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CREATIVE TRANSACTION CORPORATION v. MONROE ALLEN PUBLISHERS

United States District Court, S.D. New York


January 12, 2004.

CREATIVE TRANSACTION CORPORATION AND AMY LEE, Plaintiffs, -against- MONROE ALLEN PUBLISHERS, INC. AND PHILIP M. RIDEOUT, Defendants

The opinion of the court was delivered by: RICHARD CASEY, District Judge

MEMORANDUM OPINION & ORDER

Creative Transaction Corp. ("CTC") and its President, Amy Lee, ("Plaintiffs") sued Monroe Allen Publishers, Inc. ("MAP") and its President, Philip M. Rideout, ("Defendants") on various contract and tort causes of action arising from the parties' effort to publish and sell a dictionary. Rideout authored the dictionary; Lee provided capital and assisted Rideout in negotiations with a publishing company, Heinle & Heinle Publishers ("Heinle"). Successful in these negotiations, MAP and CTC entered into an agreement with Heinle, by which Heinle would publish and market the dictionary and would produce a derivative work. During subsequent negotiations with Heinle concerning Heinle's transfer of its rights in the dictionaries, relations between Plaintiffs and Defendants deteriorated; Plaintiffs brought suit on an eight-count complaint as a result.

Now before the Court are Defendants' motion for summary judgment and Plaintiffs' motion for partial summary judgment. For the reasons that follow Plaintiffs' motion is DENIED and Defendants' motion is GRANTED IN PART AND DENIED IN PART Page 2

 I. BACKGROUND

  In 1993, Lee and Rideout, on behalf of their companies, established a relationship to produce a dictionary entitled A Dictionary of Modern American English. According to a letter written in November 1993, that Defendants contend was a contract, Lee invested $27,000 to aid Rideout in completing his dictionary of modern American English. In exchange for the capital, Lee was to receive all of the proceeds from the Asian sales of the dictionary and any derivatives of the primary work. All other royalties were to go to Rideout. Plaintiffs dispute whether this letter represented a binding contract between the parties.

  Plaintiffs allege that Lee negotiated with Heinle on Rideout's behalf. In 1994, MAP and Heinle entered into an agreement to publish the dictionary under the title The Newbury House Dictionary of American English (the "NHD"). This 1994 agreement assigned all Asian royalties to CTC. In 1997, the parties reached a second agreement (the "1997 agreement") with Heinle to produce a derivative work called The Basic Newbury House Dictionary of American English (the "Basic NHD"). The 1997 agreement included both MAP and CTC as the dictionary's "Author." According to that contract, Heinle agreed "to pay the Author a royalty based on the net cash received by the publisher from the sale of the work." (Basic NHD Agreement, Defendants' Notice of Motion, Exh. C, at 1, 5, 6.)

  In 1998, MAP and CTC entered into another agreement (the "1998 agreement") that gave CTC: (1) the nonexclusive right to create derivations on the dictionaries for sale in Asia; (2) exclusive rights to exploit the dictionaries and derivations thereon in Asia; and (3) exclusive rights to exploit Asian-language derivations of the dictionaries throughout the world.

  Problems began after the 1998 agreement was executed. Lee and Heinle were negotiating to Page 3 transfer any rights Heinle had in the dictionaries in Asia to Plaintiffs. Rideout, unhappy about being left out of these negotiations, complained to both Heinle and Lee. Plaintiffs maintain that Defendants interfered with the negotiations by insisting that Heinle transfer to Defendants the rights to the dictionaries in the Asian market that Plaintiffs were attempting to procure from Heinle. As a result, Plaintiffs say Heinle withdrew from negotiations with them. Additionally, Plaintiffs contend that Defendants repudiated the 1998 agreement by these communications with Heinle and also by seeking to negotiate with Lee a license to exploit the dictionaries in Asia.

  Plaintiffs contend that the 1997 agreement — in which CTC was included in the definition of "Author," to whom Heinle was to pay royalties for all sales of the Basic NHD — entitles Plaintiffs to half of all royalties from the Basic NHD. Plaintiffs further allege that Defendants retained all such royalties and therefore breached the 1997 agreement. Counts one through five of the complaint relate to the 1997 agreement. The sixth cause of action alleges breach of the 1998 agreement between Heinle and the parties relating to Plaintiffs' exploitation of the dictionaries. The seventh cause of action claims that Defendants tortiously interfered with Plaintiffs' negotiations with Asian publishers regarding the dictionaries in Asia. Finally, the eighth cause of action seeks injunctive relief: (1) barring Defendants from interference with Plaintiffs' negotiations with publishing companies; (2) preventing Defendants from exploiting the dictionaries in Asia; and (3) requiring Defendants to turn over databases for the dictionaries to Plaintiffs.

  Plaintiffs move for partial summary judgment on their first cause of action, that is, that Defendants breached the 1997 agreement. Defendants move for summary judgement as to all claims.

 II. SUMMARY JUDGMENT STANDARD Page 4

  Federal Rule of Civil Procedure 56(c) provides that summary judgment is appropriate "if 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). Summary judgment should only be granted "if after discovery, the nonmoving party `has failed to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof.'" Berger v. United States, 87 F.3d 60, 65 (2d Cir. 1996) (quoting Celotex Corp. v. Catrett 477 U.S. 317, 323 (1986)). When viewing the evidence, the Court must "assess the record in the light most favorable to the nonmovant, resolve all ambiguities and draw all reasonable inferences in its favor." Delaware & Hudson Ry. Co. v. Consolidated Rail Corp., 902 F.2d 174, 177 (2d Cir. 1990).

  An issue of fact is genuine when "a reasonable jury could return a verdict for the nonmoving party," and such contested facts are material to the outcome of the particular litigation if the substantive law at issue so renders them. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "If, as to the issue on which summary judgment is sought, there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party, summary judgment is improper." Chambers v. TRM Copy Centers Corp., 43 F.3d 29, 37 (2d Cir. 1994). Only when it is apparent that no rational trier of fact "could find in favor of the nonmoving party because the evidence to support its case is so slight" should a court grant summary judgment. Gallo v. Prudential Residential Services. LP, 22 F.3d 1219, 1223-24 (2d Cir. 1994).

 III. DISCUSSION

  A. Plaintiffs' Motion for Partial Summary Judgment

  Plaintiffs maintain that no genuine factual dispute exists as to whether Defendants breached Page 5 the 1997 agreement. The 1997 agreement provides, "Publisher agrees to pay the Author a royalty based on the net cash received by the publisher from the sale of the work. . . ." (Plaintiffs' Notice of Motion, Exh. 1, ¶ 3.) The contract defines "Author" as MAP and CTC. (Id. ¶ 1.) According to Plaintiffs, Heinle paid all non-Asian royalties to MAP, and none to CTC. From this fact, Plaintiffs leap to the conclusion that the contract clearly and unambiguously entitles MAP and CTC to one-half of royalty payments for sales outside of Asia, and therefore Defendants breached the agreement. The 1997 agreement, however, says nothing about the amount of royalties that MAP and CTC were entitled to receive.

  "In a contract dispute, a motion for summary judgment may be granted only where the agreement's language is unambiguous and conveys a definite meaning." Savers v. Rochester Tel. Corp. Supplemental Mgmt Pension Plan, 7 F.3d 1091, 1094 (2d Cir. 1993). Whether a contract is clear and unambiguous is a matter of law for the court. Lucente v. Int'l Bus. Machs. Co., 310 F.3d 243, 257 (2d Cir. 2002). As stated above, the contract is not clear on whether Plaintiffs are entitled to non-Asian royalties and if so, in what amount. Therefore, the contract's meaning is a question of fact for the jury. Id. at 257; Savers, 7 F.3d at 1094. Plaintiffs' motion for partial summary judgment is denied.

  B. Defendants' Motion for Summary Judgment

  Defendants contend that the court should grant them summary judgment because the gravaman of Plaintiffs' claims is that Defendants tortiously interfered with Plaintiffs' prospective business relations with publishing companies, and such a claim cannot stand. Defendants tell the Court that Plaintiffs' complaint is like a house of cards — it collapses once the tortious interference claim is removed. Plaintiffs allege eight causes of action, however, of which the tortious interference Page 6 claim is but one. Resolution of Defendants' motion requires analysis of each cause of action alleged.

  1. Tortious Interference Claim

  To establish a claim under New York law*fn1 for tortious interference with prospective economic relations, Plaintiffs must demonstrate: (1) they had business relations with a third party; (2) Defendants interfered with those relations; (3) Defendants acted through wrongful means; and (4) Defendants' interference harmed the business relations. Lombard v. Booz-Allen & Hamilton, Inc., 280 F.3d 209, 214 (2d Cir. 2002). Defendants argue that Plaintiffs cannot demonstrate use of wrongful means or harm to prospective relations. Defendants are correct.

  Plaintiffs contend that Defendants' acts preempted potential business relations between CTC and Heinle and between CTC and Doosan Publishing, a Korean publisher. The Court need not tarry on whether CTC had any prospective business relations with these companies because Plaintiffs show no evidence of wrongful means or actual harm suffered.

  "`Wrongful means' include physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure; they do not, however, include persuasion alone although it is knowingly directed at interference with the contract." NBT Bancorp. Inc. v. Fleet/Norstar Fin. Group, Inc., 664 N.E.2d 492, 496 (N.Y. 1996) (quoting Guard-Life Corp. v. Parker Hardware Mfg. Corp., 406 N.E.2d 445, 449 (N.Y. 1980)). Whether economic pressure constitutes unlawful means must be analyzed in light of the following factors:

  [T]he circumstances in which it is exerted, the object sought to be accomplished by the actor, the degree of coercion involved, the extent of the harm that it threatens, the effect upon the neutral parties drawn into the situation, the effects upon competition, and the general reasonableness and appropriateness of this pressure as a means of accomplishing the actor's objective. Page 7

 Scutti Enters., LLC v. Park Place Entm't Corp., 322 F.3d 211, 216 (2d Cir. 2003) (quoting Restatement (Second) of Torts § 767 cmt. c).

  Plaintiffs argue that Defendants' wrongful means began on July 18, 2000, when Rideout sent a facsimile to both Heinle and Lee regarding Heinle's rights to exploit the dictionaries in Asia. Plaintiffs have submitted an affidavit from Lee, in which she alleges that Rideout interfered with negotiations with Heinle by "insisting that Heinle transfer to MAP Heinle's right to exploit" the dictionaries, (Affidavit of Amy Lee in Opposition to Defendants' Motion for Summary Judgment ("Lee Aff."), ¶ 28.)

  There is nothing in the fax, in Lee's affidavit, or in any of the other exhibits appended to Lee's affidavit, that raises a genuine issue as to whether any wrongful means were used. Rideout openly sent this communication to Lee during the process of business negotiations. The communications were not made for the purpose of harming Plaintiffs but related to contracts to which Defendants were parties. In addition, there is little negative impact on competition generally because the parties were not competitors but were engaged in a joint venture. Finally, Rideout's actions never rose above mere persuasion, as there is no evidence to suggest that Defendants could, or did, assert any economic pressure on Heinle. Rideout's alleged offer to subsidize Heinle's legal fees in a potential dispute with Plaintiffs does not constitute a threat of a civil suit; any suit would have been against Plaintiffs and not Heinle, and so not a form of economic pressure on Heinle. Thus, applying the factors set forth in Scutti, the alleged conduct does not rise to the level of wrongful means. 322 F.3d at 216. The failure to adequately establish wrongful means is itself fatal to the tortious interference claim. See Mega Tech Int'l Corp. v. Miller Elec. Mfr. Co., 1997 WL 790750, at *5 (S.D.N.Y. Dec. 23, 1997). Page 8

  With regard to Doosan Publishers, Plaintiffs have offered no evidence that their prospective business relations were actually harmed. In fact, Plaintiffs actually succeeded in their negotiations with Doosan. According to Lee, Doosan and CTC entered into a contract to publish a dictionary on May 20, 1999. (Declaration of Steven M. Rabinowitz in Support of Defendants' Motion for Summary Judgment, Exh. E at 366.) Defendants' wrongful actions, even if adequately supported, produced no cognizable harm. Defendants are granted summary judgment on Count Seven of the complaint.

  2. Breach of the 1998 Agreement

  Plaintiffs allege that Defendants breached the 1998 agreement between CTC and MAP through repudiation of that agreement, preventing Plaintiffs from exercising their rights under the agreement, and depriving Plaintiffs of the benefits of the 1998 agreement. To defeat summary judgment on the breach of contract claim relating to the 1998 agreement, Plaintiffs must go beyond their pleadings and demonstrate, by affidavits, depositions, interrogatories, or admissions, that there are material issues of fact in dispute. Davis v. New York, 316 F.3d 93, 100 (2d Cir. 2002).

  Plaintiffs first allege that Defendants breached the 1998 agreement when "Rideout stated that MAP intended to exploit derivations and adaptations" of the dictionaries in Asia and "to keep all of the proceeds of such exploitation for MAP." (Lee Aff. ¶ 29.) In addition, "Rideout claimed that MAP held the copyright to the Dictionaries," and "made an overture to [Lee on August 3, 2000] to attempt to negotiate a license for Asia." (Id. ¶¶ 30, 32.) Finally, Plaintiffs assert that Defendants breached the 1998 agreement by interfering with the ongoing negotiations between Heinle and Plaintiffs regarding exploitation of the dictionaries in Asia.

  Defendants argue that no interference by Rideout could breach the 1998 agreement because Page 9 that agreement was expressly subject to the contracts signed with Heinle, which gave to Heinle broad world-wide publication rights. Thus, Plaintiffs had to negotiate with Heinle to get a waiver or release of Heinle's rights in Asia.

  The question whether Defendants' actions in communicating with Heinle during its negotiations with Plaintiffs breached the 1998 agreement, and the content of that agreement, are questions for the jury. The 1998 agreement is not unambiguous regarding Defendants' duties in subsequent dealings with Heinle, and a reasonable jury might find that Defendants' communications with Heinle breached its contractual obligations to Plaintiffs. Therefore, summary judgment is denied as to the claim that Defendants breached the 1998 agreement.*fn2

  3. Claim for Prospective Lost Profits

  Defendants argue that Plaintiffs cannot recover damages as a matter of law for lost profits even if they succeed on the breach of contract claim relating to the 1998 agreement. Defendants base this argument on the grounds that the lost profits are too speculative and that the expert report offered by Plaintiffs must be rejected as unreliable.

  Plaintiffs do not raise any arguments in response to Defendants' motion for summary judgment on the issue of lost profits, except to state in a footnote that it is premature for the Court to determine the admissibility of their expert report. Defendants' burden is discharged by "`showing" — that is, pointing out to the district court — that there is an absence of evidence" to support Plaintiffs' claim for lost profits. Celotex Corp., 477 U.S. at 325. This Defendants have done. It is Plaintiffs' burden, then, to provide evidence supporting its claim for lost profits. See Page 10 Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir. 1994). Plaintiffs have failed to carry this burden as they have not cited to any evidentiary support for their claim for lost profits. Thus, Defendants are entitled to summary judgment on the issue of lost profits. Plaintiffs are barred from seeking such damages at trial.

  4. Breach of the 1997 Agreement, Unjust Enrichment, and Conversion

  Defendants' motion for summary judgment with regard to its alleged breach of the 1997 agreement is based on the same reasoning as Plaintiffs' motion for partial summary judgment. As explained above, the 1997 agreement is ambiguous as to whether CTC's inclusion as an "Author" under the contract entitles Plaintiffs to a share of the royalties. This ambiguity must be resolved by the jury. Lucente, 310 F.3d at 257; Savers, 7 F.3d at 1094. Defendants' motion for summary judgment regarding breach of the 1997 agreement, and the related causes of action-unjust enrichment and conversion — is denied.

  5. Injunction Compelling Delivery of Defendants' Databases

  Finally, Defendants move for summary judgment on Plaintiffs' claim that they are entitled to an injunction compelling delivery of computer databases containing the dictionaries and all derivations thereon currently in Defendants' possession. Plaintiffs contend that the 1998 agreement gives them a copyright in the dictionaries for the purpose of exploiting the dictionaries and derivations thereon in Asia. Thus, to exploit the copyright, Plaintiffs argue that they must have access to the databases. Defendants argue that any such copyright does not automatically translate into a right to access the databases. If it is determined that the 1998 agreement grants this copyright, the Court can issue an injunction requiring Plaintiffs to provide Defendants access to the databases if the other necessary elements for injunctive relief are established. See Carter v. Helmsly-Spear, Page 11 Inc., 861 F. Supp. 303, 331 n.15 (S.D.N.Y. 1994), rev'd on other grounds, 71 F.3d 77 (2d Cir. 1995). Accordingly, the Court denies summary judgment on Plaintiffs' claim for an injunction requiring access to the databases.*fn3

 IV. CONCLUSION

  For the foregoing reasons, Plaintiffs' motion for partial summary judgment is DENIED and Defendants' motion for summary judgment is GRANTED IN PART AND DENIED IN PART. Specifically, Defendants' motion is granted as to Plaintiffs' claims for tortious interference, damages in the form of lost profits, and an injunction barring Plaintiffs from interfering in Defendants' contractual negotiations with Heinle and other publishers. All other claims shall proceed to trial.

  SO ORDERED.


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