Troubled Waters: Athletes and Sponsors
In a recent filing in California Superior Court, Julian Wilson has filed a suit against his long-time sponsor, Hurley and their now parent company Bluestar for breach of contract. The suit stems from what Wilson is claiming as a breach, where Wilson claims Hurley is not paying on the contract thus far in 2020. In his filing Wilson claims that Hurley in conversations is claiming they are not required to pay on the 2020 contract because of a few things, all related to Covid-19. The virus that keeps on giving, has indeed now landed in the CA court system with the first (that we know of) lawsuit for an action sports athlete.
Wilson was one of the very few Hurley athletes to make the transition from Nike to Bluestar. Some were cut out-right, some were negotiated down in a contract modification, and others just peeled their stickers off and started something new. All of this very recent history is going to make trouble for Hurley in the near future. There are three, maybe four, areas that will be pivotal for this case, and for any other suits filed due to similar issues with athletes. Below we will take a look at the areas of concern, and how this case might shed some light on other athletes in the same position.
The first area to talk about, which we touched on previously within the context of leases, is our old friend Force Majeure. As we know these clauses are fairly common in a lease, but they are not all that common in athlete sponsorships. Sure we have clauses about injury, but that is not force majeure. And, as we know from previous discussions, courts generally strictly construe these clauses. Meaning if the thing you are claiming under force majeure is not included in the contract, typically the court will not enforce the clause. Therefore an attempt to now use Covid-19 to get out of the contract by either party will likely fail under this theory. That was the old view, it is unlikely courts will bend the existing case law too far from the previous judgments, so it is unlikely Hurley or any other sponsor looking to avoid a contractual duty with an athlete will be able to lean on force majeure. It is unclear if Wilson has such a clause, but it is not too difficult to imagine there was no contemplation of a global pandemic listed in the clause if it does exist.
Next and more probable will the theory of anticipatory repudiation. This theory allows a party to not perform their duty under the contract based on the other parties actions. Under this theory one party makes a clear, unambiguous statement that they will not or cannot perform. At that point the party given such notice typically is required to ask for assurances of performance. If none are given that the other party will actually perform, the non-breaching party can then be off the hook for their performance. With the case of Hurley it is being claimed they are not required to pay Wilson because he isn’t surfing in any competitions right now. What is not known is if Wilson has told them he won’t compete in competitions. Considering he surfed in QS events at the start of the year, and is scheduled to compete in the upcoming Australian events this month, it is unlikely Hurley will be able to argue that Wilson made them aware he would not compete. Additionally for most action sports athletes their contracts are structured in such a way that competition is only one part of the contractual duties. So any argument made by Hurley will have to be that Wilson repudiated the entire contract, not just the competition part. That argument likely won’t be too persuasive as Wilson continues to post to his social media, and generally promote the brand throughout the last 6 months. Furthermore Wilson is scheduled to surf in competitions this month and as the WCT kicks off in December at Pipeline. It would be a tough argument to make by Hurley that they were put on notice that Wilson would not be competing this year.
The next issue will be that Hurley had a lot of sponsored athletes across multiple sports. If Hurley (or any brand) has been or plans to undermine athlete contracts further by claiming repudiation, or if they have stopped paying on those contracts already, there is a risk of multiple lawsuits by athletes. Whenever you have multiple people wanting to sue one brand, there is the possibility of joining. Everyone is familiar with class action suits, but it is pretty unlikely a court would certify a class against Hurley in this particular case, as many of the athletes will not have the same exact claim, nor would there be enough to satisfy the numerosity part of a class action suit. So the other option is joinder. That is also unlikely as any athlete wanting to sue on a contract case will have their own contract, which will be different from anyone else and as such unlikely a court would allow joinder of any current Hurley athletes to Wilson’s case. So, and not saying this is what is happening, if another Hurley athlete was also not being paid, and for similar reasons, they would also have to file their own suit. The rules for joinder would likely preclude the parties from joining forces against Hurley.
Lastly, if by some stretch of legal argument Hurley is going to try and claim a possible change in their contract with Wilson there are a number of requirements for a modification to a contract. Simple oral agreements will not be taken into consideration by the courts. Any modifications must be in writing, and if there is no writing to modify the contract, Hurley won’t have much of a legal leg to stand on.
This is a weird time we are all having to navigate. It is likely more legal issues will continue to evolve over the coming months, and into 2021 with athletes and brands. With uncertainty as to when a vaccine will be available, how effective it will be, and what the worldwide demand and delivery will be, it is likely this is just the first of many athlete contract issues the action sports industry will face. Be prepared by talking to your attorney, whether you are an athlete or a sponsor, you need to know what your contractual duty is, and if you will be able or required to fulfill it.
By Travis Wilkerson
Travis served many years in the action sports industry working with different brands and most notably as Membership Director or SIMA before graduating from Whittier Law School. He now works at the Wilkerson Law Firm in Anaheim with his father/partner Jack Wilkerson.