Fat Endorsement Contracts Carry Big Stick for Those Being Bad

The recent downfall of Jared Fogle, the Subway dieter that became the face of the brand, brings to mind an issue common to both sports and entertainment law — morals clauses.

Morals or morality clauses, often a hot point in negotiations between companies and workers, seek to regulate the behavior of workers outside of the primary purpose of the contract itself. In Jared's case, the story spun by Subway was that of a severely overweight college student at Indiana University who ate Subway sandwiches twice a day as a way to get into shape.

While many have spoken out against the health benefits claimed by Subway, Jared's story gained traction in advertisements for the brand, which Subway rode through significant expansion and profits. Subway then, with Jared's marriage and his wife's birth of two children, included a family man image in its advertisements with Jared.

Unfortunately for Subway, either through Jared's efforts at carefully guarding his behavior or a lack of due diligence on Subway's part, Jared's extracurricular activities involving child pornography, solicitation of prostitutes and sexual relations with minors only came to the public's attention in the last couple of months.

Since the revelations, Subway has terminated its relationship with Fogle, removing all references to him, due specifically to the morals clause in his endorsement contract.

While every playing contract for the collectively bargained major sports leagues and associations in this country contains morals clauses to bind player behavior off the court and field, the high–profile problems with sports figures and morals clauses comes up largely in the endorsement deal context.

To be sure, there are some instances in which the talent can negotiate a morals clause into contracts that attempt to regulate the behavior of the brand, e.g. that the apparel company will not use child labor or that the retail store will not sell tobacco products, but most morals clauses are contractual provisions that give the company a unilateral right to distance itself from the endorser and punish the talent for immoral or reprehensible conduct that damages the company generally or specifically in a product's sales.

The threshold question here is what constitutes a violation of a morals clause, and that varies based on the specific language in the clause itself. Where the line is drawn will often have to do with which party has more power in the negotiations.

In a given year, the star player on the Chicago Bulls will likely have more bargaining power than a local car dealership, but the roles may be reversed when the player goes to the negotiating table for a national advertising campaign with the car manufacturer itself. What constitutes morality clause violations also depends on the nature of the company and product.

The company's ideal morals clause will be broad and vague, and when dealing with criminal law, an investigation or accusation should be enough to penalize the talent regardless of when the actions took place (e.g., allegation of detrimental conduct becomes public at any time).

Companies should use caution when relying on a broad morality clause when challenging statements and belief of the talent, though, since morality on certain issues may be vague. Sporting goods clothing brand Champion found itself sued by former Illini running back Rashard Mendenhall, whom it terminated after he took his distaste for the public celebration of Osama bin Laden's death and disbelief in the nature of the Twin Towers' destruction to Twitter.

While most Americans would have decried Mendenhall's tweets, the question of whether such statements violated the morals clause of the subject endorsement contract saw the former contractual partners argue breach in court. The parties eventually settled.

On the other hand, the talent would like to see a morality clause be detailed and specific, and when dealing with criminal law, a conviction should be the baseline to merit punishment, and if possible, even the specific crime prohibited (e.g., the athlete may be reprimanded if convicted of a violent crime with at least 30 days written notice). 



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