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, Plaintiff-Counterclaim, Defendant,


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06 Civ. 2438 (GBD)




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GEORGE B. DANIELS, District Judge:

Plaintiff Penguin Group (USA) Inc. brings this action seeking a declaration that a

November 2004 Termination Notice served on Penguin by Defendants Thorn Steinbeck and

Blake Smyle, purporting to terminate copyright grants in The Pearl made before January 1, 1978

is invalid. The Defendants answered the complaint and asserted a counterclaim seeking

guaranteed advance payments. Penguin has now moved, under Fed. R. Civ. P. 56 for partial

summary judgment based on Penguin Group (USA) Inc., v. Steinbeck et. aI., 537 F.3d 193,200

(2d Cir. 2008), which held that an agreement of the parties in 1994 validly contractually

terminated all prior grants of rights in the works it covered. Penguin's motion for summary

judgment is granted.

In 1981, Thorn and John Steinbeck IV sued Elaine Steinbeck, their stepmother, contesting

a 1974 Agreement with the literary agency, McIntosh & Otis. Under the 1974 Agreement,

royalties for the Later Works were distributed 50% to Elaine and 25% each to Thorn and John

IV. In 1983, Thorn, John IV, and Elaine entered into a settlement agreement with respect to the

1981 action, that retroactively reduced Elaine's royalty share in the Later Works and gave Thorn

and John IV the per capita royalty split they sought. In return, Elaine was given "complete

power and authority to negotiate" the exploitation and/or termination rights in the John Steinbeck

works. Thorn and John IV also executed an irrevocable power of attorney to Elaine to effect

those terms.

On or about October 24, 1994, Elaine entered into companion agreements with Penguin

for the publication of works authored by John Steinbeck. The first agreement (the "Early Works

Agreement") was between Elaine and Penguin and involved John Steinbeck works published

prior to 1940 in which Elaine was the sole copyright owner. The second agreement, (the "Later

Works Agreement") was between Thorn, Elaine and Penguin's predecessor, Viking Penguin, and

involved works authored by John Steinbeck after 1940, including The Pearl. CompI. ~ 15. On

December 22, 1994, Thorn executed a Ratification and Acceptance of The Later Works

Agreement. rd. at ~ 17. Each of the 1994 agreements contain a provision entitled "Termination

of Previous Agreements" which states

This agreement, when signed by Author and Publisher, will cancel and supercede the previous agreements, as amended, for the Works ... covered hereunder.

1994 Early Works Agreement at ~ 19; 1994 Later Works Agreement ~ 19.

In June 2004, Thorn and Blake served a Notice of Termination on Penguin and the Estate

of Elaine purporting to terminate copyright grants made before January 1, 1978 in the Early

Works. Compl. ~ 19. The District Court found that the June 2004 Termination Notice was


valid. On appeal, however, the Second Circuit concluded that the 1994 Early Works Agreement terminated and superceded any prior copyright grants and remanded the case back to the District Court for further proceedings consistent with the Second Circuit decision. In accordance with the Second Circuit decision and remand, this Court issued an order on April 22, 2009 finding that the June 2004 Notice of Termination was not enforceable and that Penguin's rights in the works did not terminate thereunder. In November 2004, Thorn and Blake served a similar Notice of Termination on Penguin and the Estate of Elaine purporting to terminate copyright grants made before January 1, 1978 in The Pearl which is subject to the 1994 Later Works Agreement. CompI. ~ 21-22. Penguin subsequently filed this action.

Summary judgment pursuant to Fed. R. Civ. P. 56 is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter oflaw. Fed. R. Civ. P. 56; Vacold L.L.c. v. Cerami, 545 F.3d 114, 121 (2d Cir. 2008). In determining whether

there is a genuine issue as to any material fact, the Court is required to resolve all ambiguities and draw all inferences in favor of the non-moving party. Sec. Ins. Co. of Hartford v. Old Dominion Freight Line, Inc., 391 F.3d 77,83 (2d Cir. 2004).

Under New York law, "parties to an agreement can mutually agree to terminate it by expressly assenting to its rescission while simultaneously entering into a new agreement dealing with the same subject matter." Penguin Group (USA) Inc., v. Steinbeck et. aI., 537 F.3d 193, 200 (2d Cir. 2008) (citing Jones v. Trice, 202 A.D.2d 394,395,608 N.Y.S.2d 688,688 (2d Dep't 1994)). When a contract is terminated and superseded, the new contract provides all ofthe


parties' obligations and remedies for breach. Penguin Group, 537 F.3d at 200 (citing Northville Indus. Corp. v. Fort Neck Oil Terminals Corp., 100 A.D.2d 865,867,474 N.y'S.2d 122, 125 (2d Dep't 1984)).

The Later Works Agreement states that "[t]his agreement, when signed by Author and Publisher, will cancel and supercede the previous agreements, as amended, for the Works ... covered hereunder." This is the same language at issue in the Penguin litigation involving the Early Works Agreement decided by the Second Circuit. Thus, the November 2004 Termination Notice would be similarly invalid, given the same termination provision in the 1994 Later Works Agreement.

Defendants, however, attempt to argue that Penguin acted with "unclean hands" in the creation, formation, and negotiation of the Later Works Agreement. In their motion, Defendants urge this Court to deny Plaintiffs motion and permit discovery on the "unclean hands" issue. Defendants argue that they are entitled to discovery pursuant to Rule 56(f) of the Federal Rules of Civil Procedure. Fed. R. Civ. P. 56(f) provides for" additional discovery where necessary to gather additional facts essential to justify the party's opposition to a summary judgment motion, if the movant filer s] an affidavit describing: (1) what facts are sought and how they are to be obtained; (2) how these facts are reasonably expected to raise a genuine issue of material fact; (3) what efforts the affiant has made to obtain them; and (4) why the affiant's efforts were unsuccessful." Shaheen v. Naughton, No. 05-6550-cv, 2007 WL 625116, at * 1 (2d Cir. 2007) (citations omitted) (citing Gualandi v. Adams, 385 F.3d 236,244-45 (2d Cir. 2004)


56(f)). However, a court can reject a request for discovery, "ifit deems the request to be based

on speculation as to what potentially could be discovered." Paddington Partners v. Bouchard, 34

F.3d 1132, 1138 (2d Cir. 1994). As the Second Circuit has explained, "Rule 56(f) cannot be

relied upon to defeat a summary judgment motion where the result of a continuance to obtain

further information would be wholly speculative." Contemporary Mission v. United States

Postal Serv ., 648 F .2d 97, 107 (2d Cir. 1981). Moreover, a "bare assertion that the evidence

supporting a plaintiffs allegation is in the hands of the defendant is insufficient to justify a denial

of a motion for summary judgment under Rule 56(f)" Id.

Here, Defendants have failed to specifically allege what they hope to discover in support

of their unclean hands claim. Defendants, for example, argue that they need discovery to see

"whether there was any quid pro quo agreed to between Penguin and Elaine in the simultaneous

execution of the Early Works Agreement and the Later Works Agreements." Def. Mem. of Law

at 9. Defendants contend that the two agreements contain "disparate financial terms."! However,

the Defendants have known about the different guarantee advance figures in the agreements since

1994. Any argument that Defendants were not signatories to Early Works Agreement, and might

not have known about the terms of that agreement, is without merit. The 1994 Later Works

Agreement specifically makes reference to 1994 Early Works Agreement. Moreover, in a letter

dated November 29, 1994, nearly a month before he executed the Ratification and Acceptance of

1 Defendants argue that the Early Works Agreement is more lucrative than the Later Works Agreement since under the Early Works Agreement, Elaine receives an annual guaranteed advance that is double the amount of the annual guaranteed advance that Penguin was obligated to pay under the Later Works Agreement.


The Later Works Agreement, Thorn wrote that he received the "package of contracts" and "visited one of [his] stable [of] judicial thoroughbreds." Thus, Thorn was on notice of any claimed financial disparity in the contracts for nearly 15 years ago. Moreover, this possible issue was identified, raised, but never pursued, as a defense in the prior litigation.

Furthermore, this Court determined in Steinbeck v. McIntosh, 04 cv 5497, 2009 WL 928189, at *7-8 (S.D.N.Y. 2009), that the 1983 power ofattomey gave Elaine complete control over the copyrights. As this Court explained, if Elaine owed any fiduciary duty to the Defendants, it certainly did not include explaining the legal consequence or financial advantages of terminating his trademark rights, particularly when he was represented by competent counsel.

See id. *7-8. Therefore, Elaine was given unrestricted right to negotiate whatever contract she wanted, even if its terms were considered less favorable that what the Defendants desired. Given previous court determinations, it is not reasonable to believe that evidence could now be discovered showing that Penguin illegally schemed with Elaine in order to deprive Defendants of additional money.

After extensive litigation in related actions, permitting Defendants further discovery on this issue would constitute an unnecessary and inappropriate fishing expedition. That request merely seeks to avoid and undermine previous rulings of the Second Circuit and the District Court. The requested discovery would be futile. Accordingly, Defendants' request for discovery on the "unclean hands" issue is denied. Defendants' motivation appears to be that after 15 years of receiving payment under the 1994 Later Works Agreement, they seek to continue to re-litigate


in an attempt to force greater payments. Defendants, however, cannot evade the terms of the

contract they bargained for, or further delay finality by embarking on a fishing expedition for

further discovery.

Plaintiff s motion for partial summary judgment is granted.

Dated: New York, New York December 2, 2009




United States District Judge