Yachting Trophy Winner Can’t Nix Opponent’s Suit

     (CN) – The holder of the America’s Cup yachting trophy must face a court battle after refusing to compete at sea against a challenger, a New York appeals court ruled.
     Golden Gate Yacht Club captured the cup at the 2010 competition in Spain with its USA-17 boat defeating Alinghi 5 in the best-of-three final series.
     This means San Francisco will host the 34th America’s Cup challenge, which will pit the USA against a challenger that wins the qualifier, the Louis Vuitton Cup, on July 4.
     The finals of the America’s Cup will take place from Sept. 7 to 21.
     Golden Gate must defeat a group of American teams for the right to defend the cup against the winner of the Louis Vuitton Cup.
     One would-be challenger on the American side is African Diaspora Maritime Corp., which is based in North Carolina.
     ADM sued Golden Gate for breach of contract, breach of trust and breach of fiduciary duty, alleging that the champions improperly denied the club’s timely challenge application and payment of the $25,000.
     ADM stated that it was a worthy challenger for many reasons, including that its team included three Olympians and an All-American athlete, in addition to “several additional talented, experienced and award-winning sailors.”
     Also, ADM claimed it would have the financial backing of “several wealthy African-Americans.”
     Litigation has occurred in New York because the cup is governed by a Deed of Gift, which is a trust instrument under New York state law.
     As the holder of the America’s Cup under its deed of gift, Golden Gate is charged with running the event, and the competition protocol states that the champion must “not unreasonably favor the interests of any competitor over another.”
     In its complaint, ADM stated that Golden Gate rejected its application under the false finding that it lacked a signature and proof of payment of the fee.
     ADM also claimed that the champions told the club it was “not satisfied that ADM will 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.” (Parentheses in original.)
     Golden Gate argued that the protocol gave it the discretion to decide who is a worthy challenger, and a Supreme Court judge for Manhattan dismissed the case.
     A divided three-judge panel of the Appellate Division’s First Department reversed Tuesday, however, finding ADM stated a sufficient claim to bring the case to trial.
     ADM can assert that its application and fee payment created an enforceable contract, according to the ruling.
     “Although defendant, the current trustee of the trophy, has discretion selecting the defender, we find that plaintiff has alleged the existence of an enforceable contract between the parties and bad faith on defendant’s part sufficiently to state a breach of contract cause of action,” Justice Rolondo Acosta wrote for the majority.
     “In the end, this is a sporting competition, and the winner should be decided in the open waters, rather than in a courtroom,” he added.
     Justice Peter Tom dissented because he found “no contract between the parties ever arose.”
     “Were plaintiff permitted to proceed on its trust claims, standing could be asserted by all of the yacht clubs chosen to participate in the regatta, as well as those who applied but were not chosen to participate,” Tom wrote. “This is a potentially numerous and amorphous class that is neither ‘limited in number’ nor sharply defined so as to come within the exception to the general rule enacted in Alco Gravure (v. Knapp Foundation, 1985). Thus, plaintiff lacks standing, and its cause of action for breach of trust and breach of fiduciary duty were properly dismissed.”
     The battle for the America’s Cup often takes place in the courtroom as well as on the waves. Before it won the 2010 America’s Cup, Golden Gate blocked the Swiss champion’s choice of the United Arab Emirates as a site for the competition.
     Golden Gate also was successful in stopping a Spanish yacht club from seeking the 2010 Cup because it did not hold an annual regatta.

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