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When a company pays a celebrity to endorse its product, part of the contract typically contains a “morals clause” that forbids the person from engaging in actions that that would bring the company “into public disrepute, contempt, scandal or ridicule.”
Morals clauses are everywhere in Hollywood talent contracts, but the standard contractual language might be too broad to stop a celebrity from being polemical on Twitter.
That could be the lesson in a recent decision by a North Carolina federal judge. In the case, Pittsburgh Steelers running back Rashard Mendenhall sued Hanesbrands Inc. for terminating his million-dollar contract to promote Champion sportswear. The clothing company ditched Mendenhall after he sent eyebrow-raising tweets on sociopolitical topics, including an attempt to temper celebration after Osama bin Laden was killed May 2. Now, a judge has denied Hanesbrands’ attempt to escape the lawsuit, saying that Mendenhall alleged a plausible claim for breach of contract.
We covered this lawsuit last year and noted that celebrities’ rights to say controversial things on Twitter could be at stake.
Mendenhall never has been shy about putting his opinions forward on topics like Islam, women, parenting and relationships, but it was his bin Laden tweet that garnered headlines. His endorsement contract with Hansebrands was canceled 48 hours after he sent this tweet: “What kind of person celebrates death? It’s amazing how people can HATE a man they have never even heard speak. We’ve only heard one side.”
In the lawsuit that followed, Mendenhall said, “This case involves the core question of whether an athlete employed as a celebrity endorser loses the right to express opinions simply because the company whose products he endorses might disagree with some (but not all) of these opinions.”
In opposition, Hanesbrands said it was compelled to act by U.S. trademark law.
“Plaintiff posits the wrong question,” said the company to the federal judge. “The correct issue for this Court is whether a trademark owner that has expended considerable time and resources building up substantial goodwill associated with its famous brand is required to continue to pay and employ a celebrity endorser. …”
The first round in this dispute has gone to Mendenhall.
Hanesbrands had a pretty standard morals clause with Mendenhall that prevented the NFL star from making actions that would bring him “into public disrepute, contempt, scandal or ridicule, or tending to shock, insult or offend a majority of the consuming public.”
But before the company exercised its rights to terminate the endorser’s contract, it had certain obligations.
“In the present case, the Court finds that to the extent that the Talent Agreement and Extension provides Hanesbrands with discretionary termination rights under Section 17(a) [the morals clause], that discretion is subject to the implied covenant of good faith and fair dealing,” Judge James Beaty wrote in his April 12 opinion. “As such, Hanesbrands’ exercise of any such discretion, under the implied covenant of good faith and fair dealing, would include a promise on Hanesbrands’ part not to act arbitrarily, irrationally or unreasonably in exercising that discretion.”
The judge continues that his deal could only be terminated based on Mendenhall becoming involved in an act that brought him “into public dispute …” and that “mere disagreement with Mr. Mendenhall’s comments would not have triggered Hanesbrands’ termination rights.”
Hanesbrands had argued that the public backlash was enough to trigger termination under its morals clause, but the judge says it’s too early and the facts aren’t complete to analyze news reports on Mendenhall’s controversial tweets or how the public reacted.
Although there were some negative news reports and some people on Twitter were upset at what Mendenhall had to say, the judge also points to several tweets directed at Mendenhall that were more positive in nature. For instance, one individual replied on Twitter, “At first I was upset about ur tweets but like ur goal it got me thinkin mad respect for u.”
The case now moves to a question that could set precedent in many lawsuits: How do you measure what’s offensive to an audience on Twitter and beyond? The answer could provide some direction not only on cases like this one involving morals clauses but perhaps in legal disputes involving issues like defamation and obscenity. Beaty foreshadows the road ahead:
“To resolve this matter, a factual determination as to the nature of the public’s response is necessary in order to assess whether the public’s response to Plaintiff’s May 2, 2011, tweets could reasonably be characterized in a manner that would trigger Hanesbrands’ right to terminate the Agreement.”
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