Apparel-maker Oakley has sued golfer Rory McIlroy and Nike, saying they breached the world's top-ranked golfer's existing contract with Oakley when he recently signed a new deal with Nike.
According to a lawsuit filed Monday in federal court in Santa Ana, Calif., Oakley tried to use its "right of first refusal" to match the Nike offer, but McIlroy and his agent, Conor Ridge, ignored the counteroffer, thereby breaching the Oakley-McIlroy contract.
Oakley claims in its lawsuit that its contractual rights for McIlroy's endorsements of its eyewear and performance apparel would be 30 percent of the Nike package. If the reports in European golf publications of a $200 million deal with Nike are accurate, then Oakley offered about $60 million to continue its deal with McIlroy. No one involved in the dispute will confirm the magnitude of the Nike offer, and it is described in the court papers only as an offer of "$_M."
According to Oakley, the damage that has resulted from McIlroy's refusal to renew with Oakley is "irreparable" and entitles Oakley to an injunction that would stop Nike and McIlroy from concluding or implementing their contract. Oakley is also claiming money damages but does not specify any amount and asserts that it has spent $300,000 on a photo shoot for the products McIlroy would have endorsed in 2013.
McIlroy's deal with Oakley includes what is known as a right of first refusal, a contract clause that allowed Oakley to match any offer that included payments to McIlroy for glasses and clothing. If Oakley wanted to match what Nike offered, its deal would continue into 2013 instead of expiring Dec. 31.
The key to any resolution of the dispute is in a string of emails between Oakley and Ridge that began in September. Late on Sept. 29, a Saturday, as negotiations for a renewal of the Oakley deal seemed to be falling apart, a sports marketing executive at Oakley named Pat McIlvain sent an email to Ridge that said: "Understood. We are out of the mix. No contract for 2013. Pat Mac."
The late-night "out of the mix" email is clearly the basis for Friday's statement from McIlroy's management company in Dublin to ESPN.com, asserting that "McIlroy has fulfilled all of his obligations to Oakley, and the claims in the lawsuit are entirely baseless."
McIlroy and Nike will assert in court that McIlvain's email was a waiver of Oakley's contractual rights to renew with McIlroy.
But McIlroy's team of agents and lawyers, after the supposed waiver, then continued to bargain with Oakley and gave it the dollar amounts that Oakley would be required to match. It was not until Oct. 23 that McIlroy's attorney finally told Oakley that the golfer "would not be continuing his relationship with Oakley beyond Dec. 31" and that they "would not engage in any further correspondence on the matter of the right of first refusal."
As McIlroy ascended to the world's top ranking, his endorsement deals began to expire, giving him a chance to put together the most lucrative package in the history of the sport.
With Titleist and Footjoy, McIlroy's previous sponsors, fading out of the picture, Nike entered with an offer for head-to-toe coverage that is reported to be worth more than $200 million. It was to include everything -- equipment, footwear, performance apparel, and what sports marketing folks like to call the "front of the hat."