As retail companies struggle to navigate the financial waters of the pandemic, athletes like professional surfer Julian Wilson have gotten caught in the undertow. Wilson, currently ranked No. 11 by the World Surf League, recently filed a complaint in the state of California against one of his long-time sponsors, Hurley. Wilson alleges that the surf apparel and accessories manufacturer refuses to pay him at least $1.5 million, which it “indisputably owes under a written endorsement agreement” in an attempt to “profit from the worldwide health pandemic,” according to the complaint obtained by Sportico.
Hurley claims Wilson breached his contract because he hasn’t participated in surf contests this year because of COVID-19—touching on a concern many sponsored athletes share as competitions across all sports have been put on pause amid the pandemic. Competition requirements or quotas are common in endorsement contracts like Wilson’s, which he signed with Hurley in 2014, but they may be almost impossible to meet during this unprecedented year—a point raised by Wilson’s legal team in his complaint. Wilson is one of the first major athletes, if not the first, to face an official reduction or, in his case, attempted termination, and file legal action against a sponsor during the pandemic.
The seven-year contract, as described in the complaint, stipulated that the Australian surfer would wear Hurley apparel during tournament play and that he would compete in at least five World Tour tournaments every year. Wilson, 31, also agreed to plug Hurley on social media, participate in photo shoots and make promotional appearances. In exchange, Hurley agreed to pay Wilson $1.5 million (an amount that could be reduced if Wilson failed to compete in at least five tournaments) annually plus certain performance-based bonuses and product royalties. According to the complaint, Hurley refuses to pay any of it.
Wilson insists that he met his end of the bargain each year of his contract. In 2020, he says he competed in several preseason contests before COVID-19 triggered widespread cancellations for competitive surfers—including deletions and indefinite postponements of World Tour events—in March.
He also claims that Hurley’s desire to restructure his deal preceded the pandemic. As described by Wilson’s attorney, Sarah Moses, Hurley pursued cost-savings measures after Bluestar Alliance—a consumer goods brand management company whose portfolio includes Brookstone, Bebe and Limited Too—acquired it late last year. One of those measures was attempting, unsuccessfully, to persuade Wilson to restructure his deal.
Wilson did ultimately allow Hurley to delay payments in light of the pandemic-induced economic downturn, but when the time came to compensate the five-time World Surf League Championship event winner in June, Hurley asked him to extend the contract. Wilson declined. Hurley then notified Wilson that it was terminating the deal.
Wilson declined to comment to Sportico, saying he would “let the complaint speak for itself.”
As told by Moses, Hurley cited Wilson’s failure to compete in canceled or postponed surf contests. The contract instructs that Hurley can terminate the contract if Wilson “ceases to compete, for any reason, in the sport of professional surfing.” Moses also notes that the contract omits a force majeure clause, meaning that whether the pandemic ought to qualify as an “Act of God” is irrelevant.
“With the Nike sale of Hurley to Bluestar Alliance, there was always an undertone of change on the horizon. Bluestar Alliance waited little time in cutting 10 surfers from Hurley’s roster at the start of 2020 in a move stated to preserve the bottom line,” said Dr. Daniel Kelly, Director of Graduate Programs at the NYU Tisch Institute for Global Sport. “While Wilson was spared from the initial cut, it’s not surprising that during the COVID-19 pandemic, Hurley has decided not to pay his $1.5 million sponsorship deal even though there isn’t an explicit force majeure clause in the contract.”
Moses charges that Hurley had no lawful grounds to terminate the contract, stressing, “Wilson performed all material conditions, covenants, and promises in accordance with the terms and conditions of the contract.” Her client continued promoting the brand’s products to his more than 800,000 Instagram followers, and on other platforms, posting as recently as Aug. 12. Hurley regularly continued to interact with Wilson’s content featuring its products even after attempting to terminate the contract.
“The fact that Hurley is still benefiting from the athlete’s name, image, and likeness without compensation for the athlete implies that adversarial action has taken place against Wilson,” Kelly added.
Moses also notes that as the sports industry adjusts to the pandemic and resumes play under new conditions, Wilson is ready to jump back into the water. He has already committed to three surf events scheduled for later this year.
The legal issue, therefore, centers on whether, and how, the pandemic alters the contractual relationship. From a literal standpoint, the contract permits for termination “for any reason” relating to ceasing to compete. Hurley could argue that the company therefore had sufficient grounds to terminate the contract given that Wilson has not competed this year. “Any reason,” theoretically could include not competing in a tournament that was canceled due to a global infectious disease outbreak.
A court might be inclined to reject such a literal reading as unjust or nonsensical. First, Wilson clearly didn’t retire or otherwise step away from surfing, continually representing himself as an active competitive surfer. Second, California courts, like those in other states, permit parties to argue “impossibility,” which is sometimes described as “impracticability” or “frustration of purpose.” The basic gist is that a party to a contract is excused when it would be impossible to perform or when circumstances have changed dramatically and unexpectedly. These ideas go to Wilson’s argument: He couldn’t compete in canceled tournaments, and participating in replacement tournaments wasn’t possible.
Hurley will have an opportunity to answer Wilson’s complaint. It’s possible that the company could insist that grounds for the termination go beyond tournament play. Hurley did not respond to Sportico’s request for comment.
Hurley could also insist that it should be excused from its end of the bargain, arguing that it would be impracticable to pay Wilson (and other surfers) given that the competitive surf industry is on a pandemic-related hiatus and not generating revenue. Along those lines, the company may maintain that other surfers agreed to postpone payments further into 2020 or 2021 while Wilson did not.
Red Bull, Oakley Eyewear, JS Industries surfboards, fins and hardware company FCS, Sunbum Sunscreen and others are among Wilson’s additional sponsors. The surfer also previously had an endorsement deal with Nike that put him in the shoe giant’s footwear and wetsuits. While Wilson’s deal with the Swoosh has long since lapsed, other athletes still sponsored by Nike have had to get creative to meet their own competition requirements to receive full pay—quotas like those Hurley is now accusing Wilson of failing to meet. With the Olympics postponed to 2021, many Nike track and field athletes, in particular, are fearful of losing endorsement money due to contract cuts or competition requirement reductions and finding themselves in the exact predicament Wilson is in today with Hurley.