Rokit Enlists Lawyer Klayman to Sue Former F1 Partner Williams
Rokit, the frequently delinquent venture capital company, has hired Larry Klayman, the notoriously litigious attorney, to pursue a $149.5 million lawsuit against its one-time Formula 1 sponsorship partner Williams Racing.
The lawsuit, filed in the U.S. District Court for the Southern District of Florida, comes after Williams won a $32 million arbitration award against Rokit over non-payments for their multiyear promotional agreements signed in 2019.
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As Sportico previously reported, Rokit, which was co-founded by billionaire John Paul DeJoria, has been accused of failing to make good on deals involving a number of professional sports teams and other business ventures. While it takes up its latest action against Williams, Rokit is still suing the Houston Rockets over a jersey patch-sponsorship deal the company stopped making payments on, which led to the NBA club winning a $11.23 million arbitration ruling.
In the suit against Williams, Rokit says that upon entering their business partnership, it had been fraudulently deceived over the competitive prospects of the racing team by its then-directors, including Claire Williams, the daughter of founder Frank Williams.
Rokit insists that it agreed to the sponsorship only after a January 2019 meeting in which the team’s top brass boasted of its revamped car’s “leading performance capabilities” and assurances it would “place in the upper side of the leaderboard.”
However, the idea that anybody would have held out high hopes for Team Williams at the time would strain the credulity of even the most casual racing fan. The family-owned constructor had struggled for years to keep up with deeper-pocketed teams who dramatically drove up the price of success. In 2018, the year before the Rokit agreement was reached, Team Williams finished second-to-last in the F1 standings with seven total points (Mercedes won with 655). The following year, Williams finished last, with one point (Mercedes had 739). In August 2020, amid a season when the team failed to score any points, Williams was sold to the U.S.-based private investment firm, Dorilton Capital, for around $200 million.
In a statement, Williams Racing called Rokit’s lawsuit “spurious,” adding that it “continues to trust in the court processes in regards to this unfortunate matter.” Claire Williams declined to comment, and a spokesperson for Dorilton Capital did not respond to an email.
Klayman, who also did not respond to a request for comment, founded the conservative watchdog groups Judicial Watch and Freedom Watch and made a name for himself in the 1990s by aggressively bird-dogging the Clinton administration. However, over the years, Klayman has been repeatedly censured and sanctioned by courts and bar associations over his legal practices. Last year, Klayman’s law license in Washington, D.C., was suspended for 18 months over multiple professional conduct violations.
In representing Rokit, Klayman faces several obvious hurdles.
First, as the complaint acknowledges, an arbitrator has already reviewed the commercial dispute between Rokit and Williams and—importantly—sided with the latter. Federal courts tend to be deferential to arbitration awards and disinclined to disturb them.
Perhaps anticipating that resistance, Rokit is now asserting that the arbitrator was unaware of “fraudulent concealment of statements of material facts,” which the company claims were not known until after the arbitration. Even if the assigned judge in the case, Cecilia Altonaga, accedes to Rokit’s interpretation of the arbitral process, there is still a lack of precedent for sponsors successfully arguing that pro teams gave unlawfully false assurances as to their likelihood of success.
Sports teams and organizations are known to engage in overly optimistic projections about their chances to win. Business partners and prospective business partners, especially those like Rokit that have previously negotiated deals in the sports industry, should arguably be even more aware of such puffery. To be sure, Rokit has also been accused of exaggerating its business capabilities, such as with its failed endeavor to build the world’s largest Wi-Fi hotspot across 27 cities in India.
Though Williams is a private limited company in England, and the plaintiffs are domesticated in Delaware and Ireland, the lawsuit contends that the Florida venue is proper because “a substantial part of the events or omissions giving rise to the claims occurred” in the jurisdiction. Formula 1’s Miami Grand Prix is held in the Sunshine State, and Klayman is currently in good standing to practice law there.
The named plaintiffs, Rokit World Limited and Rokit World Inc., are not the same entities that signed the sponsorship deals with Williams. Those were the Rokit subsidiary companies, ROK Marketing and Rokit Marketing Inc., each of which filed for bankruptcy in March 2022 under the respective pseudonyms, Combine Enterprises LLC and Able Events Inc. Four other Rokit affiliates have also filed for Chapter 7 relief since 2021. Alex Merino, an attorney representing Rokit in the bankruptcy cases, did not respond to a request for comment.
In its bankruptcy petition, Combine Enterprises claimed liabilities of $15.5 million, almost all of which were attributed to a potential claim by Williams. Able Events, meanwhile, stipulated liabilities in excess of $70 million. Its creditors, in addition to Williams, include the Houston Rockets; Rokit served as the team’s inaugural jersey-patch sponsor in 2018, before failing to deliver on millions of dollars in payments. The Rockets are attempting to seek redress by piercing Rokit’s corporate veil in U.S. bankruptcy court.
Even if the lawsuit against Williams gets dismissed, the new litigation could buy Rokit even more time in its already laborious bankruptcy proceedings, which have experienced numerous delays as the trustee and creditors await document production by DeJoria’s company. A much-deferred creditors’ meeting in the bankruptcy actions is scheduled to resume later this month, although it is unclear whether or not it will be subject to further continuances.
