NFL Player’s Tweets Teach a Lesson in Contract Performance
By now we all know at least one friend who has tweeted or posted something to Facebook without considering whether it will offend people. Ok… so, by “friend,” I mean we’ve all done it. Hopefully, your gaffe caused—at most—a few snickers, face-palms, or awkward conversations. For Steelers’ running back Rashad Mendenhall, his emotional tweet caused him to lose a multimillion dollar endorsement deal.
However, while you can’t sue your Facebook friends to recover your dignity, Rashad can (and did) sue his endorser for wrongfully terminating his deal.
His deal was with Hanesbrands, a global clothing company that owns a number of brands you probably recognize (Hanes, Champion, Playtex, etc.). They executed an endorsement contract with Mendenhall that included a “morals clause.” This clause essentially stated that Hanesbrands could terminate the deal if Mendenhall was ever arrested for a serious crime, did anything to bring him into “public disrepute, contempt, [or] scandal”, or did anything that tended “to shock, insult, or offend the majority of the consuming public.” The clause also stipulated that Hanesbrands’ decision on all matters arising under this clause “shall be conclusive.”
The problem arose in the aftermath of President’s Obama’s announcement that U.S. Navy Seals had killed Osama bin Laden. Mendenhall apparently disapproved of the public’s mass jubilation at this news, tweeting:
“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 . . .”
This tweet along with several other similar messages generated a great deal of negative publicity. This prompted Hanesbrands to terminate the endorsement deal, invoking their authority to do so under the above-quoted “morals clause.” In turn, Mendenhall sued for breach of contract, alleging that his actions had not triggered Hanesbrands’ authority to terminate.
This case is interesting not only because it simultaneously involves terrorism, an NFL player, Twitter, and (very comfortable) underwear, but also because it adds to the conversation over illusory contracts and the duty of good faith and fair dealing!
Hanesbrands moved for summary judgment in the case but the Court found for Mendenhall, holding that there remains a factual dispute over whether his tweets were offensive to a “majority of the consuming public.” In so holding, the court essentially invalidated the last sentence of the agreement’s morals clause that gave absolute discretion to Hanesbrands in determining whether Mendenhall’s comments were offensive. Here the court is recognizing that if Hanesbrands had absolute authority under this clause, the contract would be “illusory” for being freely terminable at the will of one party. The Court-imposed duty of good faith on Hanesbrands’ determination gives the Court some external standard by which it can judge Hanesbrands’ decision, and therefore protects the two-way bargain upon which all contracts must rest.
This case is both entertaining and instructive for today’s business person. You should feel free to insert one-sided subjective standards into your contracts, but be aware that a court will nonetheless require that you enforce those standards in good faith. On the flipside, for those folks out there who may be subject to seemingly arbitrary termination provisions, take solace in the fact that your contracting partners are still subject to a baseline of rationality that constrains their actions.
The case is Mendenhall v. Hanesbrands, 2012 WL 1230743 (M.D.N.C. Apr. 12, 2012), and after surviving the motion for summary judgment the case seems headed for trial in the coming months. We’ll keep you posted on any more interesting rulings—or tweets.