MLE’s beef with Chestnut stems from Chestnut’s reported sponsorship deal with Impossible Foods, a company that makes plant-based hot dogs. An MLE spokesperson said that Chestnut’s deal would be like Michael Jordan telling Nike that he was going to represent Adidas, too. Impossible Foods responded by saying they support Chestnut “in any contest he chooses” and that “meat eaters shouldn’t have to be exclusive to just one wiener.”

Should a meat eater be exclusive to just one wiener? If you’re just an amateur eater, you can probably eat whatever hot dog you want. But if you’re a professional eater, the analysis may change. MLE claims they have worked with Chestnut for years “under the same basic hot dog exclusivity provisions.” Chestnut, however, said he doesn’t have a contract with MLE or Nathan’s, and “they are looking to change the rules from past years as it related to other partners I can work with.”

Although we work on sponsorship agreements across a broad range of industries and events, we’ve not worked in the man-eat-dog world of competitive eating, so we don’t know what’s standard here. In most sponsorship agreements, though, it’s common to see an exclusivity clause that prevents a person from endorsing competing products (and how that’s defined can be highly-negotiated). In some cases, these agreements may also prevent a person from using a competing product in public.

If this post caught your attention because you’re looking to achieve fame for your company by partnering with a celebrity, you should probably work with a legal professional to help make sure you have the exclusivity rights you need for a successful campaign. But if this post caught your attention because you’re looking to achieve personal fame by eating massive quantities of food in a short amount of time, you should probably work with a medical professional to help make sure that’s really a good idea.

Robert Zeidman, a software developer, travelled to Sioux Falls to participate in the contest, signed the contest Rules, and submitted a 15-page report that he believed met the “one goal” of the contest. The judges disagreed and denied Zeidman the $5 million. Because the Rules required disputes to be arbitrated, Zeidman then initiated an arbitration proceeding. The arbitration panel’s decision holds valuable lessons for anyone who drafts promotions rules (or other contracts).

We imagine that Lindell intended to run a contest in which he would give $5 million to anyone who could disprove his claims that China had interfered with the 2020 election. (We also imagine that Lindell thought no one would be able to disprove his claims and, therefore, that he would never have to pay the money.) That’s not quite what the contest announcement (above) or the contest Rules (below) stated, though. Here are two key provisions from the Rules:

• Participants will participate in a challenge to prove that the data Lindell provides, and represents reflects information from the November 2020 election, unequivocally does NOT reflect information related to the November 2020 election.

• Participants must submit all of their evidence in writing to a three member panel selected by Lindell who will determine whether the submission proves to a 100% degree of certainty that the data shown at the Symposium is not reflective of November 2020 election data.

Lindell’s attorney told the arbitration panel that he wrote the Rules “with input from cyber experts.” The record is silent as to whether he sought input from promotions law experts, but we have our guesses.

The panel noted that “contests and their rules are evaluated under general contract principles” and that the “intent of the parties is determined from the plain language of the written contract, so long as the agreement is clear and unambiguous.” Looking at the language of the rules, the panel determined that “the Contest did not require participants to disprove election interference.” Instead, “the contestants’ task was to prove the data presented to them was not valid data from the November 2020 election.”

The panel walked through Zeidman’s report and determined that he had, indeed, proven that the data he received as part of the contest was not valid data from the November 2020 election. (If you’re interested in the technical details, read the decision which explains that because the data wasn’t packet data, it could not be “related to the November 2020 election.”) Accordingly, the panel determined that Zeidman should be awarded $5 million in accordance with the contest Rules.

Whether you’re trying to achieve a lofty goal, like proving a global conspiracy, or something more mundane, like drafting promotion rules or another type of contract, this decision holds valuable lessons. Precision is important and you need to ensure that your terms (and any related ads) clearly say what you mean. Even a provision stating that you can resolve ambiguities in your “sole discretion” (as these rules stated) may not allow you to “redo” sloppy language.

The agreement between the parties includes a provision that prevents the agency from working for a competitor without Mars’ express approval. Last year, however, Mars employees learned that the agency had answered an RFP and won a contract with a competitor without seeking approval. Mars believes this couldn’t have happened without the use of their confidential information and, to make matters worse, that two representatives with experience working for Mars have been assigned to the new account.

Mars alleges that it tried to get more information from the agency by invoking its audit rights under the agreement, but that the agency refused. And Mars reports that it sought to resolve the dispute amicably, as required by the agreement, but that those efforts have failed. The lawsuit asserts three counts of breach of contract and seeks an order requiring the agency to protect Mars’ confidential information and work product.

At this point, we only have one (heavily redacted) part of the story, and we don’t know whether either party did anything wrong or whether there are lessons to be learned here. But this case may serve as a good reminder to think carefully about exclusivity and confidentiality provisions in your agency agreements.

Registration requirements would apply to companies using form contracts (contracts drafted prior to the transaction for use in multiple transactions between the company and consumers). In addition, the form contracts must contain certain “covered terms and conditions,” as described below. This information would be made publicly available on the CFPB’s website.

The terms and conditions targeted by the CFPB proposed rule are:

• limits on consumer ability to bring a legal action by dictating the time frame, forum, or venue for a consumer to bring a legal action;
• inclusion of arbitration agreements;
• limits on ability to bring or participate in class action lawsuits;
• limits on the company’s liability to consumers including by capping the amount of recovery or type of remedy;
• waivers of claims consumers can bring in a legal action;
• limits on the ability of consumers to complain or post reviews; and
• waivers of other identified legal protections afforded under Constitutional law, a statute or regulation, or common law.

Some of these limitations are already prohibited under other statutes. For example, any contract term limiting consumers’ ability to complain or post reviews is already prohibited under the Consumer Review Fairness Act, discussed in more detail here.

But many other proposed terms and conditions are ubiquitous in financial company form contracts. For example, many companies include arbitration agreements in their terms and conditions and place limits on consumers’ ability to bring a legal action by specifying the time frame, forum, or venue for such legal action. Such contractual terms would trigger the need for CFPB registration under the new proposed rule, which could in turn trigger subsequent scrutiny under the Bureau’s UDAAP authority. Similarly, many form contracts limit the company’s liability to a consumer in one way or another, which is another “covered” term requiring registration. Indeed, as currently drafted, the CFPB’s proposed rule may result in the majority (if not all) of nonbank financial institutions needing to register contracts in the CFPB’s registry for public disclosure.

In promulgating this proposed rule, the CFPB relies on its CFPA mandate to monitor for risks to consumers in consumer financial products and services, and to conduct a risk-based supervision program for nonbanks (see CFPA §§ 1022(c) and 1024(b)). The information gathered in the registry would be used to aid in such monitoring and supervision efforts, as well as to inform the agency’s enforcement, consumer education, and rulemaking functions. Finally, the registry is intended to aid in enforcement actions by other regulators and raise public awareness about the use of covered terms.

Given the widespread use of form agreements, now is a good time to determine whether any of your company’s contract terms are covered under the proposed CFPB rule, and, if so, whether changes are in order. The specific terms and conditions included in the CFPB proposed rule signal regulators’ particular interest and likely increased scrutiny of these types of provisions in financial contracts.

Comments on the proposed rule are due by March 13, 2023.

If the fans from Ecuador are unhappy about the ban, imagine how unhappy Budweiser — who paid $75 million to sponsor the World Cup — must be.

Those of us who work on sponsorship agreements probably reacted to the news the same way — by wondering about what’s in the agreement between Budweiser and FIFA. Although we may never know the details, given Qatar’s history of tight restrictions on alcohol and the lessons that both sponsors and event organizers have learned after more than a year of COVID-related cancellations, it’s likely that the parties contemplated this possibility and addressed it in the sponsorship agreement.

When you’re negotiating a sponsorship agreement, it’s important to spend some time at the outset thinking about what will happen if an event is cancelled, altered, or you don’t otherwise get the benefits you paid for. For example, do you have a right to cancel the agreement? If so, what will happen to the money you’ve already paid? Or do you have the ability to get make-good benefits? If so, how will those be determined?

There isn’t a one-size-fits-all approach to these issues, but if you want some things to consider, grab a cerveza and listen to this podcast that we recorded earlier this year. Just don’t try to do that if you’re sitting in a stadium in Qatar. The podcast will still be here when you get back.

The parties entered into the sponsorship agreement on August 31, 2021. Although Roofclaim.com was concerned about the team’s less-than-stellar record, they were allegedly persuaded to make the investment when the Jaguars hired Urban Meyer as its head coach. Meyer was fired after only 13 games. Roofclaim.com negotiated a provision allowing them to terminate the agreement if Meyer was no longer the head coach, but that provision doesn’t kick in until the third contract year.

Roofclaim.com’s lawsuit is based on the argument that the Jaguars breached the agreement by failing to “provide the sponsorship benefits outlined in the Agreement.” Although the Agreement includes a detailed list of benefits, the complaint doesn’t specify which benefits weren’t provided. Instead, Roofclaim.com argues in the alternative that even if the team did provide the benefits, the Jaguars “created such a toxic environment around its brand” that the sponsorship has now become a detriment to RoofClaim.com.

Unless Roofclaim.com can better articulate the nature of the breach, this lawsuit may just be a Hail Mary that is unlikely to lead to a victory. But while we wait to see if the Jaguars will have a better record in court than they did on the field, this case serves as a reminder that companies need to think carefully about their termination options before entering into a sponsorship. It’s unlikely that either side will walk away with their wish list, but they should at least walk away with a realistic understanding of their options.

On the plus side, the Jaguars won their final game.

As brief background, the EU General Data Protection Regulation (GDPR) requires that businesses have in place mechanisms that ensure an adequate level of protection for EU data subject personal data transferred to the United States. Until July 16, the available transfer mechanisms were Privacy Shield, SCCs, and Binding Corporate Rules. This case arose from a complaint, filed by Austrian privacy activist Max Schrems, with the Irish Data Protection Commission (DPC). Schrems alleged that the transfer of EU personal data to the U.S. via SCCs did not ensure an adequate level of protection (and therefore violated EU data subject rights) because U.S. law enforcement and government agencies were provided essentially unrestricted access to that data. The DPC then referred to the CJEU 11 questions about whether SCCs and Privacy Shield violate EU data subject rights, including the rights to the protection of personal data, under the Charter of Fundamental Rights of the EU.

Schrems had followed the same process in 2015, and in that decision, the CJEU agreed with Schrems, holding that the data transfer framework that existed at that time (Safe Harbor) did not provide protection equivalent to that afforded within the EU, and therefore did not meet the adequacy standards for international transfers. As a result, the EU Commission agreed to replace Safe Harbor with Privacy Shield, which currently has over 5,000 participants. Most companies, including Facebook, switched to SCCs after that decision.

As the CJEU explains in the decision issued on July 16, although Privacy Shield provides an adequate level of protection for data transferred thereunder, it allows derogation from those protections “to the extent necessary to meet national security, public interest, or law enforcement requirements” and therefore “cannot ensure a level of protection essentially equivalent to that guaranteed by the EU Charter [of Fundamental Rights].” As a result, Privacy Shield is invalid, effective immediately. The CJEU upheld SCCs as a valid transfer mechanism, but reiterated that companies cannot simply sign the SCCs and be done with them. Rather, they have an obligation to ensure that their privacy and security practices are in compliance with the requirements within the SCCs, and should therefore be sensitive to sharing any EU personal data with U.S. law enforcement and government agencies.

An appeal is possible, and could result in a different outcome, but Schrems is pleased with the CJEU decision. In the meantime, please reach out for any assistance implementing, or confirming that your practices are in compliance with, SCCs.

When companies start to negotiate a sponsorship for an event, it’s common to focus on the benefits of the partnership and to ignore the possibility that the event won’t run as planned. After all, we’re lucky enough to live in a world where that rarely happens. But when it does, it serves as an important reminder that companies sometimes need to plan for these contingencies.

Make sure your sponsorship agreement addresses what will happen if an event is cancelled or you don’t otherwise get the benefits you paid for. For example, do you have a right to cancel the agreement? If so, what will happen to the money you’ve already paid? Or do you have the ability to get make-good benefits? If so, how will those be determined?

Keep in mind that even well-drafted cancellation and make-good clauses may not make you completely whole. For example, even if you can get a pro-rata refund of your sponsorship fees, or even if your benefits will roll over into a future event, you may still lose money that you’ve invested in marketing assets or other activations.

Event organizers frequently purchase insurance to cover the financial risk of an unexpected cancellation of their event or a reduction in attendance. Event cancellation insurance is typically designed to pay the event organizer for its lost profits or to reimburse it for refunds it has to pay to attendees or sponsors if the event is cancelled for reasons covered by the policy.

When drafting your agreement, in addition to standard forms of coverage, consider exploring whether the event organizer has event cancellation insurance. For more details on this insurance, please see this advisory from our Insurance Recovery team. And if you're thinking about strategies to mitigate business interruptions to your own company and ensure employee safety, please see this post from our Labor and Employment team.

Communications service providers with customers, offices, and storage facilities worldwide often encounter this issue, and it can be challenging to respond in the timely and efficient manner the order necessitates. According to the DOJ, many U.S.-based CSPs will not respond to foreign authority orders due to concerns about restrictions and liability under U.S. law. As a result, foreign law enforcement agencies have been forced to turn to Mutual Legal Assistance Treaties and request the assistance of their U.S. counterparts in obtaining a court order for the data. The MLAT process is time consuming and burdensome and in recent years has been unable to keep up with the increasing number of requests.

The CLOUD Act takes a two-step approach to resolving these issues. First, the Act allows the U.S. to enter into agreements with trusted partner countries to expeditiously obtain access to electronic data to investigate and fight serious crime and terrorism. These partner countries must meet certain criteria, including implementing substantive and procedural protections for privacy and civil liberties. The agreements will remove any legal barriers that would otherwise prohibit companies from complying with qualifying court orders from these partner countries. Second, the CLOUD Act codifies the principle that a company subject to a country’s jurisdiction can be required to produce data the company controls, regardless of where it stores that data, at any time.

The report ultimately concludes that the CLOUD Act adequately addresses the “unsustainable” MLAT situation and supports rights-respecting countries’ efforts to investigate serious crimes. As a result, U.S.-based CSPs who receive a foreign order from a partner country to disclose information, regardless of where that information is stored, must either do so or challenge the order under that country’s laws. The provider may no longer refuse to comply with the order on the grounds that doing so conflicts with U.S. law.

Morals clauses generally give companies the right to terminate an endorsement agreement, if an endorser commits an act that falls within the scope of the clause. Given what’s at stake, the scope of that clause is often one of the most-negotiated provisions in these agreements. Endorsers naturally want the clauses to be as narrow and specific as possible. (For example, a clause might only kick in if an endorser is convicted of, or pleads guilty to, a felony.) This type of clause, though, won’t necessarily help if a celebrity is only accused of sexual misconduct. Thus, companies want more flexibility. (For example, they may push for a clause that allows termination if the endorser’s actions would subject the company to ridicule, contempt, controversy, embarrassment, or scandal.)

Keep in mind that the effectiveness of your clause depends not only on its scope, but also on how it works in conjunction with other provisions in your agreement. Consider, for example, how things work if your payments are stacked towards the front of the term. You may be able to terminate for a breach later in the term, but you may not be able to recoup the money you’ve already invested. (That said, our friends at Drye Wit wrote about a type of insurance that could help.)

There isn’t a one-size-fits-all approach here. A lot depends on the person with whom you are negotiating, the amount of money involved, and the nature and length of the campaign. However, the wave of recent scandals demonstrates that companies should give serious thought to these issues whenever they negotiate with a celebrity or influencer.

This webinar series will commence January 25 and continue the last Wednesday of each month, as outlined below.

January 25, 2017, February 22, 2017, March 29, 2017, April 26, 2017, June 28, 2017, July 26, 2017, September 27, 2017, October 25, 2017, and November 29, 2017

Kicking off the series will be a one-hour webinar on “Marketing in a Multi-Device World: Update on Cross Device Tracking” on January 25, 2017 at 12 PM ET.

CLE credit will be offered for this program.

For context, in early 2015 the FTC filed a lawsuit against DIRECTV for deceptively advertising programming packages. Among other alleged violations, the FTC claimed that DIRECTV violated the Restore Online Shopper’s Confidence Act (ROSCA) by (i) charging consumers for access to premium channels through a negative option on its website while failing to clearly and conspicuously disclose all materials; and (ii) failing to obtain consumers’ express informed consent before charging them for premium channels through its website.

DIRECTV filed a motion for summary judgment on the two ROSCA claims, arguing that it disclosed all material terms through hyperlinks and info-hovers throughout the subscription web flow. DIRECTV likewise contended that it disclosed its negative option throughout the subscription web flow and in its terms and conditions, to which consumers had to affirmatively agree before their financial information was submitted to DIRECTV. To support its arguments, DIRECTV pointed out that the FTC had presented no contrary evidence. For example, the FTC did not produce consumer surveys, research, studies, or tests supporting its ROSCA claims, or even disclose whether any such evidence exists. DIRECTV also argued that its negative option disclosures complied with a consent decree previously entered into with state attorneys general.

The FTC argued in response that although DIRECTV may have disclosed material terms through hyperlinks and info-hovers, consumers would only see those disclosures if they clicked on the links or moved their cursors above the info-hovers. The FTC further argued that info-hovers did not accompany every mention of premium-channel promotions, and that consumers could navigate through the website and checkout without ever seeing any of the disclosures. The FTC also argued that the hyperlinks leading to the disclosures used non-descriptive names like “Additional Offer Details” that did not adequately describe the referenced content. Even if consumers clicked on disclosures, the FTC noted, the material terms were buried in dense, confusing language. Finally, although consumers may have been required to click to accept the terms and conditions generally, there was no information presented on the checkout page or the referenced terms and conditions about the negative option.

Last week, the federal judge overseeing the case denied DIRECTV’s motion for summary judgment on the two ROSCA claims. In denying DIRECTV’s motion, the court noted that “while the contents of the website did not appear to be disputed, the inferences drawn from those contents are vigorously disputed, and that dispute is the heart of this case.” In drawing all reasonable inferences in the opposing party’s (FTC’s) favor, as required when deciding a motion for summary judgment, the court held that there was an issue of fact as to whether the non-descriptive names of hyperlinks used by DIRECTV to disclose its material terms rendered the disclosures less than clear and conspicuous. Likewise, the court determined that, viewing all facts favorably for the FTC, there was a reasonable inference “that consumers did not have sufficient information and thus could not have given informed consent when they clicked ‘I Accept. Submit My Order.’”

Although the court’s denial of DIRECTV’s motion for partial summary judgment didn’t determine that DIRECTV’s disclosures were inadequate or that DIRECTV had violated ROSCA, the court’s finding that a triable issue of fact existed on these issues should serve as a warning to advertisers. As the FTC has advised, advertisers should incorporate key disclosures in the underlying claim, where possible, instead of using hyperlinks or info-hovers. When hyperlinks are used, the links should be obvious and labeled appropriately to convey the importance, nature, and relevance of the referenced information. Currently pending before the court is the FTC’s motion for partial summary judgment on the same claims that were the subject of DIRECTV’s motion. The FTC apparently believes that there can be no genuine issue of material fact over the alleged inadequacy of DIRECTV’s disclosures. Regardless of whether the FTC succeeds on it motion, the other claims at issue are headed for trial. Unless the parties reach a settlement, the trial is currently set to begin on January 30, 2017.

Morals clauses generally give companies the right to terminate an endorsement agreement, if an endorser commits an act that falls within the scope of the clause. Given what’s at stake, the scope of that clause is often one of the most-negotiated provisions in these agreements. Endorsers naturally want the clauses to be as narrow and specific as possible. (For example, a clause might only kick in if an endorser is convicted of, or pleads guilty to, a felony.) Companies, on the other hand, want more flexibility. (For example, they may push for a clause that allows termination if the endorser’s actions would subject the company to ridicule, contempt, controversy, embarrassment, or scandal.)

Keep in mind that the effectiveness of your clause depends not only on its scope, but also on how it works in conjunction with other provisions in your agreement. Consider, for example, how things work if your payments are stacked towards the front of the term. You may be able to terminate for a breach later in the term, but you may not be able to recoup the money you’ve already invested. (That said, our friends at Drye Wit wrote about a type of insurance that could help.)

There isn’t a one-size-fits-all approach here, but the Lochte scandal demonstrates that companies should give serious thought to these issues whenever they negotiate with an endorser.

Morals clauses generally give companies the right to terminate an endorsement agreement or obtain a reduction in fees, if the endorser commits an act that falls with the scope of the clause. Given what’s at stake, the scope of that clause is often one of the most-negotiated provisions in these agreements. Endorsers naturally want the clauses to be as narrow and specific as possible. (For example, a clause might only kick in if an endorser is convicted of, or pleads guilty to, a felony.) Companies, on the other hand, want more flexibility. (For example, they may push for a clause that allows termination if the endorser’s actions would subject the company to ridicule, contempt, controversy, embarrassment, or scandal.) There isn’t a one-size-fits-all approach, but recent events demonstrate that companies should give serious thought to this provision whenever they negotiate with an endorser.

Although termination rights in morals clauses can help curtail future losses, they won’t help the companies recoup the money they’ve already invested in the relationship. To help companies deal with those losses, at least one insurance company has offered a product “designed to help customers respond to risks from a celebrity endorser’s public fall from grace, scandal, or unexpected death.” Our friends at Drye Wit wrote about this in January, but the post is worth revising now.

To help companies deal with those losses, AIG recently announced Celebrity Product RecallResponse, a new insurance product “designed to help customers respond to risks from a celebrity endorser’s public fall from grace, scandal, or unexpected death.” Our friends a Drye Wit have more information here.