Thursday, March 06, 2008

Team New Zealand charges Alinghi with Breach of Contract & Anti-Trust violations

[Source: Emirates Team New Zealand] Emirates Team New Zealand (ETNZ), holders of the America’s Cub sailing trophy from 1995-2003, today filed lawsuits in New York Supreme Court and United States District Court charging current Cup defender Alinghi, the Swiss team owned by Italian businessman Ernesto Bertarelli, with deliberately delaying the next America’s Cup challenge to crush competition. The Kiwi sailors are seeking financial compensation from Alinghi, Bertarelli and Bertarelli-controlled AC Management for breaches of contract and trust, as well as violations of U.S. antitrust law.

In 2003 Alinghi defeated Team New Zealand at Auckland, the 32nd America’s Cup challenge since the underdog schooner America bested 15 British yachts off the Isle of Wight in 1851. The 33rd defense of the world’s oldest international sports trophy was to have been held at Valencia, Spain, in 2009, but a series of actions by Alinghi have made it more likely that boats will not be in the water again until 2011.

“The delay in staging the next America’s Cup is harming every challenging syndicate as they have to stretch budgets developed and approved for a two-year campaign over three or four years,” said ETNZ managing director Grant Dalton. “We have a duty to protect the investment in the team over many years by our loyal supporters. We also have an obligation to honor the trust shown by the hundreds of thousands of New Zealanders who have supported the team through the years.”

Boies Heads Legal Team

Heading the ETNZ legal team is attorney David Boies of New York-based Boies, Schiller & Flexner LLP. The legal actions are being taken in New York in compliance with the terms of the Deed of Gift, which in 1887 set forth the rules of the competition, stating, “This Cup is donated upon the conditions that it shall be preserved as a perpetual Challenge Cup for friendly competition between foreign countries.” The document has been amended twice by the New York Supreme Court in 1956 and 1985.
“ETNZ and other racing syndicates have made significant financial commitments based on the assurances and legal obligation of Mr. Bartarelli’s organization to defend the Cup in 2009,” said Boies. “He has violated both the spirit and letter of the Deed of Gift at every turn, and is holding this venerable competition hostage in an attempt to control the substantial financial benefits of the event and eliminate competition.”

New York State Supreme Court Action

The first action, filed in the Supreme Court of the State of New York, claims damages for breach of contract arising from an agreement made as a pre-condition of ETNZ’s entry to the 33rd America’s Cup. The agreement involved an understanding entered into by Ernesto Bertarelli on July 25, 2007, that the America’s Cup would go ahead in 2009.

“That assurance was a pre-condition of our entry,” Dalton said. “Then on November 22 last year, before the Supreme Court of New York had even issued judgment on a challenge by Golden Gate Yacht Club (representing the American team BMW Oracle, headed by Oracle founder Larry Ellison) to the validity of the Spanish challenge, Bertarelli’s AC Management announced that the Cup would be delayed.

“Mr. Bertarelli had the chance to accept a reasonable proposal from Oracle, which was also signed by the majority of the challengers, and which would have allowed the America’s Cup to be held in 2009, said Dalton. “He would not do so.”

The action also claims that Societie Nautique de Geneve, the “yacht club” Bertarelli set up as trustee of the Cup, through the actions of the other defendants has committed breaches of its fiduciary duties that trustees owe to maintain the standing and integrity of the Cup.

U.S. District Court Action

The second action has been filed in the Federal Court under United States anti-trust legislation.

ETNZ contends that Alinghi and the other defendants, abusing the power conferred to the defender under the Deed of Gift, has acted to stifle competition for the Cup and for the right that goes with it of conducting future events by accepting a paper yacht club of no substance - - CNEV - - as the challenger of record, thereby enabling it to impose rules for the next event that were completely one-sided and which were designed to give Alinghi an unfair competitive advantage.

ETNZ also contends that Alinghi’s subsequent conduct in refusing to agree to a reasonable settlement of the BMW Oracle case, the unilateral and indefinite delaying of the event from 2009 was all designed to and had the effect of increasing other teams’ costs, including those of ETNZ.

We Would Rather Be Racing

“We are heading to court reluctantly, but have no option,” said Dalton. “We would rather be racing.”

Dalton continued: “We have to ensure that when the next America’s Cup is held, Emirates Team New Zealand is still in very good shape and ready for the battle on the water. By the time AC Management announced that the 33rd America’s Cup would be delayed, we had put together a comprehensive program for 2008, with ETNZ members competing in a number of European regattas. And we had already done an enormous amount of work on the design of the new 90ft AC class boat. Design work is continuing, although with less urgency,” said Dalton.

“ETNZ is fortunate in having the full support of our sponsors, the New Zealand Government, and team members. However the delay does come at a price and it seems prudent for the team to seek financial compensation to cover additional campaign costs and damage to our brand name and reputation and to the event in which we compete, the standing of which affects our ability to raise funds."

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