Justin Bieber has emerged as a bona fide sports star, but in the most unlikely of sportstable

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Question:

Justin Bieber has emerged as a bona fide sports star, but in the most unlikely of sports—table tennis. At only 24 years old, Bieber has won 8 of the last 11 major table tennis tournaments over the past 3 years, breaking virtually every table tennis record in the process. Bieber is poised, articulate, good-looking, and has a radiant smile, which (combined with his seeming invincibility) have prompted the inevitable comparisons to Tiger Woods. Bieber even has a signature move like Tiger’s fist-pump—when Bieber serves an ace, he spins and balances his paddle on his nose like a circus seal with a ball. With his good looks, new-found wealth, instant success, and youthful indiscretions, almost every week the tabloid magazines (like Us and People) dish up stories about Bieber’s fast cars, hard-partying and revolving door of young starlet girlfriends.

Bieber’s meteoric rise to the top of the table tennis world, and the resulting media frenzy, have made Bieber a household name. This has caught the attention of Acme Sports Inc. (Acme). Acme is a leading manufacturer of indoor sports equipment (billiards, darts, foosball, table tennis, etc.). Acme would like to launch a new line of table-tennis paddles endorsed by Bieber and branded with Bieber’s name and likeness. In exchange, Acme would pay Bieber 5% of the product line’s sales.

An Overview of the Relationship

This is an endorsement contract. Some endorsement relationships merely involve the celebrity saying nice things about the product, but this relationship is more complex because Bieber’s name and likeness will incorporated into the product.

The integration of Bieber’s brand into the product creates some risks for both parties. From Acme’s perspective, Acme will incur some start-up expenses to manufacture and market the product. If the relationship sours, Bieber’s brand becomes worthless, or Acme loses its rights, then (a) Acme’s stream of cash flows may be prematurely interrupted, undercutting its investment decisions, and (b) Acme may be stuck with a warehouse of goods (and perhaps some manufacturing equipment) that it can’t use.

From Bieber’s perspective, he “owns” his brand, which is basically a set of consumer psychological perceptions. By letting Acme use his brand, he is giving up some control over how consumers perceive him. If Acme denigrates these perceptions, Bieber’s brand becomes less valuable in all respects.

In theory, shared interest in Bieber’s brand and associated revenue share should align parties’ interests. Because both parties will make more money as the product succeeds, both parties have incentives to make that happen. For now, consider that Acme might find the product line unprofitable even if it makes significant sales, so Acme might want to kill the product line even though Bieber is earning substantial royalties. Alternatively, Bieber may have non-monetary considerations that trump his interest in relationships. For example, imagine Acme wants to distribute products through low-end retail chains—BigLots or dollar stores. Bieber might be concerned about the impact on his reputation even if the distribution channel might maximize profits.

From Bieber’s Perspective

Bieber is the vendor in transactions. Typically, vendors care most about getting paid and defining what they are selling (so they don’t unintentionally sell more than they are getting paid for).

From Acme’s Perspective

Acme is the buyer in this transaction. In this case, they are procuring an asset (Bieber’s brand) as part of assembling the assets required to launch a new business line (the Bieber branded products). Bieber’s brand is only one component of a complex undertaking—while it’s a key component, Acme wants a good return on all of the assets it deploys in the business line.

INSTRUCTIONS

*Please be sure to clearly label your response to each part*

Part 1A:

Assume you are Bieber’s lawyer. Draft a list of the most important provisions (at least 7) you would advise him to include in a contract with Acme. You may not list a morals clause (see part 2 below) as one of your 7 items. Think of this as a checklist of the critical business issues from Bieber’s perspective—what are the things Bieber cares most about? Be as specific as you can and support your answers. Please rank order your list (item 1 is most important, 2 is next most important, etc.). There’s no right or wrong way to write up this list, so feel free to use any format that you wish.

Part 1B:

Now, assume you are Acme’s lawyer. Draft a list of its most important deal terms (at least 7) you would advise Acme to include in their contract with Bieber. You may not list a morals clause (see part 2 below) as one of your 7 items. Again, please be as specific as you can, support your answers, and rank order your list. Please DO NOT conduct any outside research (there is no need). The only resource you may use is your brain.

Part 2:

A morals clause describes objectionable behavior by Bieber that would create damages remedies for Acme. Typically, moral clauses turn on some violation of law or social norms, but they can also restrict behavior that degrades the value of a brand. For Part 2, you will draft two proposed “morals” clauses for the contract between Bieber and Acme: one from the perspective of Bieber and one from the perspective of Acme. Drafting the proposed morals clause from both sides of the transaction will allow you to gain perspective on the respective interests of Bieber (wants to minimize Acme’s ability to terminate his contract) and Acme (wants to maximize its ability to terminate the contract).

In drafting both clauses, consider how the lawyer for Acme would respond to a proposed morals clause that substantially favors Bieber (and vice versa). Describe what effect this might have on the negotiation process? Consider the two clauses you have drafted. For each clause, did you take a hardball approach (propose a clause the opposing side would view as overly harsh), a softball approach (propose a clause the other side would view as favorable), or straddling the fence approach (propose a clause that is favorable to both sides)? Discuss your reasoning as to why you drafted both clauses the way you did.

Please complete Part 2 before reviewing the requirements for Part 3.

Part 3:

For Part 3, assume that you are Bieber’s lawyer. Acme’s lawyer has sent you the following language for a proposed morals clause in the endorsement contract:

“Bieber shall not:

• engage in conduct that Acme (in its sole discretion) deems morally unacceptable;

• use any substances prohibited by law or the Professional Ping-Pong Players Association;

• engage in bad sportsmanship or a violation of the league rules of the Professional Ping-Pong Players Association;

• engage in any activity (personal or professional) that causes a public scandal or negative press or that tarnishes Bieber’s image; or

• criticize or disparage any products manufactured by Acme.”

As Bieber’s lawyer, it is your job to obtain the best deal for your client. Review the proposed language above and identify at least 3 changes you believe are necessary to better serve the interests of your client, Bieber. Hint: consider which terms in the above clause are ambiguous. Please make the changes you believe are necessary using ‘track changes,’ and explain your reasoning behind each of the changes.