California residents will likely be aware that remarks made by Donald Trump considered incendiary by many have led to several companies severing ties with the polarizing candidate for the GOP presidential nomination. Disparaging comments about Mexican illegal immigrants led NBC to terminate its relationship with Trump on June 29, and the Spanish television channel Univision announced that it was cancelling its coverage of the Miss USA beauty pageant. Trump owns the pageant jointly with NBCUniversal.
Trump reacted angrily to the news, and his attorneys filed a $500 million lawsuit against Univision on June 30. However, an arbitration clause in his contract with NBC has prevented him from taking legal action against that network. Attorneys representing Trump said that the network had violated the terms of its contract with the real estate developer, but they added that both parties had agreed to arbitration. Arbitration clauses avoid the publicity of business litigation by requiring parties to allow an independent arbitrator to settle disputes privately.
However, Trump’s attorneys were quick to point out that the Republican candidate’s contract with NBC did not include a morals clause. If such a clause were included in the contract, the network would be able to terminate the agreement if Trump’s statements or behavior caused it embarrassment. While the terms of the contract between Trump and NBC remain private, some observers feel that the network may find arbitration difficult. They say that Trump attracts a great deal of media attention, and businesses entering into an agreement with the entrepreneur should not be surprised by controversy.
A business law attorney may recommend arbitration clauses to avoid the costs and uncertain outcomes associated with court proceedings. An attorney may also review contracts or other legal documents and recommend that certain provisions be included to cover situations where their clients could face embarrassment or ridicule.
Source: CNN, “Donald Trump’s lawyer: NBC in ‘breach’ on Miss Universe contract”, Brian Stelter, July 5, 2015