If you thought it was insane to pay $100 for a credit card with the Kardashian sisters’ faces on it, consider this: The sisters’ decision to terminate the card early could cost them $75 million.
The card was introduced on Nov. 9. Just 20 days later the Kardashian sisters pulled out of the deal because of overwhelmingly negative responses to the card’s high fees.
But according to a lawsuit filed Jan. 6 in California, the sisters started violating the agreement almost before the ink on the contract was dry. Revenue Resource Group (RRG), the company responsible for promoting and managing the card, is suing the sisters for $75 million in damages for breach of contract.
Whatever happens in the court case, the lawsuit itself offers a rare window into the world of celebrity credit cards. The sisters received $112,000 up-front from RRG, plus $3 for every newly activated card.
In return, the Kardashians agreed to make public appearances three times a year for three years, plus another three appearances at a Los Angeles studio for photographs and video recordings to promote the card. They would mention the card everywhere they held an audience: on Twitter, Facebook, at the top of their own blogs, QVC, radio and reality TV shows and magazine interviews. The sisters did Tweet about the card and mention it on their blogs, but broke their other promises to promote the card, according to the lawsuit.
The sisters also agreed to spend three hours at the card’s launch party, held Nov. 9 at Pacha, a New York nightclub. The event cost RRG spent $65,000.
According to the lawsuit, the party was “a fiasco.” Fans were incensed because the sisters stayed in the VIP area and ignored the crowd. After 55 minutes, the sisters left. When Pacha’s owner called and berated them, the Kardashians returned and stayed for another 40 minutes. Their behavior resulted in many negative news stories, and started a wave of bad publicity for the card, the lawsuit says.
Much of the coverage centered on the Kardashian card’s unusually high fees, which included a $100 startup fee, a $7.95 monthly fee, $1.50 for ATM withdrawals and $1 for each purchase. Many financial experts, including those with Credit.com, blasted the fees in media reports. Connecticut’s attorney general threatened to investigate.
When the sisters pulled out of the deal on Nov. 29, they sent their termination letter to RRG and media outlets simultaneously, according to the lawsuit. RRG learned of their decision by watching media reports. The sisters’ decision forced RRG to shut down immediately, ending negotiations with boxer Fernando Vargas and singer Vicente Fernandez to create credit cards with them.
Between the money that RRG paid the Kadashians, what the company spent to set up the card’s back-end operations, and what the company stood to lose in future business, the sisters owe RRG $75 million, the lawsuit says.