#Blessed? Preliminary injunction related to social media accounts quashed | McDermott Will & Emery


Addressing a dispute between a wedding dress designer and her former employer over the use of the designer’s name and control of various social media accounts, the United States Court of Appeals for the Second Circuit upheld the district court’s preliminary injunction restraining the designer from using her name(s) in commerce, overturned the portion of the preliminary injunction granting the employer sole control of the social media accounts, and dismissed the case for further consideration by the district court. JLM Couture, Inc. c. GutmanCase No. 21-870 (2nd Cir. January 25, 2022) (ParkJ.) (Newman, J., agreeing in part and dissenting in part) (Lynch, J., agreeing in part and dissenting in part).

Hayley Paige Gutman worked for JLM Couture from 2011 to 2020, during which time she designed wedding and bridesmaid dresses and developed the Hayley Paige brand. Hayley Paige brand clothing has generated hundreds of millions of dollars in sales, and Gutman’s fame (and followers on social media accounts) has grown alongside the brand’s revenue. The relationship between Gutman and JLM began to break down in 2019. Following the parties’ failed contract negotiations, Gutman locked JLM on his Instagram account and edited the account’s bio to state that it was about a “personal and creative” account.

JLM later sued Gutman for breach of contract, brand dilution, unfair competition, converting social media accounts, and trespassing on movable property 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 to rule on the ‘new’ matter and” nuanced “to know who owns the [social media accounts].” The district court granted a temporary restraining order and then a preliminary injunction prohibiting Gutman from modifying, using and/or controlling the social media accounts and using the names “Hayley”, “Paige”, “Hayley Paige Gutman”, “Hayley Gutman”, “Hayley Paige” or any derivative thereof (collectively, the designer’s name) in trade. Gutman appealed.

Gutman argued that the district court erred in finding that she likely breached the non-competition and naming rights provisions of the employment contract, that JLM’s breach of the contract barred her from seeking injunctive relief. and that the social media accounts should not have been attributed to JLM. . The Second Circuit rejected arguments related to Gutman’s contract and disagreed with proposed alternative interpretations of the text, finding that the district court did not err in barring Gutman from any use of the name. of the creator in commerce. With respect to the social media accounts, however, the Court held that the preliminary injunction was too broad because “the character of the district court’s relief – a grant of perpetual, unlimited and exclusive control throughout of the dispute – rings in the property, not in the contract. Yet the district court rejected any effort to found the [preliminary injunction] on his assessment of the ownership issue. The Court found that it was “unclear on what basis the District Court prohibited Gutman from using the disputed accounts and granted full control to JLM.” Thus, the Court returned the case to the District Court to directly answer the question of JLM’s likelihood of success on its property-based conversion and trespass theories.

Judge Jon Newman agreed in part and dissented in part, arguing that the preliminary injunction went too far in prohibiting the use of the creator’s name in connection with any product or service, and that the wording of the contract supported that position.

Judge Gerard Lynch also agreed in part and dissented in part, but disagreed that the preliminary injunction was too broad in terms of controlling social media accounts. Judge Lynch said “the injunction was granted to restore the operation and control of the account to the way it was operated before Gutman unilaterally assumed sole control, pending resolution of the matter”, and “a probability of success on [JLM’s] claims for breach of contract adequately justify this type of injunction.

Practical note: When negotiating terms for a party’s name, it’s important to consider the scope of name use and how limitations might affect future business efforts. Even if Gutman ultimately succeeds on the issue of ownership and control of the social media accounts, she cannot use the accounts with their current credentials or post images without violating the other aspects of the preliminary injunction.

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