## Facts

- Loew’s, Inc. employed screenwriter Lester Cole under a written contract that included a “morals clause” requiring conduct consistent with public conventions and prohibiting acts tending to degrade him in society, bring public contempt, or prejudice the producer or the motion picture industry.
- In 1947, Cole testified before a House committee investigating alleged Communist influence in the motion picture industry.
- Cole refused to answer whether he was or had been a member of the Communist Party; his refusal was widely publicized and he was cited and later indicted for contempt of Congress.
- Loew’s asserted that the hearings and resulting publicity created substantial public and political backlash that threatened boycotts and adverse government action affecting the studio and the industry.
- Loew’s notified Cole that it was suspending him for violating the morals clause based on his refusal to answer the committee’s questions.
- Loew’s conditioned Cole’s return to work on either an acquittal of the contempt charge or removal of the contempt basis by testifying under oath that he was not a Communist.
- Cole declined to meet those conditions; Loew’s then terminated his employment, and Cole sued for breach of contract.
- The district court entered judgment for Cole; Loew’s appealed.

## Issues

1. Whether Cole’s refusal to answer the committee’s questions, together with the resulting publicity and reaction, constituted conduct within the contract’s morals clause permitting suspension and termination.
2. Whether Loew’s prior tolerance of Cole’s suspected political beliefs barred it from invoking the morals clause after public controversy arose.
3. Whether Loew’s suspension conditions (acquittal or “purge” by sworn testimony) were permissible under the contract or amounted to wrongful discharge.

## Decision

- The Ninth Circuit reversed the judgment for Cole and remanded.
- The court held that Loew’s acted within its contractual rights to suspend and terminate Cole under the morals clause.
- The court rejected the argument that Loew’s prior statements and attitudes prevented enforcement of the clause under changed circumstances.
- The court treated the conditional suspension as consistent with the contract and a permissible alternative to immediate discharge.

## Legal Principles

- A broadly drafted morals clause may be enforced according to its terms when an employee’s conduct tends to bring public contempt on the employee or to prejudice the employer or the relevant industry.
- Contract language focusing on conduct that “tends” to cause reputational or business harm permits reliance on reasonably foreseeable public reaction and resulting commercial risk, not solely on inherent moral blameworthiness.
- Prior employer tolerance of an employee’s suspected beliefs does not necessarily waive or estop enforcement of a written morals clause when later events materially change the reputational and business consequences.
- In a private employment dispute, enforcement of contractual reputational-protection provisions generally turns on the parties’ agreement and resulting business impact, rather than constitutional constraints applicable to government action.

## Conclusion

The Ninth Circuit held that Cole’s highly publicized refusal to answer the committee’s questions and the resulting contempt proceedings brought him into public disrepute and threatened prejudice to Loew’s and the motion picture industry, triggering the contract’s morals clause and justifying Loew’s suspension and termination despite earlier employer tolerance of his suspected political views.


Loew's, Inc. v. Cole, 185 F.2d 641 (9th Cir. 1950)