GGYC = Challenger of Record

The New York State Court of Appeals, in the case between Golden Gate Yacht Club (GGYC) and Societe Nautique De Geneve (SNG), regarding the validity of Club Nautico Espanol De Vela (CNEV) as the Challenger of Record, has found in favor of GGYC, reversing the Appellate Division and reinstating Justice Cahn’s orders. In its unanimous opinion, the Court held,

“Since CNEV has failed to show that at the time it submitted its Notice of Challenge it was a ‘[c]lub fulfilling all the conditions required by’ the Deed of Gift, it does not qualify as the Challenger of Record for the 33rd America’s Cup competition and Supreme Court was correct in declaring GGYC to be the valid Challenger of Record. It has been posited that the right to act as trustee of the America’s Cup should be decided on the water and not in a courtroom. We wholeheartedly agree. It falls now to SNG and GGYC to work together to maintain this noble sailing tradition as ‘a perpetual Challenge Cup for friendly competition between foreign countries.’”

THE COURT DECISION IN FULL

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This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 25
Golden Gate Yacht Club,
Appellant,
v.
Societe Nautique De Geneve,
Respondent,
Club Nautico Espanol De Vela,
Intervenor-Respondent.
Maureen E. Mahoney, for appellant.
Barry R. Ostrager, for respondent.
David W. Rivkin, for intervenor-respondent.
New York Yacht Club; The San Diego Yacht Club Sailing
Foundation et al.; William I. Koch; Team French Spirit et al.;
Deutscher Challenger Yacht Club et al.; Reale Yacht Club
Canottieri; Savoia et al.; City of Valencia, Spain, amici curiae.
CIPARICK, J.:
This appeal involves the preeminent international
sailing regatta and match race, the America’s Cup. We had
occasion once before to examine the charitable trust that governs
the competition. In Mercury Bay Boating Club v San Diego Yacht
Club (76 NY2d 256 [1990]), we strictly construed the provisions
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of the trust instrument, the Deed of Gift, to allow multihulled
vessels to compete in the America’s Cup race. Today, we are
called upon to reexamine the Deed of Gift to determine the
eligibility criteria for a Challenger of Record — specifically
whether the phrase “having for its annual regatta” requires a
yacht club to hold an annual regatta on the sea prior to issuing
its challenge (Deed of Gift, October 24, 1887, ¶ 4). We conclude
that it does.
The story of the America’s Cup begins on August 22,
1851, after the schooner yacht, America, entered a race against
British sailing vessels around the Isle of Wight, winning a large
silver cup. In honor of the winning boat, the trophy was
christened the “America’s Cup,” which became the corpus of a
charitable trust created under the laws of New York and donated
pursuant to a Deed of Gift to the New York Yacht Club in 1857.
The Deed of Gift establishes the rules governing the America’s
Cup and provides that the holder of the Cup becomes its sole
trustee and is succeeded only by a successful challenger in a
race at sea. The original Deed of Gift required only that the
challenger be an “organized” yacht club.
During the first 30 years after its inception, problems
arose with the administration of the competition. As a result,
the America’s Cup was twice returned to George L. Schuyler, the
sole-surviving donor, after two disappointing America’s Cup races
were sailed by Canadian Great Lake yacht clubs under the command
– 3 – No. 25
1
Winfield M. Thompson and Thomas W. Lawson, The Lawson
History of the America’s Cup: Record of Fifty Years, at 78
[Ashford Press Publishing, Southampton 1986] (internal quotations
omitted).
2
Id. at 88.
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of Captain Alexander Cuthbert. Neither of the challenging
vessels could withstand the rigors of open sea competition. The
Countess of Dufferin, the first challenging vessel, was described
as having “fresh water written all over her. . . [h]er hull
lacked finish, being as rough as a nutmeg grater. . . and had
little of the shipshape appearance expected of a cup
challenger.”1 The Atalanta, the second challenging vessel, was
also denounced by critics as being “a new yacht, hastily built,
totally untried, and miserably equipped. . .”2 To deal with this
“unseaworthiness” issue, Schuyler amended the Deed of Gift with
the intent of precluding Great Lakes yacht clubs from competing
and reconveyed the America’s Cup to the New York Yacht Club to
hold in trust. In addition to requiring that a challenger be an
“organized” yacht club, the amended Deed of Gift, dated October
24, 1887, added new eligibility requirements that a challenger
must meet, including that it be “incorporated, patented or
licensed by the Legislature, admiralty or other executive
department, having for its annual regatta an ocean water course.
. .” (Deed of Gift, October 24, 1887, ¶ 4). The Deed further
provides that the Cup “shall be preserved as a perpetual
Challenge Cup for friendly competition between foreign
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3
The Deed has been amended twice by orders of the Supreme
Court, New York County, dated December 17, 1956 and April 5,
1985.
4
SNG is a yacht club organized under the laws of
Switzerland.
5
CNEV is a Spanish yacht club formed by the members of
the Real Federación Española de Vela (RFEV), a Spanish sailing
federation in June, 2007.
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countries.”3
The Cup has been defended 32 times and it is the events
that occurred after the conclusion of the 32nd America’s Cup held
on July 3, 2007, in Valencia, Spain, which give rise to this
appeal. Société Nautique de Genève (SNG),4 won the Cup on March
2, 2003, in the 31st America’s Cup match and successfully
defended its right to continue as trustee of the America’s Cup in
the July 3, 2007 race. Club Náutico Español de Vela (CNEV),5 on
that very same day, submitted a Notice of Challenge to SNG for
the 33rd America’s Cup, which was accepted.
The Deed of Gift provides that once a Defender accepts
a challenge, the two yacht clubs may negotiate and set the
conditions of the next America’s Cup competition through their
mutual consent. Although not named as such by the Deed of Gift,
the sailing community refers to the resulting agreement as the
“protocol” and the challenging yacht club with the right to
negotiate the protocol is called the Challenger of Record. Since
1970, other yacht clubs that wish to compete in the America’s Cup
have been allowed to participate in the race when the Defender
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6
GGYC is a yacht club incorporated in the State of
California.
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and the Challenger of Record agree to such an arrangement and
provide in their protocol for such participation. Traditionally,
challengers that are allowed to participate based upon the mutual
agreement of the Defender and the Challenger of Record pursuant
to their resulting protocol, are known as Mutual Consent
Challengers. However, should the Defender and the Challenger of
Record fail to reach an agreement as to the terms under which
they will race, the Deed of Gift contains a default match
provision for a one-on-one race between the Defender and the
Challenger of Record.
On July 5, 2007, SNG as the Defender and CNEV as
Challenger of Record, published a protocol for the 33rd America’s
Cup setting forth the conditions of the competition that includes
an arbitration provision to resolve disputes. On July 11, 2007,
plaintiff Golden Gate Yacht Club (GGYC),6 disputing the validity
of CNEV’s challenge, primarily on the basis that CNEV was not a
bona fide yacht club — formed only a few days before submitting
its challenge — and had never held an annual regatta, presented
its own Notice of Challenge. SNG rejected GGYC’s challenge on
the basis that CNEV’s challenge was first in time and since
CNEV’s challenge had already been accepted, no other challenge
could be considered until after CNEV’s challenge had been
decided.
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7
CNEV was allowed to intervene in this action.
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On July 20, 2007, SNG, seeking to resolve the validity
of CNEV’s challenge, initiated an arbitration proceeding pursuant
to the dispute resolution mechanism provided for in the 33rd
protocol. The 33rd America’s Cup Arbitration Panel invited GGYC
to participate in the arbitration. GGYC rejected the invitation
and commenced this present litigation because it could
participate in the arbitration, only by agreeing to the protocol,
thereby exposing itself to possible disqualification at SNG’s
sole discretion. The Arbitration Panel ultimately found that the
Deed of Gift does not require a challenging club to have held an
annual regatta prior to issuing its Notice of Challenge and
therefore CNEV’s Notice of Challenge was valid. All parties
concede that the arbitration decision is not binding upon us.
In the present action, GGYC alleges that SNG breached
the Deed of Gift and its fiduciary duty as trustee by accepting
CNEV’s challenge because CNEV failed to comply with the
challenger eligibility criteria set forth in the Deed of Gift
since CNEV was not an organized yacht club and had never
conducted an annual regatta.7 Both sides moved for summary
judgment. Although Supreme Court dismissed GGYC’s breach of
fiduciary duty claim, it declared that the Notice of Challenge
issued by CNEV was indeed invalid because CNEV failed to meet the
Deed of Gift’s eligibility requirements as it had not held an
annual regatta on an ocean water course prior to submitting its
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Notice of Challenge to SNG. Supreme Court, strictly interpreting
the Deed of Gift, declared GGYC to be the Challenger of Record.
A divided Appellate Division reversed, holding the language of
the Deed to be ambiguous and declaring the Notice of Challenge
issued by CNEV valid, and CNEV the rightful Challenger of Record.
GGYC appealed pursuant to CPLR 5601(a) dissent grounds and we now
reverse.
In Mercury Bay, where we resolved a dispute regarding a
type of vessel that arose relating to the 27th America’s Cup
match, we stated that the
“[l]ong-settled rules of construction
preclude an attempt to divine a settlor’s
intention by looking first to extrinsic
evidence. Rather, the trust instrument is
to be construed as written and the
settlor’s intention determined solely from
the unambiguous language of the instrument
itself. It is only where the court
determines the words of the trust
instrument to be ambiguous that it may
properly resort to extrinsic evidence”
(id. 76 NY2d at 267).
The relevant provisions of the Deed of Gift, to be
construed here at paragraph 4 provide that:
“[a]ny organized Yacht Club of a foreign
country, incorporated, patented, or
licensed by the legislature, admiralty, or
other executive department, having for its
annual regatta an ocean water course on
the sea, or on an arm of the sea, or one
which combines both, shall always be
entitled to the right of sailing a match
for this Cup.”
The Deed, in paragraph 10, further provides that:
“when a challenge from a Club fulfilling
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8
Supreme Court did not decide the question of whether CNEV
was “organized” under the Deed and it is not necessary for us to
reach this issue to resolve this appeal.
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all the conditions required by this
instrument has been received, no other
challenge can be considered until the
pending event has been decided.”
Finally, paragraph 11 of the Deed states that the trustee:
“hereby covenants and agrees . . . that it
will faithfully and will fully see that
the foregoing conditions are fully
observed and complied with by any
contestant. . .”
Thus, to comply with the eligibility requirements as
outlined by the Deed, a challenger must be (1) an organized yacht
club, (2) foreign, in that it is not of the same country as the
trustee yacht club, (3) incorporated in its local jurisdiction or
officially recognized either through a license or patent from its
government, (4) and “having for its annual regatta an ocean water
course on the sea or an arm of the sea or one which combines
both.” It is the last requirement that divided the court below8
in light of the fact that CNEV had not held an annual regatta on
the sea prior to submitting its Notice of Challenge. It is
undisputed that the defender has the obligation to address a
challenge only when the challenger is a “club fulfilling all the
conditions required” (Deed of Gift, October 24, 1887, ¶ 10).
When such a challenge occurs, all other challenges are
foreclosed.
As we stated in W.W.W. Assoc. v Giancontieri (77 NY2d
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157, 162 [1990]), “[e]vidence outside the four corners of the
document as to what was really intended but unstated or misstated
is generally inadmissible to add to or vary the writing.” The
Appellate Division majority deemed the phrase, “having for its
annual regatta,” ambiguous and therefore found it appropriate to
glean the settlor’s intention as to the meaning and purpose of
this phrase by looking to extrinsic evidence. We disagree and
find the phrase to be unambiguous. As we did in Mercury Bay, we
must first examine the plain language of the Deed of Gift and
determine, as a matter of law, whether the language can be
construed as written and the settlor’s intention determined
solely from the unambiguous language of the instrument itself.
In looking at the plain language of the Deed of Gift
itself, as we must, we first note that the annual regatta
requirement is only one of a list of eligibility requirements set
forth in the Deed of Gift. The settlor clearly placed the
requirements of “organized” and “incorporated, patented, or
licensed” in the past and intended that a challenger would
continue to meet these eligibility requirements in the present
and future. For example, the term “incorporated” refers both to
a past event of incorporation and to a continuing status. We
believe that the settlor intended the same to be true for the
“annual” regatta requirement. By using the word “annual,” the
settlor suggested an event that has already occurred at least
once and will occur regularly in the future. Taken as a whole,
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9
The fact that CNEV has since held two ocean course
regattas, one in November, 2007 and a second in November, 2008 is
of no moment since none had been held in July, 2007 prior to CNEV
submitting its Notice of Challenge to SNG.
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we conclude that the settlor intended to link the annual regatta
requirement to the other eligibility requirements in that the
challenging yacht club has in the past and will continue in the
future “having” an annual regatta on the sea. Any other
interpretation would render the annual regatta requirement a
nullity.9
The settlor clearly intended that for a challenging
yacht club to be within the eligibility requirements, it must
have held at least one qualifying annual regatta before it
submits its Notice of Challenge to a Defender and demonstrate
that it will continue to have qualifying annual regattas on an
ongoing basis. Thus, SNG is wrong in its claim that the regatta
requirement can be satisfied by race time rather than at the time
of challenge. We conclude there is no ambiguity as to the annual
regatta clause at issue. When read in the context of the entire
Deed of Gift, the challenger must demonstrate that its Notice of
Challenge “fulfill[s] all the conditions required” (Deed of Gift,
October 24, 1887, ¶ 10) at the time it submits its challenge.
SNG and CNEV assert that the existing practice among
Defenders and Challengers of Record to allow Mutual Consent
Challengers to participate in the America’s Cup, even without
having held an open sea course regatta is evidence that the
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settlor intended that a challenging yacht club is not required to
have held a regatta on the open sea prior to issuing its Notice
of Challenge. This assertion has no merit because the plain
language of the Deed of Gift itself forecloses such an illogical
conclusion. Even if the language of the Deed of Gift were
ambiguous, evidence of these practices would not qualify as
extrinsic evidence of the settlor’s intent in 1887 as these
practices emerged much later. Thus, the decision of the Defender
and the Challenger of Record to waive the eligibility
requirements for yacht clubs seeking to participate as Mutual
Consent Challengers has no bearing on whether a yacht club
seeking to establish itself as the Challenger of Record must meet
the requirements imposed by the Deed of Gift itself.
Since CNEV has failed to show that at the time it
submitted its Notice of Challenge it was a “[c]lub fulfilling all
the conditions required by” the Deed of Gift, it does not qualify
as the Challenger of Record for the 33rd America’s Cup
competition and Supreme Court was correct in declaring GGYC to be
the valid Challenger of Record.
It has been posited that the right to act as trustee of
the America’s Cup should be decided on the water and not in a
courtroom. We wholeheartedly agree. It falls now to SNG and
GGYC to work together to maintain this noble sailing tradition as
“a perpetual Challenge Cup for friendly competition between
foreign countries” (Deed of Gift, October 24, 1887, ¶ 3).
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Accordingly, the order of the Appellate Division should
be reversed, with costs, and the orders of Supreme Court
reinstated.
* * * * * * * * * * * * * * * * *
Order reversed, with costs, and orders of Supreme Court, New York
County, reinstated. Opinion by Judge Ciparick. Judges Graffeo,
Read, Smith, Pigott and Jones concur. Chief Judge Lippman took
no part.

Decided April 2, 2009