## Facts

- Rafael Chodos, a California attorney, entered a standard author agreement with a legal publisher (later acquired by West Publishing Co.) to write a treatise on fiduciary duty.
- The agreement provided no advance payment; instead, Chodos would receive 15% of gross revenues after publication.
- Chodos spent years preparing and delivering a completed manuscript.
- West decided not to publish the manuscript for sales and marketing reasons, while conceding the manuscript was high quality and not rejected due to deficiencies in form or content.
- Chodos sued after the refusal to publish.

## Issues

1. Whether the author agreement, as limited by the implied covenant of good faith and fair dealing, permitted the publisher to reject a completed, satisfactory manuscript for purely commercial reasons unrelated to quality.
2. Whether the author could pursue restitution (quantum meruit) for the reasonable value of services where the contract contemplated compensation only through post-publication royalties.
3. Whether the district court abused its discretion by denying leave to amend to add a fraud claim due to delay and prejudice.

## Decision

- The Ninth Circuit reversed summary judgment for West on the restitution claim and remanded for further proceedings.
- The court held the publisher’s contractual discretion to reject was constrained by the implied covenant of good faith and fair dealing and could not be exercised solely on sales/marketing grounds where the manuscript met the contract’s contemplated quality.
- The court held Chodos could proceed on quantum meruit because the royalty provision did not constitute a liquidated or definite debt; any royalties were uncertain and speculative given nonpublication.
- The court affirmed the denial of leave to amend to add a fraud claim, finding no abuse of discretion in denying a late amendment that would cause prejudice after undue delay.

## Legal Principles

- A party granted discretion under a contract must exercise that discretion consistently with the implied covenant of good faith and fair dealing.
- In an author-publisher agreement, rejection discretion may be limited to good-faith evaluation of the manuscript’s form and content when that is the contract’s contemplated basis for acceptance.
- Restitution may be available despite an express contract where the contract’s compensation mechanism depends on uncertain future events that never occur, making the contractual measure of payment indefinite.
- Denial of leave to amend is reviewed for abuse of discretion; undue delay and prejudice to the opposing party support denial.

## Conclusion

The Ninth Circuit held that a publisher’s discretion under an author agreement is limited by the implied covenant of good faith and fair dealing and may not be used to reject an otherwise satisfactory manuscript for purely commercial reasons, allowing the author to seek quantum meruit recovery while upholding the denial of a late-added fraud claim.


Chodos v. W. Publ'g Co., 292 F.3d 992 (9th Cir. 2002)