Giga Games 1/Giga Games.iso/net/d_d/caltech/inbound/arnie.txt

Text File | 1993-06-22 | 18.2 KB | 325 lines

AUTHORIZED FOR EDUCATIONAL USE ONLY
  COPR. (C) WEST 1993 NO CLAIM TO ORIG. U.S. GOVT. WORKS
Not Reported in F.Supp.
225 U.S.P.Q. 1252
(Cite as: 1985 WL 442 (D.Minn.))

                  DAVID L. ARNESON, Plaintiff,
                              v.
            TSR HOBBIES, INC., a corporation, Defendant.
                     Civil No. 4-84-1180.
     United States District Court; D. Minnesota Fourth Division.
                        March 27, 1985.

    MAHER J. WEINSTEIN, Esq., and MICHAEL HIRSCH, Esq., Moss &
Barnett, 1200 Pillsbury Center, Minneapolis, Minnesota 55402,
appeared on behalf of plaintiff.
    JOHN L. BEARD, Esq., Michael, Best & Friedrich, 250 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202, appeared on behalf
of defendant.
MEMORANDUM OPINION AND ORDER

    MURPHY, District Judge.
    *1 Plaintiff, David L. Arneson, brought this action for
declaratory relief against defendant, TSR Hobbies, Inc. (TSR),
alleging breach of contract. Jurisdiction is alleged under 28
U.S.C. s 1332 and 28 U.S.C. s 2201. TSR has filed a counterclaim
for declaratory and injunctive relief. This matter is now before
the court upon the parties' cross-motions for summary judgment on
the complaint and on one of the counts contained in the
counterclaim.
                        Background
    The facts leading up to the publication of Monster Manual
II, the subject matter of this royalties dispute are basically
undisputed. Arneson and Gary Gygax collaborated in the
development of a fantasy role-playing game entitled 'Dungeons
and Dragons'. In 1980, Arneson brought an action against TSR and
Gary Gygax, its principal officer, director, and shareholder, to
recover damages and royalties relating to the publication of
'Dungeon and Dragons' and 'Advanced Dungeon and Dragons'. In
1981 the lawsuit was settled by means of the March 6, 1981
agreement. This action seeks a declaration that TSR is in breach
of that agreement.
                        A. The Agreement
    There are two main provisions in the agreement for royalties
payable to Arneson. At issue in this action is the royalty
provision applicable to a series of works published as 'Advanced
Dungeons and Dragons'. The provision provides that defendant is
obligated to provide royalties payments up to a maximum of
$1,200,000.
    One of the works covered by this provision is a work
entitled Official Advanced Dungeon & Dragons Monster Manual
(Monster Manual). Monster Manual contains descriptions of a large
number of creatures, over 300, that may be used in playing
Advanced Dungeons and Dragons. It also contains the game rules
for the use of the monsters in the play of the game. The work was
copyrighted in 1977 and 1978, and Arneson has received
substantial royalties from its sale.
    Paragraph 6(g) of the agreement provides that TSR will pay
Arneson a royalty of 2 1/2 % of the cover price for every copy
sold of Monster Manual. Monster Manual is defined in paragraph
7(f) of the agreement to include 'the book currently published by
TSR entitled 'ADVANCED DUNGEONS & DRAGONS Monster Manual' (2009)
and any revised edition or foreign language translation thereof.'
Paragraph 7(a) defines 'revised edition' to mean 'a printed work
having a title the same as or similar to the related earlier
work, revised to include changes or additions to the text, but
continuing to include substantially the same rules and subject
matter as contained in the earlier work.'
    The royalties are to be paid quarterly as provided in
paragraph 11. Paragraph 17 expressly provides that 'failure to
pay, when due, any and all amounts required to be paid pursuant
to paragraph 6 and 15 above' constitutes a default on the part of
TSR under the agreement, if not remedied by TSR within 30 days
after receiving written notice of said failure to pay from
Arneson. Paragraph 17(h) creates a limited exception to this
procedure:  *2 If there is a good faith dispute as to Arneson's
royalty or compensation entitlement to a new item which does not
currently exist and which does not constitute a revised edition
or a foreign language translation of a currently existing item,
but said new item is alleged by Arneson to fall under a more
general definition contained herein, then TSR's failure to make
payments on said new item shall not be deemed to be a default
until there is a written agreement resolving the disputes to said
new item between the parties, or until final resolution of the
good faith dispute by a Court, but only if not remedied by TSR
within thirty (30) days after a final resolution requiring TSR to
make payments on the new item.
                        B. The Dispute
    In 1983, TSR published Official Advanced Dungeons & Dragons
Monster Manual II (Monster Manual II). This work contains the
description of over 300 new creatures. These are new monsters
that are to be used in addition to the monsters listed in Monster
Manual in playing Dungeons and Dragons. It also contains the
same game rules as in Monster Manual and includes an index to all
creatures listed in Monster Manual, Monster Manual II and the
Fiend Folio Tome.
    The dispute between the parties centers on whether Monster
Manual II is a 'revised edition' of Monster Manual under the
terms of the settlement agreement between the parties. TSR
initially, for a period of approximately one year, made royalty
payments to Arneson on Monster Manual II totalling $108,703.50.
These payments stopped on November 2, 1984 when TSR sent a letter
to Arneson stating that the payments on Monster Manual II had
been made inadvertently and by mistake because it is not a
'revised edition' of Monster Manual. The letter went on to state
that TSR was therefore crediting the overpayment against the
$60,238.68 third quarter (1982) royalty otherwise due on other
works and that there remained an overpayment of $48,464.82, which
would be credited by TSR against subsequent quarterly royalty
amounts. Arneson, through his attorney, responded in a letter
dated November 5, 1984 informing TSR that it has no right to
credit or offset royalty payments owing on items other than
Monster Manual II and that such actions have placed TSR in
default under paragraph 17 of the contract. This action was filed
on November 14, 1984.
    TSR has filed a counterclaim against Arneson seeking a
declaration of its right to set-off the $108,703.50 and also
asserts three other counterclaims that are not part of these
motions before the court. [FN1]
Discussion
    Under Rule 56 of the Federal Rules of Civil Procedure, a
motion for summary judgment may be granted only if the pleadings
and affidavits show that 'there is no genuine issue as to any
material fact and that the moving party is entitled to judgment
as a matter of law.' Fed. R. Civ. P. 56(c). Disputes involving
the interpretation of unambiguous contracts are approriate cases
for summary judgment. Jackson v. Roosevelt Federal Savings & Loan
Ass'n, 702 F.2d 674, 684 (8th Cir. 1982); Parish v. Howard, 459
F.2d 616, 618 (8th Cir. 1972). Construction of a contract is
essentially one of determining the intent of the parties; it is
normally a matter of law for the court. Armstrong v. Colleti, 88
Wis.2d 148, 276 N.W.2d 364, 366 (Wis. Ct. App. 1979). However,
where a contract is ambiguous, summary judgment is not
appropriate. Champale, Inc. v. Joseph S. Pickett & Sons, Inc.,
599 F.2d 857, 859 (8th Cir. 1979). Contract language is ambiguous
only when it is reasonably susceptible of more than one meaning.
Patti v. Western Machine Co., 72 Wis. 2d 348, 241 N.W.2d 158, 160
(1976).
    *3 Both parties claim that the language of the 1981
agreement is unambiguous but argue for opposite conclusions.
    Arneson asserts that at a minimum he is entitled to
royalties at 2 1/2 % for the works admittedly covered by the
settlement agreement without any right of impoundment or set-off
by TSR for royalties it claims to have erroneously paid on
Monster Manual II. He claims that TSR is in default on the
agreement regardless of whether Monster Manual II is a revised
edition because TSR has failed to pay the $60,238.68 admittedly
owing. He also asserts that even if the $108,703.50 in royalties
was paid by mistake, TSR cannot recover any of the money because
it was a mistake of law.
    Arneson's main contention is that he is entitled to
royalties at 2 1/2 % on the sales of Monster Manual II because it
is a 'revised edition' of Monster Manual as defined in paragraph
7(a) of the agreement. Arneson states that the only issue is
whether Monster Manual II includes substantially the same subject
matter as Monster Manual. Arneson argues that both manuals
purport to be an alphabetical compendium or listing of the
monsters found in Advanced Dungeons and Dragons. He claims that
the preface in Monster Manual II written by the author, Gary
Gygax, makes it clear that the new manual is simply an expansion
of Monster Manual which will some day comprise three or four
books as additional monsters continue to be added. Finally, he
argues that the identical formats and purpose of the manuals
establishes that Monster Manual II involves the same subject
matter and that the new monsters are merely additions to the
original text.
    TSR contends that paragraph 17(h) allows it to withhold
payments made for Monster Manual II. It claims that Monster
Manual II is a 'new work' and by crediting the mistaken payments
made against royalties otherwise due, it is availing itself of
the provision in 17(h) that 'failure to make payments on said new
item shall not be deemed to be a default . . .' It therefore can
continue to withhold payments and is not in default on the
agreement.
    TSR argues that Monster Manual II does not include
substantially the same subject matter as Monster Manual and
therefore is not a revised edition. It also argues that Monster
Manual II does not include changes or additions to the text, but
rather that the vast majority (97%) was an entirely new work. It
notes that the definition of 'subject matter' is 'the substance
of a . . . book . . . as distinguished from its form or style'
rather than the 'subject of a . . . book' as erroneously stated
by Arneson. It finds this distinction crucial: while Monster
Manual II may have the same general 'subject', i.e., monsters,
the 'substance' of the books, namely the descriptions of
monsters, are not the same. TSR concludes that if Monster Manual
II is not a revised edition it can properly recover the
$108,703.50 already paid in royalties, because the payments
involved a mistake of fact. Furthermore, TSR claims the right to
extinguish this debt by withholding future royalties on other
items because mutual debts extinguish each other by operation of
law.
    *4 The language of the 1981 agreement between the parties
is controlling on the issues raised by the parties. The court has
carefully reviewed the disputed contractual provisions and all of
the materials submitted by the parties and finds that the
contract is unambiguous and compels a finding that Arneson is
entitled to summary judgment. Under paragraphs 6(g) and 7(a)
Monster Manual II is a revised edition of Monster Manual, and
Arneson is entitled to royalties for its sales. The failure of
TSR to make payments on royalties admittedly owing, because it
was withholding them as an off-set to the payments it had made on
Monster Manual II, constitutes a default under paragraph 17 of
the agreement on the part of TSR.
    In order to be entitled to royalty payments on Monster
Manual II, Arneson must establish that as a matter of law this
work constitutes a 'revised edition' of Monster Manual, as that
term is defined in paragraph 7(a) of the settlement agreement.
There is no dispute that the two works have the same or similar
title and include substantially the same rules. TSR, however,
argues that Monster Manual II does not satisfy the remaining
criteria for a revised edition.
    Under any reasonable interpretation of the language of the
agreement, the subject matter of the works are substantially the
same. Words appearing in a contract are to be given their plain
ordinary meaning. North Gate Corp. v. National Food Stores, Inc.,
30 Wis. 2d 317, 140 N.W.2d 744 (1966); In re All-Star Ins. Corp.,
112 Wis. 2d 329, 332 N.W.2d 828 (Wis. Ct. App. 1983). Subject
matter is defined as 'the substance of a discussion, book,
writing, etc., as distinguished from its form or style.' Random
House Dictionary 1415. [FN2] It is also defined as 'matter
presented for consideration; as a: the essential facts, data or
ideas that constitute the basis of spoken, written, or artistic
expression or representation; often; the substance as
distinguished from the form of an artistic or literary
production.' Webster's Third International Dictionary 2276.
    The substance of both these works is a listing and
description of monsters to be used in playing Advanced Dungeons
and Dragons. Both works are identical in their purpose and
application; they are to be used as a reference source for the
playing of Advanced Dungeons and Dragons. TSR contends, however,
that while the manuals may have the same general 'subject', the
'substance' of the two works is the specific descriptions of
monsters and these are completely different. Obviously, the new
monsters differ from the ones contained in Monster Manual and
also from each other. Each monster has different capabilities
that come to bear on the playing of the game. Yet, those same
differences exist between each of the monsters listed in Monster
Manual itself. While the substance of the description of each
monster is different, a common theme exists for the complete
work.
    The unifying basis of the two works, their essential idea,
is that these parts make up a whole; an encyclopedia of creatures
for the Advanced Dungeons and Dragons game system. See Preface to
Monster Manual II. Just as the editions of an encyclopedia are
published every few years, Monster Manual has been expanded to
include new creatures. Id. TSR's decision to place these new
monsters in a separate volume is a difference of mere form and
does not alter or impact on the substance of the material within.
If the new creatures had been interspersed alphabetically into
the existing volume, it would have been apparent at first glance
that the addition of monsters involves identical subject matter.
The inclusion in Monster Manual II of a common index of all
monsters and charts rating monsters from both volumes further
demonstrates the unity of the two works.
    *5 This decision is supported by the language of the
Monster Manual itself. The definition of revised edition and the
foreward and preface to the Monster Manual evidence that
additions to the work were contemplated and that, specifically,
the addition of new monsters was forseen. Indeed, from 1977 on,
the author, Gary Gygax, was 'designing and collecting monsters
with the aim of publishing a second volume.' Preface to Monster
Manual II. The addition of new monsters is also consistent with
the proclaimed subject matter of Monster Manual as 'AN
ALPHABETICAL COMPENDIUM OF ALL OF THE MONSTERS FOUND IN ADVANCED
DUNGEONS & DRAGONS . . ..' (emphasis supplied by the court).
Under any reasonable interpretation of the agreement, Monster
Manual II is an addition to the text and it involves
substantially the same subject matter.
    This ruling makes it necessary to resolve only one other
issue now raised by the parties. TSR argues that its set-off of
payments admittedly owing was not a breach of paragraph 17 of the
agreement placing it in default. Its reliance on paragraph 17(h)
is misplaced in this instance, however. Under the plain meaning
of 17(h) payment can be withheld only on the contested 'new'
item. TSR withheld payments on royalties admittedly owing and
thus is in default on the agreement under paragraph 17. [FN3]
ORDER
    Accordingly, based upon the above and all the files,
records, and proceedings herein,
    IT IS HEREBY ORDERED that
    1. The motion of plaintiff David L. Arneson for summary
judgment is granted.
    2. David L. Arneson is entitled to royalties from the sales
of Monster Manual II at the rate and in the amount provided for
in the March 6, 1981 agreement.
    3. The actions of TSR Hobbies, Inc., in withholding
quarterly royalty payments as a credit on overpayment of
royalties on Monster Manual II place it in default under
paragraph 17 of the March 6, 1981 agreement.
    4. The motion of defendant TSR Hobbies, Inc. for summary
judgment is denied.
    5. Summary judgment is entered in favor of David L. Arneson
on the first counterclaim of TSR Hobbies, Inc.

    FN1 TSR alleges in its second and third counterclaims that
Arneson is preparing a derivative work from Dungeons and Dragons
in violation of the agreement and the copyright laws. The fourth
counterclaim alleges that Arneson has improperly attempted to
convey and conveyed rights to use TSR's  Dungeon and Dragon
trademark.

    FN2 TSR makes a great deal out of Arneson's misquote of this
definition as 'the subject of a discussion' rather than the
substance. While TSR claims the distinction is crucial, the
differences it attempts to draw are tenuated and of no bearing on
the result because the subject matters are substantially the same
even under the definitions put forth by TSR.
    FN3 TSR has moved for summary judgment on its first
counterclaim which is the flip side of the complaint. TSR seeks a
declaration that no royalties are owing on Monster Manual II and
that it has the right to treat the payments made on it as an
advance royalty payment against other royalties due, unless and
until the court finally determines that royalties are owing on
Monster Manual II. The court's analysis decides these issues in
favor of Arneson and, accordingly, he is entitled to summary
judgment on the first counterclaim. Northland Greyhound Lines,
Inc. v. Amalgamated Ass'n, 66 F. Supp. 431, 432-33 (D. Minn.
1946), appeal dismissed, 157 F.2d 329 (8th Cir. 1946); see Pueblo
of Santa Ana v. Mountain States Tel. & Tel. Co., 734 F.2d 1402,
1408 (10th Cir.), cert. granted, 105 S. Ct. 242 (1984).
END OF DOCUMENT