The following article was written by Benjamin Haynes, Esq.
A morals/morality clause is a provision within a contract, which holds a party to a certain behavioral standard. Generally, athletes and actors will see this type of clause in endorsement contracts with various businesses.
Recently, a lawsuit filed on behalf of Steelers running back Rashard Mendenhall against Hanesbrands was voluntary dismissed based n a settlement reached between the two parties. This lawsuit was filed due to Hanesbrands terminating their endorsement deal with Rashard. This termination occurred because Rashard tweeted some controversial statements regarding Osama Bin Laden and the 9/11 attacks. For example, Mendenhall tweeted, “We’ll never know what really happened. I just have a hard time believing a plane could take a skyscraper down demolition style.” The day after Rashard published these tweets, Hanesbrands notified Rashard that they were terminating their endorsement contract. This termination was based on Rashard violating the morals clause of his contract.
Hanesbrands’ counsel filed a motion to dismiss that was ultimately denied by Judge James Beaty. Beaty had found that “Hanesbrands had an implied covenant of good faith and fair dealing not to act arbitrarily, irrationally or unreasonably in exercising discretion to execute its termination rights under the morals clause of the contract with Mendenhall.” Therefore, this case was heading towards a jury trial, unless settled beforehand.
Obviously, a defendant doesn’t want to risk a case going all the way to trial. There are too many variables that could end up costing the defendant more money in the long run. This is why the case settled before a trial could occur. However, if this trial would have taken place, would an objective jury have found that Hanesbrands acted “arbitrarily, irrationally, or unreasonably in exercising discretion to execute its termination rights under the morals clause of the contract?”
Morality clauses are ambiguous in nature. The morality clause in this instant case stated: If Mendenhall … becomes involved in any situation or occurrences … tending to bring Mendenhall into public disrepute, contempt, scandal, or ridicule, or tending to shock insult, or offend the majority of the consuming public or any protected class or group thereof, then [Hanesbrands] shall have the right to immediately terminate this Agreement.
Therefore, the question that would be presented to the jury is as follows, “did Rashard become involved in a situation which offended the majority of the consuming public when he tweeted his opinions on Osama Bin Laden and the 9/11 attacks?” If the answer is yes, then it can be said that Hanesbrands acted within their legal and contractual rights to terminate their agreement. With the amount of press and twitter responses, it could easily be said that Mendenall became involved in a situation which offended the majority of the consuming public.
As simple as the above paragraph makes this case sound, anytime you are dealing with the curtailing of free speech there is going to be resistance to enforce such a provision. There is nothing in Mendenhall’s agreement that specifically disallows him to state his conspiracy theory opinions on his social media avenues. Therefore, shouldn’t he be allowed to state his personal opinions on his personal twitter account? These questions are all a balancing test between: protecting the image of a company, enforcing the ambiguous morality clause, and free speech on behalf of the athlete.
What is worrisome for companies moving forward is the question of how do companies tailor their morality clauses in such a way that keeps them from being in a situation like Hanesbrands? Since Judge Beaty set precedent in denying Hanesbrands Motion to Dismiss, this could mean future litigation with similar circumstances if such morality clauses are not addressed differently. With the continued evolution of social media, morality clauses need to be redrafted to accommodate such potential social media related problems. The difference between a broad morality clause, like that in Mendenhall’s case, and a proposed specifically tailored morality clause, is simple. If one agrees to specifically suppress their own speech then they cannot later raise first amendment issues in a lawsuit unless extravagant circumstances are present, i.e. fraud, duress.
Look for companies to start redrafting their morality clauses in athlete’s contracts to be more specific, especially with regards to social media.