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Scuttlebutt News: A Perpetual Cup for Not So Friendly Competition Between Lawyers by Cory E. Friedman 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. Here are his reports: 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 Cory E. Friedman/Scuttlebutt 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.
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. back to top 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.
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. back to top 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.
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. back to top Part 28 - The Lawsuit to Nowhere “This Way to the Egress.” Phineas Taylor Barnum.
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. back to top 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.
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. back to top 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
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. back to top 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.
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. back to top 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).
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. back to top 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. back to top 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. back to top 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. back to top 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. back to top 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. back to top Part 18 - Game on... or is it?
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. back to top 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 c |
