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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 - Part 32 - Part 33 Part 34 - Part 35 - Part 36 - Part 37 - Part 38 - Part 39 Cory E. Friedman/Scuttlebutt Part 39 - Mark Your Calendar: February 2010 “Duh.” - Anon.
Justice Kornreich was extremely well prepared and thinks, talks, and rules quickly. She does not suffer fools gladly and wants answers to her questions, not recapitulations of briefed arguments she has read and understands. She knows what the law is, acts confidently and decisively, and cuts lawyers off when she has heard enough. Because she speaks quickly, there is some confusion as to exactly what she “directed.” Bloomberg has direct quotes that do not match anyone else’s recollection. The proof of the pudding will be the transcript. Given that Justice Kornreich acknowledged that she is bound by the Judgment, she cannot direct anything inconsistent with the Judgment - just as statements at a skippers meeting cannot change the Race Instructions or Notice of Race. The bottom line is that, barring mutual consent (yea right), the Match will be held in early February 2010, as provided in the Judgment, in Valencia or some other presumably deed compliant venue if SNG so desires. GGYC will have to make a “good faith” effort to get its Certificate of Documentation (“CoD”), the modern version the Custom House registry (“CHR”) required by the Deed, in as soon as possible, and GGYC’s boat will have to conform to its Notice of Challenge and the Deed. In other words, Justice Kornreich wasted no time directing the obvious. One wrinkle she added was a direction that the parties select a mediator and quickly begin mediation. Justice Kornreich provided a list of mediators headed by former Justice Cahn. Although Justice Cahn was once voted Seahorse Magazine Sailor of the Month, the all lawyer, mostly former judge list does not include any obvious sailors. The parties can probably go off list if they mutually choose. As the parties are down to the sailing issues - as limited by the Deed - they may need to go off list if they are going to get anything done. If they cannot agree, Justice Kornreich will probably pick a mediator. The major confusion regards whether SNG is free to choose any Northern Hemisphere Match venue other than Valencia, absent consent. Barry Ostrager repeatedly went out of his way to state that SNG is committed to a Northern Hemisphere Match, but made no commitment to Valencia. Apparently, SNG believes that another Northern Hemisphere venue will be greatly to its advantage. Time will tell. GGYC took some heat on the CoD/CHR issue, as Justice Kornreich was openly skeptical regarding the bona fides of GGYC’s boat disassembly, which prevents completion of the CoD/CHR. There probably is some gamesmanship involved, but the fact remains that these are unique boats at or beyond the bleeding edge of current technology. It would be extraordinary if sea trials did not reveal the possibility of significant improvement. After all, even the humble Laser, intended to be the most simplified design possible, needed its centers of effort and resistance modified to achieve a balance helm. Not being made aware of the practical issues, the end result was that Justice Kornreich characterized GGYC as too “slick.” Ouch. Nevertheless, her ruling was not influenced by her skeptical perception of GGYC on this issue. Similarly, SNG tried to get some mileage out of the Cheesegate spy kerfuffle and the vast queue of challengers with $10 million plus, 90-foot multihulls ready to rumble in a challenger series. Neither issue had legs. GGYC is obviously pleased with the February Match date, which confirmed what it already had in the Judgment and may put time pressure on SNG, and is studiously silent on the Northern Hemisphere issue. SNG is happy with Justice Kornreich’s handling of the CoD/CHR, although it did not get what it asked for and it is not apparent what it got that it did not already have. Apparently it believes it has great latitude regarding the Match venue. Whether Justice Kornreich and/or GGYC agree with that remains to be seen. Naturally, the air is thick with intimations of more being here than meets the eye. Whether GGYC somehow has been disadvantageously locked into its design remains to be seen, just as any advantage from a particular Northern Hemisphere Match venue remains to be seen. Either could be a fundamental advantage or pure spin and head fakery. It also remains to be seen what remains to be mediated or if mediation will produce any benefit. The Match date is set, unless SNG gives something to get a change from GGYC. The venue issue is a little murky, but not necessarily a problem. In its April 23 letter, SNG stated it intended to exercise its Deed rights regarding the rules and regulations governing the Match. While it would be intelligent to work the sailing details of the Match out, intelligence is not required for the Match to take place. After all, requiring intelligence of sailors might be the end of sailing as we know it. back to top Part 38 - Wedgies and Gun Jumping “Don’t get mad, get even.” - John Fitzgerald Kennedy. “Stuff happens and it’s untidy,. . . .” - Donald Rumsfeld.
If anyone has forgotten, the Court of Appeals remanded the case to the Commercial Division, which then entered judgment that provides that the Match be held 10 months hence (February 7 or 8 depending on which side is doing the calculating), that it be held in Valencia or wherever SNG chooses, and that SNG provide GGYC 6 months’ notice (August 7 or 8) of the venue. The order is about as clear as an order can get. While SNG claims that its argument that no match may be held before May was never considered because of the “procedural posture” of the appeals, the short answer is that it was considered by Justice Cahn and the reason it was not considered by the Appellate Division or the Court of Appeals is that SNG dropped the ball and did not press the issue on appeal or cross appeal. Even if the judgment is totally wrong (it is not), that is the judgment and SNG has to suck it up and comply. SNG can tell it to the chaplain. In their approach to the May 14, 2009 hearing, not only is SNG’s argument frivolous (in the sense of the legal term of art), it is also disrespectful of the Court, contemptuous of the Court’s authority and contumacious. However, at the very end of a pretty random brief, SNG finally reached the one response that is obvious before one even opens the brief - SNG is not yet in contempt of court, because it has yet to violate a provision of the judgment. The first requirement it has to comply with will not ripen until August 7 or 8 when it must specify the venue. Until then, it can flip off the Court and otherwise behave like a South Park character with impunity. GGYC has jumped the gun. Its remedy is to hold its fire until August 8 and, if it does not receive notification of the venue for a February 7 or 8 Match, immediately move by order to show cause for a contempt award entering a Match default. SNG may get a short period to purge its default, but would be playing with fire. What the present contempt motion may accomplish is to put SNG on notice that it better comply with the judgment, which would make non-compliance more like playing with a nuclear weapon than playing with fire. SNG’s suggestion that the Court provide it with an advisory opinion that a February Match in Valencia will comply with the Deed is pretty farfetched. Courts do not give legal advice regarding how to comply with a judgment, especially in a completely incorrect procedural context. That is what SNG is paying its lawyers to do. Despite what their brief says, their privileged advice has to be to err on the side of caution when complying with the judgment. No lawyer in his or her right mind will counsel possible contempt. Indeed, under the crime/fraud exception, such advice may not even be privileged. SNG’s cross motion to disqualify GGYC is also frivolous. As GGYC cogently lays out, it is not permitted to apply for a Certificate of Documentation (“CoD”), the modern version the Custom House registry required by the Deed, until its boat is completed and that the practice has been that “as soon as possible” has usually been much closer to the match and has even been fewer than two weeks before the match in the case of Shamrock II in 1901. In this case, GGYC’s boat is not completed and may even be disassembled for revision. With virtually nothing relevant to say, SNG lards its brief with a real howler. As everyone surely knows, both teams have been following each other around with telephoto lenses hoping to catch photos of topless boats to sell to the supermarket tabloids. That sort of thing is so pedestrian that the auto press is usually filled with pictures of disguised test models of coming sports cars and the supermarket checkout lines are filled with pictures of overweight celebrities in embarrassing situations. There is even a mini industry of photographers sitting in lawn chairs outside the perimeter of the Air Force’s top secret skunk works in the Nevada desert attempting to take pictures of top secret Air Force/CIA aircraft. Given that the Chinese were able to steal many terabytes of top secret Joint Strike Force flight data from a high security Department of Defense server, it would be shocking to learn that both teams are not engaging in far more sophisticated industrial espionage than taking pictures. They probably do everything including surreptitious colonoscopies on each other. In any event, SNG followed an Oracle sailor around filming him with a video camera as he pursued his spying. The plot was to use pictures he took, a rangefinder (like sailors, golfers and hunters use) and a GPS to figure out how big SNG’s assembly structure is. That is supposed to provide some insight into how big the boat is. Of course, all it might really tell you is how many people are coming to the barbecue. Indeed, high resolution commercial satellite photos of the SNG structure are readily available at moderate cost on the web, so the whole thing is probably a decoy. Although SNG has been telling the press the Oracle perp was in a “non-public area,” (whatever that means - perhaps the neighbor’s property), Lucien Masmejan’s affidavit does not swear that he was trespassing on SNG property. In any event, SNG swore out some sort of Swiss criminal complaint (stop me if I start blathering about Swiss law, about which I am ignorant) and the Swiss prosecutors issued a rogatory to the French flics, who conducted what appears in the original French transcript to be little more than an interview of the alleged perp. Although the certified translation SNG provides subtly hypes the terminology, there is no indication the subject was “detained” as SNG claims in any custodial sense, as a US cop would understand the term. The alleged perp basically said (undoubtedly on advice of counsel): "Yeah, I did it. So what? They've been doing the same thing to us." In the US, taking pictures of something out in the open could not possibly be criminal. It probably could not be tortious either, unless you did something like use a plane to take pictures of someone sunbathing topless behind a fence, but that is because you are invading a natural person's privacy, rather than that of an industrial operation. US law is generally that, if you want to protect a trade secret, you have to keep it secret. Allowing someone to observe your secret as you make a movie of him observing the secret does not cut it. As SNG does not allege a burglary or anything more serious than failure to keep off the grass, the whole incident sounds like complete piffle. Without any evidence that a real live crime was committed, a US judge will likely pay zero attention. Naturally, the “press,” in its infinite laziness, is mindlessly recycling SNG’s version of the story without reading or thinking about the supporting - or not so supporting - documents. About the only thing really worth noting is that it is nice to see Jim Kearney’s and Aaron Siri’s distinctive prose in the GGYC papers again. After the freakish loss in the Appellate Division, Jim honorably fell on his sword. While that did not seem fair at the time, as the bizarre result in the Appellate Division was not his fault, stepping aside was highly professional - and very unusual in today’s world in which no one ever takes responsibility. It turned out to be a brilliant move, as it allowed his partner Maureen Mahoney to do such a stellar job in the Court of Appeals. Thus, there is evidence of justice in the universe. While the May 14th hearing will probably amount to little, what we are seeing does not augur well. There is a great deal that needs to be worked out before two 40+ kt boats with this much mass get around a course without anyone getting killed. Wedgies are not going to get that accomplished. back to top Part 37 - BFD – and I do not mean Black Flag Disqualification “— Not so fast, Louis. Nobody’s going to be arrested. Not for while yet.” Richard Blaine (Humphrey Bogart), Casablanca, Warner Bros. Pictures, 1942.
There is a lot less here than meets the eye. Nobody will be held in contempt and nobody will be disqualified. The Court will likely rule that, barring agreement (and world peace), the date set in the Judgment (February 2010) really, really, really is the date and GGYC will have to provide a Custom House registry within some reasonable time period. BFD – and I do not mean Black Flag Disqualification. Justice Cahn was presented with all of the arguments regarding the dates and the hemispheres and obviously concluded that his Order (now a Judgment) complied with the Deed. Figure it out. About the only thing of much interest that will come out of this is some insight into why GGYC is holding back its Custom House registry. The Organized Yacht Club and Annual Regatta/Ocean Course clauses seem intended to narrow the universe of challengers to clubs run by gentlemen sportsmen (now gentle sportswomen as well) who would not think of challenging without a challenging yacht in the offing, which would explain why the Deed does not require that the challenging yacht be in being or that the Custom House registry accompany the Challenge. The subsequently added dimension disclosure requirement is more important in any event. GGYC did not become the Challenger of Record (COR) until the Court of Appeals handed down its decision (on April 2, 2009) and remanded the case to Supreme Court. Thus, despite the fact that it has a boat, the delay from that date does not seem very extreme. Perhaps GGYC just wants to keep its options open or perhaps, now that it is finally the COR, it intends to build another boat or boats before it makes the final decision regarding what it will race. Perhaps we will find out, but do not count on it. Worth noting is that there seems to be an interest in a corner of the sailing press in adding fuel to the fire. Thus, it has been trumpeted that “a leading legal source,” unwilling to show his or her face and be quoted by name, apparently thinks that the Court “’will get pretty stroppy with [SNG].’” I have been practicing in New York courts for a long time. I have never heard the word “stroppy” from any New York or other American lawyer. “A leading legal source” with a clue about practice in the New York Supreme Court would know that such a contempt motion is just a procedural way to get a matter about an order before the Court and that it takes vastly more before a Commercial Division justice gets perturbed with a lawyer - let alone perturbed enough for someone to be “heavily fined,” much less imprisoned. At least these anonymous “sources” confessed that they “were unsure what the limit [for a fine] might be in the USA,” before launching into the lack of limits in the British justice system and jurisdiction to imprison. Please. No one will be fined, much less imprisoned. A NY statute requires a warning for due process reasons on the face of any Order to Show Cause seeking contempt. That does not make such punishment at all likely. Whatever may happen where Helen Mirren rules, we have been doing things our own way since 1783. One thing not mentioned in John Burnham’s comprehensive report on the America’s Cup Hall of Fame Induction Ceremony and dinner was the feeling of good fellowship and camaraderie demonstrated by the AC sailors of the Corinthian Era, despite the wet blanket of Keith Mills’ uncalled for sermonette/wood shedding. John Longley’s rollicking off the cuff recounting of his experiences kept everyone in stitches and demonstrated how much fun he had in the day when the object of the Cup was not the next paycheck or some commercial bonanza. It would be interesting to know how many are having fun this time around and will look back upon AC 33 and its participants with such evident affection. back to top Part 36 - The camaraderie and "sportsmanship” should be overwhelming "[Ugarte (Peter Lorre):] You despise me, don't you? [Rick (Humphrey Bogart):] If I gave you any thought I probably would." Warner Bros. Pictures, 1942.
Full disclosure. I will be Oracle’s guest at the America’s Cup Hall of Fame Dinner at NYYC on April 30. I was concerned that accepting Oracle’s offer would have the appearance of impropriety, so I checked with the Columbia University School of Journalism and was referred to the Society of Professional Journalists, which opined that full disclosure would cure any question of conflict of interest, which is why I am bringing this out. By the way, I informed Alinghi that, had it offered, I would have accepted its offer – or offers from both teams. In any event, if, after all that I have written any ‘Butthead thinks I can be bought, make me an offer and I will consider it. Justice Cahn’s May 12, 2008 Order, which was entered as a Judgment on April 7, 2009 after the case came back down from the Court of Appeals on April 2, 2009, is pretty clear that the DoG match has to be 10 months after April 7, 2009 (February 2010) in Valencia or anywhere else (in whatever hemisphere) Alinghi wants on 6 months’ notice. Taking the position that GGYC mentioned the Northern Hemisphere when setting the July 2007 date (which is long past) in its Challenge and the fact that both clubs are Northern Hemisphere clubs, SNG announced the DoG match would be in May 2010 -- period. The next step was for GGYC to ask Justice Kornreich, who now has the case, as Justice Cahn reached mandatory retirement age at the end of 2008, to sign an order that SNG show cause on May 14 why it should not be held in contempt of the Judgment. Of course the monetary penalty for a contempt is meaningless with these folks, so the real object is to get an order reinforcing the February 2010 dates. GGYC hints that if SNG keeps it up, GGYC will ask for an order forfeiting the Cup. Not only does GGYC have the better of the argument, but it makes a pretty convincing argument that SNG has already made all of its arguments to Justice Cahn, lost, did not appeal on that point and cannot have another bite of the apple. GGYC seems prepared to sail in Valencia in February on consent or in the southern hemisphere in February at Alinghi’s election. Based upon its April 23, 2009 letter to GGYC, it appears that SNG, despite its whupping in the Court of Appeals, intends to take a hard line on this and just about every other potential issue, so expect to see plenty more litigation before the boats dial up -- and probably long after as well. If this continues, the only solution may be for the Court to appoint a Referee (like a Federal Master [or adult supervision]) to deal with the parties on a day to day expedited basis, to sort out what promises to be a fractious ongoing process. As just one example, as GGYC just became the Challenger of Record, it may decide to build more boats – with its custom house certificate to abide its decision regarding which one to sail. Expect to hear a lot more about custom house certificates and a lot of other issues. Ultimately, we are likely to see stronger language than requests for orders holding parties in contempt. So much for “sportsmanship” and settling the matter on the water. As an overlay to the legal gamesmanship, the ever gullible sailing press seems intent on serving as a megaphone for every possible head fake. Although Alinghi has yet to show anything that floats, everyone has by now heard of the 115 foot two masted multihull that shoots laser beams and thunderbolts from its stem and fire balls from its stern. The sailing journalists will almost certainly soon report that this vessel’s only teething issue is dealing with the sonic boom it creates when it breaks the sound barrier in anything more than 3 knots of true wind. Of course, it must all be true -- someone whispered it into someone’s ear. In any event, I am looking forward to the April 30 dinner – the camaraderie and “sportsmanship” should be overwhelming. Scuttlebutt editor Craig Leweck has agreed to supply me with body armor to wear under my tux in case the cross fire and ricochets get out of hand. back to top Part 35 - Court of Appeals straightens it all out "You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time." Abraham Lincoln.
Indeed, the unanimous decision, which only cites a single case other than Mercury Bay and no statutes, is so straightforward and accessible that there is little to explain. Having means having, not going to have, wanting to have, thinking about having, or day dreaming about having. Annual means you have done it at least once and plan to do it every year thereafter. In other words, the Deed means what it says and what it says is what everyone has to live with. All that remains is sweeping up SNG’s flaming wreckage. The interesting issues are where we go from here and some of the subtle things the court wrote to dissuade a SNG reappearance in court. (Irony challenged ‘Buttheads on a jihad against lawyers, the legal system, and traditional notions of fair play should jump ship here, before I cause them to hit the send button.) The court reversed the Appellate Division and reinstated now retired Justice Cahn’s “orders” – all of them. A nice belated Valentine for Justice Cahn. Thus, we are exactly where we were on May 12, 2008, when Justice Cahn ruled that the match be ten months later in Valencia or any other venue chosen by SNG upon six months prior notice to Golden Gate Yacht Club (GGYC). The only logical result is that the 10 month period re-commenced today. Unless the parties can reach agreement, that puts a DoG match in the Southern Hemisphere – or back in court, where SNG should not want to go. If they do go back, the case is now assigned to Justice Shirley Werner Kornreich, a recent addition to the Commercial Division bench. The court’s Do Not Come Back notice to SNG is subtle, but unmistakable. Although GGYC failed to cross-appeal and it was unnecessary to the decision, the court noted that Justice Cahn had dismissed GGYC’s breach of fiduciary duty claim in a way that implicitly questioned whether that claim should have been dismissed. The court further quoted the provision of the Deed, not stressed by either party, that requires that the trustee/defender “covenants and agrees . . . that it will faithfully and fully see” that the Deed is complied with. The obvious implication is that the court doubts that SNG has fulfilled its duty as trustee. In addition, the court used unusually blunt language like “wrong” and “illogical” in rejecting SNG’s arguments. If none of that registered on SNG, the final coda (hat tip to John Rousmaniere for reminding me about codas) beating SNG over the head with its own repeated argument that the Cup should be decided on the water, not in court, makes the message unmistakable. Do not let the door hit you in the butt as you leave. Do not come back. Where do we go from here? One opinion floated a while back in the yachty press is that a GGYC victory would mean nothing because GGYC is obligated to accept the majority decisions of the Mutual Consent Challengers who have signed on to SNG’s protocol. That is utter nonsense. At this point, GGYC has no duty to the Mutual Consent Challengers at all (most of whom acted cravenly), unless it voluntarily chooses to act on their behalf. GGYC is free to disregard them. If GGYC has learned anything from its serially unsuccessful efforts to be loved by all, it should – if negotiation is possible – negotiate the most advantageous match protocol it can in the most advantageous boat. Naturally, the parties can negotiate for scaled up TP 52 virtual one designs (Club 420’s on steroids), but it is hard to see how that adds luster to what should be a challenger/designer driven event. Cheap may have transitory appeal, but it is not the America’s Cup. If it wishes to, it can try to negotiate a provision allowing a Substitute Challenger of Record, if it chooses to organize a challenger selection series. Unless GGYC wants to get dry gulched, the match protocol should not include any semblance of arbitration. Arbitration has the same root as arbitrary. It is only useful for disputes you do not care about. All sailing decisions should be made by an International Jury and all decisions regarding the Deed should go back to court. If that is accomplished – a major and unlikely if – it should call Bruno Trouble and work out a revived Louis Vuitton Cup for challengers only. The winner becomes the substitute Challenger of Record. As Maureen Mahoney realized, the challenger selection series is not part of the Cup at all and should be kept separate and for the benefit (competitive and financial) of the challengers. The Defender has enough built in advantages. Of course, everyone is free to hold Acts or Act Outs or whatever, with or without the Defender, as they chose. Of course, it is just as likely that the parties wind up right back in court fighting about the date and venue, looking forward to an absurd DoG match in the Southern Ocean, or some other equally bone headed assault on the Cup’s legacy. What did SNG get out of this? Other than nothing, it did manage to delay the Cup close to two years, thereby preventing sponsorship deals from being firmed up well before the world financial meltdown and insuring that there will be far less funding for everyone, including SNG. It managed to create vast collateral damage in the sailing industry. Of course, there will be some who blame GGYC as well. After all it did sue to vindicate its rights under the Deed and the law, rather than agreeing to be screwed over. Worse yet, it won. In the end, New York’s courts acquitted themselves well. Justice Cahn was dead on the mark. The Appellate Division, First Department screwed up big time. The Court of Appeals straightened it all out. Had the parties been more anxious to move the case along, it could have been completed in half the time. GGYC’s lawyers ultimately brought home the bacon – they won cleanly and convincingly. A real walk off home run. Barry Ostrager had a great run for SNG, including putting one over on the Appellate Division and giving GGYC a significant scare, before crashing and burning. He had no chance, as the case was lost the minute Club Nautico Español de Vela (CNEV), which could never pass the smell test, was concocted. His mistake was in flying too high and close to the Court of Appeals sun. SNG should have settled after its Appellate Division win. It is possible that this series will end short of three dozen reports – but I am not giving away the laptop quite yet. back to top Part 34 - Where were you on February 10th? "It is high. It is far. It is [?]" Apologies to John Sterling.
Maureen Mahoney (for Golden Gate Yacht Club) turned in a stellar performance. She was not perfect and passed up some opportunities, but her sustained lawyering was as good as it gets. Certainly, she far surpassed David Boies and Ted Olsen in Bush v. Gore. The prize in that case was the presidency of the United States. On her feet, she far surpassed her briefs, which were very competent, but not exceptional. Clearly, in preparation for oral argument she developed the essential insight of a dispositive argument, which Judge Smith took and ran with, which may decide the case once Judge Smith has worked it out. More about that later. The Court was loaded for bear. The Court’s Public Information Officer was prepared for requests from TV and other press and the Court’s website advertised that the case would be webcast live and in reruns for anyone to watch. The Judges had done their homework, even beyond the briefs, and the bench was hot. A hot bench is one in which the judges want answers to their concerns and do not care what the lawyers want to tell them – that is in the briefs. Mahoney started by anchoring in the Court of Appeals’ Mercury Bay decision and then jumped straight into the Deed, where she did everything possible to stay. As I previously warned, one can never tell where a judge is coming from with a question or questions and any indication is only a snapshot of where the judge’s head is at that moment. That can change 180 degrees after argument. Nevertheless, while the questions Mahoney faced were tough, they seemed basically friendly in the sense of “I’m having trouble with this issue, help me with it.” Mahoney was ever the helpful advocate, unwaveringly giving the questioning judge precisely what that judge wanted. She avoided platitudes or statements of law and always responded with the language of the Deed and the import of that language. Judge Smith is a former New York City large law firm litigator and taught at Columbia Law School, usually rated as one of the country’s top five law schools. One of the perks of teaching in law school used to be the opportunity to torture law students with the Socratic method, which entails a series of ever more confusing questions without correct answers until the victim hits upon the correct principle, reaches an absurd and untenable dead end, or simply collapses in a heap. Without letting on what is the correct answer – the class has to figure it out -- the professor moves on to torture another unlucky student. Unfortunately, law students will not put up with that much intellectual stimulation anymore and just will not play the game. Appellate lawyers have to play the game – that is what they are getting paid for – so they are sitting ducks. Judge Smith got the direct answers he wanted from Mahoney and seemed reasonably satisfied. Indeed, they seemed to be engaging in a dialog in which she helped him develop his thinking. Just to let the lawyers know that he had done his homework and was not going to be fooled, Judge Smith mentioned “Captain Cuthbert,” the Canadian challenger who sparked the last amendment. To the best of my recollection, Captain Cuthbert is not mentioned in the briefs. The other persistent questioner was Judge Graffeo, herself a former NY Solicitor General (the State’s appellate advocate), who was clearly prepared to apply the Deed wherever it leads and suggested that if anyone does not like where the Deed leads them, they will have to ask the New York Courts to cy pres the Deed, which Judge Smith also picked up. Judge Ciparick asked for help on determining the intent of the grantor and got it, to the point that when Mahoney mentioned three key documents and then got diverted after talking about one, Judge Ciparick asked her for the other two at the end of her argument. Judge Read asked for clarification on a few points and got it. Judge Pigott raised the “keel yacht” issue and who is supposed to decide such issues and was led right back to the Deed and New York’s courts. Judge Jones was silent and stayed that way for the entire case. Barry Ostrager’s approach was quite different and somewhat out of sync with the Court. His speech patterns are slower than Mahoney’s to start with, and he tended toward recitations of the law and platitudes about deciding the Cup on the water. Judge Pigott asked a somewhat unfocussed hypothetical about a NY Yankees yacht club and got a lengthy, very general answer that was eventually interrupted by Judge Smith who wanted to know if that “was a yes” to Judge Pigott’s question. Ostrager raised the false issue of the “seaworthiness” of the Canadian challengers, which was a mistake, as any judge with a dictionary can figure out based upon the history of the suddenly familiar Captain Cuthbert that seaworthiness has nothing to do with it. One of the Judges asked skeptically whether the issue was experience or seaworthiness. When pressed, Ostrager stated that the safeguard of a fair competition is the defender’s fiduciary duty – which Ostrager overstated – and stated that there is no breach of fiduciary duty claim in this case. That is true, but only because Golden Gate Yacht Club (GGYC) chose to abandon a perfectly valid breach of fiduciary duty claim. Ostrager’s argument seemed to energize Judge Smith, who then launched down the path of a potentially fixed event with a compliant patsy challenger. With a 1000 watt twinkle in his eye and a fair amount of sarcasm, he said that there was no such claim in this case and he assumed everything was on the up and up, but what was there to prevent such a fixed competition if the Court agreed with Société Nautique De Genève (SNG)? While his questions may have been entirely innocent, they highlight the danger the internet poses to lawyers who skate too close to the edge. While the lawyers are limited to the record, the judges and their clerks are free to surf the internet to check up on what they hear. If any such extracurricular web surfing undermines your credibility, you will never hear about it, but the next time you shake your head it is going to fall off. By now Judge Smith was treating Ostrager like a thick skulled student who just did not get it and Judge Graffeo was asking openly skeptical questions about whether or not the challenger could simply abdicate its responsibilities. Judge Pigott threw Ostrager a lifeline with a softball question about whether or not the multi-challenger event would be aborted if GGYC wins, which Ostrager grabbed with far too much gusto. He launched into an ad hominem attack on Larry Ellison, which was totally not what the other judges had been interested in. They wanted to know what the Deed mandates and, as Judge Graffeo had suggested, if anybody does not like that, they can ask the courts to cy pres the Deed. Ad hominem attacks on the adverse party are just not done at this level. The Court of Appeals decides the law of New York. It does not want to hear parties trashing each other. In what may have been another set up, Judge Ciparick asked if GGYC was free to enter the multi-challenger event. Ostrager answered that he “believe[d] there would be an accommodation,” which sounded weasely, or worse if anyone looks at the documents on the parties’ websites. Ostrager ended with a speech that did not even stop after a curt “Thank you” from Judge Presiding Ciparick, which is the command to sit down. David Rivkin was next up for CNEV and proceeded to commit every possible appellate advocacy faux pas. After establishing that no one thinks there is any ambiguity in the Deed and no reason for the Court of Appeals to avoid deciding the case, he then was maneuvered into arguing that GGYC is trying to add words to the Deed, but that the Court should essentially amend the Deed to require that the Challenger of Record only have a bona fide intention to have an annual regatta on the sea at some time in the future, which would be a major de facto amendment of the Deed. The argument is bizarre and provoked skeptical questioning. That resulted in Rivkin talking over the judges’ questions. The one iron clad rule of appellate advocacy learned by every baby appellate lawyer is that as soon as a judge starts interrupting you with a question, you immediate shut up and look like you are thankful for the interruption. You do not finish your sentence. You do not finish your word. You do not finish your syllable. To make matters exponentially worse, he only talked over the female judges, not the men. Welcome to the 12th century. Guys – do not try that at home. At 34:53 he was way over time and asked for another minute. At 37:13 he was still talking over the judges’ questions and Judge Ciparick, who he was talking over at the time, acidly told him he had been out of time for a while. Finally, at 37:48 Judge Ciparick had had more than enough and issued a curt “Thank you.” Rivkin had been totally offensive and was so clueless that he did not even seem to realize it. Mahoney commenced her reserved five minute rebuttal with the nuclear weapon of appellate advocacy. She raised Judge Pigott’s question of the multi-challenger event and, referring to Ostrager’s claim as “untrue,” directed the Court to GGYC’s original challenge in which GGYC stated that the intent of its challenge was to hold a multi-challenger event just like AC 32. She was flat out calling Ostrager a liar, and pointing the Court to the record on appeal to prove it. Successfully executed slam-dunk for Mahoney. Somewhere between briefing and Tuesday, perhaps as a result of New York Yacht Club’s brief, Mahoney developed the insight that the time for qualification for the challenge was at the time the Challenge was issued by the Challenger of Record and, if the Challenger of Record was beaten in the selection series, at the time the new Challenger of Record is substituted. Thus, the qualifications of the so called “mutual consent challengers” is immaterial unless a “mutual consent challenger” wins the selection series and is substituted as Challenger of Record. Judge Smith grabbed that argument and ran with it. What Mahoney missed, probably because it does not jump out of the record on appeal, but must be in there somewhere, is that the so called “mutual consent challengers” have never been participating in the America’s Cup at all. Since the challenger series began in 1970 and continuing through the Louis Vuitton Cup, the Defender has merely agreed that whoever wins the challenger selection series is substituted as Challenger of Record, but until that substitution takes place, all the wannabee challengers have been engaged in extracurricular activity which is not part of the America’s Cup. Thus, only upon substitution did the qualifications of the substituted Challenger of Record have any relevance and for the unsuccessful challengers, their qualifications or lack of qualifications never became relevant. Perhaps another couple of days’ preparation – or some help from the sailors -- would have led all the way to the historical validation of her insight, but it is entirely possible that the industrious Judge Smith’s research into the history of the competition will get him all the way there. It is all a matter of public record of which the Court may take judicial notice. Aside from the history of the selection series, the only other thing Mahoney could have done would have been to point out that the claim that an accommodation would allow GGYC to participate in AC 33 was blatantly outside the record on appeal, but that if the Court was going to consider it, it should note the December 15, 2008 deadline for participation and the condition that GGYC drop this appeal in order to participate. In conjunction with the multi-challenger slam-dunk, that, to indulge my penchant for mixing metaphors, would have been a walk-off home run comparable to Bill Mazerowski’s solo shot in the bottom of the 9th inning of the seventh game of the 1960 World Series. Perhaps she was not aware of that extra-record history or simply decided to quit while she was ahead. In any event Mahoney had an excellent outing. The ultimate decision rests with the Court and all of my observations may be irrelevant to the outcome they eventually reach, which may belie all of my opinions. Indeed, thanks to the web, every ‘Butthead can compare my observations with his or her own, as well those of their friends, relatives and pets. The one thing I am certain of is that the Court will issue a thoughtful majority opinion (and perhaps additional opinions) which will be the law of New York and govern the Cup. An archived webcast of the entire proceeding at the State of New York, Court of Appeals from February 10, 2009 is expected to remain available for several months. Click here to view. back to top Part 33 - Time to make some popcorn "If it doesn't matter who wins or loses, then why do they keep score?" Vincent Thomas Lombardi. "Winning isn't everything--but wanting to win is." Id.
Thanks to the web, ‘Buttheads around the world can judge the lawyers for GGYC and SNG and the Judges of the Court of Appeals. In litigation, as in every other facet of life, some parties are willing to do whatever it takes to win and some parties are not. Watch it play out yourself. As any candid lawyer will tell you, oral argument can be very misleading, because cases are almost invariably decided upon the arguments set forth in the briefs, after the judges, with the help of their law clerks, have had a chance to really dig into an appeal. Oral argument can show what is troubling a judge or where the judge is going, or even give a lawyer an opportunity to fix up an unanticipated problem, but those occasions are relatively rare. This argument has some interesting wrinkles. Appellate Division, First Department Presiding Justice Jonathan Lippman was chosen by Governor Paterson to become Chief Judge, after Chief Judge Judith Kaye retired at the end of the year, but the New York State Dysfunctional Senate has yet to confirm him (a foregone conclusion) and he will not be sitting. Thus, there will only be six judges and Associate Judge Carmen B. Ciparick will be the Judge Presiding. ‘Buttheads may recall that, as a Supreme Court Justice, Judge Ciparick decided Mercury Bay and was reversed by the Appellate Division, First Department, and the Court of Appeals. In addition, although Judge Ciparick was reportedly one of the few Democrats who wanted to be Chief Judge, instead of going to Washington like everyone else, she was not recommended. What happens if they split 3-3? My sources in Albany who regularly appear before the Court of Appeals tell me that they will call for a do over once Chief Judge Lippman has been confirmed. The deadline to confirm is February 13, 2009, but there is no penalty if the New York State Dysfunctional Senate misses the deadline and the New York State Dysfunctional Legislature invariably misses the April 1 deadline for a budget by a mile. So, do not hold your breath. Although the Court can pull in an Appellate Division Justice to break the tie, they are unlikely to do so, as that would make the Appellate Division Justice the decider and the choice of the Appellate Division Justice the real decider. No one can remember an affirmance upon an evenly divided court, as regularly happens in the U.S. Supreme Court when a Justice recuses. So, if they announce a do over, they are probably evenly divided. My sources cannot figure out how CNEV had the gall/chutzpah/cojones (NY is multilingual) to file a brief when it had not filed a brief in the Appellate Division and is not a Respondent, but it did and got away with it without a peep from anyone, so SNG and CNEV get 20 minutes of argument, while GGYC only gets 15. To make matters worse, GGYC will probably divide its time to allow reply time, so it will go something like 10 to 12 minutes for GGYC to make its case and answer questions, then 20 minutes for SNG/CNEV (split 13 for SNG and 7 for CNEV to make CNEV look real) to muddy the waters as much as possible, and then 5 to 3 minutes for GGYC to respond to a blizzard of major stretches from SNG and CNEV. Good luck. That is not really where you want to be if you are GGYC. The buzz in Albany surrounds the appearance of U.S. Supreme Court bar superstar Maureen Mahoney on behalf of GGYC. As an avatar of Rehnquist/Roberts/Federalist Society movement conservatism (her second in command clerked for Justice Scalia) she can count on four solid conservative votes on her side when she argues in the U.S. Supreme Court. While a majority of the Court of Appeals are temperamentally conservative Republicans, they are not movement conservative ideologues and not as predictable. Against her will be Barry Ostrager, New York street fighter, for SNG. Watching the Court of Appeals react to their styles will be worth the price of admission. I am planning to attend the argument in person, so I probably will not be able to file a report until the next day. When I do, ‘Buttheads can judge me as well. back to top Part 32 - Meet the amici “Are we there yet?” Anon. Star Wars Episode II: Attack of the Clones, (20th Century Fox 2002).
While the Court of Appeals’ Mercury Bay decision restricts the inquiry to the language of the four corners of the Deed, all of the parties, and the amici in particular, seek to tip the scale with information outside the Deed. The most important amicus filed is from the New York Yacht Club (NYYC). NYYC’s brief was submitted by Carter Ledyard & Milburn, an old line white shoe firm, with Vincent Monte-Sano, a Carter Ledyard partner and NYYC sailor second chairing. It is very professional. Even though all the parties in this litigation are sailors, and America’s Cup sailors to boot, the NYYC brief is the first brief that reads like it was written by lawyers who have actually held a tiller, and really understand the history of the Cup. The input of highly knowledgeable NYYC members is obvious. As the original and only long term trustee of the Deed, as well as the only trustee intimately involved with the settlor, George Schuyler, a leading member of the NYYC, its brief will likely carry weight with the Court. NYYC pretty much sticks to the Organized Yacht Club and “having” issues, because, having given up the breach of fiduciary duty issue, that is all Golden Gate Yacht Club (GGYC) has left it to work with. Its main contribution is the argument that, based upon its experience as trustee and as the originator of the multi-challenger format, the Challenger of Record must be an established Organized Yacht Club so that it will be in a position to adequately represent the interests of all challengers and not sell them out to the Defender. That, of course, is really the abandoned breach of fiduciary claim that, in its Reply Brief, GGYC also sought to shoehorn into the Organized Yacht Club issue, only argued more cogently and based upon independent experience. Unfortunately, it fits into the Organized Yacht Club issue about as well as Cinderella’s older sister’s foot fit in the glass slipper but, to mix metaphors, that is the Procrustean bed NYYC must lie in. San Diego Yacht Club, Dennis Connor’s home club, and trustee after Dennis won (with Oracle’s Tom Ehman as part of his organization), also filed an amicus, as did Bill Koch, another former winner. Neither adds much other than to show a united front. Koch’s brief spends a lot of space tooting his own horn. ‘Buttheads looking for source material for a marathon Jeopardy or Trivial Pursuit game should take a look. (For 500 points, who has the largest collection of America’s Cup memorabilia in the world? – just what the Court of Appeals always wanted to know.) Everyone else can pass. Societe Nautique de Geneve (SNG) has already gotten most of its posse to file amici (I may have forgotten one or two – for good reason) and the claque was filled out with a bizarre brief from Team French Spirit and Team Shosholoza. An amicus which is little more than a vituperative ad hominem tirade against another amicus has to be a new one that only sailors could think of. According to the French and South Africans, NYYC is the font of all evil – sort of an Axis of Evil on West 44th Street. While NYYC’s AC stewardship has come in for plenty of criticism over the years and few would fit the Club for wings and a halo, the brief is way over the top. Moreover, it cites no authority for its charges and simply goes after NYYC in argument as if it were relying upon incontestable fact. About the only thing missing is a claim that NYYC is leading a conspiracy of les Anglais against the world. Pretty unprofessional stuff. Perhaps finally (but who knows, deadlines do not seem to mean much to these folks) Team Origin/Royal Thames filed a late amicus, based upon facts sworn to by a New York attorney with no personal knowledge of what he was swearing to, giving the lamest excuse for a late filing ever and claiming that the Protocol is hunky dory and that GGYC did not know what it really said. Of course they do not mention that GGYC was not allowed to see the Protocol unless it dropped its lawsuit. One of the unmentioned issues is that some of the amici have received loans and other financial help from the parties. Disclosure to the Court of Appeals may not be required, but non-disclosure is pretty sleazy. Exactly why SNG wants the record filled with poor quality briefs from friendly amici is a little hard to understand, other than to show that it has a lot of friends on its side. If one were a really suspicious sort of person, one might hypothesize that SNG, which would like the Court of Appeals to leave the case where the Appellate Division left it, would like the amici to convince the Court of Appeals that sailors are a bunch of nasty, childish jerks in toy sailor uniforms who should be left to squabble amongst themselves – a verdict of a pox on all their houses. That would suit SNG perfectly. I have been told that the video tape of the Mercury Bay oral argument in the Court of Appeals caught Chief Judge Wachler (who later flamed out in a tawdry personal melodrama that sent him to a psychiatric prison) muttering as the courtroom cleared, "Now we can get to real law." An outright win would be nice for SNG, but disinterest would be good enough. Unless GGYC wins outright on the “having” issue, or GGYC wins an outright affirmance, the prospects for sailing in the near future are not very good. If the Court of Appeals reverses the Appellate Division on the Organized Yacht Club issue, it is unlikely that it will hold that, as a matter of law, CNEV is not an Organized Yacht Club. It would send the case back to the Commercial Division to be decided after discovery and a trial, as Justice Cahn originally ruled would be necessary on this issue and GGYC argued in the Appellate Division. The Court of Appeals conceivably could decide that “having” is ambiguous, but that the Appellate Division got it wrong and it has to go back to the Commercial Division to be decided upon all the extrinsic evidence. In either or both cases, the result would be subject to another round of appeals. The breach of fiduciary duty issue is gone for good. All of the parties in this case have accepted the premise that the Cup is the top of the sailing heap and that was what George Schuyler intended. Arguably, neither is true and the result has been a collective distortion of the Deed. Baseball has one World Series, US football has one Super Bowl and international football/US soccer has one World Cup. Each game is the same everywhere and uses the same equipment. There is a clear hierarchy from youth leagues to the very top. Sailing is a much more heterodox sport. There are dozens of International Classes, each with an ISAF recognized World Championship. There is the “Little America’s Cup,” the Olympics, the outright speed record contenders, the ‘round the world record holder, the Vende Globe, the Volvo and a host of other premier disciplines, none of which culminate in the America’s Cup and which use completely different equipment in different events, whose only similarity is a sail and water. George Schuyler created an event that fit his conception of a sailing match, sponsored by real sportsmen and sailed in real yachts. He never thought it was for everyone. Everyone has lost sight of the singularity of George Schuyler’s event, as governed by the Deed. What this dispute is really about is that no one seems to want George Schuyler’s event and, in varying degrees, want to hijack the trophy for something “better” – meaning more commercial. This litigation is not about George Schuyler’s America’s Cup, as set forth in the Deed. It is about a different event. If they do not want to sail George Schuyler’s event, there is nothing wrong with that. They should move on, sail whatever they want, call it whatever they want and retire the Cup. Justice Cahn reached mandatory retirement at year end and now sits as a Judicial Hearing Officer (JHO), which means he only can hear cases if all parties consent. If anyone does not consent, it goes to another Justice, who gets to learn all about the America’s Cup from scratch. Something to look forward to. Of course, the way the parties are handling this case, Justice Cahn may not be the last Justice who reaches retirement age while this dispute is pending. back to top 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 contract and destroyed TNZ’s income stream from sponsorship. The complaint asks that SNG be removed as trustee and for damages. All of this is going to require discovery (which is much more time consuming and expensive than the motion practice in GGYC v. SNG) and, because there are plenty of potential pitfalls on both claims, expect Barry Ostrager, SNG’s counsel at Simpson Thacher, to find much to contest through motion practice. There are also some interesting open issues. In Mercury Bay the Court of Appeals wrote that a sporting trust may not require as high a fiduciary standard for the trustee as in a normal trust, which in the famous of formulation of Judge Cardozo is “the punctilio of an honor most sensitive.” If there is a lower standard, the contours of that lower standard are undefined, although TNZ argues that no matter how low the standard is, SNG has breached it. If SNG were removed as trustee (but not necessarily as defender), who would be the substitute trustee? Presumably a notable appointed by Justice Cahn, but not necessarily a sailor, although he or she would probably hire knowledgeable advisors. As far as the breach of contract claim goes, Alinghi will almost certainly argue that there was no contract. Count on a major fight over what law even applies to the deal. A Swiss entity located in Valencia, Spain (both civil law jurisdictions) deals by e-mail with a New Zealand entity located in Auckland, NZ (a common law jurisdiction) about a Cup event which, including acts, will take place all over the world. Place your bets on what law applies. Under New York law, they probably have a contract, but why would New York law apply? New York has the undisputed paramount interest in the Deed, but what is New York’s interest in this “contract”? Who knows what the law of some of these other jurisdictions might be? What is really amazing is that Ross and Farmer, two New Zealand lawyers (Farmer is apparently an elite Queen’s Counsel (QC) – a “silk”) would enter into something that looks like a contract, walks like contract and quacks like a contract, but which is so sketchy that it is lacking any of the normal contractual boilerplate that resolves these, as well as many more, issues. The “contract” does contain an agreement to abide by the arbitration provisions of the Protocol, but applying that arbitration provision to this “contract” would be a major stretch. Altogether an extra Christmas Day for lawyers. The disputable issues in the antitrust case are exponentially greater. Of course ‘Buttheads might ask why TNZ would try to turn this garden variety state law case into an antitrust case. The answer is two words – treble damages. Add to that the slightly broader discovery available in federal court and you have a much bigger stick to swing. Essentially, TNZ is claiming that the defendants and co-conspirators RFEV and CNEV are conspiring to monopolize, attempting to monopolize and are monopolizing (section 2 of the Sherman Act) the market for America’s Cup sponsorship in the US (the rest of the world probably only counts if it has an effect in the US) and that the defendants are combining and conspiring to restrain trade (section 1 of the Sherman Act) in America’s Cup sponsorship in the US. By making it impossible for TNZ and other viable challengers to survive, Alinghi secures and perpetuates its monopoly over that sponsorship. Like I said, this is not garden variety antitrust material like conspiring to fix the price of concrete or trash hauling in New York or the Standard Oil Company monopolized the US oil business. Of course, to profit in the long run Alinghi would have to endure considerable pain itself, to be recouped in the future, but if it can turn the sponsorship spigot on and off to suit itself, there might by a monopolist’s pot of gold at the end of rainbow. As you might guess, courts are not very hospitable to those kinds of theories, which is why it is virtually impossible for a plaintiff to win a predatory pricing antitrust case, which is basically the same idea – sell at a loss now to drive your competition out of business and make lots of money in the future. Add all the usual disputes about what the market is (AC sponsorship? All sports sponsorship?), what the geography of the market is, etc., etc. Then add in a healthy dose of factual disputes – many of the present sponsors do business in the US (Toyota, BMW, Emirates, UBS) but are headquartered and may make sponsorship decisions outside the US -- and you begin to see the outline of a 365 day per year Christmas for lawyers. If all of this were litigated to the last billable hour, the hiatus between the 32nd and 33rd AC’s would probably exceed the hiatus between the Ranger (J boat) defense and the Columbia (12-Metre) defense. Don’t count on it. But, then again, we have not seen too much rational behavior thus far, so this may get curiouser and curiouser. back to top Part 16 - Full speed on split tacks "I (really, really) don't have to show you any stinking badges.”
(January 30, 2008) I have been trying to avoid AC litigation fatigue, so I will keep this update short. On Monday, as reported in Part 15 (see below), SNG had managed to maneuver GGYC into a hole, with GGYC stuck without an optimum presentation of its arguments and SNG sailing in decent pressure with a full presentation of its argument that GGYC’s Notice of Challenge is defective and hence GGYC is not a valid challenger. In New York practice, there is a simple solution when all the papers are in and you have not made your argument – forget about rules and submit more papers, usually in the form of a letter to the judge. GGYC did exactly that in a succinct, forcefully argued, back to the basics letter to Justice Cahn. Stripped for action of any discussion of what a “keel yacht” is or is not, GGYC argues that it has provided all the information (rig and dimensions) required by the Deed, the parties can race what they please within the parameters of the Deed and that neither has to disclose the type of vessel or configuration until they line up at the starting line for the first race for all to see. GGYC goes on to argue that the defender cannot cherry pick amongst challengers by quibbling over the Notice of Challenge, but can always negotiate for more information from the challenger. Finally, GGYC argues that SNG has refused to specify the applicable rules for the match, which cannot contravene the Deed, so SNG cannot rely upon ISAF rules or pronouncements, which are not applicable in any event. In short, GGYC argues that Justice Cahn should only consider three criteria: the Deed, the Deed, and the Deed. Although GGYC avoids the “keel yacht” quagmire, it does point out that SNG submitted evidence from Nigel Irens, a multihull design expert on Alinghi’s design team. The next day SNG shot back a letter arguing that GGYC’s letter is improper – and goes on to say that GGYC does not say anything new. So, after a lull and a false start, we really seem to be at the end of the submissions and both teams are back at full speed on split tacks. GGYC argues that Justice Cahn should sign its proposed order, dated December 11, 2007 (an October 2008 match), and send the case to the Appellate Division, First Department, if SNG, as promised, appeals. SNG argues that Justice Cahn should DSQ GGYC or refer the matter to ISAF, without, however, citing any provision of the New York Civil Practice and Rules that would authorize Justice Cahn to make such a referral, or provide a mechanism to do so. Keep your fingers crossed. There seems to be enough pressure to finally get across the finish line on this leg of the race. One final note. Periodically, sailors complain that if either litigant would just be reasonable and stop this litigation, we could all go back to sailing under the AC 32 format. That sort of equivalency (in legal jargon, “in pari delicto,” of equal fault) ignores reality. Only one litigant has the power to unilaterally go back to the AC 32 format and has declined to do so, in favor of a different format which has not exactly met with universal approval. That is why the Cup is before Justice Cahn. back to top Part 15 - Did GGYC copy the Mercury Bay Challenge? “Behind every great fortune there is a crime.” -- Honore de Balzac
(January 28, 2008) Behind every litigation there is a screw-up. Make that more than one in this AC litigation. Although clients are the originators of the most ingenious and creative screw-ups, it is usually the lawyers trying to get their clients out of their messes that bear the brunt of the criticism. Clients do not fall on their swords. Lawyers do. That is why it was adios White & Case, former “best lawyers” of Société Nautique Genève (SNG). Until now, the screw-up that dominated the litigation was the creation of the obviously bogus Club Nautico Español de Vela (CNEV) as Challenger of Record. The honor of center stage now passes to the now infamous “keel yacht” challenge, which threatens to snatch defeat from the jaws of victory for Golden Gate Yacht Club (GGYC). As John Rousmaniere and others have noted, inquiries regarding how the obviously misplaced “keel” wound up before “yacht” in GGYC’s challenge have brought forth only enigmatic responses from GGYC. Buried in the latest blizzard of papers lies the answer. Barry Ostrager’s Affirmation was filed Monday and is on the web, without its fairly extensive exhibits. Exhibit H of that Affirmation is the 15 July 1987 Mercury Bay challenge. The GGYC challenge is obviously copied word for word from that challenge. Everything is exactly the same, the title, format, everything. The only differences are that Commodore Marcus Young is substituted for Humphrey Michael Gerard Fay and the dimensions are different. Each one goes on to “certify the details set out below as to the name, rig and specified dimension of the keel yacht to represent [the challenging club] in a match for the America’s Cup to be sailed in accordance with the Notice of Challenge herewith.” Thus, someone familiar with the Mercury Bay challenge obviously copied the Mercury Bay challenge verbatim without realizing that “keel” was superfluous and could only lead to trouble. That trouble has arrived. It also explains the bind GGYC’s lawyers are in. The one thing one seldom sees in a litigation, even if in the end it might be the most successful, albeit gutsy (this is a family publication), strategy, is a straightforward mea culpa. I once did it myself in NY Supreme and it worked like a charm in a very dicey situation. In this case it would be something like: “Yes, we made a silly mistake, but it does not make any difference, because we gave the dimensions and that is all we have to do. We are not going to have a keel and any confusion is feigned. Let’s go race.” Justice Cahn probably would be so shocked to hear the candor of a mea culpa uttered in a courtroom that, after he recovered from his faint, he immediately would rule in GGYC’s favor, if not award the Cup outright to GGYC. Instead, the litigation has become a debate over how many lawyers can dance on the head of a pin arguing, with expert support on SNG’s side, about the totally irrelevant question of whether a multihull can be a keel yacht. On that spurious issue, SNG, in contrast to the litigation to date, has the better of the argument. First SNG snookered GGYC by delivering the Pels interpretation the night before Wednesday’s hearing. Although the chances of Justice Cahn reading it before the hearing were near zero, GGYC’s lawyers, obviously anxious to avoid asking for a delay to respond, put together a response for the next day, without enough sailor input to realize that the Tornado class rules GGYC cited, which refer to a Tornado’s keel, were for an Olympic Class. Thus, they missed the fact that the Tornado rules demonstrate that Pels, who was obviously way beyond his authority (SNG is not an MNA) and only speaks about Olympic classes, does not know what he is talking about. Although there was no chance Justice Cahn would read either submission at or before the hearing, GGYC’s submitting at the hearing allowed SNG to ask for 5 full days for a response. SNG thus had plenty of time to prepare a response (complete with graphics in the text) bolstered by an impressive sounding group of “experts” who claim not to be getting paid for their opinions, but obviously have every reason to believe the favor may be returned at some point in the future. SNG got the last word, litigation’s weather gage, and used it to create the illusion of a ship of the line out of a lashed up raft which could not bear a single return salvo. Lucky Jack Aubrey would be impressed. So where are we? Justice Cahn is not getting much help from the litigants and will have to figure this out himself. He does not have the luxury of sifting through papers for the facts that should have been highlighted for him. Nevertheless, he may by himself come to the KISS answer I outlined in #14 -- GGYC gave the dimensions and SNG can sail what it pleases within the parameters of the Deed. That would be consistent with Mercury Bay’s four corners of the Deed, just the four corners of the Deed, approach. It would also be consistent with the terse style generally favored in New York courts. That would go GGYC’s way and the litigation would move uptown to the Appellate Division, First Department. The other possibility is that he goes down the “keel yacht” path that SNG has created. That opens three possibilities. A decision on the papers for one side or the other is not likely. Nor would punting to ISAF, as SNG wants for obvious reasons, given the Pels interpretation, be very likely. (The chances of ISAF getting the right answer on anything are . . . ?) Justice Cahn just does not have enough information to do that. The most likely of the three would be a trial on the issue of what a “keel yacht” is, which would also delight SNG, as one could design and build an Armada in the time that would take. ‘Buttheads hoping for some sailing will just have to keep their fingers crossed. Justice Cahn is in the lead for Seahorse Magazine’s Sailor of the Month. (If you have not voted, make sure you go to www.seahorsemagazine.com and cast you ballot.) If he is able to singlehand his way through this sailor created mess and get the Cup back on track and on the water all by himself, he deserves to be named Rolex Sailor of the Year. back to top Part 14 - “If you can’t convince them, make sure you confuse them.” – Anon
(January 23, 2008) Today’s hearing, which should have been the end of the first leg of the America’s Cup litigation, turned out to be the sailor’s nightmare – becalmed within sight of the finish line and suddenly discovering that someone left the time limit out of the Sailing Instructions. A lawyer’s responsibility is to zealously represent his or her client within the bounds of the law and the Code of Professional Responsibility. Sometimes it means implicitly arguing that “we don’t have to show you any stinking rules.” Sometimes it just means confusing the issues. Often it is not pretty. SNG did not win today, but Barry Ostrager justified his billing rate by not losing. He was not eloquent. His presentation was halting and he was often painfully at sea and grasping for basic terms and concepts on the sailing issues, but he managed to stave off an order, perhaps for a while. He stayed alive, which beats the alternative. His client is undoubtedly happy. A happy client makes a happy lawyer. Despite having outlawyered SNG in the exchange of letters to Justice Cahn Friday and yesterday (letters are completely outside the rules, but common in NY Practice) GGYC could not close the deal. Focusing on the fact that attempting to reopen the issue of whether GGYC is a valid challenger violates a host of rules, GGYC lost sight of the KISS principle and could not explain why the whole “keel yacht”/multihull confusion issue on GGYC’s challenge is a red herring and should not be delaying entry of an order. Even if Justice Cahn believes that SNG is violating the rules by raising a new issue at this stage of the litigation, he has to feel comfortable that his ruling is substantively correct. The KISS answer to the “keel yacht”/multihull issue (as I said in #13) is that, under the Deed, as long as the challenger sets forth the number of masts and the four dimensions required by the Deed, the defender can respond with anything it pleases within the parameters of the deed. Certainly, if it wants to have a real match, the defender can try to field a similar boat, but, as George Schuyler himself said prior to the execution of the present Deed, the defender does not have to. It can show up with the fastest boat it can design and hope for a “Coma Off Point Loma” blowout. Whether the defender is confused by extraneous or even contradictory extraneous language in the Notice of Challenge simply does not matter. Of course, as is also clear from George Schuyler’s statements about the Thistle challenge which resulted in the present Deed, the challenger and defender are allowed to talk to each other and work it out. But of course, a real match is not an issue in this dispute. By trying to explain the “keel yacht”/multihull issue, GGYC was grabbing hold of the anchor SNG had thrown it – never a very great move – but understandable as none of the lawyers are sailors. Watching non-sailor lawyers trying to explain sailing matters to a non-sailor judge quickly became as painful as watching yours truly attempt to learn to kite board probably would be. The final “I can’t believe this is happening” moment was when GGYC, responding to a last minute document entitled “Interpretation – Keel Yacht/Multihull Yacht, authored by none other than ISAF’s General Secretary Jerome Pels, now taking SNG’s side, handed up a ¾ inch submission on keels and multihulls. Don’t hold your breath while a non-sailor judge tries to deal with that kettle of fish. Not once did I hear anyone say anything about why this needs to get done quickly, so that unemployed sailors and support staff can get back to work. Where are we now? SNG gets to respond to GGYC’s submission on Monday and then – something will eventually happen. Hopefully, all the ‘Buttheads out there listened to their mothers’ advice and brought extra water and Power Bars with them, because they are going to come in handy if this drifter continues. After the hearing, Lucien Masmejan, Ernesto Bertarelli’s Swiss lawyer tried to explain to me that getting this done one way or the other was not the issue, but Barry Ostrager’s response to Justice Cahn’s question about whether the parties had discussed the nature of the challenge said it all without realizing the irony of his words: “We have irreconcilable differences with GGYC.” As some ‘Buttheads may have learned the hard way, “irreconcilable differences” is a legal term of art – it is a ground for divorce in many states (not NY). As I said way back in this series, this is like a marriage gone bad. It is getting worse. Pretty soon we start sawing the kids and the dog in half. If sailors hoping for some racing think they have it bad, think of Justice Cahn, elected by New York’s voters to deal with a bunch of squabbling sailors who refuse to leave the “room,” while not even allowed to bring a bottle of Mount Gay to the bench. The least ‘Buttheads can do is vote for Justice Cahn as Seahorse Magazines Sailor of the Month. Just go to http://www.seahorsemagazine.com/sailor_month/sailormonth.php and cast your ballot. If this keeps up, he could wear the winner’s gear in place of his robe. back to top Part 13 - The scent of an appeal grows stronger
(January 14, 2008) Who won today before Justice Cahn? Nobody. Everybody. SNG got a 9 day reprieve, but not 9 days more to prepare for the match. The date of the match will be determined – if the parties do not take the Court’s repeated suggestions that they agree – at a hearing before Justice Cahn on January 23, 2008 at 2:00 pm. The reason for the delay is straightforward. First of all, I have to point out that no ‘on the record’ hearing was held. Instead, as the appearance was scheduled as a conference, rather than argument, the Court convened an 18th century type scrum at the bench, just like the very first appearance, which allows Justice Cahn a degree of informality to explore the issues which would not be possible on the record. For that reason, even though I could hear much of the conference, it would not be appropriate to quote Justice Cahn. What is clear is that he wants to get an order entered which will finish this stage of the litigation. As SNG has stated, it will appeal whatever the order provides, so it does not make a lot of sense to beat the order to death. That is the Appellate Division’s problem. Ordinarily, the order settled by the motion winner is signed, with any valid points from the order counter-settled by the motion loser added. That makes sense, because the motion winner will have to defend the order on appeal to the Appellate Division. If the winner asks for more than he or she is entitled to, it increases the chances of reversal, but the motion winner bears that risk. Indeed, a motion loser might be better off with an overreaching order to appeal, rather than one more carefully drawn. It is a fatter target. If that were the only consideration, Justice Cahn might well have signed GGYC’s order, with the October 2008 match dates and let the Appellate Division sort it out. The complicating factor is SNG’s motion to renew and reargue, which I discussed in my last report. SNG is now making the argument that the record on the cross motions for summary judgment was not sufficient for Justice Cahn to rule that GGYC is a valid challenger. Thus, SNG argues that Justice Cahn take that issue up separately. Because the issue of whether GGYC is a proper challenger is already briefed on the motion to renew and reargue (but not yet forwarded to Justice Cahn), Justice Cahn advanced the argument from January 28 to January 23 and held the dispute over the order to that date. Not having seen the motion to renew and reargue, Justice Cahn did not express any opinion regarding whether there was any substance to it. Thus, SNG got 9 more days before an order is entered, which will set the date of the match, unless Justice Cahn decides that GGYC’s challenge is invalid and there will be no match. Having hammered SNG on both the procedure and the substance of the motion to renew and reargue, GGYC did not oppose the 9 day delay, obviously concluding it had nothing to lose and that it would get more points with the Court by being accommodating. Justice Cahn gains points in the Appellate Division’s eyes by giving SNG ample opportunity to make its case. In a break with past practice – and a stated reflection of SNG’s concern for the opinions of the ‘Butthead community – Barry Ostrager, SNG’s new lead counsel asked if he could call me to convey SNG’s position. Naturally I agreed. (I give almost anyone the courtesy of a hearing.) Most of what he had to say was in the motion to renew and reargue, with a few additions he will probably argue at the hearing. I asked some fairly probing questions and got polite, but not terribly illuminating answers. The one new argument is that in Mercury Bay, the Court of Appeals specifically stated that: “In this case, we are not presented with the issue to which Mercury Bay's arguments are relevant -- whether the required dimensions preclude the use of a catamaran by a challenger because the dimensions specified do not relate to multihull vessels and therefore do not provide the defender with the disclosure mandated by the deed.” Although the Court of Appeals went on to report that the Mercury Bay parties had submitted extensive expert opinion on the issue, it would be a mistake to conclude anything from that statement – other than the fact that Court of Appeals was not considering the issue. Specifically, it does not indicate the Court of Appeals though there was anything to the argument or that it was in any way important. On January 23rd, SNG will have its work cut out for it. First of all, under the Commercial Divisions special rules, when GGYC moved for summary judgment that its challenge was valid, based upon the evidence of the written challenge itself, SNG could not just oppose that branch of the motion, it had to come forward with contrary evidence to counter GGYC’s evidence. By not doing so, it conceded the issue and is bound by that concession. Although it can argue on appeal that the written challenge was not enough evidence to start with and, therefore, it did not need to respond to GGYC’s evidence, that is not likely to be a winning argument, because the written challenge almost certainly is enough evidence. As I previously reported, SNG also has to overcome the fact that its representative previously swore that the challenge was perfectly clear and could only mean a catamaran, regardless of the issue the Court of Appeals left open. An even bigger problem is presented by the Deed itself. As the Court of Appeals specifically held in Mercury Bay, whatever the challenger says in its challenge, the defender can show up in anything it pleases, as long as it is 90 feet or less at the waterline. Thus, regardless of whether SNG is confused by GGYC’s challenge or not, it can show up with the fastest under 90 footer it can design. Indeed, it even gets to chose the site for the match and optimize the fit between sea and wind conditions and its boat. Moreover, it would be hard to imagine that the defender is permitted to sail a multihull with the Court of Appeals’ express blessing, but the challenger is not. In addition, the issue of whether a multihull may sail is different from the issue of whether the issuer of a multihull challenge is a proper challenger. The Deed requires only that specific dimensions be disclosed. It is Justice Cahn’s responsibility to determine whether the dimensions have been disclosed. The Deed says nothing one way or the other about surplus information (the “keel yacht” issue) and SNG if free to disregard anything beyond the required dimensions. Just because the challenge is valid, however, does not preclude SNG from protesting the boat GGYC shows up with. Indeed the Court of Appeals held that such a protest should be decided by what was an IYRU jury in Mercury Bay. (Of course, the Court of Appeals had no reason to consider what to do if the jury was not indisputably impartial.) One of the points Barry Ostrager made in his call was the same one SNG has been making since the case began – this dispute should not be in Court. That is obviously true, but not very helpful. The parties should have resolved this dispute months ago, but cannot. That leaves no choice but Justice Cahn, who was doing his best to get the parties to at least agree on the match dates. Before we ended the conversation, I pointed out to Barry Ostrager that parties could probably solve this problem with the help of a really first-rate mediator like Ken Feinberg, who resolved all of the World Trade Center fund claims. What someone like Feinberg can do is not simply propose a compromise. He can do something much more important – show the parties how to agree to a compromise without feeling that they are losing face. It turns out Barry Ostrager knows Ken Feinberg, and almost certainly other first-class mediators as well. A change of counsel can often have a positive effect on a case. Picking up the phone is a major change. Coming in after a loss on summary judgment, new counsel has to be candid with the client about how deep the hole they are in really is, if for no reason other than self-preservation. New counsel is also free from blame for the existing situation. New counsel is thus in a much better position to advocate for a reasonable approach to settlement. Of course, first he or she has to fight like hell to claw back into the race and bank some credibility with the client. Having bested Herb Wachtell in the mammoth World Trade Center Insurance Litigation, Barry Ostrager had the clout to get this gig and has the skills and resources to litigate for a long time, if he can convince the Appellate Division to grant him a stay of the order Justice Cahn will enter. That is not by any means a gimme. He also has the clout to get it resolved. The jury is out and we shall see how it unfolds. back to top Part 12 - Much ado about nothing
(January 6, 2008) SNG lost before Justice Cahn despite having the “best lawyers.” With new counsel SNG is not just losing. It is getting crushed. If that were not bad enough, SNG’s counsel is making SNG look like a crew of lubberly knaves tumbling from the rigging on an out of control goose wing jibe. The capper of this “Pirates of Switzerland” performance is that the motion to renew and reargue is OCS and too late at the same time. New York Civil Practice Law and Rules (“CPLR”) 2221, which governs motions to renew and/ or reargue is titled “Motions affecting prior order.” Although the term “settlement order” has somehow crept into sailing publication discussions of this case, there is no such thing in New York practice. Justice Cahn wrote a Memorandum Decision, not an order, and directed that GGYC “Settle Order.” Settle is a verb used in the somewhat archaic sense of “settle the plate on the table.” On or after the settlement date, now effectively January 14, 2008, Justice Cahn will enter an Order. Until he does so, there is no order to affect. Indeed CPLR 2221(d)(3) mandates that a motion to reargue “shall” [mandatory] be made within 30 days after the order in question is entered and served with notice of entry. Why did not GGYC even mention that the motion is premature? Perhaps it was because the time to renew, which is a minor part of the motion, is not governed by the 30 day rule. More likely it is the same reason that a match racer slam dunks an OCS adversary, or a slugger crushes a fat slightly out of the strike zone pitch on a 3-0 count. Real litigators are competitors. Dominating is what they are about, just as it is for Russell Coutts, a major league slugger or pitcher, or any real athlete. More importantly, credibility is key to success in litigation. If you can destroy your adversary’s credibility, he sails on a perpetual header thereafter. Credibility is like virginity. It is hard to regain. Hamish Ross swore and Fred Meyer announced for SNG that the 90 X 90 boat could only be a catamaran. Fred Meyer now swears for SNG that, finally having gotten around to reading GGYC’s challenge, the 90 X 90 keel yacht sounds like a monohull. If that were to happen at trial, the next question asked is “Were you lying then, or are you lying now?” In motion practice, when Santa brings a present like that, you do not tell him he is a day early. A fair amount of sailors’ ink has been expended on the “keel yacht”/“keelboat” issue. It does not matter on this motion. A motion to renew and/or reargue is not a mulligan or a do-over. A motion to reargue is limited to “matters of fact or law allegedly overlooked or misapprehended by the court” and “shall not [mandatory] include any matters of fact not offered on the prior motion . . . .” Although a motion to renew does allow the submission of facts not previously submitted, upon “reasonable justification,” case law has set the bar for “reasonable justification” so high that relying upon divine revelation would only have a 50/50 chance of success. What will not work is Fred Meyer swearing that, although GGYC moved for summary judgment declaring that it was the rightful challenger of record – and SNG half-heartedly disputed that branch of the motion – SNG was not paying attention and has finally woken up to the realization that what Hamish Ross swore, and Meyer himself stated, could only be a multihull challenge now sounds like a monohull challenge and is unacceptably vague. Nor will the fact that CNEV has finally held a regatta work, for the reason that whether new or not, it is not a relevant fact. Justice Cahn correctly framed the issue as the state of fact at the time of CNEV’s challenge. Whether CNEV held a regatta after that date is irrelevant and does not make any difference. Thus, SNG has accomplished the oxymoronic – a premature motion that is making arguments that are a day late and a dollar short. Most of SNG’s arguments are reminiscent of the angler who landed a barracuda and was so terrified of the toothy fish thrashing about the boat that he pulled out a handgun and shot the fish and the bottom of the boat to death. For example, SNG relies upon George Schuyler’s statements about the Thistle challenge, which turned out to be 18 inches longer at the waterline than agreed. (Imagine that – gentlemen agreeing on the nature of the match.) Schuyler made it clear that the challenger had no obligation to disclose anything about its yacht’s lines and that NYYC wanted to know its size in order to meet it with a similar boat “if it so desired.” Even more importantly, the Thistle challenge predated the current Deed and resulted in the current Deed’s designation of the dimensions to be disclosed as the only requirement. Not only is all of this far from the four corners of the Deed, but the whole matter is entirely consistent with Mercury Bay and negates SNG’s claim that more information is necessary. The “keel yacht”/“keelboat” issue amounts to little. SNG’s own submission from the dictionary states that a keel is the longitudinal structural member of a vessel and can even be the name of a flat bottomed barge like vessel. In an attempt to create an issue, SNG submitted the entire 2007 ISAF International Measurers Manual -- which will undoubtedly be a treasured addition to Justice Cahn’s sailing library – but is irrelevant to construing the requirements of the 1887 deed. ISAF did not even come into existence until 1907, twenty years after Schuyler wrote the current version of the Deed and 17 years after his death. The Manual is undoubtedly even more recent. SNG also makes an argument that GGYC’s challenge is invalid which revolves around whether or not Saturday is a weekday, but, like a movie reviewer, I am not going reveal anything that would spoil the suspense for ‘Buttheads who want to read it for themselves. So, what is this foolishness all about? Delay, delay, delay. Obviously, SNG desperately wants to avoid an October 2008 defense. After all, if you were a Swiss bank (Alinghi sponsor UBS) that recently has written down some $14 billion, has gone hat in hand to anonymous Middle Eastern sources for quick cash, and is being investigated by Swiss banking regulators, would you be anxious to throw money at sponsoring the likely loser in a sailboat race, even if (especially if) he is a member of your board of directors? Consider also that he is in a blood feud with a billionaire running a major software company you may want to do banking business with. Delay, delay, delay. The shoe that has not yet dropped is whether GGYC will waive strict compliance with the 10 month requirement (SNG is in no position to insist upon it) or demand a Southern Hemisphere Match. The January 14 hearing may be interesting. back to top Part 11 - To appeal, or not to appeal,...
(December 16, 2007) SNG will not appeal and is ready for mano a mano in multihulls. Remember that? It is inoperative. It appears SNG is not coming out to play in the near future – at least not on the water – because SNG has learned to like it in court and does not want to leave. Although the settlement date for an order has come and gone, there is no order and will not be one until at least January 14, 2008. Because there needs to be 10 months’ notice of a match, that would push the match into 2009, and any subsequent monohull defense into 2011+ -- or perhaps not. How did that happen? Fairly simply, it turns out. As reported elsewhere, SNG has fired White & Case and hired Simpson Thacher. Simpson Thacher immediately wrote Justice Cahn, announcing that SNG plans to appeal, reversing the positions SNG previously took, and attempting to start over from scratch. In the course of that letter, Simpson Thacher makes some pretty questionable statements, such as the claim that SNG has agreed to hold the next Cup in Valencia, which will be the first European AC site in 150 years (the 32nd in Valencia apparently never really happened) and that the Deed requires not just LWL length, LWL beam, extreme beam and draught for the challenging vessel, but all of those for each hull. Despite everything the Court of Appeals held in Mercury Bay (and what everyone knows about the feasible configurations), GGYC is also supposed to “give the defender a clear idea of the nature of the challenging yacht.” Thus, according to Simpson Thacher, GGYC’s challenge is not valid, despite the fact that the validity of GGYC’s challenge was never disputed in the litigation. Simpson Thacher further wants to leave any dates out of the order, so that the parties can negotiate them (and, you guessed it, come back for more litigation if they cannot agree). Altogether, there are five single space pages of this stuff, which is generally long on generalities and portents of unspecified doom, but short on specifics. There is a way to do this properly. That is to let the order be entered and then make a motion to either or both renew (newly discovered evidence the court failed to consider) or reargue (the court got the law wrong). The problem with doing it the right way is that, not only is such a motion, for obvious reasons, seldom a winner, but it does not stay the time to take an appeal or stay the match. Indeed, many experienced lawyers avoid those motions precisely because, if the judge has erred, the judge gets an opportunity to fix the mistake in a way that really buries your chances on appeal. Why is this going on? By pushing the settlement date out to January 14, 2008, now scheduled for a hearing on the order, any match on 10 months’ notice as provided in the Deed would be past the November 1 cut off for a match in the Northern Hemisphere. Why is Justice Cahn allowing this? Judges seldom change their decisions, but they do not like to preclude new counsel from an opportunity to be heard – within reason. Listening and saying no is almost always better than not listening and saying no. Indeed, some litigants go through a lot of lawyers seriatim to gain delay. While the entire AC industry may be grinding to a halt and a lot of folks are facing a fairly grim Christmas, Justice Cahn has been provided little evidence demonstrating why delay is such a problem. Of course there is a solution, which GGYC has yet to raise, probably because it undercuts its attempt to advance the match. The challenger gets to specify the date on 10 months’ notice. The defender gets to specify the location. SNG’s White & Case lawyer previously swore that SNG has no home waters and has to find a location. While everyone says they prefer Valencia, no one has definitely committed to Valencia. If the order is entered in January, absent a stay from the Appellate Division, First Department, 10 months’ notice will put the match between November 1 and May 1, when no match may be sailed in the Northern Hemisphere. Absent agreement, it will just have to be sailed under the Southern Cross. back to top Part 10 - A Review, plus a look at Appeals and Deed Revisions
(December 11, 2007) Before we proceed Down the Rabbit-Hole of revamping the Deed of Gift, a brief note regarding where we are. Justice Cahn’s 11/27/07 Memorandum Decision ended with the instruction: “Settle Order.” Under this New York State procedure, the winner, GGYC, prepares a proposed order faithful to the Memorandum Decision and settles it upon the losers, SNG and CNEV. If they do not like the proposed order (three guesses), they counter settle a counter proposed order and the Justice’s Confidential Law Secretary (law clerk) will mark up one or the other to conform to what the Court really wants to do. As you guessed on your first try, SNG did not like GGYC’s proposed order and counter settled. Aside from some technical issues of interest only to those billing by the hour, the differences boil down to whether, absent consent, the match will be October 1, 3 and 5, 2008 (GGYC version) or July 18, 21 and 23, 2009 (SNG version) and whether SNG must identify the venue, be it Valencia or elsewhere, by December 31, 2007 (GGYC version) or 6 months before the match (SNG version). In an attorney’s affidavit, SNG claims that a possible appeal will take a year and that October 2008 is not feasible because the Valencia Formula 1 event will have first call on the city streets and, as SNG’s lawyer swears, “in the Northern Hemisphere the autumn equinox brings the risk of uncertain winds and storms . . . .” In a letter to the Court, GGYC cannily accepts all of SNG’s changes except the dates and, turning SNG’s previous arguments on SNG, argues that, under Mercury Bay, the Court need not get involved in the site. If Valencia is impractical, SNG can chose someplace else under either version of the order. The deadline for all of this was December 10, 2007, so an order should be signed and entered any day now. GGYC can then serve the order with notice of entry, which will commence the 30-day appeal period for the order. GGYC will then prepare a judgment, which the clerk will compare with the order and, after marking it up, will enter. Service of the judgment with notice of entry will start the final 30-day appeal period for everything in the action. Because CNEV, with GGYC’s consent, intervened as a defendant, it may appeal even if SNG does not – a potential example of how no good deed goes unpunished. While SNG offhandedly talks about an appeal, it does not mention that the match goes forward unless the Appellate Division, First Department, grants a stay of the judgment. A stay usually results in an expedited appeal, which can be quick as necessary under the circumstances, and may require that the appellant post a substantial bond. Thus, absent consent, the match soon will be upon us. With things not going all that well in the Commercial Division, Ernesto Bertarelli has suggested a total revamp of the Deed of Gift. Bob Fisher has commented on the merits of that proposal. I will briefly discuss the bare bones of the New York law, which is a blend of the common law and the Estates Powers and Trust Law (“EPTL”), a statute. The Deed of Gift has, thus far, been treated as a charitable trust. Changing it involves the ancient rule of cy pres, which never got an English makeover. Excerpt where governed by the EPTL: The requirements for cy pres are (1) the trust must be charitable in nature; (2) the language of the instrument when read in light of all attendant circumstances must indicate a general rather than specific charitable intent; and (3) the particular purpose for which the trust was created has failed or become impossible or impracticable to achieve The court must determine whether George Schuyler’s intent was general or specific. Let us say the settler created a trust for the benefit of education. That is general charitable intent. Change that to a trust for the benefit of a specific named school or for scholarships at a named sectarian school. That is specific charitable intent. In the first case, the court will be more willing to cy pres the trust. In the second case, the court will be much more restricted. If the school ceases operation, cy pres is likely to be limited to scholarships at another school of the same denomination. George Schuyler’s charitable intent seems very specific. The Cup was given for a very specific form of sailing, which Schuyler tinkered with several times to conform to a specific plan. Schuyler had many opportunities to broaden the purpose of the Cup and never did. In addition, only Schuyler, not the general public, donated the Cup, which further indicates specific intent. The next step, if the court even gets over the first hurdle, is to determine if the object of the trust has become impossible, e.g., the institution or class to be benefited no longer exists. That is a pretty difficult burden to meet in this instance. The 32nd Cup, held pursuant to the Deed, was the biggest success ever. Until the week after the 32nd Cup, the 33rd was expected to be an even bigger success. We have just seen some fairly expensive litigation expressly over the right to challenge for the Cup. Moreover, under the extremely broad consent provision of the Deed, the parties can do virtually anything they can agree on, including, as a practical matter, just about everything suggested. Indeed, a competent organization could provide a turnkey event hosting program that defenders would voluntarily embrace, which would provide substantial continuity. All told, it hardly sounds like it is impossible to proceed under the Deed. Arguably, the amendment to lower the minimum to 54 feet was necessary to allow the Cup to be contested in a world still recovering from devastation. The Cup faces no similar problem today. Implicit in the rule of cy pres is that society is not benefitted by charitable funds or real estate going unused. Unlike an endowment, school building, or hospital, the Cup is of scant intrinsic value. It is silver plate, not even sterling silver, and does not even bear the name “America’s Cup.” Competitors are really racing for tradition, bragging rights – and money -- not the Cup itself or with an endowment held in trust. As others have suggested, if someone doesn’t like the Deed, they can race for the America’s Plate or Bowl and leave the Cup on the shelf. Society would not suffer. Indeed, if an Olympic style event is desired, US Sailing, among others, has announced that votes on events and equipment are based upon medal prospects, because medals translate into higher contributions. As well funded representatives of many of the leading sailing powers are interested in the Cup, a few well placed contributions could probably put the AC 90 boats in the next Olympics. What is really at stake is a highly commercialized event, which is not commonly the purpose of the cy pres rule. Courts do not play with charitable trusts so that someone can use the trust property for personal benefit. If anyone does go down this Rabbit-Hole, the venue will move from the Commercial Division of the Supreme Court at 60 Centre Street, across Foley Square, to the much more sumptuous digs of the Surrogate’s Court at 31 Chambers Street, before either Surrogate Kristin Booth Glen or Surrogate Renee R. Roth. (Cinema fans looking for context will note that, at the climax of the Godfather, Don Emelio Barzini [Richard Conte] walks down the ornate marble hall of the Surrogate’s Court and emerges on the steps of the Supreme Court, where, on Michael Corleone’s [Al Pacino] order, he is gunned down by Al Neri [Richard Bright], uniformed as a cop.) The New York State Attorney General will have to participate. The Attorney General’s office may not be aware of how the sailing community views the matter, unless those views are brought directly to the attention of the responsible attorneys in the office. However, the presiding Surrogate would likely allow and consider formal submissions. back to top Part 9 - Justice Cahn closes the door on the Swiss
(November 27, 2007) The yachting sky has not fallen and sailing’s Chicken Littles have had a bad day, because Justice Cahn has done exactly what a Justice of the Commercial Division is supposed to do. He has quickly and carefully disposed of the dispute between GGYC (Oracle) and SNG (Alinghi) in a way that makes a successful appeal unlikely and puts the parties where they belong – on the water. To cut to the chase, he has handed GGYC complete victory, ruling that the Spanish CNEV is not a valid challenger and that GGYC is the Challenger of Record. SNG and GGYC will either negotiate a Protocol or meet in 90-foot catamarans for the fastest match races ever. As expected, Justice Cahn’s decision was based upon the Court of Appeals’ Mercury Bay decision and went straight to George Schuyler’s intent, as expressed within the four corners of the Deed of Gift. The two issues were whether CNEV is an organized yacht club and whether it qualifies by “having” an annual regatta. The way he dealt with the organized yacht club issues demonstrates how an experienced judge works. Rather than stretch to resolve the issue, and possibly be reversed, he decided that resolution of the meaning of the term would require an evidentiary hearing – a trial on “custom and practice in the sport.” Talk about an open ended inquiry. He was free to take that position because he could decide the case based upon the “having” issue alone and did not need to resolve it. On the “having” issue he found, as a matter of law, that CNEV did not qualify as a valid challenger and thus, was out and the next challenger in line, GGYC, was in. End of case. Why it really is the end of the case is that it puts SNG between a rock and a hard place. Even if it had a chance of overturning Justice Cahn’s decision on the “having” issue – which is no better than a snowball’s chance, given Justice Cahn’s careful decision, based upon undisputed facts and settled law – it has virtually no chance of overturning his decision that the organized yacht club question is an issue of fact requiring a trial. Thus, all that an appeal can get it is a remand to Justice Cahn for a trial on the organized yacht club issue. That would require discovery and, given the parties’ resources, could take quite a while -- putting the Cup in the deep, deep freeze. Even worse for SNG, they would be under considerable pressure to agree to try the case before the near legendary docket clearer of the Commercial Division, retired Justice, now Judicial Hearing Officer Ira Gammerman, who can always make time for an interesting trial. To see what that might be like, click here for just a taste. There’s plenty more to be found. Given the tone of Justice Cahn’s rejection of SNG’s claim that GGYC came to the Court with unclean hands, a trial before JHO Gammerman might not be something for SNG to look forward to. So, the bottom line is that GGYC won, SNG lost, and SNG has few options that will accomplish anything more than icing the Cup for a long time. In the end, it wasn’t who had “best lawyers,” although GGYC’s lawyers were excellent and SNG’s lawyers made the best of a losing hand, but who had the facts and the law on their side. It was no contest. Without belaboring peripheral issues, a few odds and ends need to be mentioned. This does not mean that any unhappy challenger can disrupt everything and gain the upper hand by filing a lawsuit. It simply means that if a defender violates the Deed of Gift, it can be called to account in a specialized court that knows how to resolve disputes. That’s why we have a legal system and why the Commercial Division was instituted. Indeed, investors invest in Delaware corporations because they have confidence that the Delaware Chancery Court will competently resolve disputes. This decision may provide similar confidence for sponsors contemplating investing in the Cup competition. Had SNG complied with the Deed of Gift, it would have won, the delay would have been slight, and GGYC would have had little leverage. Moreover, trying to cast GGYC as the bad guys ignores the fact that SNG’s loss was self-inflicted. The purpose of paying in-house counsel is to make sure that legal requirements are met before action is taken and to shape the action taken to meet the legal requirements. Instead, SNG simply ignored the legal requirements and broke every rule. A DSQ was inevitable. Of course, there are always clients that proceed in the face of full stop signs and they always blame the lawyers they wouldn’t listen to for not stopping them. There’s an old legal saw – pay me now, or pay me much more later. Now comes the real fun – Alinghi v. Russell. Place your bets. back to top Part 8 - Just like any other day in court
in the office." - Anon. (October 22, 2007) Unless you are Justice Cahn. If you are, you can allow the cameras from New Zealand and European TV into a packed courtroom and have some fun. First, accept the amici brief from Reale Yacht Club Canottieri Savoia and Mascalzone Latino, but warn them that, if there has to be a trial, they are not participating. That’s fine with them. On to the main event. You let Jim Kearney representing GGYC get started on the subject of how CNEV is not a yacht club and then, with a smile, twist his tail a little. You throw out a question: What difference does it make; they do something with boats don’t they? Let him think his finely tuned arguments have not registered at all. See how he reacts. You then let David Hille representing SNG get started about how CNEV is a real club. He’s feeling good because of the question you asked Kearney. Maybe you don’t care about the details. He is talking about CNEV’s upcoming regatta. Time to twist his tail. Give him the same Cheshire Cat smile and interrupt him: Their first annual race? He’s too on message for irony and doesn’t get it. Repeat the question and see if he catches on that maybe you do care about the exact words of the Deed. Watch him react. Ask a question of Kearney about the time frame and have a brief discussion about the 10-month time frame of the Deed, Northern Hemisphere, Southern Hemisphere. OK, enough of this, there’s a busy calendar waiting. Thank you, you’ll get a decision soon. On to the next case. The hearing today before Justice Cahn on the cross motions for summary judgment went true to form. Like every Justice of the Commercial Division, he has a grueling docket of hundreds of cases. A very large percentage of them will adjourn or settle, but there is no way to tell which ones will and which ones will require a decision. So, when the hearing started, Justice Cahn had not made up his mind and was not going to rule. With that kind of docket, that would be impossible. There is simply not enough time to fully prepare for every case on the calendar, especially when most will be adjourned or settled anyhow. Nor, despite the TV cameras, is oral argument likely to be as dramatic as on real TV. Seldom does anything that is not in the filed papers get said, especially when the time for argument is short. In any event, now that the motions are marked submitted, the case will be decided on the papers, where the meat of the arguments lies. Justice Cahn and his Confidential Law Secretary, a long term professional law clerk, will study the papers and the Court of Appeals’ Mercury Bay decision, check out the cases cited by the parties, do some additional research and write a decision. The time frame is a little hard to gauge. The Court of Appeals’ Mercury Bay decision gives him a massive head start, but there is that docket – and the pressure to make the decision bullet proof, because these parties have every reason to file an appeal. The decision will probably come down in weeks, not days or months, but that is a guess. Certainly the discussion of the 10-month framework for a Northern Hemisphere match in warm weather adds pressure for speed. Lawyers and parties hear what they want to hear, but anyone who thinks Justice Cahn tipped his hand is dreaming. Besides, if he gave each of them something to worry about, they might settle and avoid the need for a decision. Like I said in the last report, it ain’t over until Justice Cahn sings or, more accurately -- hands down the sheet music. back to top Part 7 - On the eve of the hearing
(October 21, 2007) One of the criticisms of match racing as a spectator event is that, if a yacht is in control at the first crossing, there can be a lot of activity, but not much changes. Now that both parties have exchanged their second and last set of papers, not much has changed. SNG has made a bunch of arguments and GGYC has covered them, utilizing the litigation weather gauge, the last word. Settlement negotiations may or may not resume the morning of the hearing. As they approach the 2 pm October 22 finish line, with Justice Cahn holding the cannon lanyard, GGYC remains in the lead, despite SNG’s best efforts. There is no real dispute about the facts or the governing law and it is show time for summary judgment. I will not attempt to parse all the latest back and forth. To do so would induce crushing boredom. For example, SNG argues that the word “having” in “having for its annual regatta . . . ,” can mean in the future, rather than possession, because people say they “are [] having dinner,” “are ‘having’” a wedding, and “are ‘having a baby,’” in the future. All of those constructions are, indeed, correct, but the Deed does not say “are having” or “is having.” It says “having for its annual regatta . . .,” which is a different construction, with a different meaning. Another SNG argument, based upon past consent practice, is too convoluted to report. It boils down to “Officer, you can’t arrest me for driving while not having a driver license. I always drive without having a license and have never been pulled over before, so it must be OK. (Besides, I am thinking about having a license in the future.)” One other point, which started out as little more than minor bolstering, shows the level of “friendly competition.” GGYC claimed that the arbitration decision between SNG and CNEV, which held that CNEV is a valid challenger, and which GGYC maintains was a sham, was handed down only a few hours before the first hearing before Justice Cahn. GGYC argued that was evidence that the arbitration was a put up job – perhaps a plus for their argument, but not a game changer. SNG countered with a claim that GGYC had misrepresented the time frame and the decision was actually handed down two days earlier. Substantively, that not a big deal, but it was guaranteed to yank GGYC’s chain hard. GGYC could not let that pass and, to defend itself from the charge of misrepresentation, GGYC went thermonuclear and responded with evidence that SNG had falsified the evidence it presented to the Court to make it look like GGYC had misrepresented the time frame. Thus, a quibble over a minor point has escalated into a defensive allegation of serious wrongdoing. I promised to report on intervenor CNEV and amici Reale Yacht Club Canottieri Savoia and Mascalzone Latino, but all I can think of is the weekly postcard from a summer camper: “Dear Mom and Dad, I am writing to let you know that there is nothing to write home about. Love, Johnny.” Each predictably echoes the arguments of its ally. For example, CNEV joins SNG’s argument that Justice Cahn should give great weight to the Arbitration GGYC claims is a sham, but do not even try to make the argument that the Arbitration supplants the Court. In fact, courts typically do not give any weight to arbitration. They either step aside entirely and leave the dispute to the arbitrators, or ignore an “arbitration” that does not bind the parties. The amici do, however, provide an opening for a little unintentional comic relief, as SNG has responded by filing a brief stating that “SNG takes no position” on whether the Court should accept the amici brief -- which then proceeds to argue that the Court should not accept the brief. Still wondering why the parties have not settled or why having Justice Cahn decide this dispute may not be such a bad idea? If there is no settlement, I expect to be at the finish line in Part 49 of the Supreme Court at 60 Centre Street to report. As in any litigation, no matter what it looks like at this point, it ain’t over until Justice Cahn sings. back to top Part 6 - On the Subject of Summary Judgments
Whether there is genuine dispute regarding any material fact issue is also a legal issue, but more difficult to determine in close cases. If, for example, the Deed also required that the Challenger have a competent helmsman, whether a particular helmsman is competent, if disputed by the parties, would ordinarily require a trial to determine, based upon the credibility of witnesses for each side. Although New York courts cannot decide fact disputes based upon the credibility of affidavits, they traditionally have been much more skeptical than federal courts about whether factual disputes are material and genuine and seldom strain or stretch to find that factual disputes are material and genuine. It probably would be very difficult to convince Justice Cahn that there is a genuine factual dispute as to whether Russell Coutts is a competent helmsman. His record is indisputable. In this case, the parties are cross moving for summary judgment and both are claiming that the facts are undisputed. Indeed, there does not appear to be any real factual dispute and the only dispute is the legal characterization of those facts and whether the requirements of the Deed are met or not. Those are issues for Justice Cahn to decide based upon legal precedent and the case is ripe for summary judgment. Ordinarily, the party moving for summary judgment has the burden of proving that summary judgment is required. In this case, the parties are cross moving and it all boils down to whether CNEV is a proper challenger or not. If it is, GGYC's complaint should be dismissed and SNG should win. If it is not, GGYC should win. Thus, as a practical matter, because there cannot be a draw, the ultimate burden - the burden of persuasion -- falls on SNG. back to top Part 5 - Crossing Tacks
“I am of the opinion that the boldest measures are the safest.” - Horatio Nelson. (October 9, 2007) Both SNG and GGYC have filed their initial moving papers on their cross motions for summary judgment before Justice Cahn in the Commercial Division and we are at the first crossing of this one leg match race to the weather mark. GGYC has crossed clear ahead on starboard and comfortably covers SNG. From where they are now, GGYC is in position to drive SNG to the port layline, tack when it chooses, and lead them to the mark. In litigation, anything can happen, even the greatest judges make unacknowledged and acknowledged mistakes, but in that case the Appellate Division stands ready to grant redress. So, although there could always be a 180 degree wind shift from the bench, or GGYC could hit a submerged container or sleeping whale, GGYC’s superior boat speed, height, maneuverability and, most of all, helming and crewing by skipper/lawyer James V. Kearney and his afterguard should allow GGYC to counter any move SNG makes. Each party gets one more set of papers, but the law and rules bar them from raising new issues in those papers. They may only respond to what the other side has raised, although they can usually get away with bolstering their initial arguments a little. GGYC gets the last word, which, in litigation, is almost as good as the weather gauge Jack Aubrey valued so highly. Since ancient times sailors have jettisoned cargo in rough weather to save their ship. In late 19th century New York, sailors wagered heavily on over-canvassed sloops ballasted with sandbags, known as Sandbaggers. On the final run to the finish, plenty of sand went over the side. In SNG’s latest papers, a lot has gone over the side, but SNG is still behind. The betting on the case before Justice Cahn is for much bigger stakes than the Sandbaggers ever raced for, and may come down to the meaning of just one word. What is gone? The argument that GGYC lacks standing, because the NY Attorney General is the only one with standing – gone. The argument that the fact that new or paper clubs have challenged after WWII is relevant in construing the Deed – gone. All that remains of that argument is that paper clubs have sailed in challenger eliminations. What is left? Argument about the meaning of the words in the Deed is basically what is left, which is what the case is really about. Indeed, the case may come down to the meaning of just one word -- “having” -- in “having for its annual regatta an ocean water course . . .” That phrase limits the universe of clubs eligible to challenge. If SNG loses on that one word, nothing else matters. SNG argues that “having” “fairly read, includes past, present or future regattas.” If they are right, they can move on to further arguments. Including a future first race within “having” may be more of a stretch than “having” can bear. If the sense and tense of the word “having” is one of present possession, as of the time of the challenge, SNG is holed below the water line. Argument about the significance of the ACM-appointed arbitrators finding that CNEV is a valid challenger is also there, but that argument sails against the tide, given the Court of Appeals’ discussion in Mercury Bay regarding the distinction between legal construction of the Deed, to be decided by judges, and sporting competition issues, to be decided by arbitrators or the protest committee. SNG has also included the affidavit of a Spanish lawyer opining that CNEV is properly licensed and qualified under Spanish law to challenge, based upon the reams of documents in Spanish and translation previously submitted, to counter a similar affidavit previously submitted by GGYC. The problem with many affidavits on summary judgment motions is that judges are not allowed to consider the credibility of what is in them, no matter how convincing it sounds. Thus, if granting summary judgment depends on which affidavit to believe, Justice Cahn cannot grant summary judgment and has to order a trial in order to decide who to believe. Of course, if the issue disputed by the affidavits is not material or not really in dispute, he can still grant summary judgment to one side or the other. Thus, CNEV’s status makes no difference if SNG loses on the meaning of “having.” In that case, SNG loses whatever CNEV’s status. GGYC has taken the bold approach by going straight to the Deed. Only an “organized Yacht Club,” “fulfilling all the conditions required by [the Deed],” may make a challenge which precludes other challengers. SNG essentially admits that CNEV is not a yacht club, but is merely “organized as a yacht club.” GGYC contends that if that were allowed, “the local bakery could challenge . . . simply by calling itself a yacht club and filing incorporation papers.” Even more effectively, GGYC homes in on “having” a regatta, which SNG argues includes future intention, by noting that if “having” can be stretched that far, a person intending to get a professional degree qualifies as “having” the degree and entitled to practice. Think about that the next time you go to a Doctor, Dentist or GGYC’s example, a lawyer. As GGYC points out, we would all be billionaires, because we are all intent on “having” $1 billion (or more). GGYC administers the coup de grace with two NY statutes, a federal statute and a federal case interpreting the federal Patent Act which GGYC argues actually use “having” in a way GGYC argues only can mean to “possess.” GGYC goes on to pound home the fact that CNEV’s “regatta” is not real, which is necessary to complete the record. GGYC uses the same approach for the word “fulfilling,” this time citing the New York Education Law, which only permits licensure of an individual “fulfilling” the requirement of being 21. An 18 year old working on becoming 21 does not get a license. Unless SNG can find some contrary statutes or other authorities, these are very effective arguments – especially as SNG cites no authority at all. Thus, GGYC argues, CNEV’s challenge is not valid and cannot preclude GGYC’s challenge. GGYC covers SNG well on a number of other points, such as CNEV’s conduct as COR, the court’s jurisdiction, the arbitration, the real positions of the various participants and other issues which do not really make much difference if GGYC is correct on the deed. SNG has its work cut out if it is to break GGYC’s cover. One area SNG will have to consider is its affidavit regarding the paper status of other challenging clubs. GGYC pounds that like a piñata, demonstrating that no paper club has ever been challenger of record, as opposed to a mere consent challenger, and essentially argues that SNG has been too cute with the court by implying that consent challengers are the same as challengers of record. That is a potentially damaging allegation. We shall see whether SNG maintains a stiff upper lip and says nothing, argues that it had no such intent, or offers an explanation. CNEV, an intervenor defendant, and Reale Yacht Club Canottieri Savoia and Mascalzone Latino, proposed amici backing GGYC, have joined. I will report on them in a subsequent report, but they are not major factors at this time. Larry Ellison is probably feeling pretty comfortable at this point and may stiffen his terms. How Ernesto Bertarelli sees things is anyone’s guess, as are the prospects for settlement. Next move, SNG. back to top Part 4 - The Timeline
GGYC asked for a preliminary injunction. The easy way to end run that difficult issue was to fast track the case for an October 22 hearing on the merits. If Justice Cahn is convinced speed is important, he will rule quickly, perhaps at the hearing, in what will likely be a solid decision. In many cases that would be the end. If there is an appeal and the loser can make a good case for speed, the Appellate Division and Court of Appeals will do whatever needs to be done. In Mercury Bay, as in most litigation, there was little reason for speed, as the competition was finished and the issue was whether the Cup should be taken away from San Diego. Here the argument is that the competition is effectively under a cloud, so a speedy resolution of that cloud is important. Thus far the parties have not laid out in any detail how the disputed provisions of the Protocol, the choice of Challenger of Record and the pendency of the dispute affect the number of participating teams, level of competition, level of sponsorship or level of media coverage. Nor have they set forth how many people and what total magnitude of Euros are affected. The Cup has become a substantial business and, if lack of a resolution adversely affects that business and is brought to the attention of the courts, they will act quickly, perhaps within months, if necessary. back to top Part 3 - The First Hearing
The end result was an agreement to cut to the chase. SNG will move to dismiss the entire action based upon “a defense . . . founded upon documentary evidence,” a NY procedural device which basically amounts to a shortcut to summary judgment. GGYC will cross move for summary judgment deciding the entire case. In essence, both sides are claiming that the only facts that matter – are “material” in legalspeak – are undisputed and only the legal effect of those undisputed facts needs to be decided by Justice Cahn, without any discovery or trial, on papers only. Of course, Justice Cahn may disagree and require a trial on some fact, but that is unlikely. The first SNG papers will be filed on September 17 and the first GGYC papers on October 1. Answering and reply papers will be filed on October 5 (or 9, remember, everyone was straining to hear), October 15 and October 19, with the hearing on the cross motions on October 22. Justice Cahn will either rule on October 22, or shortly thereafter. Clearly, that is a fairly rugged schedule, but none of the firms (David W. Rivkin of Debevoise & Plimpton is representing CNEV) can ask for more time, which would be a sign of weakness. No one was hurt and everyone went away happy. So, the flag has dropped, Justice Cahn has hailed “all clear,” and they are off even at full speed on split tacks with plenty of separation. back to top Part 2 - SNG's Case
SNG’s papers take a different approach than GGYC’s. SNG’s depend more on legal arguments and, except on the issue of CNEV’s qualifications, contain few controversial, relevant facts. Hamish Ross, Alinghi General Counsel, gives a general history of the Cup, the participants in SNG’s proposed 33rd, CNEV’s alleged qualifications and details of the previous new or paper clubs that participated. As the previous new and/or paper clubs participated pursuant to the consent provision of the Deed, and did so long after George L. Schuyler’s death, they are irrelevant. Ross also raises the issue of the International Jury’s determination on the 31st Cup that SNG could compete despite not running an annual regatta on an arm of the sea, but again, in that case there was no allegation of partiality. Finally Ross argues that SNG cannot at this time specify a venue, has no “off the shelf” rules, needs time to “analyze, assess and decide” which ISAF Rules will apply and may be financially harmed by the “cloud” of a preliminary injunction. SNG also includes the affidavit of Miguel Terrasa Monasterio, who claims to be a Spanish lawyer specializing in advising “sports professionals, artists and executives.” Like Ross, he alleges that CNEV is properly qualified under Spanish law. Both he and Ross attach the same 100 plus pages of Spanish documents and translations allegedly substantiating their claims re CNEV. The documents seem to have been created in a hurry, as in some places the club is referred to as the “Company” and the yacht club is authorized to issue both debt and equity securities. Resolution of CNEV’s qualifications this early in the litigation is unlikely, given the factual dispute. SNG’s Memorandum starts with a preliminary statement which generally argues SNG’s position, followed by a statement of facts recycling the affidavits, as did GGYC’s statement of facts. For likely reasons I will discuss below, SNG only briefly touches on the Court of Appeals’ statement in Mercury Bay regarding the extent of SNG’s fiduciary duty, with SNG arguing that it “does not owe the full range of fiduciary duties” to GGYC. SNG’s argument section sets forth its legal defenses. Foremost is SNG’s argument that under a NY statute, only NY Attorney General Andrew Coumo has standing to enforce a charitable trust and, therefore, the Deed. Although previous NY AG’s have made applications for uncontested relief under the Deed, the likelihood that Cuomo’s office, which already has an overflowing plate of financial and other chicanery, as well as the Albany “Troopergate” wanabee scandal, would jump into this dispute are slim to none. However, even if SNG is generally right, this argument is not a slam dunk. As SNG concedes, NY courts “will permit a beneficiary with ‘special interests’ to bring its own claim,” and, indeed allowed Royal Burnham YC to participate in the Mercury Bay litigation. Unfortunately for SNG, the “special interests” doctrine is loose enough to drive a 90 x 90 catamaran through if Justice Cahn wants to. SNG’s standing argument has an even bigger problem, which may explain why it does not stay on the Mercury Bay lower fiduciary duty tack very long before tacking away. Mercury Bay bases the lower fiduciary duty on the observation that a sporting trust is not really a charitable trust. If it is not a charitable trust, the door is open for any competitor to bring an action under the Deed. SNG follows by announcing it will make a motion to dismiss which generally stops an action in its tracks. Justice Cahn has many ways to solve that problem, if he wants to. Next, SNG argues that GGYC has not met the test for a preliminary injunction. SNG correctly argues that the test is higher for a mandatory injunction that changes, rather than maintains, the status quo. It then argues that GGYC has not shown a likelihood of success on the ultimate merits. That steers into the weed patch of CNEV’s qualification as a yacht club – exactly where one would want to go to slow things down. Wrapped into that issue are the issues of “new” clubs and whether prospective annual events count, which can be determined from the language of the Deed. SNG and GGYC dispute that language, but a dispute does not create ambiguity under NY law. Justice Cahn will decide what the words mean. SNG circles back to Mercury Bay for the proposition that courts will not get involved in the conduct of sporting events, but omits Mercury Bay’s distinction between the conduct of the Cup match and legal construction of the Deed, on its way to an attack on what is at this time a straw man – that GGYC will bring every protest or request for redress to the Court. Large firm litigators generally avoid touching any potentially troublesome issue unless the other side raises it, because the last thing they want is to raise an issue that blows up their face. That might explain why both sides are dancing around Mercury Bay, which cuts both ways. SNG then argues that GGYC has not demonstrated a likelihood of irreparable harm, an issue certain to glaze the eyes on non-lawyers. SNG does raise an interesting argument that GGYC is not entitled to course or rules information at this time under the Deed. The Deed is not explicit on the timing of those issues and the early practice was consensual. Cup historians can correct me if I am wrong, but until the 32nd Cup, the defense was always in home waters on an arm of the sea with agreed rules. SNG has no home waters on an arm of the sea, so the venue is up in the air. If SNG ever got around to the promised annual regatta on an arm of the sea, that might be the venue, under whatever rules they used. Even if nothing else can be agreed, one would think that some version of the ISAF Rules and Prescriptions could be agreed to, but perhaps not. Finally, SNG argues that it is being harmed more than GGYC by this dispute and litigation and asks for an unspecified, but presumably substantial, bond if a preliminary injunction is granted – which Larry Ellison can probably satisfy out of pocket change. Another worthy effort, this time from SNG, and the teams are now dialed up in the box. Next, unless the parties settle, the start at 2:00 pm on Monday, September 10, 2007 in Part 49, Courtroom 232, as James Kearney, who goes first, tries to spot the first wind shift from the bench on what could be a tricky uphill first leg for both teams. back to top Part 1 - Golden Gate YC's Case
As I previously reported, if you are going to litigate rather than sail, Justice Cahn’s courtroom is an excellent venue. GGYC filed its papers August 22 and SNG’s were filed on September 5. This is a sailing NY litigator’s commentary. While passionate advocacy impresses clients and sometimes convinces juries, when deciding motions, judges, who have usually heard it all, often are looking for help from the litigants. Connecting unfamiliar factual dots and covering the legal bases so that the judge’s decision writes itself is often the way to win a busy judge’s heart – assuming you are right to start with. GGYC wants expedited discovery and an October trial on the merits to chuck CNEV’s challenge and require SNG to defend against GGYC’s catamaran in a July 2008 match. It also wants an immediate mandatory preliminary injunction ordering SNG to provide the rules and location for that match. The final determination cannot be made on September 10. The governing precedent is the NY Court of Appeals’ decision in Mercury Bay Boating Club – the NZ mega-yacht against catamaran fiasco. The independence of the international jury and the IYRU rules were undisputed in Mercury Bay and the Court of Appeals held that only legal issues regarding the Deed would be determined by the Court, pursuant to the plain language within the four corners of the Deed, supplemented by extrinsic evidence only if necessary to determine Schuyler’s intention when he signed the Deed. Any other extrinsic evidence is irrelevant. Preliminary injunctions are only granted if a party can demonstrate the prospect of irreparable harm and a likelihood of success on the ultimate merits of the litigation. That hurdle is higher still for mandatory injunctions required a party to do something, rather than simply maintaining the status quo by refraining from doing something. The guts of GGYC’s papers are in Tom Ehman’s affidavit, which GGYC has posted on its website, without the voluminous exhibits. Although undoubtedly heavily massaged by lawyers, it is accessible to non-lawyers and the broad strokes should be familiar to most Scuttlebutt readers. According to Ehman, CNEV, the challenger of record, is not a valid challenger because it is not a real yacht club, is not licensed to hold races, has never held a real regatta and has no intention of becoming a real yacht club or even existing beyond this Cup competition. The details of Ehman’s allegations regarding CNEV’s often contradictory attempts to remedy these alleged deficiencies are voluminous -- and entertaining. According to Ehman’s account, CNEV and its Spanish allies have actually made several admissions which arguably prove GGYC’s claims about CNEV. Ehman goes on to detail why the proposed protocol is allegedly one-sided and unfair. While Justice Cahn, as directed by Court of Appeals in the Mercury Bay case, will be looking to the four corners of the Deed, Ehman also provides background regarding what the terms Schuyler used in the Deed actually meant in Schuyler’s day – at least at the NYYC level Schuyler was familiar with. If there is any doubt about the meaning of the words within the four corners, that can be helpful to the Court. Ehman then goes on to recount SNG’s alleged complete domination of CNEV and the secret arbitration conducted between SNG and CNEV before a panel of secret arbitrators chosen by ACM, which is controlled by SNG, to determine if CNEV is a valid challenger. Ehman is probably right that the arbitration is a prelude to a possible argument that Justice Cahn should defer to the arbitration panel. Don’t bet the farm on that one working, given the allegations of partiality. Ehman’s affidavit is not as detailed regarding why speed is essential, which may not be self-evident to the Court. He writes generally about how many kinds of things need to be done in a hurry to get ready for GGYC’s challenge, if CNEV’s is tossed, but there is little detail. For example, he writes about the need to procure carbon fiber, but there is no affidavit setting forth what the lead times are. Those are areas regarding which the Court might appreciate some help. Where Ehman may have set himself up for a bite on the transom is his report that some anonymous person told him about machinations involving SNG and New Zealand to hand the Cup back to Royal NZ with SNG as the challenger. Not only is that double (anonymous) hearsay and clearly inadmissible, but Royal NZ Commodore Crawford’s reported denial sounds pretty convincing. Going out on an inadmissible hearsay limb and having it collapse is not a credibility booster. GGYC’s Memorandum of Law starts with the usual practice of recycling Ehman’s Affidavit in a lengthy statement of facts. Given the resources available, its discussion of the law might be more extensive. For example, the Court of Appeals in Mercury Bay set a somewhat lower fiduciary standard for a trustee of a sporting event which is also a competitor. GGYC is silent on that issue and relies upon general principles of NY trust and fiduciary law. Similarly, while the CNEV/SNC arbitration may sink under its own weight, some discussion of federal and New York arbitration law would probably be helpful to the Court. Nevertheless, Kearney has entered the starting box with a clear, straight forward game plan and strong teamwork, especially from Tom Ehman -- a worthy effort from GGYC. Next to enter the box, SNG’s papers and the other side of the story. back to top |
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