According to a lawsuit filed in federal court in Santa Ana, California, sunglasses and sports clothes-maker Oakley tried to exercise its "right of first refusal" to match the Nike offer, but McIlroy and agent Conor Ridge ignored their counter-offer, thereby breaking the contract.
Oakley allege the damage that has resulted from McIlroy's refusal to renew with them is "irreparable" and entitles them to an injunction that would stop Nike and McIlroy from concluding or implementing their contract, reputedly worth $200m-plus (€152m).
According to a report on the website of American TV network ESPN, Oakley is also claiming material damages but does not specify any amount and asserts that it spent $300,000 on a photoshoot for the products McIlroy would have endorsed in 2013.
McIlroy had a deal with Oakley for eyewear and performance clothing. It includes what is known as a "right of first refusal", a clause that allowed Oakley to match any offer that included payments to McIlroy for glasses and clothing. If Oakley wanted to match what Nike offered, its deal would continue into 2013 instead of expiring on December 31.
The key to any resolution of the dispute is in a string of emails between Oakley and agent Ridge that began back in September. Late on the evening of September 29, as negotiations for a renewal of the Oakley deal seemed to be falling apart, a sports marketing executive at Oakley named Pat McIlvain sent an email to agent Ridge that said: "Understood. We are out of the mix. No contract for 2013. Pat Mac."
The late-night "out of the mix" email is clearly the basis for the assertion of McIlroy's Dublin management company, Horizon, in a statement to ESPN that "McIlroy has fulfilled all of his obligations to Oakley, and the claims in the lawsuit are entirely baseless".
McIlroy and Nike will assert in court that McIlvain's email was a waiver of Oakley's contractual rights to renew with McIlroy. Yet McIroy's team of agents and lawyers, after the supposed waiver, then continued to talk with Oakley and gave them the amounts they would be required to match.
It was not until October 23 that McIlroy's attorney finally told Oakley that he "would not be continuing his relationship with Oakley beyond December 31" and that they "would not engage in any further correspondence on the matter of the right of first refusal".