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Breaking down Oakley’s lawsuit against Nike
Eye-wear giant, Oakley, filed suit in Federal Court in California on December 10, 2012, against Rory McIlroy for breach of contract. The suit alleges McIlroy breached the terms of his contract with Oakley by refusing to accept Oakley’s offer to match the clothing and eye-wear portion of McIlroy’s Nike contract. Oakley claims the terms of their contract with McIlroy allowed them the right to match any deal McIlroy may sign with another company.
In court papers, Oakley estimates the value of the eye-wear and clothing portion of McIlroy’s new deal with Nike at 30 percent of the total contract. The actual amount is left blank in the suit, but, assuming Nike is paying McIlroy $200 million dollars, Oakley would have offered somewhere between $60 to $70 million to retain his services.
Oakley is further alleging they are irreparably harmed by McIlroy’s refusal to renew his contract with Oakley, and an injunction should be issued against McIlroy and Nike from contracting. The argument is that monetary damages cannot make Oakley whole for McIlroy’s breach of contract. Oakley will likely cite to the “intrinsic” value of having the No. 1 player in the world sporting their gear, and there is no way to quantify the amount that is worth. If the injunction is successful, McIlroy would not be allowed to wear Nike gear or eyewear until the lawsuit is decided.
The issue will likely come down to a number of emails between Oakley and McIlroy’s representatives. In September of 2012, an Oakley representative emailed McIlory’s agent, saying, “We are out of the mix, no contract for 2013.” McIlroy’s attorneys will argue Oakley waived their right of first refusal by saying they were out of the picture allowing McIlroy to sign with whomever he wanted. Oakley is pointing to emails from October of 2012 from McIlroy’s attorneys stating, “[McIlroy] would not be continuing his relationship with Oakley beyond Dec. 31″ and they “would not engage in any further correspondence on the matter of the right of first refusal.”
Even if Oakley’s lawsuit is successful, it is highly unlikely we will see Rory sporting Oakley gear again. Contract law is pretty clear; only in rare circumstances will a court order a person or company to specially perform under the terms of a contract. McIlroy may coff up some of his Nike money, but that means little. However, that doesn’t mean Oakley won’t attempt to argue this is one of those rare circumstances where a person of Rory’s value should be bound to perform under the terms of his contract.
But it hasn’t been all bad news for Oakley. The “O” has already taken steps to mitigate the loss of McIlroy by signing Zack Johnson and Bubba Watson for the 2013 season. Johnson, who already wore Oakley sunglasses, will now sport Oakley’s golf apparel line as well.
Oakley’s largest golfing market is America, and Bubba is more marketable to the average American than McIlroy will ever be. He has a goofy personality, is prolific on Twitter, doesn’t mind a good cry and hits the ball ridiculously long. Plus, one would have to assume that Bubba and Zach Johnson signed for much less combined than the $60 to $70 million Oakley offered McIlroy. By the end of the year, we may be calling Bubba and Johnson a better signing for the money than McIlroy.
*Seth Kerr is a practicing attorney in the areas of contract law and business litigation and has personally handled injunction related legal issues in both state and federal court. This story will be updated as more information becomes available.