Sail-World.com : Emirates Team NZ update on Court Hearing
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Emirates Team NZ update on Court Hearing |
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'Grant Dalton: 'All Ernesto had to do was give away half of one of his bag of 100 marbles and he wouldn’t be in this situation''
Richard Gladwell
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Emirates Team New Zealand have issued a release following their Court Hearing in New York on the two law suits they have lodged against Team Alinghi over the events following the 2007 America's Cup:
A hearing was held on Friday, September 5, in U.S. Federal Court, Manhattan, before Judge William Pauley.
Emirates Team New Zealand was seeking to have its action claiming damages for breach of contract and breach of trust remanded back to the New York Supreme Court where it was first filed
The second motion, brought by Alinghi, was to send both that action and the antitrust action ETNZ filed in federal court to arbitration.
Judge Pauley made no ruling on either motion, reserving his decision.
Grant Dalton said from New York today that ETNZ appreciated having the opportunity to make its arguments, and that the team looks forward to Judge Pauley's decision. As always, Dalton said, ETNZ’s efforts have been geared to resolving its issues with Alinghi, and getting back to sailing.
Emirates Team New Zealand's position is explained in a previous Sail-World article which is as follows:
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.
 | Ernesto Bertarelli is claimed to have breached the agreement signed with Emirates Team New Zealand to entice them into the 33rd America’s Cup www.alinghi.com © |
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.
 | Ernesto Bertarelli, head of Team Alinghi, with the America’s Cup, after Alinghi’s first Defence ACM 2007/Carlo Borlenghi Click Here to view large photo |
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.
 | Ernesto Bertarelli.
©Ivo Rovira/Alinghi Ivo Rovira /Alinghi |
'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’t even give us the courtesy of a reply to that note. Hence we get to this point today.
The letter or note, referred to by Dalton, was in fact released by Alinghi, revealing that Emirates Team New Zealand had sought $30million for a delay from 2009 to 2010 and $50 million if the America’s Cup was delayed until 2011, on the basis that there was an agreement in place between the two parties, as a pre-condition of Emirates Team New Zealand’s entry that there would be an America’s Cup in 2009 in Valencia.
 | Associates of CNEV pose for the signing of the 33rd America’s Cup Protocol aboard Ernesto Bertarelli’s yacht Vava. ©ACM 2007/Photo: Vicent Bosch Click Here to view large photo |
In the latest edition of Seahorse magazine, there is a very interesting interview conducted by Dobbs Davis with Ernesto Bertarelli at Key West Regatta, where Bertarelli complains that he feels that Alinghi’s case is not being fairly represented in the press. He then moves onto discussing Russell Coutts in this extract:
'Brad’s (Butterworth) mobile went off, and he did a convenient exit, because for the next 10 minutes I got an earful of how Coutts has been behind all the problems, how Coutts is getting paid enormous sums, how Russell really likes his money, did I know he’s getting $U56m a year from Larry, plus a $50m bonus if they win the Cup, and how he is very stubborn and will not budge unless he gets his way.
'You know Russell: has he ever not got his way? And in Seahorse we always give Russell’s point of view, never his. Why do we have a column from Russell’s buddy, Paul Cayard? It is too biased, only one point of view.., how do I get a column in Seahorse? (I thought, careful what you wish for, mate... and where the hell is Brad that I can’t look over at him for his take on all this?)
'I admit I was starting to glaze over a bit, but then I really looked at Ernesto. His eyes were sad, he seemed tired, and he appeared genuine in his appeal for understanding. But was it all an act?
'If so, it was a pretty good one, because I was starting to feel badly for him, maybe he did have a legitimate claim to a portion of The Truth.
Dalton’s not too sure if the current America’s Cup brouhaha can be put down to an estranged relationship between the former Alinghi skipper, and the Alinghi team boss.
'It seems to be a too simple an explanation as to what is going on', says Dalton. If I got that obsessed with personalities (as Bertarelli seems to have with Russell Coutts) I would get taken to a room here, by four of the guys and told to get over myself and there are a lot of other people that matter in this, other than just you.
'So I struggle with the notion that Coutts has got under Bertarelli’s skin so much that this is just a vendetta against Russell.
 | New York State Supreme Court, 60 Centre St, New York, by John Rousmaniere Event Media |
Where to from here?
At this stage papers have been filed in the New York Supreme Court. The case will be heard in front of a Jury who will determine whether Alinghi is justified in its actions , or whether Emirates Team New Zealand has suffered as a result of a breach of their agreement with the Defender. Dalton notes that the amount of damages 'depends on how long we are delayed. In antitrust, under law the damages are tripled. We are looking for consequential damages, and then if anti-trust is proven the amount is tripled', he adds
Alinghi have said in a statement attributed to Lucien Masmejan, Alinghi’s legal counsel that: 'We are disappointed to learn of this legal action by Emirates Team New Zealand, given their previous public acceptance and commitment to the competition.
'These actions are totally without merit, wildly miss the target and will be defended rigorously. We share the sailing community’s frustration in the delays affecting the America’s Cup but Alinghi, as trustee, is duty bound to defend its position in the current legal action and to preserve the integrity of the America’s Cup.
'We have repeatedly made it clear that Alinghi welcomes a swift court resolution and wants to get the action back on the water as soon as possible.'
And in a second related story:
Emirates Team New Zealand (ETNZ), holders of the America’s Cub sailing trophy from 1995-2003, today filed lawsuits in New York Supreme Court and United States District Court charging current Cup defender Alinghi, the Swiss team owned by businessman Ernesto Bertarelli, with deliberately delaying the next America’s Cup challenge to crush competition.
The Kiwi sailors are seeking financial compensation from Alinghi, Bertarelli and Bertarelli-controlled AC Management for breaches of contract and trust, as well as violations of U.S. antitrust law.
In 2003 Alinghi defeated Team New Zealand at Auckland, the 32nd America’s Cup challenge since the underdog schooner America bested 15 British yachts off the Isle of Wight in 1851. The 33rd defense of the world’s oldest international sports trophy was to have been held at Valencia, Spain, in 2009, but a series of actions by Alinghi have made it more likely that boats will not be in the water again until 2011.
'The delay in staging the next America’s Cup is harming every challenging syndicate as they have to stretch budgets developed and approved for a two-year campaign over three or four years,' said ETNZ managing director Grant Dalton. 'We have a duty to protect the investment in the team over many years by our loyal supporters. We also have an obligation to honor the trust shown by the hundreds of thousands of New Zealanders who have supported the team through the years.'
Boies Heads Legal Team
Heading the ETNZ legal team is attorney David Boies of New York-based Boies, Schiller & Flexner LLP. The legal actions are being taken in New York in compliance with the terms of the Deed of Gift, which in 1887 set forth the rules of the competition, stating, 'This Cup is donated upon the conditions that it shall be preserved as a perpetual Challenge Cup for friendly competition between foreign countries.' The document has been amended twice by the New York Supreme Court in 1956 and 1985.
'ETNZ and other racing syndicates have made significant financial commitments based on the assurances and legal obligation of Mr. Bartarelli’s organization to defend the Cup in 2009,' said Boies. 'He has violated both the spirit and letter of the Deed of Gift at every turn, and is holding this venerable competition hostage in an attempt to control the substantial financial benefits of the event and eliminate competition.'
New York State Supreme Court Action
The first action, filed in the Supreme Court of the State of New York, claims damages for breach of contract arising from an agreement made as a pre-condition of ETNZ’s entry to the 33rd America’s Cup. The agreement involved an understanding entered into by Ernesto Bertarelli on July 25, 2007, that the America’s Cup would go ahead in 2009.
'That assurance was a pre-condition of our entry,' Dalton said. 'Then on November 22 last year, before the Supreme Court of New York had even issued judgment on a challenge by Golden Gate Yacht Club (representing the American team BMW Oracle, headed by Oracle founder Larry Ellison) to the validity of the Spanish challenge, Bertarelli’s AC Management announced that the Cup would be delayed.
'Mr. Bertarelli had the chance to accept a reasonable proposal from Oracle, which was also signed by the majority of the challengers, and which would have allowed the America’s Cup to be held in 2009, said Dalton. 'He would not do so.'
The action also claims that Societie Nautique de Geneve, the 'yacht club' Bertarelli set up as trustee of the Cup, through the actions of the other defendants has committed breaches of its fiduciary duties that trustees owe to maintain the standing and integrity of the Cup.
U.S. District Court Action
The second action has been filed in the Federal Court under United States anti-trust legislation.
ETNZ contends that Alinghi and the other defendants, abusing the power conferred to the defender under the Deed of Gift, has acted to stifle competition for the Cup and for the right that goes with it of conducting future events by accepting a paper yacht club of no substance - - CNEV - - as the challenger of record, thereby enabling it to impose rules for the next event that were completely one-sided and which were designed to give Alinghi an unfair competitive advantage.
ETNZ also contends that Alinghi’s subsequent conduct in refusing to agree to a reasonable settlement of the BMW Oracle case, the unilateral and indefinite delaying of the event from 2009 was all designed to and had the effect of increasing other teams’ costs, including those of ETNZ.
We Would Rather Be Racing
'We are heading to court reluctantly, but have no option,' said Dalton. 'We would rather be racing.'
Dalton continued: 'We have to ensure that when the next America’s Cup is held, Emirates Team New Zealand is still in very good shape and ready for the battle on the water. By the time AC Management announced that the 33rd America’s Cup would be delayed, we had put together a comprehensive program for 2008, with ETNZ members competing in a number of European regattas. And we had already done an enormous amount of work on the design of the new 90ft AC class boat. Design work is continuing, although with less urgency,' said Dalton.
'ETNZ is fortunate in having the full support of our sponsors, the New Zealand Government, and team members. However the delay does come at a price and it seems prudent for the team to seek financial compensation to cover additional campaign costs and damage to our brand name and reputation and to the event in which we compete, the standing of which affects our ability to raise funds.'
To view the documents lodged in the New York Supreme Court and a Q&A issued by Emirates Team New Zealand, see the links below
To read the Complaint and Jury Demand click here
To read the Complaint click here
To read the Question and Answer Document from Emirates Team NZ click here
by Emirates Team NZ media
8:17 PM Sat 6 Sep 2008 GMT
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