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?

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