On January 18, 2017, the United States Court of Appeals for the Eleventh Circuit held that sisters Kim, Kourtney and Khloé Kardashian (“Kardashians”) could not rely on the doctrine of equitable estoppel to force Kroma Makeup, EU (“Kroma EU”) to arbitrate its cosmetics trademark infringement claims. In a straightforward opinion, the Eleventh Circuit found that it would be inequitable to compel a party to arbitrate its claims against a non-party to the arbitration agreement when the agreement specifically limited arbitration to disputes arising between the parties.
By Lee Tillett, Inc. (“Tillett”) developed and trademarked the Kroma cosmetic line. In 2012, Tillett entered into an agreement with Kroma EU, which gave Kroma EU the right to use the Kroma trademark. The agreement contained an arbitration clause that stated, “[T]he Parties agree that disputes arising between them … should be considered [in] independent arbitration in the State of Florida, United States.”
While Kroma makeup was being sold in the U.S. and Europe, the Kardashians entered into a licensing agreement with Boldface Licensing + Branding, Inc. (“Boldface”) to create a makeup line called “Khroma.” Kroma EU filed suit against the Kardashians for vicarious liability for trademark infringement (and against Boldface for trademark infringement and tortious interference). The Kardashians filed a motion to compel arbitration. The district court denied the motion, and the Kardashians appealed.
The Eleventh Circuit’s Analysis
The Eleventh Circuit affirmed the denial in Kroma Makeup EU, LLC v. Boldface Licensing + Branding, Inc., 2017 WL 192690 (11th Cir. Jan. 18, 2017). The parties agreed that Florida law controlled. The Kardashians argued that they could compel Kroma EU to arbitrate its claims against the Kardashians by using Florida’s doctrine of equitable estoppel. Writing for a unanimous three-judge panel, Chief Judge Ed Carnes recognized that the doctrine of equitable estoppel allows a defendant who is a non-signatory to an agreement containing an arbitration clause to force a signatory to arbitrate its claims when the claims against the non-signatory arise from that agreement. However, Judge Carnes went on to explain that a non-signatory defendant cannot utilize equitable estoppel to alter or expand an arbitration clause that would not otherwise cover the claims at issue. Thus, the Kardashians would have to show both that Kroma EU relied on the agreement to assert its claims against the Kardashians, and that the dispute was within the scope of the arbitration clause.
The court found that the language of the agreement put the claims against the Kardashians outside the scope of the arbitration clause. The clause specifically stated that the parties would arbitrate disputes between them. Since the arbitration clause only applied to disputes between the parties to the agreement, the Kardashians turned to the doctrine of equitable estoppel to compel arbitration. Kroma EU did not consent to arbitrate its disputes with the Kardashians, and therefore compelling arbitration in this instance “would violate the basic principle that parties can be forced to arbitrate only disputes that they have agreed to arbitrate.”
In closing, Judge Carnes wrote, “Like makeup, Florida’s doctrine of equitable estoppel can only cover so much.” The Eleventh Circuit has made it clear that a non-signatory cannot always rely on the doctrine of equitable estoppel to compel arbitration of claims arising under an agreement with an arbitration clause. If parties making an agreement under Florida law that contains an arbitration clause wish to avoid being compelled to arbitrate by non-signatories, they should include language in the arbitration provision that clearly limits the provision to disputes between the parties to the agreement.