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 Bruins 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 a California division of United States District Court, comes two months after Under Armour informed UCLA that it was terminating the 15-year contract the parties agreed to in 2016 that represented the largest apparel sponsorship deal in the history of college sports. Under Armour attempted to back out less than three years into the deal, with more than $200 million left to be paid.
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 wake of the COVID-19 pandemic that has halted college sports since March; that the UCLA baseball team had completed fewer than 50% of its games last season, a requirement for one of its core teams; and that the school had 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.
UCLA rejected all three 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,” Mary Osako, UCLA’s vice chancellor for strategic communications, 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.”
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,” the school wrote in its lawsuit, “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.”
Additionally, UCLA stated that Under Armour had not supplied all of the Bruins gear for the 2020-21 school year, failed to provide an on-site company representative and failed to be in compliance with its retail-store obligation.
New UCLA athletic director Martin Jarmond has aggressively pursued an apparel sponsor to replace Under Armour, engaging four competitors, according to one person with knowledge of the athletic department’s operations who spoke on condition of anonymity because he was not authorized to publicly divulge the discussions.