The Morality Clause: How #MeToo Is Changing Hollywood Dealmaking

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Lost jobs. Employee sexual harassment workshops. And extensive morality clauses

Netflix cut ties with 'House of Cards' star Kevin Spacey following extensive sexual misconduct allegations against the decorated actor — behavior that has led to a rise in morality clauses
Photo: © Depositphotos.com/renaschild
Netflix cut ties with 'House of Cards' star Kevin Spacey following extensive sexual misconduct allegations against the decorated actor — behavior that has led to a rise in morality clauses

The sexual harassment reckoning spurred by the ouster of producer Harvey Weinstein amid allegations of sexual misconduct has reverberated throughout the entertainment industry. From movie makers to actors, it's now altering how business is being done as lengthy provisions that allow dealmakers to fire stars for accusations of bad behavior become the norm.

The use of morality clauses — provisions that stipulate a party must uphold a good reputation or face termination of the agreement — is on the rise as studios and dealmakers rush to protect their investments against possible misconduct. Fox is among the studios trying to implement morality clauses, according to The Hollywood Reporter. Several other major and minor distributors have already begun doing so, sources say, with many more expected to follow suit.

"The people adopting this got burned in the last round [of allegations], including distributor clients who had to pick up films that became toxic," said Schuyler Moore, a FORBES contributor and a partner at Los Angeles-based entertainment firm Greenberg Glusker who has already had three clients embrace such clauses. "It’s becoming a very serious issue."

Once viewed by some as a cost of doing business, sexual harassment has become an expensive problem. For the Weinstein Company, it led to bankruptcy: The decorated producer and distributor filed for Chapter 11 protection last week, less than six months after a New York Times investigation led to more than 80 women accusing the company cofounder Harvey Weinstein of sexual misconduct. The accusations ruined its reputation and burdened the television and movie maker with expensive lawsuits that precipitated its bankruptcy. (Weinstein has denied claims of nonconsensual sex.)

Numerous projects associated with those accused of misconduct have been canceled amid public outcry. At Netflix, production of House of Cards was put on hold following extensive allegations against its star, Kevin Spacey, before the decision was made to complete its sixth season without him. The Los Gatos, California-based streaming platform took a $39 million write-down in its fourth quarter, part of which sources attributed to costs for the season as well as a Spacey-starring Gore Vidal biopic, which was in post-production. Spacey apologized but said he did not remember the initial claim, and he has not responded to others.

"We just hadn't had one of this magnitude and related to the societal reset around sexual harassment," CFO David Wells said of the paper loss on a quarterly earnings call.

The service also canceled its second Louis C.K. stand-up special after the comedian apologized for sexual misconduct in November, and it wrote star Danny Masterson out of its comedy series The Ranch following rape accusations against him (he has denied the claims).

Morality or morals clauses have existed in Hollywood contracts for nearly a century. The first believed use was by Universal Studios, which started inserting them into talent contracts after Paramount Pictures-affiliated silent film actor Fatty Arbuckle was tried on accusations of rape and murder in 1921.

But after #MeToo, talent representatives are struggling to limit the boundaries of morality clauses, and their expanded definition is causing problems for attorneys.

"It’s become so much more difficult to negotiate those morality provisions," said Jennifer Ko Craft, a member/partner at Dickinson Wright who regularly secures licensing and endorsement deals for talent. "It's become of higher importance to brand partners."

In the past, some morality clauses could be triggered — and cause talent to be fired — only by the conviction of a crime or a legal charge. But attorneys now say that mere public perception is often enough to get dropped.

"It's gotten so broad and vague," explained Craft. "Now, if the party is in public disrepute, a crime doesn't need to have been committed if the public views you in a certain light."

It's the broad and subjective language of morality clauses that concerns talent representatives. The deciding factor is so-called moral turpitude, defined as an act or behavior that gravely violates the sentiment or accepted standard of the community. For celebrities, this means they could be dropped from an endorsement if a news report alleges a misdemeanor, even if charges were never filed. So long as an actor is perceived to have done something of moral turpitude, even if it happened before the contract began, they're out.

Implementing a morality clause typically allows a studio to cancel a contract without having to pay any further if actors do something that negatively impacts their image and diminishes the value of their services. It's a hedge meant to protect a brand or distributor from the bad behavior of one of its performers, but some representatives for actors feel the morality clauses are going too far.

"They could be used for the wrong purpose," said David Fink, a partner at Kelley Drye and Warren who specializes in media and entertainment litigation. He cited the 1947 case of the Hollywood Ten, when filmmakers accused of being communist sympathizers were jailed and blacklisted from the industry. Back then, studios used morality clauses to terminate their contracts.

To wit, the Directors Guild of America and the Writers Guild of America have long banned morality clauses in guild member agreements. Actors have no such protection: The Screen Actors Guild-American Federation of Radio and Television Artists (SAG-AFTRA) has no such stipulations.

"We are also hearing reports as well of more widespread use of increasingly onerous morality clauses, and that is obviously a significant concern for us," said a SAG-AFTRA spokesperson. "While we do not have contract language directly prohibiting these clauses, we will be taking a close look at this issue to ensure that the union is taking all appropriate measures to protect our members."

For now, morals clauses are here to stay.

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