In a case stemming from a trademark dispute involving a beauty line owned by the Kardashian sisters, the US Court of Appeals for the 11th Circuit affirmed the district court’s denial of a motion to compel arbitration filed by the Kardashians because the sisters were not a party to the agreement containing the invoked arbitration clause, which was explicitly limited to disputes between the parties to the agreement. Kroma Makeup EU, LLC v. Boldface Licensing + Branding, Inc., et al., Case No. 15-15060 (11th Cir., Jan. 18, 2017) (Carnes, J).
Beginning in 2004, US company By Lee Tillett (Tillett) registered the KROMA trademark in connection with a line of cosmetics, and later licensed the KROMA trademark, for exclusive use in the United Kingdom and the European Union, to Kroma Makeup, EU (Kroma EU). The licensing agreement between Tillett and Kroma EU contained an arbitration clause that provided for independent arbitration in Florida for any “disputes arising between them” (emphasis added) that were “impossible to settle . . . peacefully.”
KROMA cosmetics were being sold in the United States and Europe when the Kardashians entered into a licensing agreement with Boldface Licensing + Branding to create a makeup line called “Khroma.” Shortly after releasing the Khroma line, Boldface filed a declaratory judgment action against Tillett asserting non-infringement of the KROMA trademark. Tillett countered against Boldface and each of the three Kardashians individually, filing trademark infringement claims. In April 2014, the parties settled their disputes, and Tillett represented to Kroma EU that it was recovering damages on the licensee’s behalf. When Tillett later refused to share the settlement recovery, Kroma EU filed a lawsuit for trademark infringement against Tillett and the Kardashians. The Kardashians moved to compel arbitration. After the district court denied the motion, the Kardashians appealed.
Despite not being a party to the Kroma EU-Tillett agreement, the Kardashians asked the 11th Circuit to compel arbitration under Florida’s doctrine of equitable estoppel, which requires the Kardashians to show that Kroma EU was relying on the agreement with Tillett to assert its claims against them, and that the scope of the arbitration clause covered the dispute. The 11th Circuit acknowledged the “federal policy favoring arbitration” but explained that arbitration is a matter of contract and only applies to disputes that parties have agreed to arbitrate.
The 11th Circuit explained that since the Kardashians were not “parties” to the Kroma EU-Tillett agreement, they could not use equitable estoppel to compel arbitration under the arbitration clause. The Court contrasted the facts of the Kardashian case with those where a non-party seeking to compel arbitration under a contract was an officer or agent of a signatory agreement and received rights or obligations under the agreement. Furthermore, the Court was adamant that the “disputes arising between them” language in the Tillett arbitration clause precluded the clause from applying to “any dispute.”
Confirming that the district court correctly denied the Kardashians’ motion to compel Kroma EU to arbitrate the trademark dispute, the 11th Circuit concluded that Florida’s doctrine of equitable estoppel allows a non-party to compel arbitration under an agreement only when the dispute at hand falls within the scope of the arbitration clause.
Practice Note: Believing that the 11th Circuit’s decision is inconsistent with other decisions involving similar agreement language, the Kardashians have asked the 11th Circuit to seek clarification from the Florida Supreme Court on the meaning of the arbitration clause language, or to rehear and reverse the case in lieu of certification to the Florida Supreme Court.