After three years of legal wrangling, a sailing group in North Carolina and the bearer of the prestigious America’s Cup trophy reached a settlement late last month following court-ordered mediation in New York’s Commercial Division.
The July 23 settlement between African Diaspora Maritime Corporation and Golden Gate Yacht Club scuttles a dispute prompted by a spurned chance to compete in the 34th America’s Cup, the premier international yacht sailing race.
The case is African Diaspora Maritime Corporation v. Golden Gate Yacht Club, 653419/2011.
ADM, as the non-profit sailing group is referred to in court briefs, aims to promote the visibility of African American competitive sailors and raise awareness of the role of blacks in maritime history. The group submitted an application and the $25,000 fee on March 31, 2011 to compete in the “Defender Series” against defender Oracle Team USA, backed by billionaire Larry Ellison.
Two weeks later, Golden Gate rejected the application, saying it was “not satisfied” that ADM would have the resources and experience “to have a reasonable chance of winning the America’s Cup Defender Series.”
Golden Gate, as holder of the Cup, serves as trustee of the America’s Cup. ADM claimed that the club did not review its application in good faith.
ADM’s suit against Golden Gate pit two major law firms against one other – McDermott Will & Emery and Boies, Schiller & Flexner – in a case that reached the Appellate Division, First Department. It also credibly threatened to postpone the start of the 34th America’s Cup, held between Sept. 7 and Sept. 25, 2013 in the San Francisco Bay, due to a pending motion for injunction.
The case was brought in New York since the terms and conditions of the deed of gift – a trust instrument at the center of the America’s Cup – are governed by New York law.
ADM, a sailing organization founded in 1994 by Charles M. Kithcart, a licensed captain with a 25-year history in maritime, filed claims on Dec. 12, 2011 in the Commercial Division for breach of trust, breach of fiduciary duty and breach of contract. Justice Barbara Kapnick, then seated in the division, dismissed the suit. The First Department reinstated the breach of contract claim.
Shortly before the 34th Cup began, ADM withdrew its motion to enjoin the start of the race while its claim was being considered. Boies Schiller sought the group’s litigation funding source to prove “a campaign of harassment against [Golden Gate Yacht Club] and its affiliates.”
Rather than comply with a court order to produce this expedited discovery, ADM withdrew the motion and the Cup proceeded as scheduled.
The July 23 settlement, announced in a joint press release, relates to ADM’s second amended complaint, filed Dec. 27, 2013, in which it sought more than $1 million in damages for the lost opportunity and potential sponsorship that could follow from competing on this international stage.
In court papers, McDermott Will & Emery argued that Golden Gate’s “bad faith decision to deny ADM’s application” deprived the group of the “highly lucrative opportunity to fundraise, negotiate deals with sponsors, and ultimately develop a recognizable brand to continue its efforts to participate in future America’s Cup races.”
In its motion to dismiss, Boies Schiller argued that the breach of contract claim is moot now that the 34th Cup is over. ADM also had not alleged that it would have been able to raise funds that exceeded the costs of participation had it been accepted into the Defender series, the firm said.
For a sense of the type of costs associated with the sailing competition, the four teams that competed in the 2013 regatta spent between $65 million and $100 million, reported the New York Times.
Andrew Kratenstein, a partner at McDermott Will & Emery representing ADM, declined to comment on the settlement. Philip Bowman, a partner at Boies Schiller and counsel to Golden Gate, also declined comment.
During June’s oral arguments on the motion to dismiss, Justice Saliann Scarpulla, who assumed Kapnick’s docket when the latter was elevated to the First Department, expressed skepticism about ADM’s right to damages.
“All that [the contract] requires or guarantees is that you be given a fair shake,” she told Kratenstein, according to the transcript. “So what damages are you alleging from the failure to be given a fair shake? Because it does not follow that you get to be the America’s Cup team.”
The judge ordered the parties into mediation.
The terms of the July 23 settlement are confidential. A joint release issued by the parties merely states that ADM is “fully committed to continuing its efforts to participate in future America’s Cup races” while Golden Gate is “fully supportive of ADM’s stated mission.”
In a phone interview with CLI Wednesday, Kithcart, ADM’s founder, said while he could not comment on the settlement, “The money is not the issue – the issue is the opportunity to do great things,” he said. “If you’re just dealing with dollar and cents, then you’re missing the idea of achieving great things in this country.”
He confirmed to CLI that ADM would not make a bid to compete in the 35th America’s Cup, set for 2017, due to the “angst that this lawsuit caused.” At any rate, Oracle Team USA – which defeated Emirates Team New Zealand in the 34th America’s Cup and thus has rule-making authority– already has announced the elimination of the Defender’s Series next time around for other U.S. teams to challenge its perch heading into the international arena.
Kithcart said he will determine following his team’s tours on the winter and summer circuits whether ADM’s supporters want to see the group vie for a spot in the 36th America’s Cup.
“The basic premise is that no matter what any settlement would be, we still want to be able to inspire our people to do well and to learn well and grow and we can’t do that in a position we are in,” he said. “We want to do what our mission is, and our hope is we can do it uninhibited.”