Tuesday, May 29, 2018

Round 2: Parlux Comes Out Swinging at Jay Z

Today, attorneys for plaintiffs Parlux Fragrances and Perfumania filed a blizzard of documents in their ongoing lawsuit against Jay Z. Why? Because at oral arguments on February 28, Jay Z’s side attempted to have key elements of the Parlux complaint tossed out, and Judge Ramos said no.

That opened the way for Parlux to fire the big guns today. They asked the court to compel Jay Z and his company, S. Carter Enterprises, LLC, to produce a ton of documents and to answer interrogatories, i.e., a laundry list of questions regarding the dispute. And they want things to happen quickly—they asked for a hearing on their motion to be held on June 14.

The attorneys are making liberal use of the protective order granted by Judge Ramos that allows them to redact sensitive information or file it under seal. Of the fifteen documents filed by Parlux today, six exhibits are under seal and two others are partially redacted. Still, FirstNerve can fill you in on the big picture.

Parlux claims Jay Z was contractually obligated to be available to market, develop and promote the Gold Jay Z fragrance; yet he nevertheless failed to fulfill these obligations. Therefore, Parlux is demanding relevant information as to why; in particular, they want details about  Jay Z’s schedule at the time and his obligations to other brands and business ventures. Parlux is also asking Jay Z’s side to put up or shut up regarding its counterclaim for damages owed to Jay Z; in other words, get real and tell us how you arrived at the dollar number you are demanding from Parlux.
Although Plaintiffs duly paid the royalties which ultimately inured to the benefit of Jay-Z, Defendants simply refused to uphold their end of the bargain. As Defendants’ counsel acknowledged at oral argument in open court in February 2018, Jay-Z did not show up to a single personal appearance over the entire life of the license.
The brief goes on to quote the same damning courtroom exchange that FirstNerve highlighted.

Parlux recounts how Jay Z bailed on planned November 2013 launch events at Macy’s and Sephora with only a couple of weeks notice, adding:
The November 2013 events are not the only time Parlux sought the required input and involvement from Defendants only to be rebuked and/or ignored. In fact, numerous documents produced in this case demonstrate that this was the modus operandi of the Defendants for the entirety of the contractual relationship. As early as April 30, 2013 – months before the scheduled launch of the initial fragrance – Defendant Jay-Z indicated his unwillingness to meet his contractual obligations.
According the brief, Parlux repeatedly tried to arrange meetings, only to be told by Jay Z’s team that the star was “unavailable.” The brief includes a redacted quote from an internal Jay Z email, after which the Parlux team states:
Apparently, taking the money and not doing the work is Jay-Z’s mantra.
The Parlux brief goes into great (often redacted) detail with respect to Jay Z’s repeated “non-collaborative attitude and stonewalling” which continued throughout 2013 and into 2014. The Parlux brief contains several redacted quotes from emails sent by Jay Z and Desiree Perez, the COO of S. Carter Enterprises (herself an interesting character). On what basis were these quotes kept from public view? [Foul language?—Ed.]

Included in today’s filings by Parlux are the interrogatories for Jay Z and S. Carter Enterprises (SCE) that were sent originally in May 2016. Interestingly, the questions extend to three other Jay Z enterprises: Artistic Brands Development LLC, Marcy Fragrance Trading Co. LLC, and Roc Nation Sports.

Among other things, Parlux wants to know the current disposition and/or ownership of 300,000 shares of Perfumania common stock and 800,000 Perfumania warrants that were given to Jay Z et al. as part of the perfume deal. Also, Parlux is still sore about that missing 18-carat gold dummy bottle of Gold Jay Z; thus they demand:
14. All documents concerning the location of the 18-carat gold GOLD JAY Z bottles designed by Jacob the Jeweler.
Given Jay Z’s many business deals, this demand is a doozy:
20. All documents concerning any effort that SCE or Carter undertook to promote, market and/or support any of the other brands and/or ventures that SCE or Carter own, or in which they otherwise have a financial interest.
In the February hearing, Judge Ramos expressed puzzlement as to why this case it taking so long. If the Parlux brief is to be believed, it is because Jay Z’s attorneys are deliberately dragging their feet. Expect that to continue, but also expect Judge Ramos to turn up the heat and get the case moving.

Wednesday, May 23, 2018

The Postman Always Sniffs Twice

The U.S. Postal Service has finally waddled into the scented postage stamp game, announcing the release on June 20, 2018 of a set of “Frozen Treat” forever stamps. That’s right: America’s first scented stamps will celebrate . . . popsicles.

Could the USPS have picked a more innocuous (and boring!) scented theme?

Also hard to imagine: could they have launched the new issue with a more tepid press release?
The stamps feature illustrations of frosty, colorful, icy pops on a stick. Today, Americans love cool, refreshing ice pops on a hot summer day. The tasty, sweet confections come in a variety of shapes and flavors.

Weirdly, while it describes a bunch of popsicle flavors (watermelon, blueberry, orange, strawberry, chocolate, root beer, cola, and kiwi) [Kiwi? Really?—Ed.] the press release doesn’t explicitly say which of these scents will appear on the stamps.

The release also says “Some frozen treats even have two sticks, making them perfect for sharing,” although none of the stamps shows a twin-stick popsicle. Each stamp, however, displays two popsicles side by side. Is the Postal Service trying to tell us that each stamp will feature the two corresponding scents? If so, that would be a philatelic first—in research for my post about smelly stamps I didn’t notice any examples of doubly-scented stamps. You’d think that would be something worth bragging about.

At any rate, the USA has finally joined the smelly stamp club. Here’s hoping the USPS will branch out into more compelling scents and themes. I stand behind the suggestions I made a few years ago:
I think it’s time the U.S. Postal Service joined the party. How about a Boston Tea Party commemorative? Or one for the Washington, D.C. cherry blossom festival? A mint julep scent to celebrate the Kentucky Derby. Why not a series of classic hot rods with scents of burnt rubber, gasoline and asphalt? A firearm series of historic muskets and revolvers with a gunpowder scent would be cool too.

UPDATE May 23, 2018
According to MarketWatch, “Each of the stamps features an image of popsicles in various forms, ranging from fruity to chocolate. The exact scent will be the same for all stamps, and will be announced with the launch of the stamps on June 20.” This is even more confusing. Does it mean the scent will be the same for given sheet of stamps (with multiple scents across the issue) or that the entire issue will feature only a single scent?

Tuesday, May 15, 2018

Jay Z’s Legal Team Takes It on the Chin

Fragrance industry lawsuits have great entertainment value. They give us a glimpse into the commercial wheeling and dealing that goes on behind the perfume world’s facade of glamor, romance, and sophistication. They expose the gritty, greedy, and unsentimental nature of the business, often along with juicy personal details about the players.

One such legal epic began in January, 2016 when Parlux Fragrances sued Shawn “Jay Z” Carter for $18 million. Parlux alleged that Jay Z had failed to promote the Gold Jay Z fragrance as he was specifically required by the license agreement. The following May, Jay Z denied the Parlux claims and filed a counterclaim of his own, asking for about $2.7 million from Parlux for, among other things, more than a million dollars in unpaid guaranteed minimum royalties.

I covered the initial legal skirmishes here, here, and here. Since then, lawyers for Parlux and Jay Z have battled about boring procedural matters. They also crafted an agreement designed to keep details of the Jay Z license agreement out of public view in court filings.

In May, 2017, Jay Z’s lawyers filed a motion for partial summary judgment. They claimed that by continuing to sell Gold Jay Z, Parlux is making “substantial revenues” and yet has failed to pay Jay Z the guaranteed minimum royalties specified in the license agreement. They asked the judge to find Parlux in breach of contract and to declare that Parlux is liable for the ever-growing pile of guaranteed minimum royalty payments. The Parlux lawyers maintain the company doesn’t owe Jay Z a cent, because the contract became a dead letter when Jay Z himself breached it in the first place by failing to promote Gold Jay Z.

Finally, on February 28, 2018, oral arguments took place at the courthouse at 60 Centre Street in lower Manhattan. Things got off to a crackling start and did not go well for Jay Z’s attorney, Gianni Servodidio. The transcripts, sections of which I provide here, make for great reading. They’re better than any courtroom TV drama.
THE COURT OFFICER: All rise. Part 53, New York County Supreme Court is now in session, the Honorable Charles E. Ramos presiding. Be seated and come to order, please. Turn off all cell phones. There is absolutely no talking in the courtroom while the Judge is on the bench.

THE COURT: Good morning.

MR. SERVODIDIO: Good morning, Your Honor.

[Parlux attorney]: Good morning.

[Jay Z attorney]: Good morning.

THE COURT: All fit and ready to proceed with the motion?

MR. SERVODIDIO: Thank you, Your Honor. Good morning, Your Honor. I am Gianni Servodidio, representing the defendants and the counterclaimants S. Carter Enterprises and Shawn Carter. We’re here on a narrow claim today for partial summary judgment for unpaid royalties due under the parties’ license agreement. This motion can be decided based on the very straightforward and simple contractual principle. Under the —

THE COURT: If it was that simple, you wouldn’t be here. You know that and I know that.

MR. SERVODIDIO: Under the election of —

THE COURT: Let me ask you a question: Look —

MR. SERVODIDIO: Yes, Your Honor.

THE COURT: The plaintiff’s position is that they’re not taking advantage of Jay-Z’s license. They’re just selling the inventory that they have in order to mitigate damages. I’m not sure if it’s in the papers or not; I read most of the file. Have you conducted discovery here to the point that — do we know if they’re still manufacturing and bottling under license or is this, in fact, just inventory that they’re getting rid of?

MR. SERVODIDIO: Your Honor, it’s undisputed that they’re continuing to sell licensed products and have done so —

THE COURT: That is not the question I’m asking. Are they still bottling this stuff?

MR. SERVODIDIO: Your Honor, that’s not relevant to the motion that is before the Court.

THE COURT: You know, when I ask you a question, I expect a direct answer.

MR. SERVODIDIO: Yes, Your Honor.

THE COURT: If you’re not going to answer my questions, you can leave.

MR. SERVODIDIO: No. I’m sorry, Your Honor, there is no discovery that’s been conducted on that issue. And, with respect, that it is not germane to this narrow motion. The issue is whether they terminated the contract. And it’s really simple, Your Honor. They never exercised the termination of the contact. It’s simple how to do it. You have to send a notice of breach, which they did. And then you have to follow up with a second thing, which was an actual notice of termination required under the contract. They never did that. Instead what they did was continued 
— it’s undisputed that they continued to sell licensed product. We’re going on our third year anniversary of sales of licensed products amounting to millions of dollars. They’ve sent us an affidavit from their president —
There follows a lot of give and take about terms of the contract and relevant court decisions in other cases. Judge Ramos was not in a particularly forgiving mood that day. By the time things wrap up, we can imagine the flop sweat glistening on Mr. Servodidio’s forehead.
MR. SERVODIDIO: . . . And what these cases say clearly is that the mere assertion of a [rescission] claim isn’t enough.

THE COURT: On the other hand, here I have an apparently admittedly breaching party saying this is a slam dunk, please pay me.

MR. SERVODIDIO: Your Honor —

THE COURT: At the very least, at the very least don’t I have to consider that this was a mitigation of damages, the selling off of the inventory, number one; and number two, that your client breached?

MR. SERVODIDIO: Your Honor —

THE COURT: I can’t ignore that.

MR. SERVODIDIO: In every single case that we cite today, Your Honor, there is an allegation that the licensor breached. And in some cases —

THE COURT: Is there a denial here that Mr. Jay-Z didn’t show up?

MR. SERVODIDIO: Absolutely. The claim for breach is absolutely disputed and is the subject of hotly contested discovery right now.

THE COURT: Let me ask a very specific question; if you can’t answer it, don’t answer it, because I know you weren’t there. Did Jay-Z appear in New York as required under the contract?

MR. SERVODIDIO: There’s — there was no personal appearance, Your Honor, and that is the — we have defenses for that under the contract.

THE COURT: Motion denied. Thank you very much.

MR. VIOLA: Thank you, Your Honor.

MR. SERVODIDIO: Thank you, Your Honor.
Ouch. That’s gotta hurt.

Having failed in their pre-emptive counterattack, it looks like Jay Z’s team will now have to deal with the non-performance claims brought against their client by Parlux.

Exit question: Which TV actor should play Gianni Servodidio on the inevitable Netflix docudrama?