Case 1:07-cv-00891-DLC Document 16 Filed 08/27/07 Page 1 of 19
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`07 Civ. 891 (DLC)
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`OPINION AND ORDER
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`AMY AXELROD, INC. and AMY AXELROD,
`Plaintiffs,
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`-v-
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`SIMON & SCHUSTER, INC.,
`Defendant.
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`----------------------------------------
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`Appearances:
`For Plaintiffs:
`Paul C. Rapp
`348 Long Pond Road
`Housatonic, MA 01236
`
`For Defendant:
`Marcia B. Paul
`Teena H. (Kim) Lee
`Davis Wright Tremaine LLP
`1633 Broadway
`New York, NY 10019
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`
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`DENISE COTE, District Judge:
`Plaintiffs Amy Axelrod (“Axelrod”), an author of children’s
`books, and Amy Axelrod, Inc. (“AAI”), the educational literature
`company of which Axelrod is president and principal shareholder,
`bring the instant action against Simon & Schuster, Inc. (“S&S”)
`for breach of contract, breach of covenant of good faith and
`fair dealing, fraud, copyright infringement, contributory or
`vicarious copyright infringement, and mischaracterizing special
`sales. Plaintiffs are citizens of New York and signatories,
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`Case 1:07-cv-00891-DLC Document 16 Filed 08/27/07 Page 2 of 19
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`parties in interest, and/or third party beneficiaries to six
`publishing contracts with S&S, a New York corporation, and its
`predecessor in interest for the publication of a series of books
`that teach children mathematics and feature whimsical pig
`characters (the “Pigs Series”).1 Defendant has moved to dismiss
`the plaintiffs’ amended complaint pursuant to Rule 12(b)(6),
`Fed. R. Civ. P., for failure to state claims of copyright
`infringement, contributory infringement or vicarious liability,
`and fraud. It moves to dismiss plaintiffs’ remaining state law
`claims pursuant to Rule 12(b)(1), Fed. R. Civ. P., for lack of
`subject matter jurisdiction. Plaintiffs have cross-moved for
`leave to file a second amended complaint adding a claim for
`breach of fiduciary duty. For the reasons explained below, the
`defendant’s motion is granted only with respect to plaintiffs’
`fraud claim. Plaintiff’s motion to amend is denied.
`
`BACKGROUND
`The following facts are drawn from the amended complaint
`and the six publishing agreements, which are integral to the
`amended complaint. Plaintiffs are “recognized leaders in the
`field of integration of children’s literature and mathematics.”
`Axelrod has six publishing contracts with S&S pursuant to which
`the defendant has published in hardcover and paperback versions
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`1 Only Axelrod is party to each of the six publishing agreements.
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`2
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`Case 1:07-cv-00891-DLC Document 16 Filed 08/27/07 Page 3 of 19
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`the eight Pigs Series’ titles she has authored.2 Each of these
`titles “are subject to federal copyright registrations in the
`name of Plaintiff Amy Axelrod.” Despite the “continuing and
`demonstrable market demand” for the Pigs Series, recent years
`have witnessed a sharp decline in their sales and the
`accompanying royalties due to Axelrod.
`Under the publishing agreements between Axelrod and S&S,
`the plaintiff granted the defendant the sole and exclusive right
`to print, publish, distribute and/or sell her work. Each of the
`agreements set forth a schedule for royalty payments to be made
`by S&S to Axelrod, and permit the defendant to sell the titles
`at “remainder” prices under specified circumstances. The first
`two publishing agreements provide that
`[i]f at any time after two year(s) from publication of the
`Work, [S&S] has copies on hand which, in its judgment,
`cannot be sold through usual marketing channels, [S&S] may
`sell such copies at a “remainder price”, that is, at a
`special discount of sixty percent (60%) or more from the
`retail list price. All copies sold at a remainder price
`shall be accounted for separately and not included in sales
`totals, and the royalty on each copy sold shall be five
`percent (5%) of the net amount received by [S&S] reduced by
`the manufacturing cost. [S&S] will not pay any royalties
`on copies sold at or below manufacturing cost.
`
`(Emphasis in original.)3 The other four agreements provide that
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`2 Representative titles include Pigs Will Be Pigs, Pigs Go To
`Market, and Pigs in the Pantry.
` The equivalent provision in the second publishing agreement,
`dated February 28, 1994, grants Axelrod a ten percent royalty on
`remainder sales.
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`[i]f, in the opinion of [S&S], any edition of the Work
`shall have ceased to have a remunerative sale, [S&S] shall
`be at liberty to dispose of all or part of the existing
`stock thereof and will pay to [Axelrod] a royalty of two
`and one-half percent (2.5%) of the amount received by
`[S&S], except that no royalty shall be payable on any
`copies sold at or below the cost of manufacture. In any
`event, copies sold at a discount of eighty-five percent
`(85%) or more from the suggested catalog retail price shall
`be deemed sales upon which no royalty shall be due. [S&S]
`shall make no remainder sale without first offering copies
`to [Axelrod] at the estimated remainder price. Inadvertent
`failure to offer such copies to [Axelrod] shall not be
`deemed a breach of this Agreement.
`
`Plaintiffs claim that S&S discontinued carrying the Pig
`Series books and secretly sold paperback editions at remainder
`or otherwise deeply discounted prices to third parties who
`allegedly rebound them and sold them as hardcover editions (the
`“rogue rebinders”). These rebinders purportedly “acquire deeply
`discounted versions of the Titles and rebind them with
`specialized and altered hardcovers . . . .” The rogue rebinders
`remove S&S’s logos off of the book covers and replace the
`original International Standard Book Numbers (ISBN) with new
`ISBN numbers specific to the illegitimate editions. While
`plaintiffs receive either a “heavily reduced ‘special sale’
`softcover royalty or no royalty from Defendant’s sale of a
`deeply discounted or remaindered softcover stock to the rogue
`rebinder,” the rogue rebinders sell their versions of the titles
`at the full hardcover price.
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`According to plaintiffs, S&S failed to disclose that the
`titles were out of print, did not inform plaintiffs of its
`decision to discontinue the books, and prevented them from
`demanding a reversion of their rights or seeking a different
`publisher. They also contend that the defendant failed to
`disclose the disposition of thousands of copies of the titles
`that were sold as remaindered stock to rogue rebinders and off-
`price bookstores, and provided fraudulent and incorrect
`information to plaintiffs’ auditor in the course of a 2005 audit
`of the defendant’s books. According to plaintiffs, the
`defendant allegedly “engineered the demise of Plaintiffs’
`publishing career” by “surreptitiously” withdrawing Axelrod’s
`books from the general market, using the rogue rebinders to meet
`market demand for hardcover copies. In the process, it
`generated cash for itself and avoided paying Axelrod the
`royalties owed to her.
`Plaintiffs filed the complaint on March 1, 2006 in the
`Northern District of New York seeking damages and the reversion
`of all rights to books published pursuant to the publishing
`agreements with S&S. The defendant moved to dismiss on April 17
`for lack of subject matter jurisdiction and/or improper venue,
`pursuant to Rules 12(b)(1) and 12(b)(3), Fed. R. Civ. P., and
`for discretionary transfer of the action to this Court pursuant
`to 28 U.S.C. § 1404(a). On February 1, 2007, the motion to
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`dismiss was denied, the claims arising from the first two
`publishing agreements were transferred to this Court pursuant to
`28 U.S.C. § 1406(a), and the remaining claims were transferred
`pursuant to Id. § 1404(a). Axelrod v. Simon & Schuster, Inc.,
`No. 06 Civ. 266 (LEK/RFT) (N.D.N.Y. Feb. 1, 2007) (order denying
`motion to dismiss and transferring case). The action was
`transferred to this Court’s docket on February 6.
`Plaintiffs filed an amended complaint on April 4, alleging
`that S&S 1) breached the publishing agreements, 2) violated the
`covenant of good faith and fair dealing, 3) engaged in fraud,
`4) infringed Axelrod’s copyright by exceeding the terms of the
`publishing agreements, which are “licenses by which the
`Defendants [sic] have certain limited rights to exploit the
`Plaintiffs’ copyrights,” 5) contributed to the rogue rebinders’
`infringements of Axelrod’s copyrights, and 6) mischaracterized
`special sales. The defendant moved to dismiss the amended
`complaint pursuant to Rules 12(b)(6) and 12(b)(1) on April 25.
`The plaintiffs opposed this motion and cross-moved to amend the
`complaint on June 1. Both motions were fully briefed on June
`21.4
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`4 In support of its motion, S&S submitted one affidavit
`authenticating the six publishing agreements at issue in this
`case. In opposition, the plaintiffs submitted one affidavit
`authenticating an August 4, 2004 letter written by Jennifer K.
`Weidman, vice president and senior counsel of S&S, to one of the
`alleged “rogue rebinders.” The question of whether the
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`DISCUSSION
`S&S seeks dismissal of the plaintiffs’ copyright
`infringement and fraud claims for failure to state a claim. It
`also moves to dismiss plaintiffs’ remaining claims for breach of
`contract, breach of covenant of good faith and fair dealing, and
`mischaracterization of special sales for lack of subject matter
`jurisdiction on the ground that the parties are not diverse.
`The plaintiffs in turn seek to amend their complaint by adding a
`claim for breach of fiduciary duty.
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`I. Motion to Dismiss for Failure to State a Claim
`Under the pleading standard set forth in Rule 8(a) of the
`Federal Rules of Civil Procedure, complaints must include “a
`short and plain statement of the claim showing that the pleader
`is entitled to relief.” Rule 8(a)(2), Fed. R. Civ. P.5 “[A]
`plaintiff is required only to give a defendant fair notice of
`what the claim is and the grounds upon which it rests.”
`Leibowitz v. Cornell Univ., 445 F.3d 586, 591 (2d Cir. 2006).
`Rule 8 is fashioned in the interest of fair and reasonable
`notice, not technicality, and therefore is “not meant to impose
`
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`publishing agreements are properly considered on a motion to
`dismiss for failure to state a claim is addressed below.
` The defendant has not argued that plaintiffs’ fraud claim fails
`to meet the heightened pleading standard of Rule 9(b), Fed. R.
`Civ. P.
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`Case 1:07-cv-00891-DLC Document 16 Filed 08/27/07 Page 8 of 19
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`a great burden upon a plaintiff.” Dura Pharms., Inc. v. Broudo,
`544 U.S. 336, 347 (2005). When considering a motion to dismiss
`under Rule 12(b)(6), a trial court must “accept as true all
`factual statements alleged in the complaint and draw all
`reasonable inferences in favor of the non-moving party.”
`McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir.
`2007) (citation omitted). At the same time, “conclusory
`allegations or legal conclusions masquerading as factual
`conclusions will not suffice to defeat a motion to dismiss.”
`Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328, 337 (2d
`Cir. 2006) (citation omitted). A court must apply a “flexible
`‘plausibility standard,’ which obliges a pleader to amplify a
`claim with some factual allegations in those contexts where such
`amplification is needed to render the claim plausible.” Iqbal
`v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007) (emphasis in
`original).
`Although the focus should be on the pleadings in
`considering a motion to dismiss under Rule 12(b)(6), the court
`will deem the complaint to include “any written instrument
`attached to it as an exhibit or any statements or documents
`incorporated in it by reference.” Mangiafico v. Blumenthal, 471
`F.3d 391, 398 (2d Cir. 2006) (citation omitted). Even if the
`plaintiff does not attach to the complaint or incorporate by
`reference “a document upon which it solely relies and which is
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`integral to the complaint, the court may nevertheless take the
`document into consideration in deciding the defendant's motion
`to dismiss, without converting the proceeding to one for summary
`judgment.” Holowecki v. Fed. Express Corp., 440 F.3d 558, 565-
`66 (2d Cir. 2006) (citation omitted). The necessity of
`transforming a Rule 12(b)(6) motion into a motion for summary
`judgment is “largely dissipated” when the plaintiff is shown to
`have had actual notice of the document extrinsic to the
`complaint and to have relied upon the document to frame the
`complaint. Cortec Indus., Inc. v. Sum Holdings, L.P., 949 F.2d
`42, 48 (2d Cir. 1991). When a “complaint relies heavily upon
`[the] terms and effect” of a document, such as a contract, it is
`considered “integral” to the complaint. Mangiafico, 471 F.3d at
`398. In the event that a contract extrinsic to the complaint is
`properly considered on a motion to dismiss, a court is “not
`constrained to accept the allegations of the complaint in
`respect of the construction of the [contract].” Int’l Audiotext
`Network, Inc. v. American Tele. & Tele., 62 F.3d 69, 72 (2d Cir.
`1995). The court must, however, “strive to resolve any
`contractual ambiguities in [the plaintiffs’] favor.” Id.
`While the six publishing agreements are not attached to or
`incorporated by reference in the amended complaint, they are
`properly considered on the instant motion. They are integral to
`the complaint because they provide the basis for plaintiffs’
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`Case 1:07-cv-00891-DLC Document 16 Filed 08/27/07 Page 10 of 19
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`breach of contract claim and the point of departure for their
`claims under the Copyright Act, 17 U.S.C. § 101 et seq., which
`allege that the defendant violated the statute by exceeding the
`scope of the license granted to it by the agreements to
`reproduce the Pigs Series titles. The complaint “relies heavily
`upon [the] terms and effect” of the six publishing agreements.
`Mangiafico, 471 F.3d at 398.
`
`A. Copyright Infringement
`The defendant argues that the plaintiffs fail to allege
`claims under the Copyright Act.6 To establish a claim of
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`6 Plaintiffs claim that “[d]efendant’s motion, while nominally
`labeled a motion under F.R.C.P. 12(b)(6)[,] is[] at its core[]
`an attempted end-run around” the Court of Appeals’ decision in
`Bassett v. Mashantucket Pequot Tribe, 204 F.3d 343 (2d Cir.
`2000), which sets forth the test for determining subject matter
`jurisdiction over “claims of [copyright] infringement arising
`from, or in the context of, an alleged contractual breach.” Id.
`at 355 (abrogating three-step test of Schoenberg v. Shapolsky
`Publishers, Inc., 971 F.2d 926 (2d Cir. 1992), and confirming
`test articulated in T.B. Harms Co. v. Eliscu, 339 F.2d 823 (2d
`Cir. 1964)). “[A]n action ‘arises under’ the Copyright Act if
`and only if the complaint is for a remedy expressly granted by
`the Act, e.g., a suit for infringement . . . or asserts a claim
`requiring construction of the Act.” T.B. Harms, 339 F.2d at 828
`(citation omitted); see also Bassett, 204 F.3d at 349 (“[I]f the
`complaint alleges copyright infringement or seeks an injunction
`under the Copyright Act, under T.B. Harms the federal court has
`jurisdiction.”). Plaintiffs contend that by merely changing the
`appellation of the motion, S&S invites the Court “to engage in
`precisely those inquiries that Bassett holds are inappropriate,
`particularly [at] the earliest stage of a hybrid
`contract/copyright litigation.” As the defendant’s silence in
`its motion effectively concedes, there is undoubtedly federal
`jurisdiction here because the complaint meets the T.B. Harms
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`copyright infringement, “a plaintiff with a valid copyright must
`demonstrate that: (1) the defendant has actually copied the
`plaintiff's work; and (2) the copying is illegal because a
`substantial similarity exists between the defendant’s work and
`the protectible elements of plaintiff’s.” County of Suffolk,
`New York v. First Am. Real Estate Solutions, 261 F.3d 179,
`187 (2d Cir. 2001) (emphasis in original) (citation omitted).
`“[T]he fact that a party has licensed certain rights to its
`copyright to another party does not prohibit the licensor from
`bringing an infringement action where it believes the license is
`exceeded or the agreement breached.” Tasini v. N.Y. Times Co.,
`Inc., 206 F.3d 161, 170 (2d Cir. 2000), aff’d, 533 U.S. 483
`(2001). Whether the parties dispute the existence of the
`license or its scope, “an infringement claim may be brought to
`remedy unauthorized uses of copyrighted material.” Tasini, 206
`F.3d at 171.
`The complaint sufficiently pleads a claim for copyright
`infringement. It alleges, and the defendant does not dispute,
`that each of Axelrod’s eight titles “are subject to federal
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`test. It seeks “[a]n award of up to $150,000 per act of
`copyright infringement” and attorney fees pursuant to the
`Copyright Act, and “asserts a claim requiring construction of
`the Act,” T.B. Harms, 339 F.2d at 828, by alleging that the
`defendant exceeded its license to reproduce the plaintiffs’
`books and that it contributed to infringement by third party
`rogue rebinders.
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`Case 1:07-cv-00891-DLC Document 16 Filed 08/27/07 Page 12 of 19
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`copyright registrations in the name of Plaintiff Amy Axelrod.”
`It also contends that the defendant reproduced these works in
`violation of the license granted to S&S, thereby infringing the
`copyrights. Since “[i]t is at least possible” that the
`plaintiffs may demonstrate a violation of the Copyright Act,
`their claim withstands defendant’s motion under Rule 12(b)(6).
`Chosun Int’l, Inc. v. Chrisha Creations, Ltd., 413 F.3d 324, 329
`(2d Cir. 2005).
`The defendant’s contention that “[w]hen a copyright owner
`grants a license . . . to use the copyrighted material, s/he
`waives any right to sue the licensee for copyright infringement”
`is flatly contradicted by Second Circuit authority. Tasini, 206
`F.3d at 170-71 (explicitly recognizing claims for copyright
`infringement even where plaintiff has licensed certain rights).
`None of the authorities on which the defendant relies undermines
`Tasini or its application to this motion. Indeed, most of them
`do not even address the adequacy of a pleading. For example,
`Arthur Guinness & Sons, PLC v. Sterling Publ’g Co., Inc., 732
`F.2d 1095, 1101 (2d Cir. 1984), affirmed a preliminary
`injunction; Septembertide Publ’g, B.V. v. Stein & Day, Inc., 884
`F.2d 675, 684 (2d Cir. 1989), modified and affirmed a grant of
`summary judgment; TVT Records v. Island Def Jam Music Group, 412
`F.3d 82, 92-93 (2d Cir. 2004), Graham v. James, 144 F.3d 229,
`236 (2d Cir. 1998), Bourne v. Walt Disney Co., 68 F.3d 621, 629
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`(2d Cir. 1995), United States Naval Inst. v. Charter Commc’ns,
`Inc., 936 F.2d 692, 695-96 (2d Cir. 1991), and Nolan v. Sam Fox
`Publ’g Co., Inc., 499 F.2d 1394, 1399-1400 (2d Cir. 1974),
`reviewed judgments entered following trial. While the defendant
`has cited lower court cases that considered Rule 12(b)(6)
`motions, none of these decisions suggests a reading of the law
`that would limit the impact of the Tasini decision on this
`motion. The motion to dismiss plaintiffs’ copyright claim is
`therefore denied.
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`B. Contributory or Vicarious Infringement
`A holder of a copyright may bring a claim for contributory
`or vicarious infringement of its rights under the Copyright Act.
`While “[t]he Copyright Act does not expressly render anyone
`liable for infringement committed by another,” its express
`language does not preclude “the imposition of liability for
`copyright infringements on certain parties who have not
`themselves engaged in the infringing activity.” Sony Corp. of
`Am. v. Universal City Studios, Inc., 464 U.S. 417, 434-35,
`(1984).
`[T]he concept of contributory infringement is merely a
`species of the broader problem of identifying the
`circumstances in which it is just to hold one individual
`accountable for the actions of another.
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`Id. at 435; see also Gershwin Publ’g Corp. v. Columbia Artists
`Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971). To establish
`contributory infringement, the plaintiff is required to show
`that the defendant “authorized the infringing use.” Softel,
`Inc. v. Dragon Med. & Scientific Communc’ns, Inc., 118 F.3d 955,
`971 (2d Cir. 1997) (citation omitted).
`The complaint has stated a claim for contributory or
`vicarious infringement by alleging that the defendant “sold
`remaindered or deeply discounted copies of Plaintiffs’ Titles to
`the rogue rebinders with knowledge that [they] would create and
`distribute infringing derivative works,” thereby facilitating
`infringement of Axelrod’s copyrights. The remaining arguments
`pressed by S&S concerning the contributory infringement claim,
`including reference to the first sale doctrine, do not require
`dismissal of this claim. The motion to dismiss the contributory
`or vicarious infringement claim is denied.
`
`C. Fraud Claim
`The defendant claims that the plaintiffs fail to plead a
`claim for fraud. A fraud claim will not lie under New York law
`if it arises “out of the same facts as plaintiff's breach of
`contract claim.” Telecom Intl. Am., Ltd. v. AT&T Corp., 280
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`F.3d 175, 196 (2d Cir. 2001) (citation omitted).7 In order to
`succeed on a fraud claim arising from a breach of contract, a
`plaintiff must show: (1) “a legal duty separate from the duty to
`perform under the contract”; (2) “a fraudulent misrepresentation
`collateral or extraneous to the contract”; or (3) “special
`damages that are caused by the misrepresentation and
`unrecoverable as contract damages.” Bridgestone/Firestone v.
`Recovery Credit Servs., 98 F.3d 13, 20 (2d Cir. 1996).
`Plaintiffs allege that S&S “failed to disclose to
`Plaintiffs that the Titles had been taken out of print,” and
`provided fraudulent and incorrect information regarding the sale
`of remaindered titles to plaintiffs’ 2005 auditor by
`fail[ing] to disclose . . . the disposition of thousands of
`copies of the Titles that were sold as remaindered stock to
`rogue rebinders and off-price booksellers, fail[ing] to
`provide the auditor with correct bindery notices and print
`edition information, . . . [and] further provid[ing] the
`auditor with fabricated sales and return data, which formed
`the basis of the audit.
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`Plaintiffs also allege that the defendant issued fraudulent
`royalty statements based on the fabricated sales and return
`data.
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`7 The parties do not dispute that New York law applies to
`plaintiffs’ state law claims. The complaint alleges that the
`defendants’ misrepresentations or omissions were committed in
`New York where the defendant, a New York corporation, maintains
`its principal place of business, Axelrod resides, and AAI is
`incorporated.
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`Plaintiffs fail to plead sufficiently a claim for fraud.
`Even with the allegation that the “[d]efendant’s statements
`amount to fraud with the intent to hide Defendant’s wrongful
`acts,” “the fraud claim is redundant and plaintiff's sole remedy
`is for breach of contract.” Telecom Intl. Am., 280 F.3d at 196
`(citation omitted). The plaintiffs have not pointed to any
`separate legal duty to support the fraud claim or any special
`damages. Nor have they identified a representation collateral
`to the contract. The plaintiffs’ allegations that the defendant
`allegedly failed to disclose its sales of deeply discounted and
`remaindered titles and reported false information to plaintiffs’
`auditor are premised on their failure to adhere to contractual
`duties to disclose that arise from the publishing agreements.
`In short, the plaintiffs’ fraud claim rests entirely on the
`duties contained in the agreements. To the extent that the
`plaintiffs allege a misrepresentation or omission in connection
`with contractual representations and commitments, then these
`allegations support plaintiffs’ claim for breach of contract.
`The plaintiffs’ claim for fraud is dismissed.
`
`II. Motion to Dismiss for Lack of Subject Matter Jurisdiction
`
`Having found that the plaintiffs have stated claims for
`infringement and contributory or vicarious infringement under
`the Copyright Act, the plaintiffs’ state law claims for breach
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`of contract, breach of covenant of good faith and faire dealing,
`and mischaracterization of special sales will not be dismissed
`for lack of subject matter jurisdiction.
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`III. Motion to File Second Amended Complaint
`Plaintiffs request permission to amend the complaint to
`include a claim for breach of fiduciary duty against the
`defendant. This additional claim would allege that “[b]y virtue
`of the author/publisher relationship, Defendant owes a fiduciary
`duty to Plaintiffs not to tolerate or participate in infringing
`or other activity that damages the value or commercial viability
`of literary property.” It would also contend that
`By tolerating, facilitating, encouraging, and allowing the
`rogue rebinders’ sales of hard-cover versions of the Titles
`in direct competition with legitimate [T]itles while
`simultaneously withholding legitimate Titles from the
`general trade market place, Defendant breached its
`fiduciary [sic] to Plaintiffs, and is liable to Plaintiffs
`therefore.
`
`Plaintiffs seek compensatory damages as relief for this claim.
`Rule 15(a), Fed. R. Civ. P., permits a party to amend a
`pleading “by leave of court” after the filing of a responsive
`pleading, and indicates that “leave shall be freely given when
`justice so requires.” Id. “[I]t is within the sound discretion
`of the district court to grant or deny leave to amend,” and a
`court may “deny leave for good reason, including futility, bad
`faith, undue delay, or undue prejudice to the opposing party.”
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`McCarthy, 482 F.3d at 200-01. A court must, however, provide a
`reason for its denial. Id. at 201.
`Under New York law, where parties to a contract deal in an
`“arms length” commercial transaction, a fiduciary relationship
`will not be found “absent extraordinary circumstances.” Mid-
`Island Hosp., Inc. v. Empire Blue Cross & Blue Shield, 276 F.3d
`123, 130 (2d Cir. 2002) (citation omitted). Thus, a
`conventional business relationship “without more” is not
`converted into a fiduciary relationship “by mere allegation.”
`Oursler v. Women's Interart Ctr., 566 N.Y.S.2d 295, 297 (App.
`Div. 1991); see also Ne. Gen. Corp. v. Wellington Adver., Inc.,
`624 N.E.2d 129, 132-33 (N.Y. 1993).
`The plaintiffs’ proposed language for a breach of fiduciary
`duty claim does not allege that the parties had anything more
`than a conventional business relationship between an author and
`her publisher. Nor do the plaintiffs propose to add any factual
`allegations to those already provided in the complaint. Its
`contention that S&S “tolerat[ed], facilitate[ed], encourage[ed],
`and allow[ed] the rogue rebinders’ sales of hard-cover [sic]
`versions of the Titles in direct competition with legitimate
`[T]itles while simultaneously withholding legitimate Titles from
`the general trade market place,” already appear in other
`locations of the amended complaint and were offered to support
`the breach of contract claim. Based on the plaintiffs’
`
`
`
`18
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`

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`Case 1:07-cv-00891-DLC Document 16 Filed 08/27/07 Page 19 of 19