Written by Alexandra Anfuso
Recently, in JLM Couture, Inc. v. Gutman (2d Cir. January 25, 2022), the Second Circuit vacated the provision of a preliminary injunction prohibiting Hayley Paige Gutman, a bridal gown designer and social media influencer, from accessing social media accounts under the “Hayley Paige” name.
Hayley Paige Gutman is the namesake of the “Hayley Paige” line of wedding dresses. In 2011, Gutman signed an employment agreement with JLM Couture, Inc. (“JLM”) to design bridal wear, which was extended through August 1, 2022. Pursuant to her employment contract, Gutman agreed that she would “not compete with [JLM], directly or indirectly.” Gutman additionally agreed to give JLM the “exclusive world-wide right and license” to the name Hayley Paige Gutman or any derivative thereof (i.e. the “Designer Name”) in connection with bridal wear, and the right to register the Designer Name as trademarks. She further agreed that “the Trademarks shall in perpetuity be the exclusive property of [JLM] … and [Gutman] shall have no right to the use of the Trademarks … without the express written consent of [JLM].” Finally, Gutman stipulated that, should she “violate any provision,” she “consents to the granting of a temporary or permanent injunction … prohibiting her from violating any provision” of the contract. In exchange for the above rights granted, Gutman was to receive a base salary, plus an additional percentage of revenues sold under the Designer Name for the duration of her employment, and ten years following.
Together, Gutman and JLM designed, manufactured, and marketed the “Hayley Paige”-branded bridal wear, generating $220 million in sales. Meanwhile, Gutman became a well-known personality through her activity on various social media accounts under the “Miss Hayley Paige” name, such as Instagram, TikTok, and Pinterest. As of January 2022, the Instagram account had over a million followers, and a single post on the account was valued at nearly $30,000. The account shared content about Gutman’s personal life as well as promotions of JLM’s Hayley Paige brand. Gutman controlled most of the account content, including posts, captions, and responses to direct messages, although another JLM employee “shared responsibility” for managing the account, and the CEO of JLM occasionally gave instructions for posts.
After a round of contract negotiations between Gutman and JLM failed, Gutman announced her intent to resign from the wedding gown company. Gutman then locked JLM employees out of the “Miss Hayley Paige” Instagram account, removed any reference to JLM, and changed the bio to read “Personal & Creative account of designer Hayley Paige.” Gutman then used the Instagram account to promote third-party companies without JLM’s permission, on at least two occasions.
Eventually the conflict escalated, and JLM sued Gutman, alleging, among other things, breach of their employment agreement, trademark dilution, and conversion and trespass to chattels with regard to the social media accounts. The district court granted JLM a temporary restraining order and preliminary injunction. Gutman appealed.
Gutman challenged the preliminary injunction provisions that (1) ordered her not to compete with JLM; (2) barred her from using the name “Hayley Paige Gutman” and its derivatives in trade or commerce; and (3) awarded control over the social media accounts to JLM.
The Second Circuit swiftly disposed of the trade name and non-compete issues, based on the plain language of Gutman’s employment contract with JLM. Gutman had expressly contractually agreed to the reasonable non-compete clause and to the transfer of her namerights. And, most importantly, the contract specifically allowed for an injunction to enforce its own terms.
However, control of the social media accounts was not a term of the employment contract, which made no mention of social media. The Second Circuit therefore concluded that various breaches could not justify the district court’s injunctive relief. Specifically, the Court found that JLM’s protection of the tradename and other intellectual property was not a valid justification for restricting access to the accounts: other provisions of the injunction already prohibited Gutman from using the “Miss Hayley Paige” name and designs. Additionally, the Court held that the injunction was overbroad: it failed to include an expiration, did not allow Gutman to post personal content without JLM’s permission, did not place any limits on JLM’s right to withhold permission, and did not limit JLM’s use of the accounts in any way. Finally, the significance of the specific accounts at issue was unclear, considering that additional social media accounts existed under similar and related “Hayley Paige” names.
The Second Circuit therefore vacated the portion of the injunction relating to control of social media and remanded to the district court for consideration of the relevant factors for injunctive relief, including JLM’s likelihood of success on the merits of its conversion and trespass claims.
The Second Circuit opinion demonstrates how, in a digital world, agreements should specifically delineate the rights to control digital accounts.