Mike Madriaga 8:30 a.m., Feb. 23
Organizer of Rock-n-Roll Marathon files suit against the American Cancer Society
Active-lifestyle event company wants over $1.6 million for alleged breach of contract
The collaboration between the American Cancer Society and Competitor Group Inc, the owner and operator of the Rock-n-Roll Marathon, has run its course.
The San Diego-based company, recently purchased by private equity firm Calera Capital, filed a lawsuit in federal court on March 8, accusing the national non-profit of a breach of contract and of "good faith and fair dealing" after the American Cancer Society terminated its sponsorship agreement with CGI in October of last year.
The American Cancer Society and CGI entered into a "Charity Beneficiary Agreement" in January 2010. The agreement required the non-profit to pay annual fees in exchange for marketing and fundraising opportunities during Rock-n-Roll Marathon events in New Orleans, Chicago, and Seattle.
"The collaboration will, for the first time, combine the resources of the nation's largest health care nonprofit with the endurance sports industry's leading media and event entertainment company to extend the reach of the American Cancer Society DetermiNation® endurance event program and to strengthen its impact on creating a world with less cancer and more birthdays," read a February 2010 press release.
And, according to CGI's complaint, the partnership proved to be successful venture for the non-profit.
"To say the ACS/CGI relationship has been successful would be an understatement. From January 2010 through October 2012, Defendant ACS raised approximately $5,000,000 related to its partnership with CGI."
But despite the alleged benefits of the collaboration, the American Cancer Society is pulling out of the agreement.
The problem, says the active lifestyle event company, is the cancer society failed to notify CGI of the termination 13-months in advance. Because of the lack of notice, the non-profit is required to pay a "termination fee" of $1,463, 950 and a sponsorship fee of $190,011.
"The termination fee in the Agreement is not a “penalty,” it was an agreed upon estimation of the lost revenue CGI would incur if Defendant ACS invoked its unilateral right to terminate the Agreement prior to the end of the term," reads the complaint from CGI. "This was a heavily negotiated provision that was designed to compensate CGI for the loss of a major sponsor that it would not have the opportunity to replace in a timely fashion."
Since canceling the contract, the American Cancer Society has offered to settle the dispute by paying CGI $472,000. CGI, however, wants the full amount.
"Instead of honoring its contractual obligations, and despite its prior representations acknowledging that it owes CGI for convenience” termination fees, beginning in February 2013, Defendant ACS has indicated in letters to and phone discussions with CGI that it does not owe CGI any money because the Agreement, in which both parties had performed for three years, was invalid."
Greg Donaldson, Vice President of Communications for the American Cancer Society, says CGI's claims about the financial benefits of the partnership were misleading.
"These events cost the Society more financially to produce than they raised. As a result and after careful consideration, the Society decided as a good steward of donor dollars that the DetermiNation program was not sustainable for our organization," wrote Donaldson.
"We have valued our relationship with the Competitor Group over the past few years but found that their specific event model proved far too costly to manage, while demonstrating little to no return on our financial investment.
"We think it is regrettable that CGI has chosen to file a lawsuit against the American Cancer Society, a legacy public charity. This action will only serve to divert donor dollars away from the mission of helping cancer patients and their families and direct them instead into the pockets of professional charitable fundraisers."
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