JLM Couture, Inc. v. Gutman

Background

JLM Couture, Inc. moved to modify an existing preliminary injunction involving Hayley Paige Gutman. The opinion was an amended version of an order originally issued on July 25, 2022, reissued after the Court of Appeals for the Second Circuit directed this court to reissue it while excluding provisions that had expired.

Gutman’s employment contract with JLM covered her work as a designer of bridal, bridesmaids’, evening, and related apparel. The contract included restrictions on competition and disclosure of confidential information. It also gave JLM rights to use the Designer’s Name, assigned trademark rights to JLM, and provided that designs and other works created in connection with her employment would belong to JLM or be assigned to JLM.

Gutman created Instagram and Pinterest accounts using the handle @misshayleypaige. The court found that the accounts were used extensively to advertise JLM’s products, promote trunk shows and other events, direct customers to JLM resources, answer sales and customer-service questions, and support the Hayley Paige brand. JLM employees helped plan and manage the accounts, and Gutman delegated account-related tasks to them. Gutman later changed the account credentials and blocked JLM’s access.

Court’s Analysis

A preliminary injunction is an order issued before final judgment to prevent likely harm while the case continues. The court considered whether JLM was likely to succeed, whether it would suffer harm that money could not adequately repair, whether the balance of hardships favored JLM, and whether the public interest supported the requested relief.

The court adopted a multi-factor approach to determine ownership of the social-media accounts. The factors included how the accounts were presented to the public, how they were used, and whether the company’s employees accessed and managed them. The court concluded that JLM had a clear likelihood of proving that it owned the Instagram and Pinterest accounts, or at least had a right to use and control them superior to Gutman’s right.

The court also found a clear likelihood that JLM would succeed on its conversion claim. Conversion is the unauthorized exercise of control over another party’s property. The court found that Gutman changed the credentials, refused to provide JLM with access, and excluded JLM from accounts that JLM was likely to own. Because the conversion claim supported the requested relief, the court did not separately analyze the related trespass-to-chattels claims.

The court interpreted Section 10(e) of the contract as unambiguously barring Gutman, for five years after her employment ended, from being identified publicly as the designer of goods competing with JLM’s goods. The restriction was not limited to use of the Hayley Paige name or another name covered by the contract. The court found that Gutman’s announced plan to return to bridal design under a different brand name was likely to violate Section 10(e) if her role as designer were featured in connection with competing goods.

The court found likely irreparable harm to JLM’s control of the accounts and its goodwill because the accounts were important advertising and customer-communication platforms associated with JLM’s brand. It also found that allowing Gutman to use the accounts or publicly identify herself as the designer of competing bridal goods could cause difficult-to-measure losses to JLM’s reputation, goodwill, and sales.

Disposition

The court granted in part and denied in part JLM’s motion to modify the preliminary injunction.

The court granted relief concerning the Instagram and Pinterest accounts. During the case, Gutman and those acting with her were barred from changing, transferring, or using the accounts for non-JLM commercial purposes without written permission from JLM’s chief executive officer, Joseph L. Murphy. They were also barred from taking action to gain control over the accounts, and Gutman was required to take actions necessary for JLM to maintain access and control.

The court granted preliminary relief enforcing Section 10(e). Until August 1, 2027, or an earlier date set by the court, Gutman was barred from being identified to the trade or consuming public as the designer of goods competing with JLM’s goods, or from allowing her role as a designer to be used to promote those goods. The order also continued restrictions concerning JLM’s Designer’s Names, trademarks, and designs.

The court denied JLM’s request to extend the competition restriction in paragraph 3(b) beyond August 1, 2022. It reasoned that the court had already addressed Gutman’s past violation through its earlier civil-contempt ruling and would not impose an additional sanction for that conduct. The court also declined to add preliminary relief enforcing the confidentiality requirement in Section 9(c), finding that JLM had not shown Gutman was likely to disclose confidential information apart from her use of the accounts. The court denied Gutman’s request for an increased bond. The provision that had barred competition through August 1, 2022, was stricken from the amended order because it had expired.