Skechers sues Adidas, saying it had an advantage in signing players

The shoe company Skechers is suing Adidas, claiming it was at an unfair disadvantage as a result of the alleged schemes involving the University of Louisville and other colleges that have been revealed during the FBI's investigation into college basketball.

The lawsuit, filed Wednesday in U.S. District Court in California, argued that "illicit payments denied competitors like Skechers who play by the rules a fair opportunity to compete for the cachet of having trend-setting high-school and college athletes seen in their products."

Skechers claimed it "has been harmed due to increased advertising and marketing costs and lost sales, market share and goodwill" as a result of Adidas' actions.

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"Skechers and other competitors' basketball businesses cannot effectively compete for players' footwear choices while they are amateurs — or for their endorsements when they turn professional — because Adidas has sought to 'lock up' players by paying secret, illegal bribes to them and/or their families," the lawsuit said.

Federal prosecutors allege Adidas employees helped funnel money to the families of high school basketball players to ensure they signed with Adidas-sponsored colleges and later sign endorsement deals with Adidas as pros.

In its lawsuit, Skechers is asking for "an award of the profits ... unlawfully derived as a result of wrongful conduct (by Adidas)," compensatory damages for lost sales and increased advertising costs and an injunction prohibiting Adidas from making any payments to high school or college athletes that are not disclosed publicly.

The company is requesting a jury trial.

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Skechers is being represented by the Los Angeles law firm of O'Melveny & Myers. One of the firm's attorneys arguing the case declined to comment when reached by phone Thursday afternoon.

While Skechers' brand is not commonly associated with the NBA, the lawsuit stated that Skechers signed Jamal Crawford and Josh Smith to endorsement deals as NBA players. The lawsuit also names former NBA players Karl Malone, Kareem Abdul-Jabbar and Larry Bird as endorsing Skechers, in addition to NBA owner Mark Cuban and former NFL quarterbacks Joe Montana and Joe Namath and Wayne Gretzky of NHL fame.

Skechers has also reportedly helped Big Baller Brand. The company headed by LaVar Ball was also referenced in the lawsuit, which claims that in 2015, "Skechers overtook Adidas to become the second-largest sneaker brand behind only industry powerhouse Nike. In the years that followed, Skechers and Adidas have continued to battle for that number-two spot."

According to statisa.com, Skechers ranked fourth in the United States' athletic footwear market in 2017 with a 4.7 percent share, compared to Nike (35.6), Nike's Jordan Brand (15.7) and Adidas (11.4). In June 2017, Yahoo reported that Skechers' share was 6.3 percent (compared to Adidas' 11.3 percent).

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Skechers' lawsuit names several people tied to Adidas' role in the alleged schemes, including suspended Adidas executive James Gatto, former Adidas consultant Merl Code and former travel basketball program directors Jonathan Brad Augustine and Thomas "T.J" Gassnola. Augustine and Gassnola ran Adidas-sponsored programs in Florida and Massachusetts, respectively.

Federal prosecutors alleged each played a role in schemes that have ensnared Adidas-sponsored college programs including Louisville, Miami, Kansas and NC State.

Charges against Augustine were dropped and Gassnola has pleaded guilty to federal wire fraud charges and has agreed to cooperate with prosecutors.

Gentry Estes: 502-582-4205; gestes@courierjournal.com; Twitter: @Gentry_Estes. Support strong local journalism by subscribing today: www.courier-journal.com/gentrye