Almost a year to the day UCLA first sued Under Armour for beach of their 15-year, $280 million contract, a Los Angeles superior court on Thursday issued a tentative, pretrial ruling in the school’s favor.
Judge H. Jay Ford III overruled Under Armour’s “demurrer” (formal objection) to UCLA’s complaint. The complaint raises claims for breach, bad faith, misrepresentation and other wrongs, and demands more than $200 million in damages. The judge rejected Under Armour’s insistence that it lawfully terminated the deal by invoking contractual language, including a force majeure clause that was arguably applicable to the COVID-19 pandemic.
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The ruling doesn’t mean that UCLA will win the case, or even that it’s likely to prevail. However, Under Armour, like other large, publicly traded companies, has incentives to settle litigation that could eventually lead to public disclosure of sensitive information, sworn testimony and even trade secrets. Those incentives, coupled with the advancement of UCLA’s case, could spark additional settlement talks.
The relationship between UCLA and Under Armour is not salvageable. Last December the school signed a six-year, $46.5 million deal with Jordan Brand to supply athletic apparel. It is worth less than half per year what Under Armour was paying the school.
At this early stage in the UCLA-Under Armour litigation, the legal standard of review was favorable to UCLA.
“As long as the complaint does not place a clearly erroneous construction on the provisions of the contract,” Judge Ford quoted from the California Judges Benchbook in 10-page order, “in passing on the sufficiency of the complaint, the judge must accept as correct the plaintiff’s allegations as to the meaning of the contract.” In other words, although UCLA can only win the case by meeting the preponderance of the evidence (more likely than not) burden in civil litigation, here the school only needed to show their arguments weren’t plainly wrong.
As Judge Ford saw it, UCLA’s interpretation of the contract satisfies this low threshold.
The contract defines a force majeure event as one “which renders the performance of this agreement by the affected party either impossible or impracticable.” Judge Ford concluded it is “not clearly” determinable whether “the pandemic rendered it impossible or impracticable for Under Armour or UCLA to perform.”
UCLA, for its part, insists the pandemic did not make it impossible or impracticable for either the school or Under Armour to meet their respective obligations. The judge reasoned additional litigation steps are needed to assess whether Under Armour or UCLA has it right.
Similarly, Judge Ford was unpersuaded by Under Armour’s argument that it could terminate the contract on account of a “core team” clause. The clause expressed that if UCLA ceased to field, for any reason other than a force majeure event, a so-called “core team”—defined as football, baseball, men’s basketball and women’s basketball—termination was possible. Under Armour’s termination letter noted, correctly, that the Bruins baseball team didn’t complete the spring 2020 season. Yet as Judge Ford highlighted, UCLA raised a plausible rebuttal by stressing that the baseball team played in all its scheduled games (the Pac-12, not UCLA, canceled the remainder of spring 2020 sports). Also, to the extent UCLA didn’t field a team, the reason could have been a force majeure event, namely the pandemic, and thus outside the scope of the clause.
The ruling is tentative, as Under Armour has 20 days to answer. The two sides have a long time to discuss a settlement before the trial date of Aug. 22, 2022.
The UCLA-Under Armour breakup happened amid a major reshuffling of Under Armour’s sports sponsorship approach. The company had an acrimonious separation with Cal last year that also involved force majeure claims, and paid to buy out of its contract with Cincinnati. (It also ended an on-field licensing agreement with the NFL).
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