Lawsuit alleges America's Cup organizers unfairly rejected African American sailing team and breached trustee duties by self-dealing
He's also dubious of the charge that GGYC breached its fiduciary duties as trustee by engaging in self-dealing, an argument that could have far greater consequences for Ellison in the long run. A similar dispute arose when the sailing tournament was held in New Zealand about a decade ago, he said, and the exact meaning of "trust" in the Deed of Gift has been debated before in similar arguments. "I don't think it's ever been resolved," he added.
The lawsuit argues that the cup is held in trust for the benefit of all competitors, and that GGYC violated its duties as a trustee when it set up a real-estate deal benefiting its own interests without sharing the wealth. Under the terms of the Host City Agreement, the America's Cup Event Authority (ACEA) has the potential to lock in leases and long-term development rights for up to nine piers along the city's waterfront for 66 years, with properties ranging from as far south as Pier 80 at Islais Creek to as far north as Pier 29, home of the popular dinner theater Teatro ZinZanni.
The Event Authority is a California LLC, whose agent for service of process is listed as ACEA board chairman Richard Worth of Lawrence Investments LLC — a technology and biotechnology private equity investment firm controlled by Ellison.
Under the protocol and in keeping with America's Cup tradition, competitors will share in any "net surplus revenue" earned by the America's Cup trust. However, this excludes the commercial and real estate rights granted to ACEA, the private entity controlled by Ellison, which is separate from the America's Cup trust.
"For the first time in America's Cup history, it appears that valuable rights generated by a trustee as a result of holding the America's Cup are being explicitly excluded from the Cup's net surplus revenue and ... being held elsewhere, to the detriment of the competitors," ADM's suit alleges.
Rousmaniere says this isn't the first time a legal argument invoking the Deed of Gift has found its way into court amid an America's Cup power struggle, and that the issue remains a point of debate. Part from the problem, he believes, stems from the fact that a 21st Century event is governed by a rather vague 18th century document.
"The defender really runs the thing," he said, referring to GGYC and by extension, the powerful Ellison. The question is, "How much authority is he going to give the challengers?"
"These people have a lot of lawyers working for them," Rousmaniere observed, referring to GGYC and Ellison's Team Oracle Racing, which are closely related. "People are taking a big risk here, and they want to be protected. The stakes are so high because there's so much money involved."
America's Cup spokesperson Stephanie Martin referred Guardian inquiries to Tom Ehman, Vice Commodore of GGYC, who communicated with Kithcart about ADM's application to compete. Ehman, who was taking a holiday in Spain, did not return an email request for comment and could not be reached by phone. However, a statement attributed to GGYC appeared on the blog Sailing Anarchy, which published a report about ADM's suit.
"GGYC was served today with a complaint filed in the Supreme Court, County of New York, alleging breach of fiduciary duty, among other baseless claims," the statement noted. "We believe the lawsuit is utterly without merit and that GGYC will prevail."
Kithcart, meanwhile, is keeping his eye on the prize. "We need to excite our youth and then stand back and get out of the way and see what they create," he said. "I'm betting they'll make a movie about this. I'm betting there'll be books about this. I'm betting this is history. We're going to be a story."