JLM Couture, Inc. v. Gutman

District Court, S.D. New York·Decided March 4, 2021·No. 1:20-cv-10575·Unknown

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -------------------------------------------------------x

JLM COUTURE, INC.,

Plaintiff,

-v- No. 20 CV 10575-LTS-SLC

HAYLEY PAIGE GUTMAN,

Defendant.

-------------------------------------------------------x

MEMORANDUM OPINION AND ORDER GRANTING PRELIMINARY INJUNCTION The issues in this case include a novel dispute, over the control and use of social media accounts, between a leading bridal wear designer and the manufacturer from whose employ she recently resigned. Plaintiff JLM Couture, Inc. (“Plaintiff” or “JLM”) brings this action against Defendant Hayley Paige Gutman (“Defendant” or “Ms. Gutman”), the lead designer of certain of JLM’s prominent lines of bridalwear and related merchandise, asserting federal and state law claims of trademark infringement and dilution, false designation of origin, unfair competition, conversion, trespass to chattel, breach of fidelity, breach of contract, breach of fiduciary duty, and unjust enrichment arising principally from Defendant’s activities in connection with social media accounts. (Complaint, Docket No. 1.) Before the Court is Plaintiff’s application pursuant to Federal Rule of Civil Procedure 65 for preliminary injunctive relief barring Defendant from, among other things, altering the attributes and content of certain social media accounts without Plaintiff’s permission and from engaging in activities that Plaintiff maintains constitute breaches of provisions of the 2011 employment contract between the parties. (Docket Entry No. 12.) The Court entered an order to show cause and temporary restraining order on December 16, 2020 (Docket Entry No. 8), and, after discovery and an adjournment at the parties’ request, held an evidentiary hearing on the preliminary injunction motion on February 4, 2020. The Court has jurisdiction of this matter pursuant to 15 U.S.C. section 1121, and 28 U.S.C. sections 1138(a) and 1331, and 1367(a) In accordance with Federal Rule of Civil Procedure 52(a), this Memorandum

Opinion and Order constitutes the Court’s findings of fact and conclusions of law. To the extent any finding of fact includes a conclusion of law it is deemed a conclusion of law, and vice versa. The Court has reviewed carefully all of the parties’ submissions and evidence and has had the opportunity to observe the demeanor and assess the credibility of the witnesses. For the following reasons, the Court grants in part and denies in part Plaintiff’s motion for a preliminary injunction.

FINDINGS OF FACT The Court finds as follows.

By written contract dated July 13, 2011, as amended and extended (the “Contract”, Docket Entry No. 14, Exh. 2), Hayley Paige Gutman agreed to work for Plaintiff, JLM Couture, a company in the luxury bridal design and manufacturing industry, as a designer of brides’, bridesmaids’, and evening wear and related apparel. (Docket Entry No. 14, at ¶¶ 3, 6; Docket Entry No. 106, Preliminary Injunction Hearing Transcript (“P.I. Tr.), 129:19-24.)1

1 The “Contract,” as the term is used herein, comprises the 2011 employment agreement (Docket Entry No. 14, Exh. 2), as amended by the 2014 amendment extending that agreement through August 1, 2019, (Docket Entry No. 14, Exh. 62), and the February 12, 2019, notice letter exercising Plaintiff’s option to further extend Defendant’s employment term by three years through August 1, 2022. (Id., Exh. 66.) While Defendant argues that she rejected additional duties proposed after the 2019 extension, The original 2011 Contract provided that its term would run from the date of execution through August 1, 2016, unless it was further extended by Plaintiff JLM (Contract, § 1); as noted above (see note 1), it has been extended through August 1, 2022. The Contract provides for termination by the Plaintiff for or without cause, and in the event of Defendant’s death or

disability (Contract, §§ 7, 8). It includes no provision permitting Defendant to terminate it unilaterally. In the Contract, Ms. Gutman agreed, inter alia, to perform certain duties and granted Plaintiff certain exclusive rights to use and trademark the name “Hayley Paige” and variations thereof. (See generally Contract.) Ms. Gutman also granted Plaintiff “the exclusive world-wide right and license to use her name ‘Hayley’, ‘Paige’, ‘Hayley Paige Gutman’, ‘Hayley Gutman’, ‘Hayley Paige’ or any derivative thereof ([defined] collectively [as] the ‘Designer’s Name’)” for certain purposes during the stated term of the Contract and for two years thereafter. (Contract, § 10(a).) Explicitly in exchange “for the assignment to the Company of the Designer’s Name and the Trademarks,” JLM agreed to pay Ms. Gutman as

consideration, in addition to her base pay and additional sales volume-related compensation, and for ten years following the termination of her employment with the company, a further percentage of “net revenues derived from the sale of goods under the Designer’s Name and Trademarks based on the Designer’s [N]ame.” (Contract, § 10(c)(i); P.I. Tr. 183:18-23.) The parties engaged in “rounds of negotiations” over the terms of the Contract, during which Ms. Gutman referenced a “Kenneth Pool example” and asked to “add perpetuity language.” (Docket Entry No. 60, at ¶ 6.) Ms. Gutman represented to Plaintiff during the negotiations that she had

she does not dispute that Plaintiff validly extended the Contract. (Docket Entry No. 39, at 7.) an attorney review the Contract during the negotiations, a statement she now claims was untrue. (P.I. Tr. 182:3-8.) On September 12, 2011, Ms. Gutman signed a trademark registration acknowledgment, confirming that she had transferred all trademark rights in the name “Hayley

Paige” and any derivatives thereof to JLM and that she consented to the registration of the trademark “Hayley Paige.” (Docket Entry No. 14, Exh. 3.) On July 19, 2021, JLM exercised its rights under the Contract by registering the trademark “Hayley Paige.” (Docket Entry No. 14, Exh. 4.)2 The Contract provisions that are material to this preliminary injunction motion practice read in pertinent part as follows: Section 2. Duties. . . . the Employee shall be employed as a designer of a line of brides and bridesmaids dresses . . . [and] the Employee shall perform such other duties and services commensurate with her position as a designer for the Company, as may be assigned to her by an officer of the Company, including, but not limited to . . . assisting with advertising programs . . . .

Section 9(a). Covenant not to Compete. Employee covenants and agrees that during the period of her employment with the Company, Employee shall not compete with the Company, directly or indirectly. For purposes of this Agreement, Employee shall be deemed to compete with the Company if she engages in, or is associated with (whether as an officer, director, shareholder, partner, employee, independent contractor, agent or otherwise), any person, organization or enterprise which engages in the design, manufacture, marketing or sale of: (i) bridal apparel, including bridesmaids, mother of the bride and flower girls and related items; (ii) bridal accessories and related items; (iii) evening wear and related items; and/or (iv) any other category of goods designed, manufactured, marketed, licensed or sold by the Company.

Section 9(e).

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JLM Couture, Inc. v. Gutman, (S.D.N.Y. 2021).

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