Under Armour did not breach its record $280 million contract to outfit athletes at UCLA by terminating the deal amid the COVID-19 outbreak and the resulting disrupted college sports season, the Baltimore company said this week in a court filing.
“COVID-19 upended this deal,” the athletic apparel maker said in response to a breach-of-contract lawsuit UCLA filed in Los Angeles County Superior Court seeking at least $200 million in damages.
After the NCAA and Pac-12 canceled all sporting events in mid-March, “UCLA coaches, staff and athletes could not wear Under Armour products as they ‘practiced, performed and played’ — as required — because there were no teams practicing, performing or playing," Under Armour said.
UCLA initially filed its lawsuit Aug. 26 in U.S. District Court in California, a federal court, before voluntarily dismissing it last month to instead pursue it in a state court.
The lawsuit alleges that the sports brand embellished its financial performance to get the contracts, then breached the agreement by failing to deliver its product and make scheduled payments.
Reeling from losses and coronavirus-related store shutdowns, Under Armour said in June that it planned to end the UCLA deal, one of the apparel maker’s most aggressive efforts to achieve brand dominance through an endorsement. Under Armour still had more than $200 million left to be paid on a 15-year contract agreed to in 2016.
In notices filed Monday, Under Armour seeks to strike portions of the complaint and argues for dismissal, saying there is no legal basis for the lawsuit.
It argues no liability can exist when a contract ends due to a “Force Majeure Event,” or catastrophic event that prevents performance, such as a national emergency. If such an event lasts for more than 100 days, the agreement allows for termination by either party, Under Armour said.
“In the complaint, UCLA ties itself into knots trying to explain away COVID-19” as a catastrophic event, Under Armour says.
But even without such an event, Under Armour argues it had a right to terminate if a UCLA team fails to participate in at least half its season for any other reason.
In addition, Under Armour said it could back out of the deal if a “head coach ... is convicted of or pleads guilty or no contest to a severe felony ... or is otherwise involved in a major scandal.”
UCLA’s soccer coach, who was under contract to wear Under Armour products, was arrested and indicted in connection with the “Operation Varsity Blues” college admissions scandal, Under Armour’s filing says.
In its state court lawsuit, UCLA argues that Under Armour simply wanted out of the deal, “not because of anything UCLA did, but because the deal now seemed too expensive for the financially-troubled sportswear company.”
The athletic apparel brand has been struggling for several years with faltering sales in its key North American market and has been attempting to engineer a turnaround only to see the pandemic decimate the economy and consumer demand.
UCLA’s suit accuses Under Armour of using the pandemic as a pretext to terminate its agreement, which it says neither the agreement nor the law allows.
“Following years of declining business, Under Armour’s corporate leadership apparently decided that the UCLA deal was over-market and too expensive for a troubled company,” UCLA’s lawsuit says.
Under Armour has intermittently provided some of the promised products during the pandemic, UCLA said, but it has intentionally withheld others and delayed deliveries to cause more harm to UCLA.
The lawsuit also says the university had not been aware of potential accounting irregularities, now under investigation by the U.S. Securities and Exchange Commission, and noted other problems, such as declining popularity of the brand among younger teens and fallout from a public scandal involving top male executives expensing trips to strip clubs.
In Under Armour’s motion to strike part of the university’s complaint, it said such allegations “are not only facially immaterial, but are irrelevant, improper and scandalous, and included solely to attract press interest in the Complaint, which in fact occurred.”
Mary Osako, UCLA’s vice chancellor of strategic communications, took issue with that characterization.
“While Under Armour may believe that UCLA’s advocacy for our student-athletes and the broader UCLA community is ‘irrelevant’ and ‘scandalous,’ we disagree,” Osaka said in an email Friday. “Under Armour didn’t honor its obligations to support our student-athletes, which is the true scandal.”
Before the UCLA and Under Armour deal, the NCAA Division I school had been supplied by Under Armour rival Adidas.
Under Armour had pursued a strategy several years ago of outbidding rivals such as Adidas and Nike to become an official sponsor of elite college sports programs.
In 2014, the brand signed a then record-setting, one-year deal with the University of Notre Dame for $90 million, followed by a bigger, 10-year, $96 million agreement with the University of Wisconsin.
But Under Armour is a different company today than it was when it signed such deals, experts have said, and it has been shrinking instead of growing.