Bevy of appeals tying up America’s Cup - Soundings Online

Bevy of appeals tying up America’s Cup

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Ruling gives Alinghi leg up in deciding event timeline, but BMW Oracle wants another court to decide

Ruling gives Alinghi leg up in deciding event timeline, but BMW Oracle wants another court to decide

The litigation of the 33rd America’s Cup has sliced and diced the Deed of Gift in so many ways that what started as prime rib now seems a botched stew.

The latest ruling has sliced the Deed of Gift yet another way, overturning a lower court decision that had given the nod to the Golden Gate Yacht Club as the challenger of record for the 33rd Cup. The new ruling reinstates Club Nautico Español de Vela to that key role. Writing for the majority in the 3-2 appellate decision of the New York Supreme Court, Judge Leland DeGrasse says defender Alinghi and CNEV should be ready to race 10 months after Alinghi’s Swiss club, Société Nautique de Genève, receives the July 29 ruling.

Alinghi president Ernesto Bertarelli says he was delighted with the decision and planned to move forward with a multichallenger event, one bringing many syndicates together to compete against each other to decide who races Alinghi for the Cup. His delight, however, was short-lived. Three days after Judge DeGrasse’s decision, GGYC appealed it in the New York State Court of Appeals in Albany.

“BMW Oracle is now attempting to further delay and frustrate the conduct of the America’s Cup by filing a frivolous but time-consuming appeal,” Alinghi responded, in a statement of its displeasure after a year in court.

GGYC says letting the latest decision stand would cause irrevocable harm to the Cup. “We believe the challenger of record has to be a real yacht club,” says club spokesman Tom Ehman. “It cannot be something that is manufactured with a defender to set up a one-sided event. This decision would set an absurd precedent. We believe we have an excellent case for winning on appeal.”

Six challengers — Desafio Español and Ayre, both of Spain; Shosholoza of South Africa; Team Origin of Britain; Team New Zealand; and United Internet Team Germany — signed on for a 33rd Cup originally scheduled for 2009. Alinghi has pushed back the race date to 2010 or 2011 because of the court delays.

If GGYC and its syndicate, Larry Ellison’s BMW Oracle, prevail in their appeal, GGYC will be reinstated as challenger of record. Its Deed of Gift challenge for Alinghi and BMW Oracle to meet one-on-one in 90-foot multihulls in a March 2009 three-race series also will be reinstated. BMW reportedly is close to launching its multihull, but as of now its challenge is null and void. Alinghi’s vision for the next Cup is a multichallenger event raced in 90-foot monohulls under a new design rule.

The key question all along has been whether CNEV is a bona fide yacht club under the Deed of Gift that governs the rules for the Cup regatta, and if not whether GGYC’s challenge — issued after CNEV’s — is valid. GGYC disputed the Spanish club CNEV as the challenger of record, arguing it was a “sham” club created at Alinghi’s behest to negotiate a race protocol favorable to the Swiss team and its vision, without consultation with other challengers. According to GGYC, the quid pro quo for CNEV’s cooperation was a commitment from Alinghi to hold the next Cup in Valencia.

Lower court Judge Herman J. Cahn had ruled CNEV was not a bona fide club because the newly created club had never held an annual regatta, though it says it planned to do so. The Deed of Gift says that a challenging club must be one “having for its annual regatta an ocean water course on the sea, or on an arm of the sea.” Cahn wrote in his March 17 decision that that phrase plainly means “ongoing activity; the activity has taken place and is continuing.” If there is no history of annual regattas, then there is no standing as a yacht club under the Deed of Gift, he says, and GGYC’s challenge should prevail.

The appellate judges disagreed. They went to an 1896 text, “An English Grammar For the Use of High School, Academy and College Classes,” by W.M. Baskervill and J.W. Sewell, which teaches that participles (“having” is a participle) “express action in a general way, without limiting the action to any time.” So “having for its annual regatta” is ambiguous and subject to conflicting interpretations, DeGrasse wrote. “Having” needn’t mean ongoing — past, present and future.

DeGrasse also cited the 31st America’s Cup, when an arbitration panel ruled SNG’s location on land-locked Lake Geneva did not disqualify it as a yacht club under the Deed of Gift, even though it had not run any ocean regattas before. To comply with the Deed, it could start running annual ocean regattas after challenging defender Royal New Zealand Yacht Squadron.

That CNEV planned to run an annual regatta was good enough for DeGrasse. CNEV should be the challenger of record for the 33rd Cup, he wrote.

Writing for the dissenters in the appellate decision, Judge Eugene Nardelli looked at the intent of the Deed of Gift’s author. He said the plain and natural meaning of “having for its annual regatta an ocean course” is “that the organization must be in possession of an annual regatta or, stated another way, that it has held one or more annual regattas in the past and will continue to do so in the future. Indeed, in order to realize the interpretation propounded by SNG, the Deed would have had to state ‘having, or intending to have, for its annual regatta,’ but it does not.”

Nardelli says it is clear that when George L. Schuyler, John Cox Stevens and other members of the schooner America syndicate deeded the America’s Cup to the New York Yacht Club in 1857 as a perpetual trophy, their intent was “to allow for challenges for the Cup from established yacht clubs that regularly hold annual regattas and not from a club merely organized just for the purpose of challenging for the Cup, without any experience in holding a regatta of this magnitude.” He says CNEV isn’t a bona fide club under the terms of the Deed; GGYC is, and GGYC’s challenge should prevail.

Meanwhile, a separate suit filed against Alinghi by Emirates Team New Zealand continues to wend its way through U.S. District Court in New York. The New Zealand team is seeking between $37 million and $50 million in damages from Alinghi for failing to negotiate a settlement with BMW Oracle so the Cup could go on as scheduled in 2009. New Zealand wants $37 million in damages if the Cup is delayed until 2010, $50 million if the racing is put off until 2011.

That’s today’s stew. It’s pretty wretched. Will tomorrow’s be any tastier?