular distinction and hard to pass up. Naturally, the jurors are entitled to compensation commensurate with their standing in the sport. Of course, there is no need for jurors with expertise on legal issues. While a US judge may take testimony on foreign law, which is treated as a matter of fact, a US judge is not permitted to take testimony on legal issues. Those legal issues are for the lawyers for the parties to argue and the Court to decide.
Now that Justice Kornreich has demonstrated her skill and savvy, it is time the lawyers for the parties to get their respective acts together. Given the performances at the last hearing, that may be a tall order. It certainly appears that neither Barry Ostrager nor David Boies knows a jib from a jibe and neither is equipped to get into the nitty gritty of sailing issues. They have some serious cramming to do. While Justice Kornreich may take the lead on questioning the experts, the lawyers have to fill in the spaces around her questions. For example, while an impartial jury is key to a fair regatta, the choice of Principal Race Officer (PRO) is just as important.
The testimony will likely show that February in Valencia provides fairly variable conditions. Front driven gradient wind will likely predominate, with enough surface warming to produce a sea breeze pretty unlikely. All of those weather issues, along with likely sea conditions, need to be presented to the Court. Obviously, there may be days that the PRO will have to call off racing because there is either too much or too little wind or the wind is too unstable for a fair race. That decision cannot be made based upon which boat is better suited to the conditions. A first class PRO of unquestionable skill, integrity and impartiality like Peter (“Luigi”) Reggio is essential, regardless of who sits on the jury. That factor has to be brought out.
Similarly, both teams have sailed and trained year round in Valencia for years and have a wealth of weather information, which would be very helpful to the expert jurors and the Court in reaching a decision. There is potentially plenty of additional evidence that would be helpful in reaching an informed decision. That has to be presented by the lawyers for the parties.
It is also entirely possible that one or more of the expert jurors will have to be cross examined regarding bias or if an opinion appears faulty. Success in cross examining experts requires deep familiarity with the subject matter of the testimony, so that the lawyer and the expert are on as equal terms as possible. It is not a job for amateurs, as the lawyer must be prepared to really bore in on specific areas and close avenues of escape. General questions are useless.
So the case is set up for a resolution of all outstanding issues in a way that will cut off the possibility of a successful appeal. Once this hearing is completed and Justice Kornreich rules, the parties may be out of court and off to the race course. Of course, there could be more twists and turns, so stay tuned.
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Part 48 - Adios, Persian Gulf
“I warned him. . . . You warned him.” Agent K (Tommy Lee Jones), Men in Black, Columbia Pictures Corporation 1997.
“Three blind mice, see how they run.” Anon.
“Clear? Huh. Why a four-year-old child could understand this report. Run out and find me a four-year-old child, I can't make head or tail of it.” Rufus T. Firefly (Groucho Marx), Duck Soup, Paramount Pictures 1933.
(October 27, 2009) - The America’s Cup will be sailed during the first week of February 2010. It will not be sailed in Ras al-Khaimah (RAK). However, it may not actually be decided then, because it is entirely possible that somebody’s lawyers lost the Cup today. February may only reveal who those lawyers are. Today’s candidates for keelhauling are (drum roll): 1) Whoever advised Société Nautique De Genève (SNG) that it could get away with holding the Cup in RAK with enough confidence that it designed its boat specifically for RAK like conditions; and 2) Whoever at Golden Gate Yacht Club (GGYC) fell for David Boies’ extra virgin snake oil and hired him to come into court today totally unprepared for anything other than a PR walk through - and certainly not for real legal work.
RAK is out ostensibly because Justice Kornreich harmonized Justice Cahn’s ruling with the Deed of Gift and concluded that the February Match could only be held in the northern hemisphere on consent. If SNG does not want to hold it in Valencia, Spain on consent, it will have to be sailed in the southern hemisphere.
Justice Kornreich explicitly stated that security had nothing to do with her ruling and she was not considering those arguments. In a coda, she stated that her court was in New York and the United States and no venue would be acceptable if spectators from any nation or religion would be discriminated against or prevented from attending. Bingo. It is common knowledge that anyone holding an Israeli passport or any other country’s passport with Israeli stamps on it (which is pretty common in NY and among Evangelicals nationally) is not likely to be admitted to the UAE. In the case of competitors, that is “for their own safety.” Moreover, Larry Ellison’s ethnicity is no secret. In short, there was no way a judge elected in New York is sending an event to the UAE - oh, and by the way, the Deed prohibits it. She also ruled she would so order the transcript so that SNG immediately can appeal to the Appellate Division, First Department, if it wants to. Good luck, the Appellate Division is elected as well.
The upshot is that SNG has to find a new venue, pronto. In addition, if it cannot find an RAK in the southern hemisphere, it will have to mod its boat to sail in real sailing conditions. Arguably, if those mods are significant, as they likely would be, they have to be constructed in Switzerland, so warm up the helicopter for a round trip over the Alps. Time will be very tight indeed. Throwing the dice on RAK is about the worst bet SNG could have made, unless there is a really good secret plan B. One of David Boies’ many flubs was his failure to ask for a date by which SNG has to tell GGYC where the new venue will be, so GGYC has no idea where it is going or when it will know. GGYC does not seem to be too worried, as it has designed its boat from the beginning to be appropriate for a wider range of conditions and San Diego, a major port facility, is well located for a quick container ship ride to just about anywhere.
After the RAK ruling, the hearing degenerated into complete chaos and my chronology may be a little off as the parties and the court went around in endless circles and loop de loops. (OK, a lot off -- this is going to a little impressionistic as I try to boil down hours of hearing in which no one had a clue what they were talking about or listening to.) First off, after the RAK ruling was announced, Barry Ostrager for SNG just kept on talking about how wrong the ruling was, as David Boies, who was supposed to be presenting the rules motion stood there like a potted plant and let him rant about a decided motion. A lawyer is supposed to just say “Thank you, Your Honor,” and sit down after he or she has lost and, of course, has nothing to thank the court for.
When Ostrager finally stopped, Justice Kornreich stated that she flat out did not understand what the rules dispute was about because she does not understand the RRS and the parties had not done an adequate job of explaining them to her. The quote of the day was something like: “I read Rule 86.1(b). It is just gobbledygook and I don’t have any idea what the rules it refers to are about.” She then revealed that she had tried to figure out the sailing game on her own, in a sort of autodidact no judge left behind self-help program. It soon became clear that she had not been successful.
As I have tried to point out on many occasions, a lawyer cannot expect a judge to understand something as complex as the RRS and how a sailboat race works without a tremendous amount of help. It is little different from turning a green fleet Opti sailor into a serious match racer. Of course, the problem here was that neither Ostrager nor Boies had a clue what they were talking about and could not help her or themselves. Boies, who scored some major victories with the benefit of the enormous depth of Cravath Swain & Moore while he was there, and a few victories and many more defeats since then, is a master of selling himself to clients who do not know any better and then turning the matter over to junior lawyers at his firm, while he lives the life of a Westchester County country squire at his baronial estate.
When forced off the bench, as in this case, he is no Wills Reed hobbling off the bench to win the 1973 New York Knicks the Championship and MVP as well. While Boies remains very good at well presented sound bites about the key issues (the Deed, the Deed and the Deed), he was incredibly unprepared regarding even the most basic facts of the case. Thus, every time Ostrager went off on a tear that Justice Kornreich seemed to be buying, Boies could bring things back to the basics very well, but could not respond to Ostrager’s mangled facts or the Court’s misunderstandings.
For example, in no particular order, Justice Kornreich accused GGYC of bad sportsmanship in the timing of its venue motion. Boies did not seem to know that the excuse for waiting was that GGYC had visited RAK to consider the venue before it made the motion, so that it would not be accused of making the motion without having even looked at RAK. That may be bunk, but it at least sounds like an excuse. The best Boies could do was bloviate about GGYC having no intention of playing games. The Court was obviously not convinced and GGYC got more bad sportsman press.
Justice Kornreich said she would not reconsider her original rules decision because she had relied upon the “unrebutted” affidavit of Fred Meyer, Vice Commodore at SNG. Boies did not know that the reason it was unrebutted was that it had been submitted in response to an order to show cause and, therefore, under the rules, no rebuttal was permitted, except for the oral rebuttal that Jim Kearney did, in fact, make at the hearing. Thus, Boies essentially gave the rules motion away. But wait, it gets worse. Justice Kornreich made clear she had no idea what rules, other than 49-54, she had actually ruled on. Boies had no idea either. Lacking any idea what he was talking about, he started talking about umpiring and judging, but had to stand there and read his papers as he talked to try to figure out what he was arguing.
On the measurement issue, which faded into and out of the argument like intermittent heartburn, Boies had no idea what the GGYC boat even looks like. Thus, while Ostrager constantly interrupted and raged about stern hung rudders and Justice Kornreich stated that neither of the two GGYC amas sit in the water or is measured, Boies simply rambled about how rudders do not increase speed, because he did not know that GGYC’s boat does not have stern hung rudders and both amas sit in the water along with the center hull for measurement. He simply could not explain that only 90 feet or less of the amas are in the water for measurement, but the non-stern hung inboard rudders hit the water beyond 90 feet from the forward most point the boat is in the water. A good animated graphic shown on a flat screen could have demonstrated exactly how a tri works, but Boies had no clue and probably would not have understood what he was watching had he had trial graphics. Instead he relied upon SNG’s graphics, but did not know why they were deceptive.
When Justice Kornreich asked Boies what his point was on movable ballast and where GGYC thinks movable ballast should be stowed during measurement, the whole thing began to resemble a John Cleese routine as Boies obviously had no idea where movable ballast was supposed to be stowed. (Hint: someplace on the boat.) Of course, GGYC now has water tanks for movable ballast, so they should be perfectly happy if both boats are measured without movable ballast, but that would be news to Boies.
Every time that Boies was able to focus Justice Kornreich on practice at the time of the Deed, Ostrager would come back with descriptions of Cup practice that no one has ever heard of before and Boies reverted to potted plant mode, unable to respond to obvious historical fiction. Ostrager kept arguing that the rules, which nobody could identify or describe, could not be set until the venue is known. Boies had no clue that that is ridiculous and the rules and their interpretations have little to do with the venue, once the boat classes and courses are known, as they are. Boies had no idea that the official language of sailing is English and that requiring bilingual judges is not only something that his client opposes, but a way of DSQing some of the best judges, who have no reason to be bilingual. Ostrager talked about a francophone skipper needing to be able to communicate with a bilingual judge when SNG’s helmsman and skipper are an American and a Kiwi respectively and GGYC’s helmsman is an Australian.
About the only thing that Boies knew anything about was baseball, but after giving examples of changing the strike zone and the like, he was incapable of explaining how those baseball analogies had any concrete link with his argument. Every party is allowed to bring a client representative to the counsel table or consult with a client outside the bar. Ostrager always brings an SNG rep to the table. Boies was so in love with the sound of his voice and so busy reading his briefing book in an attempt to figure out what he was talking about that he never once asked to talk to his client to figure out what planet he was on. Meanwhile everyone in the courtroom who had ever touched a tiller or knew anything about the case was close to apoplectic as Boies butchered his client’s case.
The only saving grace was that after several hours of this pointless mayhem Justice Kornreich announced that she was completely baffled by what she had heard, “unqualified” to rule, and would have to decide the rules and measurement issues on the papers - the same papers she said had baffled her in the first place. Obviously, Justice Kornreich needs to figure out a way to force the parties to pay for a court expert to help her figure this out as federal judges have authority to do. Unfortunately, it is probably too late.
The ruling on the rules and measurement she originally promised for today will now be by the end of the week. As Boies represented the moving party who wants relief, the failure to present competent argument makes him the likely winner of the chump award. However, as GGYC’s papers were better than SNG’s, if today was a complete waste of time and a wash, GGYC might still win and whoever hired Boies probably will think his brilliant argument won the case.
Finally, on behalf of GGYC, Boies filed the long awaited breach of fiduciary duty complaint against SNG to extensive PR fanfare. Do not hold your breath waiting for results from that one. So far all the complaint has accomplished is to motivate Justice Kornreich to comment on how annoyed she was to get a copy at this late date. I will write about it when I have recovered from the after effects of listening to today’s debacle.
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Part 47 - Venue motion lacks a clear leader
“Toto, I've a feeling we're not in Kansas any more.” The Wizard of Oz, Metro-Goldwyn-Mayer (1939).
“No good deed goes unpunished.” Claire Booth Luce.
(October 21, 2009) - There are two motions scheduled for oral argument on October 27, 2009 in the America’s Cup battle between Golden Gate Yacht Club (GGYC) and Societe Nautique de Geneve’s (SNG). The first is GGYC’s motion to renew its rules motion, about which I wrote in my last piece (Part 46). GGYC looks pretty good on that motion. The second is GGYC’s motion to throw out Ras al-Khaimah (RAK) as the venue for the February Match. GGYC has an uphill battle on both motions, and the hill is steeper on the venue motion. At a recent talk on the AC litigation, I was asked by an audience member whether he should cancel his flight to RAK. After recovering from my surprise at the improbability of such plans, my answer was no. Based upon SNG’s response to the venue motion and GGYC’s reply, he should hold on to his ticket a little longer.
On the venue motion there are some new faces. Despite yeoman, hands on representation for two years, GGYC has elbowed Jim Kearney at Latham & Watkins into the background as David Boies at Boies, Schiller & Flexner takes the helm. This is particularly perplexing as, although I have not agreed with every move Kearney has made (many of which were probably constrained by his client), he has done an excellent job and clearly took the laboring oar throughout. In contrast, when Boies represented Team New Zealand (TNZ) against Alinghi on a complaint that was all smoke, mirrors and bull byproduct, he never showed his face in court and his firm was totally outclassed by Jonathan Youngwood, second in command to Barry Ostrager at Simpson Thacher. TNZ ultimately threw in the towel. While Kearney’s papers always had real snap and seized your attention, Boies’ papers are pretty bland. Curiously, SNG’s papers are much better than the papers on its rules motion and read more like the papers Youngwood submitted against TNZ.
On the SNG side, Cleary Gottlieb Steen & Hamilton has appeared representing RAK as “amicus” (friend of the court). Cleary Gottlieb is an A list law firm with platinum clients and per partner profits to match. Ordinarily, lawyers for an entity like RAK would stay in the background, cooperate with SNG, provide affidavits and witnesses and even attend oral argument, but would not actually submit papers unless actual intervention was intended. It would depend on SNG’s counsel to handle the matter. Apparently, Cleary Gottlieb lacked sufficient confidence in that route and has taken a much more active role. That puts them in the partly pregnant position of claiming to be an amicus, which is ridiculous as they have a direct, rather than general interest, while simultaneously refusing to waive sovereign immunity or submit to the jurisdiction of the court. RAK makes a “comity” argument that the Court cannot tell a sovereign what to do. GGYC makes the obvious response that no one is telling RAK what to do. GGYC merely wants the Court to tell SNG what to do. Many courts would show RAK the door if it wants to be heard, but does not submit to the jurisdiction of the court, unless its purpose is limited to contesting that jurisdiction.
On the merits, SNG argues that the ruling means exactly what it says -- that it can hold the match anywhere -- and GGYC argues it cannot be read literally, as that would allow a match on “the Colorado River or Walden Pond.” The parties’ previous public statements have each provided the other with most of their respective ammunition. As I have written, I believe that when Justice Cahn ruled that “the location of the match shall be in Valencia, Spain or any other location selected by SNG,” he was well aware that at winter northern hemisphere match would require mutual consent and was pressuring SNG to get out of his courtroom and start negotiating. Unfortunately, his ruling, as is often the case in New York State courts, was just a little too terse to hammer home the point. The logical move at the time was to ask Justice Cahn to clarify the ruling. However, no one had any interest in that course. GGYC wanted a match as soon as possible and probably did not want to slow things down by asking for clarification. SNG had no reason to ask for clarification if it could use the ambiguity for its purposes.
Thus, GGYC made many statements that support SNG’s current position that it can hold the match anywhere and SNG, which wanted to delay the match, made many statements consistent with GGYC’s current position that the match could not be held during winter in the northern hemisphere. Of course, each also submits statements that are consistent with their respective current positions. Thus, the actual meaning of the ruling is getting lost in the he said, she said, back and forth. When I look in my crystal ball to see what Justice Kornreich is likely to rule on the meaning of the ruling, the crystal ball’s response is: “Are you kidding? Anything can happen.” If there is any lesson to be learned, it is that long term strategy should always control short term tactical moves, rather than the other way around, but this will not be the first time that short term thinking returned to sink its teeth into somebody’s posterior.
On the security issue, RAK, undoubtedly with the help of the United Arab Emirates government, has corralled an impressive collection of declarations from friendly high level American figures, including retired Vice Admiral Kevin J. Cosgriff, former Commander of the 5th Fleet, Jack Devine, a former high level CIA spook and Noah Feldman, a Harvard professor who has played a major role in creating Iraq’s new constitution. Not surprisingly, as they have had major roles in the area, they have “gone native” and all think that the UAE is one of the safest places on earth, although they do not say very much specifically about RAK. Nobody has much to say about the specific counter-terrorism capabilities available to RAK. Feldman makes the curious argument that the fact that those suspected by the UAE of being bad guys do not have any real rights, like citizens of more developed countries have, should somehow be reassuring. The Iraqis had better keep their eyes on the constitution Professor Feldman has advised them on. Finally, SNG submitted an affidavit from Reinhard Flick opining that the course is free from headlands and is an ocean course.
RAK submitted an extended affirmation from Dr. Khater Massad, RAK’s power behind the throne, who has all kinds of nice things to say about RAK and its investments in and plans for the Match. He does not have much to say about RAK’s specific anti-terrorism capabilities, although he believes everything will be taken care of and there is no cause for worry. RAK also submits an affirmation from Jennifer L. Gorskie, a Cleary Gottlieb associate who mined the US government’s websites for information which purports to show that RAK is safer from terrorists than Spain, Germany and Sweden. Perhaps, but that seems a little counter intuitive.
After making a major security argument in its moving papers, GGYC makes a novel argument in its reply brief -- never mind. You read that right. GGYC now says that the only issue is the meaning of Justice Cahn’s ruling and the only reason it raised security concerns is to demonstrate to the Court why the venue motion was necessary. Of course, the venue motion is necessary if GGYC’s reading of the ruling is correct and unnecessary if its reading is wrong. Security has nothing to do with it. Conversely, if RAK is unsafe, the meaning of the original ruling has to take a back seat to safety.
GGYC submits affidavits from Dyer Jones (Regatta Director for AC 32) and Tom Ehman (reporting a conversation with Cristobal Grau, the relevant Valencia official) supporting the position that Valencia is available on short notice for a February match and that organizing it would be pretty simple, as well as additional evidence that RAK is not safe, including the fact that the border of the racing area is water claimed by Iran. GGYC’s reply brief punches a bunch of holes in SNG’s security evidence and shows that much of it is consistent with GGYC’s position, but none of those punches are knockouts.
Altogether, the venue motion lacks a clear leader, which favors SNG, the non-moving party. Of course, what none of the high priced legal talent mention is that courts cannot decide motions by choosing between conflicting affidavits (even without considering the fact that most of the submitted affirmations and declarations are full of hearsay and not even sworn statements, as they do not comply with New York law and federal law does not apply). Unless Justice Kornreich determines that GGYC has not presented any sufficient evidence at all - or just ignores the law - she has no choice save to hold a trial on the factual issues in dispute with live testimony and cross examination. The interesting question is whether a party can demand a jury trial. A New York County jury might not favor anyone whose boss’ job title is “Sheik” and whose job description is “absolute monarch.”
Justice Kornreich has already held a trial on regarding how to get a Certificate of Documentation and probably has the time to hold such a hearing. Of course Justice Cahn would never have held such an evidentiary hearing. He would have sent the parties to former Justice Gammerman, now a Judicial Hearing Officer, who would promptly chew them up and spit them out, complete with a decision.
As I have previously written, most judges maintain that cases are decided on the papers and that oral argument seldom makes much difference. Justice Scalia has also recently written that the biggest mistake a litigant can make is to have a big name lawyer who has not been involved in a case on a day to day basis argue the case. So the open question is whether David Boies will live up to his reputation as an advocate when he argues the rules and venue motions on October 27, 2009 and whether he will make a significant difference. ‘Buttheads curious about his advocacy skills can check them out for themselves by listening to him argue Bush v. Gore in the Supreme Court of the United States. Just click on one of the links -- this one or that one -- and start one of the players. Ted Olson (the winner for Bush) argues first and David Boies (for Gore) argues third.
The wild card is whether Justice Kornreich wants to take the risk that, if terrorists do strike after she has sent GGYC to RAK, she will be the judge who sent them there despite the security concerns. That probably would not be very politic in New York County, or just about anyplace else. Like I said, my crystal ball is not cooperating. Do not make or change travel plans until we see what happens at the hearing and what Justice Kornreich rules.
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(October 25, 2009) - Readers have asked why Justice Kornreich cannot simply look at the Deed and decide the disputed venue issue. The answer is that she and the parties are bound by Justice Cahn’s order, which was affirmed by the Court of Appeals and is res judicata (the thing decided) between the parties in the case. (Whether it would be precedent in another case involving other parties is a different question. Probably not.) It would take extraordinary circumstances to depart from that previous ruling and no one has cited any. Thus, the only choice is to attempt to determine what the order means. Although the parties have surprisingly not cited any cases, an order, like the Deed or a contract is interpreted in light of the four corners rule and, barring a demonstrated ambiguity, only the words of the order count.
Readers have also asked why Justice Kornreich cannot just ask Justice Cahn what he meant. Again, the answer is that what he wrote is what counts, not what he meant. Had a party moved for clarification at the time, he would have been free to either issue a clarification or decline. Had GGYC cross-appealed the issue, the Court of Appeals might have granted relief, but GGYC did not cross-appeal. It is likely that GGYC wanted to keep the appeal as clean as possible, without the complication of a cross-appeal. At the time, venue was probably not perceived to be as important an issue as it currently is. Now that the order has been affirmed, it is too late.
All of that said, a clever judge can always find a way to interpret a prior order to get the result he or she thinks is correct. The trick is doing it in a way that will withstand appeal.
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Part 46 - Don’t book your flight to RAK yet
“What a Difference A Day Makes.” Maria Grever and Stanley Adams (Dinah Washington).
(October 4, 2009) - As autumn approaches in the Northern Hemisphere, the leaves are starting to fall, but not as fast as paper in the America's Cup battle between Golden Gate Yacht Club (GGYC) and Société Nautique De Genève’s (SNG) are landing.
Just as GGYC finished briefing its motion to renew its rules motion, it served a motion to throw out Ras al-Khaimah (RAK) as the venue for the February Match. SNG then used a letter about a routine scheduling issue to lay out the broad strokes of its response to GGYC’s venue motion. In the anti-climax of the month, GGYC submitted its long sought Certificate of Documentation, which is devoid of useful information save the basis for calculating how many barrels of Mount Gay Rum USA can carry as movable ballast and/or refreshment. At the rate this is going, I am going to have to start batch processing the papers. The seasonal metaphor will probably change from falling leaves to white out blizzard conditions.
By switching from motions brought on by orders to show cause, to motions brought on by 16 day notices of motion, GGYC gets to file reply papers responding to SNG’s papers answering the motion. On the rules motion, GGYC has put its reply to good use, easily covering and slam dunking SNG. Even more importantly, having the last word allows GGYC to organize the dispute in a nice, neat, user friendly bundle for Justice Kornreich.
Their four major points are:
1) SNG cannot change its pre-challenge rules;
2) GGYC’s boat may not exceed, but need not match its challenge dimensions;
3) Rudders do not count in measuring load water line (LWL); and,
4) Movable ballast must be on board when LWL is measured.
On each of the four major points, GGYC anchors its position in the Deed and sailing practice in George Schuyler’s day. (Disclosure of the ISAF - SNG Agreement is now moot.) In contrast to SNG’s personal attacks and unfocussed rants, GGYC’s reply is calm, cool and collected, making its arguments clearly and cogently. It is readily accessible to lay readers.
In litigation, like amour, where your partner has been can cause unpleasant surprises. In this case, SNG’s lawyers have been less than careful. SNG submitted an affidavit from its in-house designer, Rolf Vrolijk, swearing that SNG based its boat on GGYC’s stated 90 x 90 foot dimensions, and that if GGYC had declared a narrower or shorter boat, SNG would have built a different boat. The only problem is that Vrolijk told Seahorse Magazine in an interview published just last month that SNG had designed its boat without regard to GGYC’s boat. Oops! That is going to be painful. If SNG’s lawyers had done their homework, they would have known about the interview, would have used adequate protection when drafting Vrolijk’s affidavit, and would not now be suffering the ill effects.
Tom Schnackenberg’s affidavit does not fare much better under analysis, as GGYC points out how irrelevant most of it is. Even his reference to model yachts is beside the point, as only one of the four model yacht classes includes rudders in LWL measurement. Thus, it turns out that even in the model yacht world, the majority rule is that rudders do not count in measuring LWL. Designers planning for an America’s Cup sailed in model yachts (why not at the rate things are going?) can breathe a sigh of relief on the rudder issue. Talk about Mickey Mouse issues.
In contrast to SNG’s self-destructing affidavits, GGYC’s explain the basis of the affiants’ respective conclusions, which clearly support GGYC’s position. Despite the fact that GGYC has clearly out gunned SNG and left SNG with some gaping below the water line damage (much of it self-inflicted), GGYC is not guaranteed a win on this motion by any means. Reargument is always an uphill battle and GGYC started at a disadvantage. That disadvantage may have been cancelled out by SNG’s counsel’s in court representations that measurement would not be used to DSQ GGYC, when, in fact, it appears designed to do precisely that. If Justice Kornreich concludes that SNG’s counsel mislead her, she may have little difficulty changing her previous ruling on the rules question. Indeed, those ‘Buttheads who write in to proclaim their dislike for lawyers may want to attend the hearing, as it may be their opportunity to see a lawyer keelhauled.
GGYC’s venue motion has two prongs. The first is RAK, being in the Northern Hemisphere, does not comply with the Deed’s hemisphere clause for a February match. That goes to a sentence in Justice Cahn’s order that I have written about before. (I do not believe SNG can choose a Northern Hemisphere venue without consent.) Needless to say, GGYC maintains that the only Northern Hemisphere venue it will consent to is Valencia and SNG maintains that it is free to choose any venue it wants. GGYC seems to get pretty tied up in knots explaining why Valencia is OK, rather than just saying it consented months ago and will live by that consent. Obviously, GGYC has confidence that its boat and sailors can handle Valencia in February and SNG does not.
The second prong is that RAK, unlike Dubai, Abu Dhabi and the rest of the United Arab Emirates, is too close to Iran to be a safe place for a high profile American target like the GGYC team, as well as being too undeveloped to serve as an adequate base for an AC Match. Regardless of RAK’s good intentions, which are assumed, GGYC may actually be understating the risks. As everyone knows, including those living in caves near the Afghanistan/Pakistan border, relations between Iran and the U.S. and Israel are extremely tense and in danger of rapid escalation. Iran is also a state sponsor of terrorists operating throughout the region engaged in jihad against the “Crusader and Zionist” enemy. Like it or not, that means most ‘Buttheads.
Regardless of his actual beliefs or practices, in the eyes of the Iranian sponsored jihadis, at birth Larry Ellison became a charter member of the second category. Thus, the GGYC team is an extra high value target for Iranian sponsored jihadis, as well as assorted other free lance crazies. Hard liners in Iran, unhappy with signs of easing tensions, might see the GGYC team as a potential way to cause a confrontation to thwart progress. RAK’s good relations with its neighbors are irrelevant to such fanatics.
It certainly appears possible that SNG is cynically using these terrorists as a match racing pick against GGYC, just as circling AC boats in the 12 Metre days sailed through the spectator fleet to shake a following opponent. That is a very dangerous game for SNG to play. Clearly, GGYC is not going to forfeit for security reasons, nor should anyone expect it to do so. The U.S. has stood for freedom of the seas since its founding.
While the safety of GGYC’s team is the primary concern, the risk goes far beyond that. If Iranian backed jihadis take out the SNG team, Switzerland will send Iran a stern diplomatic note and demand compensation. If the GGYC team is attacked and the attack can be traced to Iran, the U.S. Administration would come under enormous pressure to take military action, as it rightfully should. (Imagine cable news beating the drum 24/7 to “Remember the [USA]!”, counting the days and demanding military action.) Nobody wants to be another Jimmy Carter.
As tensions escalate, the Israelis might well decide that dealing with the Iranian nuclear program was a freebie, as the U.S. Administration would be hard pressed to apply the brakes. The conflagration could easily get out hand and would have wide ranging effects on the still fragile world economy, even if confined to the region (think $500 a barrel oil). In short, SNG’s venue game could go seriously wrong in a way that goes far beyond sailboat racing. This is a really stupid idea. If all SNG is looking for is flat water and light air, there has to be other suitable venues with better neighbors. Insisting upon RAK is needlessly provocative and irresponsible.
SNG’s response only heightens concerns about its motives. That response is that Oracle, Russell Coutts and Latham & Watkins (GGYC’s lawyers) have ties to Dubai and safer parts of the UAE, but not, notably, to RAK. That is like saying that the South Bronx is perfectly safe because Park Avenue in Manhattan is safe and they are both in the same state, indeed the same city. While, the South Bronx has made tremendous progress since the New York Police Department's 41st Precinct was known as “Fort Apache,” that is simply ridiculous. Moreover, unlike the South Bronx, the risk in RAK is primarily external, resulting from its proximity to Iran. Until SNG substantively addresses the obvious security concerns, its motives remain suspect.
SNG argues that it has already moved its boat to RAK and set up shop (apparently filling up the one and only hotel). Obviously, SNG took its chances when it did so and, if RAK is not a proper venue, it has no one to blame but itself.
If all this were not enough, David Boies and his firm were hired for the express purpose of representing GGYC regarding SNG’s exercise of its fiduciary duties. So far we have not seen a motion in that regard, so it is only a matter of time before we see a GGYC motion to BFD SNG for breach of fiduciary duty. Stay tuned for a lot more litigation before the first gun is fired in February - wherever it is fired.
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Part 45 - Nothing is simple anymore
“No captain can do very wrong if he places his ship alongside that of the enemy.” - Horatio Lord Nelson.
(September 22, 2009) - A major battle, or series of battles, is brewing which will determine whether the Cup will be decided on the water in February or will be tied up in litigation for quite a while. Since the New York Court of Appeals ruled in favor of Challenger Golden Gate Yacht Club (GGYC), GGYC has skirmished with Société Nautique De Genève’s (SNG) over the date of the Match and Custom House Registry (now Certificate of Documentation).
NEWS FLASH – Justice Kornreich has ruled on the CoD issue (today), holding that GGYC need not provide its CoD earlier than two weeks before the first gun of the Match. According to Justice Kornreich, by exercising its rights under the Deed, GGYC is “unsportsmanlike” by reducing an advantage SNG has under the Deed that she just ruled SNG does not have. Go figure.
Those relatively minor engagements are over and an all out fleet engagement is taking shape. Having abandoned the quick orders to show cause that by not allowing reply papers prevented thorough presentations of the issues, GGYC has added an additional law firm, Boies, Schiller & Flexner, and has filed a comprehensive motion on a number of key issues. Looming just over the horizon is an even bigger battle regarding SNG’s exercise of its duty as trustee of the Cup.
To complicate matters, the facts at issue have changed since GGYC filed its motion, which included a branch seeking public disclosure of then secret ISAF-SNG Agreement. Before SNG could even respond, ISAF secured SNG’s agreement to public disclosure of the Agreement as well as some cosmetic changes. (Having moved for public disclosure, I will not be foolish enough to attempt to provide objective, unbiased comment of that phase of the litigation.)
Thus, as in a real battle, the target GGYC was aiming at has gained some camouflage. Nevertheless, the focus of GGYC’s motion is to reargue Justice Kornreich’s July 30, 2009 decision allowing SNG to change the rules at will, to prevent SNG from imposing measurement standards that will DSQ GGYC and to prevent SNG from reading the “not to be exceeded” clause out of the Deed’s treatment of the Challenger’s dimensions provided in the Challenge.
As ‘Buttheads may know, GGYC is also asking ISAF to reconsider its Agreement with SNG. The point of public disclosure of the Agreement was to see what ISAF was up to. Apparently, ISAF had some second thoughts, as the Agreement was cosmetically changed before it was made public. Nevertheless, ISAF has ceded to SNG a disturbing amount of the authority it was delegated by the MNA’s that make up ISAF. The International Jury is so circumscribed as to be a toothless joke unable to grant redress regarding any decision SNG makes as organizing authority. Why ISAF is giving away its authority is hard to understand.
ISAF claims the exclusive right to organize the Cup Match and, if it is thwarted, to ban participating officials and sailors from ISAF sanctioned events. Although those claims may be dubious, because the Cup Match is governed by the Deed and the New York Supreme Court and because sailor bans would have legal problems, if ISAF means what it says, there is no reason to cede any of its authority to SNG. On the contrary, if ISAF really rules the roost, it zealously should be guarding its authority and should be requiring the upmost fairness, without compromise. It should tell both parties that it will run the event according to the Deed, the RRS and its Regs and will measure the boats according to the Deed and ISAF measurement procedures and that is the way it is going to be. Period. End of story. Its failure to do so is a sign of weakness and seriously undermines its claim to authority over the Cup.
GGYC has a number of basic issues to deal with. The first is that Justice Kornreich seems to fundamentally misunderstand the four corners rule the Court of Appeals applied in Mercury Bay and this case. As Justice Kornreich seems to apply the rule, if a matter is specified in the Deed, the Deed governs, and if the Deed is silent anything goes. That is not the way the four corners rule works. Just because the Court of Appeals held in Mercury Bay that vague concepts could not override the specific provisions of the Deed does not mean everything in the sport of sailing goes out the window where the Deed refers to something like rules without explanation or elaboration.
George Schuyler did not create a completely new sport as an exercise of pure fancy. He simply created a specific sailing match within the context of the sport of sailing as he knew it. Yacht clubs had published rules that were only amended when necessary, just as the Deed was amended after Thistle turned out to be longer that planned. That is obviously what he meant when he referred to the defending club’s rules. Changing the rules in the middle of a challenge would have been inconceivable, as Schuyler said when some at NYYC proposed to allow a fleet defense. Unless the Deed specifically allows the defender to change its rules, there is no reason to use the four corners rule to create a match Schuyler never intended. The same goes for measurement and every other aspect of the match not specifically set forth in the Deed.
The reason that rudders and rudder stocks are not measured in determining Load Water Line under the ISAF procedure is simply that the ISAF procedure codifies the way it has always been done, not because ISAF invented a better idea. The reason that has always been the case is because the rudder has no effect on hull speed, so that including it in LWL would throw off the hull speed calculation. Similarly, anyone with access to standard references - or even Wikipedia, which has an excellent article - knows that the Load in Load Water Line means that the vessel is fully laden - at its Plimsoll Line. Otherwise George Schuyler would have specified 90 feet at the Partially Laden Water Line, the So-So Laden Water Line or the Unladen Water Line (UWL). In short, the four corners rule does not impose artificial aphasia upon the Court.
One of the oddities of legal practice is that lawyers have any number of legal rules pounded into them in the first year of law school which are immediately forgotten, if they were ever learned. One rule is that a contract is formed when an offer is accepted and as little as two peppercorns of consideration are exchanged. As a non-lawyer correspondent pointed out, the NOR - in this case the Deed supplemented by the NOR from SNG’s 2007 Annual regatta, as I have previously written - is an offer to enter into a contract. Once accepted by GGYC’s challenge (consideration, which is usually the entrance fee, can almost always be found) the contract is binding on both SNG and GGYC and may only be changed by mutually consent. Thus, SNG cannot unilaterally change the deal at will.
Indeed, in New York contracts that may be materially changed by one party without the other’s consent are not contracts at all. Thus, not only is Justice Kornreich misapplying the four corners rule, she is also misapplying New York contract law. Of course, the idea that SNG can change the rules at will quickly reduces to absurdity. SNG can simply make a rule that flatly provides that GGYC loses. That cannot be George Schuyler’s intent.
While GGYC’s papers may assume a little too much knowledge of the basics of sailboat racing, they present thorough arguments on the RRS and measurement issues. SNG’s papers, on the other hand are curiously lacking in legal horsepower and fire power. Laced with personal attacks and snide comments about GGYC’s sailing ability, they sound like press releases, rather than legal argument. Supreme Court Justice Antonin Scalia, who knows a few things about arguing a case, recently wrote that that sort of thing is “likely to be regarded [by a judge] as an insult [to the judge’s intelligence].” He went on to quote Ninth Circuit Judge Alex Kozinski: “We understand that you have to say all those things to keep your client happy, but we also understand that you know, and we know, and you know we know, that your case doesn’t amount to a hill of beans, so we can . . . flush it . . . .”
Things do not improve very much when SNG gets nearer the point. It argues that imprecise language in an oral directive from the bench regarding the Custom House Registry overrides the “shall not be exceeded” requirement of the Deed regarding the dimensions set forth in the challenge. Thus, based upon Justice Kornreich’s imprecise language, SNG argues that GGYC’s boat must be exactly 90 X 90, no more (which everyone agrees) and, more importantly, no less. Not only is that contrary to the Deed, but it is contrary to the laws of thermodynamics in this universe. Any boat expands and contracts according to the temperature and even, to some extent, the humidity and air pressure. Thus, it would be impossible to build a boat that would be exactly 90 X 90 without specifying the exact temperature, humidity and air pressure as is done with the standard meter measure which is stored in a vault under rigidly controlled conditions.
Of course, the reality is that boats are always built slightly smaller than the limit to be safe. Likewise, SNG’s claim that it is disadvantaged if GGYC’s boat is smaller than 90 X 90 is silly. Virtually everyone knows that, all other factors being equal, hull speed increases as waterline length increases and, thus, a shorter boat is slower. How SNG could be prejudiced if GGYC’s boat is immaterially smaller is not explained. George Schuyler’s concern about Thistle was that it was too long, not too short. Moreover, Schuyler excused Thistle’s extra length and Thistle went on to lose the match anyhow.
Indeed very little is explained as the affidavits submitted by SNG on the motion are almost totally conclusory and do not explain either how the conclusions were arrived at or what the significance of the conclusions might be. The exception is the affidavit of Tom Schnackenberg, which is a collection of random facts having little to do with any point. After rambling through irrelevant rating rules, metre rules and the ACC rule, he states that “there are not many class or rating rules which specify LWL as a measurement.” Ooookay. The only class he can cite that does and includes rudders is model boats, which of course are not exactly directly comparable to these boats. He even discusses the rudder on GGYC’s center hull, even though that was taken off a while ago.
The usual complaint about affidavits is that they are written by lawyers. This one reads like it was not even reviewed by a lawyer. (Whatever you say, Mr. Schnackenberg.) Altogether, SNG’s papers are reminiscent of a flotilla of destroyers coming out a fog bank and finding themselves directly in the path of enemy battleships. The only tactic available is to make smoke and run. SNG makes a lot of smoke. GGYC’s task is to cut through that smoke and score hits.
Because this is a motion, rather than an order to show cause, GGYC gets to submit reply papers to respond to SNG’s arguments. That forces it to make a strategic decision. One approach for GGYC would be to stand back and fight at long range, unwilling to tangle with all of SNG’s arguments for fear of being drawn into a confused and dangerous close quarters fight. Doing so would risk an inconclusive result. The other would be to follow the Nelsonian example and go straight at them with total victory achieved by destroying all opposition being the goal. Given the status quo, it would appear that GGYC has little choice, but only time and GGYC’s reply papers will tell.
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Part 44 - Motion for Public Disclosure of SNG-ISAF Agreement
Click here to view the motion.
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Part 43 - The train is off the tracks
“Less is more.” - Ludwig Mies van der Rohe.
“Nyuck, Nyuck.” - Curly (Curly Howard).
(August 12, 2009) As a result of Justice Kornreich’s July 30, 2009 Decision, we have an America’s Cup Match with no rules. Based upon the August 10, 2009 Hearing, it looks like we also have AC litigation with no rules. Although the press has been fixated on Golden Gate Yacht Club’s (GGYC) announcement that BOR 90 really is USA, the challenger, that is really the least of what happened at the August 10th hearing.
As some ‘Buttheads may recall, despite the fact that at oral argument Société Nautique De Genève’s (SNG) lawyer had pretty much given up the ghost on the immediate need for a Custom House Registry (CHR), Justice Kornreich had ordered a 12 hour hearing regarding when it first would be possible for GGYC to produce a Certificate of Documentation (COD), the modern equivalent.
Apparently, she had second thoughts about 12 hours of AC whining and wrangling, so on August 10th she held a hearing that lasted a couple of hours on the very limited subject of what is the procedure for obtaining a COD from the U.S. Coast Guard, with the option of calling additional witnesses later if necessary. It is a little hard to figure out why it was worth wasting a morning on the subject, as a summer intern probably could have found the answer on USCG website. The elephant in the courtroom is that one cannot get a COD until the vessel is “completed,” which although discussed in endless generalities, was not the subject of the hearing as to GGYC’s boat.
Nevertheless, Justice Kornreich seemed to be getting madder and madder at GGYC and ready to rule that it had been horsing around and had to produce a COD right away. When Jim Kearney, GGYC’s lawyer rested without any evidence regarding GGYC’s boat it really looked like GGYC was cooked.
After a short break for another case, the lawyers came back for argument. That was when every rule of practice and procedure went out the window. Doing it the old school New York state practice way, Kearney just got up and proceeded to testify in the form of a “proffer” (a proper proffer is only made to set forth the evidence that would have been offered had it not been excluded) based upon an affidavit by Russell Coutts, who was absent and unavailable for cross-examination. In came a boatload of hearsay evidence about what GGYC planned to do to completely revamp and rebuild its boat now that the International Sailing Federation (ISAF) Rules 49-54 were out the window. In short, while BOR 90 is the boat, as the press has reported, about the only thing that will remain after the modifications will be the BMW and Oracle logos.
Bye-bye grinders, old school winches, and most of the center hull. Hello an engine, movable (probably very high density) ballast, skin friction reduction by long chain polymer or a gas. With enough BMW Motorsport horsepower on board, the end result could be close to a multihull hovercraft. In the past, AC boats hid their keels behind skirts. USA may be wearing its skirts for the races. Wetted surface? What’s that? Drag? Ditto. Ultra light air? No problem. Why fly one hull when you can fly all three. Of course, as it is BOR 90 carries a lot of power. There is a famous saying about the Cold War/Vietnam era F-4 Phantom to the effect that its performance despite very high bulk and weight was the triumph of thrust over aerodynamics. In other words, strap two GE J79’s with a combined 36,000 lbf of thrust to a 20 ton brick with the aerodynamics of a barn and you can still hit Mach 2.2. Of course, there is no indication that BOR 90 is all that heavy.
While Justice Kornreich sustained SNG’s objection to the admission of the Coutts affidavit, she listened to Kearney repeat it, and it was now clear that the whole hearing was off the rails. If that were not chaotic enough, Kearney then raised the argument that the measurement procedure, which SNG’s counsel had represented would not be used to disqualify GGYC, subtly had been cooked in a way that would do precisely that.
Apparently based upon the 1988 New Zealand Big Boat ‘Coma off Point Loma’ measurement procedure, it substituted vessel for hull in the current ISAF procedure. While it did not make any difference in 1988, because the Big Boat carried its rudder inboard, BOR 90/USA carries its rudder(s) outboard, which would mean relocating the rudder(s) inboard, lopping a couple of yards off the boat to come in under 90 feet LWL, or a DSQ. Obviously, all of these issues are highly material regarding when GGYC’s boat will be completed, as it cannot complete its boat with the rules changing every minute.
In grand old school NY practice style, Kearney caught SNG’s lawyer completely flat footed with this ambush and he had no response other than I’ll get back to you on that. Kearney also ambushed on the obvious point that the measurement procedure specified that all ballast had to be stowed in racing position, which obviously made no sense when movable ballast would be allowed. SNG’s counsel was again obviously blindsided and his response was that ballast could not be moved but other ballast could be moved - when, of course the measurement procedure said nothing about other ballast and how can you tell them apart anyway. Obviously, this was an almost exact repeat of the infamous ‘keel yacht’ carelessness. By then SNG’s counsel should have had a pretty good idea of how George Armstrong Custer felt at the Little Big Horn when the Indians showed up.
A lawyer can be forgiven by a judge for a lot of things, but if a judge starts thinking the lawyer is playing fast and loose with representations to the Court, watch out. Justice Kornreich’s ire now was clearly focused on SNG and when SNG’s counsel said that SNG would explain the measurement procedure to GGYC, her agreement that that would be a good idea came through clinched teeth. She looked like she was considering whether judicial immunity extended to ordering the court officer to shoot a lawyer.
If all this were not weird enough, along the way SNG’s counsel conceded that even if GGYC was forced to produce a COD right away, if it modified the boat, it probably would be permitted to get an amended COD - which, of course, makes the whole thing and the entire chaotic hearing meaningless. Although probably pointless, the whole exercise was an extremely entertaining throw back to the monkey business that used to be par for the course in NY practice.
Justice Kornreich reserved decision, but it is a little hard to figure out what she can rule on, other than the requirements for a COD which, of course, can be found on the USCG website if anyone really wants to know and certainly do not need a judicial gloss. GGYC’s position is that it will produce a COD when it is ready to ship its boat to Mahmoud Ahmadinejad’s neighborhood in November after construction is completed in the U.S. Anyone’s guess regarding what will happen next on the COD front is as good as mine.
Based upon Larry Ellison’s statements at the GGYC party this week, it is pretty obvious that there is a battle royale brewing about the obviously wrong ruling on the no rules rules and dissatisfaction with the ISAF agreement, which GGYC is prevented from talking about.
Justice Kornreich was recently elected to the Supreme Court after serving as an acting Supreme Court Justice, elected to the Civil Court and appointed to Supreme Court until a slot she could run for opened up. She is obviously a rising star and headed for bigger and better things. However, she needs to take a breath and slow down. Justice Cahn had been on the bench for many years and had seen it all. He was like an old hound dog in no rush for any foolishness like fetch or even roll over. Long ago he learned not to pay much attention to lawyers and small children.
Justice Kornreich is more like a very smart and energetic terrier, not only eager to go outside and fetch, but eager to chase every squirrel and bird in sight. Until she adjusts to the fact that less judging is sometimes the best judging, the parties will have to calibrate their approach to slow things down a little and keep the litigation on the rails - if that is what they want. Otherwise, this is going to look like the starting line and top mark of a really big Opti regatta. Of course, if Jim Kearney can stay in the zone, throwing old school NY spitters, it could be more amusing than Moe, Curley, and Larry.
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Part 42 - Ain't going to be rules in this knife fight
Butch Cassidy: "No, no, not yet. Not until me and Harvey get the rules [of the proposed knife fight] straightened out."
Harvey Logan: "Rules? In a knife fight? No rules." [Butch immediately kicks Harvey in the groin]
Butch Cassidy: "Well, if there ain't going to be any rules, let's get the fight started. Someone count. 1,2,3 go."
Sundance Kid: "[quickly] 1,2,3, go." [Butch knocks Harvey out]. - Butch Cassidy and the Sundance Kid, Twentieth Century Fox Corporation, 1969.
(August 4, 2009) As I warned, everything heard at the last hearing (on July 21, 2009) was provisional pending Justice Kornreich’s ruling. As widely reported, the broad strokes remain the same - this will be a powerboat race, in which gasoline engines trim the sails and do the hiking. Indeed, just as workers with banks of TV and computer monitors in windowless rooms in Nevada launch Hellfire missiles at bad guys in Afghanistan and Pakistan, there is no reason why anyone needs to be on these boats when they race, if the engineers do their jobs properly. (More about that in a minute.) Indeed, if the software engineers get to work, there will not even be any need for anyone in the windowless rooms. After all, computers can now beat chess Grandmasters, so could sailing really be all that hard with enough teraflops of computing power?
What Justice Kornreich added in her decision that previously was not mentioned is something really new and different - no rules. You heard that right. Société Nautique De Genève (SNG) can change any rule in any way at any time up to the “start of the race.” SNG is not limited by Rule 86.1(b) as to what rules it can change. Although it might get its wrist slapped by International Sailing Federation (ISAF), it can throw out the Racing Rules of Sailing (RRS) altogether and institute something completely different at any time of its choosing.
Thus, when Golden Gate Yacht Club (GGYC) shows up with every muscle and neuron programmed to execute every match racing move instinctively, SNG can announce: “By the way, we are going to round to port, port will have right of way over starboard and windward will have right of way over leeward. You are really going to like our rules. We have been practicing them for months and think they are great - once you get used to them.” Indeed, although it might owe ISAF a few Euros, and get some grief from ISAF, SNG can send ISAF and its International Jury packing and appoint a jury of three blind mice, with no right of appeal.
Getting back to the computers in Nevada driving the boats, just a few tweaks to the outside assistance rule and we are there. While power boat proponents pooh pooh opposition to engines and claim that the difference between power and muscle is slight and an example of progress, that is only true if powered technology remains in its infancy - which may not even last through AC 33.
Given the looming constructed in the country of registry issue, an interesting issue will be whether or not BMW Motorsports can build GGYC’s engine at one of its US plants. If not, GGYC will have to go with US power. Imagine the tattoo: “BMW Oracle Racing - Powered by Harley Davidson HOG POWER,” or perhaps Pratt & Whitney or GE.
So how did a good judge go bad? The problem is not judging. It is lawyering. With a few exceptions like Southern District of New York Judge Milton Pollock who knew more about federal securities law than any securities lawyer who appeared before him - as he helpfully pointed out at every opportunity - most judges have little firsthand knowledge of the subjects they deal with. Justice Kornreich is not a sailor and she cannot be expected to figure this out without a lot more help from the litigants than she has been getting.
The only way a judge gets the information he or she needs to reach the correct result in this case is for the lawyers and sailors to work closely to make sure everything the judge needs is clearly and completely laid out in the papers. While this case turns on the legal issues framed by the Deed, applying the Deed rationally requires an understanding of how the sailing game and its rules work. Sailors have learned that through years of osmosis. Lawyers do not have a clue. While anyone in GGYC’s position obviously wants to be in court before a neutral judge, rather than before an IJ that may be subject to pressure, running too far from the RRS can leave the Court deciding what the Deed requires in a vacuum.
The task has been changed by the Commercial Division’s modernization of traditional New York Practice. Back in the day, your moving papers were little more than a carefully baited trap which the respondent, hopefully, would fall into in his answering papers. Counter arguments were never anticipated. Your real papers would be your reply papers (served by mail 5 minutes before the hearing starts), which would spring the trap and destroy the respondent. Of course, the respondent would have laid his own traps in the answering papers and would spring those traps in his surreply papers filed after the argument, to which you would respond in sur-surreply papers. There were plenty of opportunities to make your arguments in print. All of these customs, which would have been familiar to Alexander Hamilton when he practiced in late 18th Century New York County courts, were completely outside the rules.
The Commercial Division’s rules and Order to Show Cause practice are more in line with the Federal Rules. You get one shot in your opening papers and your opponent gets one shot in his answering papers, so you had better lay out your case completely in your opening papers in a way that will anticipate and deal with the answering papers. Having made the strategic decision to stick to the Deed, its strong suit, and away from the RRS and the possibility of being sent to an IJ, GGYC failed to accomplish its task of laying out the Rules so that Judge Kornreich fully comprehended them and SNG was able to drive some misconceptions about the Rules through the gap. While Jim Kearney tried hard at argument to repair the damage with an oral reply brief, it was evidently too little and too schematic, because of the time allowed, to get the job done. Thus, Justice Kornreich was left with some fundamental misunderstands regarding how this game is played and even what some of the moves have been. While fundamentally wrong on the ACVL issue, as noted below, SNG did a much more effective job of laying out its position in its papers. Thus, it prevailed on a key issue despite getting beaten up at oral argument. Once again, it was the papers that counted.
Thanks to the way this order to show cause was litigated, the first full paragraph on page 4 of the decision is a wedding cake of factual error pilled upon more factual error, as GGYC failed even to get its positions across. ISAF did not change the RRS without GGYC’s knowledge and nothing ISAF did had any effect on the boat GGYC built. The rules of ACVL are not SNG’s rules, but merely the rules that apply for local races of Lake Geneva. They have no applicability outside of Switzerland and the local rules if any that apply to AC 33 would be the local rules of the venue where it is sailed, not the venue of SNG’s clubhouse.
Among the fundamental things that got lost is that, except in events that are heavily negotiated by potential participants before an NOR is issued, like the Volvo, the NOR always precedes application for entry in the event. The NOR provides all the information to allow a sailor to decide whether to enter the event or stay away and play golf. That is the whole point of the NOR. So how should the NOR function in a DoG AC Match? The answer is that the Deed is the NOR. (It is also the class rules.) The Deed specifies when the Match will take place – 10 months after the Challenge. The Defender, which is either NYYC or a previously successful Challenger, has an annual regatta on an ocean course. That is the venue for the courses set forth in the Deed. The Defender’s rules and regulations are those of its annual regatta. The first warning is at the time set for its annual regatta. Absent mutual consent, every other detail is either set by the Deed or taken from the Defender’s annual regatta, including the SI’s. There is no other NOR, nor any need for another NOR, certainly not one created by the Defender on the eve of the event.
With the NOR properly understood as the Deed plus the Defender’s annual regatta, the Challenger can make an intelligent decision regarding whether to challenge for the Cup or stay home. The Deed gives the Defender no privilege to change the rules at will as Justice Kornreich ruled, because that would defeat the entire purpose of the Deed serving as the NOR as George Schuyler set up the default match in the Deed. The only way the Defender could change the rules at will would be if the Defender’s annual regatta preceding the challenge allowed unlimited rules changes. In that case, a rational challenger might well decide to pass on the event. Again, the purpose of an NOR would be served. Of course, a potential challenger might seek to challenge such a perversion of the Deed as a breach of fiduciary duty by the Defender/Trustee.
Thus, pursuant to the Deed/NOR, the first warning should be at 11h00 on the date set by the Deed on a DoG course set on West Cannes’ Bays (which could be a bad translation in the English language NOR), provided that course location complies with the Deed, or further offshore if necessary. As with the annual regatta, the rules would be the RRS altered only by FFVoile prescriptions to rules 60, 64.3, 68, 70.4, 78.1 and 90, because the venue is within the jurisdiction of the French Sailing Federation, rather than on Lake Geneva in Switzerland. Although sailors like the security blanket of prolix NORs stuffed with unnecessary information, nothing else would be necessary. BYOB. Based upon likely prevailing conditions on that course on that date, everyone would know what to build to best compete. Even if another venue is chosen, the same procedure would apply.
Ironically, if SNG had taken the tawdry business of venue shopping out of the mix by putting the Match on its annual regatta course, SNG would have been on much stronger ground to argue that the Match would have to wait until May to comply with the Hemispheric restriction. Conversely, SNG’s decision to venue shop to the highest most compliant bidder – which should not be permitted under the Deed – is exactly why it got stuck with a February Match.
Perhaps the strangest part of the decision is the Court’s decision to schedule 12 hours of trial time, starting on August 10, to try the issue of when it first will be possible for GGYC to provide its Certificate of Documentation, the modern equivalent of a Custom House Registry. Even if the lawyers follow the Court and never use a three syllable word like “possible” or “practical,” when a four syllable word like “practicable” will do or follow the common legal practice of never using one word like “stop,” when three words like “cease and desist” will do, it is hard to imagine how 12 hours of trial time can possible be filled without diligent adherence to the principle that legal work expands to fill available hours that a client will pay for. Normally a judge asks how long the parties want and gives them half that amount. Seldom does a court allot an extravagant amount of time on its own to what should be a very simple issue – when will GGYC’s boat be finished.
The next big fight, which, given this track record will produce the next big disaster will be in a few days regarding the venue. As previously noted, absent mutual consent, the only correct venue under the Deed/NOR is Cannes. Nothing set forth in Justice Cahn’s judgment changes that and the arguments advanced by both parties so far fundamentally misapprehend the intent of his order. Thus, we are likely to see two erroneous arguments vying for supremacy. Whatever emerges will almost certainly be for the wrong reasons.
Those who regularly practiced before Justice Cahn know that he is impressed by few and deploys a sardonic sense of humor with a deadly deadpan delivery. Common was the lawyer who happily left the courtroom with visions of sugar plums dancing in his or her head without noticing the shiv deftly inserted between his or her ribs.
When Justice Cahn ordered that “the location of the match shall be in Valencia, Spain or any other location selected by SNG, provided SNG notify GGYC in writing not less than six months in advance of the date set for the first challenge match race of the location it has selected for the challenge races,” he was responding to SNG’s argument that the event had to be in Valencia, because it was contractually bound to Valencia - a silly argument GGYC ignored and probably forgot about. Seen in that context, Justice Cahn was sticking it to SNG - if you are contractually bound to Valencia (or anywhere else), do what you have to do to comply with your contract, i.e., quit horsing around, read the next paragraph, and “engage in the mutual consent process.”
Seen in the actual context, Justice Cahn did not purport to change the Deed requirements. Indeed, absent a formal cy pres proceeding on notice to all potentially affected parties, he could not. Nor was he carving Valencia out as a single exception to the general requirements of the Deed. He was simply turning up the heat, perhaps too subtly, to try to generate some mutual consent.
Obviously, he was unsuccessful and we will see George Schuyler’s aristocratic vision of “friendly competition between foreign countries,” updated to Butch and Harvey’s no rules knife fight in a corner of the desert bearing a striking resemblance to Hole in the Wall, the gang’s desolate hideout. Now, as the powerboat proponents recently have been saying, that is what you call “progress.” It certainly will be the most exciting regatta ever sailed under Appendix E. Of course, do not be surprised if the awards ceremony for AC 33 is held in Albany, New York, in the shadow of the statue of Phillip Schuyler, George Schuyler’s ancestor.
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Part 41 - Heads I win - Tails you lose
“You are going to have to learn, . . ., the black arts, particularly
counterintelligence - the uses of information, disinformation, and how their use is ultimately... power.” - Philip Allen (William Hurt) to Edward Wilson (Matt Damon) in The Good Shepherd, Universal Pictures 2006.
"Please don't throw me in the briar patch." Br’er Rabbit to Br’er Fox. Joel Chandler Harris, Uncle Remus, His Songs and His Sayings: The Folk-Lore of the Old Plantation, 1881.
SPOILER ALERT – UNTIL THE COURT RULES EVERYTHING YOU READ IS PROVISIONAL AND THE FINAL RULING COULD BE COMPLETELY DIFFERENT.
(July 21, 2009) Société Nautique De Genève (SNG) seemingly won a major victory today before Justice Shirley Werner Kornreich in the Commercial Division of the New York State Supreme Court when Justice Kornreich told Gate Yacht Club (GGYC) - to absolutely no knowledgeable lawyer’s surprise - that there was no basis to hold SNG in contempt of court. To paraphrase Plutarch regarding King Pyrrhus, a few more such victories and SNG will be undone.
SNG essentially has been maintaining that it has the right to change the America’s Cup Match rules however and whenever it chooses and either drop ISAF Racing Rules of Sailing (RRS) numbers 49 through 54 (including stored power and movable ballast) or enforce them as it decided. SNG also maintained that it could decide measurement rules and procedures as it chose. Thus GGYC’s design team perpetually would be off balance.
What became clear in today’s hearing is that, slightly more than six months before the first race of the Match, one of the world’s largest software manufacturers just does not care what the design rules are, as long as it knows what they are. That can only be true if a couple of things are assumed.
First of all, whatever the 90 x 90 trimaran GGYC has been trialing is called (if anything), it is not “USA,” the Challenger, and never was intended to be. It is probably a development platform, training machine and trial horse. Besides, every sailor knows that changing a boat’s name is bad luck. The second is that GGYC probably is not the slightest bit surprised by the powered winches or possible movable ballast on Alinghi 5. All of that amateurish cloak and dagger nonsense about taking pictures of SNG’s tent was probably a diversion for some of the real thing - which no one will ever find out about. The third is that GGYC will be able to launch a boat taking full advantage of the suspension of Rules 49-54 or a new boat complying with those rules with plenty of time for development, by picking up where the present boat leaves off. The fourth is that GGYC will do whatever it takes.
Thus, GGYC’s strategy simply was to force SNG to put its rules cards on the table. First up was Jim Kearney, GGYC’s lawyer, who had a tough hand to play and played it well. Having no opportunity for reply papers, Kearney had to respond to SNG’s lengthy papers orally - always a difficult task. His task was made much easier by Justice Kornreich, who was completely on top of the case, having mastered the rules and the facts. Every sailor should hope for a protest committee chair as on the ball about the RRS and sailing issues as Justice Kornreich. Thus, Kearney could cut right to the important issues without have having to educate a confused judge who does not know what a winch is. Kearney had it together, laid out his case and answered Justice Kornreich’s questions smoothly. Altogether a tough, but well negotiated passage.
When Barry Ostrager took the podium for SNG, it could not have been more different. Ostrager was hit with a wall of green water from the bench as soon as he stuck his head out of the companionway. While Ostrager, who has been around the track a few times, probably was not that surprised, it must have been a major culture shock for his client, demonstrating just how different the US legal system is from anything in Continental Europe.
Right off the line Justice Kornreich wanted to know how SNG’s position squared with “friendly” competition and good faith. While Justice Kornreich made it clear that the Deed governs and SNG will be accorded all of its Defender rights under the Deed, she is not going to tolerate any screwing around with the rules or measurement process. As Ostrager battled to even start making his case, she held him on the ropes and pummeled him for a commitment that Rules 49-54 would be out of the picture and that GGYC would not be DSQ’d by some measurement gambit.
Ostrager was obviously blindsided about measurement (probably a little unfairly, but hey, this is Noo Yawk), was unfamiliar with what measurement means in sailing (beyond taking out a tape measure) and did not seem to get what Justice Kornreich was beating him up about. Naturally, he did not want to concede something important without knowing what it was. So he took a licking and kept on ticking until Justice Kornreich stopped wailing on him. He probably should have embraced the canvas sooner. Altogether, a very tough passage hunkered down under storm sails.
Based upon the transcript, it looks like Justice Kornreich did not stop until she was satisfied that she had enough - a firm enough commitment from Ostrager that, if SNG tries anything funny about Rules 49-54 or measurement, she can hang him and his client higher than Haman. Thus, while GGYC did not get “heads I win” -- Rules 49-54 are enforced and SNG’s boat has to go back to the shed -- it did get “tails you lose,” -- it can launch a boat completely free from Rules 49-54. Although only time will tell, while GGYC did not get exactly what it asked for, it looks like SNG got rolled.
Unless, after reading the transcript, Justice Kornreich, who reserved decision, changes her mind, The AC stands to roar past the Little AC and everything else on the water to produce the most exciting around the buoys sailboats ever to float. A real throwback to Captain Nat Herreshoff’s “dangerous,” “freak,” Reliance, the greatest AC boat.
In that regard, while all the emphasis has been on Rule 51 (Movable Ballast) and Rule 52 (Manual Power), the real frontier is Rule 53 (Skin Friction). After all, as long as you have an engine, why not put it to good use? Imagine a 90 x 90 multihull with scarcely more total drag than an Opti and capable of near iceboat speeds. While it may not yet be feasible, would that be a hoot – or what? Imagine being the port tacker closing with a starboard tacker at over 100 MPH. White knuckle time?
As to SNG’s demand for a Custom House Registry, the answer from the bench was a firm fugedaboudit. GGYC can race any 90 x 90 confection it chooses and can build as many 90 x 90 confections as it pleases. The SNG/ISAF deal will be submitted to the Court for in camera review and may be disclosed by the Court to GGYC if the Court deems it appropriate and GGYC agrees to keep it confidential. The desultory mediation will pointlessly continue to churn on for the simple reason that no one wants to be implicated in killing it.
Is the litigation over? What do you think? Next up we have the venue fight. The sailing money seems to be on someplace in the Persian Gulf with predictably flat water and little wind - sort of like Lake Geneva where Alinghi 5 is trialing. It is a little hard to imagine how any democratic government could successfully negotiate in secret without any leaks, so the possibilities are probably limited.
At the rate AC 33 is going, we are probably going to see on-the-water judging brought to a new level - Justice Kornreich out on the water with her courtroom staff handing down decisions and rulings as needed. At the rate her sailing education is progressing, she may even wind up able to handle the conventional on the water judging as well – true one-stop justice.
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Part 40 - Rules, rules... what are the rules?
“There you go again.” Ronald Reagan.
(July 15, 2009) In case anyone is bored with sailing and other typically pleasant summertime activities, help is on the way. Societe Nautique De Geneve (SNG) and Golden Gate Yacht Club (GGYC) are back in court trying to scratch each other’s eyes out. Justice Shirley Werner Kornreich in the Commercial Division of the Supreme Court of New York, New York County now has an additional reason to look forward to her likely August vacation. Obviously, the mediation ordered by Justice Kornreich has not resulted in an outbreak of concord and good feeling.
So, what are they fighting about now? SNG has built its boat with a snowmobile engine to run the winches and possibly (although at least one person at SNG has denied such a present capability) to pump movable water ballast. Well, what about Rule 52 which requires manual power for control adjustments and Rule 51 which bars movable ballast? It appears SNG maintains that, under Rule 86.1(b), SNG, as the Organizing Authority, is entitled to change Rules 49 through 54 in the Sailing Instructions - whenever and however it chooses. Amazingly (at least to me), as long as it sets forth the proposed changes in the Notice of Race (NOR) as required by Appendix J1.2(1), that is ordinarily its right, as long as doing so does not violate a class rule, which is prohibited by Rule 87.
Thus, it appears that, for example, under the Racing Rule of Sailing (RRS), if XYC Yacht Club is running the Club 420 Nationals, it can change Rule 49 to allow hiking racks, Rule 50 to allow multiple headsails and poles to be set, Rule 51 to allow movable water ballast, Rule 52 to allow an engine to run all this hardware, Rule 53 to allow polymer hull coating release, Rule 54 to allow off center headsail attachment, and any other Rule it chooses, as long as the class rules are silent on the issue (probably because no one ever thought to prohibit such idiocy) and it announces the changes in the NOR. Of course, the resulting boat would have no relationship to any Club 420 ever sailed and the Championship would be a travesty. Hell of a rule, that Rule 86.1(b). What ISAF’s Rules Committee was thinking when it created this regime is a little hard to figure out.
What is GGYC’s response? It maintains that the rules that apply under the Deed of Gift are SNG’s Rules at the time GGYC’s challenge was lodged. Backing that up is a venerable list of precedents from George Schuyler’s day forward. In that regard, it turns out that the NOR for SNG’s 2007 Annual Regatta did not allow modification of Rules 49 through 54.
Under Rule 86.1(c), Rules 49 through 54, and Rule 42 as well, may be altered by class rules, but arguably the class rules for the America’s Cup default match are the Deed, which may only be altered by the New York State Supreme Court under its cy pres power. In addition, the Deed also requires that the yachts be propelled by sail alone, which raises the question of whether stored power propels the yacht in violation of that provision - yet another stimulus package for litigators.
Interestingly, unlike the NOR for SNG’s 2007 Annual Regatta, the NOR for SNG’s 2009 Annual Regatta announces an unlimited right to alter Rules 49 through 54 in any manner SNG chooses, at any time, despite the fact that the classes involved were highly traditional classes like 6 meters and 8 meters. Thus, SNG reserved the right to change all of those rules in mid regatta. However, the SNG 2009 NOR does not comply with Appendix J, as the proposed changes are not specified in the NOR.
Thus, GGYC argues that SNG’s proposed rules are not the rules specified in the Deed, they violate the Deed and must be struck down because they prejudice GGYC. Obviously, for many reasons, including some coming up, GGYC wants to be in Court litigating the Deed, and not before an International Jury protesting under the RRS.
If the allegations of rules and engine power skullduggery were not enough, there is more. According to GGYC, ISAF negotiated a deal with SNG to run the February Match without any input from GGYC, agreed to a €150,000 payment from SNG to ISAF - and, at SNG’s request, refuses to show GGYC the agreement. Not only that - if that were not ample evidence, in light of the notoriety of this bitter controversy, that ISAF is tone deaf and ethically challenged - at SNG’s request, ISAF refuses to appoint an International Jury. (That is a little strange, as SNG’s usual argument is that controversies should go to the IJ, rather than Court, a tough argument to make when SNG is preventing the formation of an IJ.) GGYC wants the Court to order SNG to produce the agreement. An agreement by both Defender and Challenger and a payment to ISAF would be customary. It is the unilateral process that is the problem, thereby calling into question ISAF’s impartiality and fitness to fulfill its customary role in this Match. Clearly, ISAF feels no need to emulate Caesar’s wife.
The hearing to hold SNG in contempt (yes, again) is set for Tuesday, July 21, 2009 and Justice Kornreich will probably rule from the bench. SNG does not have to file its papers until noon the day before the hearing, so other than what we read in the SNG-friendly press, (hi Marian!) we will have to await those papers to read the counter arguments.
That said, SNG’s strategy is baffling, as it constantly sets itself up for GGYC to drag it into court on GGYC’s terms, with GGYC holding the initiative - Lucky Jack Aubrey’s “weather gauge.” If Justice Kornreich rules against SNG next week, SNG must radically modify its boat. If Justice Kornreich defers a ruling until after the Match has been sailed, SNG is handing GGYC a put option. If GGYC wins, it wins. If GGYC loses, it goes back to Court with a decent chance to knock SNG out for violating the Deed. Perhaps SNG is betting that it can do whatever it pleases and that the Court will be loath to strip it of a victory on the water. Perhaps it is right. Perhaps it is not. After all, SNG’s legal stratagems have a somewhat checkered record so far.
NEWS FLASH -- As this is going to press, I have received SNG’s cross motion to compel GGYC to provide a Custom House Registry within 14 days or be disqualified. SNG argues that GGYC challenged in a boat, not a boat concept, and that, after a launching and a re-launching, GGYC is not complying with the Court’s May Order to produce the CHR as soon as possible. GGYC’s response will likely be that, until it knows what the construction rules are, it does not know what its final completed boat will be. Interestingly, SNG attaches Justice Kornreich’s May 26, 2009 Order referring the dispute to the Alternative Dispute Resolution Program, which also stayed the action during the ADR process, which may or may not have been terminated. By signing the opposing orders to show cause bringing the motions on, the stay is probably over, but it could be a show stopper for the next episode of Steel Cage Promotions, the International Fighting Association and the New York State Supreme Court, Commercial Division’s next “Billionaires’ America’s Cup Cage Fight” production. Stay tuned.
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Part 39 - Mark Your Calendar: February 2010
“Duh.” - Anon.
(May 14, 2009) There are two constants in the America’s Cup litigation. One is that Société Nautique De Genève (SNG) and Golden Gate Yacht Club (GGYC) cannot agree on anything. The second is that both win every legal engagement. Today they appeared before Justice Shirley Werner Kornreich in the Commercial Division of the Supreme Court of New York, New York County and both claimed victory.
Justice Kornreich was extremely well prepared and thinks, talks, and rules quickly. She does not suffer fools gladly and wants answers to her questions, not recapitulations of briefed arguments she has read and understands. She knows what the law is, acts confidently and decisively, and cuts lawyers off when she has heard enough.
Because she speaks quickly, there is some confusion as to exactly what she “directed.” Bloomberg has direct quotes that do not match anyone else’s recollection. The proof of the pudding will be the transcript. Given that Justice Kornreich acknowledged that she is bound by the Judgment, she cannot direct anything inconsistent with the Judgment - just as statements at a skippers meeting cannot change the Race Instructions or Notice of Race.
The bottom line is that, barring mutual consent (yea right), the Match will be held in early February 2010, as provided in the Judgment, in Valencia or some other presumably deed compliant venue if SNG so desires. GGYC will have to make a “good faith” effort to get its Certificate of Documentation (“CoD”), the modern version the Custom House registry (“CHR”) required by the Deed, in as soon as possible, and GGYC’s boat will have to conform to its Notice of Challenge and the Deed. In other words, Justice Kornreich wasted no time directing the obvious.
One wrinkle she added was a direction that the parties select a mediator and quickly begin mediation. Justice Kornreich provided a list of mediators headed by former Justice Cahn. Although Justice Cahn was once voted Seahorse Magazine Sailor of the Month, the all lawyer, mostly former judge list does not include any obvious sailors. The parties can probably go off list if they mutually choose. As the parties are down to the sailing issues - as limited by the Deed - they may need to go off list if they are going to get anything done. If they cannot agree, Justice Kornreich will probably pick a mediator.
The major confusion regards whether SNG is free to choose any Northern Hemisphere Match venue other than Valencia, absent consent. Barry Ostrager repeatedly went out of his way to state that SNG is committed to a Northern Hemisphere Match, but made no commitment to Valencia. Apparently, SNG believes that another Northern Hemisphere venue will be greatly to its advantage. Time will tell.
GGYC took some heat on the CoD/CHR issue, as Justice Kornreich was openly skeptical regarding the bona fides of GGYC’s boat disassembly, which prevents completion of the CoD/CHR. There probably is some gamesmanship involved, but the fact remains that these are unique boats at or beyond the bleeding edge of current technology. It would be extraordinary if sea trials did not reveal the possibility of significant improvement. After all, even the humble Laser, intended to be the most simplified design possible, needed its centers of effort and resistance modified to achieve a balance helm. Not being made aware of the practical issues, the end result was that Justice Kornreich characterized GGYC as too “slick.” Ouch. Nevertheless, her ruling was not influenced by her skeptical perception of GGYC on this issue.
Similarly, SNG tried to get some mileage out of the Cheesegate spy kerfuffle and the vast queue of challengers with $10 million plus, 90-foot multihulls ready to rumble in a challenger series. Neither issue had legs.
GGYC is obviously pleased with the February Match date, which confirmed what it already had in the Judgment and may put time pressure on SNG, and is studiously silent on the Northern Hemisphere issue. SNG is happy with Justice Kornreich’s handling of the CoD/CHR, although it did not get what it asked for and it is not apparent what it got that it did not already have. Apparently it believes it has great latitude regarding the Match venue. Whether Justice Kornreich and/or GGYC agree with that remains to be seen. Naturally, the air is thick with intimations of more being here than meets the eye. Whether GGYC somehow has been disadvantageously locked into its design remains to be seen, just as any advantage from a particular Northern Hemisphere Match venue remains to be seen. Either could be a fundamental advantage or pure spin and head fakery.
It also remains to be seen what remains to be mediated or if mediation will produce any benefit. The Match date is set, unless SNG gives something to get a change from GGYC. The venue issue is a little murky, but not necessarily a problem. In its April 23 letter, SNG stated it intended to exercise its Deed rights regarding the rules and regulations governing the Match. While it would be intelligent to work the sailing details of the Match out, intelligence is not required for the Match to take place. After all, requiring intelligence of sailors might be the end of sailing as we know it.
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Part 38 - Wedgies and Gun Jumping
“Don’t get mad, get even.” - John Fitzgerald Kennedy.
“Stuff happens and it’s untidy,. . . .” - Donald Rumsfeld.
(May 12, 2009) For many years I have known a Star sailor who is not a good loser. In his prime, if he lost a club race he was out of sorts for the rest of the week. Nevertheless he has always been a gracious loser – one of the marks of a real gentleman sportsman. Did anyone expect behavior like that from Société Nautique De Genève (SNG) after its 6-0 drubbing in the New York Court of Appeals? Fugedaboudit. Instead, SNG has devoted all of its efforts to giving Golden Gate Yacht Club (GGYC) a wedgie. Unfortunately, GGYC may be forgetting JFK’s famous advice and rising to the bait.
If anyone has forgotten, the Court of Appeals remanded the case to the Commercial Division, which then entered judgment that provides that the Match be held 10 months hence (February 7 or 8 depending on which side is doing the calculating), that it be held in Valencia or wherever SNG chooses, and that SNG provide GGYC 6 months’ notice (August 7 or 8) of the venue. The order is about as clear as an order can get. While SNG claims that its argument that no match may be held before May was never considered because of the “procedural posture” of the appeals, the short answer is that it was considered by Justice Cahn and the reason it was not considered by the Appellate Division or the Court of Appeals is that SNG dropped the ball and did not press the issue on appeal or cross appeal. Even if the judgment is totally wrong (it is not), that is the judgment and SNG has to suck it up and comply. SNG can tell it to the chaplain.
In their approach to the May 14, 2009 hearing, not only is SNG’s argument frivolous (in the sense of the legal term of art), it is also disrespectful of the Court, contemptuous of the Court’s authority and contumacious. However, at the very end of a pretty random brief, SNG finally reached the one response that is obvious before one even opens the brief - SNG is not yet in contempt of court, because it has yet to violate a provision of the judgment. The first requirement it has to comply with will not ripen until August 7 or 8 when it must specify the venue. Until then, it can flip off the Court and otherwise behave like a South Park character with impunity.
GGYC has jumped the gun. Its remedy is to hold its fire until August 8 and, if it does not receive notification of the venue for a February 7 or 8 Match, immediately move by order to show cause for a contempt award entering a Match default. SNG may get a short period to purge its default, but would be playing with fire. What the present contempt motion may accomplish is to put SNG on notice that it better comply with the judgment, which would make non-compliance more like playing with a nuclear weapon than playing with fire.
SNG’s suggestion that the Court provide it with an advisory opinion that a February Match in Valencia will comply with the Deed is pretty farfetched. Courts do not give legal advice regarding how to comply with a judgment, especially in a completely incorrect procedural context. That is what SNG is paying its lawyers to do. Despite what their brief says, their privileged advice has to be to err on the side of caution when complying with the judgment. No lawyer in his or her right mind will counsel possible contempt. Indeed, under the crime/fraud exception, such advice may not even be privileged.
SNG’s cross motion to disqualify GGYC is also frivolous. As GGYC cogently lays out, it is not permitted to apply for a Certificate of Documentation (“CoD”), the modern version the Custom House registry required by the Deed, until its boat is completed and that the practice has been that “as soon as possible” has usually been much closer to the match and has even been fewer than two weeks before the match in the case of Shamrock II in 1901. In this case, GGYC’s boat is not completed and may even be disassembled for revision.
With virtually nothing relevant to say, SNG lards its brief with a real howler. As everyone surely knows, both teams have been following each other around with telephoto lenses hoping to catch photos of topless boats to sell to the supermarket tabloids. That sort of thing is so pedestrian that the auto press is usually filled with pictures of disguised test models of coming sports cars and the supermarket checkout lines are filled with pictures of overweight celebrities in embarrassing situations. There is even a mini industry of photographers sitting in lawn chairs outside the perimeter of the Air Force’s top secret skunk works in the Nevada desert attempting to take pictures of top secret Air Force/CIA aircraft.
Given that the Chinese were able to steal many terabytes of top secret Joint Strike Force flight data from a high security Department of Defense server, it would be shocking to learn that both teams are not engaging in far more sophisticated industrial espionage than taking pictures. They probably do everything including surreptitious colonoscopies on each other.
In any event, SNG followed an Oracle sailor around filming him with a video camera as he pursued his spying. The plot was to use pictures he took, a rangefinder (like sailors, golfers and hunters use) and a GPS to figure out how big SNG’s assembly structure is. That is supposed to provide some insight into how big the boat is. Of course, all it might really tell you is how many people are coming to the barbecue. Indeed, high resolution commercial satellite photos of the SNG structure are readily available at moderate cost on the web, so the whole thing is probably a decoy. Although SNG has been telling the press the Oracle perp was in a “non-public area,” (whatever that means - perhaps the neighbor’s property), Lucien Masmejan’s affidavit does not swear that he was trespassing on SNG property.
In any event, SNG swore out some sort of Swiss criminal complaint (stop me if I start blathering about Swiss law, about which I am ignorant) and the Swiss prosecutors issued a rogatory to the French flics, who conducted what appears in the original French transcript to be little more than an interview of the alleged perp. Although the certified translation SNG provides subtly hypes the terminology, there is no indication the subject was “detained” as SNG claims in any custodial sense, as a US cop would understand the term. The alleged perp basically said (undoubtedly on advice of counsel): "Yeah, I did it. So what? They've been doing the same thing to us."
In the US, taking pictures of something out in the open could not possibly be criminal. It probably could not be tortious either, unless you did something like use a plane to take pictures of someone sunbathing topless behind a fence, but that is because you are invading a natural person's privacy, rather than that of an industrial operation. US law is generally that, if you want to protect a trade secret, you have to keep it secret. Allowing someone to observe your secret as you make a movie of him observing the secret does not cut it. As SNG does not allege a burglary or anything more serious than failure to keep off the grass, the whole incident sounds like complete piffle. Without any evidence that a real live crime was committed, a US judge will likely pay zero attention. Naturally, the “press,” in its infinite laziness, is mindlessly recycling SNG’s version of the story without reading or thinking about the supporting - or not so supporting - documents.
About the only thing really worth noting is that it is nice to see Jim Kearney’s and Aaron Siri’s distinctive prose in the GGYC papers again. After the freakish loss in the Appellate Division, Jim honorably fell on his sword. While that did not seem fair at the time, as the bizarre result in the Appellate Division was not his fault, stepping aside was highly professional - and very unusual in today’s world in which no one ever takes responsibility. It turned out to be a brilliant move, as it allowed his partner Maureen Mahoney to do such a stellar job in the Court of Appeals. Thus, there is evidence of justice in the universe.
While the May 14th hearing will probably amount to little, what we are seeing does not augur well. There is a great deal that needs to be worked out before two 40+ kt boats with this much mass get around a course without anyone getting killed. Wedgies are not going to get that accomplished.
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Part 37 - BFD – and I do not mean Black Flag Disqualification
“— Not so fast, Louis. Nobody’s going to be arrested. Not for while yet.” Richard Blaine (Humphrey Bogart), Casablanca, Warner Bros. Pictures, 1942.
(May 4, 2009) Not only are Société Nautique De Genève (SNG) and Golden Gate Yacht Club (GGYC) back in the Commercial Division of the Supreme Court of the State of New York with a hearing set for May 14, 2009, but they now have dueling motions. The whole thing is beginning to look a lot like trench warfare. To add to GGYC’s contempt motion over the match date, we now have SNG’s motion to disqualify GGYC as Challenger of Record for want of a Custom House registry, or in the alternative, to require a Custom House registry within 30 days.
There is a lot less here than meets the eye. Nobody will be held in contempt and nobody will be disqualified. The Court will likely rule that, barring agreement (and world peace), the date set in the Judgment (February 2010) really, really, really is the date and GGYC will have to provide a Custom House registry within some reasonable time period. BFD – and I do not mean Black Flag Disqualification. Justice Cahn was presented with all of the arguments regarding the dates and the hemispheres and obviously concluded that his Order (now a Judgment) complied with the Deed. Figure it out.
About the only thing of much interest that will come out of this is some insight into why GGYC is holding back its Custom House registry. The Organized Yacht Club and Annual Regatta/Ocean Course clauses seem intended to narrow the universe of challengers to clubs run by gentlemen sportsmen (now gentle sportswomen as well) who would not think of challenging without a challenging yacht in the offing, which would explain why the Deed does not require that the challenging yacht be in being or that the Custom House registry accompany the Challenge. The subsequently added dimension disclosure requirement is more important in any event.
GGYC did not become the Challenger of Record (COR) until the Court of Appeals handed down its decision (on April 2, 2009) and remanded the case to Supreme Court. Thus, despite the fact that it has a boat, the delay from that date does not seem very extreme. Perhaps GGYC just wants to keep its options open or perhaps, now that it is finally the COR, it intends to build another boat or boats before it makes the final decision regarding what it will race. Perhaps we will find out, but do not count on it.
Worth noting is that there seems to be an interest in a corner of the sailing press in adding fuel to the fire. Thus, it has been trumpeted that “a leading legal source,” unwilling to show his or her face and be quoted by name, apparently thinks that the Court “’will get pretty stroppy with [SNG].’” I have been practicing in New York courts for a long time. I have never heard the word “stroppy” from any New York or other American lawyer. “A leading legal source” with a clue about practice in the New York Supreme Court would know that such a contempt motion is just a procedural way to get a matter about an order before the Court and that it takes vastly more before a Commercial Division justice gets perturbed with a lawyer - let alone perturbed enough for someone to be “heavily fined,” much less imprisoned.
At least these anonymous “sources” confessed that they “were unsure what the limit [for a fine] might be in the USA,” before launching into the lack of limits in the British justice system and jurisdiction to imprison. Please. No one will be fined, much less imprisoned. A NY statute requires a warning for due process reasons on the face of any Order to Show Cause seeking contempt. That does not make such punishment at all likely. Whatever may happen where Helen Mirren rules, we have been doing things our own way since 1783.
One thing not mentioned in John Burnham’s comprehensive report on the America’s Cup Hall of Fame Induction Ceremony and dinner was the feeling of good fellowship and camaraderie demonstrated by the AC sailors of the Corinthian Era, despite the wet blanket of Keith Mills’ uncalled for sermonette/wood shedding. John Longley’s rollicking off the cuff recounting of his experiences kept everyone in stitches and demonstrated how much fun he had in the day when the object of the Cup was not the next paycheck or some commercial bonanza. It would be interesting to know how many are having fun this time around and will look back upon AC 33 and its participants with such evident affection.
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Part 36 - The camaraderie and "sportsmanship” should be overwhelming
"[Ugarte (Peter Lorre):] You despise me, don't you? [Rick (Humphrey Bogart):] If I gave you any thought I probably would." Warner Bros. Pictures, 1942.
(April 28, 2009) In what should be a surprise only to ‘Buttheads who have spent the last two years on Mars, Société Nautique De Genève (SNG) and Golden Gate Yacht Club (GGYC) are back in the Commercial Division of the Supreme Court of the State of New York with a hearing set for May 14, 2009 to determine when the 33rd America's Cup DoG match will be sailed.
Full disclosure. I will be Oracle’s guest at the America’s Cup Hall of Fame Dinner at NYYC on April 30. I was concerned that accepting Oracle’s offer would have the appearance of impropriety, so I checked with the Columbia University School of Journalism and was referred to the Society of Professional Journalists, which opined that full disclosure would cure any question of conflict of interest, which is why I am bringing this out. By the way, I informed Alinghi that, had it offered, I would have accepted its offer – or offers from both teams. In any event, if, after all that I have written any ‘Butthead thinks I can be bought, make me an offer and I will consider it.
Justice Cahn’s May 12, 2008 Order, which was entered as a Judgment on April 7, 2009 after the case came back down from the Court of Appeals on April 2, 2009, is pretty clear that the DoG match has to be 10 months after April 7, 2009 (February 2010) in Valencia or anywhere else (in whatever hemisphere) Alinghi wants on 6 months’ notice. Taking the position that GGYC mentioned the Northern Hemisphere when setting the July 2007 date (which is long past) in its Challenge and the fact that both clubs are Northern Hemisphere clubs, SNG announced the DoG match would be in May 2010 -- period.
The next step was for GGYC to ask Justice Kornreich, who now has the case, as Justice Cahn reached mandatory retirement age at the end of 2008, to sign an order that SNG show cause on May 14 why it should not be held in contempt of the Judgment. Of course the monetary penalty for a contempt is meaningless with these folks, so the real object is to get an order reinforcing the February 2010 dates. GGYC hints that if SNG keeps it up, GGYC will ask for an order forfeiting the Cup.
Not only does GGYC have the better of the argument, but it makes a pretty convincing argument that SNG has already made all of its arguments to Justice Cahn, lost, did not appeal on that point and cannot have another bite of the apple. GGYC seems prepared to sail in Valencia in February on consent or in the southern hemisphere in February at Alinghi’s election. Based upon its April 23, 2009 letter to GGYC, it appears that SNG, despite its whupping in the Court of Appeals, intends to take a hard line on this and just about every other potential issue, so expect to see plenty more litigation before the boats dial up -- and probably long after as well.
If this continues, the only solution may be for the Court to appoint a Referee (like a Federal Master [or adult supervision]) to deal with the parties on a day to day expedited basis, to sort out what promises to be a fractious ongoing process. As just one example, as GGYC just became the Challenger of Record, it may decide to build more boats – with its custom house certificate to abide its decision regarding which one to sail. Expect to hear a lot more about custom house certificates and a lot of other issues. Ultimately, we are likely to see stronger language than requests for orders holding parties in contempt. So much for “sportsmanship” and settling the matter on the water.
As an overlay to the legal gamesmanship, the ever gullible sailing press seems intent on serving as a megaphone for every possible head fake. Although Alinghi has yet to show anything that floats, everyone has by now heard of the 115 foot two masted multihull that shoots laser beams and thunderbolts from its stem and fire balls from its stern. The sailing journalists will almost certainly soon report that this vessel’s only teething issue is dealing with the sonic boom it creates when it breaks the sound barrier in anything more than 3 knots of true wind. Of course, it must all be true -- someone whispered it into someone’s ear.
In any event, I am looking forward to the April 30 dinner – the camaraderie and “sportsmanship” should be overwhelming. Scuttlebutt editor Craig Leweck has agreed to supply me with body armor to wear under my tux in case the cross fire and ricochets get out of hand.
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Part 35 - Court of Appeals straightens it all out
"You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time." Abraham Lincoln.
(April 2, 2009) There is a famous photograph of Joe DiMaggio’s swing in which the Yankee Clipper demonstrates seemingly effortless power. Today, the New York Court of Appeals demonstrated the same effortless power as it made crushing Société Nautique De Genève (SNG) look as easy as DiMaggio or Ruth crushing one deep into the stands. Just another day’s work applying the KISS principle on Eagle Street.
Indeed, the unanimous decision, which only cites a single case other than Mercury Bay and no statutes, is so straightforward and accessible that there is little to explain. Having means having, not going to have, wanting to have, thinking about having, or day dreaming about having. Annual means you have done it at least once and plan to do it every year thereafter. In other words, the Deed means what it says and what it says is what everyone has to live with. All that remains is sweeping up SNG’s flaming wreckage.
The interesting issues are where we go from here and some of the subtle things the court wrote to dissuade a SNG reappearance in court. (Irony challenged ‘Buttheads on a jihad against lawyers, the legal system, and traditional notions of fair play should jump ship here, before I cause them to hit the send button.) The court reversed the Appellate Division and reinstated now retired Justice Cahn’s “orders” – all of them. A nice belated Valentine for Justice Cahn.
Thus, we are exactly where we were on May 12, 2008, when Justice Cahn ruled that the match be ten months later in Valencia or any other venue chosen by SNG upon six months prior notice to Golden Gate Yacht Club (GGYC). The only logical result is that the 10 month period re-commenced today. Unless the parties can reach agreement, that puts a DoG match in the Southern Hemisphere – or back in court, where SNG should not want to go. If they do go back, the case is now assigned to Justice Shirley Werner Kornreich, a recent addition to the Commercial Division bench.
The court’s Do Not Come Back notice to SNG is subtle, but unmistakable. Although GGYC failed to cross-appeal and it was unnecessary to the decision, the court noted that Justice Cahn had dismissed GGYC’s breach of fiduciary duty claim in a way that implicitly questioned whether that claim should have been dismissed. The court further quoted the provision of the Deed, not stressed by either party, that requires that the trustee/defender “covenants and agrees . . . that it will faithfully and fully see” that the Deed is complied with. The obvious implication is that the court doubts that SNG has fulfilled its duty as trustee.
In addition, the court used unusually blunt language like “wrong” and “illogical” in rejecting SNG’s arguments. If none of that registered on SNG, the final coda (hat tip to John Rousmaniere for reminding me about codas) beating SNG over the head with its own repeated argument that the Cup should be decided on the water, not in court, makes the message unmistakable. Do not let the door hit you in the butt as you leave. Do not come back.
Where do we go from here? One opinion floated a while back in the yachty press is that a GGYC victory would mean nothing because GGYC is obligated to accept the majority decisions of the Mutual Consent Challengers who have signed on to SNG’s protocol. That is utter nonsense. At this point, GGYC has no duty to the Mutual Consent Challengers at all (most of whom acted cravenly), unless it voluntarily chooses to act on their behalf. GGYC is free to disregard them. If GGYC has learned anything from its serially unsuccessful efforts to be loved by all, it should – if negotiation is possible – negotiate the most advantageous match protocol it can in the most advantageous boat. Naturally, the parties can negotiate for scaled up TP 52 virtual one designs (Club 420’s on steroids), but it is hard to see how that adds luster to what should be a challenger/designer driven event. Cheap may have transitory appeal, but it is not the America’s Cup.
If it wishes to, it can try to negotiate a provision allowing a Substitute Challenger of Record, if it chooses to organize a challenger selection series. Unless GGYC wants to get dry gulched, the match protocol should not include any semblance of arbitration. Arbitration has the same root as arbitrary. It is only useful for disputes you do not care about. All sailing decisions should be made by an International Jury and all decisions regarding the Deed should go back to court.
If that is accomplished – a major and unlikely if – it should call Bruno Trouble and work out a revived Louis Vuitton Cup for challengers only. The winner becomes the substitute Challenger of Record. As Maureen Mahoney realized, the challenger selection series is not part of the Cup at all and should be kept separate and for the benefit (competitive and financial) of the challengers. The Defender has enough built in advantages. Of course, everyone is free to hold Acts or Act Outs or whatever, with or without the Defender, as they chose.
Of course, it is just as likely that the parties wind up right back in court fighting about the date and venue, looking forward to an absurd DoG match in the Southern Ocean, or some other equally bone headed assault on the Cup’s legacy.
What did SNG get out of this? Other than nothing, it did manage to delay the Cup close to two years, thereby preventing sponsorship deals from being firmed up well before the world financial meltdown and insuring that there will be far less funding for everyone, including SNG. It managed to create vast collateral damage in the sailing industry. Of course, there will be some who blame GGYC as well. After all it did sue to vindicate its rights under the Deed and the law, rather than agreeing to be screwed over. Worse yet, it won.
In the end, New York’s courts acquitted themselves well. Justice Cahn was dead on the mark. The Appellate Division, First Department screwed up big time. The Court of Appeals straightened it all out. Had the parties been more anxious to move the case along, it could have been completed in half the time. GGYC’s lawyers ultimately brought home the bacon – they won cleanly and convincingly. A real walk off home run. Barry Ostrager had a great run for SNG, including putting one over on the Appellate Division and giving GGYC a significant scare, before crashing and burning. He had no chance, as the case was lost the minute Club Nautico Español de Vela (CNEV), which could never pass the smell test, was concocted. His mistake was in flying too high and close to the Court of Appeals sun. SNG should have settled after its Appellate Division win.
It is possible that this series will end short of three dozen reports – but I am not giving away the laptop quite yet.
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Part 34 - Where were you on February 10th?
"It is high. It is far. It is [?]" Apologies to John Sterling.
(February 11, 2009) By now many ‘Buttheads have had the opportunity to watch oral argument before the State of New York, Court of Appeals in the Cup case and have formed their own opinions. I heard the argument live (on Feb. 10, 2009) and have watched the webcast twice to nail down my impressions. While it is easy to fall into the trap of evaluating the argument based upon which side you are rooting for, that is not my purpose here. These are my observations -- as a lawyer who has argued plenty of appeals and heard plenty of appeals argued -- regarding the legal quality of what I heard and the reactions and questions of the judges. Nobody can be completely objective, but here are my style points.
Maureen Mahoney (for Golden Gate Yacht Club) turned in a stellar performance. She was not perfect and passed up some opportunities, but her sustained lawyering was as good as it gets. Certainly, she far surpassed David Boies and Ted Olsen in Bush v. Gore. The prize in that case was the presidency of the United States. On her feet, she far surpassed her briefs, which were very competent, but not exceptional. Clearly, in preparation for oral argument she developed the essential insight of a dispositive argument, which Judge Smith took and ran with, which may decide the case once Judge Smith has worked it out. More about that later.
The Court was loaded for bear. The Court’s Public Information Officer was prepared for requests from TV and other press and the Court’s website advertised that the case would be webcast live and in reruns for anyone to watch. The Judges had done their homework, even beyond the briefs, and the bench was hot. A hot bench is one in which the judges want answers to their concerns and do not care what the lawyers want to tell them – that is in the briefs.
Mahoney started by anchoring in the Court of Appeals’ Mercury Bay decision and then jumped straight into the Deed, where she did everything possible to stay. As I previously warned, one can never tell where a judge is coming from with a question or questions and any indication is only a snapshot of where the judge’s head is at that moment. That can change 180 degrees after argument. Nevertheless, while the questions Mahoney faced were tough, they seemed basically friendly in the sense of “I’m having trouble with this issue, help me with it.” Mahoney was ever the helpful advocate, unwaveringly giving the questioning judge precisely what that judge wanted. She avoided platitudes or statements of law and always responded with the language of the Deed and the import of that language.
Judge Smith is a former New York City large law firm litigator and taught at Columbia Law School, usually rated as one of the country’s top five law schools. One of the perks of teaching in law school used to be the opportunity to torture law students with the Socratic method, which entails a series of ever more confusing questions without correct answers until the victim hits upon the correct principle, reaches an absurd and untenable dead end, or simply collapses in a heap. Without letting on what is the correct answer – the class has to figure it out -- the professor moves on to torture another unlucky student. Unfortunately, law students will not put up with that much intellectual stimulation anymore and just will not play the game.
Appellate lawyers have to play the game – that is what they are getting paid for – so they are sitting ducks. Judge Smith got the direct answers he wanted from Mahoney and seemed reasonably satisfied. Indeed, they seemed to be engaging in a dialog in which she helped him develop his thinking. Just to let the lawyers know that he had done his homework and was not going to be fooled, Judge Smith mentioned “Captain Cuthbert,” the Canadian challenger who sparked the last amendment. To the best of my recollection, Captain Cuthbert is not mentioned in the briefs.
The other persistent questioner was Judge Graffeo, herself a former NY Solicitor General (the State’s appellate advocate), who was clearly prepared to apply the Deed wherever it leads and suggested that if anyone does not like where the Deed leads them, they will have to ask the New York Courts to cy pres the Deed, which Judge Smith also picked up. Judge Ciparick asked for help on determining the intent of the grantor and got it, to the point that when Mahoney mentioned three key documents and then got diverted after talking about one, Judge Ciparick asked her for the other two at the end of her argument. Judge Read asked for clarification on a few points and got it. Judge Pigott raised the “keel yacht” issue and who is supposed to decide such issues and was led right back to the Deed and New York’s courts. Judge Jones was silent and stayed that way for the entire case.
Barry Ostrager’s approach was quite different and somewhat out of sync with the Court. His speech patterns are slower than Mahoney’s to start with, and he tended toward recitations of the law and platitudes about deciding the Cup on the water. Judge Pigott asked a somewhat unfocussed hypothetical about a NY Yankees yacht club and got a lengthy, very general answer that was eventually interrupted by Judge Smith who wanted to know if that “was a yes” to Judge Pigott’s question. Ostrager raised the false issue of the “seaworthiness” of the Canadian challengers, which was a mistake, as any judge with a dictionary can figure out based upon the history of the suddenly familiar Captain Cuthbert that seaworthiness has nothing to do with it. One of the Judges asked skeptically whether the issue was experience or seaworthiness.
When pressed, Ostrager stated that the safeguard of a fair competition is the defender’s fiduciary duty – which Ostrager overstated – and stated that there is no breach of fiduciary duty claim in this case. That is true, but only because Golden Gate Yacht Club (GGYC) chose to abandon a perfectly valid breach of fiduciary duty claim. Ostrager’s argument seemed to energize Judge Smith, who then launched down the path of a potentially fixed event with a compliant patsy challenger. With a 1000 watt twinkle in his eye and a fair amount of sarcasm, he said that there was no such claim in this case and he assumed everything was on the up and up, but what was there to prevent such a fixed competition if the Court agreed with Société Nautique De Genève (SNG)? While his questions may have been entirely innocent, they highlight the danger the internet poses to lawyers who skate too close to the edge. While the lawyers are limited to the record, the judges and their clerks are free to surf the internet to check up on what they hear. If any such extracurricular web surfing undermines your credibility, you will never hear about it, but the next time you shake your head it is going to fall off.
By now Judge Smith was treating Ostrager like a thick skulled student who just did not get it and Judge Graffeo was asking openly skeptical questions about whether or not the challenger could simply abdicate its responsibilities. Judge Pigott threw Ostrager a lifeline with a softball question about whether or not the multi-challenger event would be aborted if GGYC wins, which Ostrager grabbed with far too much gusto. He launched into an ad hominem attack on Larry Ellison, which was totally not what the other judges had been interested in. They wanted to know what the Deed mandates and, as Judge Graffeo had suggested, if anybody does not like that, they can ask the courts to cy pres the Deed. Ad hominem attacks on the adverse party are just not done at this level. The Court of Appeals decides the law of New York. It does not want to hear parties trashing each other.
In what may have been another set up, Judge Ciparick asked if GGYC was free to enter the multi-challenger event. Ostrager answered that he “believe[d] there would be an accommodation,” which sounded weasely, or worse if anyone looks at the documents on the parties’ websites. Ostrager ended with a speech that did not even stop after a curt “Thank you” from Judge Presiding Ciparick, which is the command to sit down.
David Rivkin was next up for CNEV and proceeded to commit every possible appellate advocacy faux pas. After establishing that no one thinks there is any ambiguity in the Deed and no reason for the Court of Appeals to avoid deciding the case, he then was maneuvered into arguing that GGYC is trying to add words to the Deed, but that the Court should essentially amend the Deed to require that the Challenger of Record only have a bona fide intention to have an annual regatta on the sea at some time in the future, which would be a major de facto amendment of the Deed. The argument is bizarre and provoked skeptical questioning. That resulted in Rivkin talking over the judges’ questions.
The one iron clad rule of appellate advocacy learned by every baby appellate lawyer is that as soon as a judge starts interrupting you with a question, you immediate shut up and look like you are thankful for the interruption. You do not finish your sentence. You do not finish your word. You do not finish your syllable. To make matters exponentially worse, he only talked over the female judges, not the men. Welcome to the 12th century. Guys – do not try that at home.
At 34:53 he was way over time and asked for another minute. At 37:13 he was still talking over the judges’ questions and Judge Ciparick, who he was talking over at the time, acidly told him he had been out of time for a while. Finally, at 37:48 Judge Ciparick had had more than enough and issued a curt “Thank you.” Rivkin had been totally offensive and was so clueless that he did not even seem to realize it.
Mahoney commenced her reserved five minute rebuttal with the nuclear weapon of appellate advocacy. She raised Judge Pigott’s question of the multi-challenger event and, referring to Ostrager’s claim as “untrue,” directed the Court to GGYC’s original challenge in which GGYC stated that the intent of its challenge was to hold a multi-challenger event just like AC 32. She was flat out calling Ostrager a liar, and pointing the Court to the record on appeal to prove it. Successfully executed slam-dunk for Mahoney.
Somewhere between briefing and Tuesday, perhaps as a result of New York Yacht Club’s brief, Mahoney developed the insight that the time for qualification for the challenge was at the time the Challenge was issued by the Challenger of Record and, if the Challenger of Record was beaten in the selection series, at the time the new Challenger of Record is substituted. Thus, the qualifications of the so called “mutual consent challengers” is immaterial unless a “mutual consent challenger” wins the selection series and is substituted as Challenger of Record. Judge Smith grabbed that argument and ran with it.
What Mahoney missed, probably because it does not jump out of the record on appeal, but must be in there somewhere, is that the so called “mutual consent challengers” have never been participating in the America’s Cup at all. Since the challenger series began in 1970 and continuing through the Louis Vuitton Cup, the Defender has merely agreed that whoever wins the challenger selection series is substituted as Challenger of Record, but until that substitution takes place, all the wannabee challengers have been engaged in extracurricular activity which is not part of the America’s Cup. Thus, only upon substitution did the qualifications of the substituted Challenger of Record have any relevance and for the unsuccessful challengers, their qualifications or lack of qualifications never became relevant. Perhaps another couple of days’ preparation – or some help from the sailors -- would have led all the way to the historical validation of her insight, but it is entirely possible that the industrious Judge Smith’s research into the history of the competition will get him all the way there. It is all a matter of public record of which the Court may take judicial notice.
Aside from the history of the selection series, the only other thing Mahoney could have done would have been to point out that the claim that an accommodation would allow GGYC to participate in AC 33 was blatantly outside the record on appeal, but that if the Court was going to consider it, it should note the December 15, 2008 deadline for participation and the condition that GGYC drop this appeal in order to participate. In conjunction with the multi-challenger slam-dunk, that, to indulge my penchant for mixing metaphors, would have been a walk-off home run comparable to Bill Mazerowski’s solo shot in the bottom of the 9th inning of the seventh game of the 1960 World Series. Perhaps she was not aware of that extra-record history or simply decided to quit while she was ahead.
In any event Mahoney had an excellent outing. The ultimate decision rests with the Court and all of my observations may be irrelevant to the outcome they eventually reach, which may belie all of my opinions. Indeed, thanks to the web, every ‘Butthead can compare my observations with his or her own, as well those of their friends, relatives and pets. The one thing I am certain of is that the Court will issue a thoughtful majority opinion (and perhaps additional opinions) which will be the law of New York and govern the Cup.
An archived webcast of the entire proceeding at the State of New York, Court of Appeals from February 10, 2009 is expected to remain available for several months. Click here to view.
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Part 33 - Time to make some popcorn
"If it doesn't matter who wins or loses, then why do they keep score?" Vincent Thomas Lombardi.
"Winning isn't everything--but wanting to win is." Id.
(February 8, 2009) Scuttlebutt Internet TV highlights for Tuesday, February 10, 2009 at 2:00 pm EST, State of New York, Court of Appeals, Web Channel http://www.nycourts.gov/ctapps (and follow links). Featuring Golden Gate Yacht Club vs. Société Nautique De Genève – Webcast. (Summer reruns available the next day.) Parental guidance is strongly advised. May contain pointless showboating, misleading questions, beating up on the side the judge actually favors, softball questions, judges lost without their law clerks, stoney silence and other misleading behavior. Everything must be taken with a bucket of salt. Do not try this at home.
Thanks to the web, ‘Buttheads around the world can judge the lawyers for GGYC and SNG and the Judges of the Court of Appeals. In litigation, as in every other facet of life, some parties are willing to do whatever it takes to win and some parties are not. Watch it play out yourself.
As any candid lawyer will tell you, oral argument can be very misleading, because cases are almost invariably decided upon the arguments set forth in the briefs, after the judges, with the help of their law clerks, have had a chance to really dig into an appeal. Oral argument can show what is troubling a judge or where the judge is going, or even give a lawyer an opportunity to fix up an unanticipated problem, but those occasions are relatively rare.
This argument has some interesting wrinkles. Appellate Division, First Department Presiding Justice Jonathan Lippman was chosen by Governor Paterson to become Chief Judge, after Chief Judge Judith Kaye retired at the end of the year, but the New York State Dysfunctional Senate has yet to confirm him (a foregone conclusion) and he will not be sitting. Thus, there will only be six judges and Associate Judge Carmen B. Ciparick will be the Judge Presiding. ‘Buttheads may recall that, as a Supreme Court Justice, Judge Ciparick decided Mercury Bay and was reversed by the Appellate Division, First Department, and the Court of Appeals. In addition, although Judge Ciparick was reportedly one of the few Democrats who wanted to be Chief Judge, instead of going to Washington like everyone else, she was not recommended.
What happens if they split 3-3? My sources in Albany who regularly appear before the Court of Appeals tell me that they will call for a do over once Chief Judge Lippman has been confirmed. The deadline to confirm is February 13, 2009, but there is no penalty if the New York State Dysfunctional Senate misses the deadline and the New York State Dysfunctional Legislature invariably misses the April 1 deadline for a budget by a mile. So, do not hold your breath. Although the Court can pull in an Appellate Division Justice to break the tie, they are unlikely to do so, as that would make the Appellate Division Justice the decider and the choice of the Appellate Division Justice the real decider. No one can remember an affirmance upon an evenly divided court, as regularly happens in the U.S. Supreme Court when a Justice recuses. So, if they announce a do over, they are probably evenly divided.
My sources cannot figure out how CNEV had the gall/chutzpah/cojones (NY is multilingual) to file a brief when it had not filed a brief in the Appellate Division and is not a Respondent, but it did and got away with it without a peep from anyone, so SNG and CNEV get 20 minutes of argument, while GGYC only gets 15. To make matters worse, GGYC will probably divide its time to allow reply time, so it will go something like 10 to 12 minutes for GGYC to make its case and answer questions, then 20 minutes for SNG/CNEV (split 13 for SNG and 7 for CNEV to make CNEV look real) to muddy the waters as much as possible, and then 5 to 3 minutes for GGYC to respond to a blizzard of major stretches from SNG and CNEV. Good luck. That is not really where you want to be if you are GGYC.
The buzz in Albany surrounds the appearance of U.S. Supreme Court bar superstar Maureen Mahoney on behalf of GGYC. As an avatar of Rehnquist/Roberts/Federalist Society movement conservatism (her second in command clerked for Justice Scalia) she can count on four solid conservative votes on her side when she argues in the U.S. Supreme Court. While a majority of the Court of Appeals are temperamentally conservative Republicans, they are not movement conservative ideologues and not as predictable. Against her will be Barry Ostrager, New York street fighter, for SNG. Watching the Court of Appeals react to their styles will be worth the price of admission.
I am planning to attend the argument in person, so I probably will not be able to file a report until the next day. When I do, ‘Buttheads can judge me as well.
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Part 32 - Meet the amici
“Are we there yet?” Anon.
Star Wars Episode II: Attack of the Clones, (20th Century Fox 2002).
(January 8, 2009) In Part 31, I wrote that we have just about reached the end of the line in the pending America’s Cup litigation. Not quite. Meet the amici – and are they all over the lot. Few amici add much to determination of an appeal. In every Supreme Court case involving business, the environment, labor or consumers, the usual suspects (the US Chamber of Commerce, the AFL-CIO, the Sierra Club, etc.) file briefs predicting the end of the world if the wrong side wins. Some may actually get read. Occasionally, important amici are filed by retired military officers, judges or other groups with real experience regarding an issue which provides additional information useful to the court. Few of the amici in this case have anything useful to say.
While the Court of Appeals’ Mercury Bay decision restricts the inquiry to the language of the four corners of the Deed, all of the parties, and the amici in particular, seek to tip the scale with information outside the Deed. The most important amicus filed is from the New York Yacht Club (NYYC). NYYC’s brief was submitted by Carter Ledyard & Milburn, an old line white shoe firm, with Vincent Monte-Sano, a Carter Ledyard partner and NYYC sailor second chairing. It is very professional. Even though all the parties in this litigation are sailors, and America’s Cup sailors to boot, the NYYC brief is the first brief that reads like it was written by lawyers who have actually held a tiller, and really understand the history of the Cup. The input of highly knowledgeable NYYC members is obvious.
As the original and only long term trustee of the Deed, as well as the only trustee intimately involved with the settlor, George Schuyler, a leading member of the NYYC, its brief will likely carry weight with the Court. NYYC pretty much sticks to the Organized Yacht Club and “having” issues, because, having given up the breach of fiduciary duty issue, that is all Golden Gate Yacht Club (GGYC) has left it to work with. Its main contribution is the argument that, based upon its experience as trustee and as the originator of the multi-challenger format, the Challenger of Record must be an established Organized Yacht Club so that it will be in a position to adequately represent the interests of all challengers and not sell them out to the Defender. That, of course, is really the abandoned breach of fiduciary claim that, in its Reply Brief, GGYC also sought to shoehorn into the Organized Yacht Club issue, only argued more cogently and based upon independent experience. Unfortunately, it fits into the Organized Yacht Club issue about as well as Cinderella’s older sister’s foot fit in the glass slipper but, to mix metaphors, that is the Procrustean bed NYYC must lie in.
San Diego Yacht Club, Dennis Connor’s home club, and trustee after Dennis won (with Oracle’s Tom Ehman as part of his organization), also filed an amicus, as did Bill Koch, another former winner. Neither adds much other than to show a united front. Koch’s brief spends a lot of space tooting his own horn. ‘Buttheads looking for source material for a marathon Jeopardy or Trivial Pursuit game should take a look. (For 500 points, who has the largest collection of America’s Cup memorabilia in the world? – just what the Court of Appeals always wanted to know.) Everyone else can pass.
Societe Nautique de Geneve (SNG) has already gotten most of its posse to file amici (I may have forgotten one or two – for good reason) and the claque was filled out with a bizarre brief from Team French Spirit and Team Shosholoza. An amicus which is little more than a vituperative ad hominem tirade against another amicus has to be a new one that only sailors could think of. According to the French and South Africans, NYYC is the font of all evil – sort of an Axis of Evil on West 44th Street. While NYYC’s AC stewardship has come in for plenty of criticism over the years and few would fit the Club for wings and a halo, the brief is way over the top. Moreover, it cites no authority for its charges and simply goes after NYYC in argument as if it were relying upon incontestable fact. About the only thing missing is a claim that NYYC is leading a conspiracy of les Anglais against the world. Pretty unprofessional stuff.
Perhaps finally (but who knows, deadlines do not seem to mean much to these folks) Team Origin/Royal Thames filed a late amicus, based upon facts sworn to by a New York attorney with no personal knowledge of what he was swearing to, giving the lamest excuse for a late filing ever and claiming that the Protocol is hunky dory and that GGYC did not know what it really said. Of course they do not mention that GGYC was not allowed to see the Protocol unless it dropped its lawsuit.
One of the unmentioned issues is that some of the amici have received loans and other financial help from the parties. Disclosure to the Court of Appeals may not be required, but non-disclosure is pretty sleazy.
Exactly why SNG wants the record filled with poor quality briefs from friendly amici is a little hard to understand, other than to show that it has a lot of friends on its side. If one were a really suspicious sort of person, one might hypothesize that SNG, which would like the Court of Appeals to leave the case where the Appellate Division left it, would like the amici to convince the Court of Appeals that sailors are a bunch of nasty, childish jerks in toy sailor uniforms who should be left to squabble amongst themselves – a verdict of a pox on all their houses. That would suit SNG perfectly. I have been told that the video tape of the Mercury Bay oral argument in the Court of Appeals caught Chief Judge Wachler (who later flamed out in a tawdry personal melodrama that sent him to a psychiatric prison) muttering as the courtroom cleared, "Now we can get to real law." An outright win would be nice for SNG, but disinterest would be good enough.
Unless GGYC wins outright on the “having” issue, or GGYC wins an outright affirmance, the prospects for sailing in the near future are not very good. If the Court of Appeals reverses the Appellate Division on the Organized Yacht Club issue, it is unlikely that it will hold that, as a matter of law, CNEV is not an Organized Yacht Club. It would send the case back to the Commercial Division to be decided after discovery and a trial, as Justice Cahn originally ruled would be necessary on this issue and GGYC argued in the Appellate Division. The Court of Appeals conceivably could decide that “having” is ambiguous, but that the Appellate Division got it wrong and it has to go back to the Commercial Division to be decided upon all the extrinsic evidence. In either or both cases, the result would be subject to another round of appeals. The breach of fiduciary duty issue is gone for good.
All of the parties in this case have accepted the premise that the Cup is the top of the sailing heap and that was what George Schuyler intended. Arguably, neither is true and the result has been a collective distortion of the Deed. Baseball has one World Series, US football has one Super Bowl and international football/US soccer has one World Cup. Each game is the same everywhere and uses the same equipment. There is a clear hierarchy from youth leagues to the very top. Sailing is a much more heterodox sport. There are dozens of International Classes, each with an ISAF recognized World Championship. There is the “Little America’s Cup,” the Olympics, the outright speed record contenders, the ‘round the world record holder, the Vende Globe, the Volvo and a host of other premier disciplines, none of which culminate in the America’s Cup and which use completely different equipment in different events, whose only similarity is a sail and water.
George Schuyler created an event that fit his conception of a sailing match, sponsored by real sportsmen and sailed in real yachts. He never thought it was for everyone. Everyone has lost sight of the singularity of George Schuyler’s event, as governed by the Deed. What this dispute is really about is that no one seems to want George Schuyler’s event and, in varying degrees, want to hijack the trophy for something “better” – meaning more commercial. This litigation is not about George Schuyler’s America’s Cup, as set forth in the Deed. It is about a different event. If they do not want to sail George Schuyler’s event, there is nothing wrong with that. They should move on, sail whatever they want, call it whatever they want and retire the Cup.
Justice Cahn reached mandatory retirement at year end and now sits as a Judicial Hearing Officer (JHO), which means he only can hear cases if all parties consent. If anyone does not consent, it goes to another Justice, who gets to learn all about the America’s Cup from scratch. Something to look forward to. Of course, the way the parties are handling this case, Justice Cahn may not be the last Justice who reaches retirement age while this dispute is pending.
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Part 31 - So who is going to win? Damned if I know.
“Sir! I have a plan!” Dr. Strangelove (Peter Sellers), Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb, Columbia Pictures 1964.
“I’m not a crook.” Richard M. Nixon.
(December 9, 2008) We have just about reached the end of the line in the pending America’s Cup litigation. Oral argument is scheduled for February 10, 2009 and Golden Gate Yacht Club (GGYC) has filed its Reply Brief. There is little new in that Reply Brief. GGYC has a plan and is sticking to it. Although GGYC decries Société Nautique Genève (SNG) “irrelevant and intemperate attacks on GGYC’s motivations,” its defense lacks zing and fails to counter-attack, even where SNG has put itself in position for an easy slam dunk. GGYC does devote two full single spaced bulleted pages to an outside the record (“dehors the record” in legalese) factual response to SNG’s outside the record (and completely irrelevant and trivial) claim that GGYC derailed AC 33, which can only be a reflection of a sore point for GGYC management.
The plan GGYC is sticking to is the grammar of the Deed of Gift, which at this point has been beaten to death. Anyone who has not heard of the “having for its annual regatta an ocean water course on the sea, or on an arm of the sea, . . .” clause is not going to hear any more about it here. The only interesting new authority cited is the text of the Twelfth Amendment to the U.S. Constitution, which gives the presidency to the “[p]erson having the greatest number of votes” in the Electoral College, rather than the person planning to have the greatest number of votes. Not a bad example of nineteenth century usage amongst educated writers.
The plan also includes heavy emphasis on the “organized Yacht Club” dispute, which GGYC also lost in the Appellate Division. Perhaps because it dropped the ball by failing to cross-appeal in the Appellate Division the dismissal by Justice Cahn of its breach of fiduciary duty claim, that is the only way GGYC can attack SNG for self dealing by inventing CNEV to trade venue in Valencia for a Protocol which would guaranty an SNG victory. Self dealing, of course, is a pretty good basis for a breach of fiduciary duty claim and a lot better than the weak breach of fiduciary duty claim GGYC made when it unsuccessfully was trying to romance Valencia.
The theory is that an “organized Yacht Club” is resistant to a defender’s blandishments and would never agree to a one sided protocol or field a weak challenger that would waste the defender’s time and resources. The problem is that there is no evidence that is true, nor is there any logical basis for the assertion. Recently, Royal New Zealand Yacht Squadron, a Royal, Blue Ensign and former Cup holder, demonstrated that would agree to just about anything if the price is right. The two half baked Canadian challenges that spurred the last Schuyler “on the sea” amendment to the Deed were from the Royal Canadian Yacht Club (founded in 1852) and the Bay of Quinte Yacht Club (founded in 1876). Both were organized yacht clubs with RCYC almost as old as New York Yacht Club (founded in 1844). Thus, it seems that even a Royal Warrant club destined to fly the Blue Ensign of the Admiralty was willing to serve as a burgee of convenience for a pretty weak challenger. Indeed, since the NYYC’s last defender selection amongst competing syndicates of NYYC members seeking to defend on behalf of the club, virtually every participating club has been a burgee of convenience. Thus, there is no logical reason to believe an organized yacht club is any more responsible than a paper club. Notably, when Schuyler sought to rebuff the Canadians, he did not tinker with the organized yacht club requirement, but, rather, knocked them out with the “arm of the sea” amendment.
Secondly, the argument that the organized Yacht Club requirement is independent of the “incorporated, patented or licensed” clause which is set off by commas immediately following is not the greatest argument. It is perfectly natural to read the following clause as being the indicia of being organized. As a practical matter, it is hard to understand how a club could be “incorporated, patented or licensed” without being organized in some fashion. GGYC’s argument would have a lot more force if Schuyler had written “Any organized Yacht Club, but not a B.S. paper Yacht Club, of a foreign country . . .” He did not.
That’s about it. While oral argument can be high theater, most judges will tell you that it seldom changes judicial minds. The arguments made in the briefs are the ones that count. So who is going to win? Damned if I know. Although interpretation of trust instruments is usually pretty predictable, this case is sui generis and the Court of Appeals could be just as unpredictable as was the Appellate Division.
To complicate the matter, we do not even know who the new Chief Judge will be or, if one of the Associate Judges is elevated, who will be the new Associate Judge. Although New York’s judiciary is well respected, the rest of the state government is universally referred to with the qualifying adjective “dysfunctional,” as in The New York State Dysfunctional Legislature. Until a few decades ago the Judges of the Court of Appeals, like all other judges in New York, were elected based upon back room deals by party leaders. That process was upended by Jacob Fuchsberg, an extremely successful and wealthy personal injury lawyer, with previously undisclosed scholarly legal skills, who spent enough money to campaign on TV and win a seat on the Court. The party bosses could not let that happen again. Democracy would ruin everything. Perhaps fearing that allowing the Governor to appoint judges would allow New York to perfect a system like the present one in Illinois for selling offices, the result was a constitutional amendment which set up the Commission on Judicial Nominations to propose a list of seven individuals, from which the Governor “shall” chose.
So far so good. As some may know our Governor is “Accidental Governor” David Paterson, who succeeded Governor Client #9 when he chose to resign to pursue a full time career publicly mortifying his wife and daughters. (David Paterson is accidental, because we could only have a fairly normal person with a sense of humor as Governor by accident.) When the Commission, advised by its counsel, my law school classmate Stephen Younger, announced its list, Governor Paterson quickly announced that he “couldn’t help but notice” that the list of replacements for Chief Judge Judith Kaye was comprised of six white men and one black man – not a single woman, Hispanic, Asian or any of the other far more than 28 flavors of New Yorkers. Somehow, even our legally and functionally blind Governor had “noticed” what no one else was able to see. (I told you he had a sense of humor.) Governor Paterson has called upon another of my law school classmates, Attorney General Andrew Cuomo, to find a way out of this mess, but so far no solution has been proposed. My class is doing a really sterling job. Bottom line – nobody knows who will be the seventh Judge, making the outlook that much murkier.
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Part 30 - Will conservative tactics lose this race?
“Don’t bring a knife to a gunfight.” Anon.
“F***’n A, we just got a penalty.” Paul Cayard.
(November 18, 2008) Anyone who has ever fouled another boat with a sloppily set sail or sheet, missed a shift or a layline, blown a tack, missed a hiking strap and gone MOB, sailed over a spinnaker, or seen an adversary do any of those things, knows that there are plenty of ways to blow a race. Sometimes playing it too safe is the way to lose. The same is true in litigation and Golden Gate Yacht Club (GGYC) may be set to blow this one. It is not that Societe Nautique de Geneve (SNG) is doing anything particularly brilliant, but by treating the edge as if it does not exist, SNG seems to be doing a terrific job of forcing GGYC errors in the medal round of the America’s Cup litigation in the New York Court of Appeals.
Since my last report, SNG has filed its brief, Club Nautico Español de Vela (CNEV) has filed a brief it may not be entitled to file, and some amicus briefs have also been filed. (Team New Zealand has also dismissed its two actions against Ernesto Bertarelli and his posse, which were sure losers in any event.) Only GGYC’s reply brief remains to be filed before oral argument early next year.
As I last reported, GGYC opening brief is a pretty dry dissection of the Deed – exactly the sort of brief that often works in the U.S. Supreme Court if you represent the kind of client favored by the ideological majority of the Court. One of the primary rules of Supreme Court practice, and of success in large firm practice in general, is risk aversion. One can always come up with plenty of reasons to play it safe, but take the slightest chance as a junior lawyer and have it blow up, and your large firm career is over. By the time large firm lawyers have senior responsibility, they no longer even remember how to take chances – even necessary chances. (Think of Anna Tunnicliffe taking a calculated, yet nevertheless major chance which paid off in gold at Qingdao.)
Playing it safe and losing can always be rationalized and is the only way to go – especially when the client is not providing steady business anyway. One chance large firm litigators are almost always loath to take is anticipating and dealing with the other side’s arguments. The mantra is always “if they raise it we will deal with it on reply.” That may be GGYC’s undoing in this case.
Before SNG filed its brief, Reale Yacht Club Canottieri Savoia (RYCCS) and Mascalzone Latino (Vincenzo Onorato) filed an amici brief on GGYC’s side. Amicus briefs can be very helpful, because amici are traditionally free to argue all sorts of evidence that is not in the record and, therefore, may not be raised by the parties. They are also helpful to show the court that somebody besides the parties cares about the result. While not a masterpiece of legal writing, RYCCS’s brief does help GGYC (at the expense of GGYC’s new legal team) by pointing out a lot of helpful evidence in the record.
This is really odd for several reasons. Usually an amicus does not dig into the record. That is the job of the parties. More importantly, the mark of a U.S. Supreme Court advocate is absolute mastery of the record. If the advocate handled the case below, that is not that difficult, but top flight U.S. Supreme Court advocates, like John Roberts before he became Chief Justice of the United States, are renowned for picking up a record they have never seen and learning it cold. RYCCS’s brief makes GGYC’s current team’s grip on the record look shaky by comparison.
In contrast to GGYC’s rather starchy brief, Barry Ostrager takes chances like a former presidential candidate at the craps table (albeit with a better track record). His brief for SNG comes on like a swarm of hornets with anger management issues stinging everything in sight. Central to SNG’s whirlwind attack (picked up by its allied amici) is that GGYC’s Larry Ellison is a loser who is trying to steal the Cup by scheming to short circuit the multiple challenger format in place since 1970 and litigate his way into a solo shot at the Cup in “monstrous [sic]” multihulls.
This is an attack line Ostrager tried out at argument in the Appellate Division, which may have had some effect there. Anyone paying attention to that argument would have seen it coming. Although it was predictable that SNG would take this approach, GGYC did not deal with it in its brief. While GGYC can deal with it in its reply brief, GGYC is now on the defensive and looks like it ducked a key issue. Never a good place to be.
Had GGYC dealt with the argument head on in its brief, GGYC would not be on the defensive, because the argument goes well beyond a “Pinocchio” and merits a “Pants on Fire.” A multichallenger event can only happen with the consent of the Defender, because the Defender has to accept the substitution of the winning challenger if it is not the Challenger of Record. Without such consent, a multichallenger event is a non-starter. Likewise, a monster multihull match race is the default if the Defender will not agree to something reasonable. Thus, by failing to anticipate and press this argument in its brief, GGYC put itself on the defensive and lost the high ground. Perhaps GGYC made a decision to set a clever trap and then pounce, but it had better be pretty clever. Ducking the issue, along with the abandonment of its breach of fiduciary duty claim in the Appellate Division, has resulted in GGYC painting itself into a very small technical/grammatical corner.
SNG’s brief contains a swarm of arguments that play pretty fast and loose with the facts and the law. They also go far beyond the record below, i.e., the bald statement that Oracle’s multihull “would be dangerous to sail.” (BTW, Reliance, arguably the greatest of all AC yachts, was deemed dangerous by many.) For example, SNG complains that Justice Cahn did not send the matter to ISAF for determination by an International Jury. Leaving aside the fact that that is not the way ISAF or International Juries work, the fact remains that SNG never took the proper steps to do that. SNG knew how to remove TNZ’s action to federal court under the Federal Arbitration Act to enforce arbitration. If there was any ground for arbitration in this case, it would have done the same thing. Indeed, when asked by Judge Pauley in the TNZ action whether this case affected his, SNG candidly admitted it did not because GGYC did not agree to arbitration. All of that was fair game for GGYC in its brief, rather than absorbing the first punch and hoping for a comeback.
The same sort of thing runs throughout the brief. For example, an important Court of Appeals case is selectively quoted, so that it seems to support the exact opposite of what the Court actually ruled. According to SNG, the Deed amendments in response to the Canadian Challenges of the 19th century were motivated by concern that the Canadian Challengers were “unseaworthy,” which is either a misuse of “unseaworthy” or a new one. SNG implies that Schuyler’s comment reported in the press that the defender “has a right to know what kind of vessel we have to meet,” was made after the last amendment to the Deed. Actually it was the explanation for the current dimension requirements of the Deed, which Schuyler presumably thought sufficient for the quoted purpose.
While this sort of thing would almost certainly not work in the U.S. Supreme Court, practice in the Court of Appeals is a little looser and SNG may be able to get away with it to considerable effect. The real beauty of SNG’s brief (after GGYC ducked the foreseeable attacks) is that GGYC only has a limited amount of space to respond. It often takes twice as much space to refute a specious argument as it takes to make it. Whether GGYC can regain the high ground remains to be seen.
In addition to SNG, CNEV filed a brief. That is really odd, as CNEV never appealed to the Appellate Division and did not participate in SNG’s appeal. Thus, while there may be some explanation, it would appear that CNEV, which is not an appellant or respondent in the Court of Appeals, has no right to file a brief. SNG’s sudden decision to crash the party after declining to RSVP in the Appellate Division does, however, raise an interesting issue that GGYC never raised in the Appellate Division and has probably waived.
SNG has the right to defend under the Deed, but it has no right to a particular challenger. Indeed, GGYC probably should have sued CNEV in its complaint, but GGYC did not – CNEV intervened as a defendant. (Usually parties do not volunteer to be sued, but CNEV did.) Had GGYC not abandoned its breach of fiduciary duty claim against SNG, SNG would certainly have standing to defend its performance of its fiduciary duties. With that claim out of the case, CNEV is the only party aggrieved by Justice Cahn’s decision – and arguably the only party with standing to appeal.
By not appealing to the Appellate Division, CNEV waived its right to appeal. At that point GGYC may actually have won the case for good and, if it realized it, could have avoided SNG’s appeal to the Appellate Division and this Appeal. Perhaps there is a reason why GGYC did not raise the issue in the Appellate Division, as there may be a reason for its strange decision to waive the breach of fiduciary duty claim, but it is not apparent. Certainly, SNG’s lame claim on oral argument in the Appellate Division, when one of the Justices raised the issue of CNEV’s non-appeal, that SNG and CNEV were “united in interest,” does not cut it. That may work when a parent, guardian or relative sues on behalf of minor or incompetent, but not in commercial litigation. SNG cannot be CNEV’s “Next Friend.”
In addition to the resurrected CNEV’s brief, which, although less frenetic than SNG’s brief, is in many ways more cogent but sometimes way off the mark, SNG’s posse of poseurs also filed amicus briefs. One brief from French Spirit (Marc Pajot), Argo Challenge (who?), Green Comm Challenge (+39 Challenge), Team Shosholoza and Aye Challenge (who?) picks up the claim that GGYC is trying to exclude them, when of course, it is SNG that is excluding them if GGYC wins. The brief is about as good as the prospect that any of those teams will be significant factor in the Cup.
Despite GGYC’s unrelenting charm offensive to reassure Valencia that Valencia has nothing to worry about if GGYC wins, Valencia knows which side its bread is buttered on and filed an amicus brief in favor of SNG. It is a straight out plea for the jobs and revenue Valencia believes an SNG victory in the Court of Appeals will bring. They ought to send a copy to Secretary of the Treasury Henry Paulson. Perhaps he will cut them a TARP check from the $700 million bailout fund.
All of these amici piling on fill the Court of Appeals record with material beyond the record below and CNEV’s brief actually makes some cogent points. SNG even refers to the amici briefs, which is a no no.
For some reason, GGYC has never been willing to take off the gloves in this case and has pulled its punches in a so far unsuccessful attempt to win SNG over. Good luck. When White & Case (which just laid off a bunch of lawyers and support staff) represented SNG, GGYC did pretty well. Since Barry Ostrager jumped into the ring, shrugging off the gloves and Marquis of Queensbury rules, GGYC has been on the defensive, as Ostrager forces errors. It is as if Ostrager has put a voodoo spell or hex on them. Ostrager is not a pretty fighter, but he is an effective one -- Jake LaMotta, rather than Muhammad Ali. His brief gets the job done.
GGYC has one more brief and one more chance. So far, its U.S. Supreme Court fighter has been less than overwhelming. She has one more chance to show that she is the Million Dollar Baby. If she is not, SNG will hold on to the Cup for as long as it wants – perhaps as long as NYYC did – and GGYC will go from wannabe to neverbe.
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Part 29 - Doubled down on the meaning of the word “having.”
“It depends upon what the meaning of the word is -- is.” William Jefferson Clinton.
(October 1, 2008) “Double Down. A Blackjack term that refers to doubling your wager after drawing two cards in return for only taking one additional card.”
Winning in the Supreme Court and losing in the Appellate Division is bound to get one’s attention. Golden Gate Yacht Club’s (GGYC) response is to double down. It has made a few changes. Although it has not changed law firms, it has changed lead counsel, opting for Maureen E. Mahoney, Jim Kearney’s partner from Latham & Watkins’ Washington, D.C. office, along with two lawyers from her Appellate Advocacy team. Mahoney is an extremely experienced member of the exclusive Supreme Court Bar of lawyers who regularly argue before the U.S. Supreme Court. Her impressive credentials are consistent with former Attorney General Ed Meese’s long term project to remake the Federal Judiciary – University of Chicago Law Review, law clerk to Justice William Rehnquist (succeeded as one of his clerks by now Chief Justice John Roberts), Assistant Solicitor General in the George H.W. Bush Justice Department and nominated to the Federal District Court Bench (lapsed as a result of the election of Bill Clinton). Ordinarily, by now she would have been nominated to a U.S. Court of Appeals slot and then the U.S. Supreme Court after a lucrative career in Supreme Court advocacy, but, for some reason, it has not happened and she has stayed on the other side of the bench. Perhaps she just likes winning big cases. She had done a lot of it.
Mahoney is not a member of the New York Bar and does not seem to have appeared in the New York Court of Appeals or the Appellate Divisions. She does not appear to be a sailor. Although she is probably not familiar with New York State practice, none of the procedural issues below are at issue in the Court of Appeals and, based upon her reputation for impeccable preparation and appellate advocacy skills, she should readily adapt to practice in the Court of Appeals, which is subtly different from the U.S. Supreme Court.
GGYC’s opening Brief in the Court of Appeals bears the imprint of U.S. Supreme Court practice. While this case has been appealed to the Court of Appeals as of right, because of the two dissenters in the Appellate Division, First Department, cases can only reach the U.S. Supreme if the Supreme Court agrees to accept them (except for the Supreme Court’s very limited original jurisdiction). In the tiny percentage of cases accepted, only a very narrow question presented may be addressed. Thus, advocacy is often on pinpoint and extremely arcane issues of statutory or constitutional language – although the resulting decisions may run to scores of pages, if not more.
On this appeal, after abandoning a cross appeal on its claim that Société Nautique Genève (SNG) had breached its fiduciary duty as defender, GGYC has doubled down on the meaning of the word “having.” That is it. Everything rides on its tense as used the Deed’s phrase “having for its annual regatta an ocean water course . . . .” The “organized Yacht Club” issue is still argued, but Justice Cahn did not consider that ready for determination, which GGYC concedes.
While the basic arguments remain the same, style has changed. Jim Kearney and Aaron Siri favor the vigorous, often punchy style of New York litigators. You cannot win in New York’s state and federal trial courts if you do not keep the audience’s attention. Your competition is Broadway. U.S. Supreme Court writing is much more like law review writing -- smooth, conservative, colorless, unemotional, seamless, organized, and, some would say, not very interesting.
Other than the more liberal use of legal Latin like noscitur a sociis (roughly birds of a feather flock together), the arguments remain the essentially the same, although, for some reason, an excellent example based upon some federal and state statutes has been dropped and a quote from Shakespeare’s Measure for Measure so arcane that it has to be explained is included. Although the breach of fiduciary duty claim is gone, GGYC finally argues that the one sided Protocol was a quid pro quo for keeping the Cup in Spain, which is slipped in on the “organized Yacht Club” issue, which GGYC argues is in the Deed to prevent collusion, a point which is a bit of a stretch in the Schuyler’s lifetime, before multi-challenger events. Why would a solo challenger want to collude? To lose? Too bad GGYC did not cross appeal, where the argument would have had more heft.
Curiously, although there is wall to wall grammar and rules of construction on the “having” issue, GGYC never points out that in all the examples in which “having” refers to the past or future (“was having,” “will be having”), there is a verb form or other locution that squarely puts the event in the past or future. A bare “having,” with no additional help, remains in the present.
On the issue of whether “having” is ambiguous and requires extrinsic evidence, which the Appellate Division, First Department used to reverse Justice Cahn, GGYC sticks to its argument that there is no ambiguity, but argues that the evidence of actions long after Schuyler’s death, used by the Appellate Division to reverse, are irrelevant, because they have nothing to do with Schuyler’s intent. Apparently, GGYC has enough confidence in its grammatical and statutory construction arguments that it does not employ the fall back argument of the existence of contemporary evidence which was not considered, because no one argued that the language was ambiguous, which should be considered on a remand if the Court of Appeals agrees that “having” is ambiguous. Instead it argues that the Appellate Division, “inexplicably ignored key extrinsic evidence of the settlor’s intent” – that nobody brought to the Appellate Division’s attention. That, of course, is a sort of back door way to make the argument, rather than through the front door. Just because the Appellate Division reached out to decide an ambiguity does not mean the Court of Appeals is likely to do the same.
The “keel yacht” issue is briefly raised and back handed.
Most litigation never gets to the Court of Appeals and the process is much like distilling moonshine. A lot of stuff goes into the hopper at the Supreme Court level, much less reaches the Appellate Division and by the time it reaches the Court of Appeals it is distilled down to the essential end point – white lightning. In this case it is the word “having” that came out of the still. Chief Judge Judith Kay ages out of the Court of Appeals at the end of this year and a new Chief Judge will be sworn in after New Year’s Day, who, with the six Associate Judges, will sample GGYC’s product and decide if it has enough kick to reverse the Appellate Division and reinstate GGYC as Challenger of Record.
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Part 28 - The Lawsuit to Nowhere
“This Way to the Egress.” Phineas Taylor Barnum.
(September 7, 2008) Even attentive ‘Buttheads who diligently have been paying attention to The Greatest Show on Earth, the three ring circus also known as the AC litigation (Commercial Division, Appellate Division, First Department, and now the main event in the third and most important ring, the New York Court of Appeals) may have forgotten about the AC sideshow in the U.S. District Court for the Southern District of New York, before District Judge Pauley. There amongst General Tom Thumb, The Fiji Mermaid and Chang and Eng, the Siamese Twins, Team New Zealand (TNZ) has been exhibiting the greatest oddity of them all, The Lawsuit to Nowhere, against Ernesto Bertarelli and his posse (SNG, ACM, et al.)
If you have been focusing on the presidential race between “Senator Change” and “Senator Change,” or have actually been out sailing or doing something useful, a quick refresher is in order. TNZ sued Ernesto, et al. in two separate actions. One was a state court action before Justice Cahn in the Commercial Division alleging damages from a breach of a contract embodied in some e-mails to hold AC 33 in 2009 and a second claim that Ernesto, et al. breached fiduciary duties owed to TNZ in the way they went about setting up AC 33. The second action was a pretty far out antitrust action against the same crew before Judge Pauley in the U.S. District Court. Because of the arbitration agreement in the AC 33 Protocol, Ernesto, et al. removed the state court case to the U.S. District Court, based upon the Federal Arbitration Act (FAA). It was then assigned to Judge Pauley. TNZ moved to remand the state court action back to Justice Cahn and Ernesto, et al. moved to compel arbitration of everything before – (you guessed it) Ernesto’s handpicked arbitrators.
After at least six sets of papers and a booster seat load of exhibits, Judge Pauley heard oral argument on September 5, 2008. Although Judge Pauley reserved and will write a decision, based upon the papers and the argument – and without going out on a limb with any predictions – it seems very likely that Judge Pauley will send everything to arbitration. It appears that TNZ’s cases were rather poorly thought out, without much attention to trying to write around arbitration. While a party can always plead inconsistently, at some point inconsistency becomes incoherence. TNZ seems to be there, as over and over again opposing counsel was able to turn TNZ’s factual allegations back upon TNZ to undercut key elements of TNZ’s effort to avoid arbitration.
As TNZ alleged and anyone who paid attention to the absurd arbitration between SNG and CNEV about whether CNEV was a proper challenger saw, the two arbitrators carried over from the five arbitrators of AC 32, along with the third arbitrator, who just happens to be a lawyer for the Spanish Government (which just might have an interest in keeping the AC in Spain – ya think?) are utterly reliable for SNG. Indeed, in the SNG and CNEV arbitration, their decision was a cut and paste of SNG’s papers. TNZ probably has to go through the almost certainly farcical arbitration to preserve its position on appeal, assuming it has nothing better to do with its money, but it almost certainly will be a waste of time.
That, of course, raises the issue of who is paying for a lawsuit which amounts to empty legal calories. After splitting from Cravath Swaine & Moore, one of the most profitable law firms in the world, which routinely makes mid seven figure payouts to its senior partners, to make more money with his own firm, David Boies, TNZ’s lawyer, has been focusing on equity positions in litigation. There is no way Boies would invest in this case. Indeed, except for an appearance on Bloomberg TV, Boies has been MIA and the ball has been carried by his junior partner Philip Bowman. On the other side, Barry Ostrager, Simpson Thacher & Bartlett’s lead counsel has also been absent, leaving the case in the very capable hands of his junior partner Jonathan Youngwood, who did an excellent job at the hearing. Nevertheless, the litigation has to be costing someone something. (Indeed Grant Dalton and a PR guy showed up at the hearing.) While there has been speculation that Oracle might by financing the action to harass Ernesto, et al., that seems pretty farfetched, as there has not been much bang for the buck, nor is there likely to be.
A couple of interesting things relating to the main event came out, although it does not appear anyone from Oracle familiar with the AC litigation was there to catch them.
What came out of general interest is that the Arbitration Clause in the AC 33 Protocol, which will probably be TNZ’s undoing in these cases, goes back to the AC 31 Protocol promulgated by none other than TNZ, which may have been its originator. Recall that it was the AC 31 arbitration panel that decided that SNG was a proper challenger, even though it had never run an annual regatta on the sea or an arm of the sea. That decision not only let SNG into the party for the first time, but also provided SNG with an oft repeated argument in favor of CNEV. To carry the irony further, the arbitration clause is totally unnecessary. The International Jury used in previous AC’s provides finality on all sailing issues – with reasonable due process, unlike the arbitration panel. The IJ cannot decide Deed of Trust Issues, but as we have seen, they belong in court if they cannot be worked out. In any event, TNZ is almost certainly about to find out how wrong arbitration is. The irony for the sailing community is that TNZ’s breach of fiduciary duty claim will go down the tubes in the arbitration. GGYC made a breach of fiduciary duty claim, which was pretty half hearted for political and PR reasons, and then dropped it by not cross appealing in the Appellate Division. There is a good argument to be made (CNEV was invented to guaranty the deal with Valencia, which profited SNG, and to make sure SNG could not lose, so that the AC would stay in Valencia – the purest self dealing), but no one is going to make it now that TNZ has blown it.
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Part 27 - Cold-cocked by the Applellate Division
“A boat that may have broken a rule of Part 2 while racing may take a penalty at the time of the incident. Her penalty shall be a Two-Turns Penalty unless….” RRS Rule 44.1.
“It ain't over 'til the fat lady sings.” -- Anon.
(July 29, 2008) By now many ‘Buttheads know that a sharply split Appellate Division, First Department, has voted 3-2 to reverse Justice Cahn on the law and reinstated the now teamless Club Nautico Español de Vela (CNEV) as Challenger of Record. Having incorrectly predicted that the First Department would affirm Justice Cahn, it is time for me to do my penalty turns. That said, unless BMW Oracle Racing's Larry Ellison throws in the towel or a mutual desire to settle breaks out, this case is going to Chief Judge Judith Kaye (who is actually quite svelte) and the Judges of the New York Court of Appeals in Albany, NY, who will have the final say. The two dissenting votes in the Appellate Division give Golden Gate Yacht Club (GGYC) an automatic right to appeal. While the Appellate Division, being a division of the Supreme Court, has the power, unlike almost every other appellate court, to reverse on the facts or the law or both, the Court of Appeals may only reverse on the law. As the Appellate Division reversed solely on the law, the Court of Appeals has a relatively free hand on any appeal.
The majority opinion, written by Justice DeGrasse, recently elevated after a mammoth trial in which Simpson Thacher & Bartlett, Barry Ostrager’s firm, appearing pro bono, successfully argued that New York’s school funding was unconstitutional, has some pretty severe problems which may give GGYC an opening in the Court of Appeals. Although no one argued before Justice Cahn that the Deed’s “having” language is ambiguous, the Appellate Division sua sponte raised the issue, found that it was ambiguous, and that extrinsic evidence needed to be considered to resolve the ambiguity. That determination is questionable. Ordinarily, the meaning of language in a legal document is an issue of law to be determined by the court. Just because the parties have different interpretations of the words does not make them ambiguous. It just makes them disputed. The court cannot duck a hard issue and has to decide. Ambiguity is a factual issue. In the classic example from first year of law school, two parties contracted regarding the cargo of the ship named the Peerless. Unfortunately, there were two ships named Peerless, so there was an ambiguity. Which one did they contract about? Parties sometimes agree to bi-monthly payments of $X amount. Do they mean two payments of $X every month or one $X payment every other month?
In finding an ambiguity, the Court relied upon an 1896 grammar guide which it noted was included in the record, as if that somehow made the grammar guide a fact. Of course, it is simply an authority – like an 1896 case Xeroxed and bound into the record – not a fact. Moreover, the rule applied by the Court does not even seem to apply to the language in question, which lacks the antecedent verb the rule applies to.
When a contract or trust instrument has a patent ambiguity within its four corners, New York law sends the court to a factual determination based upon extrinsic evidence, which almost always results in a trial. Thus, at this point, having questionably found an ambiguity, a remand to Justice Cahn for evidence of George Schuyler’s intent would have been in order. (If there is such evidence, I would bet John Rousmaniere knows where and what it is. - read John's opinion) Instead, the Appellate Division resolved the issue itself based upon an undeveloped record. Obviously, the necessary evidence concerns the intent of George Schuyler, the settlor of the Deed. Instead, the Court relied upon the course of dealing of the parties to AC 31, involving Societe Nautique de Geneve’s (SNG) eligibility. In the case of a disputed contractual term, how the parties acted is often an admission regarding an ambiguous term’s meaning. The problem is that the course of dealing in AC 31 has nothing to do with George Schuyler or his intent. Had he acted in a way that explains the “having” language, that would be relevant, but there is no such evidence in the record. Likewise, while custom and usage in an industry may be significant resolving contractual ambiguities, there was no custom and usage regarding this issue in George Schuyler’s day.
The Appellate Division went on to wrap up the entire case by holding, as a matter of law, that CNEV is an organized Yacht Club, because it is organized -- incorporated. It found the absence of yachts to be irrelevant. Justice Cahn had left that issue undecided, but they decided it, making their decision a final determination of all issues and ripe for appeal to the Court of Appeals.
GGYC did not appeal from Justice Cahn’s dismissal of its breach of fiduciary duty claim, so that was not considered and is out of the case as far as the Court of Appeals is concerned. Whether that was a good idea remains to be seen.
Although Justice Nardelli’s dissent, joined by Justice Presiding Saxe, sharply disagrees with the majority, it does not engage the majority opinion point by point or hand to hand as dissents in the U.S. Supreme Court often do – especially when Justice Scalia takes up his extra sharp poison pen. Indeed, the dissent, which is much more substantial than the majority, reads like it originally was the majority opinion, until someone switched sides and made what was a more cursory dissent the majority opinion, which would explain the delay in releasing the decision. One of the interesting issues obliquely raised on oral argument, but never discussed by anyone, is whether SNG actually had standing to appeal in the first place. CNEV clearly did, as they were disqualified, but CNEV did not appeal.
The bottom line is that Barry Ostrager has won a major victory for SNG. Whether he has won the war remains to be seen, but the ball is now clearly in GGYC’s court. The tide of battle has shifted. And no, I have learned my lesson and am not going to make any predictions – except that there will be more headers and lifts before this is over. How long it will take depends on whether GGYC is as successful achieving speed in the Court of Appeals as SNG was in the Appellate Division.
What is clear is that the Cup is in shambles. Uncertainty is total. Unless there has been some First Class bluffing, two of the biggest white elephants since the Spruce Goose are under construction. The Challenger of Record, CNEV, no longer has a team or an annual regatta and may have dropped out altogether. The venue is questionable. SNG’s latest press release seems designed to rub GGYC’s nose in the loss and KO any chance that GGYC will participate if it loses in court. Team New Zealand agreed to sell out the other teams on AC33, but neglected to get paid up front and is now suing because it got stiffed. (It will lose -- the subject of a future report.) They probably cannot kiss and make up. The other teams are either unfriendly to SNG, or are broke or bootleg, or both. How many nobodies can SNG round up and finance? Who will pay to watch SNG and the seven dwarfs? The sponsors are caught in a perfect economic storm and are in survival mode concentrating on battening down the hatches to ride it out. Throwing money at a boat race when they are taking on green water as fast as they can pump cannot be part of the program. Laid off sailors are scrambling and probably getting earfuls from their mothers and significant others regarding their career choices. They have nuked the refrigerator.
Just when Justice Cahn had provided adult supervision and gotten the classroom under control, the Assistant Principal decided he knows better. It is now up to the Principal.
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Part 26 - NY legal regatta nearing the awards ceremony
“Slump? I ain't in no slump. I just ain't hitting.” -- Lawrence Peter (“Yogi”) Berra
(June 5, 2008) Barry Ostrager, Societe Nautique de Geneve’s (SNG) lead counsel from Simpson Thacher & Bartlett, has been on a bit of a roll lately. That roll may have ended in the Appellate Division, First Department, of the Supreme Court of the State of New York this afternoon. Although occasionally dramatic, oral argument is almost always overrated and often deceptive. Appeals are decided on the briefs and, unless a lawyer does something incredibly dumb, oral argument seldom makes any difference. Judges hearing a long calendar may not even remember what lawyers say.
A prima donna on the bench can ask difficult questions just to show off or battle with another member of the panel. Occasionally, judges will hammer a lawyer because they know they have to rule in the lawyer’s favor, despite their contrary personal feelings about the case. Sometimes, however, a panel will hammer a lawyer because it just does not like his or her position. The judge’s body language and tone is usually the tip off. That is what it looked like for Barry Ostrager’s time at the podium. He was hammered. It was not friendly.
The Appellate Division affirms over 80% of the decisions below, so, as appellant, Ostrager started with a structural mountain to climb. Whether Ostrager had a programmatic argument to make or not will never be known, because the bench, which was not just hot, but red hot, lit into him from the start, as a brief sample of the questions shows. First came the Justice Presiding, David B. Saxe, who was on the motion panel that ruled against SNG on the request for a stay. He wanted to know why the appeal could not have been avoided by consent. Then he skeptically asked what SNG’s “beef” was with Justice Cahn’s decision anyhow.
Next came Justice Carla Moskowitz, who until recently sat with Justice Cahn in the Commercial Division. She wanted to know why it all did not depend on the definitions of the trust (the “having” issue) and why the Court did not have to look at the Court of Appeals’ Mercury Bay decision – as if SNG was arguing against the language of the Deed and the Mercury Bay decision. Justice Saxe picked up on that and wanted to know how the Mercury Bay decision compelled a decision in SNG’s favor.
Of course, just because the Justices were asking these tough questions did not mean that they were giving Ostrager any time to answer them. They were not. Indeed, if Ostrager was doing anything wrong, it was not trying to slow the argument down, like a batter who steps out of the box and plays with his gloves, elbow guard, helmet and every other piece of equipment to disrupt a pitcher’s rhythm. Instead he tried to hit the pitches out of the park, which only seemed to increase their frequency.
Justice Rolando T. Acosta, a native Spanish speaker who was obviously all over anything relating to CNEV and the Spanish venue, asked why the Court could not just affirm and set a proper date if necessary. From the way he said it, it did not sound like an affirmance was much of a problem in his eyes.
Justice Saxe was not going to give Ostrager any breathing room and wanted to know why CNEV is a proper challenger and then launched into a question about the “plain language of ‘having.’” An intelligent answer to any of these questions could easily take several minutes. Ostrager was getting seconds.
Justice DeGrasse, who was just elevated to the Appellate Division and, therefore, the junior member of the panel, asked about Secret Cove and the consent challenger distinction, which Ostrager tried to explain with some not very accurate generalities.
It did not matter, because Justice Acosta jumped in with a poisoned chalice. He raised a footnote in Golden Gate Yacht Club’s (GGYC) last brief citing the URL of the story that Desafio Espanol had jumped ship from CNEV for Club Maritimo del Abra. Ostrager tried to say that fact was outside the record (which it is, but the Court can probably take judicial notice of it anyhow), but wound up sounding like he was denying it was true. If Justice Acosta’s clerk goes back and confirms the story, that answer could easily be a huge problem for SNG.
Justice Eugene L. Nardelli, who was also on the motion panel that ruled against SNG on the request for a stay was relatively quiet, but his body language during Ostrager’s argument varied from boredom to “why do I have to listen to this?”
Justice Saxe then weighed in with a question about whether a yacht club’s qualification as a challenger should be measured at the time of the challenge, which clearly does not favor CNEV. By now the red light signaling that SNG’s time was up had been on for quite a while as the panel continued to pepper Ostrager. Under the circumstances, that was probably not a good sign. If the Panel was satisfied with the answers it was getting, it would have let Ostrager off the hook, instead of continuing to hammer him past the time limit. Exceeding the time limit also allows the Panel to feel that it has given a losing party extra time to make its case, despite the fact that the pummeling they had dished out left little time to make any case at all.
Compared to what Barry Ostrager went through, Jim Kearney, GGYC’s lawyer from Latham & Watkins, practically had a leisurely walk in the newly refurbished adjacent Madison Square Park on what was a beautiful late spring day. Kearney seemed to have made the decision to dial down the intensity level and the Panel reciprocated. Soft-pedaling the date issue, Kearney expressed strong support for Justice Cahn’s decisions, with just a teensy problem with the date that gave SNG’s twice the Deed’s 10 month preparation time. He did not push it.
The questioning was pretty tame. Justice Acosta seemed to be commiserating with Kearney about SNG “calling you out” – perhaps not quite the way that Lord Mansfield would have put it while Lord Chief Justice, King’s Bench, but consistent with New York’s more pavement level practice. Kearney agreed and got plenty of time to respond.
Justice Moskowitz gave him a nice fat softball about the arbitration issue and gave him plenty of time to explain all the deficiencies of arbitration under the SNG/CNEV 33rd Protocol.
Justice Acosta challenged Kearney about whether CNEV was not a real club, but gave Kearney plenty of time to explain its deficiencies and how Justice Cahn had not ruled on that issue because he had decided on the “having” issue. The red light went on and that was the end of that. No extra time was needed.
The date issue finally came up on SNG’s short rebuttal time and Barry Ostrager pushed the argument that this was a Northern Hemisphere challenge, but while he was finally getting the opportunity to build up a head of steam, the Panel was mentally moving on to the next case. A few final questions, including one about whether there was really any doubt about the nature of the boat GGYC was challenging with (the “keel yacht” issue), and Ostrager was allowed to run the clock out as the Panel stared at him.
While, again, you never can tell, there did not seem to be any disagreement within the Panel or any indication that there were difficult issues on which they needed help. Nothing indicated that the Panel had any problem with Justice Cahn’s decisions, except possibly the date, which did not seem to be a major problem they could not deal with one way or the other. That is understandable as, discounting the October 2008 date, which is a non-starter, the discrepancy is a mere 6 weeks.
Predictions are always difficult, but the decision will almost certainly be in June and probably sooner, rather than later. It will probably be unanimous and short, possibly a paragraph or less. The odds are very high on a straight “Affirmed.” There is a small chance of the Panel modifying the date to May 1, 2009 in a sentence or two and affirming “as modified,” a prerogative of the Appellate Division shared by virtually no other appellate court. Do not bet the boat on a reversal. Do not plan to retrace Henry Hudson’s voyage to Albany, where the Court of Appeals sits. Almost certainly, unless SNG wants to go back to the well on the custom house registry or some other issue, this New York State Court regatta is moving towards the awards ceremony.
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Part 25 - Gameplanning for the Appeal hearing
“Been in this game one-hundred years, but I see new ways to lose 'em I never knew existed before.” -- Charles Dillon (“Casey”) Stengel.
(May 28, 2008) Since Societe Nautique de Geneve (SNG) succeeded in consolidating the appeals before the Appellate Division for one big shoot out on June 5, 2008, the appeal has begun to resemble the Democratic primary melodrama. For one thing, the briefing has been dragged out with two extra briefs. The rhetoric has also gone pretty far over the top. Although Simpson Thacher & Bartlett, SNG’s law firm, does considerable pro bono work representing Guantanamo detainees, suing the State of New York to get more money for New York City schools and the like, its bread and butter is representing the richest and most powerful interests in the world, for which it is well compensated.
Thus, it was hilarious when, tearing a page from the playbook of a certain multi-millionaire Wellesley/Yale Law graduate knocking down boilermakers at Bronko’s Bar, Simpson Thacher filed a brief for billionaire Ernesto Bertarelli’s SNG bewailing the attempt of a “billionaire ‘sportsman’ [Larry Ellison] utilizing Tonya Harding litigation tactics . . . .” It actually went downhill from there. You would think Ernesto Bertarelli was an impoverish worker out of a John Grisham novel injured by the kinds of interests Simpson Thatcher might represent in a Grisham novel. Asking the Court to allow SNG to proceed in forma pauperis (as a poor person relieved of filing fees) would have fit right in. The catalog of Ellison’s evil deeds even extended to teeing up a two boat match race – something unprecedented in AC history. Perhaps Barry Ostrager plans on offering to knock down boilermakers with the Justices of the Appellate Division at oral argument.
The Appellate Division, First Department is one of the most workmanlike, by the book, follow the law wherever it takes you, courts in the country. It is not the Supreme Court of Dogpatch. That kind of over the top faux-populist rhetoric is unlikely to help SNG one bit. It may even produce some fairly intense eye rolling on the bench.
On May 15, 2008, shortly after Justice Cahn set the March 2009 date, Tom Ehman, Golden Gate Yacht Club’s (GGYC) spokesman, was interviewed by Stuart Streuli/Sailing World. He essentially said that GGYC was disappointed that Justice Cahn had ordered March 2009, rather than October 2008, but that all the teams had experience training in Valencia in March and GGYC was ready to sail in Valencia in March 2009. It was time to get on with it.
That seemed to be the set-up for a simple winning argument: “May it please the Court, we would have preferred to sail in October, but we will consent to sail in Valencia in March and ask that this Court affirm Justice Cahn’s orders in all respects. Thank you. [Counsel sits down.]” The Appellate Division would be faced with a no brainer and likely would have issued a unanimous one word decision, “AFFIRMED,” on Tuesday, June 10, 2008 at 11 a.m., the next issuance date. The chances that the Court of Appeals would have granted an appeal would have been near zero. Indeed, as I noted in the last report, GGYC had not made any provision for a cross appeal in the consolidation order, which further pointed to acceptance of the March 2009 date.
Thus, it came as a shock when, halfway into its next brief, GGYC launched into an impassioned argument that Justice Cahn had erred when he set the March 2009 as the date, rather than October 2008. To further compound the surprise, GGYC went on at length in apocalyptic language about how anything other than October 2008 will destroy commercial law as we know it in New York. How construing the language of a sui generis Deed of Trust would work such horrors on commercial law, when the Appellate Division will almost certainly limit the decision to the Deed of Trust, is a little hard to follow. In any event, the argument for October 2008 remains extremely weak and unmoored to New York practice.
How attacking any part of Justice Cahn’s orders in any respect, thereby undermining the rest of the orders, makes sense is even harder to follow. The only explanation is that someone overruled Tom Ehman’s sensible approach in the hope of securing a virtual forfeit in October. It is unlikely that GGYC’s lawyers would have had a vested interest in that strategy, unless the issue of allowing SNG to divert the process with the motions to reargue and disqualify GGYC has arisen internally. The likely guilty party is higher up on the GGYC client side. In any event, by biting the hand that fed it, GGYC is playing with fire and may succeed in snatching defeat from the jaws of victory. The last thing in GGYC’s interest is forcing the Appellate Division to really dig into all the issues when it won all the important issues below. You never know what can happen.
Needless to say, in its final brief (there really is an end to the briefs), SNG slams GGYC for complaining about the date when it did not file a cross appeal. Surprisingly, SNG was not able to find a case directly supporting its position, but cited cases on a different, but similar, point that may be helpful to its position. Of course, in the ‘Through the Looking Glass’ world of this case, if SNG is able to convince the Appellate Division to disregard GGYC’s crypto cross appeal, it may be doing GGYC a big favor by getting rid of a very weak argument and focusing the Appellate Division on the issues that favor GGYC.
Amazingly, neither side devotes any reasoned argument to the hemisphere clause. For example, is the hemisphere clause an absolute prohibition, which cannot be waived, or is it subject to the consent clause? One would have thought that GGYC would have argued that it is subject to the consent clause and, therefore, SNG’s stated preference for Valencia, plus GGYC’s consent, equals March in Valencia. Similarly, although SNG treats the hemisphere clause as unwaivable, one would have expected some argument regard whether it is unwaivable or subject to the consent clause. The Appellate Division could easily decide the appeal on that issue, without either side weighing in at all.
In any event, the next stop is oral argument at 2:00 pm on June 5, 2008 at 25th Street and Madison Avenue. Unlike the prima donnas on the Supreme Court of the United States, questions from bench will be designed to elicit information and the Justices will not be playing ‘hide the ball’. It may be possible to tell where they are going from the general tenor of argument. Then again, it may not be.
On one final note, the Team New Zealand (TNZ) against Alinghi, ACM, SNG and Ernesto Bertarelli cases continue to percolate. Unless there is an outpouring of ‘Butthead interest, I do not intend to cover more than the basics. To that end, the Alinghi defendants have removed the state court breach of contract/breach of fiduciary duty case to the U.S. District Court in Manhattan, claiming that the agreement to the arbitration clause of the aborted 33rd Protocol governs and, therefore, the Federal Arbitration Act provides federal question jurisdiction. The Alinghi defendants then asked Judge Pauley, who has that case and the antitrust case, to send both to arbitration. Judge Pauley will hold a pre-motion conference on June 20, 2008 to decide whether to allow the request to go forward as a motion. Obviously, if the cases are sent to Alinghi’s pet arbitrators, based upon TNZ’s consent to the applicability of the 33rd Protocol to these cases, (a bit of a stretch), TNZ’s chances would be very dim. In the ultimate irony, TNZ truly would be host by its own petard -- further evidence that it pays to be careful who you get in bed with.
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Part 24 - Cahn backs both teams into a corner
“Then said the king, The one saith, This is my son that liveth, and thy son is the dead: and the other saith, Nay; but thy son is the dead, and my son is the living.
And the king said, Bring me a sword. And they brought a sword before the king.
And the king said, Divide the living child in two, and give half to the one, and half to the other.” -- I Kings 3, 23-25.
“How did things ever get so far? I don't know. It was so unfortunate, so unnecessary. Tattaglia lost a son and I lost a son. We're quits. And if Tattaglia agrees, then I'm willing to let things go on the way they were before.” -- Vito Corleone, The Godfather (Paramount 1972).
(May 13, 2008) By now most ‘Buttheads know that Justice Cahn ordered that the DoG Match commence “ten calendar months from the date of service of a copy of this order, with notice of entry, upon the attorneys who have appeared herein.” Indeed, Societe Nautique de Geneve (SNG) managed to get the clerk to enter the order and perfected an appeal of the May 12, 2008 Order on May 13, 2008. The Appellate Division ordered the two appeals consolidated, with an extra week’s briefing, to be heard on June 5, 2008, so SNG has succeeded on two fronts. It has avoided a 2008 DoG Match and it has cured all the potentially fatal procedural infirmities of the original appeal. It is not home free, as it faces a Southern Hemisphere defense in 10 months, with no infrastructure in place – except in New Zealand (which will never happen because of all the bad blood) and possibly Australia. Even worse, there is no sponsorship or TV in place and the Match could give new meaning to the term financial black hole. CDO’s on steroids.
Lawyers often sloppily talk about cutting the baby in half when the plaintiff is awarded half of the demand. A really Solomonic decision is what we saw Justice Cahn hand down on May 12, 2008 -- a decision that forces the litigants to make difficult choices and has the potential to force a resolution by the parties themselves. Anyone who thinks that Justice Cahn made a careless mistake is dreaming. He knew exactly what he was doing.
Characteristically, Justice Cahn got there by steering past the shoals of the parties’ arguments, propelled solely by the Court of Appeals’ Mercury Bay decision. The Court of Appeals pointed out that the defender only gets a scant 10 months to prepare a defense, even if the challenger has spent years preparing. In NY State practice, (as ‘Buttheads may know), only an order means anything. Decisions do not. Thus, if the 10 months begins from certainty about the challenger, the date chosen is the only possible date. None of the SNG’s legal maneuvers require any different result, because Justice Cahn concluded that none were frivolous. They were within the rules of the game.
How does all this shake out? The overwhelming likelihood is that the Appellate Division will simply affirm. Justices do not get elevated to the Appellate Division because they are dumb or cannot recognize a savvy decision when they see one. Justice Cahn has carefully anchored everything he has done in the Court of Appeals’ Mercury Bay decision, without any stretching or reaching. SNG will argue that everything is wrong and CNEV should be reinstated. Its chances of prevailing are remote. It will further argue that a March 2009 Match violates the Deed because the challenge was for the Northern Hemisphere, which is a stretch of the actual language of the challenge, and because SNG is a Northern Hemisphere Club. The later argument might have more force if SNG was a real salt water club planning to sail within cannon shot of the clubhouse. Given that SNG is a fresh water club which chose a site in a different country for purely commercial reasons, the argument has little force and the March date will likely stand.
The whole issue of hemisphere was extensively briefed and argued before Justice Cahn and he clearly knew that a March Match would have to be sailed in the Southern Hemisphere – which SNG did not want. He also had been presented all the financial reasons why SNG wanted to sail in Valencia and the extent of the financial pressure a non-Valencia Match would place on SNG. Finally, he knew that cranking the order out when he did would allow the entire case to be resolved in June. King Solomon would approve.
Golden Gate Yacht Club (GGYC) will likely argue that everything Justice Cahn did is correct, except for the date and Justice Cahn’s denial of judgment that SNG had breached its fiduciary duty. The later would require a cross appeal, which is not provided for in the briefing schedule, so how that would be accomplished is a little unclear.
Although GGYC has long argued for the October 2008 date, as ‘Buttheads know, I have always found that a pretty weak argument and the least likely date to be ordered. The chances GGYC will get the Appellate Division to buy it are slim. Relying upon Mercury Bay, Justice Cahn did not have to deal with the possible existence of an agreement to toll the Match. GGYC is in a quandary if it seriously intends to contest the March date. October 2008 is not going to fly. It could argue for July 4, 2008, based upon an argument that Justice Cahn erred by finding that equity required 10 months for SNG, because SNG breached its fiduciary duty when it chose CNEV and, therefore, the litigation is all SNG’s fault and the July 4, 2008 Match date should stand. Of course, that does not work, because GGYC probably cannot be ready in July. It may decide to take half a loaf and argue for the March date, which puts maximal financial pressure on SNG.
That leaves everyone where Justice Cahn put them – where neither wants to be. Of course, SNG can attempt to delay further by arguing that the 10 months cannot start until all uncertainty is resolved by a decision from the Appellate Division and either a decision from the Court of Appeals or the foreclosure of an appeal to Court of Appeals. While that might make sense in a normal commercial litigation, it does not get SNG anywhere in this case.
As it stands, the Cup is in “stand in a cold shower and rip up large amounts of currency,” mode. The sponsors (except Oracle) have to be in hibernation. While the litigation is not really that expensive (discovery is the real expense in litigation), the fact is that there are other expenses and little if anything is coming in. There is no benefit to simply possessing the Cup. While everyone marvels at NYYC’s 132 year hold on the Cup, since it lost in 1983, the issue is how many times you have won, not how long you have held it. SNG cannot win again if it does not sail. It cannot sail if it draws out the litigation. It might gain a little preparation time, but that cannot be a major factor. It cannot line up sponsors or TV without a final date. It is not going to put financial pressure on GGYC by delaying further. Of course, GGYC cannot win either if it does not sail and the object of the game is to get to a Match.
There is a strong possibility that one side or the other perceives its case to be strong enough and the outcome certain enough that it is willing to roll the dice on June 5, 2008. If neither makes that hard and fast decision, this is the time to settle the case – which is exactly what Justice Cahn had in mind. For better or worse, the Cup has become a business. The fact that no one is actually making a profit does not mean it is not. It just means that everyone has to sharpen their pencils. It also means that there has to be certainty and an end to this litigation, which is not a bet the business litigation, but, rather, a burn down the business litigation. Pouring more gasoline on is not going to help matters.
Can these parties settle this case on their own? Not a chance. There is simply too much bad blood. As I said way back near the beginning, this is like a really bad matrimonial case. Forget about the kids (in this case, the sailing world forlornly watching this spectacle from the sidelines). The parties have to get on with their lives and go back to sailing and making the Cup a success and the sponsors happy. The only way that it is going to get settled is through mediation. The parties have to be separated and a creative way to make both sides winners found. It is not going to be easy.
Just finding an appropriate mediator and bringing the mediator up to speed will be a challenge. A lawyer is going to be snowed by both sides on the sailing issues. As sailors, we forget how much knowledge about the sport and the Cup we have accumulated over the years. Try force feeding it to a non-sailor and see how it works. A sailor is going to be snowed by both sides on the legal issues. There actually is a little bit to the legal game. A business person will be snowed by both sides on both sets of issues. Only a mediator familiar with both the legal issues and the sailing issues and -- most important of all – who is willing to assertively push back and push forward on both, has a chance of succeeding.
Unfortunately, everyone has had bad experiences with bad mediators who passively pass proposals back and forth like a glorified letter carrier. That does not mean that mediation is pointless, but merely that some mediators are pointless. It can be done. The alternative is simple continuing in the same track -- June 5, 2008 in the Appellate Division on 25th Street in New York. That may be the light at the end of the tunnel. It could also be the headlamp of an oncoming locomotive.
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Part 23 - No stay... no way
“Oh, it's German.” -- Pvt. Mellish, “Saving Private Ryan,” (Amblin, DreamWorks SKG 1998)
“If I could just touch the hem of His garment.” -- “Touch the Hem of His Garment,” Sam Cooke with the Soul Stirrers.
(May 11, 2008) After a period of relative calm, the litigation front has been very busy. In roughly chronological order, the first development was Societe Nautique de Geneve (SNG) filing its reply on its motion in the Appellate Division for a stay and response to Golden Gate Yacht Club’s (GGYC) motion to dismiss the appeal. In an effort to evade GGYC’s well founded motion to dismiss, SNG made a highly formalistic argument that the only thing on appeal was the motion to disqualify GGYC based upon the “keel yacht” kerfuffle. That had the side effect of making it plain that the appeal is not really about anything at all, because Justice Cahn’s November 27, 2007 opinion is not on appeal, as no order has been entered, due to SNG derailing the order settlement process. In its reply, SNG complains that the case has become a “procedural morass.” SNG is being unduly modest. Thanks to its maneuvers, FUBAR would be a better way to describe its appeal.
On May 8, 2008, a full motion panel of the Appellate Division denied SNG’s motion for a stay and GGYC’s motion to dismiss. The important news is that, while GGYC’s motion to dismiss was denied without prejudice to GGYC addressing the issue in its main brief, SNG’s motion for a stay was simply denied, which means the denial of a stay is final. Adios, stay.
On May 9, 2008 at noon, Justice Cahn’s chambers convened a telephone conference, reportedly to determine if the parties still wanted a ruling on the DoG Match date and requesting an MS Word file of SNG’s proposed order (which provides for July 2009 Match Dates). While that might seem like a hopeful sign for SNG, it probably is just the opposite. Justice Cahn knows that no matter what he does, SNG will appeal. Thus, he will want to use as much of SNG’s order as he can, to prevent SNG from complaining about minor provisions of the order on appeal. In any event, the call certainly signals that an order on the November 27, 2007 opinion, which went back on the front burner on April 2, 2008, is imminent, probably this week or the next, depending on the progress on the promised opinion explaining the order.
May 9, 2008 was also the day GGYC’s brief was due in the Appellate Division. Because Appellate Division briefs are traditionally prepared and professionally bound by “legal printers,” even though the contents are word processed, rather than typeset like U.S. Supreme Court briefs, GGYC’s brief was almost certainly bound and ready to file. The chambers call must have stirred a last minute flurry of decision making on one point, which will be apparent in a minute.
SNG’s brief was a tad bombastic, overwrought, apocalyptic and unfocussed. Indeed, I missed the one new argument buried in it, which eagle-eyed (and undoubtedly highly caffeinated, if he was still focusing at that point) ‘Butthead Richard Hill caught. As Richard put it more clearly than SNG did, SNG argued that challenger compliance with the requirements of the Deed is a “sufficient but not necessary” condition, a common mathematics concept. (You could fool me, as Math was never my strong suit.) Thus, according to SNG, it can accept a challenge from Muffy the Green Opti lake sailor’s club, to be sailed in Opti’s on a pond, even if it is not required to. If that is not ridiculous enough, SNG could even accept a challenge from something like CNEV.
The argument falls apart, because the exclusivity clause of the Deed only prevents another challenge if Muffy’s challenge is from a Club “fulfilling all the conditions required by this [Deed].” That strongly points to the conditions of the Deed being necessary, rather than merely sufficient. It also means that, if SNG accepts a challenge from Muffy’s club or CNEV, it must also accept GGYC’s challenge and cannot sail against the “Bum of the Month” to keep the Cup out of real competition. It also raises the truly ugly possibility that, if SNG starts make sailing decisions like its decisions on Cup stewardship, it might lose to Muffy. We could then see two clubs claiming possession of the Cup, Muffy’s club and GGYC – sort of like the period when there were two competing Popes, one in Avignon and one in Rome, or the farce of having two simultaneous World Heavyweight Boxing Champions.
GGYC’s Brief, which is very well done, calmly and methodically demolishes SNG’s Brief piece by piece. First up is a clear presentation of the case, carefully building the scaffold of indisputable facts and SNG admissions to hang SNG by its own petard. It also places the blame for the procedural mess squarely on SNG. Of course, GGYC deep sixes its own failure to make any attempt to stop SNG from throwing a monkey wrench in the gears by proceeding with the motions to reargue and to DSQ GGYC before an order was entered on the November 27, 2007 opinion. They are pretty safe, as even SNG, which tends to the shameless, cannot claim that the mess is GGYC’s fault for not stopping SNG – “Your Honor, it’s their fault, they didn’t stop me before I killed again!”
Although GGYC makes a convincing argument, in part based upon SNG’s own statements, that SNG’s attempt to separate the motion to DSQ GGYC on the “keel yacht” issue from the motion to reargue is as bogus as CNEV, it does not rest on that service ace alone. It then methodically puts together all of the previous substantive arguments from the summary judgment motions onward in one cohesive whole. While none of those issues are before the Appellate Division, because no order on the November 27, 2007 opinion has been entered and appealed from, a careful litigator always covers all the bases in every court, except the U.S. Supreme Court, which limits the briefs to the single issue it wants to hear about. Buttheads who followed the previous motions and Justice Cahn’s decisions will know the arguments.
On the sufficient/necessary condition argument, GGYC relies upon the fact that new arguments are barred on appeal to the Appellate Division and SNG’s many affirmative assertions on the summary judgment motions that directly contradict the position it now takes. GGYC’s analogy of a bakery challenging is a little half-baked.
Although GGYC did not file a notice of cross appeal, it takes the unorthodox step of arguing that, even though Justice Cahn has yet to rule on the Match date, only October 2008 can be the date and that the Appellate Division should order that date. Given the fact that Justice Cahn’s chambers had just held a conference call on that very issue, there must have been at least a bit of a flutter about whether to leave that in the Brief. It stayed in. As Justice Cahn has not ruled, the Appellate Division is not likely to rule on the issue. But, as most of the case is not before the Appellate Division, yet nevertheless fully briefed, why not throw in more for them to beg off on. Perhaps the rationale is that, whatever date Justice Cahn picks, GGYC will have gotten its two cents in on the issue, although it does not deal with the date no one seems to want, July 4, 2008, the date in its challenge. Perhaps spurred by SNG’s absurd oral statement on the initial stay motion that GGYC had “welshed” (apologies for the quote of a now non-PC slur) on the tolling agreement, when it was SNG that rejected the deal, GGYC cites the provision of the Civil Practice Law and Rules that bars SNG’s claim that there was a tolling agreement.
If Justice Cahn signs an order this week or the next, SNG will probably try to get an appeal of that order consolidated with this appeal, which would finally rationalize the “procedural morass” it both created and complains of. GGYC has probably crafted its Brief in a way that would allow it to agree if it finds that tactically and strategically advisable, perhaps with a short Surreply Brief to allow it to clean up any loose ends.
SNG gets to file a Reply Brief on Thursday, May 15, 2008, but it can only respond to GGYC’s Brief, which does not leave it with many avenues of attack. We shall see what it has to say, but the major upcoming events will be Justice Cahn’s ruling on the DoG Match date and the June 5, 2008 oral argument on the appeal, with a decision likely in June. Although the Appellate Division’s decision in Mercury Bay was extensive, the Appellate Division could revert to its customarily terse one word, one line or one paragraph orders resolving appeals. We are getting near the end of this soap opera. Not being on an order finally determining the case, there is no way this appeal is going to the Court of Appeals. If consolidated with a Match date ruling and SNG loses, SNG’s chances of getting to the Court of Appeals improve to slightly better than “when pigs fly,” unless Chief Judge Judith Kaye wants to show that the court system is not in slow down mode to force the legislature to give the state’s judges a pay raise. (They are suing the legislature.)
Far down on the list of developments is the agreement of Team New Zealand and the SNG/Alinghi/Bertarelli defendants in the antitrust case in the federal court in New York that the defendants will respond to the Team New Zealand’s complaint on May 20, 2008. Presumably, that response will almost certainly be a forest killing motion to dismiss, based upon a yards long laundry list of reasons. Stay tune – or not.
Finally, although I have been trying to stick to the legal issues and stay away from the over the top and likely pointless PR swirling around this controversy, there is one intersection of the legal issues and the PR that is pretty amusing. Back on April Fools’ Day, David Boies, the legal Rock Star representing Team New Zealand, was interviewed by Mike Schneider on Bloomberg TV in a segment that lasted over 20 minutes. In the sort of Pirates of Armonk performance that only a Rock Star could bring off, Boies sounded like he was leading the charge before Justice Cahn to defeat the Evil Alinghi Empire. In the clueless, star struck fashion typical of what passes for journalism today, Mike Schneider, obviously awed to be in the presence, only fed Boies marshmallows and let it go on. He did not ask to touch the hem of Boies’ garment, but it came pretty close.
Unless you were familiar with the case, you could have never guessed that Boies only is involved in an antitrust/breach of contract sideshow that will have zero effect on anything other than possibly, but not likely, Team New Zealand’s bank account. Team New Zealand’s complaints make it sound like it is suing because it sold out the other teams and did not get paid for selling out (sort of like suing for theft of services – an odd way to present yourself to the world). The only possible real effect would be a settlement bringing Team New Zealand in on SNG’s side.
The upshot of Boies’ impersonation of Jim Kearney, GGYC lawyer, was that Barry Ostrager got a 25 minute segment to respond to Boies, which he used to go after GGYC, rather than Boies’ client, Team New Zealand. Completely lost, Schneider melted into the furniture and just let him talk. The only consolation for Kearney, who was obviously robbed in Boies’ identity theft, is that Boies’ TV production values are really pretty good, so it was sort of like a TV biopic in which an actor portrays a real person better than the real person, bound by the constraints of reality, could. I am sure Kearney could have done an excellent job presenting GGYC’s case, as he does in court, and ought to get the opportunity to do so on TV, but as screwball comedy, this was pretty good.
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Part 22 - Very strange salesmanship
"It's a Sicilian message. It means Luca Brasi sleeps with the fishes." -- Pete Clemenza, The Godfather (Paramount 1972).
(April 23, 2008) If following the last few legal maneuvers has required heavy weather skills, this report is not even going to require hiking. Societe Nautique de Geneve (SNG) filed its opening brief in the Appellate Division, First Department on April 21, 2008. Golden Gate Yacht Club (GGYC) filed its response to SNG’s formal motion for a stay pending appeal and cross-motion to dismiss the appeal the next day on April 22, 2008.
At a forest killing 12,468 words (just 1,532 shy of the 14,000 word limit), SNG’s brief, which cites only seven cases, is long (very, very long) on recycled rhetoric and short on anything new. When a lawyer has that much to say about so little law, you know he or she is in trouble. If you have followed the story thus far, you are up to speed. The only things noteworthy are SNG’s attempts to evade the motion to dismiss that SNG knew was coming (more about that in a minute), and SNG’s public willingness to blame Justice Cahn for the lack of a DoG Match date - which SNG is responsible for - while Justice Cahn is in the midst of setting a date. This is especially strange, as if Justice Cahn holds for SNG and sets the DoG Match for May 2009 or later, SNG will have all it can reasonably expect to get. Given the state of the appeal, if Justice Cahn sides with GGYC on the date, SNG’s goose is cooked. Once again, very strange salesmanship.
In contrast, at a trim 10 pages, GGYC motion papers in the Appellate Division are back to the winning form GGYC showed on the summary judgment motions before Justice Cahn. Lawyers like to orate that “it is hornbook law” that their client must win. In this case, GGYC is able to rely on an actual hornbook -- New York Practice, by David D. Siegel, my law school New York Practice professor -- for the proposition that an order denying reargument is not appealable. When Siegel’s hornbook says your appeal should be dismissed, you are in trouble. On the stay issue, which, given Justice Andrias’ order denying a stay, is likely going nowhere, GGYC argues that there is nothing to stay, because Justice Cahn did not order SNG to do anything that could be stayed. In short, each party is in the same place. Each can build or not build. SNG gets to reply to GGYC’s motion papers, but, if their Brief is any indication, they need to hire a magician to solve the appealability problem.
Although SNG’s brief does not directly respond to GGYC’s cross-motion to dismiss, it clearly is aware of the problem. In a 12,468 word brief, it is not very hard to bury a sentence or two about the April 17, 2008 Order on the motion to reargue and SNG buries it in a Marianas Trench of words. Of course, the only other thing appealable, the twin Order denying disqualification of GGYC as challenger, was handled in the very same opinion and Justice Cahn treated them as Tweedle Dee and Tweedle Dum.
Indeed, SNG does not even really discuss the April 17, 2008 Orders it is appealing from and lavishes its efforts on the November 27, 2007 opinion which has not yet produced an appealable order. While ‘Buttheads may justifiably find this confusing, the Appellate Division will not. While a loosey goosey court might ignore the fact that it does not have an appealable order before it, the Appellate Division, First Department, is not a loosey goosey court. It is about as far from one as possible. Unless something changes, SNG is going to be fighting Luca for the covers.
The only thing that can change is an Order on the Justice Cahn’s November 27, 2007 opinion, which, presumably, will set the DoG Match date. If the date is before May 2009, SNG will appeal. It will probably appeal no matter what the date is. In that case, SNG will try to get the appeal on the June term and consolidated with this appeal. That is going to be a tough sell and the calendar is working against SNG at a rate which is probably increasing exponentially every day. As I said, SNG should be interviewing magicians.
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Part 21 - A game changing event
"Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." -- Winston S. Churchill, 10 November 1942.
(April 15, 2008) Societe Nautique de Geneve (SNG) went to the Appellate Division, First Department, of the Supreme Court of the State of New York on April 15, 2008, seeking a stay of Justice Cahn’s March 17, 2008 Orders pending resolution of its appeal of those Orders. SNG went away empty handed. It did succeed in getting an expedited appeal, but that was something Golden Gate Yacht Club (GGYC) wanted just as much as SNG did and immediately agreed to. Thus, as it now stands, the Deed of Gift (DoG) Match will go forward on the date to be set by Justice Cahn when he enters an order on the summary judgment motions decided on November 27, 2007. SNG does get a second shot at a stay in a formal motion, but is likely that that motion will not be decided until the main appeal is decided in June – unless the appeal is dismissed, which is entirely possible. This is a game changing event. If SNG does not prepare for the DoG Match, it does so at its peril.
Despite SNG’s press release about changing jurisdictions, not only is the Appellate Division the same jurisdiction (NY), it is the same court that Justice Cahn sits in – the Supreme Court. It is merely a different division of the Supreme Court, populated by Supreme Court Justices, like Justice Cahn, assigned to the Appellate Division by the Governor. Practice and Procedure is just as arcane and idiosyncratic. What makes the system work is the cadre of professional staff attorneys who ride shotgun for the Justices. They have been there, done that, and know every argument a lawyer can make better than the lawyer making the argument. Off the cuff, they shoot down errant arguments and deflate lawyers like a porcupine in a balloon store.
Thus, when SNG’s lawyers, GGYC’s lawyers, and yours truly appeared in the clerk’s office at the appointed time, the main event literally took place across the counter, as E. Lauren Holmes, who was there for the 1989 Mercury Bay Case, pressed the lawyers regarding why a stay should or should not be issued. Audiences do not come much tougher. Although she was coming to the case completely cold, she consistently rocked the lawyers and immediately identified an extremely clever issue that neither set of lawyers seemed to have anticipated.
She wanted to know what difference a stay on appeal would make. A stay and a toll are different. A stay merely suspends the operation of the order appealed from, while a toll actually stops the underlying event. Thus, if, for example, 1) Justice Cahn orders an October DoG Match, 2) a stay is issued by the Appellate Division, and 3) SNG’s appeal is denied, the DoG Match goes forward in October, just as if the appeal never happened. It is not postponed or extended for the length of the appeal. That would require a toll, but ordering a toll is probably beyond the jurisdiction of the Appellate Division, because ordering a toll would really be entering an injunction enjoining sailing the DoG Match.
Entering injunctions is not part of the Appellate Division’s job description. It could conceivably send the case back to Justice Cahn with instructions to consider an injunction, but that is pretty unlikely, as the issue was never before him in the first place, so he never had a shot at it. Justice Cahn is not going to order SNG to sail the DoG Match. He is only going to set the date and SNG can sail or not sail as it pleases. Now that the Appellate Division has declined to issue a stay, there is little reason for him to do so. Thus, even if SNG gets a stay, it probably will not make any difference. Courts do not grant relief that does not make any difference.
After a bit of a wait, Ms. Holmes took the lawyers up to talk to Justice Andrias in chambers (I was not invited despite my best efforts on behalf of the ‘Butthead community). If you chose (a) Justice Adrias saw things the same way as Ms. Holmes and denied the stay, you win and move on to the next round. The result was a hand written order denying the stay, granting an expedited appeal for the June Term as agreed by the parties, and allowing SNG to file a motion for a stay on a schedule the parties agreed to. (Guess the chances a motion panel reversing their colleague, Justice Andrias.)
Barry Ostrager, SNG’s lawyer, in a letter today to Justice Cahn, reported that Justice Andrias said he expected that the merits panel on the appeal would toll the DoG Match for the period of the appeal, but a lot of offhand comments are made in chambers which have no effect on the ultimate decision of the merits panel. If the Appellate Division lacks the power to toll the DoG Match, it is not going to happen. Of course, with the DoG Match date pending before Justice Cahn, writing him about your client’s appeal from his decision may not be the most effective salesmanship.
If the whole gale/storm and mountainous seas SNG encountered were not enough, GGYC’s lawyer announced that GGYC will move to dismiss the appeal, because the March 17, 2008 Order denying reargument is not an appealable order and the March 17, 2008 Order denying disqualification of GGYC is really the same non-appealable order. For pretty abstruse reasons you do not want to know about unless you regularly practice in New York State Courts, that is probably correct. Thus, SNG’s appeal could be sunk by GGYC’s motion before SNG even gets to starting line of the appeal. Indeed, the merits panel could sink the appeal on its own motion. Any attempt to get a stay or toll from the Appellate Division would go down with the ship.
Although SNG has been accused of seeking delay for the sake of delay, it does deserve credit for trying to get its appeal heard before the July-August break. GGYC did not serve copies of the March 17, 2008 Orders, with Notice of Entry (an essential, but pro forma one page piece of boilerplate), until March 27, 2008. Had SNG waited thirty days after March 27, 2008 to file its appeal, as it was entitled to do, there would have been little chance of making the June calendar and the appeal would have been heard on the September calendar. Of course, if the appeal is dismissed, it may all be for naught, because the appealable order will be the Order on the November 27, 2007 decision, which Justice Cahn has yet to enter. Making the June calendar will be pretty unlikely.
As I have previously written, SNG has a really tough passage ahead on the appeal. In general, affirmances outnumber reversals by three or more to one. Add that Justice Cahn is reversed less often than most Justices and closely followed the Court of Appeals’ Mercury Bay decision and you can see the outlines of a bumpy ride for SNG. While then Justice, now Judge, Ciparick was reversed by the Appellate Division in the Mercury Bay decision, she did not have the benefit of the Court of Appeals’ decision affirming her reversal when she ruled.
If SNG does get to a merits panel in June, it may have an even bigger blow to weather. GGYC’s lawyer will almost certainly be in a position to announce that GGYC’s boat is complete and ready to hit the water and that, if SNG is not ready, it is only because it chose not to be ready. He could argue that, in essence, SNG is holding its breath until it gets the delay it wants. The Appellate Division may decide to let SNG turn blue if that is what SNG wants to do.
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Part 20 - 10 months from when?
"Are we there yet?" -- Anon.
(April 2, 2008) Do we have a date for the Deed of Gift (DOG) Match? No. A simple cruise around the buoys has turned into an epic 18th century winter rounding of the Horn. Now that it is clear that there will be a DOG Match between Societe Nautique de Geneve (SNG) and Golden Gate Yacht Club (GGYC) before there is another conventional multi-challenger monohull event, just about everyone in the sailing community would like to see the DOG Match sailed as soon as possible. GGYC has said so. Grant Dalton has said so. Vincenzo Onorato has said so. Professional sailors in career holding patterns have said so. ‘Buttheads have said so.
Before we can get there, Justice Cahn has to set a date for the DOG Match, which was the purpose of the April 2, 2008 hearing. After listening to the parties, Justice Cahn was left in irons, unable to set a date and had to hold off until he can figure the date out on his own. GGYC stuck to its previous rationale for an October 2008 Match. That pegs the Match to 10 months after Justice Cahn’s November 27, 2007 opinion granting summary judgment to GGYC and DSQing CNEV. (GGYC continues to implicitly concede that a toll was in effect despite the fact that SNG rejected a toll. See Episode 19 of this saga.) The fundamental problem with that argument is that an order has yet to be entered on the summary judgment motions Justice Cahn decided on November 27, 2007.
In NY State practice, opinions do not count, except as education for lawyers and precedent. In a given case, only orders count. Only orders are legally operative and can be appealed. Thus, GGYC is trying to base the beginning of a 10 month period on something that in NY State practice does not matter. GGYC argues that SNG should have know that the jig was up on November 27, 2007, should have started building its boat and cannot benefit from all the motion practice that prevented entry of an order or the motions that were not decided until March 17, 2008. GGYC argues that, although SNG was entitled to proceed as it did, it somehow cannot benefit from the delay GGYC concedes it was entitled to cause.
If you are having difficulty following that argument, you know why Justice Cahn did not set a date. Penalizing a party for something it was entitled to do is a major stretch. If a toll was in effect, SNG is entitled to 10 months from an order. It ain’t over ‘til it’s over and it ain’t over ‘til an order is entered. If SNG sailed to the edge, but not over the edge, in order to delay entry of an order, good for its lawyers — they earned their fee. Calling permitted conduct wrongdoing does not make it wrongdoing. It is the same as coming up under another boat at the start, hailing leeward, and without contact forcing it OCS. It may earn you hard feelings in the fleet, but you cannot be DSQed.
GGYC’s fall back argument is that, if March 17 is the end of the toll, that brings you to January 2009 and SNG should have to choose a venue in a hemisphere in which a match can be held in January. So elliptical is GGYC’s presentation of this argument that, although it quotes the Deed, it never comes out and says the words “Southern Hemisphere.” Indeed when, Justice Cahn suggested that it would be warm enough to sail in Valencia in January -- and SNG pointed out that Valencia is in the Northern Hemisphere -- GGYC did not say a word about the many delightful places to sail in the Southern Hemisphere. While Justice Cahn could send the parties to the Southern Hemisphere, without any evidence that a Southern Hemisphere Match is feasible, that is a tough sell. Indeed, although SNG did not pick up on it, while the March 17, 2008 decision was entered as two Short Form Orders (don’t ask), they were on motions to renew and reargue and to DSQ GGYC. Neither was on the summary judgment motions and thus, neither is the right order – which still has not been entered. If one accepts the 10 month toll, the 10 months have yet to begin.
SNG stuck to its argument that you start from March 17, 2008 and because they are located in the Northern Hemisphere, they cannot be forced to race until May 1, 2009. SNG bolsters that argument with a flat statement that SNG cannot be ready before then and that the Match should be decided on the water, not in the courtroom. Justice Cahn readily agreed with the latter proposition. GGYC countered that there was no evidence in the record that SNG could not be ready in October 2008, but Justice Cahn seemed inclined to accept Barry Ostrager’s (SNG’s lawyer) representation of counsel that October 2008 was “impossible” for SNG.
SNG did earn at least one Pinocchio for repeatedly arguing that not only could SNG not be ready by October 2008, but neither could any of the other teams (not including GGYC, of course). That is technically true, but, of course, the reason is that no other team has any reason (or money) to build a DOG boat, because there can be no challenger series in a DOG Match without SNG’s consent, which is not very likely. GGYC wins an equal number of Whiffs for letting that go by unchallenged. GGYC seems afraid of acknowledging that the other teams are frozen out, even though the other teams know they are frozen out and, for that reason, are vociferously agitating for a prompt DOG Match. Indeed, the two parties’ litigation strategies seem to be driven by PR concerns about things that go bump in the night which seem overblown, given that every heart and mind that gives a damn was made up a long time ago and will not be won or lost at this point, regardless of what anybody does or says.
Where do we go from here? When the procedure to settle an order on the November 27, 2007 decision went off track in December 2007, there were close to a half dozen proposed orders and counter proposed orders floating around Justice Cahn’s chambers with just about every possible date after 1887 for the DOG Match. Justice Cahn said he intends to sign an order and write an opinion explaining why. Signing an order will take little time, but writing an opinion may take some time.
The one thing in GGYC’s favor is that Justice Cahn may simply decide to sign GGYC’s order with the October 2008 Match date and let GGYC defend it if there is an appeal. That is common practice. The problem with that is that, while SNG has little chance of getting a stay from the Appellate Division on an appeal of the issues Justice Cahn decided on November 27, 2007 and March 17, 2008, it might have a shot on dates lacking a decent rationale. Alternatively, if Justice Cahn notices that there was no tolling agreement in effect, he could order a Match in July 2008 and that would be that. SNG’s chances of getting a stay would be slim. As it stands, SNG has been hammered twice and is not winning the battles, but as of today it has not lost the war and may escape to fight again, either on the water in 2009 or in the Appellate Division.
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Part 19 - Tolling Agreements 101
"I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few." -- sung by Bobby Bare.
(March 30, 2008) In response to letters from both Societe Nautique de Geneve (SNG) and Golden Gate Yacht Club (GGYC), Justice Cahn has set a 9:30 am hearing on April 2, 2008, presumably to consider setting a date for AC 33, the Deed of Gift (DOG) Challenge. GGYC has set October 1, 3 and 5, 2008 as the dates and SNG is insisting on nothing earlier than May 1, 2009. SNG should be sitting pretty going into this hearing. Indeed, SNG should be in a position to push the Match out for years. Instead, thanks to a spectacular blunder, almost as bad as not going around a mark, SNG is going into the hearing with its pants around its ankles begging for mercy from Justice Cahn, whose decision on SNG’s last motions practically had “we are not amused,” as the refrain.
How did SNG dig itself this hole? If, based upon past history, you chose (a) “overreaching,” you win and move on to the next round. Ordinarily, the deadline to do anything is unaffected by litigation. In special cases, statutes provide a stay while litigation is pending. For example, governmental entities usually get an automatic stay of enforcement of a judgment while they appeal. Those statutory stays are relatively rare and none apply to this case. At the very first hearing on September 10, 2007, Justice Cahn suggested a tolling agreement to stop the clock on GGYC’s July 4, 6 and 8, 2008 challenge. Both sides supported in general terms a toll of the July 2008 dates, but with no specificity and no court reporter to take a detailed “agreement” down, New York Civil Practice Law and Rules (CPLR) 2104 renders their statements unenforceable, unless reduced to a writing and signed by the parties, which customarily then would be submitted to Justice Cahn for his signature and entry on the docket.
Obviously, both parties thought they would have a tolling agreement, (although it is much more important to defendant SNG, which does not want the Match to happen), and Jim Kearney, GGYC’s lawyer at Latham & Watkins, sent David Hille, SNG’s lawyer at White & Case, a proposed stipulation. In an outbreak of “irrational exuberance,” Kearney even signed the proposed stipulation and referred in his cover letter to “the tolling agreement agreed to before Justice Cahn at the September 10, 2007 hearing.” Indeed, the proposed stipulation was extremely generous – perhaps too generous -- as it tolled the Match until 10 months after all litigation was completed, including appeals to the Appellate Division and the Court of Appeals. Thus, it could easily have tolled the Match for years if SNG decided to drag its feet.
Amazingly, SNG declined to sign and file the stipulation and sent back a counter offer unjustifiably demanding more than just maintenance of the status quo. Negotiations broke down and nothing was agreed. Every law student is taught in first year Contracts class that, except for sales of goods under the Uniform Commercial Code, a counter offer acts as a rejection of the offer to which it responds. Thus, not only had the parties not agreed, but, by making a counter offer, SNG had rejected the offered stipulation. (Just goes to show that legal education is about as effective as sex ed is.) Thanks to overreaching that could only have come from the client, rather than the lawyers, SNG, the party that needed the toll the most, was now going bare, as it will be on April 2, 2008 at 9:30 am. It probably seemed like a good idea at the time.
It is entirely possible that no one was more surprised than GGYC as a DOG Match fell into its lap on November 27, 2007, when Justice Cahn ruled in its favor with no tolling agreement in place. By not agreeing to the tolling agreement, SNG had handed GGYC a windfall. No wonder GGYC started building its multihull challenger shortly thereafter. They were in a position to demand that the July 4, 2008 date be adhered to – and, conversely, had to be prepared if SNG did so.
Instead of building a boat, SNG fired White & Case, hired Simpson Thacher & Bartlett, and launched into the “keel yacht” motions, which wasted several months of everyone’s time and forced Justice Cahn to write another decision ruling that he did not screw up and really meant what he decided the first time. Those motions would have been a successful diversion if SNG’s flank had been covered by a tolling agreement, which would have allowed it to plod through more motions and appeals until the Cup was stone cold dead or GGYC gave up. Without a tolling agreement to cover its flank, and no boat in the works, the keel yacht motions make the Charge of the Light Brigade look like a clever idea.
Curiously, everyone has enough they do not want to talk about (I have probably only scratched the surface – after all, I never guessed anyone would drop the ball on a tolling agreement) that, in their letters, both parties dance around the issues as if they were members of the Bolshoi Ballet. For example, SNG implies that some sort of toll is in place, without actually saying so, which would be untrue. It then argues that it was not really, really, really certain that it should build a very, very, very expensive boat until March 17, 2008 and that GGYC is being really, really, really mean by demanding October 2008, which would not allow it to build a really, really, really competitive boat. The grasshopper is asking the Court to excuse its indolence while the ant was busily dealing with all that nasty carbon fiber and resin. Amazingly, SNG actually argues that the fact that GGYC announced that it was building its boat, while SNG claims it was sitting on its hands, works in SNG’s favor. Apparently, it is some sort of publicly announced ambush. Of course, as GGYC points out, Mercury Bay holds that fairness has nothing to do with the requirements of the Deed.
SNG argues that, because 10 months from March 17 falls after November 1, SNG is located in the Northern Hemisphere, and somehow gets to choose the hemisphere in which it will defend, even though it has no home waters anywhere in the world, it gets a pass until May 1, 2009 (Note: the Deed of Gift states the time period when racing can occur in each hemisphere).
Rather than going for July 2008, based upon the lack of a toll, or saying that it is entitled to July 2008, but is such a bunch of nice guys that it will wait until October 2008, GGYC backs into the date by arguing about when 10 months should commence, arguing for November 27, 2007, which gets it to October 2008. For some reason GGYC has been unwilling to go for the knockout on the tolling issue. It almost looks as if GGYC feels it can only spar and must carry the palooka into the 6th round so it does look like the fight is fixed. Perhaps it is afraid of appearing to be ungentlemanly in going back on its counsel’s statement that it would toll the 10 months, even though it was SNG that rejected the deal, or is afraid of looking unsportsmanlike by taking advantage of SNG’s blunder -- as if SNG had any compunctions about taking the gun when New Zealand had to be towed off the course in AC 31 as a result of engineering errors. Perhaps GGYC just will not be ready until October.
GGYC attempts to run down all of SNG’s arguments, such as that, if you start on March 17, that gets you to January 2009 and SNG gets to choose the hemisphere because it gets to choose the venue. GGYC responds that even if you wind up in January, the date controls and SNG has to pick a venue in a hemisphere that works for that date. GGYC also argues that if SNG’s preferred venue, Valencia, is not available in October 2008, because of a Formula One race, SNG will have to choose another venue. Much of this previously was argued in mind-numbing detail back in December. GGYC also argues that SNG has been designing something since shortly after the November 27, 2007 decision, when Grant Simmer said it was, and Nigel Irens first surfaced for SNG. Of course, these appeals to equity have little to do with the Deed or the dates.
SNG threatens an appeal if it does not get its way, but that is not much of a threat without the tolling agreement. It would have to convince the Appellate Division, First Department to issue a stay of the Match, which would require convincing the Appellate Division that SNG has a serious chance of prevailing on appeal. By forcing Justice Cahn to hammer them a second time, SNG has probably burned that bridge before crossing it and the threat is an empty one. Once again, the tolling agreement blunder comes home to roost.
Given the whoppers SNG came up with at the last hearing (“ISAF is like the Football Commissioner” – Goran Petersson, are you listening?) the hearing will be interesting and we may be able to award a few Pinocchio’s. Perhaps we will hear that the tolling agreement was not signed because the conference room came under sniper fire. Given past form, Justice Cahn will get to the bottom of this, although it may take some time to sift through the murk. One thing is almost certain – there will be more litigation. SNG has refused to name a venue. We could easily see litigation to compel designation of a venue and/or a venue designated that will lead to litigation. Another near certainty is that GGYC will regret giving SNG until October. No good deed ever goes unpunished. The smart money will be betting that SNG is engaged in a rope-a-dope.
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Part 18 - Game on... or is it?
(March 18, 2008) First the news. Justice Cahn, in a decision dated March 17, 2008, has denied Societe Nautique de Geneve’s (SNG) motion to renew and reargue his November 27, 2007 decision declaring CNEV’s challenge invalid and Golden Gate Yacht Club (GGYC) the Challenger of Record. Justice Cahn also denied SNG’s twin motion to declare GGYC’s Challenge invalid. Although we have two outstanding decisions, it is not clear whether Justice Cahn’s recent decision technically is an order, or whether he still needs to enter an order on the original November 27, 2007 decision, starting the time to appeal. Regardless, SNG has announced it will not appeal. Importantly, Justice Cahn ruled that, if the parties cannot resolve that dates for the Deed of Gift Match, they can either come back to him for a ruling, or, citing the New York Court of Appeals’ Mercury Bay decision, have it arbitrated by “a neutral associated with the yachting community.”
Now the real news. After Justice Cahn’s decision was handed down, Ernesto Bertarelli called. He confirmed that SNG will not appeal, he wants to decide the Cup on the water, rather than in court, and that the next match will be a Deed of Gift Match in multi-hulls. When questioned about the date for the Dead of Gift Match, he said that SNG would not be ready to race in October 2008 if that turns out to be the date. He further confirmed that, if pressed to race in October 2008, SNG will forfeit.
I called GGYC to ask for their comment and spoke to Tom Ehman. His position is that GGYC, as challenger, has the right under the Deed to chose the Match date and, if SNG does not want to accept October 2008, SNG has to take the initiative to get it changed. He expressed great respect for Team Alinghi’s abilities, expects them to be ready to race at the highest level whenever the Match is scheduled, and does not believe they will forfeit.
Ehman argues that the ball is now in SNG’s court. If SNG does not like the October date, SNG will have to make a proposal to GGYC, go back to Justice Cahn, or risk a forfeiture (subject to further litigation). If SNG and GGYC cannot reach a compromise on the date (How about February or March in the Southern Hemisphere??? – no takers so far), GGYC will demand notice of the venue. If SNG names the venue, GGYC will show up ready to race in October. If SNG does not name the venue, GGYC will probably have to go back to Justice Cahn.
Given that news, Justice Cahn’s full decision is a lot less exciting. ‘Buttheads who have read previous articles in this series will recognize the elements of Justice Cahn’s decision, which are essentially hornbook NY law and the Deed. As to the motion to renew and reargue, Justice Cahn ruled that “SNG has not demonstrated that the court overlooked any relevant fact, misapprehended the law or otherwise mistakenly arrived at its determination.” In other words, SNG did not convince him he was wrong. He went on to write that SNG had made its litigation strategy decision, has not proffered any new facts, and does not get a Mulligan or do over.
On the motion to declare GGYC’s challenge invalid, Justice Cahn ruled that, by providing the information required by the Deed, GGYC had filed a valid challenge and the “keel yacht” kerfuffle just did not matter. Relying upon Hamish Ross’ affidavit swearing that the “Certificate could only be for ‘a multi-hulled vessel – presumably, catamaran,’” Justice Cahn ruled that the fact that the vessel might be “’unusual’” does not undermine the Certificate. “Hence, SNG has not established that the ‘keel yacht’ cannot describe a multi-hull vessel.”
Quoting the NY Court of Appeals’ Mercury Bay decision, Justice Cahn went on to rule that, as long as GGYC specified its dimensions, the parties can race the fastest boats they can build “’so long as they fall within the broad criteria of the deed.’”
SNG made a number of arguments that the dates specified by GGYC were invalid, which it claimed invalidated GGYC’s challenge. Justice Cahn dismissed all of them.
Ernesto Bertarelli says he does not want to litigate anymore. Either the parties will finally negotiate a venue and date, someone will blink, or they will litigate some more. So there we are. If they are going to race, SNG and GGYC are going to have to start talking, even if it is only about where to park the boats. Now is as good a time as any.
I was able to get both Ernesto Bertarelli and Tom Ehman to independently agree that Deed of Gift multi-hulls may not be able to crack the 50 knot barrier, but, in decent wind, should easily top 40 knots – according to Ehman, both upwind and downwind. At least they can agree on something. It’s a start.
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Part 17 - Some thunder from down under
“Mama don't let your babies grow up to be [sailors], Don't let 'em pick guitars and drive them old trucks, Make 'em be . . . lawyers.” -- written by Ed Bruce and Patsy Bruce, performed by Waylon Jennings and Willie Nelson
“War is a continuation of politics by other means.” -- Karl von Clausewitz
(March 6, 2008) The second front has been opened – and the third. As widely reported, Team New Zealand Limited, (“TNZ”) (Emirates seems to be MIA), filed two complaints against Societe Nautique de Geneve (SNG), Team Alinghi, S.A., AC Management, S.A. and Ernesto Bertarelli. The first is a straightforward breach of fiduciary duty/breach of contract complaint filed in the Commercial Division of the New York State Supreme Court, New York County. TNZ requests that it be assigned to Justice Cahn. In keeping with the selection of David Boies of Boies, Schiller & Flexner, LLP, one of the most aggressive quality US law firms, as counsel for TNZ, the second, filed in the US District Court for the Southern District of New York (literally a short stone’s throw behind the Supreme Court building) and assigned to US District Judge Pauley, is an anti-trust case which lies somewhere near the outer limits of US anti-trust law.
We have already seen Justice Cahn in action. I appeared before Judge Pauley soon after he became a judge and found him to be an excellent, no nonsense judge (who quickly ruled in my favor – full disclosure.) Unlike the pending GGYC v. SNG case before Justice Cahn, which should have been history by now -- if the keel yacht issue had not been allowed to drift off course -- neither of TNZ’s cases is amenable to a prompt resolution. Indeed, all of the appeals in GGYC v. SNG will probably be resolved before either case gets anywhere near resolution, so don’t hold your breath.
The state court case is pretty straightforward. It alleges that SNG (and the other defendants) engaged in self dealing and breached a fiduciary duty to TNZ by cooking up the CNEV challenge in order to fix the 33rd Cup in SNG’s favor and wound up injuring TNZ by postponing the Cup because SNG was caught by GGYC (Oracle), which cuts off TNZ’s income, especially from sponsors, but not its expenses.
The breach of contract claim is a little more intriguing. It alleges that, when Alinghi found it could not get any substantial challengers to sign up for the SNG “negotiated” Protocol, Ernesto Bertaralli did a deal with Grant Dalton, which was memorialized in e-mails between Hamish Ross (Alinghi) and James Farmer (TNZ) and constituted a contract. The terms were essentially that TNZ would sign up as a challenger (with the €50,000 entry fee deferred) in return for a hard 2009 date in Valencia for AC 33. By postponing AC 33 indefinitely, Alinghi breached the contract and destroyed TNZ’s income stream from sponsorship. The complaint asks that SNG be removed as trustee and for damages.
All of this is going to require discovery (which is much more time consuming and expensive than the motion practice in GGYC v. SNG) and, because there are plenty of potential pitfalls on both claims, expect Barry Ostrager, SNG’s counsel at Simpson Thacher, to find much to contest through motion practice. There are also some interesting open issues. In Mercury Bay the Court of Appeals wrote that a sporting trust may not require as high a fiduciary standard for the trustee as in a normal trust, which in the famous of formulation of Judge Cardozo is “the punctilio of an honor most sensitive.” If there is a lower standard, the contours of that lower standard are undefined, although TNZ argues that no matter how low the standard is, SNG has breached it. If SNG were removed as trustee (but not necessarily as defender), who would be the substitute trustee? Presumably a notable appointed by Justice Cahn, but not necessarily a sailor, although he or she would probably hire knowledgeable advisors.
As far as the breach of contract claim goes, Alinghi will almost certainly argue that there was no contract. Count on a major fight over what law even applies to the deal. A Swiss entity located in Valencia, Spain (both civil law jurisdictions) deals by e-mail with a New Zealand entity located in Auckland, NZ (a common law jurisdiction) about a Cup event which, including acts, will take place all over the world. Place your bets on what law applies. Under New York law, they probably have a contract, but why would New York law apply? New York has the undisputed paramount interest in the Deed, but what is New York’s interest in this “contract”? Who knows what the law of some of these other jurisdictions might be? What is really amazing is that Ross and Farmer, two New Zealand lawyers (Farmer is apparently an elite Queen’s Counsel (QC) – a “silk”) would enter into something that looks like a contract, walks like contract and quacks like a contract, but which is so sketchy that it is lacking any of the normal contractual boilerplate that resolves these, as well as many more, issues. The “contract” does contain an agreement to abide by the arbitration provisions of the Protocol, but applying that arbitration provision to this “contract” would be a major stretch. Altogether an extra Christmas Day for lawyers.
The disputable issues in the antitrust case are exponentially greater. Of course ‘Buttheads might ask why TNZ would try to turn this garden variety state law case into an antitrust case. The answer is two words – treble damages. Add to that the slightly broader discovery available in federal court and you have a much bigger stick to swing. Essentially, TNZ is claiming that the defendants and co-conspirators RFEV and CNEV are conspiring to monopolize, attempting to monopolize and are monopolizing (section 2 of the Sherman Act) the market for America’s Cup sponsorship in the US (the rest of the world probably only counts if it has an effect in the US) and that the defendants are combining and conspiring to restrain trade (section 1 of the Sherman Act) in America’s Cup sponsorship in the US. By making it impossible for TNZ and other viable challengers to survive, Alinghi secures and perpetuates its monopoly over that sponsorship. Like I said, this is not garden variety antitrust material like conspiring to fix the price of concrete or trash hauling in New York or the Standard Oil Company monopolized the US oil business.
Of course, to profit in the long run Alinghi would have to endure considerable pain itself, to be recouped in the future, but if it can turn the sponsorship spigot on and off to suit itself, there might by a monopolist’s pot of gold at the end of rainbow. As you might guess, courts are not very hospitable to those kinds of theories, which is why it is virtually impossible for a plaintiff to win a predatory pricing antitrust case, which is basically the same idea – sell at a loss now to drive your competition out of business and make lots of money in the future. Add all the usual disputes about what the market is (AC sponsorship? All sports sponsorship?), what the geography of the market is, etc., etc. Then add in a healthy dose of factual disputes – many of the present sponsors do business in the US (Toyota, BMW, Emirates, UBS) but are headquartered and may make sponsorship decisions outside the US -- and you begin to see the outline of a 365 day per year Christmas for lawyers.
If all of this were litigated to the last billable hour, the hiatus between the 32nd and 33rd AC’s would probably exceed the hiatus between the Ranger (J boat) defense and the Columbia (12-Metre) defense. Don’t count on it. But, then again, we have not seen too much rational behavior thus far, so this may get curiouser and curiouser.
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Part 16 - Full speed on split tacks
"I (really, really) don't have to show you any stinking badges.”
(January 30, 2008) I have been trying to avoid AC litigation fatigue, so I will keep this update short. On Monday, as reported in Part 15 (see below), SNG had managed to maneuver GGYC into a hole, with GGYC stuck without an optimum presentation of its arguments and SNG sailing in decent pressure with a full presentation of its argument that GGYC’s Notice of Challenge is defective and hence GGYC is not a valid challenger. In New York practice, there is a simple solution when all the papers are in and you have not made your argument – forget about rules and submit more papers, usually in the form of a letter to the judge.
GGYC did exactly that in a succinct, forcefully argued, back to the basics letter to Justice Cahn. Stripped for action of any discussion of what a “keel yacht” is or is not, GGYC argues that it has provided all the information (rig and dimensions) required by the Deed, the parties can race what they please within the parameters of the Deed and that neither has to disclose the type of vessel or configuration until they line up at the starting line for the first race for all to see. GGYC goes on to argue that the defender cannot cherry pick amongst challengers by quibbling over the Notice of Challenge, but can always negotiate for more information from the challenger. Finally, GGYC argues that SNG has refused to specify the applicable rules for the match, which cannot contravene the Deed, so SNG cannot rely upon ISAF rules or pronouncements, which are not applicable in any event. In short, GGYC argues that Justice Cahn should only consider three criteria: the Deed, the Deed, and the Deed. Although GGYC avoids the “keel yacht” quagmire, it does point out that SNG submitted evidence from Nigel Irens, a multihull design expert on Alinghi’s design team.
The next day SNG shot back a letter arguing that GGYC’s letter is improper – and goes on to say that GGYC does not say anything new.
So, after a lull and a false start, we really seem to be at the end of the submissions and both teams are back at full speed on split tacks. GGYC argues that Justice Cahn should sign its proposed order, dated December 11, 2007 (an October 2008 match), and send the case to the Appellate Division, First Department, if SNG, as promised, appeals. SNG argues that Justice Cahn should DSQ GGYC or refer the matter to ISAF, without, however, citing any provision of the New York Civil Practice and Rules that would authorize Justice Cahn to make such a referral, or provide a mechanism to do so. Keep your fingers crossed. There seems to be enough pressure to finally get across the finish line on this leg of the race.
One final note. Periodically, sailors complain that if either litigant would just be reasonable and stop this litigation, we could all go back to sailing under the AC 32 format. That sort of equivalency (in legal jargon, “in pari delicto,” of equal fault) ignores reality. Only one litigant has the power to unilaterally go back to the AC 32 format and has declined to do so, in favor of a different format which has not exactly met with universal approval. That is why the Cup is before Justice Cahn.
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Part 15 - Did GGYC copy the Mercury Bay Challenge?
“Behind every great fortune there is a crime.” -- Honore de Balzac
(January 28, 2008) Behind every litigation there is a screw-up. Make that more than one in this AC litigation. Although clients are the originators of the most ingenious and creative screw-ups, it is usually the lawyers trying to get their clients out of their messes that bear the brunt of the criticism. Clients do not fall on their swords. Lawyers do. That is why it was adios White & Case, former “best lawyers” of Société Nautique Genève (SNG). Until now, the screw-up that dominated the litigation was the creation of the obviously bogus Club Nautico Español de Vela (CNEV) as Challenger of Record. The honor of center stage now passes to the now infamous “keel yacht” challenge, which threatens to snatch defeat from the jaws of victory for Golden Gate Yacht Club (GGYC). As John Rousmaniere and others have noted, inquiries regarding how the obviously misplaced “keel” wound up before “yacht” in GGYC’s challenge have brought forth only enigmatic responses from GGYC. Buried in the latest blizzard of papers lies the answer.
Barry Ostrager’s Affirmation was filed Monday and is on the web, without its fairly extensive exhibits. Exhibit H of that Affirmation is the 15 July 1987 Mercury Bay challenge. The GGYC challenge is obviously copied word for word from that challenge. Everything is exactly the same, the title, format, everything. The only differences are that Commodore Marcus Young is substituted for Humphrey Michael Gerard Fay and the dimensions are different. Each one goes on to “certify the details set out below as to the name, rig and specified dimension of the keel yacht to represent [the challenging club] in a match for the America’s Cup to be sailed in accordance with the Notice of Challenge herewith.” Thus, someone familiar with the Mercury Bay challenge obviously copied the Mercury Bay challenge verbatim without realizing that “keel” was superfluous and could only lead to trouble. That trouble has arrived. It also explains the bind GGYC’s lawyers are in.
The one thing one seldom sees in a litigation, even if in the end it might be the most successful, albeit gutsy (this is a family publication), strategy, is a straightforward mea culpa. I once did it myself in NY Supreme and it worked like a charm in a very dicey situation. In this case it would be something like: “Yes, we made a silly mistake, but it does not make any difference, because we gave the dimensions and that is all we have to do. We are not going to have a keel and any confusion is feigned. Let’s go race.” Justice Cahn probably would be so shocked to hear the candor of a mea culpa uttered in a courtroom that, after he recovered from his faint, he immediately would rule in GGYC’s favor, if not award the Cup outright to GGYC.
Instead, the litigation has become a debate over how many lawyers can dance on the head of a pin arguing, with expert support on SNG’s side, about the totally irrelevant question of whether a multihull can be a keel yacht. On that spurious issue, SNG, in contrast to the litigation to date, has the better of the argument. First SNG snookered GGYC by delivering the Pels interpretation the night before Wednesday’s hearing. Although the chances of Justice Cahn reading it before the hearing were near zero, GGYC’s lawyers, obviously anxious to avoid asking for a delay to respond, put together a response for the next day, without enough sailor input to realize that the Tornado class rules GGYC cited, which refer to a Tornado’s keel, were for an Olympic Class. Thus, they missed the fact that the Tornado rules demonstrate that Pels, who was obviously way beyond his authority (SNG is not an MNA) and only speaks about Olympic classes, does not know what he is talking about. Although there was no chance Justice Cahn would read either submission at or before the hearing, GGYC’s submitting at the hearing allowed SNG to ask for 5 full days for a response. SNG thus had plenty of time to prepare a response (complete with graphics in the text) bolstered by an impressive sounding group of “experts” who claim not to be getting paid for their opinions, but obviously have every reason to believe the favor may be returned at some point in the future. SNG got the last word, litigation’s weather gage, and used it to create the illusion of a ship of the line out of a lashed up raft which could not bear a single return salvo. Lucky Jack Aubrey would be impressed.
So where are we? Justice Cahn is not getting much help from the litigants and will have to figure this out himself. He does not have the luxury of sifting through papers for the facts that should have been highlighted for him. Nevertheless, he may by himself come to the KISS answer I outlined in #14 -- GGYC gave the dimensions and SNG can sail what it pleases within the parameters of the Deed. That would be consistent with Mercury Bay’s four corners of the Deed, just the four corners of the Deed, approach. It would also be consistent with the terse style generally favored in New York courts. That would go GGYC’s way and the litigation would move uptown to the Appellate Division, First Department.
The other possibility is that he goes down the “keel yacht” path that SNG has created. That opens three possibilities. A decision on the papers for one side or the other is not likely. Nor would punting to ISAF, as SNG wants for obvious reasons, given the Pels interpretation, be very likely. (The chances of ISAF getting the right answer on anything are . . . ?) Justice Cahn just does not have enough information to do that. The most likely of the three would be a trial on the issue of what a “keel yacht” is, which would also delight SNG, as one could design and build an Armada in the time that would take.
‘Buttheads hoping for some sailing will just have to keep their fingers crossed. Justice Cahn is in the lead for Seahorse Magazine’s Sailor of the Month. (If you have not voted, make sure you go to www.seahorsemagazine.com and cast you ballot.) If he is able to singlehand his way through this sailor created mess and get the Cup back on track and on the water all by himself, he deserves to be named Rolex Sailor of the Year.
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Part 14 - “If you can’t convince them, make sure you confuse them.” – Anon
""Badges? We ain't got no badges. We don't need no badges. I don't have to show you any stinking badges!" -- "The Treasure of the Sierra Madre", Warner Bros. (1948 - click here)
(January 23, 2008) Today’s hearing, which should have been the end of the first leg of the America’s Cup litigation, turned out to be the sailor’s nightmare – becalmed within sight of the finish line and suddenly discovering that someone left the time limit out of the Sailing Instructions. A lawyer’s responsibility is to zealously represent his or her client within the bounds of the law and the Code of Professional Responsibility. Sometimes it means implicitly arguing that “we don’t have to show you any stinking rules.” Sometimes it just means confusing the issues. Often it is not pretty. SNG did not win today, but Barry Ostrager justified his billing rate by not losing. He was not eloquent. His presentation was halting and he was often painfully at sea and grasping for basic terms and concepts on the sailing issues, but he managed to stave off an order, perhaps for a while. He stayed alive, which beats the alternative. His client is undoubtedly happy. A happy client makes a happy lawyer.
Despite having outlawyered SNG in the exchange of letters to Justice Cahn Friday and yesterday (letters are completely outside the rules, but common in NY Practice) GGYC could not close the deal. Focusing on the fact that attempting to reopen the issue of whether GGYC is a valid challenger violates a host of rules, GGYC lost sight of the KISS principle and could not explain why the whole “keel yacht”/multihull confusion issue on GGYC’s challenge is a red herring and should not be delaying entry of an order. Even if Justice Cahn believes that SNG is violating the rules by raising a new issue at this stage of the litigation, he has to feel comfortable that his ruling is substantively correct.
The KISS answer to the “keel yacht”/multihull issue (as I said in #13) is that, under the Deed, as long as the challenger sets forth the number of masts and the four dimensions required by the Deed, the defender can respond with anything it pleases within the parameters of the deed. Certainly, if it wants to have a real match, the defender can try to field a similar boat, but, as George Schuyler himself said prior to the execution of the present Deed, the defender does not have to. It can show up with the fastest boat it can design and hope for a “Coma Off Point Loma” blowout. Whether the defender is confused by extraneous or even contradictory extraneous language in the Notice of Challenge simply does not matter. Of course, as is also clear from George Schuyler’s statements about the Thistle challenge which resulted in the present Deed, the challenger and defender are allowed to talk to each other and work it out. But of course, a real match is not an issue in this dispute.
By trying to explain the “keel yacht”/multihull issue, GGYC was grabbing hold of the anchor SNG had thrown it – never a very great move – but understandable as none of the lawyers are sailors. Watching non-sailor lawyers trying to explain sailing matters to a non-sailor judge quickly became as painful as watching yours truly attempt to learn to kite board probably would be. The final “I can’t believe this is happening” moment was when GGYC, responding to a last minute document entitled “Interpretation – Keel Yacht/Multihull Yacht, authored by none other than ISAF’s General Secretary Jerome Pels, now taking SNG’s side, handed up a ¾ inch submission on keels and multihulls. Don’t hold your breath while a non-sailor judge tries to deal with that kettle of fish. Not once did I hear anyone say anything about why this needs to get done quickly, so that unemployed sailors and support staff can get back to work.
Where are we now? SNG gets to respond to GGYC’s submission on Monday and then – something will eventually happen. Hopefully, all the ‘Buttheads out there listened to their mothers’ advice and brought extra water and Power Bars with them, because they are going to come in handy if this drifter continues.
After the hearing, Lucien Masmejan, Ernesto Bertarelli’s Swiss lawyer tried to explain to me that getting this done one way or the other was not the issue, but Barry Ostrager’s response to Justice Cahn’s question about whether the parties had discussed the nature of the challenge said it all without realizing the irony of his words: “We have irreconcilable differences with GGYC.” As some ‘Buttheads may have learned the hard way, “irreconcilable differences” is a legal term of art – it is a ground for divorce in many states (not NY). As I said way back in this series, this is like a marriage gone bad. It is getting worse. Pretty soon we start sawing the kids and the dog in half.
If sailors hoping for some racing think they have it bad, think of Justice Cahn, elected by New York’s voters to deal with a bunch of squabbling sailors who refuse to leave the “room,” while not even allowed to bring a bottle of Mount Gay to the bench. The least ‘Buttheads can do is vote for Justice Cahn as Seahorse Magazines Sailor of the Month. Just go to http://www.seahorsemagazine.com/sailor_month/sailormonth.php and cast your ballot. If this keeps up, he could wear the winner’s gear in place of his robe.
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Part 13 - The scent of an appeal grows stronger
"It is better that ten guilty persons escape than one innocent suffer." -- Sir William Blackstone, Commentaries, IV, 27.
(January 14, 2008) Who won today before Justice Cahn? Nobody. Everybody. SNG got a 9 day reprieve, but not 9 days more to prepare for the match. The date of the match will be determined – if the parties do not take the Court’s repeated suggestions that they agree – at a hearing before Justice Cahn on January 23, 2008 at 2:00 pm. The reason for the delay is straightforward.
First of all, I have to point out that no ‘on the record’ hearing was held. Instead, as the appearance was scheduled as a conference, rather than argument, the Court convened an 18th century type scrum at the bench, just like the very first appearance, which allows Justice Cahn a degree of informality to explore the issues which would not be possible on the record. For that reason, even though I could hear much of the conference, it would not be appropriate to quote Justice Cahn. What is clear is that he wants to get an order entered which will finish this stage of the litigation.
As SNG has stated, it will appeal whatever the order provides, so it does not make a lot of sense to beat the order to death. That is the Appellate Division’s problem. Ordinarily, the order settled by the motion winner is signed, with any valid points from the order counter-settled by the motion loser added. That makes sense, because the motion winner will have to defend the order on appeal to the Appellate Division. If the winner asks for more than he or she is entitled to, it increases the chances of reversal, but the motion winner bears that risk. Indeed, a motion loser might be better off with an overreaching order to appeal, rather than one more carefully drawn. It is a fatter target.
If that were the only consideration, Justice Cahn might well have signed GGYC’s order, with the October 2008 match dates and let the Appellate Division sort it out. The complicating factor is SNG’s motion to renew and reargue, which I discussed in my last report. SNG is now making the argument that the record on the cross motions for summary judgment was not sufficient for Justice Cahn to rule that GGYC is a valid challenger. Thus, SNG argues that Justice Cahn take that issue up separately. Because the issue of whether GGYC is a proper challenger is already briefed on the motion to renew and reargue (but not yet forwarded to Justice Cahn), Justice Cahn advanced the argument from January 28 to January 23 and held the dispute over the order to that date.
Not having seen the motion to renew and reargue, Justice Cahn did not express any opinion regarding whether there was any substance to it. Thus, SNG got 9 more days before an order is entered, which will set the date of the match, unless Justice Cahn decides that GGYC’s challenge is invalid and there will be no match. Having hammered SNG on both the procedure and the substance of the motion to renew and reargue, GGYC did not oppose the 9 day delay, obviously concluding it had nothing to lose and that it would get more points with the Court by being accommodating. Justice Cahn gains points in the Appellate Division’s eyes by giving SNG ample opportunity to make its case.
In a break with past practice – and a stated reflection of SNG’s concern for the opinions of the ‘Butthead community – Barry Ostrager, SNG’s new lead counsel asked if he could call me to convey SNG’s position. Naturally I agreed. (I give almost anyone the courtesy of a hearing.) Most of what he had to say was in the motion to renew and reargue, with a few additions he will probably argue at the hearing. I asked some fairly probing questions and got polite, but not terribly illuminating answers.
The one new argument is that in Mercury Bay, the Court of Appeals specifically stated that: “In this case, we are not presented with the issue to which Mercury Bay's arguments are relevant -- whether the required dimensions preclude the use of a catamaran by a challenger because the dimensions specified do not relate to multihull vessels and therefore do not provide the defender with the disclosure mandated by the deed.” Although the Court of Appeals went on to report that the Mercury Bay parties had submitted extensive expert opinion on the issue, it would be a mistake to conclude anything from that statement – other than the fact that Court of Appeals was not considering the issue. Specifically, it does not indicate the Court of Appeals though there was anything to the argument or that it was in any way important.
On January 23rd, SNG will have its work cut out for it. First of all, under the Commercial Divisions special rules, when GGYC moved for summary judgment that its challenge was valid, based upon the evidence of the written challenge itself, SNG could not just oppose that branch of the motion, it had to come forward with contrary evidence to counter GGYC’s evidence. By not doing so, it conceded the issue and is bound by that concession. Although it can argue on appeal that the written challenge was not enough evidence to start with and, therefore, it did not need to respond to GGYC’s evidence, that is not likely to be a winning argument, because the written challenge almost certainly is enough evidence.
As I previously reported, SNG also has to overcome the fact that its representative previously swore that the challenge was perfectly clear and could only mean a catamaran, regardless of the issue the Court of Appeals left open. An even bigger problem is presented by the Deed itself. As the Court of Appeals specifically held in Mercury Bay, whatever the challenger says in its challenge, the defender can show up in anything it pleases, as long as it is 90 feet or less at the waterline. Thus, regardless of whether SNG is confused by GGYC’s challenge or not, it can show up with the fastest under 90 footer it can design. Indeed, it even gets to chose the site for the match and optimize the fit between sea and wind conditions and its boat. Moreover, it would be hard to imagine that the defender is permitted to sail a multihull with the Court of Appeals’ express blessing, but the challenger is not.
In addition, the issue of whether a multihull may sail is different from the issue of whether the issuer of a multihull challenge is a proper challenger. The Deed requires only that specific dimensions be disclosed. It is Justice Cahn’s responsibility to determine whether the dimensions have been disclosed. The Deed says nothing one way or the other about surplus information (the “keel yacht” issue) and SNG if free to disregard anything beyond the required dimensions. Just because the challenge is valid, however, does not preclude SNG from protesting the boat GGYC shows up with. Indeed the Court of Appeals held that such a protest should be decided by what was an IYRU jury in Mercury Bay. (Of course, the Court of Appeals had no reason to consider what to do if the jury was not indisputably impartial.)
One of the points Barry Ostrager made in his call was the same one SNG has been making since the case began – this dispute should not be in Court. That is obviously true, but not very helpful. The parties should have resolved this dispute months ago, but cannot. That leaves no choice but Justice Cahn, who was doing his best to get the parties to at least agree on the match dates. Before we ended the conversation, I pointed out to Barry Ostrager that parties could probably solve this problem with the help of a really first-rate mediator like Ken Feinberg, who resolved all of the World Trade Center fund claims. What someone like Feinberg can do is not simply propose a compromise. He can do something much more important – show the parties how to agree to a compromise without feeling that they are losing face. It turns out Barry Ostrager knows Ken Feinberg, and almost certainly other first-class mediators as well.
A change of counsel can often have a positive effect on a case. Picking up the phone is a major change. Coming in after a loss on summary judgment, new counsel has to be candid with the client about how deep the hole they are in really is, if for no reason other than self-preservation. New counsel is also free from blame for the existing situation. New counsel is thus in a much better position to advocate for a reasonable approach to settlement. Of course, first he or she has to fight like hell to claw back into the race and bank some credibility with the client. Having bested Herb Wachtell in the mammoth World Trade Center Insurance Litigation, Barry Ostrager had the clout to get this gig and has the skills and resources to litigate for a long time, if he can convince the Appellate Division to grant him a stay of the order Justice Cahn will enter. That is not by any means a gimme. He also has the clout to get it resolved. The jury is out and we shall see how it unfolds.
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Part 12 - Much ado about nothing
"Can't anybody here play this game?" -- Charles Dillon (“Casey”) Stengel.
(January 6, 2008) SNG lost before Justice Cahn despite having the “best lawyers.” With new counsel SNG is not just losing. It is getting crushed. If that were not bad enough, SNG’s counsel is making SNG look like a crew of lubberly knaves tumbling from the rigging on an out of control goose wing jibe. The capper of this “Pirates of Switzerland” performance is that the motion to renew and reargue is OCS and too late at the same time.
New York Civil Practice Law and Rules (“CPLR”) 2221, which governs motions to renew and/ or reargue is titled “Motions affecting prior order.” Although the term “settlement order” has somehow crept into sailing publication discussions of this case, there is no such thing in New York practice. Justice Cahn wrote a Memorandum Decision, not an order, and directed that GGYC “Settle Order.” Settle is a verb used in the somewhat archaic sense of “settle the plate on the table.” On or after the settlement date, now effectively January 14, 2008, Justice Cahn will enter an Order. Until he does so, there is no order to affect. Indeed CPLR 2221(d)(3) mandates that a motion to reargue “shall” [mandatory] be made within 30 days after the order in question is entered and served with notice of entry.
Why did not GGYC even mention that the motion is premature? Perhaps it was because the time to renew, which is a minor part of the motion, is not governed by the 30 day rule. More likely it is the same reason that a match racer slam dunks an OCS adversary, or a slugger crushes a fat slightly out of the strike zone pitch on a 3-0 count. Real litigators are competitors. Dominating is what they are about, just as it is for Russell Coutts, a major league slugger or pitcher, or any real athlete. More importantly, credibility is key to success in litigation. If you can destroy your adversary’s credibility, he sails on a perpetual header thereafter. Credibility is like virginity. It is hard to regain. Hamish Ross swore and Fred Meyer announced for SNG that the 90 X 90 boat could only be a catamaran. Fred Meyer now swears for SNG that, finally having gotten around to reading GGYC’s challenge, the 90 X 90 keel yacht sounds like a monohull. If that were to happen at trial, the next question asked is “Were you lying then, or are you lying now?” In motion practice, when Santa brings a present like that, you do not tell him he is a day early.
A fair amount of sailors’ ink has been expended on the “keel yacht”/“keelboat” issue. It does not matter on this motion. A motion to renew and/or reargue is not a mulligan or a do-over. A motion to reargue is limited to “matters of fact or law allegedly overlooked or misapprehended by the court” and “shall not [mandatory] include any matters of fact not offered on the prior motion . . . .” Although a motion to renew does allow the submission of facts not previously submitted, upon “reasonable justification,” case law has set the bar for “reasonable justification” so high that relying upon divine revelation would only have a 50/50 chance of success. What will not work is Fred Meyer swearing that, although GGYC moved for summary judgment declaring that it was the rightful challenger of record – and SNG half-heartedly disputed that branch of the motion – SNG was not paying attention and has finally woken up to the realization that what Hamish Ross swore, and Meyer himself stated, could only be a multihull challenge now sounds like a monohull challenge and is unacceptably vague. Nor will the fact that CNEV has finally held a regatta work, for the reason that whether new or not, it is not a relevant fact. Justice Cahn correctly framed the issue as the state of fact at the time of CNEV’s challenge. Whether CNEV held a regatta after that date is irrelevant and does not make any difference. Thus, SNG has accomplished the oxymoronic – a premature motion that is making arguments that are a day late and a dollar short.
Most of SNG’s arguments are reminiscent of the angler who landed a barracuda and was so terrified of the toothy fish thrashing about the boat that he pulled out a handgun and shot the fish and the bottom of the boat to death. For example, SNG relies upon George Schuyler’s statements about the Thistle challenge, which turned out to be 18 inches longer at the waterline than agreed. (Imagine that – gentlemen agreeing on the nature of the match.) Schuyler made it clear that the challenger had no obligation to disclose anything about its yacht’s lines and that NYYC wanted to know its size in order to meet it with a similar boat “if it so desired.” Even more importantly, the Thistle challenge predated the current Deed and resulted in the current Deed’s designation of the dimensions to be disclosed as the only requirement. Not only is all of this far from the four corners of the Deed, but the whole matter is entirely consistent with Mercury Bay and negates SNG’s claim that more information is necessary.
The “keel yacht”/“keelboat” issue amounts to little. SNG’s own submission from the dictionary states that a keel is the longitudinal structural member of a vessel and can even be the name of a flat bottomed barge like vessel. In an attempt to create an issue, SNG submitted the entire 2007 ISAF International Measurers Manual -- which will undoubtedly be a treasured addition to Justice Cahn’s sailing library – but is irrelevant to construing the requirements of the 1887 deed. ISAF did not even come into existence until 1907, twenty years after Schuyler wrote the current version of the Deed and 17 years after his death. The Manual is undoubtedly even more recent. SNG also makes an argument that GGYC’s challenge is invalid which revolves around whether or not Saturday is a weekday, but, like a movie reviewer, I am not going reveal anything that would spoil the suspense for ‘Buttheads who want to read it for themselves.
So, what is this foolishness all about? Delay, delay, delay. Obviously, SNG desperately wants to avoid an October 2008 defense. After all, if you were a Swiss bank (Alinghi sponsor UBS) that recently has written down some $14 billion, has gone hat in hand to anonymous Middle Eastern sources for quick cash, and is being investigated by Swiss banking regulators, would you be anxious to throw money at sponsoring the likely loser in a sailboat race, even if (especially if) he is a member of your board of directors? Consider also that he is in a blood feud with a billionaire running a major software company you may want to do banking business with. Delay, delay, delay.
The shoe that has not yet dropped is whether GGYC will waive strict compliance with the 10 month requirement (SNG is in no position to insist upon it) or demand a Southern Hemisphere Match. The January 14 hearing may be interesting.
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Part 11 - To appeal, or not to appeal,...
"This is the operative statement. The others are inoperative." -- Ron Ziegler, President Richard M. Nixon’s Press Secretary
(December 16, 2007) SNG will not appeal and is ready for mano a mano in multihulls. Remember that? It is inoperative. It appears SNG is not coming out to play in the near future – at least not on the water – because SNG has learned to like it in court and does not want to leave. Although the settlement date for an order has come and gone, there is no order and will not be one until at least January 14, 2008. Because there needs to be 10 months’ notice of a match, that would push the match into 2009, and any subsequent monohull defense into 2011+ -- or perhaps not. How did that happen?
Fairly simply, it turns out. As reported elsewhere, SNG has fired White & Case and hired Simpson Thacher. Simpson Thacher immediately wrote Justice Cahn, announcing that SNG plans to appeal, reversing the positions SNG previously took, and attempting to start over from scratch. In the course of that letter, Simpson Thacher makes some pretty questionable statements, such as the claim that SNG has agreed to hold the next Cup in Valencia, which will be the first European AC site in 150 years (the 32nd in Valencia apparently never really happened) and that the Deed requires not just LWL length, LWL beam, extreme beam and draught for the challenging vessel, but all of those for each hull.
Despite everything the Court of Appeals held in Mercury Bay (and what everyone knows about the feasible configurations), GGYC is also supposed to “give the defender a clear idea of the nature of the challenging yacht.” Thus, according to Simpson Thacher, GGYC’s challenge is not valid, despite the fact that the validity of GGYC’s challenge was never disputed in the litigation. Simpson Thacher further wants to leave any dates out of the order, so that the parties can negotiate them (and, you guessed it, come back for more litigation if they cannot agree). Altogether, there are five single space pages of this stuff, which is generally long on generalities and portents of unspecified doom, but short on specifics.
There is a way to do this properly. That is to let the order be entered and then make a motion to either or both renew (newly discovered evidence the court failed to consider) or reargue (the court got the law wrong). The problem with doing it the right way is that, not only is such a motion, for obvious reasons, seldom a winner, but it does not stay the time to take an appeal or stay the match. Indeed, many experienced lawyers avoid those motions precisely because, if the judge has erred, the judge gets an opportunity to fix the mistake in a way that really buries your chances on appeal.
Why is this going on? By pushing the settlement date out to January 14, 2008, now scheduled for a hearing on the order, any match on 10 months’ notice as provided in the Deed would be past the November 1 cut off for a match in the Northern Hemisphere.
Why is Justice Cahn allowing this? Judges seldom change their decisions, but they do not like to preclude new counsel from an opportunity to be heard – within reason. Listening and saying no is almost always better than not listening and saying no. Indeed, some litigants go through a lot of lawyers seriatim to gain delay. While the entire AC industry may be grinding to a halt and a lot of folks are facing a fairly grim Christmas, Justice Cahn has been provided little evidence demonstrating why delay is such a problem.
Of course there is a solution, which GGYC has yet to raise, probably because it undercuts its attempt to advance the match. The challenger gets to specify the date on 10 months’ notice. The defender gets to specify the location. SNG’s White & Case lawyer previously swore that SNG has no home waters and has to find a location. While everyone says they prefer Valencia, no one has definitely committed to Valencia. If the order is entered in January, absent a stay from the Appellate Division, First Department, 10 months’ notice will put the match between November 1 and May 1, when no match may be sailed in the Northern Hemisphere. Absent agreement, it will just have to be sailed under the Southern Cross.
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Part 10 - A Review, plus a look at Appeals and Deed Revisions
“. . . burning with curiosity, [Alice] ran across the field after [the White Rabbit] and fortunately was just in time to see it pop down a large rabbit-hole under the hedge. In another moment down went Alice after it, never once considering how in the world she was to get out again.” – Alice’s Adventures in Wonderland
(December 11, 2007) Before we proceed Down the Rabbit-Hole of revamping the Deed of Gift, a brief note regarding where we are. Justice Cahn’s 11/27/07 Memorandum Decision ended with the instruction: “Settle Order.” Under this New York State procedure, the winner, GGYC, prepares a proposed order faithful to the Memorandum Decision and settles it upon the losers, SNG and CNEV. If they do not like the proposed order (three guesses), they counter settle a counter proposed order and the Justice’s Confidential Law Secretary (law clerk) will mark up one or the other to conform to what the Court really wants to do.
As you guessed on your first try, SNG did not like GGYC’s proposed order and counter settled. Aside from some technical issues of interest only to those billing by the hour, the differences boil down to whether, absent consent, the match will be October 1, 3 and 5, 2008 (GGYC version) or July 18, 21 and 23, 2009 (SNG version) and whether SNG must identify the venue, be it Valencia or elsewhere, by December 31, 2007 (GGYC version) or 6 months before the match (SNG version). In an attorney’s affidavit, SNG claims that a possible appeal will take a year and that October 2008 is not feasible because the Valencia Formula 1 event will have first call on the city streets and, as SNG’s lawyer swears, “in the Northern Hemisphere the autumn equinox brings the risk of uncertain winds and storms . . . .”
In a letter to the Court, GGYC cannily accepts all of SNG’s changes except the dates and, turning SNG’s previous arguments on SNG, argues that, under Mercury Bay, the Court need not get involved in the site. If Valencia is impractical, SNG can chose someplace else under either version of the order. The deadline for all of this was December 10, 2007, so an order should be signed and entered any day now. GGYC can then serve the order with notice of entry, which will commence the 30-day appeal period for the order. GGYC will then prepare a judgment, which the clerk will compare with the order and, after marking it up, will enter. Service of the judgment with notice of entry will start the final 30-day appeal period for everything in the action. Because CNEV, with GGYC’s consent, intervened as a defendant, it may appeal even if SNG does not – a potential example of how no good deed goes unpunished.
While SNG offhandedly talks about an appeal, it does not mention that the match goes forward unless the Appellate Division, First Department, grants a stay of the judgment. A stay usually results in an expedited appeal, which can be quick as necessary under the circumstances, and may require that the appellant post a substantial bond. Thus, absent consent, the match soon will be upon us.
With things not going all that well in the Commercial Division, Ernesto Bertarelli has suggested a total revamp of the Deed of Gift. Bob Fisher has commented on the merits of that proposal. I will briefly discuss the bare bones of the New York law, which is a blend of the common law and the Estates Powers and Trust Law (“EPTL”), a statute. The Deed of Gift has, thus far, been treated as a charitable trust. Changing it involves the ancient rule of cy pres, which never got an English makeover. Excerpt where governed by the EPTL:
The requirements for cy pres are (1) the trust must be charitable in nature; (2) the language of the instrument when read in light of all attendant circumstances must indicate a general rather than specific charitable intent; and (3) the particular purpose for which the trust was created has failed or become impossible or impracticable to achieve
The court must determine whether George Schuyler’s intent was general or specific. Let us say the settler created a trust for the benefit of education. That is general charitable intent. Change that to a trust for the benefit of a specific named school or for scholarships at a named sectarian school. That is specific charitable intent. In the first case, the court will be more willing to cy pres the trust. In the second case, the court will be much more restricted. If the school ceases operation, cy pres is likely to be limited to scholarships at another school of the same denomination.
George Schuyler’s charitable intent seems very specific. The Cup was given for a very specific form of sailing, which Schuyler tinkered with several times to conform to a specific plan. Schuyler had many opportunities to broaden the purpose of the Cup and never did. In addition, only Schuyler, not the general public, donated the Cup, which further indicates specific intent.
The next step, if the court even gets over the first hurdle, is to determine if the object of the trust has become impossible, e.g., the institution or class to be benefited no longer exists. That is a pretty difficult burden to meet in this instance. The 32nd Cup, held pursuant to the Deed, was the biggest success ever. Until the week after the 32nd Cup, the 33rd was expected to be an even bigger success. We have just seen some fairly expensive litigation expressly over the right to challenge for the Cup. Moreover, under the extremely broad consent provision of the Deed, the parties can do virtually anything they can agree on, including, as a practical matter, just about everything suggested. Indeed, a competent organization could provide a turnkey event hosting program that defenders would voluntarily embrace, which would provide substantial continuity. All told, it hardly sounds like it is impossible to proceed under the Deed. Arguably, the amendment to lower the minimum to 54 feet was necessary to allow the Cup to be contested in a world still recovering from devastation. The Cup faces no similar problem today.
Implicit in the rule of cy pres is that society is not benefitted by charitable funds or real estate going unused. Unlike an endowment, school building, or hospital, the Cup is of scant intrinsic value. It is silver plate, not even sterling silver, and does not even bear the name “America’s Cup.” Competitors are really racing for tradition, bragging rights – and money -- not the Cup itself or with an endowment held in trust. As others have suggested, if someone doesn’t like the Deed, they can race for the America’s Plate or Bowl and leave the Cup on the shelf. Society would not suffer. Indeed, if an Olympic style event is desired, US Sailing, among others, has announced that votes on events and equipment are based upon medal prospects, because medals translate into higher contributions. As well funded representatives of many of the leading sailing powers are interested in the Cup, a few well placed contributions could probably put the AC 90 boats in the next Olympics. What is really at stake is a highly commercialized event, which is not commonly the purpose of the cy pres rule. Courts do not play with charitable trusts so that someone can use the trust property for personal benefit.
If anyone does go down this Rabbit-Hole, the venue will move from the Commercial Division of the Supreme Court at 60 Centre Street, across Foley Square, to the much more sumptuous digs of the Surrogate’s Court at 31 Chambers Street, before either Surrogate Kristin Booth Glen or Surrogate Renee R. Roth. (Cinema fans looking for context will note that, at the climax of the Godfather, Don Emelio Barzini [Richard Conte] walks down the ornate marble hall of the Surrogate’s Court and emerges on the steps of the Supreme Court, where, on Michael Corleone’s [Al Pacino] order, he is gunned down by Al Neri [Richard Bright], uniformed as a cop.) The New York State Attorney General will have to participate. The Attorney General’s office may not be aware of how the sailing community views the matter, unless those views are brought directly to the attention of the responsible attorneys in the office. However, the presiding Surrogate would likely allow and consider formal submissions.
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Part 9 - Justice Cahn closes the door on the Swiss
“Ah, Your Majesty, there is no second.”
(November 27, 2007) The yachting sky has not fallen and sailing’s Chicken Littles have had a bad day, because Justice Cahn has done exactly what a Justice of the Commercial Division is supposed to do. He has quickly and carefully disposed of the dispute between GGYC (Oracle) and SNG (Alinghi) in a way that makes a successful appeal unlikely and puts the parties where they belong – on the water. To cut to the chase, he has handed GGYC complete victory, ruling that the Spanish CNEV is not a valid challenger and that GGYC is the Challenger of Record. SNG and GGYC will either negotiate a Protocol or meet in 90-foot catamarans for the fastest match races ever.
As expected, Justice Cahn’s decision was based upon the Court of Appeals’ Mercury Bay decision and went straight to George Schuyler’s intent, as expressed within the four corners of the Deed of Gift. The two issues were whether CNEV is an organized yacht club and whether it qualifies by “having” an annual regatta. The way he dealt with the organized yacht club issues demonstrates how an experienced judge works. Rather than stretch to resolve the issue, and possibly be reversed, he decided that resolution of the meaning of the term would require an evidentiary hearing – a trial on “custom and practice in the sport.” Talk about an open ended inquiry. He was free to take that position because he could decide the case based upon the “having” issue alone and did not need to resolve it. On the “having” issue he found, as a matter of law, that CNEV did not qualify as a valid challenger and thus, was out and the next challenger in line, GGYC, was in. End of case.
Why it really is the end of the case is that it puts SNG between a rock and a hard place. Even if it had a chance of overturning Justice Cahn’s decision on the “having” issue – which is no better than a snowball’s chance, given Justice Cahn’s careful decision, based upon undisputed facts and settled law – it has virtually no chance of overturning his decision that the organized yacht club question is an issue of fact requiring a trial. Thus, all that an appeal can get it is a remand to Justice Cahn for a trial on the organized yacht club issue. That would require discovery and, given the parties’ resources, could take quite a while -- putting the Cup in the deep, deep freeze. Even worse for SNG, they would be under considerable pressure to agree to try the case before the near legendary docket clearer of the Commercial Division, retired Justice, now Judicial Hearing Officer Ira Gammerman, who can always make time for an interesting trial. To see what that might be like, click here for just a taste. There’s plenty more to be found. Given the tone of Justice Cahn’s rejection of SNG’s claim that GGYC came to the Court with unclean hands, a trial before JHO Gammerman might not be something for SNG to look forward to.
So, the bottom line is that GGYC won, SNG lost, and SNG has few options that will accomplish anything more than icing the Cup for a long time. In the end, it wasn’t who had “best lawyers,” although GGYC’s lawyers were excellent and SNG’s lawyers made the best of a losing hand, but who had the facts and the law on their side. It was no contest.
Without belaboring peripheral issues, a few odds and ends need to be mentioned. This does not mean that any unhappy challenger can disrupt everything and gain the upper hand by filing a lawsuit. It simply means that if a defender violates the Deed of Gift, it can be called to account in a specialized court that knows how to resolve disputes. That’s why we have a legal system and why the Commercial Division was instituted. Indeed, investors invest in Delaware corporations because they have confidence that the Delaware Chancery Court will competently resolve disputes. This decision may provide similar confidence for sponsors contemplating investing in the Cup competition. Had SNG complied with the Deed of Gift, it would have won, the delay would have been slight, and GGYC would have had little leverage.
Moreover, trying to cast GGYC as the bad guys ignores the fact that SNG’s loss was self-inflicted. The purpose of paying in-house counsel is to make sure that legal requirements are met before action is taken and to shape the action taken to meet the legal requirements. Instead, SNG simply ignored the legal requirements and broke every rule. A DSQ was inevitable. Of course, there are always clients that proceed in the face of full stop signs and they always blame the lawyers they wouldn’t listen to for not stopping them. There’s an old legal saw – pay me now, or pay me much more later.
Now comes the real fun – Alinghi v. Russell. Place your bets.
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Part 8 - Just like any other day in court
"A bad day on the water beats a good day
in the office." - Anon.
(October 22, 2007) Unless you are Justice Cahn. If you are, you can allow the cameras from New Zealand and European TV into a packed courtroom and have some fun. First, accept the amici brief from Reale Yacht Club Canottieri Savoia and Mascalzone Latino, but warn them that, if there has to be a trial, they are not participating. That’s fine with them. On to the main event.
You let Jim Kearney representing GGYC get started on the subject of how CNEV is not a yacht club and then, with a smile, twist his tail a little. You throw out a question: What difference does it make; they do something with boats don’t they? Let him think his finely tuned arguments have not registered at all. See how he reacts. You then let David Hille representing SNG get started about how CNEV is a real club. He’s feeling good because of the question you asked Kearney. Maybe you don’t care about the details. He is talking about CNEV’s upcoming regatta. Time to twist his tail. Give him the same Cheshire Cat smile and interrupt him: Their first annual race? He’s too on message for irony and doesn’t get it. Repeat the question and see if he catches on that maybe you do care about the exact words of the Deed. Watch him react. Ask a question of Kearney about the time frame and have a brief discussion about the 10-month time frame of the Deed, Northern Hemisphere, Southern Hemisphere. OK, enough of this, there’s a busy calendar waiting. Thank you, you’ll get a decision soon. On to the next case.
The hearing today before Justice Cahn on the cross motions for summary judgment went true to form. Like every Justice of the Commercial Division, he has a grueling docket of hundreds of cases. A very large percentage of them will adjourn or settle, but there is no way to tell which ones will and which ones will require a decision. So, when the hearing started, Justice Cahn had not made up his mind and was not going to rule. With that kind of docket, that would be impossible. There is simply not enough time to fully prepare for every case on the calendar, especially when most will be adjourned or settled anyhow. Nor, despite the TV cameras, is oral argument likely to be as dramatic as on real TV. Seldom does anything that is not in the filed papers get said, especially when the time for argument is short.
In any event, now that the motions are marked submitted, the case will be decided on the papers, where the meat of the arguments lies. Justice Cahn and his Confidential Law Secretary, a long term professional law clerk, will study the papers and the Court of Appeals’ Mercury Bay decision, check out the cases cited by the parties, do some additional research and write a decision.
The time frame is a little hard to gauge. The Court of Appeals’ Mercury Bay decision gives him a massive head start, but there is that docket – and the pressure to make the decision bullet proof, because these parties have every reason to file an appeal. The decision will probably come down in weeks, not days or months, but that is a guess. Certainly the discussion of the 10-month framework for a Northern Hemisphere match in warm weather adds pressure for speed.
Lawyers and parties hear what they want to hear, but anyone who thinks Justice Cahn tipped his hand is dreaming. Besides, if he gave each of them something to worry about, they might settle and avoid the need for a decision. Like I said in the last report, it ain’t over until Justice Cahn sings or, more accurately -- hands down the sheet music.
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Part 7 - On the eve of the hearing
If the law is against you, pound the facts. If the facts are against you, pound the law. If both are against you, pound the table. - Anon.
(October 21, 2007) One of the criticisms of match racing as a spectator event is that, if a yacht is in control at the first crossing, there can be a lot of activity, but not much changes. Now that both parties have exchanged their second and last set of papers, not much has changed. SNG has made a bunch of arguments and GGYC has covered them, utilizing the litigation weather gauge, the last word. Settlement negotiations may or may not resume the morning of the hearing. As they approach the 2 pm October 22 finish line, with Justice Cahn holding the cannon lanyard, GGYC remains in the lead, despite SNG’s best efforts. There is no real dispute about the facts or the governing law and it is show time for summary judgment.
I will not attempt to parse all the latest back and forth. To do so would induce crushing boredom. For example, SNG argues that the word “having” in “having for its annual regatta . . . ,” can mean in the future, rather than possession, because people say they “are  having dinner,” “are ‘having’” a wedding, and “are ‘having a baby,’” in the future. All of those constructions are, indeed, correct, but the Deed does not say “are having” or “is having.” It says “having for its annual regatta . . .,” which is a different construction, with a different meaning. Another SNG argument, based upon past consent practice, is too convoluted to report. It boils down to “Officer, you can’t arrest me for driving while not having a driver license. I always drive without having a license and have never been pulled over before, so it must be OK. (Besides, I am thinking about having a license in the future.)”
One other point, which started out as little more than minor bolstering, shows the level of “friendly competition.” GGYC claimed that the arbitration decision between SNG and CNEV, which held that CNEV is a valid challenger, and which GGYC maintains was a sham, was handed down only a few hours before the first hearing before Justice Cahn. GGYC argued that was evidence that the arbitration was a put up job – perhaps a plus for their argument, but not a game changer. SNG countered with a claim that GGYC had misrepresented the time frame and the decision was actually handed down two days earlier. Substantively, that not a big deal, but it was guaranteed to yank GGYC’s chain hard. GGYC could not let that pass and, to defend itself from the charge of misrepresentation, GGYC went thermonuclear and responded with evidence that SNG had falsified the evidence it presented to the Court to make it look like GGYC had misrepresented the time frame. Thus, a quibble over a minor point has escalated into a defensive allegation of serious wrongdoing.
I promised to report on intervenor CNEV and amici Reale Yacht Club Canottieri Savoia and Mascalzone Latino, but all I can think of is the weekly postcard from a summer camper: “Dear Mom and Dad, I am writing to let you know that there is nothing to write home about. Love, Johnny.” Each predictably echoes the arguments of its ally. For example, CNEV joins SNG’s argument that Justice Cahn should give great weight to the Arbitration GGYC claims is a sham, but do not even try to make the argument that the Arbitration supplants the Court. In fact, courts typically do not give any weight to arbitration. They either step aside entirely and leave the dispute to the arbitrators, or ignore an “arbitration” that does not bind the parties. The amici do, however, provide an opening for a little unintentional comic relief, as SNG has responded by filing a brief stating that “SNG takes no position” on whether the Court should accept the amici brief -- which then proceeds to argue that the Court should not accept the brief.
Still wondering why the parties have not settled or why having Justice Cahn decide this dispute may not be such a bad idea?
If there is no settlement, I expect to be at the finish line in Part 49 of the Supreme Court at 60 Centre Street to report. As in any litigation, no matter what it looks like at this point, it ain’t over until Justice Cahn sings.
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Part 6 - On the Subject of Summary Judgments
(October 15, 2007) If asked to characterize summary judgment in New York's Supreme Court, Commercial Division, Casablanca's Rick Blaine (Humphrey Bogart) might advise that it is just like any other summary judgment, only more so. The purpose of summary judgment is to dispose of cases which lack a genuine disputed issue of material fact which would require a trial to determine. What is a material fact? One that is essential to a claim or defense. To start your car you need an appropriate mixture of fuel and air, compression and a spark. Subtract one and the car will not start, so each is material. To see if your favorite music is essential to starting the car, subtract it and see if the car will start when all the other elements are present. In this case, the material elements are the terms of the Deed and Justice Cahn will decide, as a matter of law, the meaning of the words in the Deed and their construction -- what the Deed requires and grants. Disputes regarding the law or the construction of the Deed cannot preclude summary judgment. The court decides them.
Whether there is genuine dispute regarding any material fact issue is also a legal issue, but more difficult to determine in close cases. If, for example, the Deed also required that the Challenger have a competent helmsman, whether a particular helmsman is competent, if disputed by the parties, would ordinarily require a trial to determine, based upon the credibility of witnesses for each side. Although New York courts cannot decide fact disputes based upon the credibility of affidavits, they traditionally have been much more skeptical than federal courts about whether factual disputes are material and genuine and seldom strain or stretch to find that factual disputes are material and genuine. It probably would be very difficult to convince Justice Cahn that there is a genuine factual dispute as to whether Russell Coutts is a competent helmsman. His record is indisputable. In this case, the parties are cross moving for summary judgment and both are claiming that the facts are undisputed. Indeed, there does not appear to be any real factual dispute and the only dispute is the legal characterization of those facts and whether the requirements of the Deed are met or not. Those are issues for Justice Cahn to decide based upon legal precedent and the case is ripe for summary judgment.
Ordinarily, the party moving for summary judgment has the burden of proving that summary judgment is required. In this case, the parties are cross moving and it all boils down to whether CNEV is a proper challenger or not. If it is, GGYC's complaint should be dismissed and SNG should win. If it is not, GGYC should win. Thus, as a practical matter, because there cannot be a draw, the ultimate burden - the burden of persuasion -- falls on SNG.
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Part 5 - Crossing Tacks
“I am of the opinion that the boldest measures are the safest.”
- Horatio Nelson.
(October 9, 2007) Both SNG and GGYC have filed their initial moving papers on their cross motions for summary judgment before Justice Cahn in the Commercial Division and we are at the first crossing of this one leg match race to the weather mark. GGYC has crossed clear ahead on starboard and comfortably covers SNG. From where they are now, GGYC is in position to drive SNG to the port layline, tack when it chooses, and lead them to the mark.
In litigation, anything can happen, even the greatest judges make unacknowledged and acknowledged mistakes, but in that case the Appellate Division stands ready to grant redress. So, although there could always be a 180 degree wind shift from the bench, or GGYC could hit a submerged container or sleeping whale, GGYC’s superior boat speed, height, maneuverability and, most of all, helming and crewing by skipper/lawyer James V. Kearney and his afterguard should allow GGYC to counter any move SNG makes. Each party gets one more set of papers, but the law and rules bar them from raising new issues in those papers. They may only respond to what the other side has raised, although they can usually get away with bolstering their initial arguments a little. GGYC gets the last word, which, in litigation, is almost as good as the weather gauge Jack Aubrey valued so highly.
Since ancient times sailors have jettisoned cargo in rough weather to save their ship. In late 19th century New York, sailors wagered heavily on over-canvassed sloops ballasted with sandbags, known as Sandbaggers. On the final run to the finish, plenty of sand went over the side. In SNG’s latest papers, a lot has gone over the side, but SNG is still behind. The betting on the case before Justice Cahn is for much bigger stakes than the Sandbaggers ever raced for, and may come down to the meaning of just one word.
What is gone? The argument that GGYC lacks standing, because the NY Attorney General is the only one with standing – gone. The argument that the fact that new or paper clubs have challenged after WWII is relevant in construing the Deed – gone. All that remains of that argument is that paper clubs have sailed in challenger eliminations.
What is left? Argument about the meaning of the words in the Deed is basically what is left, which is what the case is really about. Indeed, the case may come down to the meaning of just one word -- “having” -- in “having for its annual regatta an ocean water course . . .” That phrase limits the universe of clubs eligible to challenge. If SNG loses on that one word, nothing else matters. SNG argues that “having” “fairly read, includes past, present or future regattas.” If they are right, they can move on to further arguments. Including a future first race within “having” may be more of a stretch than “having” can bear. If the sense and tense of the word “having” is one of present possession, as of the time of the challenge, SNG is holed below the water line.
Argument about the significance of the ACM-appointed arbitrators finding that CNEV is a valid challenger is also there, but that argument sails against the tide, given the Court of Appeals’ discussion in Mercury Bay regarding the distinction between legal construction of the Deed, to be decided by judges, and sporting competition issues, to be decided by arbitrators or the protest committee.
SNG has also included the affidavit of a Spanish lawyer opining that CNEV is properly licensed and qualified under Spanish law to challenge, based upon the reams of documents in Spanish and translation previously submitted, to counter a similar affidavit previously submitted by GGYC. The problem with many affidavits on summary judgment motions is that judges are not allowed to consider the credibility of what is in them, no matter how convincing it sounds. Thus, if granting summary judgment depends on which affidavit to believe, Justice Cahn cannot grant summary judgment and has to order a trial in order to decide who to believe. Of course, if the issue disputed by the affidavits is not material or not really in dispute, he can still grant summary judgment to one side or the other. Thus, CNEV’s status makes no difference if SNG loses on the meaning of “having.” In that case, SNG loses whatever CNEV’s status.
GGYC has taken the bold approach by going straight to the Deed. Only an “organized Yacht Club,” “fulfilling all the conditions required by [the Deed],” may make a challenge which precludes other challengers. SNG essentially admits that CNEV is not a yacht club, but is merely “organized as a yacht club.” GGYC contends that if that were allowed, “the local bakery could challenge . . . simply by calling itself a yacht club and filing incorporation papers.”
Even more effectively, GGYC homes in on “having” a regatta, which SNG argues includes future intention, by noting that if “having” can be stretched that far, a person intending to get a professional degree qualifies as “having” the degree and entitled to practice. Think about that the next time you go to a Doctor, Dentist or GGYC’s example, a lawyer. As GGYC points out, we would all be billionaires, because we are all intent on “having” $1 billion (or more).
GGYC administers the coup de grace with two NY statutes, a federal statute and a federal case interpreting the federal Patent Act which GGYC argues actually use “having” in a way GGYC argues only can mean to “possess.” GGYC goes on to pound home the fact that CNEV’s “regatta” is not real, which is necessary to complete the record.
GGYC uses the same approach for the word “fulfilling,” this time citing the New York Education Law, which only permits licensure of an individual “fulfilling” the requirement of being 21. An 18 year old working on becoming 21 does not get a license. Unless SNG can find some contrary statutes or other authorities, these are very effective arguments – especially as SNG cites no authority at all. Thus, GGYC argues, CNEV’s challenge is not valid and cannot preclude GGYC’s challenge.
GGYC covers SNG well on a number of other points, such as CNEV’s conduct as COR, the court’s jurisdiction, the arbitration, the real positions of the various participants and other issues which do not really make much difference if GGYC is correct on the deed.
SNG has its work cut out if it is to break GGYC’s cover. One area SNG will have to consider is its affidavit regarding the paper status of other challenging clubs. GGYC pounds that like a piñata, demonstrating that no paper club has ever been challenger of record, as opposed to a mere consent challenger, and essentially argues that SNG has been too cute with the court by implying that consent challengers are the same as challengers of record. That is a potentially damaging allegation. We shall see whether SNG maintains a stiff upper lip and says nothing, argues that it had no such intent, or offers an explanation.
CNEV, an intervenor defendant, and Reale Yacht Club Canottieri Savoia and Mascalzone Latino, proposed amici backing GGYC, have joined. I will report on them in a subsequent report, but they are not major factors at this time.
Larry Ellison is probably feeling pretty comfortable at this point and may stiffen his terms. How Ernesto Bertarelli sees things is anyone’s guess, as are the prospects for settlement. Next move, SNG.
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Part 4 - The Timeline
(September 12, 2007) As I previously wrote (Scuttlebutt 2422), from the Commercial Division to the Appellate Division, to the Court of Appeals, New York’s Courts are prepared to act at whatever speed is necessary under the circumstances. The caveat is that it all depends on the parties and their ability to convince the courts that there is a real reason for haste.
GGYC asked for a preliminary injunction. The easy way to end run that difficult issue was to fast track the case for an October 22 hearing on the merits. If Justice Cahn is convinced speed is important, he will rule quickly, perhaps at the hearing, in what will likely be a solid decision. In many cases that would be the end. If there is an appeal and the loser can make a good case for speed, the Appellate Division and Court of Appeals will do whatever needs to be done. In Mercury Bay, as in most litigation, there was little reason for speed, as the competition was finished and the issue was whether the Cup should be taken away from San Diego. Here the argument is that the competition is effectively under a cloud, so a speedy resolution of that cloud is important.
Thus far the parties have not laid out in any detail how the disputed provisions of the Protocol, the choice of Challenger of Record and the pendency of the dispute affect the number of participating teams, level of competition, level of sponsorship or level of media coverage. Nor have they set forth how many people and what total magnitude of Euros are affected. The Cup has become a substantial business and, if lack of a resolution adversely affects that business and is brought to the attention of the courts, they will act quickly, perhaps within months, if necessary.
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Part 3 - The First Hearing
(September 10, 2007) Justice Cahn dropped the flag shortly after 2:00 pm on Monday for what will be a one leg drag race finishing at the top mark on October 22, 2007. Fittingly, the scene would have been familiar to NY lawyers practicing in 1887 when the Deed was signed, or 1851 when the AMERICA first won the Cup, or in Alexander Hamilton’s day for that matter. When the clerk called number 6 on the calendar, two or three of GGYC’s lawyers, three or four of SNG’s lawyers, two of CNEV’s lawyers and a lawyer from the NY AG’s Office leapt to their feet to grab a good spot in the tight scrum which quickly formed pressing against the edge of Justice Cahn’s bench. What then followed was the usual chaos of lead lawyers straining in hushed sidebar voices to give bumper sticker versions of who they were, who they represented and why truth, justice and the American way were on their side, while their juniors strained to hear what was going on so that they could keep notes of what was agreed at lightning speed. Meanwhile, Tom Ehman for GGYC and Hamish Ross for SNG sat outside the bar, almost certainly unable to hear a word, probably wondering why they had flown 3,000 miles to NY.
The end result was an agreement to cut to the chase. SNG will move to dismiss the entire action based upon “a defense . . . founded upon documentary evidence,” a NY procedural device which basically amounts to a shortcut to summary judgment. GGYC will cross move for summary judgment deciding the entire case. In essence, both sides are claiming that the only facts that matter – are “material” in legalspeak – are undisputed and only the legal effect of those undisputed facts needs to be decided by Justice Cahn, without any discovery or trial, on papers only. Of course, Justice Cahn may disagree and require a trial on some fact, but that is unlikely. The first SNG papers will be filed on September 17 and the first GGYC papers on October 1. Answering and reply papers will be filed on October 5 (or 9, remember, everyone was straining to hear), October 15 and October 19, with the hearing on the cross motions on October 22. Justice Cahn will either rule on October 22, or shortly thereafter. Clearly, that is a fairly rugged schedule, but none of the firms (David W. Rivkin of Debevoise & Plimpton is representing CNEV) can ask for more time, which would be a sign of weakness. No one was hurt and everyone went away happy. So, the flag has dropped, Justice Cahn has hailed “all clear,” and they are off even at full speed on split tacks with plenty of separation.
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Part 2 - SNG's Case
(September 9, 2007) Ernesto Bertarelli recently announced that "It is not possible that we will lose. We have the best lawyers." Nevertheless, having commented upon GGYC’s papers, I have taken a look at SNG’s as well, in case any reader does not share his confidence.
SNG’s papers take a different approach than GGYC’s. SNG’s depend more on legal arguments and, except on the issue of CNEV’s qualifications, contain few controversial, relevant facts. Hamish Ross, Alinghi General Counsel, gives a general history of the Cup, the participants in SNG’s proposed 33rd, CNEV’s alleged qualifications and details of the previous new or paper clubs that participated. As the previous new and/or paper clubs participated pursuant to the consent provision of the Deed, and did so long after George L. Schuyler’s death, they are irrelevant. Ross also raises the issue of the International Jury’s determination on the 31st Cup that SNG could compete despite not running an annual regatta on an arm of the sea, but again, in that case there was no allegation of partiality. Finally Ross argues that SNG cannot at this time specify a venue, has no “off the shelf” rules, needs time to “analyze, assess and decide” which ISAF Rules will apply and may be financially harmed by the “cloud” of a preliminary injunction.
SNG also includes the affidavit of Miguel Terrasa Monasterio, who claims to be a Spanish lawyer specializing in advising “sports professionals, artists and executives.” Like Ross, he alleges that CNEV is properly qualified under Spanish law. Both he and Ross attach the same 100 plus pages of Spanish documents and translations allegedly substantiating their claims re CNEV. The documents seem to have been created in a hurry, as in some places the club is referred to as the “Company” and the yacht club is authorized to issue both debt and equity securities. Resolution of CNEV’s qualifications this early in the litigation is unlikely, given the factual dispute.
SNG’s Memorandum starts with a preliminary statement which generally argues SNG’s position, followed by a statement of facts recycling the affidavits, as did GGYC’s statement of facts. For likely reasons I will discuss below, SNG only briefly touches on the Court of Appeals’ statement in Mercury Bay regarding the extent of SNG’s fiduciary duty, with SNG arguing that it “does not owe the full range of fiduciary duties” to GGYC.
SNG’s argument section sets forth its legal defenses. Foremost is SNG’s argument that under a NY statute, only NY Attorney General Andrew Coumo has standing to enforce a charitable trust and, therefore, the Deed. Although previous NY AG’s have made applications for uncontested relief under the Deed, the likelihood that Cuomo’s office, which already has an overflowing plate of financial and other chicanery, as well as the Albany “Troopergate” wanabee scandal, would jump into this dispute are slim to none. However, even if SNG is generally right, this argument is not a slam dunk. As SNG concedes, NY courts “will permit a beneficiary with ‘special interests’ to bring its own claim,” and, indeed allowed Royal Burnham YC to participate in the Mercury Bay litigation. Unfortunately for SNG, the “special interests” doctrine is loose enough to drive a 90 x 90 catamaran through if Justice Cahn wants to.
SNG’s standing argument has an even bigger problem, which may explain why it does not stay on the Mercury Bay lower fiduciary duty tack very long before tacking away. Mercury Bay bases the lower fiduciary duty on the observation that a sporting trust is not really a charitable trust. If it is not a charitable trust, the door is open for any competitor to bring an action under the Deed.
SNG follows by announcing it will make a motion to dismiss which generally stops an action in its tracks. Justice Cahn has many ways to solve that problem, if he wants to.
Next, SNG argues that GGYC has not met the test for a preliminary injunction. SNG correctly argues that the test is higher for a mandatory injunction that changes, rather than maintains, the status quo. It then argues that GGYC has not shown a likelihood of success on the ultimate merits. That steers into the weed patch of CNEV’s qualification as a yacht club – exactly where one would want to go to slow things down. Wrapped into that issue are the issues of “new” clubs and whether prospective annual events count, which can be determined from the language of the Deed. SNG and GGYC dispute that language, but a dispute does not create ambiguity under NY law. Justice Cahn will decide what the words mean.
SNG circles back to Mercury Bay for the proposition that courts will not get involved in the conduct of sporting events, but omits Mercury Bay’s distinction between the conduct of the Cup match and legal construction of the Deed, on its way to an attack on what is at this time a straw man – that GGYC will bring every protest or request for redress to the Court. Large firm litigators generally avoid touching any potentially troublesome issue unless the other side raises it, because the last thing they want is to raise an issue that blows up their face. That might explain why both sides are dancing around Mercury Bay, which cuts both ways.
SNG then argues that GGYC has not demonstrated a likelihood of irreparable harm, an issue certain to glaze the eyes on non-lawyers. SNG does raise an interesting argument that GGYC is not entitled to course or rules information at this time under the Deed. The Deed is not explicit on the timing of those issues and the early practice was consensual. Cup historians can correct me if I am wrong, but until the 32nd Cup, the defense was always in home waters on an arm of the sea with agreed rules. SNG has no home waters on an arm of the sea, so the venue is up in the air. If SNG ever got around to the promised annual regatta on an arm of the sea, that might be the venue, under whatever rules they used. Even if nothing else can be agreed, one would think that some version of the ISAF Rules and Prescriptions could be agreed to, but perhaps not.
Finally, SNG argues that it is being harmed more than GGYC by this dispute and litigation and asks for an unspecified, but presumably substantial, bond if a preliminary injunction is granted – which Larry Ellison can probably satisfy out of pocket change. Another worthy effort, this time from SNG, and the teams are now dialed up in the box.
Next, unless the parties settle, the start at 2:00 pm on Monday, September 10, 2007 in Part 49, Courtroom 232, as James Kearney, who goes first, tries to spot the first wind shift from the bench on what could be a tricky uphill first leg for both teams.
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Part 1 - Golden Gate YC's Case
(September 7, 2007) George L. Schuyler, “the sole surviving owner of the Cup won by the Yacht AMERICA at Cowes, England,” in 1851, and grantor of the 1887 Deed of Trust would probably be astonished to find lawyers contending for the Cup’s future before Justice Herman Cahn in the Commercial Division at 60 Centre St. in Manhattan, rather than before PRO Peter Reggio on an arm of the sea. Nevertheless, that is where the competition will be when the flag drops on September 10 -- unless the parties settle. The sea lawyers facing off in the box will be James V. Kearney of left-coast based mega-firm Latham & Watkins skippering plaintiff Team Oracle for Golden Gate Yacht Club and Owen Pell of uber-New York White & Case skippering defendant Alinghi for Societe Nautique de Geneve, each with a substantial afterguard and many associates grinding computers back in the office.
As I previously reported, if you are going to litigate rather than sail, Justice Cahn’s courtroom is an excellent venue. GGYC filed its papers August 22 and SNG’s were filed on September 5. This is a sailing NY litigator’s commentary. While passionate advocacy impresses clients and sometimes convinces juries, when deciding motions, judges, who have usually heard it all, often are looking for help from the litigants. Connecting unfamiliar factual dots and covering the legal bases so that the judge’s decision writes itself is often the way to win a busy judge’s heart – assuming you are right to start with.
GGYC wants expedited discovery and an October trial on the merits to chuck CNEV’s challenge and require SNG to defend against GGYC’s catamaran in a July 2008 match. It also wants an immediate mandatory preliminary injunction ordering SNG to provide the rules and location for that match. The final determination cannot be made on September 10. The governing precedent is the NY Court of Appeals’ decision in Mercury Bay Boating Club – the NZ mega-yacht against catamaran fiasco. The independence of the international jury and the IYRU rules were undisputed in Mercury Bay and the Court of Appeals held that only legal issues regarding the Deed would be determined by the Court, pursuant to the plain language within the four corners of the Deed, supplemented by extrinsic evidence only if necessary to determine Schuyler’s intention when he signed the Deed. Any other extrinsic evidence is irrelevant. Preliminary injunctions are only granted if a party can demonstrate the prospect of irreparable harm and a likelihood of success on the ultimate merits of the litigation. That hurdle is higher still for mandatory injunctions required a party to do something, rather than simply maintaining the status quo by refraining from doing something.
The guts of GGYC’s papers are in Tom Ehman’s affidavit, which GGYC has posted on its website, without the voluminous exhibits. Although undoubtedly heavily massaged by lawyers, it is accessible to non-lawyers and the broad strokes should be familiar to most Scuttlebutt readers. According to Ehman, CNEV, the challenger of record, is not a valid challenger because it is not a real yacht club, is not licensed to hold races, has never held a real regatta and has no intention of becoming a real yacht club or even existing beyond this Cup competition. The details of Ehman’s allegations regarding CNEV’s often contradictory attempts to remedy these alleged deficiencies are voluminous -- and entertaining. According to Ehman’s account, CNEV and its Spanish allies have actually made several admissions which arguably prove GGYC’s claims about CNEV. Ehman goes on to detail why the proposed protocol is allegedly one-sided and unfair.
While Justice Cahn, as directed by Court of Appeals in the Mercury Bay case, will be looking to the four corners of the Deed, Ehman also provides background regarding what the terms Schuyler used in the Deed actually meant in Schuyler’s day – at least at the NYYC level Schuyler was familiar with. If there is any doubt about the meaning of the words within the four corners, that can be helpful to the Court.
Ehman then goes on to recount SNG’s alleged complete domination of CNEV and the secret arbitration conducted between SNG and CNEV before a panel of secret arbitrators chosen by ACM, which is controlled by SNG, to determine if CNEV is a valid challenger. Ehman is probably right that the arbitration is a prelude to a possible argument that Justice Cahn should defer to the arbitration panel. Don’t bet the farm on that one working, given the allegations of partiality.
Ehman’s affidavit is not as detailed regarding why speed is essential, which may not be self-evident to the Court. He writes generally about how many kinds of things need to be done in a hurry to get ready for GGYC’s challenge, if CNEV’s is tossed, but there is little detail. For example, he writes about the need to procure carbon fiber, but there is no affidavit setting forth what the lead times are. Those are areas regarding which the Court might appreciate some help.
Where Ehman may have set himself up for a bite on the transom is his report that some anonymous person told him about machinations involving SNG and New Zealand to hand the Cup back to Royal NZ with SNG as the challenger. Not only is that double (anonymous) hearsay and clearly inadmissible, but Royal NZ Commodore Crawford’s reported denial sounds pretty convincing. Going out on an inadmissible hearsay limb and having it collapse is not a credibility booster.
GGYC’s Memorandum of Law starts with the usual practice of recycling Ehman’s Affidavit in a lengthy statement of facts. Given the resources available, its discussion of the law might be more extensive. For example, the Court of Appeals in Mercury Bay set a somewhat lower fiduciary standard for a trustee of a sporting event which is also a competitor. GGYC is silent on that issue and relies upon general principles of NY trust and fiduciary law. Similarly, while the CNEV/SNC arbitration may sink under its own weight, some discussion of federal and New York arbitration law would probably be helpful to the Court. Nevertheless, Kearney has entered the starting box with a clear, straight forward game plan and strong teamwork, especially from Tom Ehman -- a worthy effort from GGYC.
Next to enter the box, SNG’s papers and the other side of the story.
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About the author
The America's Cup is back in the New York Supreme Court, with the outcome weighing heaviliy on the 33rd event. Defender Ernesto Bertarelli's Alinghi/SNG team laid out the Protocol in July 2007 which found little support within the sailing community. The terms heaviliy favored the defender, and Challenger Larry Ellison's BMW Oracle Racing/GGYC team took the issue to court in hopes of improving the competitive balance for all teams.
NY lawyer Cory Friedman, who is familiar with both the law, the court, the judge, and the sport, submitted a Letter to the Editor in Issue 2422 (August 30, 2007), where he provided the following comments:
"There has been much uninformed whining by non-lawyers about GGYC's action against SNG in the New York Supreme Court. Sailors should be pleased, not whining. The Commercial Division of the Court was instituted for one purpose -- to get important cases done quickly, efficiently, and correctly. It is staffed with a small number of excellent justices with excellent support. Herman Cahn is one of the best. He routinely cuts through the most complex commercial and financial cases with dispatch. He is seldom reversed. If he grants GGYC's motion to hold the trial in October, the music will stop in October and somebody is not going to have a chair.
"The Appellate Division, First Department, is equally good and will expedite the appeal to decision in weeks or days if necessary. Joe Sullivan wrote the decision in Mercury Bay and is still on the bench. They don't come any sharper. They will get it right. There may or may not be an appeal as of right to the Court of Appeals, but there is no grass growing on that bench either. The bottom line is that there can be quick, definitive resolution. GGYC has not been trying its case in the press. If ACM's press releases indicate its true thinking, SNG is about to get schooled big time. That kind of pettifogging may work in Switzerland -- it doesn't work in the Commercial Division. If Justice Cahn decides speed is important, expect a quick resolution. His order points in that direction. Stop whining, be happy."
Ever since his August letter above, Cory has partnered with Scuttlebutt, and has been sitting in during the hearings, and reviewing all the filings so as to provide the sailing public with commentary that is accurate and unbiased, and full of insight and predictions based on his extensive experience in this arena. His reports are provided above.
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