Distributor’s Suit Claims Sports Specialties Broke Deal

An Orange County distributor of sports caps made by Sports Specialties Inc. in Irvine has sued the company for $10 million, claiming that it has broken an exclusive distributorship agreement.

The lawsuit by Unlimited Specialty Products Inc. claims that the 16-year-old agreement was renewed in November, 1991, and that Sports Specialties, which later became a subsidiary of Nike Inc., began violating it in January, 1992.

Mark Masters, Unlimited’s founder and owner, said Wednesday that because of the dispute the company was forced into receivership by its bank in June. He said sales dried up after Sports Specialties began using other distributors in the states west of the Mississippi--the territory where he said his company had exclusive rights.

Officials at Nike in Beaverton, Ore., could not be reached for comment. In Irvine, Sports Specialty’s chief financial officer, Jess Meyers, said the company would not comment on the suit.

Masters said he was a Sports Specialties employee in 1978 when he started Unlimited with an agreement to be the cap maker’s sole distributor in the western United States.

Sales of Sports Specialties products made up about 95% of Unlimited’s peak annual sales of $9 million, he said. Since January, however, sales have all but disappeared. Masters said he has laid off all of his employees. “We had 17 people once, and I laid off the last one on Friday,” he said.

He declined to discuss why he believes Sports Specialties started using other distributors less than two months after renewing his exclusivity agreement.

The Irvine manufacturer, which pioneered the practice of licensing sports teams’ names and logos to decorate merchandise, was negotiating to be acquired by Nike in January, 1992, when Masters’ suit alleges the agreement was broken. In June of that year, the sports shoe and apparel giant bought Sports Specialties for more than $50 million.