America’s Cup: Another Stroll Down Legal Lane

When the America’s Cup finds itself beyond the realm of its own regulations, the U.S. legal system becomes the playground for the players. At times like this we reach out to Cory E. Friedman, who held our hand during the last class of the titans – Larry Ellison versus Ernesto Bertarelli – and is stepping in again to decipher this week’s court filings. Hang on… this may stir some feathers…

“Things have taken a turn for the surreal.” – Captain Miller (Tom Hanks), Saving Private Ryan, DreamWorks SKG (1998).

“I’m not making this up, you know!” – Anna Russell, “The Ring of the Nibelungs” (An Analysis), Anna Russell Sings! Again? Columbia Masterworks (1953).

Has the 34th America’s Cup, the Windows 8/New Coke of sailing, gotten weird enough for you? An opening parade of RIBs? One out of the four competitors shed bound? ACEA’s and ACRM’s crack Brit and Kiwi lawyers telling the Jury that the Oxford English Dictionary, rather than U.S. law, is the authority on whether the Event Permit is a U.S. Regulation? Threats to pull the plug? Oh, never mind? One boat races? How about a two boat race with one boat scored DNF? How about the AC Event Authority protesting Luna Rossa for not going to a party?

Well, if that is not weird enough for you try this. African Diaspora Maritime (ADM) (remember them?), fresh off a major victory over Golden Gate Yacht Club’s (GGYC) crack legal team on GGYC’s botched motion to dismiss (GGYC won on two unimportant claims and lost the big one) now is asking Justice Barbara Kapnick in New York State Supreme Court to put a fork in AC 34 until ADM has an opportunity to field a campaign to wrest GGYC’s defense from Larry Ellison’s Oracle Team USA. Having backed GGYC on the motion to be dismiss only to be slapped down by the Appellate Division, what she will do is anyone’s guess.

A little background is necessary. As with much else that has gone wrong with AC 34, this mess is an unforced error that the Smart Guys and their Kiwi lawyer baked into AC 34 through the “for the avoidance of doubt” Protocol. It is a historical fact that defenses honed by defender trials have been more successful than solo defenses. So the Smart Guys who engineered AC 34 thought it would be a great idea to see if some American billionaire was silly enough to drop $100+ million or so to fight Larry Ellison for the right to represent GGYC in the defense, or more likely finance a trial horse for Larry’s team to use as a chew toy. After all, really, really silly billionaires are a dime a dozen – right?

Back in the days of the ‘straw hats’ who ran NYYC defenses, syndicates confined to NYYC members put their campaigns together and raced in the defense trials until the straw hat committee politely informed them that they were excused, eventually leaving the official defender. Naturally, the gentlemen at NYYC, many of whom were the foremost white shoe lawyers at New York’s most prestigious old line law firms, created no protocols, criteria, rules or anything else to restrict their discretion. They were not stupid. Writing down rules just gives people something to bitch about.

Of course, blue collar GGYC was not brimming with people willing to flush $100+ million down the toilet to be Larry’s chew toy, so the NYYC approach was not going to work. Therefore, the Smart Guys, who must have been eating magic mushrooms, decided to invite potential sucker defenders through the Protocol. To “protect” themselves they provided in Article 8.3:

“GGYC will review Defender Candidate applications and will accept those it is satisfied have the necessary resources (including but not limited to financial, human, and technological) and experience to have a reasonable chance of winning the America’s Cup Defender Series.”

As anyone busily cramming for the this month’s administration of the New York Bar Exam would know (unlike the Defenders crack legal team) that is exactly the type of “sole discretion” clause that, unlike a really personal contract such as one to paint a portrait or do a nose or boob job, affords about as much protection as a condom provides for amorous porcupines.

ADM applied and was rejected. Amazingly, GGYC did not even try to get the case assigned to Justice Kornreich as related to the previous AC litigation. That might not have worked, but Justice Kornreich understands the Deed of Gift and AC structure and moves her cases very quickly. GGYC was able to convince Justice Kapnick that there was no contract and she dismissed the breach of contract claim, as well as two inconsequential claims. It took her a very long time to hand down her decision.

On appeal to the Appellate Division, First Department, the story was completely different. ADM brought in its firm’s A team, Andrew B. Kratenstein, an extremely accomplished appellate lawyer who did a really masterful job against GGYC’s B team. What was even more remarkable was the Court’s full throated attack on GGYC. They did not like anything about GGYC and treated GGYC like a bunch of snobby blue blazers just asking to be keel hauled. Kratenstein could have stayed in bed and still won. Keel haul GGYC was exactly what they did. The decision was pretty scathing, especially on the issue of GGYC’s demonstration of good faith. GGYC got one dissenter, but that is a day late and a dollar short.

I spoke to Captain Kithcart, President/ Executive Director of ADM, and his lawyers at the Appellate Division after the argument. They are extremely earnest and they certainly sounded like they believed they could bring off a campaign if just given a fair chance. They would not tell me the identity of the money waiting in the wings or the sailors waiting for the go code, pleading that they do not want to come out into the open until the Court gives them the go code. None of my pretty skeptical questions fazed them at all. They did not ask me for a contribution and I sure did not volunteer one.

Again, all of this is a succession of unforced errors on the Defender’s part. It did not have to put anything in the Protocol about defender candidates and did not have to move to dismiss. It could have just answered ADM’s Complaint and spent a couple of years in discovery below the radar. Instead, GGYC handed ADM an unnecessary victory and made Justice Kapnick look bad in front of her bosses.

With a blast of wind from the Appellate Division, First Department at its back, ADM has gone back to Justice Kapnick asking for an Order that GGYC Show Cause why an order should not be entered compelling expedited document production and answers to interrogatories by July 31, 2013 and depositions of Tom Ehman, Anthony Romano and Norbert [“the Mechanic”] Bajurin during the week of August 5. The objective is a preliminary and permanent injunction stopping AC 34 until ADM can compete with OTUSA. Notably, ADM did not ask for a preliminary injunction halting everything until trial, which would have been the thermonuclear option. ADM has asked that Justice Kapnick sort this out on a conference call scheduled for July 19, 2013.

Where do we go from here? Search me. ADM will probably get some expedited discovery. Ordinarily that would be a considerable pain in the neck, but nobody on the discovery list besides Norbert, who actually has a day job fixing radiators and AC units, has anything better to do besides posting chirpy piffle on Facebook anyhow. Will Justice Kapnick play Dr. Kevorkian for AC 34 and put everyone out their misery? That seems close to impossible – but GGYC’s crack legal team just keeps shooting itself in the foot and this is AC 34, which seems to go from weird, to weirder, to weirdest.

The only thing that is certain is that somebody is pouring a lot of money into ADM’s case. Stay tuned.

Comment:  If there are any discrepancies in this report, the corrections will be published promptly and prominently, as is standard policy at Scuttlebutt. – Craig Leweck, Scuttlebutt