UCLA and Under Armour Settle for $67.5M

    July 29, 2022, 09:00 AM

    It was announced that UCLA will receive a settlement payment in an amount of approximately $67.5 million from sports apparel manufacturer Under Armour to resolve a lawsuit stemming from the termination of a sponsorship deal.

    The sponsorship deal at issue represented the largest collegiate sponsorship in history when it was signed in 2016 as it would have paid UCLA $280 million over 15 years to outfit the UCLA sports programs in Under Armour apparel. However, beginning in the COVID-19 Pandemic, the relationship between the two parties began to sour. In June 2020, after UCLA had halted all sports programs due to the COVID-19 Pandemic, Under Armour informed UCLA of its intent to terminate the sponsorship deal due to UCLA not providing marketing benefits for an extended period of time (namely, since no sports were being played, no Under Armour gear was being worn and “marketed”).

    Under Armour attempted to invoke the force majeure clause in the agreement to allow the company to exit the deal. UCLA initially sued Under Armour for more than $200 million for breach of contract to prevent Under Armour’s termination of the sponsorship deal. Under Armour countersued with a claim that UCLA violated a separate agreement by covering the apparel company’s logos with social justice patches on uniforms. As part of the settlement, the parties both dropped their respective lawsuits and entered into mutual non-disparagement agreements.

    At the heart of this issue is Under Armour’s invocation of the force majeure clause in the parties’ sponsorship agreement. A force majeure clause is a provision in a contract that frees both parties from obligation if an extraordinary event directly prevents one or both parties from performing. Normally, the extraordinary event is something beyond the control of any party or any entity and, historically, was characterized as an “act of God” that prevented a party from performing their duties under a contract.

    Although a common contractual term in commercial agreements, force majeure clauses were not often exercised outside of the “natural disaster” realm—hurricanes, earthquakes, floods, etc.—or, depending on the drafting of specific provisions, sometimes acts of war or terrorism. However, as was the case with Under Armour and UCLA, the COVID-19 Pandemic gave rise to many parties attempting to invoke force majeure clauses under commercial agreements which then spurred a great amount of lawsuits that are still matriculating through the court system. This is an example of the importance of retaining experienced counsel to review, negotiate and draft commercial agreements so that the parties are not only properly protected but, also, informed and aware of their rights as well as the rights of other parties to the agreement.