UCLA sues Under Armour for terminating $280 million sponsorship deal with school

UCLA sued Under Armour in federal court on Wednesday, alleging it terminated its $280 million sponsorship agreement with the Bruins not because of the coronavirus pandemic but because the record-setting deal was too expensive for the financially troubled apparel company.

The lawsuit, filed in U.S. District Court in Los Angeles, said the amount in dispute is more than $200 million. UCLA sued Under Armour on the grounds of breach of contract, breach of implied covenant of good faith and fair dealing, and promissory estoppel.

In May 2016, Under Armour and UCLA signed the largest athletic apparel deal in collegiate sports history at the time, with the apparel company agreeing to provide the Bruins with at least $280 million in financial support, including monetary payments and products over 15 years. The deal went into effect in July 2017.

"By 2020, Under Armour wanted to get out of that deal-not because of anything UCLA did, but because the deal now seemed too expensive for the financially-troubled sportswear company," the lawsuit says. "Under Armour decided that it would use the COVID-19 pandemic as a pretext to 'terminate' the sponsorship agreement. But neither the governing agreement nor the law allows Under Armour to do so. This action seeks to hold Under Armour to the promises that it made."

In June, Under Armour notified UCLA and Cal that it was ending its sponsorships with the schools by invoking a force majeure clause in the deals. In 2016, Under Armour reached a 10-year, $85.6 million sponsorship deal with the Bears. The San Jose Mercury-News reported earlier this month that the Cal agreement was never signed and the two sides had been working off a term sheet the past four years.

"It is unfortunate that Under Armour is opportunistically using the global pandemic to try to walk away from a binding agreement it made in 2016 but no longer likes," UCLA vice chancellor of strategic communications Mary Osako said in a statement. "UCLA has met the terms of the agreement, which does not require that games in any sport be played on a particular schedule. We filed this lawsuit in order to support our student-athletes and the broader UCLA community, including the athletic department that has brought 118 national championships to Westwood.''

When Under Armour announced it was ending its deal with UCLA, the company told ESPN in a statement, "Under Armour has recently made the difficult decision to discontinue our partnership with UCLA, as we have been paying for marketing benefits that we have not received for an extended time period. The agreement allows us to terminate in such an event and we are exercising that right.

"We know that this has been a challenging time for athletes, sports programs and performance apparel brands alike. Under Armour will continue to preserve our strength in this challenging environment, while maintaining a strong network of partnerships with individuals, organizations and leagues that make us the on-field authority for focused performers."

According to the lawsuit, UCLA's agreement with Under Armour includes a force majeure clause, which provides that "[n]either Party is liable for any breach of its obligations under this Agreement to the extent that the breach resulted from a Force Majeure Event provided that it: promptly notifies the other Party the nature and cause of the Force Majeure Event and details of how the Party is mitigating its losses in relation to the Force Majeure Event; and [t]akes all reasonable steps to work around, reduce, or mitigate the effects of the Force Majeure Event. If a Force Majeure Event continues for more than one hundred (100) days, either Party may terminate this Agreement with immediate effect by written notice."

The agreement defines a force majeure event as a cause or event that meets at least two criteria: "it is beyond the commercially reasonable control of [Under Armour] (or the reasonable control of UCLA)" and "it renders the performance of this Agreement by the affected Party either impossible or impracticable." Under the deal, examples of force majeure events includes "flood, earthquake, fire, labor actions or work stoppages, natural calamities, national emergencies, declarations of war, riot, civil disturbance, sabotage, explosions, acts of God, acts of any regulatory, governmental body and/or agency, having jurisdiction over the affected Party, including without limitation any Laws, orders, ordinances, acts, or mandates which prohibit, restrict, or regulate the affected party's performance of its obligations under this Agreement."

"Under Armour is financially struggling and has been for quite some time," the lawsuit says. "These struggles long predated the challenges of COVID-19, and even pre-dated Under Armour's negotiations and entering of the Agreement with UCLA in 2016. ... On information and belief, and unbeknownst to UCLA at the time of the Agreement, Under Armour has been engaging in accounting and disclosure practices designed to manipulate the appearance of its financial health, since at least 2015."

In November, Under Armour confirmed that it was the subject of federal investigations by the Justice Department and Securities and Exchange Commission over its accounting practices.