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Parlux to Jay Z in Suit: You Stink at Fulfilling Contract Terms

Lawsuit filed asks for $2 million in royalties, $18 million in compensatory damages, among other demands.

Parlux Fragrances LLC and Perfumania Holdings Inc. paid Shawn “Jay Z” Carter $2 million in 2012 to produce the rapper’s fragrance. Now they’d like it back, please, along with 300,000 stock shares in Perfumania, 800,000 warrants to purchase Perfumania common stock and at least $18 million in compensatory damages.

Court documents filed in the Supreme Court of the State of New York against Carter personally and S. Carter Enterprises LLC, alleges rescission, breach of contract, breach of implied covenant of good faith and fair dealing, and asks for declaratory judgment in Parlux’s favor, in addition to voiding the contract.

Court filings noted that Parlux expected to generate at least $15 million at wholesale for Carter’s Gold Jay Z fragrance in its first year on counter, 2013, and $35 million at wholesale in the second and subsequent years after the launch, including flankers.

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The suit states that the brand generated only about $14 million in net sales in 2013 and did “much worse in the second year” following the launch. “Parlux has experienced a net loss on this brand after taking into account marketing and promotional experiences, guaranteed minimum royalties and all other operating expenses associated with the brand,” the suit said.

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After factoring in returns that retailers are making of Gold Jay Z “because of the absence of Jay Z’s participation and a follow-up flanker line,” this brand had sales in the second year after the launch of only $6.1 million rather than the projected $35 million. “It is expected that sales in subsequent years will continue to fall,” court papers stated.

The suit also identifies numerous promotional opportunities it alleges Carter spurned, including an appearance on “Good Morning America” and the Sephora store adjacent to the GMA set; promotional videos for the fragrance; social media posts on Carter’s own social media accounts and providing a quote for the fragrance’s press release.

As part of an overall marketing campaign for Gold Jay Z, Parlux worked with Jacob the Jeweler to create a Gold Jay Z fragrance bottle with an 18-karat gold cap and poured gold exterior, which cost Parlux more than $20,000, according to the suit. The objective was that the contest winner would win the bottle and cap. Instead, the suit alleges, Carter rejected all concepts for the campaign, yet kept the prototype gold bottle. As well, Parlux continued to create flanker possibilities for Carter, to which they “did not receive any substantive feedback” from Carter and his management team.

Parlux’s suit says the company repeatedly addressed these concerns with Desiree Perez, Carter’s business manager, to no avail.

Repeated messages left for Parlux executives had not been returned at press time.