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‘Hayley Paige’ Instagram Ownership Still Fluid Despite Ruling

Jan. 28, 2022, 10:15 AM

Wedding dress designer Hayley Paige Gutman and her former company, JLM Couture Inc., disagree over how and when a Second Circuit axing of an order to transfer an Instagram account should be enforced, raising intriguing procedural questions.

The U.S. District Court for the Southern District of New York had ordered Gutman to surrender a contested 1.1 million-follower Instagram account to JLM. The U.S. Court of Appeals for the Second Circuit faulted the lower court’s basis for the transfer.

At the same time, the appeals court left open the possibility the ruling could be reinstated if the district court analyzed factors the appeals court hadn’t addressed.

JLM said that left an opening for the district court to issue a reworked injunction, or at least a restraining order. But Gutman said because the part of the injunction ordering the transfer no longer exists, the account should be immediately returned.

U.S. District Judge Laura Taylor Swain issued an order Thursday for the parties to confer on what to do next with the account and provide a status report by Feb. 2.

The conflict raises procedural questions regarding a trial court’s latitude for deciding on a process for conforming to appellate opinions. As part of her order, Swain asked the parties for their views on her authority.

The process itself underscores the discretion that even overruled trial court judges retain in managing their cases.

Law professor Lumen N. Mulligan of the University of Kansas, who has written a treatise on civil procedure, said a vacated order immediately ceases to exist. But he also said that—within the bounds of the law and higher court rulings—a trial court judge “owns the most power regarding the parties in front of it, with the ability to find facts and exercise discretion” to manage practical elements of a case.

“To vacate something actually means nothing was decided. It voids it,” Mulligan said. But “a court of appeal does not exercise trial court discretion. These kinds of interim relief orders are discretionary acts.”

Now What?

The Second Circuit said the district court erred by basing its injunction on the likelihood of success of JLM’s breach of contract claims, not claims that the once jointly operated accounts Gutman took control of were JLM’s property. Forcibly turning over property went further than enforcing JLM’s contract rights, the court said in a split decision.

The same day, Gutman asked Swain for an order for JLM to give Gutman full control of the accounts.

JLM responded Thursday with an argument that the Second Circuit left the door open for Swain to reinstate the injunction on different grounds, restore the temporary restraining order it replaced, or at least let both parties have account access with orders restraining Gutman from disparaging the company. Gutman responded that JLM was improperly re-arguing the appeal.

Mulligan said he’d “be shocked” if a district judge granted new preliminary injunction relief without further briefing, and doubted one would play “fast and loose with a mandate.” But he said a judge could grant a request for a new temporary restraining order in a process that could move quickly, letting JLM retain the account during renewed injunction briefing.

Social Wrinkle

In theory, Gutman could have gone to Instagram with the Second Circuit opinion, trademark attorney Todd S. Bontemps of Potomac Law Group said. “If it’s clear in the appeals court ruling that the order is vacated, that should be enough” for Instagram to give her access, Bontemps said. He also said requiring further briefing to regain something a voided injunction took away wouldn’t generally be fair.

“Because all of this costs money, you shouldn’t have to go through all these hoops and spend additional resources if you have two separate legal orders supporting your case that your client should regain ownership,” Bontemps said.

But he also said that in his experience social media companies are “sticklers” that “want to see written orders.” The Second Circuit didn’t directly order a transfer. He also said appellate courts don’t generally go into mechanical details of what should happen next.

The digital nature of the property at issue makes the procedural question even more difficult, Mulligan said. A social media account to which multiple parties can have access at once can also fluctuate in value through non-use or misuse, which can factor into core equitable questions of who would be exposed to greater harm with or without an injunction, he said.

“It would be easier to understand if we were dealing with a Picasso. It started in House A, the order was put it in House B. Revoke the order: back to House A it goes,” Mulligan said. “That’s a trickier question in a digital world.”

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

The case is JLM Couture, Inc. v. Gutman, S.D.N.Y., No. 20-10575, Order 1/27/22.

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

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

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