Outsourcing Justice

The Kardashian Sisters and Arbitration

In a humorous opinion (“Like makeup, Florida’s doctrine of equitable estoppel can only cover so much,”), the Eleventh Circuit addressed equitable estoppel in connection with a trademark dispute involving the Kardashian sisters and their cosmetic line. See Kroma Makeup EU, LLC v. Boldface Licensing + Branding, Inc., No. 15-15060 (11th Cir. Jan. 18, 2017) (click here for a copy of the decision).

The arbitration clause at issue appeared in a marketing agreement between a distributor and a developer of a competing line of cosmetics, and the distributor sued the Kardashian sisters and the competing developer.  The district court allowed the competing developer to compel arbitration of the distributor’s claims because the arbitration clause was contained in the contract between the developer and distributor.

However, the district court refused to allow the Kardashian sisters to compel arbitration under a theory of equitable estoppel, and the Eleventh Circuit affirmed.  The Eleventh Circuit reasoned that the arbitration clause at issue was too narrow to allow for equitable estoppel because the arbitration clause covered only “disputes arising between” the developer and the distributor.  The Eleventh Circuit suggested that if the clause had been drafted more broadly, so that the parties agreed to arbitrate all disputes arising out of the contract (as opposed to all disputes “between the developer and distributor” arising out of the contract), then the Kardashian sisters could have relied on a theory of equitable estoppel under Florida law.

In addition to the humor in the opinion (“at first blush”), the opinion is notable for pointing out errors in older FAA decisions.  There is an entire body of case law discussing the FAA and doctrines like equitable estoppel and third-party beneficiaries, which allow non-signatories to rely on an arbitration clause.  Many of these older FAA cases relied on a federal common law regarding non-signatories.  The Eleventh Circuit correctly pointed out that whether a non-signatory can rely on an arbitration clause will depend on state contract law, not a federal common law arising from the FAA.

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