Dunn v. CCH Inc.
834 F. Supp. 2d 657 (2011)
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Rule of Law:
In a publishing contract granting a publisher the discretion to terminate if a manuscript is not 'acceptable,' the publisher's decision is limited by the implied covenant of good faith and fair dealing, which requires the termination to be based on genuine, honest dissatisfaction with the author's work.
Facts:
- CCH Incorporated (CCH), a legal publisher, decided to create a new line of expert treatises and recruited Stephen J. Dunn (Dunn), a tax attorney, as an author for a treatise on IRS Practice and Procedure.
- In February 2010, Dunn and CCH executed a Publishing Agreement that allowed CCH to terminate the contract if Dunn delivered a manuscript that was not 'acceptable' in form and content.
- Dunn submitted a sample chapter on 'Testimonial Privileges.' CCH's editor found it lacked sufficient depth but was an acceptable starting point, and Dunn successfully revised it after receiving feedback.
- Dunn later submitted a second draft chapter on 'Tax Returns.' CCH editor Maureen Bornstein considered this chapter to be significantly deficient, lacking depth and breadth of coverage.
- Bornstein provided Dunn with general comments and a sample chapter from another treatise but did not request a revision or provide specific line-edits.
- In response to the feedback, Dunn emailed Bornstein stating, 'Tax Returns is not a very deep subject... I'm not sure what we can do about it,' and referred to a competitor's treatise that CCH recommended as 'worthless.'
- Based on the deficient chapter and Dunn's response, CCH's editorial team concluded that Dunn was unwilling or unable to make the necessary revisions to produce an acceptable manuscript.
- On August 11, 2010, CCH informed Dunn by phone that it was terminating the Publishing Agreement, followed by a formal letter on August 27, 2010.
Procedural Posture:
- Stephen J. Dunn filed a two-count complaint against CCH Incorporated in the United States District Court for the Eastern District of Michigan, alleging breach of contract and breach of the implied covenant of good faith and fair dealing.
- Plaintiff Dunn filed a motion for partial summary judgment on the issue of liability.
- Defendant CCH Incorporated filed a cross-motion for summary judgment on both liability and damages.
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Issue:
Under Illinois law, does a publisher's contractual right to terminate an agreement for a manuscript that is not 'acceptable in form and content' require the publisher to act in good faith by being honestly dissatisfied with the work?
Opinions:
Majority - Cohn, District Judge
Yes, a publisher's contractual right to terminate an agreement for an 'unacceptable' manuscript is limited by the implied covenant of good faith and fair dealing, which requires the publisher to be honestly dissatisfied with the work. The court held that while a publisher has discretion, it is not absolute and must be exercised reasonably. Citing precedent like Doubleday & Co. v. Curtis, the court adopted the 'honest dissatisfaction' standard, meaning a publisher can terminate a contract if its dissatisfaction with the submitted work is genuine and not a pretext for other motives. In this case, summary judgment is inappropriate because a genuine issue of material fact exists as to whether CCH was honestly dissatisfied. While Dunn's second chapter was deficient and his email response dismissive, CCH's failure to offer him an opportunity to revise—as it had with the first chapter—creates a factual dispute for a jury to decide regarding CCH's good faith.
Analysis:
This decision reinforces the application of the implied covenant of good faith and fair dealing to contracts containing satisfaction clauses, particularly in the publishing industry. It establishes that a publisher's discretion to deem a manuscript 'unacceptable' is not absolute and is subject to judicial review for 'honest dissatisfaction.' The case illustrates that the process of giving feedback and the author's responsiveness are critical facts in determining good faith, making it difficult for either party to win on summary judgment if there is conflicting evidence. This precedent guides future disputes by signaling that a publisher's abrupt termination without offering an opportunity to cure may be viewed as evidence of bad faith, while an author's dismissive attitude toward feedback may justify a publisher's conclusion that the author is unwilling to perform.
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