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2nd Cir. Remands Court Order on Haley Paige Instagram Account

Jan. 25, 2022, 4:47 PMUpdated: Jan. 25, 2022, 7:55 PM

Luxury dress designer Hayley Paige Gutman convinced the Second Circuit to ax a lower court order requiring her to surrender her 1.1 million-follower Instagram account to JLM Couture Inc.

Most of the lower court’s injunction against Gutman using her name during a trademark and breach of contract fight with JLM was affirmed by the U.S. Court of Appeals for the Second Circuit. But it struck the court’s order to turn over the Instagram and other social media accounts to JLM as overbroad, at least on the basis the court cited.

The lower court could, on remand, decide JLM likely owns the social media accounts and restore the order. But it based its initial decision on the likelihood of success of its contract claims, not of its conversion claims that the accounts were their property. Turning over the account went further than enforcing JLM’s right to an injunction that stopped the contract breach.

The three-judge panel concurred on most of Circuit Judge Michael H. Park’s ruling, but two dissented with parts.

Circuit Judge Gerard E. Lynch said the lower court did not overreach by ordering Gutman to turn over the Instagram account. He said the injunction wasn’t “tantamount to awarding ownership of the account” as the majority suggested, but merely “restored the operation and control of the account to the manner in which they were operated before Gutman unilaterally seized exclusive control.”

Circuit Judge Jon O. Newman said the breadth of the prohibition of Gutman from using her own name was unjustifiably overbroad. Her employment contract specifically ceded rights to her name as a trademark, but the injunction went further and barred all use of her name in commerce, he said.

Gutman started designing dresses under the Hayley Paige brand for JLM in 2011. The parties engaged in renegotiation of Gutman’s employment arrangement in 2019, but talks broke down over control of her social media accounts. JLM alleged she’d been posting off-brand content to her new TikTok account and later her Instagram account. Gutman alleged the company imposed new, unreasonable social media duties, according to court briefs.

Gutman resigned in December 2020. But the district court sided with JLM in ruling the resignation was ineffective, because she wasn’t empowered to terminate her contract absent a breach. It issued a preliminary injunction enforcing the noncompete agreement in her contract and ordering her to turn over her Instagram, TikTok, and Pinterest accounts.

But while “Gutman signed away several of her rights to JLM,” she didn’t “forfeit her right to keep property that is legally hers,” the court said. Because the district court declined to address JLM’s conversion and trespass to chattel—use of property without owner permission—claims, the appeals court declined to evaluate them for the first time.

The lower court could evaluate the likelihood of success of those claims on remand and reconsider that aspect of the injunction.

The appeals court said the district court also erred by assuming its analysis of the Instagram account applied to all of the social media accounts at issue. The injunction lists 18 accounts including the three disputed ones, and it’s “unclear how the eighteen accounts were chosen in the first place,” the court said.

The court rejected Gutman’s argument that her noncompete agreement no longer applied because she resigned. The court called her arguments “inconsistent with the plain terms of the contract,” which said only JLM could unilaterally terminate the contract.

Gutman also argued the contract only barred her from using her name to market wedding dresses, but the court said the contract had no such limiting language.

JLM is represented by Adelman Matz PC. Gutman is represented by Haynes and Boone LLP.

The case is JLM Couture Inc. v. Gutman, 2d Cir., No. 21-870, 1/25/22.

(Updated with additional reporting. Earlier version corrected headline to reflect that Gutman regains the Instagram account under the decision.)

To contact the reporter on this story: Kyle Jahner in Washington at kjahner@bloomberglaw.com

To contact the editor responsible for this story: Keith Perine at kperine@bloomberglaw.com