The UCLA and Under Armour Partnership: A Costly Breakup
In the world of collegiate sports, partnerships between universities and athletic apparel companies are common. These deals provide schools with financial resources and athletic gear, while offering brands exposure to a large and dedicated fan base. One such partnership, between the University of California, Los Angeles (UCLA) and Under Armour, made headlines when it was established and again when it was prematurely terminated. This article delves into the details of the UCLA-Under Armour partnership, its unraveling, the ensuing legal battle, and the financial implications for both parties.
A Record-Breaking Deal
On May 24, 2016, UCLA and Under Armour announced a 15-year performance footwear and apparel agreement. At the time, the deal was the largest sponsorship agreement in college sports history, valued at $280 million. As part of the partnership, Under Armour was to exclusively design and supply the footwear, apparel, and equipment for training and game-day uniforms for all 25 of the university's men's and women's varsity athletic teams.
Under Armour Founder and CEO Kevin Plank expressed enthusiasm for the partnership, stating, "With 113 NCAA Championships, UCLA is the most decorated athletic program in history, the benchmark for excellence in performance. Under Armour's commitment to growth through innovation and an unwavering mission to make all athletes better aligns seamlessly with UCLA and the pioneering figures that helped build the program, and we look forward to reaching new heights with the Bruins."
The agreement was mutually beneficial. For UCLA, it meant a massive infusion of cash and athletic apparel. For Under Armour, it strengthened its global brand impression, aligning with UCLA's significant international student pool and impressive roster of athletes from all over the world. As part of the agreement, Under Armour paid UCLA $15 million up front in addition to roughly $11 million per year in rights and marketing fees. The apparel company also agreed to supply the school with an average of $7.4 million in clothing, shoes and equipment each school year while contributing $2 million over an eight-year span toward athletic facility upgrades. Additionally, through this new partnership, UCLA Athletics would continue in its ability to provide apparel allocations for the UCLA Spirit Squad and Bruin Marching Band while enhancing its allocations to campus recreation and their club sports teams.
Under Armour committed to expanding its West Coast footprint with a commitment to open new retail locations in the greater Los Angeles area - including on LA's Westside - and offer annual internship opportunities at the brand's Baltimore-based global headquarters for university students.
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UCLA joined reigning NFL MVP Cam Newton, two-time NBA MVP Stephen Curry, MLB National League MVP Bryce Harper, NHL MVP Carey Price, PGA Tour Player of the Year Jordan Spieth and one of the most decorated athletes of all-time, Michael Phelps on the Under Armour roster and would be integrated into the brand's comprehensive story-telling efforts, social media initiatives, retail promotions and grassroots activations.
Cracks in the Foundation
Despite the initial excitement, the partnership began to unravel in June 2020. Under Armour informed UCLA that it intended to terminate the deal, citing "marketing benefits" that UCLA had not provided "for an extended time period." The company said in a statement that it wanted to end the partnership because of UCLA’s inability to provide unspecified marketing benefits as required by the contract between the parties. "Under Armour has recently made the difficult decision to discontinue our partnership with UCLA, as we have been paying for marketing benefits that we have not received for an extended time period," the company said in a statement. "The agreement allows us to terminate in such an event and we are exercising that right."
Under Armour attempted to invoke the force majeure clause in the agreement after UCLA stopped all athletic events after the COVID-19 pandemic began. A force majeure clause is a contractual provision intended to protect the parties in the event that the contract can’t be performed due to forces outside the parties’ control or that they could not have anticipated.
The agreement between UCLA and Under Armour contains a force majeure clause which defines a “Force Majeure Event” as a “cause or event” meeting at least two criteria: (1) it is beyond the commercially reasonable control of either party and (2) the performance of the agreement by the affected party is rendered either impossible or impracticable. The agreement lists examples of what constitutes such “causes or events,” including a flood, earthquake, work stoppages, national emergencies, acts of God, and “acts of any regulatory, governmental body and/or agency, having jurisdiction over the affected [p]arty, including without limitation any [l]aws, orders, ordinances, acts, or mandates which prohibit, restrict, or regulate the affected [p]arty’s performance of its obligations under [the] [a]greement.” If a qualified “Force Majeure Event” continues for more than 100 days, either Under Armour or UCLA can terminate the agreement effective immediately by providing written notice.
President Trump declared a national emergency in response to the COVID-19 pandemic on March 13, 2020. Additionally, the NCAA cancelled all college sports for the spring, and the playing of college sports became impracticable, if not impossible. Therefore, both a qualified “Force Majeure Event” and exhaustion of the 100-day requirement contained in the agreement arguably had been met by the end of June when Under Armour informed UCLA it was terminating the agreement.
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UCLA athletic director Dan Guerrero, whose 18-year tenure at the school was set to end that week, appeared to contest Under Armour’s ability to unilaterally dissolve its agreement with the school in a letter he sent to Bruins constituents. "We are exploring all of our options to resist Under Armour’s actions and will share more information as we can," Guerrero wrote. "We want to reassure you that UCLA Athletics remains committed to providing our hard-working staff and student-athletes with the footwear, apparel and equipment needed to train and compete at the highest level."
Legal Battles and Settlement
In August 2020, UCLA sued Under Armour for more than $200 million for breach of contract. UCLA claimed that Under Armour was using the COVID-19 pandemic as a pretext to terminate an agreement it now finds too expensive. The California Supreme Court has been clear that even in the case of a force majeure clause in a contract, a greater than anticipated expense does not by itself excuse the obligation, unless there exists “extreme and unreasonable difficulty, expense, injury, or loss involved.” As Mary Osako, vice chancellor of strategic communications at UCLA, stated “[i]t 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.” The fact that Under Armour has continued to meet its obligations to other similarly-situated schools, even publicly announcing a four-year extension of its sponsorship deal with Texas Tech University on June 25, 2020, provides further evidence that it is capable of meeting its obligations to UCLA but chooses not to because of the expense.
In September 2021, Under Armour countersued UCLA, claiming the school violated a separate agreement by covering Under Armour logos with social justice patches on the uniforms of its football and basketball teams. Under Armour agreed to provide minimal apparel to UCLA's teams for the 2020-2021 academic year, despite already calling off the final 12 years of the deal. However, the Bruins covered up the Under Armour logo on all of their in-game jerseys with a "Stand Together" patch, which Under Armour claimed was an attempt to undercut their brand under the guise of promoting social justice. Lawyers representing UCLA said at the time that there was no intention to be petty or vindictive by hiding or damaging the Under Armour logos in any way.
Both lawsuits have been dropped in light of a settlement. On May 26, the two sides agreed to the settlement, which required Under Armour to pay UCLA $67,491,275, and absolves both parties of any liability. Under Armour was required to make its full cash payment to UCLA within 30 days of the effective date, according to the settlement agreement.
"UCLA is one of the most recognized and respected collegiate names around the globe," Mary Osako, UCLA's vice chancellor of strategic communications, said in a statement to ESPN. "We are gratified to have resolved this matter in a way that benefits our student-athletes and the entire Bruin community."
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The settlement included a mutual non-disparagement clause.
Financial Implications and Future Prospects
The termination of the Under Armour deal and the ensuing legal battle had significant financial implications for UCLA. The Los Angeles Times reported in January that UCLA's athletic department has a debt of more than $100 million, which stems in part from the loss of the Under Armour agreement. "I inherited a deficit with UCLA athletics," athletic director Martin Jarmond told ESPN in July. "So when you have a significant financial challenge, it's difficult to just maintain, never mind to invest."
The cash the Bruins lost out on when Under Armour walked away played a key role in sending the athletic department spiraling into the red over the past three years.
In December 2020, UCLA announced a six-year partnership with Nike and the Jordan Brand that will pay the school $46.45 million. While the school was able to pivot and strike a new deal with Jordan Brand and Nike, the six-year, $46.45 million contract did not do nearly enough to save UCLA Athletics from its $103 million of debt. Nike has a two-year option to extend the UCLA-Jordan deal when it’s up after the 2026-27 school year.
UCLA made a big move in June that could wipe away those financial concerns in short order, though, announcing that the school would be leaving the Pac-12 in favor of the Big Ten starting in 2024. UCLA cited financial struggles as a reason for the conference shift.
UCLA was owed about $213 million on its Under Armour deal when the Baltimore company (NYSE: UAA) moved to terminate the agreement. That “loss” will eventually be much smaller. The Nike deal expires before the 2027 football season, five years before the Under Armour deal was set to end. UCLA will then hit the market for a new apparel sponsor as a member of the Big Ten.
UCLA’s split with Under Armour came at an especially rough time for the school. In addition to the financial uncertainty of the pandemic, which was just a few months old when the termination letter was sent, UCLA’s athletic department has struggled under hefty losses. That includes deficits of $18.9 million and $21.7 million in the two years before the pandemic, according to Sportico’s college finance database. In that span, no public FBS school reported larger losses. The Under Armour deal, one of the largest in the country, was considered a reliable revenue stream that would help limit losses.
Under Armour's Perspective
Under Armour’s retrenchment isn’t just affecting its partners-it also fundamentally reset the market for college apparel deals. Under Armour’s spending spree from 2015-2017 forced Nike and Adidas to also pay up for partners, and without Under Armour as a competitor, prices have since come down. UCLA is a perfect example: In May 2016 it signed a 15-year deal worth $18.7 million per year.
Like many other companies struggling amid the COVID-19 pandemic, Under Armour’s financial outlook is increasingly bleak. Wall Street analysts project the company’s sales for the current fiscal quarter to be down 53.8% from the same period last year, according to American Banking and Market News. Shares of Under Armour stock opened at $9.11 on Friday, well below its 12-month high of $27.72.
Amid a shift in its sponsorship strategy, Under Armour is in the process of ending many of its high-profile college partnerships. Around the same time it sent its letter to UCLA to terminate that deal, it moved to terminate its 10-year, $86 million with the Cal-Berkeley. It also ended its 10-year, $49.7 million contract with Cincinnati, a complex transaction that Sportico detailed last year.
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