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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 10 - Part 11 - Part 12 - Part 13 - Part 14 - Part 15 - Part 16 Part 17 - Part 18 - Part 19 - Part 20 - Part 21 - Part 22 - Part 23 Part 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, 2007, 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 ahe |
