Team NZ sues to break out of Alinghi seige

by Richard Gladwell on 7 Mar 2008
This morning, New Zealand time, Emirates Team New Zealand announced they had engaged the top New York legal firm of Boies, Schiller and Flexner to pursue the America’s Cup Defender Societe Nautique de Geneve, America’s Cup Management and Alinghi for breach of contract, in regard to the staging of the 33rd America’s Cup.

A second action under US Federal law is an anti-trust suit and claims that Alinghi, and parties, had abused their powers as Defender and had harmed both the Event and Challenging Teams.

Sail-World.com spoke with Emirates Team New Zealand boss Grant Dalton earlier today, from New York.

The first question was as the end point of all this – to get financial compensation, or as a pincer movement on Alinghi to force them back into a conventional America’s Cup scenario

'Our strategy is to get back on the water as quick as possible – 2010 is a do-able environment and 2011 is more practical. But the longer it takes the more we will be seeking in compensation', Dalton replied.

To recap, an agreement was signed when Emirates Team New Zealand agreed to enter the 33rd America’s Cup, for an event in 2009 in Valencia.

The date of 2009, which was on the table at that point, is now clearly unachievable. As a result Alinghi’s parties could be liable under the agreement that Dalton claims he signed around 25 July, three weeks after the conclusion of the 32nd America’s Cup.

At that time Emirates Team New Zealand was clearly the king-maker back in the dispute between Alinghi and BMW Oracle Racing. In a protracted night of negotiation, Dalton was urged on one hand by Bertarelli to enter under assured conditions, and on the other by Tom Ehman of BMW Oracle Racing to stay out of the game and force Bertarelli’s hand.

Against a lot of criticism, Dalton threw his lot in with Alinghi, secured the conditions he needed to get an America’s Cup running in 2009, and put the reputation of Emirates Team New Zealand on the line for Alinghi.

Bertarelli in turn used that entry many times to justify his actions, saying that the entry of a team of the standing of Emirates Team New Zealand was proof positive that his actions were not unreasonable.

For its part, Emirates Team New Zealand used the entry to try and get changes to the Protocol to the 33rd America’s Cup and also to have input into the design rule for the new AC90 classs.

With the benefit of hindsight did Dalton regret entering on the 25th of July 2007?

'No, we entered only on the condition that the event was held in 2009 in Valencia,' Dalton replied.. 'It was a pre-condition of our entry, a signed pre-condition. I regret that he (Bertarelli) decided to flaunt that agreement. But no, given the same circumstances I would enter again. We could not foresee that they would renege on a contractual obligation.'

Now heavily entrenched in the legal process of the New York Supreme Court, and with one, maybe two levels of Appeal available, many wonder how Emirates Team New Zealand, without the backing of a billionaire or Patron can survive a siege engineered by Alinghi and their parties.

'To answer that question you have to look at our funding model' says Dalton. We are not using any Government or sponsors money. We have a great group of supporters and friends that are involved in the background with Team New Zealand. But if it went on for a huge amount of time, no we wouldn’t survive, no team could. We could survive for a 100 years if we put everyone out in the street and used the available funds to just trickle out against the rent. But the whole integrity of the Team would be destroyed. We have taken a view on the future and cut our cloth accordingly.

'Their actions are squeezing the (America’s Cup) market and increasing it for themselves, if you like– deliberately or not as the case may be.' Emirates Team New Zealand believe that this is a breach of Anti-Trust law which has been used against many companies to break up companies and stop monopolistic practices.

Redundancies

This siege has resulted in redundancies at Emirates Team New Zealand, after previous announcements that all re-contracted staff would be kept on albeit it reduced salaries. Dalton confirmed that around 25 team members had been made redundant, and that the team had been reduced in size to around 60 people at this stage -primarily sailing team and designers.

Many of the arguments that were raised today in the papers filed in the New York Supreme Court echo those from Golden gate Yacht Club, raised in earlier Hearings.

The difference lies in the fact that while Golden Gate YC is seeking specific performance in terms of getting a conventional America’s Cup sailed in 2009 and now 2011 in Valencia in accordance with the Deed of Gift, Emirates Team New Zealand’s dispute is about compensation for breech of an agreement, and actions by Alinghi which are, by intent or omission, forcing existing, and long established players from the America’s Cup.

'This argument with Alinghi and related parties is completely commercial', says Dalton. 'I get angry when I have to be involved in the redundancy of people who have worked for Team New Zealand for 15 years and were expecting their mortgage payment next month was also going to be from Team New Zealand because they have been re-employed. That makes me angry. That’s not right.'

'To a man, the guys have stayed completely loyal and stayed with us through what has been a difficult time for them. But they have to make a living as well. In making that living they are staying together, sailing on different boats – the afterguard will go together to work as a unit, for instance.

'We will be sailing Neville Crichton’s new 69fter as Emirates Team New Zealand, and then sailing on other circuits like the TP52’s as well as Shockwave.

No delay for Cup

In response to further questioning as to how long Emirates Team New Zealand can survive, with the America’s Cup locked in Court, Dalton was at pains to point out that this Action would not delay the Cup, but was purely seeking damages for loss incurred when signing an agreement back in July/August 2007 in the good faith and the expectation that Alinghi and parties would act reasonably to ensure that a conventional America’s Cup took place in 2009.

'We can sustain this action until hell freezes over. We have taken a view as to how long this games will take to get started again, and we can survive for that time. And if it takes longer, then we will have to cut our cloth accordingly.

'My priority now is to keep people paid and their mortgages going and their kids at school – anything outside that has to be self funding.

'In some situations cases team members are still on 50% retainers – in others that level has been reduced. But you have to work for your money.

Communication and Obsession

One of the features of the America’s Cup wrangling to date has been the disjointed communication between the parties, and particularly where agreement seems to have been reached on one level, but is rejected by Team bosses, Bertraelli in particular.

Given that Bertarelli provided a $5million loan to Team New Zealand back in 2003 to help finance the double America’s Cup Defender through a very a very difficult and tight restart period, many would have thought that Grant Dalton would have had a better relationship with Ernesto Bertarelli than the current impasse would tend to indicate.

'I haven’t talked to Bertarelli for ages,' says Dalton. . 'that brings us to this point is that we sent Alinghi and their associate parties a note late last year saying 'you have delayed this thing unilaterally, when you could easily have settled and not put ourselves and everyone else in this position. They didn’