Addressing a dispute between a bridal designer and her former employer regarding the use of the designer’s name and control of various social media accounts, the US Court of Appeals for the Second Circuit affirmed the district court’s preliminary injunction prohibiting the designer from using her name(s) in commerce, vacated the portion of the preliminary injunction granting the employer exclusive control over the social media accounts and remanded the case for further consideration by the district court. JLM Couture, Inc. v. Gutman, Case No. 21-870 (2d Cir. Jan. 25, 2022) (Park, J.) (Newman, J., concurring in part and dissenting in part) (Lynch, J., concurring in part and dissenting in part).
Hayley Paige Gutman worked for JLM Couture from 2011 to 2020, during which time she designed bridal and bridesmaid dresses and developed the Hayley Paige brand. Hayley Paige brand apparel generated hundreds of millions of dollars in sales, and Gutman’s fame (and social media account followers) grew alongside the brand’s sales revenue. Gutman and JLM’s relationship began to break down in 2019. Following the parties’ failed contract negotiations, Gutman locked JLM out of her Instagram account and changed the account bio to indicate that it was a “personal and creative” account.
JLM subsequently sued Gutman for breach of contract, trademark dilution, unfair competition, conversion of social media accounts and trespass to chattels on social media accounts, among other things. The district court agreed with JLM that Gutman had breached the contract but declined to decide “whether JLM had shown a likelihood of success on its conversion and trespass claims or opine on the ‘novel’ and ‘nuanced’ question of who owns the [social media accounts].” The district court granted a temporary restraining order and then a preliminary injunction barring Gutman from changing, using and/or controlling the social media accounts and using the names “Hayley,” “Paige,” “Hayley Paige Gutman,” “Hayley Gutman,” “Hayley Paige” or any derivate thereof (collectively, the designer’s name) in commerce. Gutman appealed.
Gutman argued that the district court erred in concluding that she likely breached the noncompete and name-rights provisions of the employment contract, that JLM’s breach of the contract prohibited it from seeking injunctive relief and that the social media accounts should not have been assigned to JLM. The Second Circuit rejected Gutman’s contract-related arguments and disagreed with the proffered alternative interpretations of the text, concluding that the district court did not err in prohibiting Gutman from any use of the designer’s name in commerce. With respect to the social media accounts, however, the Court held that the preliminary injunction was overbroad because “the character of the district court’s relief—a grant of perpetual, unrestricted, and exclusive control throughout the litigation—sounds in property, not in contract. Yet the district court disclaimed any effort to ground the [preliminary injunction] on its evaluation of the ownership question.” The Court concluded it was “unclear on what basis the district court excluded Gutman from using the Disputed Accounts and granted total control to JLM.” Thus, the Court remanded the case for the district court to directly answer the question as to JLM’s likelihood of success on its property-based theories of conversion and trespass.
Judge Jon Newman concurred in part and dissented in part, arguing that the preliminary injunction went too far in prohibiting use of the designer’s name in connection with any product or service, and that the text of the contract supported this position.
Judge Gerard Lynch also concurred in part and dissented in part but disagreed that the preliminary injunction was overbroad with respect to control of the social media accounts. Judge Lynch stated that “the injunction was granted to restore the operation and control of the account to the manner in which they were operated before Gutman unilaterally seized exclusive control, pending resolution of the case,” and “a likelihood of success on [JLM’s] claims for breach of contract adequately justifies this type of injunctive relief.”
Practice Note: When negotiating terms regarding a party’s name, it is important to consider the scope of the name’s use and how limitations might affect any future business endeavors. Even if Gutman is ultimately successful on the issue of ownership and control of the social media accounts, she cannot use the accounts with their current handles or post images without violating the other aspects of the preliminary injunction.