The ever-diligent AC Anarchists have once againbroken a big AC story, this time of a lawsuit filed on Monday in New York against Golden Gate Yacht Club by a strange little North Carolina Nonprofit called the Africa Diaspora Maritime Corporation. The suit alleges that GGYC prevented ADMC from entering the AC World Series on an arbitrary and capricious basis by citing a sham excuse for their rejection, and seeks in excess of one million dollars in damages for this count. The complaint also alleges GGYC breached its fiduciary duties as Trustee of the America’s Cup by that rejection, and asks the court to compel GGYC to accept ADMC’s entry, reschedule the ACWS and the America’s Cup, and jump through a bunch of other hoops to allow them to compete.
GGYC addressed the suit in a statement we received a few minute ago. “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. We believe the lawsuit is utterly without merit and that GGYC will prevail.”
We spoke with Charles Kithcart, the head of the Diaspora organization, back in April when he was fighting to enter the AC. He had a clever and ambitious plan to bring an African-American team into the pearly-white AC air, and while he had no money to speak of, he claimed to have numerous black sailors and philanthropists interested in becoming part of the effort if they became a bona fide Challenger, and Kithcart claimed he had substantial government support for a North Carolina-based Challenge. Back then, Kithcart believed he was being screwed, while GGYC representatives claimed to have done everything possible to help the Diaspora enter the AC. Whether his claims are baseless or not, we’ve got to hand it to the guy for fighting the good fight and having a good goal. Like it or not, in these days of the 99%, there’ll be an awful lot of interest in a storyline that includes something like “billionaire bans African-American yacht racing team from America’s Cup.
But after poring over the suit, and the notes from our investigation back in April, we’re struggling to see how Kithcart can actually get a court to compel GGYC to accept his entry – and Ellison isn’t really the kind of guy to pay someone off just to make them go away, even if it is in his own best PR interest.
But that’s not all Kithcart’s going for, and the case might not be such a loser after all. The dude is pissed, and he wants the Court to go as far as giveing GGYC the flick as Trustee – and he might have just found a way to do it.
Starting on page 20, the Complaint devotes quite a bit of time to an issue that never quite sat well with us: SF real estate. Kithcart rightly points out how the Protocol goes to great lengths to explain exactly how teams will share in the revenue produced by the Cup, yet the reality on the ground is that the biggest chunk of revenue to flow to the interconnected web of companies running Ellison’s Cup comes not from TV or sponsor or intellectual property deals – it comes from long term waterfront real estate leases and property transfers from SF to the Bank of Larry. And of course, those deals are specifically excluded from any revenue sharing with any of the beneficiaries of the Trust, even though representatives of the Trustee negotiated them.
We think a court could reasonably conclude that the real estate deals are ‘self-dealing’ by GGYC, which would be clearly impermissible under New York law as a violation of a Trustee’s duties. The deals are public knowledge, and GGYC will have to somehow argue that they don’t represent the kind of behavior that NY law prohibits from Trustees. As the complaint points out:
“GGYC is strictly forbidden from using its possession of the Cup…to stage AC34 in a manner that directly benefits itself, or any of its members…or any third party…Such transactions are void ab initio [‘void from the start’ – ed]…and any gain must be accounted for and turned over to the trust.”
There’s plenty more to this story, and of course the place to watch it all unfold is AC Anarchy. Did someone complain that the five-month hiatus from racing would be boring? Not a chance.
Photo of Charles Kithcart is from his time aboard the White Holly.