Licensees continue to bank on the Kardashian name to sell beauty products despite a whopping $180 million lawsuit from a principal investor accusing Kim, Khloé and Kourtney of failing to support the Kardashian Beauty makeup line.
Although its principal investor Hillair Capital Management LLC launched the lawsuit, Haven Beauty Inc., the Lake Forest, Calif.-based marketer of Kardashian Beauty makeup, is — not surprisingly — pressing forward with its business. Kardashian Beauty makeup is available at Ulta and the Web site Kbeauty.com, and contains 83 stockkeeping units, including faux lashes, mascara, bronzer, eye shadow and lip products, priced predominantly from $8.99 to $14.99.
A Haven Beauty employee reached Tuesday by WWD is soft peddling what is a complicated legal challenge, saying, “I don’t anticipate there being any impact from the lawsuit.” The employee, who declined to divulge her name, stressed, “Haven Beauty is not a party to the lawsuit. The lawsuit is strictly between the Kardashians and the equity fund partner.”
Attorneys for the Kardashians were not available at press time.
According to legal documents, Haven Beauty was intended to be a joint venture between Hillair and the Kardashians. The documents detail that, under the terms of an agreement between Hillair and the Kardashians, Hillair expected the Kardashians to receive 40 percent of the fully diluted equity in Haven, but the Kardashians have rebuffed efforts by Hillair to give them the equity interest. According to Hillair, the Kardashians had wandering eyes for other partners.
Haven is the repository of assets Hillair won in Oct. 17, 2014, after Boldface, a Santa Monica, Calif.-based company that originally introduced makeup under Kardashian Beauty umbrella, went into receivership. The lawsuit states Hillair transferred those assets, including the license to produce Kardashian Beauty, to Haven; injected millions into Haven to fund Kardashian Beauty and, in return, imagined the Kardashians would be committed to promoting the makeup.
In total, Hillair discloses in the legal documents that it has spent nearly $10.2 million to salvage the Kardashian Beauty makeup with the understanding that the Kardashians would be the faces of the line. Instead, the firm claims the Kardashians pursued new partners to distribute the makeup line and buy out Hillair’s interest. When new partners with enough funds didn’t materialize, the lawsuit asserts the Kardashians threatened to terminate Hillair’s license.
“Not only did the Kardashians fail to take the steps necessary to market, promote and support the line, the Kardashians took affirmative steps to delay or undermine the ability of Haven to effectively distribute the Kardashian Beauty line,” the lawsuit reads. In the lawsuit, Hillair is seeking to recoup its almost $10.2 million investment in Kardashian Beauty and additional damages of between $64 million and $180 million.
Gregory Fayer, a lawyer for Hillair, further said, “We are extremely disappointed that it has come to this. Hillair entered into this venture with the Kardashians with the expectation of a long, mutually beneficial relationship. Unfortunately, having poured over $10 million into saving the Kardashians’ makeup line, the Kardashians failed to hold up their end of the bargain, and Hillair was left with no choice but to file a lawsuit.”
Meanwhile, Haven Beauty endures with the purpose of growing Kardashian Beauty. “We have a very experienced, very capable team that works on the products,” said the unnamed Haven Beauty employee. “We have intentions of building out the business, but we have not yet done so.” She said the objective of Haven Beauty is to “make the best product possible at the price point it [Kardashian Beauty] is in mass.”
Separately, Farouk Systems markets hair care products under the Kardashian Beauty name. Its products have been pictured in news reports about the lawsuit filed by Hillair, although Farouks Systems is not connected to Hillair or Haven Beauty. Talking to WWD in 2014, when Kardashian Beauty hair care products launched, Farouk Systems executive chairman and founder Farouk Shami projected the products would generate $200 million in retail sales during their first year on the market.