By: Enny Olaleye

On January 18, 2023, prominent rapper Flo Rida, known for hits like, “Right Round,” “GDFR (Going Down for Real),” and “Low,” emerged victorious in his $82.6 million breach of contract lawsuit against the popular energy drink company Celsius Holdings Inc. Flo Rida, whose real name is Tramar Dillard, and his production company, Strong Arm Productions brought suit against Celsius Holdings Inc. In the suit, he claims the company had violated the terms of their 2014 endorsement deal and fraudulently hid information from Dillard during the time of partnership, which ended in 2018, and the court ultimately agreed. 

In the complaint, Dillard’s legal team stated that, “as a music industry superstar and international icon with millions of digital followers, Flo Rida played an instrumental role as the worldwide brand ambassador and launched a new era for Celsius brand development, growth, and expansion.” This statement raises questions about celebrity endorsements and the level of involvement celebrities actually undertake in these deals with multi-billion-dollar companies. 

Thus, the question arises: “What actually is an endorsement deal?” 

An endorsement deal is a contract between a company and a (typically well-known) celebrity who grants the company permission to use his or her name and reputation to advertise a product or service. After the contract is signed, the company compensates the endorser (celebrity) to promote the company’s product or services.  The contract lists the explicit terms and conditions of the endorsement for the celebrity, such as how or where the celebrity should advertise the product, or restrictions on how the celebrity uses the product or service in public. For the period of time defined in the contract, the company commits to providing the endorser with the product at their request free of charge as part of the compensation. 

From the company-standpoint, the primary goal of an endorsement agreement is to increase brand awareness and product revenue. Companies are able to increase brand awareness and product sales without associating their product with a particular celebrity, but by taking advantage of the popularity of their own spokesperson. On the other hand, companies are sometimes able to solidify their brand awareness with unknown individuals who later become popular from the brand awareness. For example, popular brand figures such as “Jake from State Farm,” and “Flo from Progressive,” have led to successful brand campaigns for their respective companies by becoming nationally recognized over time and gaining their own fame—even leading to celebrities dressing up as them for Halloween. 

However, from a celebrity standpoint, considering whether to endorse a product is a bit more complicated.   How involved a celebrity wants to be in the endorsement depends on a variety of factors like their level of desire to increase personal brand exposure, their desire to increase net worth, or their genuine personal  interest in cultivating and investing in the product itself. Today,  the prevalence of influencers and celebrities featured in television commercials and posting products on their social media pages is ubiquitous, whether it’s to increase their brand exposure or simply cut a check is less obvious. Further, it’s becoming more common to see celebrity-company combinations, such as Ryan Reynolds and Mint Mobile  or Flo Rida and Celsius, who enter into endorsement deals as co-owners or stakeholders, permitting them to retain a portion of the product revenue, while simultaneously using their celebrity to endorse the product. 

Although celebrity endorsements have been proven to increase product revenue and awareness, as well as build product credibility, there are still drawbacks companies must consider. First and foremost, celebrities do not work for free. Securing a celebrity endorsement is expensive for companies. Additionally, as product revenue increases celebrities often expect to be paid more, reasoning that the increase in profit directly correlates with their endorsement. In fact, most celebrities ensure companies expressly include this provision in the endorsement agreement before proceeding with the partnership. 

With respect to Dillard’s suit against Celsius, his team claimed such a provision was “specifically contemplated in terms of the agreement, that ‘as Celsius profited in the future, additional compensation would be paid to Dillard by Celsius in the form of shares of company stock and ongoing royalties.’” Further, his legal team claimed that “from ‘a financial perspective,’ Celsius ‘exponentially increased product revenues and sales, attracted key investors, and upgraded its financial status upon partnering with Dillard starting in 2014—all of which ultimately led to the important transition into the Nasdaq market in mid-2017.’” In response, Celsius’ legal team claimed that they did not owe Dillard any additional financial compensation, provided that “the amount of royalties he [Dillard] was entitled to on the products did not exceed the stock revenue he had already been paid. In addition, any increase in Celsius’ stock value occurred after Dillard’s contract expired and therefore Celsius does not owe him any additional compensation.”  

Ultimately, when cultivating celebrity endorsement agreements or simply contracts of any kind, it’s important to complete due diligence, where both parties must undertake all precautions while drafting and reviewing the contract, in hopes of avoiding litigation, drawing bad publicity to the client and ensure the nature and use of the product is not breaching any legal provisions.