Rory, the T-Rex, the Kaiser, the goose, the gander and the golden egg

Rory McIlroy and Dermot Desmond during the Pro-Am for the 2013 Irish Open at Carton House. 26 June 2013. Picture: Thos Caffrey / www.golffile.ie

Reports that Rory McIlroy is now a bigger name than some of the blue chip companies who sponsor him comes as no surprise given that his every golfing move is a headline-generating story around the globe.

Interest in his life outside the ropes is also massive given he’s single and enormously wealthy. His riches are fully deserved but who could have imagined that the signing of a $100 million, five-year endorsement deal with Nike in January 2013 would coincide with an acrimonious management break up just months later that is now the subject of a multimillion euro legal case.

Well, perhaps some may have seen it coming but to the layman, it’s fascinating sideshow to a Hall of Fame career, offering a glimpse behind the curtain into the world of high finance, PR and sports management.

Just last week, up to 12 lawyers were in the commercial division of the High Court for three days (one day longer than scheduled) as Horizon Sports Management brought several motions before Mr Justice Raymond Fullam applying for orders seeking inspection of mobile phones owned by McIlroy, his father Gerry and two former Horizon employees who are now with Rory McIlroy Inc, CEO Donal Casey and Chief of Staff Sean O’Flaherty. 

It’s not for nothing that the satirical magazine, The Phoenix, calls Dublin's "Four Courts" building where High Court cases are settle, the "Four Goldmines". And given that these pre-trial proceedings employed the services of nine barristers (four of them Senior Counsels) and several solicitors, the costs involved are clearly considerable. It’s said a day in the High Court in a big profile case can cost €100,000. 

The Four Courts in Dublin, aka the Four Goldmines

The will all be back in court to conclude the pre-trail hearings on Friday but the trial itself is set to run for a frighteningly expensive six to eights weeks from February 3 with McIlroy, who could be needed to give evidence for two weeks, claiming he is entitled to repudiate a December 2011 agreement with Horizon, Gurteen Ltd and Canovan Management Services on grounds that it was an improvident bargain and he wasn't given proper legal advice as a 22-eyar old. Horizon deny his claims, and have counter-claimed for damages.

McIlroy sued Horizon and announced the setting up of Rory McIlroy Inc on the day that Horizon’s Conor Ridge and Colin Morrissey were attending Graeme McDowell’s wedding in the Caribbean — 27 September 2013. It's a wedding anniversary that nobody involved in the court proceedings will forget in a hurry

Paul Sreenan, a senior counsel for Horizon and the other defendants in the case, told the court that a series of emails was exchanged between Donal Casey, Sean O'Flaherty, Rory McIlroy Foundation head Barry Funston, Gerry McIlroy, McIlroy’s solicitor at Goodbody’s Eoin MacNeill and public relations consultant Terry Prone regarding the planning and timing of the court proceedings.

Terry Prone of The Communications Clinic

Quoting from the communications strategy put together by McIlroy’s PR consultants, the goal was to make people to understand "'wildly unbalanced and avaricious Horizon contract terminated". According to Sreenan, Prone said the message was to be that "Rory's business interests now in the hands of the heavyweights.”

McIlroy and Nike had been sued by Oakley in the US in December 2012 over a “right of first refusal” dispute on foot of the $100m Nike deal.

The dispute was eventually settled out of court in November 2013 with all sides involved in the redaction of a statement issued by Pat McIlvain, Oakley's vice president of global sports marketing, which read:

"We are very pleased the proceedings against Rory have been resolved. We enjoyed an excellent relationship with Rory as an Oakley brand ambassador. He conducted all his engagements on our behalf with energy and professionalism. We recognize that, in his business dealings with us that were the subject matter of this dispute, Rory was represented by his agent."

Sreenan showed the court an e-mail between McIlroy’s solicitor and Casey relating to the settlement of the Oakley proceedings and how “a press release to be issued in the context of the settlement would be potentially more explicit in terms of blaming the defendants for the fact that the Oakley litigation came about.”

The email read: 

"Agreed re Nike response, see where they are coming from. Suspect the problem is not the positive wording re Rory's integrity but rather (i) the positivity re Oakley and (ii) the inference that Nike to blame.

Need to dial down (i). On (ii) I think the statement that Rory had no part in the genesis still leaves inference re Nike. Perhaps we need to be more explicit re the "blame" piece. The Statement of Claim could help here. It is a public document so the various charges are in the public domain. See amended wording which is more explicit towards Horizon and tracks what's in the Statement of Claim”. 

In his Statement of Claim against Horizon, McIlroy is reclaiming the money he paid Oakley.

That Donal Casey was actively involved in McIlroy’s affairs as CEO of Rory McIlroy Inc in October 2013 is self-evident. But in seeking inspection of the mobile phones owned by the McIlroys, Donal Casey and Sean O’Flaherty, Horizon’s defence lawyers aim to show that from January to April 2013 there was intense activity and communication between McIlroy and others over the decision to end the Horizon relationship.

Donal Casey, formerly a consultant for Horizon Sports Management, now CEO of Rory McIlroy Inc.

They included his father, his caddy JP Fitzgerald, Casey, the billionaire businessman Dermot Desmond (aka the Kaiser), Horizon employee O’Flaherty and an associate of Gerry McIlroy’s, family friend Barry Funston, who subsequently joined the Board of Rory McIlroy Inc.

Senior barrister Paul Sreenan told the court: "The Defendants have equally strong grounds to believe that some or all of these individuals were heavily involved in advising the Plaintiff to establish his own management company, Rory McIlroy Inc, for the purposes of replacing the Defendants as his management agent.

“The Defendants believe that during the period prior to April 2013 and subsequently up October 2013, there was intense activity and communication between the Plaintiff and these individuals both in relation to the establishment of Rory McIlroy Inc and other matters at issue in the proceedings.”

A decision on the battle to secure examination of the phones — physical or logical imaging — which have no been reset to factory settings, will be made this Friday.

Donal Casey’s barrister, Cian Ferriter, was firm in his belief that there are no grounds whatsoever in granting the request and even made a Jurassic Park style plea to the Judge..

“They say deliberate destruction of information and they say we need now to send in the IT expert to forensically examine. But in fact, Judge, all that could now happen is we have some kind of a digital archaeological dig that might get little fragments of data which will tell us whether the T-Rex ever went across this particular plain, but won't get the T-Rex himself.”

Barrister Maurice Collins, appearing for Horizon, later replied:

“What is being said essentially is that Mr. Casey has done such a good job of destroying this material that there is no purpose in making any order for inspection.”

While Horizon has countersued and claims unpaid feeds of $9m to date, there is no final number for what they may be claiming just yet though the Nike commission will run to more than $21m. If they win they will continue to earn other commissions on sponsorship related bonuses due to McIlroy until the end of 2017.

If McIlroy wins his case and is proved right in his belief that his contract was improvident and that he was paying unfair commissions, he will avoid the big $20 million pay out for starters.

He claims that he was guaranteed the same terms of commission as Graeme McDowell, who he says was a 10 percent shareholder in Horizon, unbeknownst to him at the time. There was also the fact there was no discovery by Horizon of documents relating to what one of McIlroy's barristers, Rossa Fanning, said McIlroy's solicitor had revealed were "serious deficiencies in discovery" relating to "communications with Graeme McDowell in relation to the sale and redemption of his shares."

He also claims he was guaranteed the same commission terms as McDowell when he joined and yet Horizon's barrister Paul Sreenan was quick to jump on a small detail that emerged when he agreed an amended contract with Conor Ridge in March 2013: 

"Of course whatever about one of his allegations that he was to have the same terms as Mr. McDowell -- at the point in March 2013 when he decided to negotiate lower terms for himself than those of the original Representation Agreement, he was clearly, even in his own mind if he ever considered that he had parity with Mr. McDowell, breaking that parity at that point in  time."

McIlroy signed with Gurteen (a vehicle set up by Horizon for the player alone) on 21st December 2011. The deal was signed in the offices of William Fry Solicitors and as part of his case, McIlroy alleges there was a lack of independent legal advice.

“Mr. McIlroy was in contact at one stage with solicitors in Northern Ireland, Messrs Tughans, to whom he had been referred by the Defendants, and we say that he chose not to retain them further. We also say that at that meeting of 21st December, 2011 he was specifically told again that there was no pressure to sign the agreement, no time pressure to sign the agreement, that he should get independent legal advice, but that he chose to sign it notwithstanding.”

Horizon went ahead and negotiated endorsements for McIlroy and set about extracting him from some of his earlier contractual commitments, set up by Chubby Chandler at ISM

At the end of 2012, the Nike deal was struck for $100 million over five years but in March of 2013, Horizon suggested a change in McIlroy’s contract, “consistent with what they had indicated to him originally when he signed up”, reducing on-course commission rate to zero percent and off-course commission to 15%, with the exception of the Nike contract, where it would stay at 20%.

Nike Golf unveils Rory McIlroy at a fanfare event in Abu Dhabi. 14 January. 2013 Picture: Fran Caffrey / www.golffile.ie

The contract would also be extended to the end of 2017 and McIlroy agreed. 

However, it was around this time that the relationship went pear-shaped and this period is likely to form the heart of the trial in February.

It all stated with a dispute between Casey and Horizon over the commission Casey believed he was due on the commission they were to receive on the Nike deal.

However, the Nike deal did not include the golf bag and Casey severed his ties with Horizon in December 2012. Ridge and Casey settle their differences with a financial settlement in March 2013, around the time that McIlroy amended his Horizon contract and negotiated a reduction in his fees from 5% (on course) and 20% (off course) to o% and 15% with the Nike arrangement remaining at 20% until the end of 2017.

“However, Judge, the difficulty arose when the ink was hardly dry on the amendment agreement of March 2013,” Sreenan told the court. “Because in April come May 2013 Mr. McIlroy set up a company, Rory McIlroy Incorporated, essentially to manage himself and tried to, on our case, repudiate his contractual arrangements.”

McIlroy sued, claiming he was entitled to rescind his agreements because of his alleged youth and lack of commercial experience, claiming it was “an unconscionable and improvident bargain” and that he should have obtained and been provided with independent legal advice and was not.

He also alleged breach of fiduciary duty in relation to a number of specific incidents: UNICEF, CAA (who had been helping Horizon in the US), Abu Dhabi and Donal Casey.

According to the defence, Horizon was dissatisfied with the service that CAA were providing and when CAA discovered that the Horizon had reduced their commissions to McIlroy and accordingly the percentage that CAA could earn, they terminated the arrangement.

The Abu Dhabi incident involved first class Etihad tickets made available to McIlroy for travel from Australia to Abu Dhabi. In the end, he didn’t use them and rather then letting them go to waste, Horizon were converted into business class tickets for Sean O’Flaherty and another Horizon employee. This, the defence said, was standard practice in industry 

As for the Donal Casey incident, McIlroy’s solicitors A&L Goodbody explained that “because you didn't tell us at the time that you split up from Donal Casey, whom is a person that we would have wished to have involved in representing Mr. McIlroy, we say that these are sufficiently serious breaches of your agreement and your duties that we are entitled to rescind this contract.”

It appears that McIlroy's father Gerry was furious about the Casey exit.

According to Sreenan, there was a clause in the contract that said that in the event of a material breach of the contract that McIlroy had to provide Horizon with advance notice and the opportunity of remedying the breach.

“And there is where the dispute essentially lies,” Sreenan said.

The matter of the mobile phones relates what may or may not have been going on behind the scenes in the early months of 2013, covering not just McIlroy’s walk-off with wisdom tooth pain at the Honda Classic at the end of February, but the break up period that began in earnest in April-May and the decision to sue and set up Rory McIlroy Inc.

Rory McIlroy and Dermot Desmond at Carton House in June 2013.  Picture: Fran Caffrey / www.golffile.ie

During that time, the billionaire Irish businessman Dermot Desmond was approached for advice on the affair not by McIlroy directly but by his caddie, JP Fitzgerald via Sean O'Flaherty.

Horizon's barrister, Paul Sreenan set out the situation as he saw it, Aka the conspiracy theory:

"The Defendants have very strong grounds to believe that during the former period, January to April 2013, there was intense activity and communication between the Plaintiff and a number of individuals who were clearly involved in his decision to no longer be represented by the Defendants.

“They included his father Gerry McIlroy; his caddy JP Fitzgerald; a former consultant to the Defendants Donal Casey, who subsequently became Chief Executive of Rory McIlroy Inc in or about October 2013; the businessman Dermot Desmond; a former employee of the Defendant Sean O'Flaherty, who subsequently became Chief of Staff of Rory McIlroy Inc; an associate of Gerry McIlroy, Barry Funston, who subsequently joined the Board of Rory McIlroy Inc. 

"The Defendants have equally strong grounds to believe that some or all of these individuals were heavily involved in advising the Plaintiff to establish his own management company, Rory McIlroy Inc, for the purposes of replacing the Defendants as his management agent.The Defendants believe that during the period prior to April 2013 and subsequently up October 2013, there was intense activity and communication between the Plaintiff and these individuals both in relation to the establishment of Rory McIlroy Inc and other matters at issue in the proceedings.”

Thus began the search for T-Rex which could take the form of emails, texts or Whatsapp messages planning the split and the court action, Horizon say. 

Casey’s lawyers pointed out that he is a non-party in the case and had left Horizon in December 2012 and did not take up employment with Rory McIlroy Inc until September or October 2013.

On day two, Horizon’s defence team went to work on that aspect of the case with Maurice Collins telling the court that he intended to demonstrate that Casey was intimately and intricately involved in the planning of the proceedings and their timing.

He showed the court an email with sent by Casey to Sean O'Flaherty and the PR consultant Terry Prone on 30 June 2013:

"The legal process may become public this week,” his email ran. “Publicity in this domain is never ideal but at least the context of Rory being forced to issue proceedings to gain sight of his own files tilts the scales away from Horizon. It smells of impropriety on their part. Sean will connect Terry with Eoin MacNeill.”

There was also an email from Casey to Tipperary man Shane O’Donoghue, a presenter of golf programming on CNN International, dated 16th July 2013:

"Keep the cluais [‘ear’ in Irish] to the talamh [ground]. We would be very interested to get an insight into CR’s [Conor Ridge’s] mindset and disposition at the moment.”

It has to be said that Justice Fullam had opened proceedings in the case by saying that there were two people referred to in the papers, “namely Mr. Desmond and a Mr. O'Donoghue, Shane O'Donoghue, and they are members of the same golf club and that I'm a member of and are there any objections in relation to my hearing the motions?”

Neither side had any objections.

The quest for forensic examination of the eight phones wiped by Rory McIlroy and the phones restored to factory settings by O’Flaherty, Casey and Gerry McIlroy was strongly opposed by the plaintiffs (McIlroy), who described what Horizon claim was a "concerted effort” by Casey, O’Flaherty and McIlroy Snr to destabilise Ridge’s relationship with McIlroy as “the worst conspiracy in the world.”

Rossa Fanning, a barrister acting for McIlroy said:

“Why does every text and every mobile phone need to be read at all? Why do they need this information?…. The fact is that the conspiracy theory is just preposterous… Mr. McIlroy fell out with Horizon a week before the Masters, in April 2013, when the ink was barely dry on the amendments to the Representation Agreement that he signed on 18th March 2013. If that was a conspiracy it was the worst conspiracy in the world. Why would you sign an amendment agreement on 18th March, 2013 and why would a top class professional golfer do something as disruptive as part company with his management a week before one of the most important tournaments on the calendar?”

Horizon replied through Maurice Collins, who presented the court with an email that he said showed how intimately involved the golfer had been in the planning the litigation.

Sean O'Flaherty and Gerry McIlroy during the 2013 US Open. Picture: Fran Caffrey / www.golffile.ie

The email had been sent by O’Flaherty on 13 March 2013, when he was still employed by Horizon, regarding McIlroy’s amended agreement with Horizon.

“This is an e-mail sent by Mr. O’Flaherty… sending on a copy of an amendment agreement, bringing to the attention of Mr. McIlroy what he says are clauses that are adverse to the interests of Mr. McIlroy. Then he says at the bottom:

"Gerry, when you have reviewed this Rory please do not hesitate to call me. I am worried that Connor might suspect my actions so may I give the envelope to Connor [sic] on Friday as instructed. Hope Rory will tackle Connor on the issues.”

The clause or clauses in question, believed to mistakenly refer to the Nike contract being in perpetuity, were quickly amended though the perception remains that McIlroy was under contract to pay Horizon commission on his Nike contract for as long his relationship with the sportswear giant remained intact.

How such a clause could end up in a document in the first place beggars belief given the sums involved and the magnitude of the deal.

Whatever about the dynamics of Conor Ridge’s relationship with Donal Casey and O’Flaherty, the fact that Dermot Desmond has been closely involved with members of the McIlroy camp is no massive surprise given his love of golf and his closeness to McIlroy’s caddie JP Fitzgerald.

Barrister Rossa Fanning explained that Desmond was contacted by McIlroy about contract matters as he (Desmond) was experienced in this area. 

Desmond asked his own lawyer to prepare a memo which the McIlroy disclosed previously to the defendants but this was followed by more inquiries in relation to documents mentioned in the memo which were also handed over, eventually.

Horizon’s barrister Maurice Collins said the documents mentioned in the memo should have been but were not disclosed and an explanation was needed from both Rory McIlroy and Sean O'Flaherty in relation to their authorship.

One of the documents produced in court by one of Horizon's barristers, Maurice Collins, was an email sent by Dermot Desmond to McIlroy's caddie JP Fitzgerald, who has frequently toted the bag for the Cork-born businessman over the past 20 years.

"I enclose a memo from [in-house lawyer] Maria O'Sullivan,..."  This is the document that was disclosed on discovery.  "...who you met on Friday, regarding the legal situation, which is I think is self explanatory.  I spoke with Rory and asked him to be upfront with Conor and obtain the legal documents between himself  and Horizon.  Also, enclosed is a memo from Brendan Timbs, who you  also met, re tax advice. We will have to get  additional information from Arena Wealth Management as  to why he is domiciled in Monaco..." 

Arena Wealth Management are financial advisers to  Mr. McIlroy. "...but all these things can be resolved in due course. The most important thing now is to get the legal contracts and decide on a strategy for an amicable  separation between Rory and Horizon.  You can pass on these documents to Rory and Sean but  confidentiality is absolutely key and it is important that copies are not made as it might lead to discovery."

Rory McIlroy and Dermot Desmond during the pro-am for the 2014 Irish Open at Fota Island.  Picture: Eoin Clarke / www.golffile.ie

Collins said one of those documents sent to Dermot Desmond was headed "Reasons for termination of contract" and Mr Desmond's lawyer concluded, after careful analysis", that the termination was not warranted.

“I don't think I need to read this, Judge, but I think the Court will see a very careful analysis of the material with Ms. O'Sullivan indicating that the material did not in her opinion warrant the termination of the Representation Agreement and asking for further information if the matter was to be taken further and questioning inter alia the use of the word misappropriation in respect of the payment of monies to UNICEF by Mr. Ridge. That's an issue in the case. It was a donation to UNICEF which was made, Mr. McIlroy says without his authority and contrary to his instructions. It was recovered but here it's described as a misappropriation.”

Sean O’Flaherty’s barrister, Mark Connaughton said his client was prepared to swear an affidavit stating that he was the author of documents referred to in the lawyer's memo.

But he also took time out to complain to the court about the language used by the defence. 

As O’Flaherty is a non-party in the proceedings, he said: 

“There's a lot I want to say to the Court about my particular status as a notice party in this because I keep thinking, when I hear Mr. Collins, that I am a co-defendant. I'm really tired of that and I want to address that, but I'm in the Court's hands in relation to that.

“The other thing I want to say — because I know a lot of this grand-standing is done for other purposes. This is about something that occurred after Mr. McIlroy, whom I don't represent, wrote to Mr. Ridge on 1st April telling him he couldn't trust him any more. So this is not like something that's taking place way back in the mists of time. This is what Mr. Collins is highlighting as being a critically important thing to his case, when he knows at that stage that Mr. McIlroy is out the door.”

The decidedly animated actions of the lawyers involved, the talk of “grandstanding” and the subsequent headlines on newspaper reports of the case in the national papers last week, brought back something said by the Judge on the second day of the hearing. 

“There are allegations on both sides,” Justice Fullam said. “There are allegations of leaking documents to journalists against the Defendants and there are allegations against the Plaintiff. Now, this case or these proceedings, that’s the flavour of them. So it's a question of sauce for the goose or sauce for the gander.”

With one side talking of "trust" and “misappropriation” and the other crying conspiracy, deliberate destruction of documents and the “frustration” of justice, it’s a case for mature audiences only.

One can't help wonder why things are dragging on when a man of Dermot Desmond's business intelligence tells you to settle something amicably. 

The breakdown in mediation could be explained if McIlroy had made an offer and had it rejected. Whether a further offer will be forthcoming over Christmas remains to be seen. Considering the surface has barely been scratched and with the prospect of long sessions of cross-examination to come, McIlroy's build up to next year's Masters will be busier than ever.