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Monday, July 30, 2007
 
Morals Clauses and Michael Vick's Endorsement Contracts

Last Friday, Nike announced that it was suspending Michael Vick's endorsement contract, effective immediately, while Reebok, the NFL's official uniform supplier, and Donruss, a leading trading card company, both announced that they would no longer sell Vick-related items. As reported by Brent Hunsberger in The Oregonian, Nike's decision reflects a marked change in position from its immediate reaction to Vick's indictment, when the world's largest athletic wear maker stood by Vick, issuing a statement saying, "We do believe that Michael Vick should be afforded the same due process as any citizen."

Animal-rights groups, however, didn't react too well to Nike's position and staged well-publicized protests outside of Nike's headquarters in Beaverton, Oregon, as well as outside of numerous Nike stores. Nike may have also been motivated to reverse course due to news of several of Vick's co-defendants cooperating with prosecutors, and perhaps also civil rights activist Al Sharpton's arguably surprising lack of support for Vick.

Still, and as we've discussed on several occasions, there is a long way to go before Michael Vick is found guilty of any crime. And as we listen to myriad talking heads blast Vick for his alleged behavior, we should keep in mind that we have yet to hear his side of the story. And when he tells that story, he will be advised by Billy Martin, one of the nation's top litigators and whom Vick secured the services of last week. Although some facts concerning how the government obtained evidence against Vick remain unclear, I strongly suspect that Martin will have something to say about how that evidence was obtained, perhaps questioning how a warrant issued to search a premises for drugs turned into a dog fighting investigation, and how the incriminating evidence was found in a separate facility behind the home. Arguments over the admissibility of certain pieces evidence are often crucial in trials, and while it's unclear if issues of admissibility will be raised by Martin, they seem like a pretty good bet to come up.

But with endorsement contracts, we're typically not talking about proving guilt "beyond a reasonable doubt," like we do with criminal trials. Instead, we're usually talking about whether a company is better or worse off being endorsed by a particular person, and if worse off, whether that company has a legal right to suspend or terminate its relationship with an endorser. Along those lines, even if Vick is found not guilty, or if he pleads no contest to lesser charges or if the charges are dropped for whatever reason, his mere tacit involvement with underground dog fighting can be seen as morally reprehensible--a point raised by Geoffrey in a comment last week--and thus ill-suited for someone endorsing a product. Indeed, Vick's previous misbehavior (e.g., the Ron Mexico lawsuit; giving the finger to Falcons' fans) motivated several other endorsers, including Coca-Cola, EA Sports, and Air Tran, to not continue their endorsement relationships with him.

With respect to Nike in this instance, however, we see a company suspending an existing contract, rather than not continuing an expiring contract. As I discussed with Hunsberger for his story, Nike enjoys that right due to a morals clause in its contract with Vick. The type of behavior that can trigger a morals clause is often the subject of intense negotiation between an athlete's representative and the company endorsed by his client, and that is a point that Peter Carfagna and I discuss in an article written by Robb London in the October 2005 issue of the Harvard Law Bulletin:
A recent trend, [Harvard Law School lecturer on law] Peter Carfagna says, is an almost obsessive attention now paid to morals clauses in sports contracts, especially in the aftermath of the O.J. Simpson and Kobe Bryant criminal cases. "Morals clauses are now the most heavily negotiated terms," he said. "And the steroid scandal in Major League Baseball is putting even more pressure on sponsors to negotiate escape clauses in contracts with athletes who test positive for illegal performance-enhancing drugs."

Lawyers hash out as much as they can foresee before a contract is finalized, says Michael McCann LL.M. '05, who, together with Greg Skidmore '05, maintains a popular sports law blog, sports-law.blogspot.com. Must an athlete be convicted of a crime before a company will be released from an endorsement contract? If so, must it be a felony? Is a mere allegation or charge sufficient to void a contract? Does a single positive test for steroids give Nike an out? What about gambling, domestic violence, an admitted extramarital affair or anything in an athlete's private life that does reputational harm--will an allegation or admission release a company from continuing to honor a contract?
It will be interesting to see whether Vick will be able to not only defeat criminal charges, but also restore his image. I think we can safely say that his days of earning $7 million a year in endorsements are long gone, and most marketing experts seem to agree. Professor Bill Sutton of the University of Central Florida, for instance, artfully says, "He's going to disappear, like a magic act."

But let's say that Vick can overcome his legal problems. Can he then make a marketing comeback?

He probably won't have that opportunity with the Falcons, which seem poised to release him. And as CNBC's Darren Rovell examines on Sports Biz, it's unlikely that Nike will want him back.

But say, hypothetically, that the Oakland Raiders signed Vick and he thrived there, restoring a once feared, but now scorned, franchise to dominance--could Vick be great again in the eyes of fans, or would the memories of dog fighting linger on?





20 Comments:

Nike could be especially wary of bad publicity in the Vick situation because the company itself has been involved in unrelated controversies - alleged use of underpaid foreign labor, and the marketing of expensive footwear to lower-income urban young people.

Anonymous Peter -- 7/30/2007 9:58 AM  


The same concerns were expressed during the Kobe Bryant rape trials but once due process played out and he was cleared, there appears to have been little lasting blowback from NBA fans.

If Vick is to be exonerated of these charges (however unlikely that may be), I expect that he will enjoy the same benefit of the doubt provided that he produces on the field.

The passage of time and sustained athletic excellence usually dictate sponsor actions after public moralizing dies down - Nike definitely learned that lesson from the Kobe rape allegations. HSUS and PETA will find another topic du jour post-Vick (like they always do) and Nike et al. will continue pay athletes who produce highlight reel plays.

Anonymous Jason Chung -- 7/30/2007 10:40 AM  


Those are two great comments, thanks guys.

Peter,

Great contextual point about Nike, a company that certainly has been the subject of previous controversies concerning the treatment of others. Along those lines, I suspect the company may be particularly sensitive to advocacy groups that stage protests and the like.

Jason,

Excellent reference to Kobe Brant. Like you said, he overcame sexual assault charges in a legal court and also, to a large extent, in the court of public opinion. Moreover, sexual assault allegations, particularly when they are characterized as rape allegations, are probably more stigmatizing than are allegations of dog abuse, although they are both pretty egregious behaviors to have allegedly committed.

Blogger Michael McCann -- 7/30/2007 11:10 AM  


If I recall correctly, Kobe Bryant was not acquitted in a trial; his case never went to trial; the charges were dropped.

If my memory is right, then there would seem to be a significant dfference between Vick's situation and Bryant's. On the assumption that Vick goes to trial, those proceedings will put even more "unsavory" information and images out there for the public to add to their collective impression of Michael Vick. I just don't see how that will help him in the world of product endorsements even if he is acquitted.

Anonymous The Sports Curmudgeon -- 7/30/2007 11:25 AM  


Sports Curmudgeon,

That is good distinction about Kobe's situation, thanks for noting it.

Still, there was an unflattering mug shot of him, he was ordered to appear in court to hear the charges against him (a hearing covered by TV cameras), and he pled "not guilty" in a separate hearing that also had TV cameras covering it. The criminal cloud over him also lasted for a while: an arrest warrant was issued on July 3, 2003 and charges weren't dropped until September 1, 2004.

Moreover, according to his entry on Wikipedia, Bryant's marketing reputation suffered considerably: "His endorsement contracts with McDonald's, Nutella, and Ferrero SpA were terminated. Sales figures from NBA merchandisers indicated that sales of replicas of Bryant's jersey fell far off of their previous highs."

Granted, and as you explain, a comparison between Kobe and Vick isn't perfect, but it still seems on point and may supply some hope for Vick, should he defeat the charges against him.

Blogger Michael McCann -- 7/30/2007 11:51 AM  


Let me take a different take on Jason and SC's comments: Mike uses the phrase "overcome his legal problems." Much depends on how Vick overcomes those problems.

If the charges are dismissed (as with Kobe) or if the jury hangs and the government does not retry (as with, for example, John "Hot Rod" Williams), I think he can bounce back as a player and as an endorser.

If the case goes to trial and Vick is acquitted, it is somewhat less clear. The public often sees an acquittal not as an exoneration but as an indication that the defendant "pulled one over on the jury." Or the public could take it mean that there simply was not enough proof under the incredibly high beyond-a-reasonable-doubt standard, but there was enough to convince us that he did engage in the misconduct.

And consider a third possibility: Vick is convicted and either receives no jail time or a short sentence. He has served his time and paid his debt to society. Will the public be ready to forgive?

Historically, the public has shown a limitless capacity to forgive great athletes, especially if they continue to "produce highlight reel plays."

Blogger Howard Wasserman -- 7/30/2007 2:18 PM  


Howard,

Thanks for your comments. I suspect that Vick will have many fans and many detractors no matter the outcome of the trial (assuming a trial even takes place), although I agree that the manner in which his legal problems are resolved will influence mainstream attitudes toward him. I also agree with your observation about the public's remarkable capacity to forgive those who entertain them.

Blogger Michael McCann -- 7/30/2007 5:02 PM  


But say, hypothetically, that the Oakland Raiders signed Vick and he thrived there, restoring a once feared, but now scorned, franchise to dominance--could Vick be great again in the eyes of fans, or would the memories of dog fighting linger on?

JaMarcus Russell might have a thing or two to say about that...

Blogger Joshua -- 7/30/2007 11:46 PM  


Joshua,

Good point, JaMarcus Russell will no doubt try his best to dissuade the Raiders from acquiring Michael Vick or any other marquee quarterback. But considering the Raiders' offensive line woes and assorted other problems, I wonder how long Russell will last there? I'm sure it was exciting to be the first overall pick, but the Raiders seem like a very difficult team from which to break into the NFL.

Blogger Michael McCann -- 7/31/2007 12:17 AM  


Not only Vicks should be suspended from NFL but he should be thrown off permently from everything he has done. He's put the worst role model for everyone and brought shame to the team and the entire NFL! This is something we will not forgive about but he has killed innocent animals and Vicks SHOULD BE SENTENCE!

Anonymous ERICA -- 7/31/2007 12:28 PM  


Michael,

In my opinion, Russell is the better quarter between him and Vick. I realize that Russell is still unproven in the NFL, but Vick never lived up to the hype. He did not devolpe into the stellar QB that many expected. Vick continues to throw only a few more TD's than INT's every year, and his rushing is not consistant (although he is arguably the best rushing QB in the leage)

During the last three years Vick's TD/INT has been 14/12, 15/13, and 20/13.

In comparison to some of the league's other scrambling QB's these numbers arent that good.

McNabb's last three full seasons (15 or 16 games like Vicks last three)compared at 25/12, 16/11, and 31/8.

Brunell in his rushing days put up numbers like 18/7 , 20/9, and 15/7.

Even Vince Young put up 12/13 in his rookie year.

So vick has proved to be a mediocre passer at best while putting up good numbers rushing.

The raiders should take a chance on Russell rather than a long shot on Vick, not to mention the headaches that come with him.

Thats my two cents on Vick-Oakland.

Blogger Jimmy H -- 7/31/2007 12:54 PM  


It's my impression (and the impression of other blogs) that Vick's biggest problem is not cruelty to animals but the fact that these fights are bet on. I wonder of the NFL is down playing this aspect of the Vick affair.

Dog fighting is a cultural plus amongst some groups and I suspect that certain Raider's fans see this as a plus.

Anonymous Mikeyes -- 8/01/2007 4:43 PM  


dog fighting was evented by the causicans race it seems to me that that everybody including all fans have just flip the strip on Vick what the hell happened to all the loyal fans I don't see know one standing up or beside Vick in his time of need. Usally there are 2 sides to a story but no one wants to hear Vicks side. People just hear the word dog fighting and they go bilistick no question asked its really sad that no one is speaking up for Vick when he really needs his fans the most To all the fake Mike Vick Fans Where your #7 jersey at now. B*****!!!
BIG BOY #1 MIKE VICK FAN FOR LIFE

Blogger Big Boy -- 8/07/2007 4:51 PM  


To Erica who left that awesome comment about Vick I have one for you. You stupid Sista How you going to convict your own kind before you know whats really going on People of our culture have it hard enough you ain't no judge or the DA so how you MY SISTA going to prejudge anybody and P.S. You just be role model for you and yours.

Blogger Big Boy -- 8/07/2007 5:04 PM  


This is America. Michael Vick is innocent until proven guilty. Give the guy a break and let's not rush to judgment.

Anonymous Anonymous -- 8/14/2007 5:19 PM  


I personally think Michael Vick was trying to help out some of his old friends. And look what the old friends did to him.

He is a great athlete and everyone seems against him. I agree he is innocent until proven guilty.

Hang in there, Mike!

Anonymous Anonymous -- 8/14/2007 5:24 PM  


Never mind if Vick was "helping" old friends, his "friends" have testified that he executed dogs that were "poor" fighters. His guilt and complicity in these evil, despicable events will hopefully lead to his 1) 5 year imprisonment, 2) the way too small maximum fine of $250k, and 3)being permenantly barred from the NFL.

Anonymous Anonymous -- 8/19/2007 12:09 AM  


learn how to spell, moron. invented and ballistic. maybe we should be able to start routinely dragging negros tied to the back of our trucks. Hey, they're just "niggers". No big deal. It's just a cultural thing. His own friends revealed how he brutally abused and murdered his dogs. Shut up, Dick Vick fan. Ignorant scum.

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