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Armstrong’s Endorsement Contracts and the "Morals Clause"

Lance Armstrong has had a bad fall, and that’s before taking into account the morals clauses in his endorsement contracts.

In late August 2012, Lance Armstrong, seven time winner of the Tour de France, announced that he would no longer contest the U.S. Anti-Doping Agency’s (USADA) allegations that Armstrong and his teammates used performance enhancing drugs in violation of international cycling rules. The following day, USADA stripped him of his Tour de France titles and imposed a lifetime cycling ban. In October 2012, USADA issued its report on Armstrong and the U.S. Postal Service Team, claiming that over 1,000 pages of sworn testimony, email messages, financial payments, and lab test results “shows beyond any doubt that the U.S. Postal Service Pro Cycling Team ran the most sophisticated, professionalized and successful doping program that sport has ever seen.”

A few days later, the International Cycling Union announced it would not appeal USADA’s decision, and in the weeks that followed, Nike, Trek and Oakley terminated their endorsement relationships with Armstrong.

In this article, Loeb & Loeb partner Brian Socolow discusses legal and business issues surrounding morals clauses in endorsement contracts, which allow companies to terminate, or otherwise take corrective action against, an athlete-endorser who is tarnishing the company’s reputation based on some “immoral” conduct.

Brian R. Socolow is a partner at Loeb & Loeb LLP. His practice includes the representation of individuals and organizations in the sports industry in a wide range of legal matters, including intellectual property issues and new media, sponsorships and endorsements, the purchase and sale of sports assets, risk management and sports-related litigation.

Reprinted from Sports Litigation Alert, Volume 9, Issue 12, November 2, 2012. Copyright © 2012 Hackney Publications. Permission for article reprint has been granted.