Cenaps Corp. v. Cmty. of Christ
Cenaps Corp. v. Cmty. of Christ
Opinion of the Court
This cause comes before the Court on two motions: (1) Counterclaim-Defendants' Motion to Dismiss Counterclaim (Doc. No.24), which Counterclaim-Plaintiff opposes (Doc. No. 34); and (2) Defendants' Motion for Judgment on the Pleadings (Doc. No. 38), which Plaintiff opposes (Doc. No. 46). As explained blow, both motions are granted in part and denied in part.
I. Background
The CENAPS Corporation ("CENAPS") alleges the following in its amended complaint (Doc. No. 14): CENAPS is the owner of all rights to the books and other works of authorship by Terence Gorski, who is an internationally recognized expert on substance abuse, mental health, violence, and crime. CENAPS has identified 87 materials that Gorski has written that CENAPS owns. (Doc. No. 14-1). Community of Christ is a not-for-profit corporation *1027that does business as Herald House,
Prior to September 30, 2017, CENAPS and/or Gorski entered into publishing agreements with Defendants under which Defendants were granted rights to copy and distribute certain materials (hereinafter, "Works"). In August of 2017, CENAPS sent a letter to Defendants purporting to terminate all publishing agreements for the Works, effective September 30, 2017, but it would allow Defendants to sell off their remaining inventory of the Works until December 31, 2017.
In response to the amended complaint, Herald House (as Counterclaim-Plaintiff) filed a copyright infringement counterclaim against CENAPS and Gorski (Doc. No. 17), in which it alleges the following: The publishing agreements discussed in the amended complaint gave Herald House the exclusive right to publish the Works. The publishing agreements are all essentially identical,
Herald House contends that the publishing agreements could only be terminated if one of the above four types of events occurred-(1) book out of print; (2) sales no longer profitable; (3) Herald House's bankruptcy or liquidation; or (4) declined request for subsequent printings-and since none of these events occurred, the agreements could not be terminated by CENAPS' August 2017 letter. As such, Herald House contends that the publishing agreements remain in force, and Herald House still has the exclusive license to publish and distribute the Works covered by those agreements. Furthermore, Herald House contends that since Counterclaim-Defendants CENAPS and Gorski are currently publishing and distributing nine of the Works listed in an exhibit to the counterclaim
II. Motion to Dismiss
In response to Herald House's counterclaim for copyright infringement, Gorski and CENAPS filed the instant motion to dismiss. As explained below, the motion is granted in part and denied in part.
*1028A. Standard of Review
In deciding a motion to dismiss, the district court is required to view the complaint in the light most favorable to the plaintiff. See Murphy v. Federal Deposit Ins. Corp.,
B. Analysis
In their motion to dismiss, Gorski and CENAPS argue that since they terminated the publishing agreements via the August 2017 letter, Herald House no longer holds an exclusive license to the Counterclaim Works. As such, they argue that Herald House's copyright counterclaim fails.
Pursuant to
The parties agree that Missouri state law governs the publishing agreements.
CENAPS and Gorski are correct that under Missouri law, "contracts for an indefinite period of time may be terminated at the will of either party." Superior Concrete Accessories v. Kemper,
Accordingly, the issue presented by the motion to dismiss is whether the publishing agreements are for an indefinite period of time, and thus, terminable at-will. As explained below, the Court finds that they are for an indefinite period of time and terminable at-will.
In Paisley v. Lucas,
The court analyzed the language and first considered whether it showed an intent that the contract would last into perpetuity. The court concluded that it did not, stating:
"The courts are prone to hold against the theory that a contract confers a perpetuity of right or imposes a perpetuity of obligation. Yet it seems to be the law in this state that, where the intention to do this is unequivocally expressed, the contract will be upheld.... But in this jurisdiction ... courts will only construe a contract to impose an obligation in perpetuity when the language of the agreement compels that construction."
Id. at 270-71 (quoting James Maccalum Printing Co. v. Graphite Compendius Co.,
Next, the court considered whether the contract at issue was for an indefinite period of time. The court concluded that it was, stating:
The period of employment under the contract ... is not definitely ascertainable by any fixed criterion. The duration of the contract was not fixed expressly or by implication. Its expiration does not depend upon the expiration of a period of time, upon the completion of a given undertaking, or upon the happening of some event. A contract for life will be upheld only where the intention, that the contract's duration is for life, is clearly expressed in unequivocal terms. We hold that appellant's employment under the contract was for an indefinite period and could be terminated at the will of either party.
Id. at 271.
Herald House, however, argues that the publishing agreements in the instant case are not indefinite and cannot be deemed terminable at-will, because they contain clear language outlining exactly when they will be terminated (i.e., only when one of the four specified events occurs). Missouri case law does not support Herald House's argument.
In Haith v. Model Cities Health Corporation of Kansas City,
Likewise, in Main v. Skaggs Community Hospital,
The plaintiff argued that because the contract limited the reasons for which the hospital could discharge him, the contract was not terminable at-will. See
The contract is not limited to a fixed period of time, nor does it terminate upon completion of one or more specific undertakings or upon the occurrence of some event. It is, by its own terms, "for an indefinite period." It purports to grant plaintiff the right to perpetual employment by Hospital unless plaintiff's performance becomes deficient enough to constitute "just cause" for firing him. It is therefore a contract imposing an obligation in perpetuity, ... [which is condemned by Paisley ].
Conversely, Armstrong Business Services, Inc. v. H & R Block,
One of the issues before the court was whether the agreements were for an indefinite duration. See
The practical effect of the duration provision in the franchise agreements is the creation of a perpetual contract. As written, a franchise agreement is to continue for an initial period of five years from the date of the agreement and then automatically renew for a series of five-year contracts until the parties agree not to renew the agreement and, therefore, to terminate the business relationship. The parties, however, failed to create an enforceable perpetual contract. The duration provision does not unequivocally express an intent of the parties to create a perpetual, never-ending franchise agreement. Instead, the clause providing for automatic renewal contradicts an intention that the contract would last forever.
* * *
The franchise agreements are not indefinite contracts. Instead, they have definite, *1031fixed terms. The parties explicitly provided for five-year terms. A franchise agreement has an initial period beginning on the date of its formation and expiring five years later. Thereafter, if renewed, the agreement will run for another term of five years. The franchise agreements' renewal provision will not, however, be enforced without assurance of mutual assent.... Thus, should the parties desire, they may choose to continue their relationship under a renewed contract for an additional five-year period. In such a case, the parties would be bound to the completion of that five-year term except for instances of material breach or a mutual agreement to terminate sooner.
In the instant case, Herald House argues that the publishing agreements remain in force unless and until one of the four specified events occurs. Thus, it appears that Herald House may be arguing that a perpetual agreement exists. However, as explained by one court facing the issue of whether an enforceable perpetual agreement existed:
In order to find an intent that a contract be enforced perpetually, the Missouri Supreme Court has set the bar high: there must be an unequivocal expression that the contract last forever. The parties agreed at oral argument, and our own investigation is in accord, that the only Missouri case where this high hurdle has been met analyzed a contract with the word "perpetually" in the agreement.
H & R Block Tax Services LLC v. Franklin,
In the instant case, the publishing agreements do not explicitly state that they are intended to last forever. As such, based on the above case law, the publishing agreements are not enforceable perpetual agreements.
Herald House also argues that the publishing agreements are not for an indefinite period of time, because the publishing agreements state that they will terminate upon the happening of one of four specified events. However, the cases discussed above also contained identifiable termination events that did not prevent them from being deemed to last for an indefinite period of time. See Paisley,
Accordingly, based on Missouri case law, the publishing agreements do not contain a fixed and definite term. Instead, the publishing agreements are for an indefinite period, making them terminable at-will.
Given the conclusion that the publishing agreements were terminable at-will, and given that Herald House alleges that CENAPS "purport[ed] to have terminated" the publishing agreements by its August 2017 letter, Herald House cannot show that it continues to have an exclusive license to publish the Works identified in the termination letter. To the extent that Herald House's counterclaim is based on Works identified in the termination letter, Herald House's counterclaim fails.
*1032However, it is unclear whether all of the Counterclaim Works were identified as being terminated by the August 2017 termination letter, as the termination letter does not provide the full title of each of the terminated Works. Furthermore, as pointed out by Herald House, the termination letter states that some of the Works are not being terminated because they are co-authored by Gorski and another author. It appears that at least one of the Counterclaim Works is co-authored by Gorski and another author,
The Court does not have sufficient information to determine which of the publishing agreements relating to the Counterclaim Works was terminated by the August 2017 letter. As such, CENAPS and Gorski are directed to file a short notice by March 8, 2019 listing the Counterclaim Works that were identified in the termination letter and explaining how the Court can match the Counterclaim Works to the Works identified in the termination letter. By March 15, 2019, Herald House is directed to file a notice of agreement with CENAPS and Gorski's notice or file a notice explaining why/how it disagrees with their notice.
III. Motion for Judgment on the Pleadings
Next, Herald House and Community of Christ (collectively referred to in this section as "Herald House") move for judgment on the pleadings as to the copyright infringement and trademark infringement claims asserted against them by CENAPS in the amended complaint. As explained below, the motion is granted in part and denied in part.
A. Standard of Review
The standard of review for a motion for judgment on the pleadings is the same as for a motion to dismiss-the question is whether the count states a claim for relief. See Sun Life Assurance Co. of Canada v. Imperial Premium Finance, LLC,
B. Analysis
Herald House contends that it is entitled to judgment on CENAPS' copyright infringement and trademark infringement claims. In support of this contention, Herald House asserts four arguments: (1) Herald House cannot infringe CENAPS' copyrights because the publishing agreements were not terminated by the August 2017 letter; (2) even if the termination letter could terminate the publishing agreements, it would only terminate those specific Works identified in the letter; (3) even if the termination letter could terminate the publishing agreements, the first sale doctrine would allow Herald House to sell the copies of the Works that Herald House published prior to the September 30, 2017 termination date; and (4) if CENAPS' copyright claim fails, then its trademark infringement claim fails as well. Accordingly, the Court will address each argument.
*10331. Termination
Herald House first argues that it cannot infringe CENAPS' copyrights because the publishing agreements were not terminated by the August 2017 letter. However, the Court has fully analyzed this argument above in Section II and found that the publishing agreements are for an indefinite period, making them terminable at-will. Thus, CENAPS has stated a claim for copyright infringement.
2. Works Identified in the Termination Letter
Next, Herald House argues that even if the termination letter could terminate the publishing agreements, it would only terminate those specific Works identified in the letter, despite the fact that CENAPS alleges in its amended complaint that the termination letter terminated Herald House's exclusive license to all of the Works. Herald House is correct that the termination letter (Doc. No. 34-1) conflicts with CENAPS' allegation (Doc. No. 14. ¶ 18) that the termination letter terminated Herald House's exclusive license to publish all of the Works. The termination letter only identifies 50 Works to which the letter purportedly applies.
CENAPS does not address this argument in its response. Accordingly, the Court agrees with Herald House that the termination letter only terminated those specific Works identified in the letter. As such, the Court grants Herald House's motion and dismisses CENAPS' copyright claim to the extent that it relates to Works not listed in the termination letter.
The termination letter does not clearly identify the title of each of the Works. In order to provide the Court with necessary information, CENAPS is directed to file a short notice by March 8, 2019 that identifies which of the 87 materials listed in Document Number 14-1 are the 50 Works that were purportedly terminated by the August 2017 letter and the explain how the Court can match the Works identified in the termination letter with the ones listed in Document Number 14-1. By March 15, 2019, Herald House is directed to file a notice of agreement with CENAPS notice or file a notice explaining why/how it disagrees with CENAPS' notice.
3. First Sale Doctrine
Next, Herald House argues that even if the termination letter could terminate the publishing agreements, the first sale doctrine would allow Herald House to sell the copies of the Works that Herald House had published prior to the September 30, 2017 termination date. As explained below, the Court finds that the first sale doctrine is inapplicable.
Pursuant to
In the instant case, Herald House's inventory that was published prior to September *103430, 2017 had not yet been sold, and as such, Herald House's sale of such inventory is not protected by the first sale doctrine. The Court makes no finding regarding whether Herald House committed copyright infringement by selling off such existing inventory.
4. Trademark Infringement
Next, Herald House argues that if CENAPS' copyright claim fails, then its trademark infringement claim fails as well. However, as explained above, the Court has found that CENAPS may still pursue its copyright infringement claim. As such, the Court denies Herald House's motion to dismiss CENAPS' trademark infringement claim.
IV. Conclusion
Accordingly, it is ORDERED AND ADJUDGED that:
(1) Counterclaim-Defendants' Motion to Dismiss Counterclaim (Doc. No.24) is GRANTED IN PART AND DENIED IN PART : The motion is GRANTED to the extent that Herald House's counterclaim is based on Works identified in the termination letter that were solely authored by Gorski; otherwise, the motion is DENIED .
(2) CENAPS and Gorski are directed to file a short notice by March 8, 2019 listing the Counterclaim Works that were identified in the termination letter and explaining how the Court can match the Counterclaim Works to the Works identified in the termination letter.
(3) By March 15, 2019, Herald House is directed to file a notice of agreement with CENAPS and Gorski's notice or file a notice explaining why/how it disagrees with their notice.
(4) Defendants' Motion for Judgment on the Pleadings (Doc. No. 38) is GRANTED IN PART AND DENIED IN PART : The motion is GRANTED to the extent that CENAPS' copyright claim is based on Works that are not listed in the termination letter; otherwise, the motion is DENIED .
(5) CENAPS is directed to file a short notice by March 8, 2019 that identifies which of the 87 materials listed in Document Number 14-1 are the 50 Works that were purportedly terminated by the August 2017 letter and explaining how the Court can match the Works identified in the termination letter with the ones listed in Document Number 14-1.
(6) By March 15, 2019, Herald House is directed to file a notice of agreement with CENAPS notice or file a notice explaining why/how it disagrees with CENAPS' notice.
DONE AND ORDERED at Tampa, Florida, this 27th day of February, 2019.
In response to the motion to dismiss, Herald House filed a copy of several of the publishing agreements, as well as the purported termination letter. The parties agree that the Court can consider these documents without converting the motion to dismiss into a motion for summary judgment, because these documents are central to Herald House's counterclaim and their authenticity is not challenged. (Doc. No. 24, p. 6; Doc. No. 34, p. 7 n.2).
Counterclaim-Plaintiff Herald Publishing House states that it is wrongly named as simply "Herald House" in the amended complaint. However, for consistency, it refers to itself in the relevant documents as "Herald House," and the Court will do so also.
The parties allege in their pleadings that the letter was dated August 3, 2017, but the letter has since been filed and is dated August 8, 2017. (Doc. No. 34-1).
The parties agree that the publishing agreements are "essentially identical." (Doc. No. 34, p. 7-8; Doc. No. 34-1).
The exhibit is filed at Doc. No. 25.
The publishing agreements provide that they shall be construed, enforced, and governed by Missouri law.
Paisley was overruled in part on other grounds by Novak v. Baumann,
One of the Counterclaim Works is titled, "Denial Management Counseling Workbook: Practical Exercises for Motivating Substance Abusers to Recover," and it is identified as being "by Terence R. Gorski, with Stephen F. Grinstead." (Doc. No. 25).
Herald House is free to later present the Court with case law showing that its sale of its existing inventory did not constitute copyright infringement.
Reference
- Full Case Name
- The CENAPS CORPORATION v. COMMUNITY OF CHRIST and Herald House d/b/a/ Independence Press, Herald Publishing House d/b/a Independence Press, Counterclaim-Plaintiff v. The CENAPS Corporation and Terence Gorski, Counterclaim-Defendants.
- Status
- Published