BY:Michael I. Rudell
(Originally published in the Entertainment Law column in the New York Law Journal, August 23, 2002.)
One of the more controversial provisions in the agreement between an author and publisher of a trade book allows the publisher to reject a manuscript which it considers unacceptable. In a case in which a well-know author claimed that defendants rejected his manuscript in bad faith and fraudulently induced him to write an additional draft of the work that they never intended to publish, a federal court has dismissed the complaint and granted summary judgment on publishers’ counterclaim for the return of advances paid to the author prior to termination of the contact.[i]
John J. Nance is a commercial air pilot who has written eight aviation-based thrillers. His last novels, “Pandora’s Clock” and “Medusa’s Child” were published in hardcover by Doubleday and paperback by St. Martin’s. In February of 1997, Nance signed a new contract (the “Contract”) with those publishers for the publication of three additional novels. The Contract provided that Nance would receive $1 million per book, with payments to be made upon signing, completion of specified outlines and manuscripts “complete and satisfactory to the Publisher” and publication of each novel.
The Contract further provided that “should Publisher conclude that the Work or any portion thereof as first submitted cannot be revised to its satisfaction within a timely period or should Publisher find the revised Work or any portion thereof unacceptable for any reason, Publisher may reject it.”
The first novel contemplated under the Contract, “The Last Hostage,” was published in the Spring of 1998. On January 6, 1998, Nance’s literary agent had submitted an outline for the second work entitled “Blackout” which involved a pilot of a commercial air flight who is blinded by a mysterious laser and forced to land the plane with the help of his terrified passengers.
The senior editor of Doubleday, who had worked with Nance on “The Last Hostage,” sent comments the day after he received the “Blackout” outline. Nance then submitted a revised outline and thereafter met with personnel of the publishers. In February he submitted another revised outline which the publishers accepted the following month, and they sent Nance an advance payment of $150,000 in accordance with the provisions of the Contract.
Nance then drafted a manuscript based upon the approved outline and sent it to the senior editor who responded in writing that the manuscript was “coming along nicely” and shared some of his concerns with the submission, such as the need to increase suspense by withholding certain plot details until later in the work. After Nance submitted the rest of the draft, the senior editor wrote Nance that, although the manuscript had “a lot of great things going,” some areas of the plot needed to be made more suspenseful or credible, and that he intended to share the draft with the editors at St. Martin’s before sending a more formal response.
That response turned out to be an 8-page, single-spaced letter dated September 2, 1998 which described specific problems with the plot, characterization and pacing of the manuscript. The publishing executives invited Nance to provide them with a plan for revisions once he had identified “the missing big idea” that would appeal to readers and “get [sales] back to the Pandora level.”
Nance thereafter submitted a revised outline with a new “high concept,” but the editors, unimpressed by his changes, sent him their own suggested outline for “Blackout.” Their letter cautioned, however, that “our acceptance of the [first “Blackout”] outline did not imply that we would accept the first draft of ‘Blackout,’ which we have decided not to do. And, should you choose to follow our suggested revised outline…we still have to evaluate the next draft and determine its acceptability.”
In early November, Nance submitted another revised outline based upon the suggestions of the editors. Shortly thereafter, the senior editor informed Nance’s agent that Nance should draft a manuscript based upon the revised outline.
Nance submitted part of the second draft of “Blackout” on December 1, 1998. Although he indicated in his cover letter that he must know immediately if there is anything in the evolving copy that did not fully meet the expectations of the approved outline, the senior editor responded that the editors would be unable to evaluate the work until they had received the entire manuscript. By early January, 1999, Nance had provided them with the remainder of “Blackout.”
In a letter dated February 8, 1999, the editor-in-chief of Doubleday formally terminated the Contract, stating that “after two rewrites the manuscript is editorially unacceptable and there is no likelihood that a further revision will solve the editorial problems.”
Shortly thereafter, Nance sold the second “Blackout” manuscript to Penguin Putnam, Inc. for an advance of $550,000. The hardcover edition of the novel was published in February of 2000. Doubleday and St. Martin’s then sought to recover the advances that they had paid to Nance for “Blackout” and the unwritten third novel. After settlement discussions were unsuccessful, Nance filed his action.
After reviewing the standards applicable for summary judgment, the Court discusses Nance’s breach of contract claim. It notes that the Contract provided that Nance’s manuscript had to be “complete and satisfactory to [the] Publisher,” and that publishers could reject the manuscript if they found it “unacceptable for any reason.” The decision cites a line of cases which have interpreted such clauses to grant publishers wide discretion to terminate publishing contracts, “provided that the termination is made in good faith and that the failure of the author to submit a satisfactory manuscript was not caused by the publisher’s bad faith.” [ii] The requirement that a work be “complete and satisfactory to [the] Publisher” gives the publisher the right to reject the work as long as it acts in good faith.
Nance claims that the publishers rejected “Blackout” not only on its own merits, but in response to low sales figures for his two previous books. The Court indicates that it is not clear whether the rejection of a manuscript based on poor sales of prior works constitutes bad faith but, even if it were, Nance has failed to present evidence, after extensive discovery, that defendants rejected his draft because of disappointing sales of his most recent works.
Further, there is nothing else in the record that supports an inference of bad faith. The fact that the senior editor praised certain aspects of early drafts and outlines does not indicate an attempt to deceive or mislead Nance. Further, Nance’s contention that the editors exhibited bad faith by rejecting a manuscript when they previously had approved its outline also fails, because the Contract states clearly that “acceptance of the outline for a Work and payment of the portion of the advance due as a result thereof shall not in any way limit or restrict the Publisher’s right to determine, following delivery of the complete manuscript of the Work, whether the complete manuscript is satisfactory.”
The Court notes that it is indisputable that the editors at the publishers spent considerable time and effort working with Nance on the “Blackout” manuscript. This differentiates the instant case from one in which the publishers rejected works without giving the authors any editorial suggestions or opportunities for revision. Nor does Putnam’s subsequent publication of “Blackout” provide evidence of defendants’ bad faith because it is well established that evaluations of editorial acceptability are based upon the subjective judgment of the publishers.
Because Nance has not raised any triable issue of fact that defendants rejected his manuscript in bad faith, the publishers’ motion for summary judgment on Nance’s claim for breach of contract is granted.
Nance also alleged that defendants fraudulently induced him to make extensive revisions in the “Blackout” manuscript when, in fact, they had no good faith intentions of considering the manuscript at all because of the sales record of his prior books. The Court rejects this contention because (a) Nance presented no evidence that the publisher rejected the manuscript in bad faith and (b) the claim is qualitatively equivalent to his breach of contract claim. Regarding the latter, New York law indicates that a contract action cannot be converted into one for fraud merely by alleging that the contracting party did not intend to meet its contractual obligations. Because Nance’s fraud claim is based on the same facts as his breach of contract claim, it fails as a matter of law.
In addressing defendants’ counterclaim for the return of advances which it paid, the Court cites clause 3(b)(ii) of the Contact which provides: “If the manuscript for Work #2 is rejected, the Author shall retain 50% (50 percent) of monies previously advanced for Work #2 and all other monies paid to the Author for Work #2 shall be returned to Publisher, and Publisher shall not be obligated to make any further payment hereunder for that Work. Thereafter, the Author may grant the rights to Work #2 to another publisher, subject to the Author’s obligation to repay Publisher the retained sum out of first and all monies received from such other publisher for Work #2. Further, in the event of rejection of Work #2, Publisher may, at its option, terminate this agreement for Work #3 as well, and the Author shall repay Publisher all sums theretofore advanced for Work #3.”
Construing an unambiguous contract is a question of law for the Court. Here, it is uncontested that of the total amount that Nance received from defendants, $250,000 represented advances for “Blackout” and $100,000 represented an advance for Work #3. Having received an advance of $550,000 from Putnam for “Blackout” , Nance, therefore, is obligated to repay $350,000 to defendants less amounts he previously returned during the course of settlement negotiations.
Authors hoping that the facts of this case would provide the basis for a decision eroding a part of the foundation of the acceptability clause will take no solace in this opinion. It still remains difficult for an author to prove a publisher acted in bad faith in rejecting a manuscript.
[i] Nance v. Random House, Inc., New York Law Journal, Volume 228, No. 26, August 8, 2002 (S.D.N.Y.)
[ii] Doubleday & Co. v. Curtis, 763 F.2d 495, 501 (2d Cir. 1985).