Flawless Style LLC v. Saadia Group LLC

Background

Flawless Style LLC and FloridaHusker LLC are entities wholly owned by Gabrielle Monique Union-Wade. Through FloridaHusker, Union owns two registrations for the GABRIELLE UNION trademark covering various clothing items.

In 2021, Flawless and Saadia entered a License and Spokesperson Agreement. The agreement allowed Saadia to use Union’s name, brand, likeness, and GABRIELLE UNION trademark to relaunch the brand through Lord & Taylor, New York & Company, and Fashion to Figure. The agreement required Union’s prior approval of, among other things, merchandise design, packaging, and use of the mark, and required Saadia to pay guaranteed royalties and other amounts.

Beginning in May 2022, Saadia allegedly failed to make required royalty payments and professional-fee payments. Flawless sent a written notice of breach on February 9, 2023, giving Saadia 15 business days to cure. After Saadia did not respond or cure, Flawless sent a March 7, 2023 letter terminating the agreement effective immediately. The agreement required Saadia to stop its activities involving the collection and materials incorporating Union’s identity after a termination based on Saadia’s material breach. Saadia nevertheless continued selling covered merchandise through its websites.

The plaintiffs filed this action on March 20, 2023, asserting breach of contract and seeking an injunction. They later added claims under federal trademark law for infringement and false designation of origin. The court entered a temporary restraining order on April 21, 2023, restricting Saadia’s use of the mark and its sale of covered merchandise unless specified labels, tags, packaging, and devices were removed. Saadia opposed the request for a preliminary injunction.

Preliminary-Injunction Standard

A preliminary injunction is an order issued before final judgment to prevent ongoing or threatened harm during the litigation. The court required the plaintiffs to show a likelihood of success on the merits or sufficiently serious questions for litigation, likely irreparable harm without an injunction, a favorable balance of hardships, and consistency with the public interest. The court concluded that the plaintiffs satisfied these requirements.

Likelihood of Success

The plaintiffs asserted claims under 15 U.S.C. § 1114 for infringement of a registered mark and under 15 U.S.C. § 1125(a) for false designation of origin. Both claims required the plaintiffs to show that the mark was legally protected and that Saadia’s use was likely to confuse consumers about the source or sponsorship of the goods.

The court first determined that the agreement had been properly terminated. Under the agreement, either party could terminate immediately by written notice when the other party materially breached and failed to cure within 15 business days. Saadia did not dispute the alleged failure to pay, but argued that the plaintiffs and Union had materially breached first by delaying approvals, failing to promote the Lord & Taylor website, incurring excessive professional-service costs, and refusing to work with certain people.

The court found Saadia’s evidence of those alleged breaches insufficient. It noted that the agreement did not treat Union’s unavailability because of professional commitments as a breach, and that the submitted communications did not show the alleged approval delays. The court also found no adequate evidence supporting Saadia’s allegations about professional fees, promotion, or refusal to work with individuals. Saadia had not provided evidence that it gave written notice of these alleged breaches before the litigation. The court further ruled that verbal notice would not satisfy the agreement’s written-notice requirement.

The court denied Saadia’s request for an evidentiary hearing. It found that Saadia had not explained how additional testimony would materially change the record and that the relevant disputed issues could be resolved from the papers. The court also held that Saadia had chosen to continue the agreement despite the alleged plaintiffs’ breaches. Under New York law, continuing to perform after a known breach can waive the right to terminate the agreement based on that breach. Because Saadia continued the agreement and continued selling the merchandise, it remained obligated to perform and could not rely on the agreement’s sell-off rights after Flawless later terminated the agreement for Saadia’s material breach.

The court therefore concluded that Saadia’s continued use of the GABRIELLE UNION mark was unauthorized. The plaintiffs’ trademark registrations established that the mark was protected. Because Saadia was a former licensee continuing to use the mark after the license ended, the court presumed a likelihood of consumer confusion. It found that the plaintiffs had shown a strong likelihood of success on their trademark claims.

Irreparable Harm

The court held that the plaintiffs were entitled to a rebuttable presumption of irreparable harm. In the licensing context, unauthorized use by a former licensee threatens the economic value, goodwill, and reputation associated with the mark. The plaintiffs did not need to prove that Saadia had already damaged the mark’s reputation; the potential loss of control over the goods and the mark was sufficient.

The court rejected Saadia’s argument that the plaintiffs could not be harmed because the merchandise had previously been approved. It also rejected Saadia’s argument that the plaintiffs waited too long to seek an injunction, finding that less than six weeks passed between termination of the agreement and the request for injunctive relief.

Balance of Hardships and Public Interest

The court rejected Saadia’s claims that the injunction would cause millions of dollars in losses and lead to the termination of approximately 30 to 45 employees. The court found those claims unsupported and not credible, particularly because the covered merchandise was only one of numerous product lines on Saadia’s websites. It held that avoiding the promotion and sale of infringing products was not a legally protected hardship.

The court also found that the public interest favored an injunction. Consumers may associate a former licensee’s products with the trademark owner, creating a heightened risk of confusion and deception.

Bond and Disposition

The court set a $250,000 bond, concluding that Saadia had not supported its claimed losses and that the plaintiffs had presented strong evidence of trademark infringement. The court granted the plaintiffs’ motion for a preliminary injunction. The restraints in the temporary restraining order were to remain in place through the pendency of the litigation. The court also denied Saadia’s request for an evidentiary hearing.