UCLA Says Under Armour Can't Use Virus To Duck $280M Deal

By Zachary Zagger
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Law360 (August 27, 2020, 7:20 PM EDT) -- UCLA said Thursday sportswear maker Under Armour Inc. is trying to use the COVID-19 pandemic as a "pretext" to escape its record-setting $280 million deal to outfit the Bruins sports teams just three years into the 15-year agreement.

The UCLA athletics department, formally represented by the Regents of the University of California, hit Under Armour with a breach of contract lawsuit in California federal court after the athletic shoe, apparel and equipment maker sought to get out of the agreement before officially terminating it in June. 

Under Armour and UCLA, which had been sponsored by Adidas, inked the deal in 2016 after the sportswear company offered a record-setting $280 million for the exclusive 15-year sponsorship, outbidding rivals like Nike and Adidas. UCLA says it will suffer $200 million or more if Under Armour reneges on the deal just three years into its term. 

"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," UCLA alleged. "Under Armour decided that it would use the COVID-19 pandemic as a pretext to 'terminate' the sponsorship agreement."

According to the complaint, Under Armour informed UCLA that it was terminating the contract under force majeure language that allows for termination of the contract when an event "renders the performance" of the agreement "by the affected party either impossible or impracticable," citing the NCAA and Pac-12 Conference's decisions to cancel the spring college sports seasons.

But UCLA said the question is not "whether an event has caused general disruption in an industry, or made a pre-existing deal less economically attractive to the affected party, but to whether the event has actually made the performance of a specific contractual obligation by the affected party impossible or impracticable."

"Nothing about COVID-19 made it 'impossible or impracticable' for Under Armour to meet its obligations under the agreement," UCLA alleged. "Nor did COVID-19 make it impossible or impracticable for UCLA to meet its material obligations under the agreement."

Sports are moving forward with voluntary workouts and preparations for future games and Under Armour has even provided some of the equipment and apparel required under the agreement, UCLA said.

Under Armour also cannot say UCLA failed "to take reasonably appropriate action(s)" after the arrest and indictment of a former UCLA soccer coach in the "Operation Varsity Blues" college admissions scandal, UCLA said. 

"[Under Armour's] doing so was purely pretextual," UCLA said, noting that the school immediately placed the coach on leave and he has since resigned.

UCLA alleged Under Armour never supplied an on-site brand representative who was supposed to work with the school to provide the equipment and merchandise and never opened up a Los Angeles Under Armour store featuring UCLA merchandise, as they had agreed.

"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," Mary Osako, vice chancellor of strategic communications for UCLA, said in a statement to Law360. "UCLA has met the terms of the agreement, which does not require that games in any sport be played on a particular schedule."

Under Armour's $280 million offer to UCLA for the sponsorship surpassed the then two largest such deals — Nike's 15-year agreements with Ohio State University and the University of Texas for $252 million and $250 million, respectively — according to the complaint.

Under the deal, Under Armour agreed to provide uniforms and equipment for the UCLA sports teams, spend money marketing the teams and other compensation in exchange mainly for Bruins sports teams and coaches wearing Under Armour merchandise and for other Under Armour advertisements.

However, since inking the deal, UCLA's vaunted men's basketball team, which has 11 NCAA tournament championships, has only made the NCAA tournament once and its football team has had only one bowl game appearance, reducing Under Armour's national exposure. 

"While we are disappointed that UCLA elected to file suit, we are confident in our position and will defend it vigorously," Under Armour said in a statement to Law360. "We sought and remain open to working out a reasonable and appropriate transition for the university, and most importantly for the student-athletes.

"In fact, at UCLA's request after the termination of the agreement, Under Armour continued to deliver athletic products for the 2020-2021 school year because we support athletes, even as it remains uncertain when sports will resume," the statement said.

Under Armour has faced allegations it misreported profits between 2015 and 2016 and company founder Kevin Plank stepped down as CEO in October. Last month, the company acknowledged that it has received a so-called Wells Notice from the U.S. Securities and Exchange Commission, signaling an enforcement action against the company. 

UCLA is represented by Bert H. Deixler, Nicholas F. Daum and Nary Kim of Kendall Brill & Kelly LLP

Counsel information for Under Armour was not immediately available. 

The case is The Regents of the University of California, on Behalf of the Department of Intercollegiate Athletics on its Los Angeles Campus v. Under Armour Inc., case number 2:20-cv-07798, in the U.S. District Court for the Central District of California

--Additional reporting by Tom Zanki. Editing by Alyssa Miller.

For a reprint of this article, please contact reprints@law360.com.

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