African-American Cup syndicate wins appeal for breach of contract

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An appellate court ruling breathed new life into an African-American syndicate’s suit against the Golden Gate Yacht Club for denying its application to race against Oracle Team USA for the right to defend the America’s Cup this summer in San Francisco.

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Justice Roland Acosta, of the Appellate Division of the New York Supreme Court, said in his June 13 ruling that when African Diaspora Maritime, a Raleigh, N.C.-based sailing syndicate, filed its application with the Golden Gate Yacht Club and paid a $25,000 entry fee, African Diaspora and the club entered into a contract requiring the Golden Gate Yacht Club to “act in good faith” in reviewing the application.

“ADM alleges facts sufficient to raise the question whether GGYC acted in bad faith,” Acosta wrote. “Specifically, ADM alleges that GGYC attempted to sabotage its efforts to submit an application of defense by excluding it from the competitor forum, thereby preventing it from obtaining information critical to the application; GGYC initially sought to deny ADM’s application of defense on various technicalities, including that it was not signed and did not include a document evidencing payment of the $25,000 fee; GGYC falsely asserted that ADM had lied about its proposed team, claiming that [David] Pedrick, ADM’s yacht designer, had denied being a member of ADM’s team; and GGYC falsely claimed that it rejected ADM’s application of defense because it was not satisfied that ADM [would] ‘have the necessary resources’ to compete, even though America’s Cup teams do not obtain funding until after their applications are accepted.”

The lower court — the New York Supreme Court — which dismissed African Diaspora’s complaint in January, ruled there was no breach of contract because there could be no contract between the Golden Gate Yacht Club and African Diaspora until the yacht club approved the application and accepted African Diaspora as a defender candidate. And even if there was a contract, the Cup protocol — the regatta rules adopted by the Golden Gate Yacht Club and the challenger of record — “expressly affords GGYC unfettered discretion to decide if an applicant meets the qualifications to compete.”

The Golden Gate Yacht Club was bound to accept only applicants “it is satisfied 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,” the protocol reads.

In its rejection letter dated April 15, 2011, the Golden Gate Yacht Club told African Diaspora that it was not satisfied that African Diaspora had the resources or experience to do that, according to African Diaspora’s complaint. African Diaspora denied the assessment, saying its team includes three Olympic and one All-American sailor; additional “talented, experienced and award-winning sailors”; Pedrick, an experienced America’s Cup yacht designer; and some wealthy backers.

African Diaspora Maritime, led by Charles M. Kithcart, an African-American yachtsman and professional mariner, was conceived not only as a Cup syndicate but also as a vehicle for “motivating, inspiring and teaching” youth math and science through the sport of sailing, publicizing the history of black mariners, and connecting people of African descent worldwide. Kithcart said African Diaspora had worked out a plan with the North Carolina departments of commerce and tourism to build a boat park in Raleigh to pique media interest and had recruited wealthy African-Americans to support the campaign.

“We’re creating a new template for the America’s Cup of cooperation along cultural, economic, racial and social lines on our team,” said Kithcart. “That’s the strength of this country — diversity.” He says African Diaspora’s campaign also can help move the marine industry toward greater diversity.

Justice Acosta, while upholding the lower court’s dismissal of two other counts — breach of trust and breach of fiduciary duty by self-dealing — said there was an enforceable contract between the Golden Gate Yacht Club and African Diaspora and enough grist for the lower court to consider whether the Golden Gate Yacht Club had acted in bad faith in reviewing African Diaspora’s application.

“Essentially the court ruled that the one remaining claim — breach of contract — presents factual issues that cannot be decided on a motion to dismiss,” Golden Gate Yacht Club vice commodore Tom Ehman said. “GGYC looks forward to proving, in the appropriate forum at the appropriate time, that it acted in good faith and that ADM’s claims are meritless.”

Acosta seemed to be in African Diapora’s corner, arguing for giving the “little guy” a chance to race against billionaire Larry Ellison’s mighty Cup machine. “In the end, this is a sporting competition, and the winner should be decided in the open waters rather than in a courtroom,” he wrote. “After all, it is not a competition if the defender wins by default.”

— Jim Flannery

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