Hollywood Docket: Kardashians Can't Compel Arbitration in Khroma Beauty Lawsuit

The Kardashians - H  2015
Courtesy of E!

The Kardashian sisters can’t compel a European beauty company into arbitration to resolve a trademark fight over their Khroma cosmetics line, according to a federal appellate court in Florida.

The legal background, in a nutshell, is complicated. While an existing line of makeup called Kroma had already been for sale in Europe and the U.S., the Kardashians entered into a licensing deal with Boldface Licensing + Branding to create their line. Boldface then sued the EU company for a declaration that Khroma didn’t infringe on the Kroma trademark. That company, By Lee Tillett, then filed trademark infringement counterclaims against both Boldface and Kim, Khloe and Kourtney Kardashian. That suit settled in April 2014, but Tillet refused to share its settlement award with Kroma EU — to which it had transferred trademark and distribution rights in 2012 — and Kroma filed the lawsuit at issue here.

The district court granted Tillet’s motion to compel Kroma EU into arbitration, but denied a similar motion filed by the Kardashians. That’s the matter the 11th Circuit is considering here.

“At first blush, the issue appears to require application of Florida’s doctrine of equitable estoppel under which a party to an agreement who relies on it in a dispute with a non-party can be required by that non-party to comply with other terms of the agreement, including the arbitration clause,” states the opinion. “But there is a wrinkle in this case: the arbitration clause which the non-party to the agreement is seeking to enforce is explicitly limited to disputes between the parties. What then?”

The appellate court found that, while there is a “healthy regard” for policy favoring arbitration, at the end of the day it is a matter of contract and, here, the Kardashians sought to enforce an arbitration clause in an agreement that they were not a party in order to resolve a claim that is outside of the scope of that clause. (Read the decision in full here.)

“[W]e would effectively be rewriting the agreement between the signatories about which disputes they would arbitrate to require one of them to arbitrate disputes that they had not agreed to,” states and 11th Circuit opinion. “That would violate the basic principle that parties can be forced to arbitrate only disputes that they have agreed to arbitrate.”

In other entertainment law news:

— Sony Pictures has been given the green light to confidentially arbitrate a dispute arising from the premature release of a film because of its massive 2014 email hack. Possibility Pictures sued in July, claiming Sony breached the anti-piracy provisions of its distribution agreement for To Write Love on Her Arms by not doing more to prevent or mitigate a cyber attack and consequently its film was downloaded for free nearly 20,000 times. In October, Sony filed a motion to stay the suit and move the fight behind closed doors. On Wednesday, U.S. Magistrate Judge Daniel Irick recommended the court grant the motion, finding that arbitration is the appropriate forum in which to decide whether the case needs to be arbitrated or can play out in open court. Irick found that the contract itself specifies that the arbitrator should decide the gateway issue of arbitrability and therefore did not reach the issue of whether the underlying claim itself is subject to the arbitration agreement. (Read the report and recommendation in full here.)

— Valhalla Entertainment, the producer behind AMC's The Walking Dead, has settled its trademark lawsuit against the studio formerly known as Valhalla. Just days before the hit zombie series' season premiere, Valhalla Entertainment filed a suit claiming that Valhalla Studios was causing confusion in the marketplace — especially since both companies are based in the Atlanta area. At the time, the studio's executive chairman of the board, Ryan Millsap, told The Hollywood Reporter that his company was unaware of another Valhalla when it chose its name. Now, Millsap confirms that everything has been resolved and his company has a new moniker: Blackhall Studios. "We’re excited to move forward," says Millsap.

— Paramount Pictures has hired Stephen Plum as its senior executive vp, heading up the studio's motion picture business and legal affairs department. Plum will report to Andrew Gumpert, the company's newly minted COO, and will work closely with chairman and CEO Brad Grey, according to a Tuesday press release. “I have known Steve for many years, and he is very well-regarded in the industry as a strategic executive with tremendous experience who brings a collaborative approach to deal making," said Gumpert of Plum. "I’m extremely excited by the opportunity to have him join me and our outstanding team at Paramount to execute on Brad’s strategy as we continue to grow our slate and work with premier talent and global partners.” Plum most recently was exec vp business affairs for the motion picture group at 20th Century Fox. The studio on Tuesday also announced the promotion of longtime business affairs executive Rona Cosgrove to executive vp business affairs.