A New York federal court has agreed to modify the preliminary injunction it entered in March 2021 in the lawsuit that pits bridal designer Hayley Paige Gutman against her former employer – and owner of her eponymous label – JLM Couture over her ability to compete with JLM and use social media accounts bearing her name. In a 57-page opinion and order on Monday, Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York determined that JLM has demonstrated “a clear likelihood of success on the merits” of its property and contract claims, thereby, extending the timeline for barring the designer from doing things like making changes to – or attempting to gain control over – the @misshayleypaige social media accounts.
Among the primary issues at the heart of the recently-issued opinion and order are JLM’s likelihood of success on the merits for its conversion and trespass to chattels claims in the lawsuit, which, according to the court, “turn[s] on the novel question of ownership of social media accounts,” and JLM’s likelihood of success in establishing that Hayley Paige Gutman’s conduct – including teasing the impending launch of a new bridal collection in “August of 2022” – constitutes a breach of the terms of employment contract that she entered into with the company, including an enduring non-compete provision.
In order to determine JLM’s likelihood of success on its property-based claims (namely, conversion and trespass to chattels), a discussion about “ownership of social media accounts” – a Pinterest account and an Instagram account, both of which bear the handle @misshayleypaige – “is necessary and appropriate,” Judge Swain states. (Ownership of the accounts is relevant, as JLM was looking to get the court to extend the duration of certain provisions past the term of Gutman’s employment contract (August 1, 2022) until the merits of the claims are resolved in the litigation. The provisions prevent Gutman from “making any changes” to the Hayley Paige social media accounts that are “inconsistent with her duties under the contract, without the ‘express written permission of’” JLM CEO Joseph Murphy; and prohibit Gutman from taking “any action, other than a properly noticed application to the Court, to gain exclusive control” over the accounts.)
Evaluating Ownership
Evaluating JLM’s likelihood of success on the merits for its conversion and trespass to chattels claims, Judge Swain asserts that “neither party disputes that ‘intangible property such as websites and account information can be the object of conversion under New York law,’” and that claims of trespass to intangible property, such as social media accounts, “have been treated as claims for trespass to chattels by courts applying New York law.” The issue of ownership of a social media account, however, is novel, according to the court, as “few courts have examined the question.”
Nonetheless, JLM cites two decisions that provide “helpful guidance for resolving the instant motion,” per Judge Swain, pointing to In re CTLI, LLC and Int’l Bhd. Teamsters Loc. 651 v. Philbeck. In those cases, the U.S. Bankruptcy Court for the Southern District of Texas and the U.S. District Court for the Eastern District of Kentucky, respectively, “focused on common factors pertinent to the determination of whether a business or organization-related social media account belongs to the entity or to the individual who created it.” Those factors include “whether the account handle reflects the business name; how the account describes itself; [where/how] the account was promoted; whether the account includes links to other internet platforms of the entity; the purpose for which the account was used; and whether employees … had access to the account and participated in its management.”
Looking at the individual factors, Judge Swain asserts that the evidence in the lawsuit at hand “strongly supports” a finding that the @misshayleypaige accounts were “held out as business accounts” for the Hayley Paige brand, as the accounts were “utilized to promote JLM’s business.” For instance, the accounts “regularly feature[ed] JLM products,” including the wedding dresses designed by Gutman for the Hayley Paige brand. In addition to “JLM utiliz[ing] the accounts to identify its products,” it incorporated the accounts’ handle @misshayleypaige “on hang tags of its physical garments in the Hayley Paige lines, in print advertisements, and on its website.” The court also found that the descriptions displayed on the Instagram and Pinterest accounts “regularly included a link to JLM’s website www.hayleypaige.com,” and “frequently featured the email address of JLM’s Public Relations Department,” which leans towards the accounts being “held out as business accounts marketing JLM’s Hayley Paige brand.”
Beyond that, the court noted that Gutman and other JLM employees “frequently collaborated on strategies in which the accounts could be effectively leveraged to advertise trunk shows, promote stores selling HP brands, and inform followers about promotional codes or sales events,” efforts that “were directly tied to the corporate goals of promoting brand visibility and increasing sales and revenues.” In addition to collaborating with Gutman, JLM’s employees “directly participated in the management of the accounts in support of JLM’s business interests,” with the accounts playing “a critical role as a communication platform for JLM’s actual and potential customers, for both sales-related inquiries and customer service,” among other things.
And still yet, the court noted that Gutman created the accounts “shortly after she signed [her] contract (which transferred to JLM the exclusive right to use such a variation of her name for commercial purposes) and a trademark registration acknowledgement form assigning the rights in her name to JLM,” which “weighs heavily in favor of finding that the accounts are business assets owned by JLM.”
The court was largely unpersuaded by Gutman’s arguments to the contrary, including her claim that she has superior rights to the accounts because she created them “with her subjective intention that they be utilized for personal reasons.” Additionally, Gutman claimed that no shortage of her posts were not business oriented, and instead, were aimed at “reflecting her personality.” Not convinced, the court held that “when the content of the accounts is examined holistically, the content of a more personal character does not outweigh the content geared toward Ms. Gutman’s marketing of JLM’s products, nor the type of subtle marketing in which she associated the girly, whimsical aspects of her personality with JLM’s Hayley Paige brand.”
Taken together, the court determined that JLM established its “clear likelihood of success in demonstrating that it owns the Instagram and Pinterest account[s] or (to the extent Ms. Gutman or the relevant platforms may hold title to the accounts) has a right to use and control the accounts vastly superior to any such right of Ms. Gutman.”
In addition to showing a likelihood of success when it comes to proving ownership, Judge Swain found that JLM also successfully established that it will suffer “irreparable injury in the absence of injunctive relief maintaining its control of the accounts,” that the “balance of hardships tipping in its favor, and that the public interest would not be disserved by the issuance of preliminary injunctive relief prohibiting Ms. Gutman from making any changes to the Instagram or Pinterest accounts or taking steps to assume exclusive access over those accounts.” On this front, the court pointed to its previous finding that amid a deterioration in the parties’ employment relationship, “Ms. Gutman changed the access credentials for the Instagram and Pinterest account[s], refused to share the new log-in information with JLM, and informed JLM that she would ‘not [be] posting any JLM related business to the account,’ thereby blocking JLM’s access to its critical marketing platforms for the HP brands.”
And still yet, Judge Swain stated that “JLM’s ability to control the content of the accounts is critical to maintaining the strong Internet presence of the HP brands, JLM’s reputation, and the goodwill JLM has created among potential and actual customers who follow the accounts,” which weighs in favor of extended injunctive relief.
Because JLM’s likely success on its conversion claim supports the relief granted as to the Instagram and Pinterest accounts, namely, a block against Gutman making changes to (or trying to gain control of) the accounts, Judge Swain states that “the Court need not conduct a separate analysis of the related trespass to chattels claims at this juncture.”
Competition & Confidential Information
The court also determined that JLM established a clear likelihood of success on the merits of its claim that that Gutman’s “intended launch of a competitive brand would breach the restriction imposed” by her employment contract,” with the court finding that Gutman’s “plans to return to the industry and publicly identify herself as the designer of a competitive brand demonstrate that she intends to engage in conduct that is likely to constitute a breach” of the term in her contract that prohibits her from “‘identif[ying] [herself] to the trade or consuming public as the designer’ of ‘any goods in competition with goods manufactured and sold by’ JLM for a period of five years follow the conclusion of the Contractual employment term on August 1, 2022.” As such, the court agreed to — new injunctive relief
This round was not all wins for JLM. The court refused to impose preliminary injunctive relief with regards to a contract term that requires Gutman to refrain from disclosing confidential JLM information, including “customer lists,” as JLM made “no showing” that Ms. Gutman is likely to disclose confidential information apart from her use of the [Hayley Paige] social media accounts. Since the court granted “exclusive control” of the accounts to JLM, it found that such concerns are not warranted. The court also declined to impose an additional sanction for Gutman’s past “misconduct,” including her announcement of a competing collection, as “the Court will enforce with injunctive relief, [which] provides substantial protection to JLM against competitive design activity in the bridal space.”
The court’s order comes less than two years after JLM filed its lawsuit against Hayley Paige Gutman – who found widespread fame thanks to her recurring role on TLC’s reality show Say Yes to the Dress – in December 2020, accusing Gutman of federal and common law trademark dilution and unfair competition, breach of contract, conversion, and breach of fiduciary duty, among other claims, after she began posting “personal images in addition to bridal images” to the @misshayleypaige account, as well as uploading posts “promoting the goods of third parties, such as olive oil, beer, and nutritional supplements, none of which were approved by JLM, and none of which relate to the bridal industry.” Not only did Gutman “hijack” the Hayley Paige account, JLM has argued in its lawsuit that she took “steps to convert it from a JLM company account” – and its 1 million-plus followers – “to her own business platform, as if she were an influencer.”
The court has routinely characterized the lawsuit as “a novel dispute” between Hayley Paige Gutman, “a leading bridal wear designer and the manufacturer from whose employ she recently resigned over the control and use of social media accounts.”
The case is JLM Couture, Inc. v. Gutman, 1:20-cv-10575 (SDNY).
Share
