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California Judge Sides With UCLA in Under Armour Contract Suit

A California court has ruled on behalf of UCLA in a suit against athletic gear titan Under Armour, which terminated its partnership with the university at the height of the pandemic last year.

The decision comes after the university filed a breach-of-contract lawsuit against the Baltimore-based activewear firm in August 2020, alleging that it violated the terms of a 15-year deal worth $280 million—the largest sponsorship deal in the history of U.S. college sports.

Under Armour, which entered the agreement in 2016, was to provide student athletes and certain school employees with UCLA-branded footwear, apparel and other equipment, as well as merchandise for sale by the university. The company sought to terminate the partnership in late June 2020, telling UCLA that it had failed to honor unspecified contractual commitments to market the goods. The company also invoked the “Force Majeure” clause of its contract, which excuses both parties from liability in fulfilling the agreement due to impacts of an event or circumstance beyond either party’s control. Under Armour cited interruptions to regular business and the cancellation of certain sporting events as a reason for invoking the clause.

Last week, the Superior Court of California in Los Angeles County issued a tentative ruling against Under Armour, saying that the company failed to establish that its termination of the agreement was clearly permitted under the Force Majeure clause.

“The face of the complaint does not clearly establish that Under Armour was an ‘affected party’ under the definition of ‘Force Majeure Event,’ or that Plaintiff UCLA was unable to perform,” Judge H. Jay Ford III wrote in his decision. UCLA did not agree that the Covid crisis made it “impossible or impractical” for either party to perform their duties as stipulated by the contract, and the court agreed with the university’s assessment.

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“At best, they establish the existence of a pandemic and the public response thereto,” the judge wrote of Under Armour’s argument. “They do not establish the impact of the pandemic on Under Armour’s or UCLA’s ability to perform under the Agreement.”

Under Armour asserted that it was entitled to terminate the partnership based on the limited fielding of UCLA sports teams during the Covid crisis. The agreement stipulated that if any of the university’s core teams did not participate, for any reason other than a Force Majeure event, in at least 50 percent of the scheduled games in a regular season, it would be allowed to end the contract. UCLA said that all of its core teams played in all scheduled games. While certain events were canceled due to Covid restrictions, the school argued, UCLA never pulled its athletes from events, and it was not suspended or barred from participating in more than half of the scheduled games and matches.

UCLA argued that Under Armour’s attempt to terminate the contract was in “bad faith,” citing the brand’s “financial distress” as the true reason for its attempt to back out.

Under Armour’s Q2 2020 earnings report, released last August, revealed a loss of $182.9 million. One year later, the brand has swung to a profit of $59.2 million. In an earnings call earlier this month, CEO Patrik Frisk expressed lingering concerns about the company’s ability to procure product amid rampant delays. About one-third of the company’s supply chain is based in Vietnam, which has been hit hard by the Delta variant and is struggling with low vaccination rates.

“Currently, we have experienced some things happening already from Vietnam in terms of impact not just on the actual manufacturing, but also to the logistics and some port congestion and container availability,” Frisk said. “We’re monitoring it, and as you know, it’s a very fluid situation right now in terms of what’s currently going on and how that thing is spreading.”

While Judge Ford ruled tentatively against the company in a decision last week, he has granted it 20 days to respond before the matter is called for a hearing and argued. Neither UCLA or Under Armour responded to requests for comment.

Jordan Brand was officially announced as UCLA’s new athletic apparel and footwear partner on July 1, and the university’s football team will play its 2021 season in new uniforms made by the label.