that P Second A of the Publishing Agreement establishes Simon & Schuster's obligation to publish, Simon & Schuster argues that P 50 of the Basic Agreement establishes its absolute right to decide not to publish. Simon & Schuster argues that P Third C of the Publishing Agreement dictates that in case of conflict with a term in the Publishing Agreement, the terms of the Basic Agreement, and thus P 50, would prevail. However, P Third C simply states that the parties to the contract "agree to the following special provisions [regarding the computation of ATS' royalties], which shall prevail over any conflicting provisions in the Basic Agreement." (Id. Ex. B P Third C.) This paragraph does not demonstrate the parties' intent to have all provisions of the Basic Agreement prevail over any conflicting provision in the Publishing Agreement, unless specified as a "special provision." A more reasonable interpretation of P Third C is much more limited: any provision in the Basic Agreement that conflicts with the special provision concerning royalty payments should be disregarded.
The fact that the parties present the court with different interpretations of the contract does not mean that the contract is ambiguous, particularly where one party's "interpretation would 'strain the contract language beyond its reasonable and ordinary meaning.'" Metropolitan Life Insurance Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir. 1990) (quoting Bethlehem Steel Co. v. Turner Construction Co., 2 N.Y.2d 456, 141 N.E.2d 590, 161 N.Y.S.2d 90, 93 (1957)). Paragraph Second A, which states that Simon & Schuster shall publish the book within eighteen months of acceptance, provides a clear statement regarding the expectations of the parties. Paragraph 50, on the other hand, which addresses Simon & Schuster's rights to dispose of and exercise its primary rights in the book, does not clearly relate to Simon & Schuster's obligation to publish and should not be read to undermine the expectations of the parties outlined in P Second A.
Moreover, if the court were to accept Simon & Schuster's reading of P 50, then P 83(a) of the Basic Agreement would be superfluous. Paragraph 83(a) specifically limits Simon & Schuster's obligation to publish the book in the event that the book should contain any legally actionable material. Thus, it would be reasonable to interpret P Second A as establishing the parties' intent that Simon & Schuster would publish the book within eighteen months of acceptance, and that this obligation is limited by the specific language of P 83(a). If P 50 gave Simon & Schuster the unqualified right to decide not to publish, the limitation specified in P 83(a) would be meaningless.
The parties' conflicting interpretations of P 84, however, cannot be resolved without looking beyond the terms of the contract. Simon & Schuster argues that P 84 provides that ATS' sole remedy, in the event that Simon & Schuster should decide not to publish within the eighteen-month period provided in P Second A, would be to keep the advance payments already received and to regain the rights to the book. According to Simon & Schuster, the eighteen-month period merely sets an outside limit on how long it is entitled to hold onto the rights to the book without publishing, and does not obligate it to actually publish the book. If the court were to accept Simon & Schuster's interpretation of P 84, the duty to publish would be limited by Simon & Schuster's right to simply delay publication indefinitely. Although the language of P 84 speaks only of a delay in publication and does not address Simon & Schuster's fundamental duty to publish, it is possible that the parties intended that P 84 would be ATS' sole remedy in the event that Simon & Schuster should decide not to publish within the eighteen-month period.
If, on the other hand, the court were to accept ATS' interpretation of P 84, Simon & Schuster would not be able to escape its obligation to publish under the guise of a "delay," and P 84 would not apply unless there had in fact been a decision to delay publication, rather than to cancel publication altogether. In the present case, the manuscript was accepted in July 1988, and publication was scheduled for February 1989, seven months later. Under ATS' interpretation of the contract, P 84 would apply only if Simon & Schuster inexcusably delayed publication beyond this February 1989 date, and the eighteen-month period established by P Second A had not yet expired. Then, if Simon & Schuster failed to publish within the eighteen-month period, ATS would not be limited by the remedy provided in P 84, but would instead be entitled to sue for breach of contract. Because P 84 is ambiguous, and thus makes the requirements of P Second A uncertain, a question of fact remains regarding the parties' intention with respect to Simon & Schuster's duty to publish.
ATS argues that P 83(b) of the Basic Agreement, which is included in the contract with a line drawn through its text, resolves any ambiguity created by P 84 and supports its understanding that Simon & Schuster has a duty to publish. The deleted P 83(b) provides as follows:
The Publisher shall not be obligated to publish the Literary work if, whether before or after acceptance thereof, supervening events or circumstances since the date of this agreement have, in the sole judgment of the Publisher, materially adversely changed the economic expectations of the Publisher in respect to the Literary Work at the time of the making of this agreement, and in such event all of the Publisher's rights in and to the Literary Work shall terminate and revert to the Author on the giving by the Publisher to the Author of notice of its decision, or, if the Publisher fails to do so, by the Author pursuant to Paragraph 84, and in any such event, the Author shall be entitled to retain all payments to the Author theretofore made under this agreement.
(Id. P 83(b).) ATS argues that because the evidence is clear that the parties excised this language from the contract, Simon & Schuster should not be permitted to argue that other provisions of the contract in effect restore the deleted language.
Although Simon & Schuster argues that the court may not consider extrinsic evidence of the parties' intent when the language of a contract is unambiguous, the contract is ambiguous, and extrinsic evidence must therefore be considered. See Burger King, 893 F.2d at 527-28. Had P 83(b) been included in the contract, it would have created an additional limitation on Simon & Schuster's obligation to publish, and would have given ATS only those rights outlined in P 84 in the event that Simon & Schuster should fail to publish. While the exclusion of this provision suggests that the parties intended that Simon & Schuster's obligation to publish and ATS' right to a remedy would not be limited in this way, neither party has submitted an affidavit by an individual with personal knowledge of the contract negotiations that explains the parties' intention in removing this paragraph. Therefore, a genuine issue of material fact regarding the parties' intention remains.
Furthermore, if P 84 is construed to apply only in the case of a publisher's decision to delay publication, and not in the case of a publisher's decision not to publish at all, an additional dispute of fact remains as to which of these decisions Simon & Schuster made in September 1988. The correspondence between Simon & Schuster and ATS' agent that followed Borts' death suggests that Simon & Schuster changed its decision regarding publication based on Borts' death and what Simon & Schuster perceived as Borts' resulting loss of credibility as a healer and his inability to assist in promoting the book. (Id. Ex. F.) The fact that these problems would not change with time seems to suggest that Simon & Schuster did not decide to delay publication, but rather decided not to publish. However, resolution of that issue will ultimately involve a question of credibility, and therefore cannot be resolved on a motion for summary judgment.
Finally, Simon & Schuster's argument that it was not obligated to publish pursuant to P 83(a) lacks merit. Paragraph 83(a) does not require Borts' assistance in undertaking a legal review of the book. Paragraph 83(a) twice specifies that Simon & Schuster's attorney is responsible for deciding whether the book contains any legally actionable material. Only after such a determination is made is Borts required to make the changes requested. Although Simon & Schuster asserts that it cannot determine whether the book contains actionable material "without consultation with Borts," (Def. Mem. at 15), nowhere in P 83(a) is such consultation required of Borts. Moreover, Simon & Schuster's reading of P 83(a) contradicts the terms outlined in P 79 of the Basic Agreement. Paragraph 79 provides, in part, that following delivery of the manuscript in final form, Simon & Schuster "shall not have the right to terminate this agreement solely as a result of the death of the Author." (Bender Aff. Ex. C P 79.) If Simon & Schuster did not have the right to terminate the agreement solely as a result of Borts' death, it would be unreasonable to read P 83(a) as allowing Simon & Schuster to terminate the agreement because Borts' death made him unable to assist in the attorney's legal review. Therefore, P 83(a) does not grant Simon & Schuster the right to terminate the agreement.
In sum, neither P 50 nor P 83(a) grants Simon & Schuster the absolute right to decide not to publish the book. However, because it is unclear how to reconcile the language of P 84 with the requirements of P Second A, the rights of the parties under the contract are unclear. Although the extrinsic evidence that P 83(b) was deleted suggests that the parties did not intend to grant Simon & Schuster the absolute right to decide not to publish the book and leave ATS with only the remedy outlined in P 84, this cannot be determined without more information regarding the negotiation of the contract. Therefore, the motions of both ATS and Simon & Schuster for summary judgment on ATS' claims are denied.
II. Simon & Schuster's Counterclaims
Simon & Schuster asserts two counterclaims, each alleging a different theory for the return of the $ 81,250 in advance payments made to ATS. First, Simon & Schuster argues that since Borts could not fulfill his obligation to assist in a legal review of the book, it had the right to terminate the contract and ATS had an obligation to return all payments advanced under the contract pursuant to P 83(a) of the Basic Agreement. For the reasons discussed above, this argument is without merit.
Second, Simon & Schuster argues that P 79 gives it the right to a refund of advance payments because any requests it might have for substantiation cannot be satisfied now that Borts is dead. Simon & Schuster cites only a small portion of P 79 in its brief and in doing so misinterprets its provisions. Paragraph 79 provides as follows:
If, however, because of illness or any other factor beyond his control, the Author is unable so to deliver the Literary Work, the date for such delivery shall be extended for a reasonable time. If after the elapse of such reasonable time the Author continues to fail or is unable to deliver the Literary Work or to satisfy the Publisher's request(s) for changes or substantiation, the Publisher may give written notice of termination, effective at the expiration of 60 days or such longer period as the Publisher may specify in such notice, and if the Author shall fail to deliver the manuscript in Final Form within such 60 days or specified longer period, as the case may be, this agreement will be terminated at the expiration of said period, and the Publisher may recover all amounts advanced to the Author subject to the provisions of Paragraph 6 of the Rider. . . .
(Bender Aff. Ex. C P 79.) This paragraph, cited by Simon & Schuster to establish the Author's obligation to "satisfy the Publisher's request(s) for changes or substantiation," addresses Borts' obligations prior to submitting the manuscript to Simon & Schuster in "Final Form." As stated above, Borts delivered the book in final form in July 1988 and Simon & Schuster accepted it for publication. Therefore, these provisions do not apply. Moreover, as previously noted with respect to Borts' inability to assist with a legal review, if Simon & Schuster could not terminate the agreement following delivery of the book in final form solely as a result of Borts' death, it would be unreasonable to conclude that it could terminate the agreement based on Borts' inability by reason of his death to comply with any potential requests for changes or substantiation. In any event, Simon & Schuster has cited no requests for changes or substantiation that Borts failed to satisfy, nor has it provided any proof that it gave written notice of termination as required by this provision.
Simon & Schuster's reliance on Rider 6 of the Publishing Agreement, which is referred to in P 79, is also misplaced. Simon & Schuster argues that Rider 6 requires ATS to "'make every effort to sell the work elsewhere, and [plaintiff] . . . shall be obligated to repay advances hereunder . . . from the first (and all) proceeds of any contracts with others concerning the rights in the work granted therein.'" (Def. Mem. at 21, quoting Bender Aff. Ex. B, Rider 6.) Once again, Simon & Schuster quotes only part of the provision, leaving out the first clause of Rider 6 which makes clear that its terms apply only "in the event of termination of this Agreement because the complete manuscript or revised complete manuscript is unacceptable. . . ." (Bender Aff. Ex. B, Rider 6.) As stated earlier, Simon & Schuster deemed the manuscript "acceptable" in July 1988 when it made the second advance payment. Therefore, Rider 6 by its own terms does not apply.
Simon & Schuster's motion for summary judgment on its counterclaims is therefore denied and ATS' motion to dismiss the counterclaims is granted.
III. Simon & Schuster's Affirmative Defenses
ATS moves to strike each of Simon & Schuster's seven affirmative defenses. Because discovery has not yet been completed, this motion must be denied as premature, except with respect to two of the affirmative defenses.
First, Simon & Schuster's affirmative defense of "frustration" must be stricken. Simon & Schuster argues that while certain clauses of the contract show that the possibility of the author's death was recognized by the parties when they drafted the contract, the cause of Borts' death, which undermined his credibility as a healer, could not have been contemplated. Simon & Schuster argues that the unforeseeable circumstances of Borts' death frustrated the purpose of the contract. ATS, in response, argues that Simon & Schuster could have foreseen this possibility and that the doctrine of frustration applies only when "the frustration [is] so severe that it is not fairly to be regarded as within the risks that [the party] assumed under the contract." Strauss v. Long Island Sports, Inc., 60 A.D.2d 501, 401 N.Y.S.2d 233, 238 (2d Dep't 1978). Had Simon & Schuster included contract language similar to that in the deleted P 83(b), it would have been relieved of its duty to publish the book once it determined that Borts' death "materially adversely changed [its] economic expectations." (Bender Aff. Ex. C P 83(b).) By agreeing to delete this language, Simon & Schuster chose to assume the risk that its economic expectations for the book might change, but that such change would not relieve it of its obligations under the contract. The affirmative defense of frustration is therefore stricken.
Second, Simon & Schuster's affirmative defense that ATS "anticipatorily breached the Agreement by reason of the death of Ian Borts" must also be stricken. As discussed earlier, Borts' death, which followed Simon & Schuster's acceptance of the final manuscript, did not constitute a breach of the contract.
For the foregoing reasons, the motions of both ATS and Simon & Schuster for summary judgment on ATS' claims are denied, as is Simon & Schuster's motion for summary judgment on its counterclaims. ATS' motion for summary judgment dismissing the counterclaims is granted, as is its motion to strike the fourth and fifth affirmative defenses. Finally, ATS' motion to strike the first, second, third, sixth and seventh affirmative defenses is denied as premature.
Dated: New York, New York
June 7, 1994
MIRIAM GOLDMAN CEDARBAUM
United States District Judge