Frankfurt Kurnit Klein & Selz

October 30th, 2020

October Sports Industry News 2020

What's Happening

Here’s what’s happening at the intersection of sports, marketing, and entertainment law as we approach Election Day and the holiday season.

Pandemic-Induced Contract Termination

As the pandemic rages on and contractual obligations are not being fulfilled, we continue to see breach of contract lawsuits in the sports world, with each party arguing that the other committed the breach. The questions continue to be: How does the pandemic affect the parties’ obligations and is there a justifiable excuse for non-performance? Consider the following: 

• Arguing that The Coca-Cola Company (“TCC”) is using the COVID-19 pandemic as a pretext to end its sponsorship agreement, the National Hot Rod Association (“NHRA”) sued the beverage brand for breach of contract in California federal court. In a $34 million deal signed in 2017, the parties, which according to the complaint have had a relationship since 2002, extended TCC’s sponsorship of the drag racing series through 2023, primarily as the title sponsor for the NHRA Mello Yello Drag Racing Series. In its complaint, NHRA states that TCC indicated in 2019 that it wanted to exit the agreement (just two years into the extension) and once the pandemic caused the NHRA to cancel and postpone certain racing events, TCC argued that NHRA breached the agreement and therefore TCC would immediately terminate the relationship. The NHRA seeks damages for TCC’s breach of contract and a declaratory judgment directing that the sponsorship agreement remains in full force and effect.
• Pro surfer and Hurley endorser Julian Wilson sued the surf apparel brand in California state court for refusing to pay him at least $1.5 million pursuant to his endorsement agreement, which began in 2014. Wilson alleged that Hurley was attempting to benefit from the pandemic by claiming that he breached the endorsement agreement by not participating in the required number of surf contests, which were cancelled due to the pandemic. Unlike team sports athletes, participation in a specific number of competitions is a critical element in an endorsement agreement with an individual sport athlete. Wilson ultimately dropped the lawsuit a month after filing, likely as the result of a settlement between the parties.
• As we noted in our last two Sports Industry Alerts, both UCLA and the University of California – Berkeley continue to battle Under Armour over the termination of their respective 15 year, $280 million and 10 year, $85 million apparel provider deals, in each of which the apparel maker claims it was justified 1) due to the universities’ failure to perform their obligations; and 2) under a force majeure clause. Interestingly, UCLA has continued to play this football season in its Under Armour uniforms, despite suing the brand, as there was not enough time to switch apparel providers before the season commenced. 

Once More, with Feeling: College Athletes and Publicity Rights

A new federal bipartisan bill promises to pave the way for college athletes to profit from their name, likeness, image, and persona. The “Student Athlete Level Playing Field Act” would prohibit the NCAA and universities “from restricting athletes from seeking out their own endorsement deals while also providing Congressional oversight to the process.” The NCAA, which favors uniform, national legislation, is likely to benefit from two features in the new bill: 1) the bill, if enacted, would preempt state name, image, and likeness laws; and 2) it would assign the Federal Trade Commission the right to oversee any program. (California, Colorado, Florida, Nebraska, and New Jersey have already enacted their own amateur athlete publicity laws). The proposed legislation also restricts college athletes from endorsing entities associated with alcohol, tobacco, vaping, marijuana, adult entertainment, or gambling, something that the NCAA and individual schools have also sought.  

This bill, of course, is not the first attempt from federal legislators to address the name, image, and likeness issue in college sports. Past Congressional bills include The “Student Athlete Equity Act” and the “Fairness in College Athletics Act.” Additionally, the NCAA itself is expected to present a set of name, image, and likeness rules sometime soon that will be voted on in January 2021. On the assumption college athletes will be able to commercialize their persona rights, several name, image, and likeness “advisory firms” (such as Altius Sports Partners and Opendorse) are working with universities and their athletes to develop name, image, and likeness strategies.

My Image but Your Copyright Lawsuit?

Texans quarterback DeShaun Watson can add himself to the ever-growing list of celebrities being sued for posting images of themselves on their social media pages. A recent copyright infringement suit by a Houston-based sports photographer claims Watson “continued to copy, publish, and use without permission or a license” photographs belonging to the photographer on Watson’s Instagram page even after receiving a demand letter. With the ease of posting photos and other content in digital media, this type of lawsuit is becoming more frequent – as many other artists and celebrities have found out.  

CBDon’t

Shortly after Browns quarterback Baker Mayfield announced that he was endorsing and investing in CBD brand Beem, the NFLPA sent an email to its licensed agents advising against NFL players endorsing cannabinoid or CBD companies. The union cited an NFL policy stating that “NFL players, coaches, and other employees must not endorse or appear in advertisements for alcoholic beverages, tobacco, or cannabinoid products” (emphasis by the NFLPA). Although athlete endorsements of CBD brands and products have been on the rise over the last two years, as the NFLPA email shows, CBD can still be a controversial area.  

Sponsorship with Purpose

Two recent naming rights deals show the increase of non-traditional sponsorships that incorporate more than just marketing assets. First, beverage packaging company Ball Corp. recently completed a long term deal with Kroenke Sports & Entertainment that includes naming rights to the Denver arena that houses the NBA’s Nuggets and NHL’s Avalanche, as well as marketing rights with the NFL’s Rams and Premier League’s Arsenal. As part of the deal, Ball Corp., which is the world’s largest manufacturer of aluminum beverage cans, intends to promote sustainability “by strengthening in-venue aluminum recycling, providing fans with a more environmentally friendly fan experience, and showcasing aluminum beverage packaging as the most sustainable choice.”

Next, Amazon entered into a long-term, naming rights deal with the Seattle arena that will host the NHL’s Kraken and WNBA’s Storm, renaming the arena “Climate Pledge Arena.” Building on the Climate Pledge (the company’s climate plan that will focus on sustainability), the company stated that the arena “will be the first net zero carbon certified arena in the world, generate zero waste from operations and events and will be powered with 100% renewable electricity."

And Now, a Word From Our Bloggers

Mma Afoaku addresses the New York Attorney General’s lawsuit against two gyms for charging illegal dues and prohibiting consumers from cancelling memberships.

Rayna Lopyan discusses advertisers’ need for flexibility in media buying agreements, particularly with respect to Super Bowl ad time.

Noted and Quoted

Vault Rankings

In its 2021 listing, Vault ranked Frankfurt Kurnit #6 in Best Law Firms for Media, Entertainment, and Sports.

Commercial Sports Contracts and COVID-19

In a recent article for LawInSport, “How commercial sports contracts are being affected by COVID-19,” Christopher Chase provided the U.S. perspective.

The Virtual Advertising Landscape

Christopher Chase contributed to the Supponor whitepaper: Virtual Advertising – Cutting Through the Regulation, where he discussed regulation of virtual advertising under U.S. law.

Want to Learn More?

The New Environment of the Sports Industry

On December 8, Christopher Chase speaks on the panel “The new environment of the sports industry and the rise of e-sports“ at the Inter-American Association of Intellectual Property’s (ASIPI) annual conference (which is being held virtually).

Frankfurt Kurnit Webinars

We’re taking a break from in person conferences and presentations, but please visit our website to see if there is a webinar that may interest you.

If you have questions about sports industry legal matters, please contact Christopher Chase at cchase@fkks.com or (212) 826 5568, or contact any other member of the Sports Group at Frankfurt Kurnit.