Sparkman & Stephens Holdings, LLC v. Mystic Seaport Museum, Inc.Sparkman & Stephens Holdings, LLC v. Mystic Seaport Museum, Inc.
Mary S. McElroy, United States District Judge.
This matter comes before the Court on the parties’ cross-motions for summary judgment. (
I. BACKGROUND
S&S is a naval architecture and brokerage firm that has designed yachts and other maritime vessels since its founding in 1929. The Museum is one of the world‘s leading maritime museums, which holds more than 130 collections of historical ship plans. This case arises from a dispute over a 1989 Agreement (“1989 Agreement“) between S&S and the Museum governing the donative transfer of certain S&S maritime drawings and associated records to the Museum for long-term preservation. Pursuant to the 1989 Agreement, upon donation, title to the S&S materials passed to the Museum and the Museum assumed an obligation to offer the materials to the public, including through the sale of copies subject to certain limited exceptions. (
On August 15, 2018, Donald Tofias acquired S&S and sought to obtain control over access to S&S‘s historical drawings. (
On January 15, 2021, S&S filed this lawsuit alleging that the Museum breached the 1989 Agreement by (1) selling copies of S&S plans for use in the restoration of
On April 24, 2023, both parties filed motions for summary judgment. S&S argues that the Court should grant summary judgment that (1) the Museum is liable for breach of contract, (2) the Museum has infringed various S&S copyright registrations; and (3) the Museum is not entitled to corrective advertising damages. (
II. SUMMARY JUDGMENT STANDARD
Summary judgment‘s role in civil litigation is “to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.” Garside v. Osco Drug Inc., 895 F.2d 46, 50 (1st Cir. 1990). Summary judgment is appropriate when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.”
III. DISCUSSION
Much of this case turns on whether the 1989 Agreement permits the Museum to sell copies of S&S drawings for the purpose of restoring existing boats. Thus, the Court begins its analysis by interpreting the 1989 Agreement. Despite the parties’
A. Contract Interpretation
Under New York law, “the initial interpretation of a contract ‘is a matter of law for the court to decide.‘” Int‘l Multifoods Corp. v. Com. Union Ins. Co., 309 F.3d 76, 83 (2d Cir. 2002) (quoting K. Bell & Assocs., Inc. v. Lloyd‘s Underwriters, 97 F.3d 632, 637 (2d Cir. 1996)). At the initial interpretation stage, the Court must determine whether the contract is ambiguous with respect to the question disputed by the parties. See id. “A contract is ambiguous under New York law if its terms could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.” Orchard Hill Master Fund Ltd. v. SBA Commc‘ns Corp., 830 F.3d 152, 156-57 (2d Cir. 2016) (quoting Chesapeake Energy Corp. v. Bank of N.Y. Mellon Tr. Co., 773 F.3d 110, 114 (2d Cir. 2014)). By contrast, “[n]o ambiguity exists where the contract language has a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion.” Chesapeake Energy Corp., 773 F.3d at 114 (quoting Law Debenture Tr. Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458, 467 (2d Cir. 2010)).
“If the [C]ourt finds that the contract is not ambiguous it should assign the plain and ordinary meaning to each term and interpret the contract without the aid of extrinsic evidence.” Alexander & Alexander Servs., Inc. v. These Certain Underwriters at Lloyd‘s, London, England, 136 F.3d 82, 86 (2d Cir. 1998). However, if the Court “concludes that a [contract] provision is ambiguous, the [C]ourt may accept any available extrinsic evidence to ascertain the meaning intended by the parties during the formation of the contract.” New York Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 114 (2d Cir. 2010) (quoting Parks Real Est. Purchasing Group v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 43 (2d Cir. 2006)).
1. The 1989 Agreement is Ambiguous
The crux of the parties’ dispute centers around the interpretation of Sections VII and X of the 1989 Agreement. Section VII states in relevant part:
Sailplans and profiles, and arrangement drawings of decks and interiors (hereinafter called Category I drawings) may be reproduced and sold by MSM for research and publication, with a S&S/MSM credit line being required for the latter use. Reproductions of other drawings (hereinafter called Category II drawings) will be sold by MSM under a legally-binding, two-party agreement stating that they will be used exclusively for study or model-making, that they will not be copied, that they will not be used for boatbuilding, and that they will not be published or passed on to others. Category II drawings will not be released for publication without written approval from S&S. Third party violation of plan restrictions, such as boats being built without S&S agreement, will be handled on a case basis with legal action being initiated by either S&S or MSM on its own behalf.
(
Permission to build boats from any drawings in the S&S collection will be
within the sole discretion of S&S who may negotiate directly with the builder, and any inquiries of this nature that come to MSM will be referred to S&S.
(
2. Extrinsic Evidence
When interpreting an ambiguous contract, the Court “may accept any available extrinsic evidence to ascertain the meaning intended by the parties during the formation of the contract.” N.Y. Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 114 (2d Cir. 2010). Summary judgment should be granted “where the extrinsic evidence illuminating the parties’ intended meaning of the contract is ‘so one-sided that no reasonable person could decide to the contrary.‘” New York Marine & Gen. Ins. Co., 599 F.3d at 115 (quoting Compagnie Financiere De Cic Et De L‘Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 232 F.3d 153, 158 (2d Cir. 2000)). In other words, summary judgment is appropriate when “the ambiguities may be resolved through extrinsic evidence that is itself capable of only one interpretation, or where there is no extrinsic evidence that would support a resolution of these ambiguities in favor of the nonmoving party‘s case.” Topps Co. v. Cadbury Stani S.A.I.C., 526 F.3d 63, 68 (2d Cir. 2008).
Here, the record contains two forms of extrinsic evidence that unequivocally support the Museum‘s interpretation of the 1989 Agreement: (1) the testimony of witnesses involved in the drafting and negotiation of the 1989 Agreement and (2) the three-decades-long course of dealing between the parties.
a. Evidence of the Drafters’ Intent
In July 1987, Maynard Bray prepared and distributed the first draft of what became the 1989 Agreement. Between 1987 and 1989, the parties and their attorneys exchanged proposed revisions to the draft that Mr. Bray had prepared. (
Mr. Bray testified that at the time of drafting the 1989 Agreement, it was his understanding that the term boatbuilding, as used in Section VII, referred to new construction, and did not incorporate restoration or rebuilding of existing boats. (
S&S points to nothing in the record to rebut this testimony. Instead, S&S claims that all three witnesses favor the Museum, and thus their testimony must be assessed by a jury. (
b. Course of Dealings
The nearly thirty-year course of dealings between S&S and the Museum bolsters the Museum‘s interpretation of the 1989 Agreement. Between the execution of the 1989 Agreement on February 15, 1989, and Mr. Tofias’ acquisition of S&S on August 15, 2018, S&S referred customer inquiries seeking S&S plans for use in boat restorations to the Museum. (
“The parties’ interpretation of the contract in practice, prior to litigation, is compelling evidence of the parties’ intent.” Ocean Transp. Line, Inc. v. Am. Philippine Fiber Indus., Inc., 743 F.2d 85, 91 (2d Cir. 1984) (citing Old Colony Tr. Co. v. Omaha, 230 U.S. 100, 118 (1913)). New York courts have “extended the course-of-dealings doctrine ‘to include evidence that a party has ratified terms by failing to object,’ provided there is ‘an indication of the common knowledge and understanding of the parties.‘” Ward v. Nat‘l Geographic Soc‘y, 284 F. App‘x 822, 824 (2d Cir. 2008) (quoting Diesel AG” cite=“121 F.3d 24” pinpoint=“31” court=“2d Cir.” date=“1997“>New Moon Shipping Co. v. MAN B & W Diesel AG, 121 F.3d 24, 31 (2d Cir. 1997)). The undisputed evidence of the course of dealings between the parties under the 1989 Agreement compels the conclusion that the 1989 Agreement permits The Museum‘s sale of copies of S&S drawings
B. The Museum is Entitled to Judgment as a Matter of Law on S&S‘s Breach of Contract Claim Based On Improper Reproduction and Sale
It is undisputed that all S&S‘s allegations of breach of contract related to the reproduction and sale of designs stem from sales that the Museum made for the purpose of restoring existing boats, which the Court has found is permitted by the 1989 Agreement. (
C. The Museum is Entitled to Judgment as a Matter of Law on S&S‘s Copyright Infringement Claims
Similarly, S&S‘s copyright infringement claims are premised solely upon the Museum‘s sale of various Gesture drawings to Gesture‘s owner for use in restoration. (
D. S&S‘s Remaining Breach of Contract Claims
S&S also alleges that the Museum has breached the 1989 Agreement by failing to properly preserve S&S materials (“Preservation Claim“) and failing to maintain a log of sales for the years 2000 to 20031 (“Log Claim“). (
1. S&S‘s Preservation Claim
Section II of the 1989 Agreement states that the S&S “material will be maintained by MSM pursuant to the normal policies and practices of MSM[.]” (
matters that properly go to the weight of the evidence; and the
In viewing the record in the light most favorable to S&S, the Court finds that there is a dispute of material fact about whether the Museum‘s care of the S&S materials complies with its normal policies and practices. Therefore, the Museum‘s Motion for Summary Judgment on this claim is denied.
2. S&S‘s Log Claim
Section IX of the 1989 Agreement states: “MSM will maintain a log of all S&S drawings sold and make this information available to S&S upon request.” (
To prevail on their breach of contract claim, S&S “must establish ‘(1) an agreement, (2) adequate performance [on their part], (3) breach by [the Museum], and (4) damages.‘” Donohue v. Hochul, 32 F.4th 200, 206-07 (2d Cir. 2022) (quoting Fischer & Mandell, LLP v. Citibank, N.A., 632 F.3d 793, 799 (2d Cir. 2011)). The first two elements are not in dispute. Nevertheless, S&S‘s Log Claim fails because the evidence is insufficient to establish a breach by the Museum. Despite S&S‘s argument to the contrary, there is no genuine issue of material fact regarding whether the log that the Museum “reconstructed” can “actually substitute for the original log that the Museum was required to maintain[.]” (
E. Rescission of the 1989 Agreement is Unavailable as a Matter of Law
Under New York law, “[r]escission is an extraordinary remedy, appropriate only where the breach is found to be material and willful, or, if not willful, so substantial and fundamental as to strongly tend to defeat the object of the parties in making the contract.” Courchevel 1850 LLC v. Espinosa, No. 17 CV 799 (VB), 2020 WL 635498, at *4 (S.D.N.Y. Feb. 11, 2020), aff‘d sub nom. Courchevel 1850 LLC v. Wisdom Equities LLC, 846 F. App‘x 33 (2d Cir. 2021) (quoting Krumme v. WestPoint Stevens Inc., 238 F.3d 133, 143 (2d Cir. 2000)). A claim for rescission, “seeks to restore the parties to status quo, as if the parties had never entered into the contract.” Unger v. Ganci, 200 A.D.3d 1604, 161 N.Y.S.3d 546, 549 (2021) (citation omitted). Accordingly, the equitable remedy of rescission “may be invoked ‘only when there is lacking [a] complete and adequate remedy at law and where the status quo may be substantially restored.‘” Syncora Guarantee Inc. v. EMC Mortg. Corp., 874 F. Supp. 2d 328, 340 (S.D.N.Y. 2012) (quoting Rudman v. Cowles Commc‘ns, Inc., 30 N.Y.2d 1, 13, 330 N.Y.S.2d 33, 280 N.E.2d 867 (1972)).
In this case, rescission cannot effectively restore the parties to their pre-contract status quo. The Museum has provided over thirty-four-years of services from which S&S has benefitted, including dedicating thousands of hours and hundreds of thousands of dollars to the care and preservation of the S&S-donated materials. (
F. Unjust Enrichment
“The theory of unjust enrichment lies as a quasi-contract claim. It is an obligation the law creates in the absence of any agreement.” Goldman v. Metro. Life Ins. Co., 5 N.Y.3d 561, 572, 841 N.E.2d 742, 746 (2005). “Where the parties executed a valid and enforceable written contract governing a particular subject matter, recovery on a theory of unjust enrichment for events arising out of that subject matter is ordinarily precluded.” IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 142, 907 N.E.2d 268, 274 (2009). Consequently, “[a]n unjust enrichment claim is not available where it simply duplicates, or replaces, a conventional contract . . . claim.” Corsello v. Verizon New York, Inc., 18 N.Y.3d 777, 790, 967 N.E.2d 1177, 1185 (2012).
Here, S&S argues that their unjust enrichment claim goes beyond the breach of contract issue because it “to some extent” relates to the Museum‘s donation revenue which is not covered by the 1989 Agreement. (
“MSM has received the benefit of advertising and displaying the S&S materials as part of its collection . . . [which] in turn served to provide MSM with donation revenue to which it was not entitled because it has not been complying with its obligation under the 1989 Agreement, e.g., based on MSM‘s sale of plans for boatbuilding purposes, failure to properly maintain the S&S materials in MSM‘s possession, and failure to maintain logs and provide such logs to S&S upon request.”
(Id. at 3-4) (emphasis added.) The Museum is thus entitled to summary judgment on S&S‘s unjust enrichment claim.
G. The Museum May Pursue Corrective Advertising Damages
S&S seeks summary judgment on the Museum‘s claim for corrective advertising damages on the basis that the Museum did not timely disclose this theory of damages. The Court finds that the Museum‘s disclosure of its intent to seek collective advertising damages was timely. Therefore, S&S‘s motion for summary judgment on this issue is denied.
IV. CONCLUSION
For all these reasons, S&S‘s Motion for Partial Summary Judgment (
The Counts and Counterclaims that remain to be decided by a factfinder are S&S‘s claim for Breach of Contract limited to “MSM‘s Failure to Properly Preserve S&S Materials” (Count VII ¶¶ 77-81), and the Museum‘s Counterclaims for Tortious Interference with Business Relations (Count I), Tortious Interference with Prospective Business Relations (Count II), and Declaratory Judgment of Invalid Copyrights (Count III).
IT IS SO ORDERED.
Mary S. McElroy,
United States District Judge
August 17, 2023