Nike has taken to federal court in an attempt to prevent American runner, Boris Berian, from wearing New Balance or any other competing brand during the upcoming Olympic Games in Rio, in which Berian is expected to compete, and any other public events. The sportswear giant filed suit in the U.S. District Court for the District of Oregon, a federal court in Portland, last week seeking a temporary restraining order and further injunctive relief to prevent Berian from breaching what Nike claims is an existing contract between the two parties.
According to Nike’s complaint, “Although Defendant [Berian] is currently under an exclusive endorsement contract with Nike, he has chosen to compete in the footwear and apparel of one of Nike’s competitors. Because Nike will suffer irreparable harm if Defendant is allowed to continue such conduct in high-profile events like the Olympic Trials and Olympic Games, Nike seeks injunctive relief precluding Defendant from continuing to violate his contractual obligations pending resolution of this matter.”
In particular, Nike alleges that Berian has taken to wearing New Balance gear as of late and has “refused to acknowledge that Nike renewed its contractual agreement with him when it agreed to match an offer that Defendant presented Nike in January 2016 from New Balance.” The sportswear giant further claims that it exercised "a right of first refusal provision” in Berian’s original endorsement contract, thereby renewing its deal with the runner. Per Nike, however, "Defendant has refused to acknowledge that Nike renewed its contractual agreement with him when it agreed to match an offer that Defendant presented Nike in January 2016 from New Balance."
For the uninitiated, the “right of first refusal” is a common clause in endorsement contracts between athletes and sponsors (among other parties). It typically allows the sponsor to match a third party’s offer to keep the athlete on its roster. Such clauses are particularly important for sponsoring brands, as they tend to invest significant time and resources in athletes, and as a result, they tend to insist upon a first refusal right to protect their exclusive relationship with the athlete and retain the ability to keep him from joining the ranks of a competitor.
One of the key issues at hand is whether Nike actually agreed to meet New Balance’s offer in its entirety. According to additional court filings, one significant difference between the terms offered by New Balance and the proposed Nike renewal contract centers on reduction clauses. The offer that New Balance presented to Berian in January consisted of a three-year term for $375,000 ($125,000 per year), and did not contain any reduction clauses, contract provisions that can serve to reduce the base salary due to an athlete if certain benchmarks are not met.
Shortly after Berian presented the New Balance offer to Nike, it agreed to match the terms. At some point thereafter, though, Nike provided Berian with the actual long-form contract, which included reduction clauses. Sources suggest that such terms may reduce the base pay due to Berian by at least 25 percent. Nike has alleged that such reduction clauses were included in the contract merely because they are “standard in track and field endorsement contracts.” Such provisions did not, however, exist in the initial offer that New Balance submitted to Berian, arguably making it so that Nike did not actually match the terms of its competitor’s offer, and is apparently what has given rise to Berian arguing that he does not maintain a renewed contractual relationship with Nike.
Nike Global Director of Athletics, John Capriotti, argued otherwise in correspondences submitted to the court this past week. In a letter to Berian’s agent, Merhawi Keflezighi, that was filed with the court, Capriotti noted that Nike intended to “match the New Balance Offer… and will enter into a new contract with Boris.” In the same letter, Capriotti stated: “Because the New Balance Offer is silent on reductions and NIKE is only obligated to match the terms stated in the New Balance Offer, we will send to you a new contract, which will include the stated terms of the New Balance Offer as received. However, if material terms were omitted from the New Balance Offer, such as the purposeful exclusion of reductions, please provide to us a for review a revised offer from New Balance that reflects that and all other material terms.”
Berian’s legal team has not filed any formal responses to Nike’s lawsuit. The runner, however, has taken to his personal Twitter account, which bears a profile photo that includes a New Balance sneaker, to tell his side of the story and bash the Portland-based sportswear giant. A few of the tweets read as follows …