America's Cup - Oracle Racing win in Court but with collateral damage

by Richard Gladwell, Sail-World.com NZL on 23 Apr 2016 Oracle Racing have had another claim against them by a former crew member dismissed.

The case is the second the commercial arm of America's Cup defender Oracle Team USA, have won.

All cases were brought in the District Court for the Northern District of California, based in San Francisco. And used the same lawyer, a New Zealander, Patricia Barlow, who claimed at the end of the latest case that she was acting o a pro bono basis for Matthew Mitchell, at least.

The first case was by grinder Joe Spooner (NZL) over an employment-related claim when his contract was terminated by Oracle Racing after they failed to reach agreement on the financial terms of Spooner and his family relocating and staying in the new venue of Bermuda.

Matthew Mitchell (NZL) did have two cases running in the San Francisco Court - being the one against Oracle Team USA claiming they should have dismissed OTUSA crew member Simeon Tienpont (NED) when he had admitted an involvement in some of the activities surrounding boat tampering in four America's Cup World Series regattas involving one design AC45 wingsailed multihulls. Mitchell was claiming $400,000 in damages for what he claimed was a discriminatory dismissal, and that he was made a fall guy in the affair.

Several other members of OTUSA were named and/or penalised by the International Jury and had subsequent action taken against then by Oracle Racing. However, Tienpont remained with the team and is now believed to be with Softbank Team Japan.

The second case, which is still ongoing is against the International Jury for the 34th America's Cup, essentially making the same claim as in the first that action should have been taken against Tienpont by the Jury as was done with Mitchell and five others who were named.

That case is largely in its infancy with Mitchell’s lawyer only having been able to serve a summons on two of the five-member jury. No compensation is being sought by Mitchell.

Both cases have been joined and brought under the purview of U.S. District Judge Vincent Chhabria.

'Barking up the wrong tree?'
As a New Zealander, Matthew Mitchell's case was reviewed by two Commissioners from Yachting New Zealand, who expressed some reservations as to his complicity and noted that while Tienpont had admitted his involvement, no action had been taken by the Jury. Yachting New Zealand decided to impose no further penalty on Mitchell.

Neither did the International Sailing Federation after a case against another OTUSA sailor, Dirk de Ridder went to the Court of Arbitration for Sport and his three-year suspension from the sport was reduced to just 18 months after “de novo” (starting afresh and calling key witnesses) Hearing of the evidence. It was a 2:1 majority verdict only

On Thursday, local time, in San Francisco the CourthouseNews.com reported that in a ruling from the bench, the a federal judge dismissed an America's Cup sailor's lawsuit against Oracle Team USA, saying his claims bordered on frivolous.

“U.S. District Judge Vincent Chhabria on Thursday told Mitchell's attorney Patricia Barlow, 'It seems your client is barking up the wrong tree if he has a tree to bark up at all.'

Chhabria asked Barlow: 'How can you possibly establish that Oracle racing's conduct caused the jury verdict against your client?'

Barlow said she had recently learned that Oracle Racing suppressed exonerating evidence against Mitchell, which a member of the jury had told her would have been 'a game changer.'

Tienpont allegedly laughed about weighing down the kingpost, she said, but a crewmate who would have testified to this was cowed by the team's admonition to keep quiet about the investigation.

Chhabria said he didn't see how that changed things for Mitchell.

'If a team is under investigation, there is nothing wrong with telling the team members they can't talk about it amongst themselves or tell their wives,' he said. 'There's no indication that anybody on the racing team prevented or threatened anybody to keep them from talking to the jury or cooperating with the investigation.'

He added: 'Frankly, this lawsuit if it's not frivolous, it's borderline frivolous.'

It took Chhabria only a few minutes to hand down his ruling. He spent most of the hearing upbraiding Barlow for her conduct in the case, particularly for restating Mitchell's contract claim verbatim in her amended complaint after Chhabria had ruled that Oracle had not breached its employment contract with Mitchell by failing to fire Tienpont.

'Part of the problem here is that you don't seem to understand how things work in federal court,' Chhabria said, obviously vexed at Barlow's attempts to build the case through discovery.

'You can't take depositions for the purpose of gaining the ability to state a claim. You have to state a claim before you start taking depositions,' the judge said.

Chhabria continued: 'It seems like you're using the court as a vehicle to allow your client to complain about stuff. He thinks he took the fall for something somebody else did, but there's no cause of action he has against Oracle Racing. The federal court is not a forum for people to complain about how things are going in their lives.'

Barlow apologized to the court, saying she represented Mitchell, a fellow New Zealander, pro bono and that her motive in pursuing the claims was pure.

Chhabria said: 'You can file a frivolous lawsuit even if you don't believe it was frivolous. You have an obligation to be objective and not just be a mouthpiece for someone to complain about how things went down.'

Chhabria said he did not see why he shouldn't sanction Barlow, but he did not.

'I'm going to let you off with a warning this time,' he said.

For the full story click here

Decision not unexpected
While Mitchell and his lawyer may be smarting at the Judge’s comments and dismissal of their claims, they should not have been surprised.

Chhabria had earlier ruled against Mitchell on the matter but had left the door open to bring new evidence to the Court, within 14 days.

The decision in February 2016 said in part:

“Dismissal is with leave to amend. It's difficult to imagine how Mitchell could amend his complaint, consistent with Rule 11, to allege either standing or a legitimate theory of liability based on the Oracle Team's failure to suspend or fire Tienpont. But if he believes he can, he must do so within 14 days of this order.”

On April 14, 2016, the Court itself issued an Order shortening the time for hearing on May 19 to a month earlier and citing various aspects of non-compliance with Court orders by Mitchell’s legal team.

A day earlier on April 13, 2016 Oracle Racing had filed in the San Francisco Court dismissing Mitchells’ claims and seeking costs of $23,332.50.

Oracle Team USA’s legal approach was not to answer the substance of the complaint by Mitchell, except in parts of its note of April 13, instead claiming that it lacked legal merit and cited an extensive list of relevant cases and legal precedence, thus avoiding having to answer Mitchell's claims had the complaint gone to a formal Hearing in open Court.

Mitchell, in contrast, focussed largely on the circumstances of the matter and introduced into the public arena some interesting documents to support his claims.

One of these were the notes of the discussion that took place between Graham McKenzie of the International Jury and Lee Ann La France, the independent investigator appointed by Oracle Racing to investigate the claims, of which Oracle Team USA first became aware on July 26, 2013.

Nine days later on August 3, 2013, the International Jury issued a notice saying that it had received a Report from the Chief Measurer relating to the boat tampering, and a confidentiality order was placed on the matter by the International Jury.

Next day, August 4, Oracle Team USA’s rules adviser, Richard Slater wrote a three-page note to the International Jury outlining the investigations that the team had undertaken in the preceding ten days, and that the report of the CEO or other independent investigation would be provided to the International Jury. (Item 10 of the note below)

McKenzie Notes
Many expected that report would be a full report and in writing, with the team having taken some action itself, and for the Jury to consider that report and then be in a position to act without having to conduct its own investigation.

The McKenzie notes record that the full written report would only go to Larry Ellison, Russell Coutts, and Grant Simmer.

Instead, the report was verbal only, was a discussion over three weeks later on August 31, 2013, between the investigator Lee Ann La France and a Jury member Graham McKenzie, an Auckland lawyer, who took notes which were later typed up.

(Evidence was given at the subsequent Court of Arbitration for Sport Hearing that the investigation was never completed, a written report was never produced, and that there were two meetings between La France and McKenzie.)

The existence of those notes and the verbal report was only revealed mid-way through the Court of Arbitration for Sport Hearing a year later. For the full CAS Decision and background click here

Other documents introduced into the public arena via Mathew Mitchell’s submission include emails which appear to emanate from America’s Cup Events Authority legal adviser Sam Hollis and Alejandra Mato of OTUSA (PA to Russell Coutts).

One from Alex Mato is dated August 21, 2013, and is addressed to Grant Simmer, Tom Ehman, Russell Coutts and legal adviser Phil Bowman.

It confirms a call from Sam Hollis about a meeting that took place with Hollis and David Tillett, the Chairman of the International Jury.

In the note “Tillett confirms that out of the six people, they have identified four that will get a case to stick concerning a Rule 69 infraction”.

The note goes on to say that the Jury expect the report from Lee Ann La France (Oracle Racing's independent investigator) will be “somewhat reduced” with maybe no names of team members.

The internal memo also contains a comment that “According to Tillett what was found on our AC45’s is only the tip of the iceberg of what’s been found (sic), and it is dismissive and disappointing that we are not co-operating to resolve this with the jury.”

The memo says that the Jury are confident that Grant Simmer and Russell Coutts are not involved, but questions, if others did, know, or should have known.

“They trust Grant. They however believe that we are not sharing information, and we should co-operate”, the memo adds.

The note discusses a $5million penalty being imposed, but it is felt that this would be “Ice-cream money” to the team and “they will have to penalise us with points.”

Note to Self
Sam Hollis’ email to himself concerns an hour-long meeting held in his office with David Tillett and echoes the sentiments in the Mato note.

Tillett is said to have commented on a trespass case bought by OTUSA against Emirates Team NZ and Luna Rossa and remarked that “OTUSA would be better on focussing on co-operation with the Jury re Article 60 investigation than seeking to protest ETNZ/LR”

It adds a comment that “Team has closed ranks - very uncooperative in interviews”.

When the contents of the emails were put to David Tillett earlier this week, the then International Jury Chairman said that he was only prepared to discuss the background “off the record.” The South Australian said that the discussions were confidential and done in the context of being asked by the organising authority “to assist them relating to updates as to where matters were, bearing in mind the Rule 69 reports and possible implications for the event, timing and whether it would affect the scheduling of the Cup”.

Tillett added that previously he was “not aware of the existence of these notes prior to proceedings or that there had been any communication with one of the competitors”.

“Some of it is accurate, some are taken out of context, and some of it is not accurate,” he said as a general comment to the memos which cover four pages and in places are quite indistinct. They cover his thoughts on other matters such as on the merits of the AC72 class and similar periphery issues not relevant to the Hearings.

Cases continue
Tillett and the International Jury still have two actions lodged or pending.

One is the aforementioned by Matthew Mitchell in front of the same judge that has just dismissed his case against Oracle Racing. Another is believed to be pending from suspended Oracle Team USA crewman Dirk de Ridder who maintains that he is innocent of involvement in the affair. It is believed that claim will be lodged in New York Supreme Court, where the Deed of Gift for the America’s Cup is registered.

The Arbitration Panel for the 35th America’s Cup is believed to have been appointed and formed. Names have not yet been announced however none of the 34th America’s Cup Jury are involved. One of those involved is believed to be Yachting Australia President Matt Allen. The other two are believed to be European resident sports lawyers, one of whom has to be a member of the Court of Arbitration for Sport.

They are believed to be considering two matters one being the issue of withdrawal of the 35th America’s Cup Qualifier Series from Auckland after the team claimed they had a signed agreement from ACEA to this effect.

The other concerns a media statement issued by Emirates Team NZ in support of Luna Rossa over their position on the changing of the America’s Cup Class from being an AC62 to a smaller yacht nine months after entries had closed, and the change class decision made without the consent of all competitors. It is claimed this statement breached the provisions of the Protocol which governs the 35th America’s Cup.