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As a flood of allegations forces Hollywood to look inward, executives and lawyers representing brands would be remiss not to increase their focus on the risks associated with celebrity partnerships and how to minimize them while maximizing celebrity reach and leverage.

For every celebrity hiding a dark past or even criminal behavior, so many others can serve as influential brand ambassadors. Brands regularly invest massive sums of money in these relationships because a celebrity can lend credibility and cache, creating a sense of relevancy in the eyes of consumers and ultimately boosting consumer engagement and profits. But given the increasing frequency of sexual harassment claims against high-profile figures, brands are now confronting the fact that those potential rewards may come with significant risk. The central question becomes, is your big name behind the brand worth it?

Harvey Weinstein amfAR gala, Inside, Cipriani Wall Street, New York, America - 10 Feb 2016

Harvey Weinstein  Swan Gallet/WWD/REX/Shutterstock

The following lists four specific strategies brands should consider to mitigate these risks and increase the likelihood that their partnerships with celebrities will be successful.

First, brands may want to enhance the content in morality clauses, which are common provisions within an endorsement, license or similar arrangement. A morals clause violation can result in termination of relationship with the celebrity and/or provide grounds upon which the brand may recover damages from the celebrity. A generic, brand-friendly morals clause might read like this: “The Ambassador shall not commit any act or do anything which might tend to bring Ambassador into public disrepute, contempt, scandal, or ridicule, or which might tend to reflect unfavorably on the Brand and the image thereof.”

This type of clause could also incorporate conduct without regard to public conventions, morals and decency; crimes and offenses of the laws of any country involving moral turpitude; and/or acts that shock, insult or offend the general relevant community (or communities), including those that are bigoted, obscene or prejudicial. Where brands often agree to limit the scope of acts that would constitute a violation of the morality clause, brands may now have greater leverage to insist on more robust clauses that stipulate with greater specificity behaviors that would bring a celebrity — and thereby the brand they represent — into public disrepute or contempt.

Second, brands might want to consider conducting enhanced due diligence before they enter into any arrangement, through conducting background checks and interviews. Through diligence, potential risks may be uncovered, and the brand can be in the position to require that the celebrity make legally binding claims or “representations and warranties” about their personal lives. For example, if a celebrity vows to have never taken drugs or participated in criminal activity, a brand is on firm legal footing to establish a breach of contract if those statements later are proven false.

Of course, strategies one and two will be limited by both the scope of remedies provided by the contract and a determination by the brand of which of those remedies (if any) it is willing to employ. For instance, litigation against a celebrity for breach of a morality clause or representation will present a brand with a separate set of challenges — from public relations to financial — that it must also weigh. Alternative remedies could, therefore, include a right to terminate the deal and/or to collect a negotiated amount of pre-determined (“liquidated”) damages.

Third, brands may want to consider if there are methods of structuring deals that might promote positive behavioral incentives. For instance, through profit-sharing arrangements, a celebrity who is acting as a licensee of his/her eponymous name brand may be incentivized to stay on his/her best behavior. These arrangements give the celebrity a certain amount of ownership or interest in the brand, which means he or she will share in the downside suffered from a public scandal.

Finally, brands might consider it wise to obtain additional insurance to protect their investments. Insurance can take several forms. Notably, death and disgrace policies allow brands to recoup money they have spent developing campaign materials that are no longer usable, because the celebrity ambassador has died or become the subject of public contempt.

While celebrity branding can vary greatly in size and scope, the provisions of a celebrity brand ambassador, endorsement or licensing arrangement are unique and should be carefully negotiated and drafted to maximize the value of the relationship and minimize risk to the brand. The above four strategies are useful tools in ensuring a successful partnership with a public personality.

Ilana Lubin is a partner in Crowell & Moring’s New York office where she represents clients in the apparel, fashion, retail, luxury and beauty sectors regarding cross-border and domestic mergers and acquisitions and intellectual property transactions, including joint venture arrangements focusing on the exploitation of celebrity and corporate brands.

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