America's Cup- Appeal decision announced on Rules and Venue

by Richard Gladwell on 16 Dec 2009
In a not unexpected decision, the Appellate Division of the New York Supreme Court has declined to uphold the Appeal lodged by Societe Nautique de Geneve in respect of the venue and Rules issues.

The Appellate Court found that the order made by Justice Herman Cahn as to the selection of venue must be in compliance with the Deed of Gift, whereas the Defender, SNG, had literally interpreted his decision to mean anywhere in the world, and accordingly chose a place that it believed to offer good weather and waters for a Match on 8 February and chose Ras al-Khaimah in the United Arab Emirates.

Two months after the announcement of the UAW venue, the Challenger, Golden Gate Yacht Club argued that the venue was not in compliance with the Deed of Gift, and that the regatta must be sailed in Valencia, the Northern hemisphere venue named by Justice Cahn, if the parties could not agree on another options.

SNG had arbitrarily named Ras al-Khaimah, believing that as Defender they had the right to name a venue of their choosing without reference to the Challenger, despite two Open Letters issued by GGYC just prior to the decision advising that any selection made, other than Valencia, made without their consent, would be Appealed.

SNG chose to call the Challenger's bluff, and the Appeal followed.

After setting out a long recitation of the history of the matter the Court upheld the Supreme Court decision. No further appeal is possible, except by leave of the Appellate Division, and this is unlikely to be granted.

Accordingly the match will take place in Valencia on 8 February 2010. The Louis Vuitton Trophy series to be sailed in Auckland, New Zealand a month later, will be the first opportunity for the other 20 potential challengers to shape up, in anticipation of the 34th America's Cup expected to be staged in 2011 or 2012.

On the issue of whether rudders would be included in the measurement of waterline length, the Appellate Division again upheld the Supreme Court decision, citing the practice of the New York Yacht Club at the time of the publication of the latest version of the 19th century Deed of Gift, which governs the America's Cup Cup.

In 1887 the New York Yacht Club's rules specifically excluded the inclusion of rudders in the measurement of Load Water line Length which may not exceed 90ft.

The rules published by SNG, made it clear that the rudder would be included, and due to the configuration of the Challenger, a trimaran whose outer hulls or ama, contained the rudder - the aftermost point for measurement - and that would have extended her length to around 98ft, meaning that the Challenger would not be eligible to race to for the America's cup, and would have been disqualified before the regatta began.

Under the decision of the Supreme Court, upheld by the Appellate Division, the rudders will be excluded. In effect this now means that only the main hull of the US Challenger will be measured for the calculation of waterline length, and she is expected to now comply with the requirements of the Deed of Gift.

The Challenger is in the final stages of packing, ahead of her departure for Valencia in the next few days. Meanwhile the Defender has continued to trial off Ras al-Khaimah, she will now complete that program before shipping to Valencia in preparation for the 33rd America's Cup, which will be a best of three series, to be sailed over courses of about 40nm in length as prescribed in the Deed of Gift.

That Match is expected to be concluded by 15 February 2010, and at that point a new America's Cup will be put in motion being a multi challenger event, sailed under the mutual consent provisions of the Deed of Gift, sailed in a similar manner to the 32nd America's Cup which was completed in July 2007.

The full decision is as follows:

Decided on December 15, 2009
Friedman, J.P., Sweeny, Freedman, Abdus-Salaam, JJ.

1764 1765N 602446/07

[*1]Golden Gate Yacht Club, Plaintiff-Respondent,

v

SociÉtÉ Nautique De Geneve, Defendant-Appellant, Club Nautico Espanol De Vela Intervenor-Defendant. Emirates of Ras Al Khaimah, Amicus Curiae.


Sullivan & Cromwell LLP, New York (Robert J. Giuffra, Jr. of counsel), for appellant.
Boies, Schiller & Flexner LLP, Armonk (David Boies of counsel), for respondent.
Cleary Gottlieb Steen & Hamilton LLP, New York (Jeffrey A. Rosenthal of counsel), for amicus curiae.

Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered October 30, 2009, which granted plaintiff Golden Gate Yacht Club's (GGYC) motion for an order declaring invalid Societe Nautique De Geneva's (SNG) selection of Ras Al Khaimah, United Arab Emirates (RAK) as the venue for the 33rd America's Cup yacht race, unanimously affirmed, without costs. Order, same court and Justice, entered November 4, 2009, which, inter alia, ruled that, under the Deed of Gift governing the race, a yacht's 'rudders' may not be included in measuring its length on load water-line, unanimously affirmed, without costs.

Concerning the October 30, 2009 order, by order filed April 7, 2009 (Golden Gate Yacht Club v Societe Nautique de Geneve, 12 NY3d 248 [2009]), the Court of Appeals reinstated a May 12, 2008 order of Supreme Court which provided, insofar as pertinent, that (1) 'the location of the match shall be in Valencia, Spain or any other location selected by SNG [or agreed to by the parties], provided SNG notify GGYC in writing not less than six months in advance of the date set for the first challenge match race of the location it has selected for the challenge match races,' and (2) that the date of the first race 'shall be the date ten calendar months from the date of service of a copy of this order, with notice of entry, upon the attorneys who have appeared herein,' or such other date as might be agreed to by the parties (2008 NY Slip Op 32296[U], *4-5 [May 12, 2008, Cahn, J.]).

Also pertinent is the Deed's requirement that races be conducted between May 1 and November 1 if in the Northern Hemisphere and between November 1 and May 1 if in the Southern Hemisphere. Measuring 10 months from the Court of Appeals' April 7, [*2]2009 order, the first race would have to be conducted on February 8, 2010.

Nevertheless, on April 23, 2009, SNG informed GGYC that the first race was to conducted on May 3, 2010, and that SNG would notify GGYC before December 3, 2009 of a Northern Hemisphere venue. GGYC moved to hold SNG in contempt, arguing that, by virtue of the April 7, 2009 order, the first race had to be conducted on February 8, 2010, and that SNG had to notify GGYC of the location of the races no later than August 8, 2009.

SNG responded that it set the date in May, rather than February, because GGYC's Notice of Challenge expressly put forth a Northern Hemisphere challenge and, under the Deed, a Northern Hemisphere race could not take place earlier than May. On May 14, 2009, the court directed SNG to hold the races in February 2010, 'as per the order of the Court of Appeals.'

On August 5, 2009, SNG announced the selection of RAK, which is in the Northern Hemisphere, as the venue of the races. GGYC again objected, arguing that, by virtue of the April 7, 2009 order, and notwithstanding the Deed's requirement that a February race be conducted in the Southern Hemisphere, the races had to be conducted in Valencia, Spain, which is in the Northern Hemisphere, in February 2010, absent agreement otherwise between the parties or SNG's selection of an alternative Deed-compliant location by August 8, 2009.

The motion court correctly rejected SNG's selection of RAK. The April 7, 2009 order of the Court of Appeals does not explicitly state that it intended to remove entirely the Deed's hemisphere requirements, or otherwise indicate, as SNG argues, that it was a compromise between GGYC's claimed right to have the race conducted as soon as 10 months after issuance of the order and SNG's claimed right to select a Northern Hemisphere venue.

Accordingly, the order should be read as carving out an exception to the Deed's hemisphere requirements in the case of Valencia, and the phrase 'or any other location selected by SNG' should be read as 'or any other Deed-compliant location selected by SNG.' RAK, which is in the Northern Hemisphere, is not a Deed-compliant location for a February race.

Concerning the November 4, 2009 order on appeal, the court correctly found, based on extrinsic evidence, that the Deed excludes rudders for the purpose of measuring the length on load water-line.

The Deed, which provides, in relevant part, that the competing vessels, 'if single-masted, must measure between 44 and 90 feet on the load water-line,' and states that neither the 'center-board' nor 'sliding keel' shall be considered part of the vessel for any purposes of measurement, but does not define 'load water-line,' which is clearly a term of art with specialized meaning in the sport of sailing, is ambiguous as to whether rudders should be considered in measuring the length on load water-line.

The mere fact that the Deed expressly only states that the center-board and sliding keel shall not be considered in the measurement does not necessarily mean that all other parts of the vessel, including the rudders, were intended to be considered in making that measurement.

Given this ambiguity, the court properly relied on undisputed extrinsic evidence, including New York Yacht Club rules extant at the time the 1887 Deed was settled, showing that length on load water-line is typically
measured 'exclusive of any portion of the rudder or rudder-stock.' [*3]

We have considered the remaining contentions and find them unavailing.

THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: DECEMBER 15, 2009

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