Report: Cal's Legal Dispute With Under Armour Taking Odd Turns
The legal dispute between athletic gear manufacturer Under Armour and Cal is taking some unusual turns, according to Jon Wilner, who wrote an extensive report about the situation in the San Jose Mercury News.
At the heart of the matter is a 2016, 10-year contract that Under Armour says Cal has breached,. However, Cal officials claim the contract, which went into effect in 2017, was never signed by Cal. The university is operating off the term sheet, which has fewer obligations for Cal.
It’s a big sticking point because Cal is still owed $58 million in cash and product remaining on the contract, according to the Mercury News report. That money becomes even more important now that Cal is losing millions with the cancellation of fall football.
Under Armour wants to end its agreement with Cal based on the contract, and it issued a notice of termination in June specifying two breach-of-contract points, according to the Mercury News story:
--The first invokes force majeure (i.e, the ‘act of God’ clause) and asserts that Cal failed to fulfill contractual obligations to Under Armour because of the cessation of college sports during the coronavirus pandemic.
--The second claim focuses on the sale, by a third-party operator, of $591.68 of apparel from Cal’s long-gone days as a Nike client.
The first claim is part of the contract that Cal did not sign but Under Armour claims is valid. That “force majeure” aspect is not part of the term sheet.
Cal did not respond to Wilner’s request for comment, citing confidentiality issues, but the Mercury News reported Cal's letter of response to Under Armour by deputy campus counsel Julie Conner included the following statement:
“Assuming that your [termination notice] was a negotiating strategy to bring Cal to the table to reevaluate the terms of the Letter Agreement, it was sorely misplaced.”
Regarding the second claim of a breach of contract, the Mercury News noted that Conner said the following in her response letter:
“At the time of your letter (June 22), there were three Nike products listed on the websites cited, accounting for 34 units worth $591.68.
“Our partnership is valued at $8.8 million per year. It is laughable to think that this paltry amount of product constitutes materiality.”
The Mercury News obtained comment from an attorney familiar with these kinds of agreements.
“Given the length of the deal, Under Armour’s strategy comes across as disingenuous,” Joshua Gordon, a sports law professor and arbitrator for the Court of Arbitration for Sport in Switzerland, wrote in an email [to the Mercury News]. “Under Armour is overreaching here and taking a strong-arm approach that seems ill-advised even if their goal is to try to negotiate an end to an agreement they now regret.”
You are advised to read the entire Mercury News article to get a full range of the legal interpretations and actions taking place.
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