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Moving Day: Oakley’s Lawsuit Against McIlroy Highlights Challenges of Rights of First Refusal

At the start of 2011, the sunglasses maker Oakley signed a two-year endorsement deal with Rory McIlroy. The contract included a right of first refusal, which afforded Oakley the opportunity to retain McIlroy as an Oakley endorser beyond 2012 by matching any offer covering the same product categories that McIlroy might receive for the period after the expiration of the Oakley deal.

At the time that Oakley embarked on its relationship with McIlroy, he was a somewhat unproven commodity, both as a golfer and as a brand endorser. Fast forward to late 2012. McIlroy had risen to the top of the world golf rankings and had won two major championships and consecutive golfer-of-the-year awards. With the term of McIlroy’s agreements with Oakley and with his other longtime sponsors scheduled to expire, Nike entered into a lucrative, multiyear, “head-to-toe” endorsement agreement with McIlroy.

This article examines the lawsuit that Oakley filed against McIlroy and Nike in December alleging that the golfer violated the right of first refusal provision in his contract with Oakley by purportedly refusing to honor Oakley’s right to match Nike’s offer, illuminating some of the thorny issues inherent in crafting and later enforcing right-of-first-refusal provisions in athlete and celebrity endorsement deals.

This article was first published in the January 25, 2013 issue of Sports Litigation Alert, Volume 10, Issue 1.

Sunny Brenner is a partner at Loeb & Loeb LLP, based in Los Angeles. His diverse litigation practice focuses primarily on entertainment, sports and media-related matters, intellectual property and commercial disputes.