Before Kylie Jenner’s namesake cosmetics brand got its start, and long before Kim Kardashian began offering up beauty products of her own under the soon-to-be-rebranded KKW name, the eldest three sisters in the reality television family embarked on a beauty venture. Together with licensing company Boldface Licensing + Branding, Kourtney, Kim, and Khloe Kardashian launched Khroma Beauty in 2012, only to become embroiled in a number of lawsuits over the name, ultimately, culminating in a rebrand to Kardashian Beauty.
In exchange for “an advance of $1 million plus an 8 to 10 percent royalty on the wholesale price of products (sales royalty) or, alternatively, guaranteed minimum royalty payments for various contract periods and an optional renewal period for a total of $5,206,900,” the Kardashians granted Boldface the right to use their “trademarks, images, and likenesses for the development, manufacture, production, distribution, advertisement, promotion and sale of specified cosmetic products” under the Kardashian Beauty moniker. While Kardashian Beauty has been defunct for years, the Kardashian sisters have, nonetheless, been embroiled in a legal battle over it since March 2016 when their amusingly-named corporate entities Kimsaprincess Inc., 2Die4Kourt and Khlomoney Inc. were named in a lawsuit filed by Hillair Capital Management.
In the complaint that it filed in the spring of 2016, Hillair Capital – the company that purchased the Kardashian Beauty assets and assumed the rights to the licensing deal from Boldface in 2014, after Boldface (which sued the sisters in a separate case) ran into financial trouble – set out claims of breach of contract, breach of the implied covenant of good faith and fair dealing, promissory fraud and declaratory relief, and argued that, among other things, the famous sisters failed to live up to their end of the contract, which required them to serve as the faces of the brand and promote it for the duration of the 5-year-long licensing deal that they entered into with Boldface.
Seeking $180 million in damages, Hillair asserted that almost immediately after it “agreed to put up millions of dollars to help the Kardashians salvage their struggling Kardashian Beauty makeup line” by buying out Boldface, the sisters simply stopped living up to their end of the bargain. “Almost immediately” after the ink on the deal was dry, Hillair claimed that Kourtney, Kim, and Khloe “stopped marketing, promoting and supporting the line, and began courting new potential investors to buy out Hillair’s stake.”
Lawyers for the Kardashians denied the allegations set out by Hillair, calling the suit “an obvious attempt to create leverage by hedge fund operators, who took over the Kardashians’ cosmetics brand.” More than that, they also successfully sought to usher Hillair’s case into arbitration, as the licensing agreement and “the mutual releases signed by the parties just prior to the time [that Hillair] acquired Boldface’s assets” all contained arbitration clauses. In connection with their push for arbitration, the Kardashians sought damages in connection with Hillair and its holding company Haven’s alleged failure to pay them millions of dollars in royalties and to indemnify them for the cost of legal counsel in a separate trademark infringement case related to the Kardashian Khroma name.
Still yet, the sisters formally terminated the licensing agreement in July 2016, and lodged claims of trademark infringement and right of publicity violations against Hillair and Haven after the companies “continued using the Kardashians’ names and images.” Not long thereafter, the Kardashians obtained a preliminary injunction to prevent Haven from releasing the Kardashian Beauty products and using the Kardashians’ names and images without their permission, at which point Hillair and Haven claim that they “immediately ceased distributing products and wound down [the] business.”
Fast forward to 2019 and following arbitration proceedings, the Kardashians’ counsel filed a petition with a California state court in order to obtain confirmation of a nearly $11.5 million damages award granted by the arbitration panel. The petition was approved by Los Angeles Superior Court Judge Richard Fruin, prompting Hillair and co. to challenge not only the arbitration award but the initial order that sent the matter arbitration in the first place and a subsequent order denying their petition for vacatur in connection with the arbitration award.
According to the appeal lodged by Hillair and Haven, the trial court erred in a number of regards, including by “improperly [making] substantive determinations regarding arbitrability that were reserved for the arbitration panel in the arbitration clause in the releases” that the parties signed, and “improperly permit[ing] the panel to decide whether [Haven and Hillair], as third parties to the licensing agreement,” which was entered into by the Kardashians and Boldface, “had to arbitrate under that agreement’s arbitration clause.” Haven and Hillair also took issue with the court “imposing joint and several liability on [them] for Haven’s breaches of a contract to which they were not parties to,” among other things.
Fast forward again to July 6, 2021, and the California Court for Appeal for the Second Appellate District sided with the Kardashians in the case that Justice Judith Ashmann-Gerst says “arises primarily out of disputes over licensing royalties, indemnity obligations, and promotional duties between the owners and affiliates of a cosmetics company and Kim Kardashian West, Kourtney Kardashian, [and] Khloe Kardashian.” In a 49-page decision that was first reported by the Hollywood Reporter, the court affirmed the judgment from the Superior Court of Los Angeles County, thereby, confirming the arbitration award, and denying Hillair and Haven’s petition for vacatur.
According to the court, despite Hillair and Haven’s arguments to the contrary, the trial court did not “decide any substantive issues of arbitrability,” and instead, properly left those issues – including the issue of whether the panel had jurisdiction as a result of the arbitration clause in the releases – to the arbitration panel. Beyond that, the court asserted that Hillair and Haven failed to show that the panel’s exercise of jurisdiction over certain claims that did not arise from the releases was “wholly groundless,” because the issues “involved the same or similar subjects, parties and legal issues” as those present in the releases.
And still yet, the court shot down Hillair and Haven’s argument that the Kardashians’ claims “accrued before the releases were executed,” i.e., before Hillair and Haven were parties to any contract with the Kardashians, and “should have been dismissed by the panel accordingly.” The court held that in making such an argument, Hillair and Haven “are essentially arguing that the panel made either an error of fact or an error of law, neither [of which] are reviewable [by the court],” as “arbitration awards are immune from judicial review,” and thus, the court will not “review the validity of the arbitrator’s reasoning” or “the sufficiency of the evidence supporting an arbitrator’s award.”
With that in mind, the court held that “the arbitration award resolved all the parties’ claims,” and affirmed the judgment, holding that the Kardashians “shall recover their costs on appeal.”
The case is Hillair Capital Investments LP et al., v. Kim Kardashian West et al., (Los Angeles County Super. Ct. No. BC614374).
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