A lawsuit involving the Public Broadcasting Service and former television host Tavis Smiley is creating the kind of drama that would make the cast of Downton Abbey blush, and that includes Maggie Smith in her role as Violet Crawley, Dowager Countess of Grantham. That is because the litigation centers on an alleged breach of the "morals clause" included in the agreement that gave rise to the Tavis Smiley talk show, which PBS used to air nightly beginning in 2004. While the case is still pending, a recent ruling relating to the interpretation of that morals clause provides some very useful lessons—but first, a bit of background.

Nothing To Smile About

Through his company TS Media, Smiley initially contracted with PBS in 2002 to produce and distribute the program. That agreement was renegotiated and extended each November thereafter, the last time being in 2017, which contemplated production and distribution of the talk show for its 15th season, commencing in 2018. But in late 2017, PBS received an anonymous complaint regarding alleged sexual misconduct by Smiley, triggering an investigation by PBS's outside legal counsel.

Consequently, PBS suspended the Tavis Smiley show in December 2017, which led TS Media to file its complaint against PBS for breach of contract. The lawsuit, venued in Washington, D.C., asserts that the investigation was a "sham" and that Smiley's dismissal was racially biased. In response, PBS terminated its 2015, 2016 and 2017 contracts with TS Media and countersued, in part pursuant to a morals clause in the agreements, which read:

Producer [TS Media] shall not commit any act or do anything which might tend to bring Producer into public disrepute, contempt, scandal or ridicule, or which might tend to reflect unfavorably on PBS, any station broadcasting or scheduled to broadcast a program, any licensee of PBS, any sponsor of the program, or to injure the success or any use of the Program. Producer agrees that these same 'morals' standards shall apply to all talent hired, retained or utilized by Producer to work on, or in connection with, the Program ('Program Personnel'), including but not limited to the talent to be featured in the Program.

The Court Speaks

PBS's position did not sit well with Smiley and TS Media, which moved for partial summary judgment in October 2019, arguing some of the finer points of the morals clause. Judge Yvonne Williams ruled on the motion in early 2020, and her decision included a detailed interpretation of the provision's language that should be of interest to practitioners, whether they represent management or employees.

Judge Williams began by addressing the timing of the events leading to Smiley's dismissal and the termination of TS Media's contracts. By way of the morals clause, Smiley agreed that he "shall not commit" embarrassing or corrupt acts, which begs the question: For PBS to successfully leverage this language in support of its breach of contract claim, must the offending act have occurred after the agreement was executed, or could the morals clause have been breached when the transgression happened before the contract was entered yet uncovered during its term? According to Judge Williams, the word "shall" unambiguously applied to future conduct on Smiley's part, which would have been music to Smiley's ears had PBS failed to allege misconduct during the terms of the 2015, 2016 or 2017 contracts. But such was not the case, and Judge Williams denied TS Media's motion.

Lesson Learned

For lawyers negotiating or drafting morals clauses, there is a key takeaway from the court's determination; specifically, those representing management may want to include language that is awareness- (as opposed to occurrence-) based. For instance, a management-friendly morality provision could read:

In the event that, during the term of the Agreement, [Employer] becomes aware of an action or omission by [Employee] (whether occurring prior to or during the term of the Agreement) which might tend to bring [Employer or Employee] into public disrepute, contempt, scandal or ridicule, or which might tend to reflect unfavorably on [Employer], its affiliates, licensees, advertisers, supporters or sponsors, or to injure the success or any use of [Employer's products or services], then [Employer] will have the right to immediately terminate the Agreement."

Of course, this wording might be a non-starter for attorneys representing employees to the extent it changes the function of the morals clause from a covenant regarding behavior during the term of the contract to a representation that nothing untoward ever occurred in the past, or will occur during the agreement's term, that could trigger the employer's termination rights.

The Court Speaks: Part II

Judge Williams also considered whether the allegations raised against Smiley were serious enough that they "might tend" to bring him into public disrepute or reflect unfavorably on PBS. She found this to be an issue of material fact for a jury; however, the plain language of the morals clause before the court clearly leans toward management as it pertains to this standard.

To be sure, attorneys negotiating on behalf of employees could argue that this "might tend" verbiage creates, in effect, a virtually de minimis standard, and that some level of significance or materiality regarding triggering conduct would be more equitable for their clients. For its part, counsel for management would want to reason that trying to quantify the extent of reputational damage is extremely challenging, and that management must be given the room to react to scandalous situations in a way that protects their company's reputation, goodwill, employees, brand and shareholder value.

A Word to the Wise: Arbitration

Surprisingly, the Tavis Smiley case—salacious allegations and all—is playing out in open court and not behind closed doors in a confidential arbitration proceeding. Understandably, seasoned attorneys have varying opinions about the pros and cons of alternative dispute resolution, especially when they are representing employees. That being said, in the Smiley litigation, arbitration would have been a win-win, saving Smiley some embarrassment related to the public airing of the sensational accusations against him and keeping PBS out of the limelight. The upshot: every lawyer who negotiates and drafts a contract that includes a morals clause should seriously consider arbitration, especially when a public figure is involved.

Negotiate and Draft With Care

No doubt about it, cases like the one between TS Media and PBS can result in public relations nightmares, which not only shine a negative light upon the parties, but can also radically shift the leverage between them. For this reason, attorneys negotiating and drafting morals clauses must do so with eyes wide open, which will help to avoid any Downton Abbey-level drama.

Michael S. Poster is a partner at Michelman & Robinson, a national law firm with offices in Los Angeles, Orange County (California), San Francisco, Chicago and New York City. He leads the firm's corporate & securities practice group, and maintains a practice focused on corporate and financing matters, particularly those in the music business. he can be contacted at [email protected] or 212-659-2565.