The opinion of the court was delivered by: Francis, United States Magistrate Judge
The defendant in this action, Michael Drosnin, is the author of the
bestselling book The Bible Code, in which he purports to have discovered
prophesies of future events embedded within the text of the Hebrew Bible.
The plaintiff, Torah Soft Ltd. ("Torah Soft"), is a corporate entity
whose principal shareholder and sole officer, Dr. Yochanon Spielberg,
created computer software that Mr. Drosnin used in connection with the
creation of his book. The plaintiff contends that Mr. Drosnin breached
agreements to provide publicity for Torah Soft and to give the plaintiff
the opportunity to market its software with the book. Mr. Drosnin has
filed counterclaims against Torah Soft and third-party claims against
Dr. Spielberg asserting that they committed breach of contract by
offering for sale to the public the software that had been modified for
his exclusive use. Mr. Drosnin further alleges that Torah Soft and Dr.
Spielberg engaged in unfair competition by falsely representing that he
had used Torah Soft's computer program to write his book.
The parties consented to proceed before me for all purposes pursuant to
28 U.S.C. § 636(c). Mr. Drosnin has now moved under Rule 56 of the
Federal Rules of Civil Procedure for summary judgment dismissing the
complaint. Torah Soft and Dr. Spielberg have cross-moved for summary
judgment on the counterclaims and third-party claims and have also moved
for sanctions pursuant to 28 U.S.C. § 1927 on the ground that Mr.
Drosnin's counsel acted in bad faith by failing to withdraw three of the
counterclaims and third-party claims until confronted with Torah Soft's
summary judgment motion.
For the reasons that follow, Mr. Drosnin's summary judgment motion is
granted in part and denied in part, and Torah Soft's motions for summary
judgment and for sanctions are denied.
According to Bible code theory, the Hebrew Bible contains predictions
of the future encrypted in its text. The first step in breaking the code
is to identify letters, each equidistant from the next (equidistant
letter skips or "ELS's"), that form a word or phrase. For example, in The
Bible Code, Mr. Drosnin contends that the name "Yitzhak Rabin" appears
once in the Bible, with each letter separated by 4,772 others. The
relevant ELS is therefore 4,722. Next, the text of the Bible is
rearranged into columns of letters, each the length of the chosen ELS. In
the example, columns of letters 4,772 units high form a matrix. That
matrix can then be examined to determine whether any recognizable phrase
crosses the word at issue, implying a prophesy. In this instance, the
name "Yitzhak Rabin" is intersected by the words "assassin will
assassinate," a "prediction" that proved accurate.
According to Dr. Spielberg, he first developed a computer program for
conducting Bible code searches (the "Software") in 1988. (Declaration of
Yochanan Spielberg dated March 25, 2002 ("Spielberg 3/25/02 Decl."),
¶ 4). On August 17, 1992, he was contacted by Mr. Drosnin who had
purchased a copy of the Software and was interested in using it in
connection with a book he intended to write about the Bible code.
(Spielberg 3/25/02 Decl., ¶¶ 8-10). In order for the Software to be
most useful to Mr. Drosnin, certain modifications were required, and Dr.
Spielberg alleges that he agreed to perform the necessary programming
services in return for compensation at the rate of $20 per hour and the
promise of publicity in connection with
the book. (Spielberg 3/25/02
Decl., ¶¶ 10, 12, 14). Dr. Spielberg contends that $20 per hour was
far below the market value for his services and that he agreed to it only
because of the accompanying promise of publicity. (Spielberg 3/25/02
Decl., ¶¶ 14, 15, 51). On the same day that this conversation took
place, Mr. Drosnin sent Dr. Spielberg a facsimile outlining the requested
modifications to the Software and stating, "I think that the work I'm
doing will eventually lead to a lot of publicity for your company, and
I'll appreciate any assistance you can give me." (Affirmation of Howard
I. Rhine dated March 26, 2002 ("Rhine 3/26/02 Aff."), Exh. 1).
Dr. Spielberg claims that in September 1992 he spoke with Dr. Drosnin
about the nature of the publicity that Torah Soft would receive. When he
asked whether Torah Soft would be mentioned by name in the book, Mr.
Drosnin replied that it would. (Spielberg 3/25/02 Decl., ¶ 17). Dr.
Spielberg also asked if the book would include Torah Soft's fax number and
e-mail address, and Mr. Drosnin answered, "Yes." (Spielberg 3/25/02
Decl., ¶ 18). According to Dr. Spielberg, on at least fifteen
occasions when Mr. Drosnin requested additional programming services, he
reiterated that Torah Soft would receive substantial publicity and "make
a lot of sales" as a result of publication of the book. (Spielberg
3/25/02 Decl., ¶ 20).
Similarly, in March 1995, Mr. Drosnin requested modifications to the
Software that required the use of a utility program known as a
"debugger." When Dr. Spielberg told him that the debugger would cost a
few hundred dollars, Mr. Drosnin purportedly said, "You're going to make
a lot of software sales when my book comes out, so I do not want to pay
100% of the cost of the debugger. Let's split it." Dr. Spielberg then
purchased the debugger on that basis. (Spielberg 3/25/02 Decl., ¶¶ 29,
According to Dr. Spielberg, Mr. Drosnin not only promised him
publicity, but also raised the possibility of marketing the Software
together with the book. In September 1994, Mr. Drosnin suggested several
possibilities: a disk with the Software could be included with each copy
of the book, the book and the Software could be marketed simultaneously
by the same publisher, or marketing could be coordinated between the
book's publishers and a software distributer. In addition, if the
Software were not sold jointly with the book, an advertising insert could
be included in the book. (Spielberg 3/25/02 Decl. ¶¶ 59, 60). In
December 1995, Mr. Drosnin promised Dr. Spielberg that if he were to
market any software with the book, it would be Torah Soft's product.
(Spielberg 3/25/02 Decl., ¶¶ 63, 64, 65).
The Bible Code was ultimately published in 1997. It included no
reference to Torah Soft or Dr. Spielberg, but credited Dr. Eliyahu Rips,
an Israeli mathematician, with "discovery" of the Bible code. (Affidavit
of William H. Crosby, Jr. dated March 25, 2002 ("Crosby 3/25/02 Aff."),
Exh. F, at 13-14). No software was marketed with the book.
In addition to contesting many of the plaintiff's allegations, Mr.
Drosnin asserts that when he engaged Dr. Spielberg to modify the
Software, they agreed that the enhanced version would be for Mr.
Drosnin's exclusive use and would not be sold or distributed to others.
(Affidavit of Michael Drosnin dated March 22, 2002 ("Drosnin 3/22/02
Aff."), ¶ 4). According to Mr. Drosnin, Dr. Spielberg acknowledged
this agreement by including in the opening screen of the Software the
legend: "For use of Michael Drosnin Only!" (Drosnin 3/22/02 Aff., ¶
4). However, subsequent to publication of The Bible Code, Dr. Spielberg
sold copies of the modified Software to the public.
In connection with those sales, Torah Soft placed an advertisement on
its website in 1998 that included the catchphrase: "Now use the same
program that Michael Drosnin used to write The Bible Code." (Drosnin
3/22/02 Aff., ¶ 5). Mr. Drosnin contends, however, that he relied on
Dr. Rips' computer program to write the book and only used Torah Soft's
Software to do preliminary research and to print out the matricies that
were used in the book to illustrate the Bible code "finds." (Drosnin
3/22/02 Aff., ¶ 5).
Torah Soft first filed a complaint against Mr. Drosnin and his
publisher, Simon and Schuster, Inc., in 1998 in New York State Supreme
Court. (Affidavit of William H. Crosby, Jr. dated Jan. 31, 2002 ("Crosby
1/31/02 Aff."), attached to Notice of Motion, Exh. A). The claims against
Simon and Schuster were dismissed by stipulation (Crosby 1/31/02 Aff.,
Exh. B), and Torah Soft subsequently filed its First Amended Complaint.
(Crosby 1/31/02 Aff., Exh. C). That pleading alleged four claims against
Mr. Drosnin: breach of contract, breach of fiduciary duty, quantum
meruit, and unjust enrichment. (Crosby 1/31/02 Aff., Exh. C).
In the meantime, Mr. Drosnin had filed an answer with crossclaims
against Torah Soft and parallel third-party claims against Dr.
Spielberg. The First Counterclaim*fn1 charges that Torah Soft breached an
agreement with Mr. Drosnin to maintain the modified Software for his
exclusive use by marketing that Software to the public. (Affirmation of
Howard I. Rhine dated Jan. 31, 2002 ("Rhine 1/31/02 Aff."), attached to
Notice of Motion for Summary Judgement, Exh. 1 ("Answer"), ¶¶
83-100). The Second and Third Counterclaims allege false advertising and
deceptive trade practices, respectively, in violation of New York General
Business Law, on the ground that Dr. Spielberg sold the Software with the
false representation that it had been used by Mr. Drosnin to write The
Bible Code. (Answer, ¶¶ 101-106). The Fourth Counterclaim asserts that
by using Mr. Drosnin's name to market the Software without his
permission, Dr. Spielberg and Torah Soft violated New York Civil Rights
Law § 51. (Answer, ¶¶ 107-110). Finally, the Fifth Counterclaim
raises a common law claim of unfair competition, again based on the
representation that the Software was used to write the book. (Answer
Mr. Drosnin then moved to dismiss the First Amended Complaint. In a
decision dated June 17, 1999, the Honorable Ira Gammerman first found
that the dispute is governed by Israeli law insofar as it is a claim for
breach of a contract for personal services. (Crosby 1/31/02 Aff., Exh. E
at 4-6). Justice Gammerman rejected the argument that the entire
Complaint should be dismissed for failure to join Dr. Spielberg as a
necessary party. (Crosby 1/31/02 Aff., Exh. E at 6-10). He then went on
to dismiss the breach of fiduciary duty claim, finding that Dr. Spielberg
had failed to properly allege a partnership between himself and Mr.
Drosnin that would give rise to such a duty. (Crosby 1/31/02 Aff., Exh. E
at 11-13). Finally, Justice Gammerman denied the motion to dismiss the
quantum meruit and unjust enrichment claims, in part because Mr.
Drosnin, the moving party, failed to provide any affidavit setting fourth
the relevant Israeli law. (Crosby 1/31/02 Aff., Exh., E at 14-16).
Justice Gammerman's decision was affirmed by the Appellate Division,
First Department on January 25, 2000. Torah Soft Ltd. v. Drosnin,
268 A.D.2d 367, 702 N.Y.S.2d 272 (1st Dep't 2000).
The defendant argues that Torah Soft's breach of contract claims with
respect to the provision of publicity are deficient under Israeli law in
three respects. First, the general promise to provide publicity for Torah
Soft was too vague and indefinite to be enforceable. Second, any promise
was made in the context of precontractual negotiations or social
discourse, and was not binding. And, third, there was no evidence of the
parties' resolve to be bound by such a promise. Similarly, Mr. Drosnin
argues that there was no binding contract that obligated him to market
Torah Soft's Software with The Bible Code. Again, he contends that the
alleged agreement was too indefinite to be enforced and that the parties
did not display a resolve to be bound. He also maintains that any
agreement was voided because it was based on a condition precedent
— that some software be sold with the book — which did not
occur. Finally, the defendant argues that the claims of unjust enrichment
and quantum meruit must be dismissed because the only enforceable
contract that existed — that which required him to pay Dr.
Spielberg $20 per hour for modifying the Software — was fully
Dr. Spielberg and Torah Soft cross-moved for summary judgment on each
of the counterclaims and third-party claims. They contend that the First
Counterclaim, for breach of contract, is preempted by United States
copyright law. Dr. Spielberg and Torah Soft argue that the defendant's
common law unfair competition claim should be dismissed because of the
failure to allege bad faith and a likelihood of confusion to consumers.
They also moved for judgment on the defendants' Second, Third, and Fourth
Counterclaims, but Mr. Drosnin withdrew them.
Finally, Dr. Spielberg and Torah Soft have moved for sanctions pursuant
to 28 U.S.C. § 1927 on the ground that the defendant's failure to
withdraw the three moribund counterclaims at some earlier date
constituted bad faith and was designed to multiply the proceedings. I
will address each motion in turn.
A. Standard for Summary Judgment
Pursuant to Rule 56 of the Federal Rules of Civil Procedure, summary
judgment is appropriate where "the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
Fed.R.Civ.P. 56(c); see also Andy Warhol Foundation for the
Visual Arts, Inc. v. Federal Insurance Co., 189 F.3d 208, 214 (2d Cir.
1999). The moving party bears the initial burden of demonstrating "the
absence of a genuine issue of material fact." Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). Where the moving party meets that burden,
the opposing party must come forward with specific evidence demonstrating
the existence of a genuine dispute of material fact.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
In assessing the record to determine whether there is a genuine issue
of material fact, the court must resolve all ambiguities and draw all
factual inferences in favor of the nonrnoving party. Id. at 255; Vann v.
City of New York, 72 F.3d 1040, 1048-49 (2d Cir. 1995) Nonetheless, the
"litigant opposing summary judgment may not rest upon mere conclusory
allegations or denials, but must bring forward some affirmative
indication that his version of relevant events is not fanciful." Podell
v. Citicorp Diners Club, Inc., 112 F.3d 98, 101 (2d Cir. 1997) (internal
quotations omitted); see also Matsushita Electric Industrial Co. v.
Zenith Radio Corp., 475 U.S. 574, 586 (1986) (a nonmoving party "must do
more than simply show that there is some metaphysical doubt as to the
material facts"); Goenega v. March of Dimes Birth Defects Foundation,
51 F.3d 14, 18 (2d Cir. 1995) (nonmovant "may not rely simply on
conclusory statements or on contentions that the affidavits supporting
the motion are not credible") Rule 56 requires that when a summary
judgment motion is made and supported, the non-moving party "must set
forth specific facts showing that there is a genuine issue for trial."
Fed.R.Civ.Pro. 56(e). In sum, if the court determines that "the record
taken as a whole could not lead a rational trier of fact to find for the
non-moving party, there is no `genuine issue for trial.'" Matsushita, 475
U.S. at 587 (citing First National Bank of Arizona v. Cities Service
Co., 391 U.S. 253, 289 (1968)).
B. Defendant's Summary Judcunent Motion
1. Contract Claim - Publicity
Justice Gammerman previously determined that the contractual
arrangements between Mr. Drosnin and Torah Soft concerning the services
provided by Dr. Spielberg are governed by Israeli law. There is no
occasion to revisit that decision. The law of the case doctrine generally
applies to decisions made by a state court prior to removal to federal
district court. See Rekhi v. Wildwood Industries, Inc., 61 F.3d 1313,
1317-18 (7th Cir. 1995); Bogosian v. Board of Education of Community
School District 200, 73 F. Supp.2d 949, 954 (N.D.Ill. 1999); 18 Moore's
Federal Practice § 134.22[c][i] (3d ed. 1999) ("When an action is
removed from a state court to a federal court, the law of the case
doctrine applies to the decisions entered by the state court prior to
removal."). Pursuant to that doctrine, a court may review a matter
previously decided in any of three circumstances: (1) where there has been
an intervening change of controlling law, (2) where new evidence has
become available, or (3) where there is a need to correct a clear error
or prevent manifest injustice. See United States v. Minicone, 26 F.3d 297,
300 (2d Cir. 1994). No such factor is present in this action. In
addition, in a removed case a federal court may reconsider a
determination based on state procedural law if its application in the
federal forum would be anomalous. See Soda v. Oldsmobile Division of
General Motors Corp., No. CIV-88-1155E, 1990 WL 130524, at *2 (W.D.N.Y.
Aug. 30, 1990) Aqain, that is not the case here. Accordingly, this issue
will be determined pursuant to Israeli law.
Each party has submitted expert affidavits with respect to the Israeli
law of contracts. The respective experts are both highly qualified . . .
The defendant's expert, Joel Singer, received his law degree from Tel
Aviv University Law School and served as Legal Advisor to the Israeli
Ministry of Foreign Affairs. He is currently a partner at Sidley Austin
Wood LLP. (Affidavit of Joel Singer dated Jan. 30, 2002
("Singer Aff."), ¶ 2). The plaintiff's expert, Opher Levenberg,
received his Bachelor of Law degree from the Hebrew University of
Jerusalem and is a partner in the firm of Haim Samet, Steinmetz, Hang
& Co. in Tel Aviv. (Declaration of Opher Levenberg dated March 24,
2002 ("Levenberg Aff."), ¶¶ 1, 3).
These experts are in substantial agreement with respect to the broad
contours of Israeli contract law. In general, oral contracts are fully
enforceable. Contracts (General Part) Law, 5733-1973, § 23.*fn3 As a
threshold matter, the parties must intend to enter into a bindinq legal
relationship, as opposed to a mere societal agreement like a promise to
come to dinner. (Singer Aff., ¶¶ 2, 4).*fn4
Without an intention to create a contract, there is
neither room nor reason to deal with the provisions
of the contracts laws, because this phenomenon is
not a contract and the [Israeli] Contracts Law does
not apply to it. Accordingly, the intention to
create legal-contractual relations is, in my view, a
preliminary requirement to entry into the contracts
domain. The [Israeli] Contracts Law, which opens
with the word "contract," through the requirement
for an intention to create legal relations, serves
as a filter that separates between contractual and
non-contractual phenomena. With regard to an
agreement that is not characterized by an intention
to create legal-contractual relationships, one
should not proceed along the course created by the
legislating authority by asking whether a "contract"
was formed through an offer and acceptance, as
required by Article 1 of the Contracts Law. A
societal agreement is not a contract to which the
contracts laws are applicable, because it does not
include an intention to create legal relationships.
Gabriela Shalev, Contracts Laws 84 (Jerusalem, 2d ed. 1995).
Furthermore, even in the context of a commercial relationship, statements
may not be legally binding if the parties' words or conduct indicate that
they did not intend a formal contract.
Even when the parties are interested in a legal
relationship, they may assign a different strength to
their statements. Thus, for instance, mere boasting by
the seller praising his merchandise does not express any
commitment by the seller regarding the quality of the
product; such statements do not, by themselves,
constitute an intention to create a legal ...