Rory McIlroy has announced a break from golf following failed mediation talks in Dublin this week, relating to his dispute with former management company, Horizon Sports. A company he was with for two years before leaving in May 2013 to start his own management company.
In the current lawsuit, McIlroy clams Horizon took advantage of his youth and lack of legal advice in his first agreement, according to Forbes last year when McIlroy first sued Horizon.
In published comments the agreed upon commissions entitled Horizon Sports Management to a rich 20% fee on all off-the-course income received by McIlroy.
The golfer claims that the commissions were excessive and resulted in an unconscionable contract, as an athlete of McIlroy’s stature should not have to pay more than 7% of earnings from endorsement deals. McIlroy also alleges that he was young, naive and failed to have the support of legal counsel when he executed the agreement containing such a compensation structure. Albeit he had already experienced a number of years with a previous management company, International Sports management based in the UK.
Horizon is countering by suing for a reported $3 million for a breach of contract.
In order to prepare for the court date McIlroy is opting out of the European Tour's BMW Masters at the end of October and the PGA Tour's WGC-HSBC Champions the second week of November. The world number is however expected to return for the DP World Tour Championship in Dubai, the final event of the European Tour's 'Race to Dubai.'
No doubt these changes are bad news to the tournament sponsors.
There remains a possibility McIlroy's early 2015 tournament schedule could be affected with the Abu Dhabi HSBC Golf Championship and the Omega Dubai Desert Classic set for January. On the PGA Tour McIlroy can start as he did last season at the Honda Classic, which is convenient to his home in Florida. This year, the Honda Classic begins on February 26, and less than two months before McIlroy will attempt to win his first Masters. So the timing of the case is not ideal
Conor Ridge of Horizon Sports Management was McIlroy’s agent when he signed the sizeable 9 figure endorsement deal with Nike. Albeit one that also resulted in a lawsuit filed by Oakley based on a breach of contract claim.
Oakley’s position was the McIlroy ignored the company’s right of first refusal to match any offers that McIlroy received from a competitor of Oakley, and Oakley deemed Nike to fit the classification. The matter was ultimately settled with Oakley in November 2013.
The real issue perhaps, as identified by Forbes magazine in 2013, is that agents are entitled to commissions on all deals negotiated while they served in a representative capacity. The fact that the agent who negotiated a contract is no longer the athlete’s official representative while the term of the agreement continues has no legal effect on the agent’s right to commissions under the terms of the terminated representation agreement.
Which raises the potential entitlement due to Horizon for the balance of the years on the Nike agreement for example – if as yet unpaid.
The possibility of a 20% commission on the $25Million a year Nike deal might still carry an 8 or 9 year liability from McIlroy is a considerable chunk of change in anyone's language. And one which would explain why mediation has broken down and that may not be as open and shut case as is being reported. Or just about a US$3m counter claim
At the time the case was first made public, The Daily Telegraph reported the contract was presented to him on December 21st, 2011 in a solicitor’s office on the day of the Horizon Christmas party “in circumstances of great informality”. Since that moment things have gained a lot more formality and even the on course earnings have increased to unimaginable bake levels following the McIlroy's two major wins this season.
However as things stand the Dublin courts are destined to hear more about McIlroy’s finances next February. Which could prove unsavoury for the sports star keen on his privacy. If the assumption of the remaining commission is incorrect then it is hard to understand why paying the counter claim of US$3m would not be the most expedient solution. Given that two appearances in Asia could easily cover that for McIlroy.
Therefore there must be more than meets the eye on this one.
The onoy certainty for Horizon Sports is that losses will only further increase as Graeme McDowell is set to leave the company at the end of the year to work under his own management organisation. Which will leave Shane Lowry as the major Irish player under Horizon’s watch, along with 2010 Irish Open winner, Ross Fisher. A dramatic turn of events for an Irish company that shot to the fore in 2010 when McDowell ended the 40 year old barren run by Europeans, by winning the US Open.
These days that historic day on the eighteenth green at Pebble Beach must seem but a distant memory for all concerned these days.
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