LOS ANGELES — UCLA has filed a lawsuit against Under Armour that seeks more than $200 million in damages, alleging the apparel company defrauded the school by embellishing its financial standing before luring the school into a record $280 million contract that it breached by failing to make scheduled payments or deliver its product as promised.
The lawsuit, filed Wednesday in the U.S. District Court in California, comes two months after the Baltimore-based athletic apparel brand informed UCLA that it was terminating the 15-year contract agreed to in 2016 that represented the largest apparel sponsorship deal in the history of college sports. Under Armour backed out less than three years into the deal, with more than $200 million left to be paid.
Under Armour paid $11 million per year in rights and marketing fees as well as contributing $2 million per year to aid in facility improvements. Under terms of the contract, the company is supposed to supply $6.85 million in athletic apparel, footwear and uniforms.
After approaching UCLA in April to ask that its payment for that month be pushed back to July as part of a cash-flow shortage, the lawsuit states, Under Armour informed UCLA in late June that it wanted to end its contract, citing three grounds for termination.
Under Armour told the school it was invoking the force majeure clause in the agreement in the wake of the COVID-19 pandemic that has halted college sports since March, noting, for example, that the UCLA baseball team had completed fewer than 50% of its games last season, a requirement for one of its core teams.
It also cited UCLA’s struggles in its flagship sports. The football program has had a losing record four straight seasons, including a 7-17 mark in Chip Kelly’s first two seasons, which has led to declining attendance at the Rose Bowl. Men’s basketball struggled the first half of last season but won nine of its last 11 in Mick Cronin’s first season.
“Under Armour 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,” the company said in a statement in late June.
Under Armour also said UCLA failed “to take reasonably appropriate action(s)” after the arrest and indictment of men’s soccer coach Jorge Salcedo in connection with the “Operation Varsity Blues” college admissions scandal.
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UCLA rejected all the claims in its lawsuit, saying it had fulfilled the terms of the contract and that the novel coronavirus outbreak did not prevent its athletes and coaches from wearing Under Armour gear while engaging in team meetings, voluntary workouts and other preparations for the resumption of games.
“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,” said Mary Osako, UCLA’s vice chancellor for strategic communications, 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.”
Under Armour said in a statement that it was disappointed UCLA filed the suit but remained "confident in our position and will defend it vigorously. 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."
UCLA also alleged that Under Armour misled the school about its struggling finances before the signing of the agreement in 2016.
In a notice sent to investors last month, the company revealed that the U.S. Securities and Exchange Commission and the U.S. Department of Justice would be recommending penalties for Under Armour’s having engaged in practices to make its financial picture look healthier than it actually was from the third quarter of 2015 through the end of the following year. That period covers the time that Under Armour was negotiating with UCLA about a potential sponsorship deal.
“Had UCLA known that Under Armour was making false financial statements in violation of law and SEC regulation, and falsely reporting its sales reported from quarter to quarter, UCLA would never have entered into the Agreement and/or would have terminated the Agreement at a time when other similarly-attractive sponsorship agreements could have been negotiated for UCLA,” the school wrote in its lawsuit.
The Associated Press contributed to this report.