A reputation takes years to develop and moments to be destroyed – this is true not only for brands but for individuals. When brands and public figures link themselves to one another, it is done with the mutual decision to consider how they wish to highlight their images. A brand is meant to stand for something and when the people who are the faces of the brand do not uphold the values and beliefs for which the brand stands, the brand's reputation can suffer. Similarly, a public figure's reputation can be tarnished if they are associated with a brand plagued with disruptive conduct (e.g. #MeToo breaches, harassment by key executives, data breaches, and unsafe products). With that knowledge has come the inclusion of "morality" or "morals" clauses in agreements such as talent agreements and spokesperson agreements. But not every morality clause is created equal and the parties must consider what they hope to achieve when drafting the clause in order to ensure their reputation is protected.
In November 2018, the Supreme Court of Canada dismissed a leave to appeal application on the application of a morality clause.1 Certain lessons can be pulled from the Superior Court and Court of Appeal decisions and should be considered when drafting and reviewing these clauses.
Michael Zigomanis is a professional hockey player. In May 2011, Mr. Zigomanis met Frank D'Angelo, president and controlling mind of D'Angelo Brands. Mr. D'Angelo approached Mr. Zigomanis and another professional hockey player to appear in a television commercial for their Cheetah brand energy drinks.
A Talent Services Agreement was prepared by D'Angelo Brands for the players to sign before the television commercial was filmed. The agreement contained a termination clause in favour of D'Angelo Brands, which included a morals clause. The clause stipulated in part that termination would be available to D'Angelo Brands if "the athlete commits any act which shocks, insults, or offends the community, or which has the effect of ridiculing public morals and decency".2
On February 11, 2012, D'Angelo Brands terminated the contract with Mr. Zigomanis, citing, among other things, that the latter had been the subject of major media coverage arising from a "nude photo scandal". At the relevant time, two nude photographs of Mr. Zigomanis were circulating on the Internet. Mr. Zigomanis had taken the photographs of himself and sent them electronically to his then-girlfriend at the end of 2010. At some unknown date, an unknown individual posted the photos on the Internet. By December 2011, the media uncovered the existence of the photographs and published them. Mr. Zigomanis was unaware that the photos were publicly accessible at the time he signed the agreement.
Mr. Zigomanis commenced a lawsuit against D'Angelo Brands for wrongful termination of the contract, seeking the unpaid balance of the income he would have received over the remainder of the contract term and its renewal.
The Court examined whether D'Angelo Brands was entitled to terminate the Agreement under the morals clause. The Court concluded that the actions of Mr. Zigomanis did not amount to a breach of this clause for the following reasons:
- The clause could only be triggered by the actions of the athlete. The Court accepted the undisputed evidence that Mr. Zigomanis was not responsible for posting the nude photographs;
- Even if Mr. Zigomanis was considered responsible for the nude photographs, the clause did not specifically address his past personal conduct. The Court indicated that a clause concerning Mr. Zigomanis' past personal conduct could have been inserted and inferred from its omission that past conduct was not intended to be included and so had no retrospective effect;
- Even if the clause had been interpreted to apply to past conduct, the private transmission of nude photos between two consenting adults within a relationship is not likely to shock, insult, or offend the community or ridicule public morals and decency.
D'Angelo Brands appealed the trial judge's decision. The Ontario Court of Appeal dismissed the appeal and held that the trial judge's finding that the community conscience would not be shocked by Mr. Zigomanis' conduct was reasonable.3
- Consider whose actions can trigger the clause. For instance, can the clause capture events, which were not directly caused by the contracting party yet can reduce the value of the endorsement or promotional benefits?
- Consider what events will trigger the clause. Such considerations include the community being targeted and how explicit the clause should be with respect to events which would not be acceptable to the brand/public figure and their respective communities. Consider including specific examples of offending conduct;
- Consider whether the clause will include past and/or future conduct. Some contracts include benefits, which carry forward beyond the end of the term and consideration should be given as to whether those benefits should be affected by post-contract conduct.
While this article highlights a case in which the brand included a morality clause in its favour, it is becoming increasingly common for athletes and entertainers to demand morals clauses in reverse. These considerations apply equally in both contexts.
1 2156775 Ontario Inc. o/a D'Angelo Brands v Michael Zigomanis, 2018 CanLII 105392 (SCC).
2 Zigomanis v 2156775 Ontario Inc. (D'Angelo Brands), 2016 ONSC 7053 at para 10.
3 Zigomanis v 2156775 Ontario Inc. (D'Angelo Brands), 2018 ONCA 116.
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