JLM Couture, Inc. v. Gutman

Background

The court considered Defendant Hayley Paige Gutman’s motion under Local Civil Rule 6.3 to reconsider its March 1, 2024 order. That order requested additional briefing and modified a preliminary injunction. Gutman asked the court to lift the injunction’s enforcement of Paragraph 10(e) of her contract with JLM Couture, Inc. She also asked the court to return two accounts—an Instagram account and a Pinterest account using the handle “@misshayleypaige”—to her while the court considered issues sent back for further proceedings.

Paragraph 10(e) provides that, for five years after termination of Gutman’s employment, if JLM filed an application to register a trademark, Gutman could not be identified to the trade or consuming public as the designer, and her role as designer could not be used to promote competing goods sold by JLM.

Reconsideration standard

The court explained that reconsideration is an extraordinary remedy. Under Local Civil Rule 6.3, the moving party must identify an intervening change in controlling law, new evidence, or a need to correct clear error or prevent manifest injustice. Reconsideration is not a way to relitigate old issues, present new theories, or obtain another hearing on the merits.

Paragraph 10(e)

Gutman argued that she had been subject to a non-compete restriction for more than three years and that such a restriction was impermissible under New York law. The court rejected that characterization. It stated that Gutman’s employment had not terminated before July 31, 2022, that Paragraph 10(e) had been enforced as a post-employment restriction since August 1, 2022, and that New York courts routinely enforce reasonable non-compete restrictions lasting two years or less.

Gutman also argued that the March 1 order reinstated the restriction without considering whether it was reasonable under New York law. The court disagreed, stating that its order had applied the relevant three-part test and concluded that Paragraph 10(e) was not unreasonable, overly broad, or unduly burdensome at that stage. The court also considered the restriction’s length and its authority under New York law to shorten or amend a restrictive covenant.

Gutman further argued that enforcing the restriction before full consideration of the remand issues would harm her because of her poor financial position, while JLM was in bankruptcy and did not appear to be producing new Hayley Paige-branded products. The court stated that Gutman did not argue that JLM had stopped advertising or selling those products. It relied on its prior findings that JLM was likely able to show a possible unfair competitive advantage if Gutman encouraged customers or prospective customers to leave JLM, while Gutman could continue working as an uncredited designer of competing goods or use a new name and face for non-competing goods during the restricted period.

Control of the accounts

Gutman argued that the Second Circuit had ruled that injunctive relief concerning the accounts could not be ordered without first assessing likely ownership. She also argued that the proper status quo without an injunction was her sole and exclusive control of the accounts. The court stated that the Second Circuit had concluded that giving JLM exclusive control was erroneous and had defined the relevant status quo as a return to shared access. Because Gutman did not identify clear error in the court’s interpretation, the court found no basis for reconsideration.

Disposition

The court denied Gutman’s motion for reconsideration in its entirety. The opinion states that the parties’ opening briefs on the issues sent back for further proceedings were due March 29, 2024, and that the case remained referred to Magistrate Judge Cave for general pretrial management.