On appeal, Jay-Z and Parlux Fragrances LLC were both looking to overturn a lower court's summary judgment rulings. After the oral arguments and before Thursday's opinion, Parlux went to trial against Jay-Z and his company, with the jury in November rejecting the perfumer's $68 million contract claims, but also rejecting the rapper and entrepreneur's countersuit for alleged unpaid royalties.
In a unanimous opinion authored by Justice John R. Higgitt, the appellate panel held that the lower court erred in denying Jay-Z's royalties claim for $4.5 million, and also said the court erred in not dismissing Parlux's breach of the implied covenant of good faith and fair dealing claim and not dismissing a breach of contract claim against Jay-Z, whose real name is Shawn Carter.
"The record is clear: Parlux sold licensed products after July 31, 2015, but failed to pay royalties on those sales," the panel said. "Plaintiffs' contention that no judgment on the royalties counterclaim is warranted because defendants may have some liability to plaintiffs on their claims in this action is without merit."
Parlux and its parent, Perfumania Holdings Inc., filed the case in state court in 2016. The company claimed that Jay-Z and his company, S. Carter Enterprises LLC, breached a contract with Parlux by failing to make promotional appearances at the November 2013 launch of the fragrance or otherwise help keep the brand profitable.
In closing arguments at the trial, Jay-Z's counsel framed the case as a misunderstanding exacerbated by dishonest deal brokers. But Parlux countered that the defense was "engaged in smoke and mirrors distraction," claiming Jay-Z simply "disapproved and disappeared" when he couldn't get what he wanted and destroyed evidence after Parlux sued.
Throughout the trial, former Parlux executives testified that the failure of the "99 Problems" and "Empire State of Mind" rapper to work with them to promote the product resulted in millions in lost profits.
Jay-Z and his attorneys broadly argued that Parlux failed to understand how to properly market his luxury brand and protect his products from being sold "on the shelves of Walmart between hand sanitizer and Tic Tacs," as his attorney said in his opening statement. The perfumer's witnesses were unreliable, Jay-Z's attorney further argued, and the company had lied to the billionaire even as it sold unapproved follow-on products after Jay-Z rejected their "lazy" ideas.
In Thursday's opinion, the appellate panel noted that the oral arguments in the appeal occurred before the trial.
"The parties have not alerted us as to the outcome of the trial; however, based on our review of public court records, a verdict was rendered," the panel said. "Additionally, the public court records disclose that the parties are presently engaged in posttrial motion practice. No party has suggested to us that this appeal has been rendered moot, and, given our conclusion that certain summary relief is warranted (i.e., judgment as a matter of law), we conclude that the appeal is not moot."
Counsel for the parties did not immediately respond to requests for comment.
Justices John R. Higgitt, Barbara R. Kapnick, Anil C. Singh, Bahaati Pitt and Martin Shulman sat on the appellate panel.
Parlux Fragrances is represented by Anthony J. Viola, Andre K. Cizmarik, Kara M. Cormier and Whitney M. Costin of Mintz Levin Cohn Ferris Glovsky and Popeo PC.
Jay-Z and his company are represented by Alex Spiro, Ellyde R. Thompson and Cory D. Struble of Quinn Emanuel Urquhart & Sullivan LLP.
The case is Parlux Fragrances LLC et al. v. S. Carter Enterprises LLC et al., case number 14387-14387A, in the Supreme Court of the State of New York, Appellate Division, First Judicial Department.
--Additional reporting by Frank G. Runyeon. Editing by Michael Watanabe.
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