Kroma Makeup EU, LLC v. Kimberly Kardashian

Citations: 845 F.3d 1351; 121 U.S.P.Q. 2d (BNA) 1312; 2017 U.S. App. LEXIS 855; 2017 WL 192690Docket: 15-15060

Court: Court of Appeals for the Eleventh Circuit; January 17, 2017; Federal Appellate Court

Original Court Document: View Document

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Kimberly, Kourtney, and Khloe Kardashian appeal the denial of their motion to compel arbitration regarding claims of cosmetics trademark infringement by Kroma Makeup EU, LLC. The case involves Florida's doctrine of equitable estoppel, which allows a non-party to enforce an arbitration clause in a relevant agreement. However, the arbitration clause in question is expressly limited to disputes between the original parties. 

Kroma's trademark, developed by Lee Tillett, was licensed to Jay Willey Ltd. in 2010, and later to Kroma EU in 2012, both agreements including arbitration provisions for disputes. The Kardashians entered a licensing agreement with Boldface Licensing to create a makeup line named "Khroma." Following the launch, Boldface sued Tillett for a declaratory judgment concerning trademark infringement, leading Tillett to counterclaim against Boldface and add the Kardashians as defendants. A settlement was reached in April 2014, but Tillett did not share any recovery with Kroma EU, prompting the latter to file a lawsuit against Boldface and the Kardashians.

Tillett's motion to compel arbitration for Kroma EU was granted, but the Kardashians' motion was denied, leading to the current appeal. The review of the district court's denial of the Kardashians' motion is conducted de novo, applying federal substantive law of arbitrability under the Federal Arbitration Act (FAA), which supports a strong policy favoring arbitration.

Arbitration is contractual, and the Federal Arbitration Act (FAA) applies only to disputes agreed upon by the parties. The question of whether a non-signatory can compel a signatory to arbitrate is governed by state law, with Florida law agreed upon by the Kardashians and Kroma EU. The Kardashians, as non-signatories to the Kroma EU and Tillett agreement, seek to compel arbitration of Kroma EU’s claims against them through Florida's equitable estoppel doctrine. This doctrine allows a non-signatory to compel arbitration if the signatory relies on the agreement's terms in their claims against the non-signatory. However, the non-signatory cannot broaden the arbitration clause's scope to include claims that fall outside it.

For the Kardashians to compel arbitration, they must demonstrate that Kroma EU's claims are based on the agreement and that the arbitration clause encompasses the dispute. This two-step requirement is illustrated in the Florida District Court of Appeal case Koechli v. BIP International, Inc., where a non-signatory was allowed to compel arbitration because the claims arose from their actions as agents of a signatory. The court emphasized that even if a non-signatory can access an arbitration clause, they can only compel arbitration if their dispute falls within its scope. The specific arbitration clause at issue states it covers disputes about the validity, interpretation, termination, or performance of the Agreement. The Kardashians must be considered "parties" under this clause to invoke equitable estoppel, but they have not cited Florida case law supporting their status as parties for arbitration purposes. Previous Florida rulings supporting non-signatories’ access to arbitration clauses typically involved non-signatories who were agents and had received rights and obligations under the agreement.

The Kardashians argue that limiting equitable estoppel to compel arbitration only if the plaintiff's claims fall within the arbitration clause undermines the doctrine's equitable nature. They assert that a non-signatory should be able to enforce the agreement even if the claim does not fall under the arbitration clause, but this would be inequitable as it rewrites the agreement between the signatories regarding which disputes they would arbitrate. A party cannot be forced into arbitration without having agreed to it, and Kroma EU did not consent to arbitrate disputes with the Kardashians or any non-signatory, only with Tillett. 

A hypothetical scenario illustrates this: if Party B disputes with a non-signatory C regarding an issue outside the arbitration scope, C cannot force B into arbitration based on equitable estoppel, as the dispute is not covered by the agreement. This principle applies here, where the arbitration provision only covers disputes between the signatory parties. Forcing Kroma EU to arbitrate would mean rewriting the arbitration clause of its agreement with Tillett. 

Equitable estoppel may allow a non-signatory to compel arbitration if the claims fall within the arbitration clause’s agreed scope, but in this case, the language specifies arbitration only for disputes arising between the signatories. Thus, the court holds that equitable estoppel does not apply here, affirming the denial of the Kardashians’ motion to compel arbitration with Kroma EU.