Before we go any further, we want to note that this is not an article about force majeure, or impossibility or impracticability of contract performance. For those of you who were hoping you'd find something to read that wasn't about force majeure, please continue reading. For the rest of you, Tiger King's last episode is out. Enjoy.
The response to this pandemic by celebrities and influencers is all over the map. Celebrities and influencers are posting significant amounts of content while we stay at home during the COVID-19 pandemic — from writing songs about hand washing and delivering messages of hope, to donating millions of dollars to relief efforts and those in need and cooking with their children.4
But some influencers are also making headlines for less savory reasons — from denouncing and even disobeying social distancing and shelter-in-place mandates to "commiserating" with followers from their mansions, beach houses, palatial ranches, etc.5 The response from the public is mixed. In particular, some influencers have received negative feedback from their followers,6 while others have issued public apologies.7
Advertisers are seeing spillover from what some consider foolish and asinine posts by their paid influencers. Do these posts hurt our front-line medical staff and our efforts to flatten the curve? Will others viewing these posts host their own parties of 50 in their backyards?
It's unclear at this point. That said, the behavior provoking backlash, and the subsequent apologies, raise the question of whether advertisers should socially distance themselves from their social influencers.
When an influencer acts in a way that devalues their association with a brand, the advertiser may seek to disassociate from them to reinforce, preserve and strengthen the good will of their brand. To help distance themselves from an influencer's conduct, advertisers can analyze the morals clauses of their endorsement agreements, to see if these clauses provide an appropriate remedy.
Generally, morals clauses serve as important avenues for terminating contracts when the talent or influencer conducts themselves in a way that is contrary to the advertiser's (and its consumers') standards and ethics. A simple morals clause may read as follows:
If at any time during the term of this agreement, Influencer becomes the subject of public disrepute, contempt or scandal that affects Influencer's image or goodwill, then Advertiser may, upon written notice to Influencer, immediately suspend or terminate this agreement and Influencer's services hereunder, in addition to any other rights and remedies that Advertiser may have hereunder or at law or in equity.
In light of novel backlash that arises during (hopefully) rare events like COVID-19, advertisers may ask two questions: (1) How much discretion can we exercise when citing a breach of a morals clause; and (2) how can exercising our termination right under a morals clause impact our payment obligations? We will look at each in turn.
Morals Clauses and Advertiser Discretion
In 2008, Rashard Mendenhall, an NFL athlete, and Hanesbrands Inc. entered into a talent agreement to promote and advertise Hanesbrands's Champion products. The agreement contained the following morals clause:
If Mendenhall commits or is arrested for any crime or becomes involved in any situation or occurrence (collectively, the "Act") 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 we shall have the right to immediately terminate this Agreement. HBI's decision on all matters arising under this Section 17(a) shall be conclusive.
On May 2, 2011, following the announcement of Osama bin Laden's death, Mendenhall posted a series of controversial tweets, including: "What kind of person celebrates death? It's amazing how people can HATE a man they never even heard speak. We've only heard one side ..." and "We'll never know what really happened. I just have a hard time believing a plane could take a skyscraper down demolition style."
The tweets elicited a range of reactions from followers — some positive and some negative. Hanesbrands terminated their agreement with Mendenhall, citing the morals clause as its justification. Mendenhall sued, alleging that he had the right to use Twitter to freely express opinions on public events, and that therefore, the termination violated the covenant of good faith and fair dealing implied in every contract.8
The court acknowledged that implied in all contracts governed by New York law "is a covenant of good faith and fair dealing in the course of contract performance," which requires parties exercising discretion under the contract "not to act arbitrarily or irrationally in exercising that discretion."9 Therefore, "mere disagreement with Mr. Mendenhall's comments would not have triggered Hanesbrands' termination rights under [the morals clause]."10
The court further asserted that:
[A] factual determination as to the nature of the public's response is necessary in order to assess whether the public's response to [the] May 2, 2011 tweets could reasonably be characterized in a manner that would trigger Hanesbrands' right to terminate the Agreement.11
In fact, Hanesbrands had carefully documented the varying public responses to Mendenhall's tweets. And Mendenhall publicly acknowledged that his responses stirred up a controversy.
But the court denied Hanesbrands' motion for judgment on the pleadings, leaving for the trier of fact to determine whether Mendenhall's tweets brought him into public disrepute, contempt, scandal or ridicule, or satisfied any requirement under the applicable morals clause. Mendenhall and Hanesbrands ultimately settled the lawsuit in 2013.
This case is helpful in reminding advertisers to document negative publicity and backlash that a paid social influencer receives for his or her posts during the COVID-19 pandemic. But posts by influencers today may be distinguishable from those in Mendenhall — because some may be evidence of violations of state law.
In particular, some of these influencer posts show large gatherings, failures to follow social distancing guidelines, or other conduct in direct violation of state public health policies. While many of these acts are misdemeanors, punishable only by fines,12 they are violations of law just the same.
Overlaying the patchwork of state laws lies ambiguity in enforcement, and the very real fact that stay-at-home orders have become politicized. Regardless of politics, judges may be unsympathetic to influencers' posts at a time when medical resources are strained, and PPE and ventilators are in short supply.
Payments to Influencers When Agreements Are Terminated
Does an advertiser need to pay an influencer if it terminates their agreement for violation of the morals clause? In short, it depends.
Unlike those F-words that lawyers are throwing around these days (force majeure, John Finlay and Frank Cosgrove), violating a morals clause generally is a breach of the agreement. Accordingly, an advertiser would not be required to pay an influencer for violating an agreement's morals clause, if no other agreement applies.
That's easier said than done — particularly if all fees owed under the agreement have already been paid. Clawing back fees from a celebrity who has been paid will prove difficult, without litigation.
The best outcome may simply be that the advertiser may terminate the agreement, and publicly announce that it has distanced itself from the influencer after learning about the social media posts in question.
Next Steps
When we come out from the other side of this — and we will — advertisers may wish to consider the following action items:
- Revise the morals clause language in agreements with social influencers to specifically address content that may run afoul of executive orders, regardless of enforcement by a state.
- If there is a morals clause is missing in the agreement, it's time to put one in.
- Spread out payment, or put payment in escrow, in order to mitigate loss from a social influencer's posts.
- Have conversations with your influencers — now and in the future — to express these concerns, and avoid engaging an influencer who does not share the same values as the brand.
- See Terry Carter, Leslie Jordan is Going Viral For Documenting His Quarantine and Every Video Is A Masterpiece, BuzzFeed News (April 5, 2020), Available at www.buzzfeed.com.
- See Chrissy Teigen (@ChrissyTeigen), Instagram (April 4, 2020), Available at www.instagram.com.
- See Mariel Padilla and Neil Vigdor, Stuck at Home, You Can Still Explore the Zoo or Aquarium. Some Penguins Could, Too, N.Y. Times (March 18, 2020), Available at www.nytimes.com.
- See Olivia Blair, 47 Celebrities Cheering Us Up During Coronavirus Social Distancing, Elle UK (April 9, 2020), Available at www.elle.com.
- See Kenzie Bryant, Is this the End of Influencing as We Knew It?, Vanity Fair (April 3, 2020), Available at www.elle.com.
- See Libby Torres, Justin Timberlake faces backlash after complaining '24-hour parenting is just not human' after self-isolating with his wife and son, Insider.com (April 10, 2020), Available at www.insider.com.
- See Vanessa Hudgens (@VanessaHudgens), Twitter (March 17, 2020, 4:37 P.M.), Available at twitter.com.
- See Mendenhall v. Hanesbrands Inc. , 856 F. Supp. 2d 717, 721 (M.D.N.C. 2012).
- See Mendenhall, 856 F. Supp. 2d at 725 (citing Dalton v. Educ. Testing Serv. , 663 N.E. 2d 289 (N.Y. 1995)).
- Id. at 726.
- Id. at 727–28.
- See N.Y. Exec. Order No. 202.14 (April 7, 2020).
This article was originally published by Law360.
