The New York Court of Appeals on Thursday upended the defending America's Cup champion's choice of a challenger for a meet that had been set for July 2010.
The ruling was a unanimous reversal of an Appellate Division decision. Chief Judge Jonathan Lippman, who was confirmed by the Senate on Feb. 11, did not take part in the appeal.
In Golden Gate Yacht Club v. Society Nautique De Geneve, 25, the court rejected the choice of the defending champion sailing club, Societe Nautique de Geneve, of a challenger which had failed to meet the requirements of the "unambiguous" legal document that controlled the competition.
The Swiss-based club had fielded a sailing crew called Team Alinghi that triumphed in the last two America's Cup races in 2003 and 2007.
The day that the Swiss club won the 2007 contest, it selected a Spain-based club, Club Nautico Espanol de Vela, as "Challenger of Record."
Under the deed of gift to the New York Yacht Club that set up the international competition in 1857, the selected challenger is authorized to negotiate the parameters of the next race with the defending champion.
With one exception, the seven America's Cup competitions held since 1983 have involved multiple challengers racing in single-hull boats. The 2010 race negotiated between the Swiss and Spanish clubs had provided for 19 clubs, fielding single-hull boats, to engage in a competition in July 2010 off the coast of Valencia, Spain.
But a week after the Spanish club was chosen, an American club, the Golden Gate Yacht Club, challenged the selection on the ground that the Spanish club was a sham club that had been picked by the Swiss club in order to set rules favorable to it for the next -- the 33rd -- America's Cup meet.
The San Francisco club backs BMW Oracle Racing.
The Swiss club fired back that the American club had spent more than $15 million in building a three-hulled boat which was beyond the financial capabilities of most clubs other than the Swiss group.
In mounting its challenge, the Golden Gate Club contended that the Spanish club was disqualified as a challenger because it had not met the requirement of the deed of trust that it have "for its annual regatta an ocean water course."
At the time it issued the challenge, the Spanish club had never held an "annual regatta." Since then it has held two.
The Appellate Division, 1st Department, dividing 3-2, had found the annual regatta language ambiguous and concluded, looking at extrinsic evidence, that the Spanish club had met the requirement by holding a regatta after the challenge was issued but before the America's Cup race was held. That ruling reversed one by Manhattan Justice Herman Cahn. With its decision Thursday, the Court of Appeals reverted to Cahn's view of the case.
Writing for the court, Judge Carmen Beauchamp Ciparick concluded that the language was "unambiguous" and requires that a challenger "must have held at least one qualifying regatta before it submits its Notice of Challenge."
Now two heavyweights, both billionaires, will have to negotiate the terms of the next contest for the oldest major trophy in international sport: Larry Ellison, the owner of the Golden Gate's BMW Oracle, and Ernesto Bertarelli, the owner of the Alinghi.
Both boats are multi-hulled, and recognized to be faster than single-hulled vehicles.
Jane Eagleson, a spokeswoman for the Golden Gate Club, declined to specify what type of race the club would seek to negotiate, saying the club expected to comment "in the next few days."
Barry Ostrager, a partner at Simpson Thacher & Bartlett who represented the Societe Nautique de Geneva, said the decision puts the club back to "square one" in planning the race.
Maureen E. Mahoney of the Washington, D.C., office of Latham & Watkins represented the Golden Gate Club. The Spanish club, Club Nautico Espanol de Vela, was represented by David W. Rivkin of Debevoise & Plimpton.
