A Right to Match Can Provide Multiple Benefits

by Burns & Levinson LLP
Contact

A client recently forwarded me an article about a lawsuit that Oakley brought against Nike and golf wonder-boy Rory McIlroy.  In that suit, Oakley claims that as part of its endorsement agreement with McIlroy it had a right to match any new endorsement proposals made to McIlroy.  Nevertheless, after Nike made a proposal to McIlroy, the golf star refused to consider Oakley’s tender of a match.  While it appears that Oakley’s claims in that case will rise or fall based on whether McIlroy/Nike can prove that Oakley waived its right to match, the dispute reminded me that rights to match (sometimes denoted as  “rights of first refusal”) can turn out to be extremely valuable assets in a host of contexts.

Perhaps the most common use of rights to match arises in the context of restrictions on the transfer of equity in a closely held business.  Indeed, without such restrictions, a competitor might easily be able to buy out a minority equity holder and instantly gain access to key company data.  Even if that is not a genuine concern, those involved in a closely held business generally do not want a stranger to suddenly be their business partner.

A less common, albeit perfectly legitimate, use of a right to match (assuming it is drafted properly and not barred by a statute) would be in the context of an employment agreement.  Such a clause could prevent a company from losing a key employee to a competitor – as long as the company was willing to match the competitor’s offer.  Further, if the employee refused to abide by a right to match, the company may well be able to get an injunction preventing the competitor from continuing to employ the employee.  In other words, the company could end up in a similar or perhaps even better position than if a traditional non-compete were in effect because, unlike with a non-compete, the company would not have to show that the former employee would be using the company’s confidential information, goodwill or trade secrets in order to obtain injunctive relief.

Still another situation where a right to match can be effective and very important is where a company has a business partner who would be difficult or impossible to replace.  Including a right to match in a contract with such a business partner may greatly decrease the possibility that finding a new partner ever will be necessary.

While parties sometimes try to make an end-run around rights to match by structuring their proposals so that the party with the right to match has no practical ability to match, if a court believes that an offer is collusive and not bona fide, it likely will find such conduct to be a breach of the covenant of good faith and fair dealing, and not let the parties get away with such a tactic. Further, even if the offer is not collusive, at least one case out of California ruled that the holder of a right to match could match by making a reasonably equivalent offer in light of the fact that an identical offer simply was not possible.

The bottom line is that business people and in-house counsel should keep in mind that a right to match can be employed in all sorts of situations and provide all sorts of benefits.  So, the next time you are entering into a business contract, consider whether a right to match might allow you to obtain some business security (or at least peace of mind) that you may not be able to get any other way.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Burns & Levinson LLP | Attorney Advertising

Written by:

Burns & Levinson LLP
Contact
more
less

Burns & Levinson LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.