America’s Cup: African Diaspora Maritime v. Golden Gate Yacht Club

While the competition of the 34th America’s Cup may have concluded on September 25, 2013 with a win by Oracle Team USA and Golden Gate Yacht Club, there is still a matter of law in which the club remains involved. Legal commentator Cory E. Friedman provides an update…

“I’ll be back.” The Terminator (Arnold Swartzenegger), The Terminator, Hemdale Film (1984).

“You don’t understand. I coulda had class. I coulda been a contender. I coulda been somebody, . . . .” Terry Malloy (Marlon Brando), On the Waterfront, Columbia Pictures Corporation (1954).

In case there was any doubt, the America’s Cup 35 Silly Season has officially begun. It was kicked off by the Defender when it announced that “we’re from the Defender and we’re here to help you lower AC costs.” Sounds like a solution for “A Tale of Two America’s Cups.” That is the same Defender that likely spent more than all the challengers combined to eke out a victory in AC 34.

Shrinking the boats by a few feet will dramatically cut costs – just like shrinking our cars has made them dramatically cheaper to buy, maintain and repair. Oh, and for those who thought the AC was a “design” contest, “design” will be redefined. Henceforth the boats will all be the same except foils and the only “design” contest will be the graphics silk screened on the boats. Out with all those expensive CAD programs and fancy computers; Adobe Illustrator will be the go to computer program. Run it on your tablet. Good luck with that.

Enough of this frivolity. Let us talk about something serious – African Diaspora Maritime (ADM) v. Golden Gate Yacht Club (GGYC). Yes, it’s baaaack. When last we checked in July, ADM had a hearing scheduled on a motion for a preliminary injunction stopping the AC finals in their tracks. Suddenly my AC journalist friends worldwide, who refused GGYC’s invitations to write about the case when it was filed, were burning up the phone lines and Skype asking me whether ADM’s motion had a chance.

We never found out as some sort of partial settlement was reached which resulted in the hearing on the motion for a preliminary injunction being withdrawn. Nobody is talking, but usual legal practice results in a presumption that GGYC paid a chunk of cash to make that happen. How much? The market price would be ADM’s accrued legal fees, and then some. GGYC recently was offered the opportunity to comment on the case, but has not responded. ADM has declined to discuss the resolution of the motion.

Plaintiffs like ADM almost never ask for confidential settlements as settlements are usually good advertising for them and their lawyers. Confidentiality is usually pressed by defendants to avoid the embarrassment of paying on cases they previously claimed were without merit – bad for credibility. It also allows them to claim that they cannot comment because of contractual confidentiality – which they themselves requested. Smart plaintiff lawyers get a settlement premium for confidentiality.

Don’t be surprised if you hear that this analysis is “flawed” or “inaccurate” in some unspecified way that cannot be disclosed – because of confidentiality.

Where are we now? After some scheduling mistakes by the Unified Court System and a delay caused by a funeral, a conference was held with Justice Kapnick’s Confidential Law Secretary (clerk) and then with Justice Kapnick herself. GGYC’s counsel has been pressing for a stay of disclosure (discovery) since the Appellate Division reversed Justice Kapnick’s decision dismissing the case, and she does not seem to be buying a stay under any circumstances. GGYC can always ask the Appellate Division again for a stay – and lose again.

GGYC’s counsel has also argued that the case is moot because AC 34 is done. That argument seems to be based on something said at oral argument before the Appellate Division. That is a pretty silly argument, as anyone who listened to the three-day broccoli food fight the U.S. Supreme Court held regarding the Affordable Care Act can contend. As that argument abundantly demonstrated, oral argument is generally a lot of half-cocked sound and fury signifying very little. Judges do not like lawyers quoting what was said – too embarrassing in general to encourage.

The upshot is that ADM has filed a Third Amended Complaint boiled down to the damages prong of the case. What are those damages? Basically, the lost opportunity to build a brand, gain sponsors, and develop AC experience. In the process, ADM hikes its skirt a little to show some leg, in particular a hint of its avenues for seeking support as an accepted AC participant from wealthy African-Americans. It claims moral, if not financial, support from Bill Cosby and a couple of other significant African-Americans, including an Ambassador. Obviously, there is a lot of potential African-American sponsorship, not to mention corporate sponsorship that would have a lot of halo value, but only if ADM were an accepted participant.

ADM also uses the Third Amended Complaint to slam GGYC’s behavior, making a case that GGYC acted dismissively and disrespectfully. ADM alleges that at a minimum GGYC dissembled about Dave Pedrick’s possible participation as ADM’s designer and quoting an e-mail that GGYC Commodore Norbert Bajurin (who otherwise would have been GGYC’s best witness) should have been warned by GGYC’s lawyers to keep to himself. ADM also alleges what everyone intuitively suspects – that GGYC ceded the right to choose the defending syndicate to Oracle. Thus, ADM alleges the game was fixed to start with.

GGYC has until the end of the month to answer the Third Amended Complaint or move to dismiss it. A discovery conference will set a discovery schedule at about the same time. Because discovery has not been stayed, moving to dismiss, which would be a very weak motion, will accomplish nothing except generate legal fees. Justice Kapnick is pretty busy and has a track record of taking a long time to decide motions. Another motion to dismiss may not get decided for a very, very long time. Meanwhile discovery will proceed. More dumb, disrespectful e-mails will come out – they always do. At the end of discovery, GGYC can move for summary judgment claiming that there are no disputed issues of material fact and GGYC is entitled to judgment as a matter of law. In this kind of case, especially as the Appellate Division already has ruled in ADM’s favor and that the case should proceed, GGYC is not likely to convince Justice Kapnick that a summary judgment motion is a winner and the case should not go to trial.

What happens then? Either a trial or a settlement. It will boil down to a question of whether ADM’s lawyers have the cojones to go to trial, which large New York law firms seldom do because it is so expensive and risky. With a few exceptions, large firm lawyers who have not done a stint as prosecutors usually lack jury trial experience and settle cases. This case is different. What it boils down to – and what the Appellate Division rotisseried GGYC to a crisp about – is that a bunch of stuck up, smart aleck, yachties on Oracle’s payroll at GGYC disrespected ADM and its Executive Director Charles Kithcart, treated him as if he was invisible, harkening back to an earlier period in American history. That is the ball game.

ADM may be inexperienced, but many of the AC 45 teams were crewed by ringers with no connection to their alleged national sponsor. The Asian teams were not exactly overloaded with Asians, unless you count ANZACs as Asians, so there is no reason why an ADM team seeded with ringers could not have been as plausible as some of the other teams that did compete – allegedly with financial support from Oracle because they were broke.

Like it or not, given a typical New York County jury, this is not a case GGYC should want to try. That is not PC; it is simply reality. When you are not with the jury you love, you love the jury you are with. Had GGYC even gone through the motions of pretending to treat ADM and Kithcart respectfully and forthrightly, and had decent down to earth witnesses the jury could relate to, GGYC would probably win a verdict without much risk. But, that is not the case.

If ADM’s lawyers are prepared to take the case to trial, they could very well ring the bell even if their evidence is thin. After all, they rang the bell in the Appellate Division, which is not that much different from a New York County jury. There will be many twists and turns before we ever get to that point, so stay tuned; it may go completely differently. Whatever happens, it is not likely to have a major effect on AC 35, but who knows, the envelope cannot even be seen in the rearview mirror anymore.

January 7, 2014

© Cory E. Friedman 2014