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SALT LAKE CITY - A clothing company claiming fraud, breach of contract and "retaliation for whistleblowing" has filed a $2 million lawsuit against the University of Utah.
Level 7 Sports claims the U. wrongfully terminated a contract with the company when its products began selling better than merchandise from larger companies, according to a 10-count complaint filed in U.S. District Court last week.
The lawsuit alleges a fraught relationship between the company and the University of Utah beginning in 2011, which Level 7 claims was marked by suspicious side deals and misrepresentation by school officials.
Level 7 sought to provide low-cost, high-quality merchandise with a greater profit margin than companies such as Under Armour, Champion and Gear, providing a 20 percent to 25 percent rate of return, including a $50,000 donation to the athletics department, compared with the normal 12 percent rate of return.
The lawsuit names several university administrators and alleges the U. terminated the contract with Level 7 in part due to pressure from larger companies when Level 7's "Utah Athletic Apparel" and "cUte" products became popular.
"By everyone's accounts, Level 7's products were some of the best-selling items in the university bookstore and at the Red Zones stores," the lawsuit states. "Despite that performance, however, the relationship between Level 7 and the (University of Utah) began to deteriorate when Level 7 learned about - and reported to various administrators - certain deals and relationships at the university that Level 7 deemed inappropriate."
Level 7 alleges it was punished for whistleblowing after raising concerns about the "inappropriate relationships," which aren't explicitly spelled out in the lawsuit.
Under Armour complained to the university about black replica jerseys it had commissioned from Level 7, though the university told Level 7 the conflict had been resolved and to continue with the product, the lawsuit claims. The university later told Level 7 it couldn't sell the black jerseys because the school didn't want the conflict with Under Armour to continue.
The university then went on to award Under Armour the chance to provide the school's highly popular annual fan shirt, despite them costing more than Level 7's products, according to the lawsuit.
Level 7 also claims in the lawsuit it had an exclusive five-year contract, which would automatically renew after three years, to sell Utah Athletic Apparel and cUte merchandise to the university and and throughout Utah. The university later offered four other vendors the option to sell products at its Sandy Red Zone store and told Level 7 its products couldn't be sold there.
Level 7 claims the U. ended its contract for "pretextual reasons" and to comply with public bidding requirements that they had previously avoided, the claim states. The U. went on to terminate Level 7's one-year licenses for Pac-12 and U. logos, "making it essentially impossible for Level 7 to continue in its business."
After terminating the contract, the remaining three years of the deal to supply Utah Athletics products were put up for bid, the lawsuit alleges. Meanwhile, Level 7 claims the university continues to use infrastructure, signs, tents and trailers paid for by the company.
Attempts to reach University of Utah officials for comment Monday were unsuccessful.
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