Penske Media Corp. v. Shutterstock, Inc.
This text of 2025 NY Slip Op 31796(U) (Penske Media Corp. v. Shutterstock, Inc.) is published on Counsel Stack Legal Research, covering New York Supreme Court, New York County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
Penske Media Corp. v Shutterstock, Inc. 2025 NY Slip Op 31796(U) May 15, 2025 Supreme Court, New York County Docket Number: Index No. 652761/2024 Judge: Joel M. Cohen Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 03M -----------------------------------------------------------------------------------X PENSKE MEDIA CORPORATION INDEX NO. 652761/2024
Plaintiff, 11/06/2024, MOTION DATE 01/08/2025 -v- SHUTTERSTOCK, INC., MOTION SEQ. NO. 002 003
Defendant. DECISION + ORDER ON MOTION -----------------------------------------------------------------------------------X
HON. JOEL M. COHEN:
The following e-filed documents, listed by NYSCEF document number (Motion 002) 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 127, 128, 131, 133, 134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 191, 192, 193, 194, 195 were read on this motion for PARTIAL SUMMARY JUDGMENT .
The following e-filed documents, listed by NYSCEF document number (Motion 003) 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 67, 68, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190 were read on this motion for PARTIAL SUMMARY JUDGMENT .
This case involves a contractual arrangement predicated mainly on Plaintiff Penske
Media Corporation (“PMC”) giving Defendant Shutterstock, Inc. (“Shutterstock”) access to take
photographs at exclusive, high-profile live events, such as the Academy Awards and Tony
Awards ceremonies. In exchange, Shutterstock agreed to pay a share of royalties from those
photographs to PMC, with guaranteed minimum payments made annually. The arrangement
worked reasonably well until mid-March 2020, when the coronavirus pandemic forced the mass
cancellation of high-density live events of the type covered by the parties’ agreement. After
unsuccessful negotiations to revise the deal terms to address the pandemic, and faced with the
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 1 of 26 Motion No. 002 003
1 of 26 [* 1] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
elimination of nearly all revenue from the arrangement, Shutterstock gave notice that it believed
PMC breached the contract by failing to provide access to live events and demanded “cure.”
PMC responded by suing Shutterstock in the Southern District of New York in June 2020 (the
case was refiled in this Court after federal law claims were dismissed). Shutterstock thereafter
terminated the agreement and refused in July 2020 to make a $3.5 million “advance” payment to
cover the final year of the arrangement (through June 2021). It also counterclaimed for breach of
contract and sought rescission of the agreement due to frustration of purpose.
PMC now moves for summary judgment on its breach of contract claim and to dismiss
Shutterstock’s counterclaims for breach of contract (in part), rescission due to frustration of
purpose, and restitution after recission (Mot. Seq. 002). Shutterstock moves for partial summary
judgment dismissing PMC’s breach of contract claim and in its favor on its first counterclaim
that PMC breached the parties’ contract by not providing access to certain events (Mot. Seq.
003).
For the following reasons, PMC’s motion for summary judgment dismissing in part
Shutterstock’s first counterclaim for breach of contract is granted; both parties’ motions are
otherwise denied.
STATEMENT OF FACTS
PMC is a media company that owns, among other things, entertainment and fashion
industry publications such as Women’s Wear Daily (WWD), Variety, Billboard, The Hollywood
Reporter, and Rolling Stone (NYSCEF 192 [PMC’s Response to Shutterstock’s
Counterstatement to PMC’s Rule 19-a statement (“Counterstmt”)] ¶96). For decades, PMC has
consistently enjoyed exclusive access to attend and photograph high-profile entertainment and
fashion industry events (Counterstmt ¶97). PMC also hosts and invites third parties to its own
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 2 of 26 Motion No. 002 003
2 of 26 [* 2] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
events, galas, conferences, summits, and other event functions (Counterstmt ¶98). These live
events are part of PMC’s core business (see NYSCEF 35 [Deposition Transcript of Jay Penske
(“Penske Tr.”)] at 21:18-20).
For years, PMC—through its publication Variety—had granted Getty Images the right to
use its “golden pass” to attend and photograph third-party entertainment and fashion industry
events (Counterstmt ¶99; NYSCEF 32 [Agreement between Variety and Getty Images]).
However, by early 2015, a dispute arose between PMC and Getty Images (see NYSCEF 33
[Demand Letter to Getty Images dated July 27, 2015]; NYSCEF 34 [October 26, 2015 email
from Mr. Penske]). PMC also owns a large and ever-growing photographic collection with
millions of images related to its publications (NYSCEF 134 [“Rule 19a Stmt”] ¶2). PMC had
recently acquired thousands of images in hard copy from its acquisitions of Variety and WWD,
which it had not previously offered for license, and was interested in monetizing this content
(Counterstmt ¶¶108, 115; NYSCEF 36 [“Grobar Tr.”] at 292:5-18).
Shutterstock is a provider of high-quality photographs and other content (Counterstmt
¶89). In 2014, Shutterstock decided to launch an “editorial” product to capitalize on the growing
demand for editorial photography and gain market share from Getty Images (Counterstmt ¶91).
In early 2015, Shutterstock acquired Rex Features, the largest independently owned
photographic press agency in Europe—securing significant event access in Europe—and
identified PMC as its solution for obtaining event access in the United States (Counterstmt ¶¶93-
95). Over the next two years, Shutterstock entered into multi-year agreements with various other
entities in order to gain additional access and content for its Editorial product. Shutterstock’s
deals with two major news photographic agencies gave it access to roughly 4,500 fresh,
newsworthy images each day (Counterstmt ¶94).
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 3 of 26 Motion No. 002 003
3 of 26 [* 3] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
Archive & Event Image Hosting and Licensing Agreement
On or about June 20, 2015, PMC and Shutterstock entered into an Archive & Event
Image Hosting and Licensing Agreement (the “Agreement”), effective as of July 1, 2015, which
provided for a six-year term that was to expire on June 30, 2021 (NYSCEF 38 [“Agrmt,”]; Rule
19a Stmt ¶¶6-7). The Agreement was part of Shutterstock’s strategic plan to gain “credibility in
Free access — add to your briefcase to read the full text and ask questions with AI
Penske Media Corp. v Shutterstock, Inc. 2025 NY Slip Op 31796(U) May 15, 2025 Supreme Court, New York County Docket Number: Index No. 652761/2024 Judge: Joel M. Cohen Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 03M -----------------------------------------------------------------------------------X PENSKE MEDIA CORPORATION INDEX NO. 652761/2024
Plaintiff, 11/06/2024, MOTION DATE 01/08/2025 -v- SHUTTERSTOCK, INC., MOTION SEQ. NO. 002 003
Defendant. DECISION + ORDER ON MOTION -----------------------------------------------------------------------------------X
HON. JOEL M. COHEN:
The following e-filed documents, listed by NYSCEF document number (Motion 002) 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 127, 128, 131, 133, 134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 191, 192, 193, 194, 195 were read on this motion for PARTIAL SUMMARY JUDGMENT .
The following e-filed documents, listed by NYSCEF document number (Motion 003) 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 67, 68, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190 were read on this motion for PARTIAL SUMMARY JUDGMENT .
This case involves a contractual arrangement predicated mainly on Plaintiff Penske
Media Corporation (“PMC”) giving Defendant Shutterstock, Inc. (“Shutterstock”) access to take
photographs at exclusive, high-profile live events, such as the Academy Awards and Tony
Awards ceremonies. In exchange, Shutterstock agreed to pay a share of royalties from those
photographs to PMC, with guaranteed minimum payments made annually. The arrangement
worked reasonably well until mid-March 2020, when the coronavirus pandemic forced the mass
cancellation of high-density live events of the type covered by the parties’ agreement. After
unsuccessful negotiations to revise the deal terms to address the pandemic, and faced with the
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 1 of 26 Motion No. 002 003
1 of 26 [* 1] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
elimination of nearly all revenue from the arrangement, Shutterstock gave notice that it believed
PMC breached the contract by failing to provide access to live events and demanded “cure.”
PMC responded by suing Shutterstock in the Southern District of New York in June 2020 (the
case was refiled in this Court after federal law claims were dismissed). Shutterstock thereafter
terminated the agreement and refused in July 2020 to make a $3.5 million “advance” payment to
cover the final year of the arrangement (through June 2021). It also counterclaimed for breach of
contract and sought rescission of the agreement due to frustration of purpose.
PMC now moves for summary judgment on its breach of contract claim and to dismiss
Shutterstock’s counterclaims for breach of contract (in part), rescission due to frustration of
purpose, and restitution after recission (Mot. Seq. 002). Shutterstock moves for partial summary
judgment dismissing PMC’s breach of contract claim and in its favor on its first counterclaim
that PMC breached the parties’ contract by not providing access to certain events (Mot. Seq.
003).
For the following reasons, PMC’s motion for summary judgment dismissing in part
Shutterstock’s first counterclaim for breach of contract is granted; both parties’ motions are
otherwise denied.
STATEMENT OF FACTS
PMC is a media company that owns, among other things, entertainment and fashion
industry publications such as Women’s Wear Daily (WWD), Variety, Billboard, The Hollywood
Reporter, and Rolling Stone (NYSCEF 192 [PMC’s Response to Shutterstock’s
Counterstatement to PMC’s Rule 19-a statement (“Counterstmt”)] ¶96). For decades, PMC has
consistently enjoyed exclusive access to attend and photograph high-profile entertainment and
fashion industry events (Counterstmt ¶97). PMC also hosts and invites third parties to its own
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 2 of 26 Motion No. 002 003
2 of 26 [* 2] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
events, galas, conferences, summits, and other event functions (Counterstmt ¶98). These live
events are part of PMC’s core business (see NYSCEF 35 [Deposition Transcript of Jay Penske
(“Penske Tr.”)] at 21:18-20).
For years, PMC—through its publication Variety—had granted Getty Images the right to
use its “golden pass” to attend and photograph third-party entertainment and fashion industry
events (Counterstmt ¶99; NYSCEF 32 [Agreement between Variety and Getty Images]).
However, by early 2015, a dispute arose between PMC and Getty Images (see NYSCEF 33
[Demand Letter to Getty Images dated July 27, 2015]; NYSCEF 34 [October 26, 2015 email
from Mr. Penske]). PMC also owns a large and ever-growing photographic collection with
millions of images related to its publications (NYSCEF 134 [“Rule 19a Stmt”] ¶2). PMC had
recently acquired thousands of images in hard copy from its acquisitions of Variety and WWD,
which it had not previously offered for license, and was interested in monetizing this content
(Counterstmt ¶¶108, 115; NYSCEF 36 [“Grobar Tr.”] at 292:5-18).
Shutterstock is a provider of high-quality photographs and other content (Counterstmt
¶89). In 2014, Shutterstock decided to launch an “editorial” product to capitalize on the growing
demand for editorial photography and gain market share from Getty Images (Counterstmt ¶91).
In early 2015, Shutterstock acquired Rex Features, the largest independently owned
photographic press agency in Europe—securing significant event access in Europe—and
identified PMC as its solution for obtaining event access in the United States (Counterstmt ¶¶93-
95). Over the next two years, Shutterstock entered into multi-year agreements with various other
entities in order to gain additional access and content for its Editorial product. Shutterstock’s
deals with two major news photographic agencies gave it access to roughly 4,500 fresh,
newsworthy images each day (Counterstmt ¶94).
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 3 of 26 Motion No. 002 003
3 of 26 [* 3] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
Archive & Event Image Hosting and Licensing Agreement
On or about June 20, 2015, PMC and Shutterstock entered into an Archive & Event
Image Hosting and Licensing Agreement (the “Agreement”), effective as of July 1, 2015, which
provided for a six-year term that was to expire on June 30, 2021 (NYSCEF 38 [“Agrmt,”]; Rule
19a Stmt ¶¶6-7). The Agreement was part of Shutterstock’s strategic plan to gain “credibility in
the market for editorial content” and transform itself from a provider of low value stock
photographs to a purveyor of prestigious news and editorial content (Rule 19a Stmt ¶¶23, 25).
Under the Agreement, PMC granted Shutterstock two sets of rights: (i) “an exclusive
worldwide right” to exploit all of the content under the Agreement, including the “Archive
Content,” “PMC Event Content,” and “Third Party Event Content”; and (ii) access for
Shutterstock to photograph certain live events hosted by others (“Third Party Events”) and by
PMC (“PMC Events”) (Agrmt §3[a]).
Under “Archive Content,” the Agreement provides that “PMC and Shutterstock will work
together in good faith in the creation, management, hosting, distribution and syndication of
image, footage and/or audio content” currently owned or obtained by PMC during the
Agreement, and provides that Shutterstock has the right to “upload and host PMC’s Archive
Content, including, but not limited to, the Fairchild, Variety, WWD, W, DNR, Deadline,
Sportstyle, V-Life, FN, HollywoodLife, BGR, TVLine content libraries . . .” (Agrmt §3[a][i]).
Under “PMC Events and PMC Event Content,” the Agreement provides:
PMC will provide Shutterstock access to its events, galas, conferences, summits, and other event functions to which third parties are invited generally (“PMC Events”). All image, footage and/or audio content recorded at such PMC Events are referred to herein as “PMC Event Content”. During the License Period, Shutterstock will provide editorial photographic event coverage, at Shutterstock’s expense, for all PMC Events . . . . Shutterstock agrees that for all PMC Event Content
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 4 of 26 Motion No. 002 003
4 of 26 [* 4] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
distributed by Shutterstock or its subsidiaries, Shutterstock or its subsidiaries shall use all commercially reasonable efforts to promote such PMC Event Content in “featured” or “spotlight” emails or other distribution methods. In the event that any third party sponsors of PMC Events would like to license or otherwise use any PMC Event Content for commercial or advertising purposes (beyond such sponsors’ use of PMC Event Content for PR, social media and other promotional purposes as part of such sponsor’s sponsorship activation with PMC), Shutterstock and PMC agree to share in all gross revenues received by Shutterstock from the licensing or other monetization of such PMC Event Content, less any actual refunds, on a 50/50 basis.
(Agrmt § 3[a][ii] [emphasis added]). Under “Third Party Event Access and Third Party
Event Content,” the Agreement provides:
PMC will provide to Shutterstock defined credentials, passes, and VIP access to significant events around the world to which PMC has access as defined herein (“Third Party Events”). All image, footage and/or audio content created hereunder at the Third Party Events is referred to herein as “Third Party Event Content”. Subject to the Getty Agreement Restrictions, PMC hereby grants to Shutterstock the right to be the sole third party to leverage and utilize PMC’s credentials and access to capture Third Party Event Content at Third Party Events. These Third Party Events shall initially include, but not be limited to, those events listed on Schedule “D”. PMC shall work with Shutterstock in good faith to create additional access at third party events that will enable the Parties to further monetize the Third Party Event Content.
(Agrmt § 3[a][iii] [emphasis added]).
Schedule D lists twelve well-known “red carpet” entertainment events: the Golden
Globes Awards and Nominee Press Conference, Sundance Film Festival, Grammy Awards,
Academy Awards, Tony Awards, Emmy Awards, Cannes Film Festival, Screen Actors Guild
Awards, Directors Guild of America Awards, Venice Film Festival, Independent Spirit Awards,
and Toronto Film Festival (the “Schedule D Events”) (id.).
Although Shutterstock initially drafted the Third Party and PMC Event provisions
without the qualifying “to which” clauses (Rule 19a Stmt ¶36), PMC added those qualifications,
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 5 of 26 Motion No. 002 003
5 of 26 [* 5] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
and Shutterstock accepted them (Rule 19a Stmt ¶36-37). Mr. Pfeifer, who negotiated the deal on
behalf of Shutterstock, testified that he didn’t recall having any discussion with PMC about that
addition (Deposition Transcript of Benjamin Pfeifer [“Pfeifer Tr.”] at 98:2-4) but that they
“expected Variety to be able to get into any event of significance. In fact, Variety being at an
event would make it significant” (Pfeifer Tr. at 98:11-18). When asked about the difference
between the original language and PMC’s addition, Mr. Pfeifer testified, “I don't know what their
specific intent was. Reading this today, I understand it to be creating wiggle room in the event
that they're blocked out of an event because of some third-party, say Getty, causing a problem
for Variety getting access to an event, but we didn't contemplate that as a high risk” (Pfeifer Tr.
at 98:19-25 – 99: 1-7). Mr. Pfeifer testified that “I understand that the language ‘to which PMC
has access’ is a qualification, but I would add that we did not perceive this as business risk at the
time.” (Pfeifer Tr. at 100:5-9]).
Under the Agreement, Shutterstock agreed to pay royalties to PMC, with up-front
advances against such royalties (“Advances”) due at the start of each of the Agreement’s six
license periods (“License Periods”) (id. §6). The Agreement provides:
Royalties and Advances: Shutterstock shall pay PMC 30% of all gross revenue, less actual refunds, generated from Shutterstock’s sale, distribution, syndication or other monetization of the Archive Content, PMC Event Content, and Third Party Event Content (the “PMC Royalties”). Shutterstock shall pay to PMC an annual fully recoupable advance against royalties (the “Royalty Advances”) payable as follows:
• Year 1: $1,500,000 due on or before September 1, 2015 • Year 2: $1,500,000 due on or before July 1, 2016 • Year 3: $2,000,000 due on or before July 1, 2017 • Year 4: $2,500,000 due on or before July 1, 2018 • Year 5: $3,000,000 due on or before July 1, 2019 • Year 6: $3,500,000 due on or before July 1, 2020
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 6 of 26 Motion No. 002 003
6 of 26 [* 6] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
The Royalty Advances shall be recoupable by Shutterstock solely from all PMC Royalties (as defined above) otherwise payable to PMC during the twelve month period of the License Period to which such Royalty Advance relates (i.e., the July 1 to June 30 period following payment) and any options or extensions thereto. . . .
(Agrmt. §6). PMC’s negotiator testified that “the reason that we [PMC] did this was to make
sure that when Shutterstock was able to recoup royalties, it was only in relation to the 12-month
period” (NYSCEF 37 [Greene Tr.] at 231:6-11]).
Further, Shutterstock agreed to provide PMC a $1 million credit per Period for licensing
images on Shutterstock’s platform (Agrmt. §2[a]; Counterstmt ¶123). Shutterstock agreed to
provide “PMC an account with Shutterstock’s cloud-based digital asset management service,
WebDAM. During the License Period, such account will have the right to store up to 100 TBs of
digital content at no cost to PMC” (Agrmt. §2[b]). The parties agreed that “[d]uring the License
Period, Shutterstock will use all commercially reasonable efforts to assist PMC in transferring
the Archive Content, any PMC Event Content and any Third Party Event Content to
Shutterstock’s WebDAM” (Agrmt. §4).
The Agreement contains a termination provision requiring written notice and a 45-day
cure period before a party can terminate for cause (Rule 19a Stmt ¶21). It provides that “[e]ither
Party may terminate the Agreement at any time for cause by giving the other Party written notice
and providing for a forty-five (45) day period (“Cure Period”) during which the other must
correct, cure or otherwise resolve the alleged cause for termination. If at the conclusion of the
Cure Period the cause for termination has not been corrected, cured or otherwise resolved then
the non-breaching Party shall give written notice of termination to the other of not less than ten
(10) business days.” (Argmt. §8). During contract negotiations, Shutterstock requested the right
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 7 of 26 Motion No. 002 003
7 of 26 [* 7] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
to terminate the Agreement if Shutterstock’s revenues fell significantly below a prescribed level,
but PMC rejected that term (Rule 19a Stmt ¶¶31-35).
A press release dated June 22, 2015 issued by the parties states that “[b]y combining
Shutterstock’s technology and innovative marketplace with PMC’s insider access, journalism
excellence and event exclusivity, both companies are taking a significant step together to build
the world’s best editorial service and to drive future growth” (NYSCEF 80). The Press Release
lists “[h]ighlights of the strategic alliance” as follows:
• Commencing in 2016, Shutterstock will have an exclusive worldwide right and license to PMC's archive, including images from its legendary, 100-year-old publications Variety and WWD. • At the more than 50 events, galas, summits and conferences PMC produces annually, Shutterstock will capture the unique moments, as well as market and license the imagery to the world's media. • Leveraging PMC's insider access, Shutterstock will document leading Hollywood events which may include the Golden Globe Awards and the Academy Awards, as well as capture the latest fashion industry trends including global runway coverage and exclusive parties. • PMC has chosen Shutterstock's digital asset management service, WebDAM, to support its editorial and creative teams' needs to store, organize and manage visual content on the leading cloud- based platform. (id.).
In its Complaint, PMC cites an article about the deal between the parties that emphasizes
that “Access is Everything” and that “[t]he production of editorial content is a heavily protected
wall garden. Whether its celebrity, sports and some of the news, it is event-centric with very
strict regulations on who can photograph them” (see Compl. ¶22 [“Shutterstock was finally able
to “crack the barriers” and gain access through PMC that industry expert Paul Melcher coined
Shutterstock’s “golden pass.”]; NYSCEF 54 [Melcher article]).
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 8 of 26 Motion No. 002 003
8 of 26 [* 8] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
PMC’s Chief Operating Officer, George Grobar, testified that “[t]he deal was built on the
concept of they could leverage the access to these events. So I -- as well as the archives, which
we had, and so I think that the fact that they would have expected these particular events to
happen is not unreasonable” (NYSCEF 36 at 134:22-135:1-4). Todd Greene, a negotiator of the
Agreement on behalf of PMC, testified that based on his understanding, Shutterstock was
looking for a “media partner who could partner with them and help them gain entry into a market
that they previously were not a party to . . . it was important to them that they enter into an
agreement with somebody like PMC that could give them access to images to be captured for
use in editorial -- for their editorial product” (NYSCEF 37 at 97:24-25 - 98: 2-3, 16-20).
Mr. Pfiefer, Shutterstock’s lead negotiator, testified that “[i]n Rex Features we had
entertainment, but UK and European focused. As we lined up deals with European Press
PhotoAgency, AP and others, we were filling in different buckets. PMC for us was the solution
for U.S. entertainment and fashion access and archive content” (Pfeifer Tr at 162:10-18). He
further testified that as to event access was that “what we had learned in our diligence with
acquiring Rex Features is that most of their revenue came from live events, not their archives,
and Rex Features had a hard time getting credentials, in particular to U.S. fashion and
entertainment events. So this part of the Deal Scope specifically to Shutterstock meant that, you
know, Variety could get into any entertainment event it wanted to up until the point that we did
this deal” (Pfeifer Tr at 53:15-25).
The record reflects that PMC had also recently acquired thousands of images in hard
copy from its acquisitions of Variety and WWD (Counterstmt ¶108). In particular, PMC acquired
the “Fairchild Archive” “which is the largest fashion archive of photographs” from Conde Nast
and PMC “w[as] required to move certain assets off their platform or their offices” (Penske Tr. at
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 9 of 26 Motion No. 002 003
9 of 26 [* 9] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
493:21-25 – 440:1-3, 11-12). PMC was “trying to do [their] first comprehensive deal” and avoid
“disparate deals, one with Getty, one with Adobe, one with Corbis.” Mr. Penske testified that
“[t]he idea was to try to do a single deal. So we were saying, hey, at this point, Jon, you know,
we're looking for a comprehensive deal, and our timeline is tight as it relates to when we are
required to move stuff off of the Conde Nast system” (id. at 440:8-20).
PMC was in the process of digitizing these photographs which was “a very, very complex
project. We were dealing with millions of photographs that were physical assets that had to be
touched by human hands and evaluated for appropriateness and trying to get the highest value”
including determining whether Shutterstock could sell the images (NYSCEF 36 [“Grobar Tr.”] at
292:5-18). PMC testified that “[i]t’s going to take a long time to get through that which
Shutterstock was well aware of. They did not – they were supportive of our plan. They did help
pay for the digitization because we were making progress.” (Grobar Tr. at 292:22-25 – 293:1-2).
When asked about the language in the Agreement that Shutterstock proposed which
provided for Shutterstock partially reimbursing PMC’s expenses arising from PMC’s obligation
to make the archive images SSTK-compliant, Mr. Pfeifer testified that “[w]hat I recall is that by
this point the Shutterstock content team had been exploring ways to speed digitization and
metadata creation of archival content. I remember us looking at the Rex Features archive content
and then having conversations with Jay [Penske] about the state of his archives, which were
similar or worse than Rex Features. And we offered assistance in finding vendors that could help
digitize, scan and accelerate the process of making the archival content commercially, you know,
monetizable” (Pfeifer Tr at 79:10-25 – 80:1-8).
Jon Oringer, Shutterstock’s founder and former CEO, testified that they tried to do due
diligence on the archive, but “a lot of what we got back was that it wasn't fully digitized, so it
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 10 of 26 Motion No. 002 003
10 of 26 [* 10] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
was hard to full- -- really understand what it was. So we had to go in blind on a couple of these
details” (NYSCEF 164 [“Oringer Tr.”] at 102:23-25 – 103:1-2) but that “[w]e had every
expectation that this would be something successful, yes. We -- we wanted the archive to be
successful” (Oringer Tr. at 104:9-11).
Performance Under the Agreement
Shortly after signing the Agreement, PMC began providing Shutterstock with access to
Events (Counterstmt ¶125). In each of the first four License Periods, Shutterstock used PMC’s
credentials to attend hundreds of Events. It is undisputed that PMC provided no Archive Content
until fourteen months into the Agreement (Counterstmt ¶126).
Shutterstock timely paid the first four Advances (Counterstmt ¶127). Shutterstock also
timely paid the fifth Advance for $3 million, which was fully recoupable against royalties due to
PMC from revenue generated from July 1, 2019 through June 30, 2020 (“Fifth Period”)
(Counterstmt ¶128). That revenue was expected to come primarily from Third Party Event
Content, which together with PMC Event Content had accounted for approximately 90% (or
more) of the revenue generated under the Agreement from 2015 to 2019 (Counterstmt ¶118;
129).1 It is undisputed that Shutterstock’s expenses under the Agreement exceeded its net
revenues for each License Period (NYSCEF 70 at 21; NYSCEF 133 at 21).
The Covid-19 Pandemic
In mid-March 2020, with a few months of the Fifth License Period remaining, virtually
all live events were cancelled due to the COVID-19 pandemic (Counterstmt ¶139). All of the
1 As to 2020, Shutterstock testified that “the archive sales percentage did shift from around 9 percent, as I mentioned earlier, to 30. A big piece of that was that one large deal with Kiehl’s” (NYSCEF 165 [“Murray Tr.”] 605:10-16).
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 11 of 26 Motion No. 002 003
11 of 26 [* 11] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
Live Events listed in Schedule D that had been scheduled to occur between July 1, 2020 and June
30, 2021 were cancelled, postponed, or held in a substantially altered manner that undermined
their value for purposes of the Agreement (Counterstmt ¶141). From then on, PMC did not
provide Shutterstock with access to any Events (Counterstmt ¶¶140-141). Shutterstock’s revenue
under the Agreement dropped to “almost nothing” (Counterstmt ¶142).
In late March 2020, Shutterstock approached PMC in an effort to amend the Agreement
to account for the pandemic’s impact on Events (Counterstmt ¶145). Shutterstock proposed an
adjusted Advance and offered to pay PMC a higher percentage of the licensing revenue
(Counterstmt ¶¶ 72, 74). In response, PMC proposed that the parties extend the term for an
additional year with Shutterstock paying the corresponding $3.5 million Advance in two
installments, and that Shutterstock give PMC an additional $1 million credit for licensing images
on Shutterstock’s website in exchange for the deferral (Rule 19a Stmt ¶76; Counterstmt ¶147).
The respective proposals were not accepted.
On May 18, 2020, Shutterstock sent a “Cure Notice” to PMC under Section 8 of the
Agreement, citing PMC’s purported breach of the Agreement for failing to provide access to
Events. PMC did not respond. Instead, on June 15, 2020, PMC filed an action against
Shutterstock in federal court (Penske Media Corp. v Shutterstock, Inc., No. 1:20-CV- 04583
(MKV) (SDNY) (the “Federal Action”) (Counterstmt ¶¶156-157). On July 2, 2020, Shutterstock
confirmed its termination of the Agreement (Counterstmt ¶158).
PROCEDURAL HISTORY
In the Federal Action, PMC alleged that Shutterstock terminated the Agreement without
cause, and thereafter refused to pay royalties and advances as set forth in the Agreement, and
also brought claims for breach of the implied covenant, and copyright-related claims (see Penske
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 12 of 26 Motion No. 002 003
12 of 26 [* 12] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
Media Corp. v Shutterstock, Inc., 548 F Supp 3d 370 [SDNY 2021]). After the court denied a
motion to dismiss, the parties “voluntarily dismiss[ed] of all federal claims and counterclaims
upon which federal jurisdiction was based” (Penske Media Corp. v Shutterstock, Inc., 2024 WL
1313356, at *1 [SDNY Mar. 27, 2024]). The court declined to assert supplemental jurisdiction
with respect to the remaining state law claims and dismissed the action for lack of subject matter
jurisdiction (id.).
On May 29, 2024, PMC refiled its lawsuit in this Court, asserting a single claim for
breach of contract on the ground that “Shutterstock had no valid basis to terminate” the
Agreement and “fail[ed] to pay” the Advance and provide the licensing credit for the Period
starting July 1, 2020 (NYSCEF 1 ¶¶ 40-41). On June 24, 2024, Shutterstock asserted, inter alia,
a counterclaim for breach of contract based on PMC’s purported breaches of the Agreement,
including failure to provide access to Events starting in March 2020 (NYSCEF 5 ¶¶59-64).
PMC now seeks summary judgment on its First Claim for Breach of Contract and on
Defendant’s First Counterclaim for Breach of Contract (insofar as it relates to PMC’s purported
failure to provide Shutterstock access to cancelled Schedule D Events), Second Counterclaim for
Rescission Under Frustration of Purpose Doctrine, and Third Counterclaim for Restitution After
Rescission. Defendant moves for summary judgment on its First Counterclaim for Breach of
Contract and on Plaintiff’s Claim for Breach of Contract.
DISCUSSION
Under CPLR 3212, “[s]ummary judgment must be granted if the proponent makes ‘a
prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence
to demonstrate the absence of any material issues of fact,’ and the opponent fails to rebut that
showing” (Brandy B. v Eden Cent. School Dist., 15 NY3d 297, 302 [2010]).
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 13 of 26 Motion No. 002 003
13 of 26 [* 13] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
A. Breach of Contract Claims (Plaintiff’s First Claim and Defendant’s First Counterclaim) As discussed above, each party sues the other for breach of contract. PMC alleges that
Shutterstock breached the Agreement by “improperly purport[ing] to terminate the Archive &
Event Agreement as of no later than July 17, 2020” and “by failing to pay the $3.5 million non-
refundable advance due and owing prior to July 17, 2020” (Compl. ¶¶40-41). In response,
Shutterstock’s first counterclaim alleges that “[t]o the extent the purposes of the Contract were
not frustrated prior to termination” PMC breached the Agreement by, among other things, failing
to perform under the Agreement and breaching its representation “that it would supply
credentials, passes and VIP access to at least the events identified in Schedule D” (NYSCEF 6
[“CC”] ¶62).
Section 8 of the Agreement provides that “[e]ither Party may terminate the Agreement at
any time for cause by giving the other Party written notice and providing for a forty-five (45)
day period (“Cure Period”) during which the other must correct, cure or otherwise resolve the
alleged cause for termination. If at the conclusion of the Cure Period the cause for termination
has not been corrected, cured or otherwise resolved then the non-breaching Party shall give
written notice of termination to the other of not less than ten (10) business days.” (NYSCEF 38
§8 [emphasis added]). The language of this section indicates that a breach of the Agreement
constitutes a “for cause” event. Thus, the first issue is whether there was a breach by PMC that
allowed Shutterstock to terminate the Agreement.
Beginning with Shutterstock’s counterclaim, the dispute boils down to whether PMC
was—as Shutterstock contends—unconditionally obligated under the Agreement to provide
Shutterstock with access to the specified Schedule D Events, regardless of whether those Events
actually took place. The Court finds that the contract language does not support Shutterstock’s
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 14 of 26 Motion No. 002 003
14 of 26 [* 14] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
strained reading. Although the Agreement provides that PMC “will provide Shutterstock access”
to various Third Party and PMC Events, it also expressly limits that obligation to events “to
which PMC has access” (Third Party Events) or those “to which third parties are invited
generally” (PMC Events). Here, it is undisputed that the Third Party Events were cancelled.
Accordingly, they were not events “to which PMC [had] access.”
Shutterstock’s contention that Schedule D of the Agreement (listing certain Third Party
Events) overrides the contractual definition—and essentially shifts the risk to PMC if an Event
does not take place—is unavailing. The provision on which Shutterstock relies provides that
“[t]hese Third Party Events shall initially include, but not be limited to, those events listed on
Schedule ‘D.’” While it would have been possible for parties to shift the contractual/financial
risk of Event cancellation solely to PMC, this language does not do so. It is, read naturally,
simply an “initial” list of Events to which PMC had access in 2015 when the Agreement was
signed, and there is no dispute as to its accuracy. The inclusion of the word “initially” indicates
that the list was subject to change. Crucially, what is missing is any language indicating that
Schedule D creates an unconditional obligation upon PMC to ensure access to all such Events—
even if they are cancelled—at pain of breach of contract damages and/or termination for cause.
Courts are “extremely reluctant to interpret an agreement as impliedly stating something”—here,
guaranteeing events would occur—“which the parties have neglected to specifically include”
(Vermont Teddy Bear Co., Inc. v 538 Madison Realty Co., 1 NY3d 470, 475 [2004]). 2
2 Although the Court finds no ambiguity requiring resort to extrinsic evidence, it notes that the only moderately persuasive contemporaneous evidence offered on the motions supports PMC’s position. Specifically, PMC insisted upon (and Shutterstock agreed) adding the “to which” language upon which the Court has relied, reflecting its importance to understanding the scope of PMC’s obligations.
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 15 of 26 Motion No. 002 003
15 of 26 [* 15] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
Accordingly, the Court finds that PMC did not breach the Agreement by “failing” to
provide access to Events because there is no evidence that PMC denied Shutterstock to any
Events (Schedule D or otherwise) to which PMC had access. Therefore, Shutterstock’s first
counterclaim for breach of contract must be dismissed to the extent it relies on these arguments.3
The Court has considered Shutterstock’s other arguments in opposition to summary judgment on
this counterclaim and finds them unavailing.
This also dispenses with one of Shutterstock’s grounds for terminating the Agreement for
cause and failing to make the otherwise required $3.5 million payment in July 2020—namely,
that PMC breached the Agreement by failing to provide access to Events. However, as discussed
below, questions remain as to whether PMC is entitled to summary judgment on its affirmative
claim against Shutterstock for breach of contract in view of Shutterstock’s affirmative defense of
frustration of purpose.
B. Frustration of Purpose
“In order to invoke the doctrine of frustration of purpose, the frustrated purpose must be
so completely the basis of the contract that, as both parties understood, without it, the transaction
would have made little sense” (Ctr. for Specialty Care, Inc. v CSC Acquisition I, LLC, 185 AD3d
34, 42 [1st Dept 2020]; Jack Kelly Partners LLC v Zegelstein, 140 AD3d 79, 85 [1st Dept
2016]). The doctrine is described in Restatement (Second) of Contracts as follows: “[w]here,
after a contract is made, a party’s principal purpose is substantially frustrated without his fault by
the occurrence of an event the non-occurrence of which was a basic assumption on which the
3 It is unclear what, if anything, remains of Shutterstock’s first counterclaim after dismissing its Schedule D-related claims. However, since Plaintiff only moved for partial summary judgment on that counterclaim, it will not be dismissed in full at this time.
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 16 of 26 Motion No. 002 003
16 of 26 [* 16] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
contract was made, his remaining duties to render performance are discharged, unless the
language or the circumstances indicate the contrary” (Restatement (Second) of Contracts § 265
[1981]). Frustration of purpose “focuses on events which materially affect the consideration
received by one party for his performance. Both parties can perform but, as a result of
unforeseeable events, performance by party X would no longer give party Y what induced him to
make the bargain in the first place” (United States v Gen. Douglas MacArthur Senior Vil., Inc.,
508 F2d 377, 381 [2d Cir 1974]). “The doctrine of frustration of purpose does not apply unless
the frustration is substantial. It is not enough that the transaction has become less profitable for
the affected party or even that he will sustain a loss” (Rockland Dev. Assoc. v Richlou Auto Body,
Inc., 173 AD2d 690, 691 [2d Dept 1991]).
As this Court observed in another pandemic-related contract action, the frustration of
purpose doctrine “has its origin in what are known as the coronation cases” in which “defendant
was excused from his duty of payment for use of the plaintiff's apartment along the route of the
coronation procession, when the procession was cancelled because the King became ill” (A/R
Retail LLC v Hugo Boss Retail, Inc., 72 Misc 3d 627 [Sup Ct, NY County 2021], referring to
Krell v Henry [1903] 2 KB 740 [Eng.]). More recently, the defense rose to the forefront in a
number of pandemic-era commercial landlord-tenant lease disputes. As discussed infra, New
York courts generally “rejected frustration of purpose, impossibility of performance, and failure
of consideration as defenses to the nonpayment of rent under a commercial lease as a result of
the pandemic” (841-853 Fee Owner, LLC v Space Initiatives LLC, 227 AD3d 434, 435 [1st Dept
2024], lv to appeal dismissed, 42 NY3d 981 [2024], rearg denied, 43 NY3d 937 [2025]; see also
Pentagon Fed. Credit Union v Popovic, 217 AD3d 480, 481 [1st Dept 2023]; Knickerbocker
Retail LLC v Bruckner Forever Young Social Adult Day Care Inc., 204 AD3d 536, 537 [1st Dept
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 17 of 26 Motion No. 002 003
17 of 26 [* 17] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
2022]; City Natl. Bank v Baby Blue Distributions, Inc., 199 AD3d 559 [1st Dept 2021]; 558
Seventh Ave. Corp. v Times Sq. Photo Inc., 194 AD3d 536 [1st Dept 2022]). However, given
the unique nature of the facts in this case, the Court finds that application of the frustration of
purpose doctrine may—depending on the resolution of disputed facts—discharge Shutterstock’s
remaining duties to render performance (including payment of the 2020-2021 Advance) under
the Agreement.
First, it is undisputed that a supervening event, not in existence at the time the parties
entered the Agreement, occurred through no fault of either party: the Covid-19 pandemic and
resulting cancellation of Events, including Schedule D Events. Second, it is undisputed that
both PMC and Shutterstock expected live, in-person events to occur under the Agreement and
for PMC to provide Shutterstock with access to those events. That was a basic assumption on
which the contract was made. Moreover, while the Court has determined that PMC was not
contractually obligated to provide access to the cancelled Schedule D Events, the inclusion of
those Schedule D Events in the Agreement indicates that, at the very least, the parties expected
those events to occur. Shutterstock’s position that it would not have entered into the Agreement
with PMC but for the opportunity to get exclusive access to Events, and that was its principal
purpose in entering into the Agreement is supported by the record.
For example, in a deposition, PMC’s COO, George Grobar, admitted that “[t]he deal was
built on the concept of they could leverage the access to these events. So I -- as well as the
archives, which we had, and so I think that the fact that they would have expected these
particular events to happen is not unreasonable” (NYSCEF 36 at 134:22-135:1-4). Todd Greene,
a negotiator of the Agreement on behalf of PMC, testified that based on his understanding,
Shutterstock was looking for a “media partner who could partner with them and help them gain
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 18 of 26 Motion No. 002 003
18 of 26 [* 18] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
entry into a market that they previously were not a party to . . . it was important to them that they
enter into an agreement with somebody like PMC that could give them access to images to be
captured for use in editorial -- for their editorial product” (NYSCEF 37 at 97:24-25 - 98: 2-3, 16-
20). In its own Complaint, PMC cites an article about the deal between the parties that
emphasizes that “Access is Everything” and that “[t]he production of editorial content is a
heavily protected wall garden. Whether its celebrity, sports and some of the news, it is event-
centric with very strict regulations on who can photograph them” (see Compl. ¶22 [“Shutterstock
was finally able to “crack the barriers” and gain access through PMC that industry expert Paul
Melcher coined Shutterstock’s “golden pass.”]; NYSCEF 54 [Melcher article]). Indeed, the
press release issued by the parties states, “[b]y combining Shutterstock’s technology and
innovative marketplace with PMC’s insider access, journalism excellence and event exclusivity,
both companies are taking a significant step together to build the world’s best editorial service
and to drive future growth” (NYSCEF 80 [emphasis added]).
And it is undisputed that as of March 2020, PMC ceased supplying access to any live
events. Further, there is evidence that all of the Live Events listed in Schedule D that had been
scheduled to occur between July 1, 2020 and June 30, 2021 were cancelled, postponed, or held in
a substantially altered manner that undermined their value for purposes of the Agreement
(Counterstmt ¶141). The lack of access to events meant that Shutterstock could not attend those
events to photograph—the very reason Shutterstock entered into this Agreement. And while
Shutterstock’s performance under the Agreement—the advancement of royalties—was not
rendered impossible, its reason for doing so is arguably frustrated and rendered the transaction
one “that would have made little sense” going forward (Ctr. for Specialty Care, 185 AD3d at 42).
In other words, there is a viable argument that performance by PMC could no longer give
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 19 of 26 Motion No. 002 003
19 of 26 [* 19] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
Shutterstock what induced it to make the bargain in the first place (MacArthur Senior Vil., Inc.,
508 F2d at 381).
PMC argues that the principal purpose of the agreement was not destroyed because
nothing about the pandemic diminished Shutterstock’s rights or expectations related to the
Archive side of the Agreement. However, there is evidence in the record indicating that PMC
did not deliver any Archive Content to Shutterstock until fourteen months into the Agreement
after Shutterstock had already paid two Advances (Counterstmt ¶126), and that the Archive
Content accounted for only around 10% (or less) of the revenue generated under the Agreement
from 2015 to 2019 (id. ¶118). In those circumstances, PMC has not conclusively negated
Shutterstock’s defense of frustration of purpose as a matter of law.
Further, there is evidence that inclusion of the Archive Content was more a benefit to
PMC, who had to move a recently-acquired archive of photographs from Conde Nast’s platform
and offices and was looking to have a comprehensive deal with Shutterstock who could host its
digital archive and help monetize the images (Penske Tr. at 493:21-25 – 440:1-20 [“[t]he idea
was to try to do a single deal. So we were saying, hey, at this point, Jon, you know, we're looking
for a comprehensive deal, and our timeline is tight as it relates to when we are required to move
stuff off of the Conde Nast system”]). Much of what PMC acquired was in hard copy and
needed to be digitized which PMC testified was “a very, very complex project. We were dealing
with millions of photographs that were physical assets that had to be touched by human hands
and evaluated for appropriateness and trying to get the highest value” including determining
whether Shutterstock could sell the images (Grobar Tr. at 292:5-18). PMC testified that “It’s
going to take a long time to get through that which Shutterstock was well aware of. They did not
– they were supportive of our plan. They did help pay for the digitization because we were
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 20 of 26 Motion No. 002 003
20 of 26 [* 20] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
making progress.” (Grobar Tr. at 292:22-25 – 293:1-2). Oringer, Shutterstock’s founder and
former CEO, testified that they tried to do due diligence on the archive, but “a lot of what we got
back was that it wasn't fully digitized, so it was hard to full- -- really understand what it was. So
we had to go in blind on a couple of these details” (Oringer Tr. at 102:23-25 – 103:1-2) but that
“[w]e had every expectation that this would be something successful, yes. We -- we wanted the
archive to be successful” (Oringer Tr. at 104:9-11). This evidence further undermines PMC’s
motion for summary judgment.
The pandemic-era landlord-tenant cases on which PMC relies are distinguishable. The
majority, if not all, of those cases rejected the frustration of purpose defense based on the fact
that the “parties' respective duties were to pay rent in exchange for occupying the leased
premises”—duties that were not substantially frustrated by the tenant’s inability to use the space
as intended for a couple of months during a multi-year lease (Valentino U.S.A., Inc. v 693 Fifth
Owner LLC, 203 AD3d 480 [1st Dept 2022] [“Contrary to plaintiff's contention, frustration of
purpose is not implicated by temporary governmental restrictions on in-person operations, as the
parties' respective duties were to pay rent in exchange for occupying the leased premises, and
plaintiff acknowledged that it was open for curbside retail services as of June 4, 2020 and
services by appointment as of June 22, 2020”]). Thus, the courts found that the party relying on
the doctrine (i.e., the tenant) largely obtained the principal purpose (i.e., access to the property
for business operations), and was only temporarily inconvenienced and/or experienced only a
partial and transitory reduction in sales. In contrast, assuming Shutterstock can persuade a finder
of fact, there is evidence that Shutterstock reasonably expected that it would receive essentially
none of the benefit that formed the principal purpose of the Agreement.
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 21 of 26 Motion No. 002 003
21 of 26 [* 21] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
Moreover, in many of the landlord/tenant cases the parties had expressly contemplated
the possibility of a government shutdown on their respective contractual obligations. The force
majeure provisions in commercial leases, which “delineate ex ante which disruptions will excuse
which obligations,” precluded parties from arguing that the event which prevented performance
was unforeseeable and required that the court hold the parties to the allocation of risk agreed on
in the contract (see A/R Retail LLC, 72 Misc 3d 627; see also Zero Carbon Holdings, LLC v
Aspiration Partners, Inc., 732 F Supp 3d 326, 363 [SDNY 2024] [“The doctrine of frustration of
purpose does not relieve Plaintiffs of their obligations or deny Defendant the benefit of the
contracted-for remedy if Plaintiffs failed to meet those obligations”] [applying New York law]).
In contrast, the Agreement here does not contain any provision contemplating or allocating risk
if essentially all Events—including those in Schedule D—were cancelled. Nor is there any
evidence that the parties ever discussed the possibility that Third Party Events would be
cancelled by circumstances outside the parties’ control.
PMC also argues that the purpose of the Agreement was only “partially frustrated”
because Shutterstock had already received the benefits of the Agreement from July 2019 to
March 2020, and because Shutterstock continues to enjoy such benefits. This argument too is
unpersuasive. First, PMC’s reliance on pandemic-era cases (see Durst Pyramid LLC v Silver
Cinemas Acquisition Co., 2022 NY Slip Op 31958[U], 7 [Sup Ct, NY County 2022], affd, 2023
NY Slip Op 06311 [1st Dept 2023]) that involved long-term leases with many years left is
misplaced. In those cases, the length of the lease going forward went to whether there was “total
or substantial frustration.” So, for example, courts found that an interruption of business for a
couple of months in a ten or twenty year lease cannot be said to have totally or substantially
frustrated the lease, particularly where the circumstances had improved over time to permit
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 22 of 26 Motion No. 002 003
22 of 26 [* 22] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
business to proceed in alternative ways (Gap, Inc. v 170 Broadway Retail Owner, LLC, 195
AD3d 575, 577 [1st Dept 2021] [rejecting plaintiff’s argument that “Executive Order 202.8
rendered it objectively impossible to perform its operations as a retail store” because “by the
time plaintiff filed its complaint in July 2020, this was no longer the case”]). Here, by contrast,
the Agreement had only a year remaining and it was subject to a separate $3.5 million
guaranteed royalty payment for which – Shutterstock contends, with some evidentiary support –
no value was expected. In contrast to the ability of certain commercial tenants (restaurants, retail
stores, etc.) to continue their businesses despite pandemic-related restrictions on indoor
gathering, Shutterstock has a viable contention that there was no “virtual” way to capture
photographs of live events that did not occur.
The Restatement provides that where there is a frustration of purpose, the party’s
“remaining duties to render performance are discharged” (Restatement (Second) of Contracts §
265 [1981]). Illustration 3 to the Restatement is analogous here: “A, who owns a hotel, and B,
who owns a country club, make a contract under which A is to pay $1,000 a month and B is to
make the club’s membership privileges available to the guests in A’s hotel free of charge to
them. A’s building is destroyed by fire without his fault, and A is unable to remain in the hotel
business. A refuses to make further monthly payments. A’s duty to make monthly payments is
discharged, and A is not liable to B for breach of contract” (Restatement (Second) of Contracts §
265 (1981), Illustration 3). As this Illustration demonstrates, A’s continuing performance was
not impossible, A could have continued to make monthly payments to B. However, A’s purpose
in agreeing to make monthly payments was frustrated and the agreement no longer made sense
going forward.
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 23 of 26 Motion No. 002 003
23 of 26 [* 23] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
In this case, Shutterstock had agreed to pay PMC a large, up-front “annual fully
recoupable advance” against such royalties at the start of each of the Agreement’s six successive,
one-year License Periods. Each Advance was “fully recoupable” by Shutterstock, but “solely”
from the royalties generated and due to PMC “during the twelve month period of the License
Period to which such Advance relates.” (Agmt. § 6; NYSCEF 37 [Greene Tr.] at 231:6-11 [“the
reason that we did this was to make sure that when Shutterstock was able to recoup royalties, it
was only in relation to the 12-month period”]). Thus, under the Agreement, Shutterstock has a
viable argument that each License Period stands on its own. And at the time the payment was
due, none of these Events were happening. Unlike the pandemic-era lease cases, this case does
not involve the prospect of terminating payment obligations for years of rent going forward, but
rather only one annual (and final) payment. Moreover, deriving some nominal value under the
Agreement during the pandemic does not conclusively foreclose the defense here because, as
noted, the question is whether this unforeseen event “substantially frustrated” Shutterstock’s
“principal purpose” in entering the Agreement.
Finally, PMC argues that the pandemic caused Shutterstock no real financial harm under
the Agreement because Shutterstock had already lost money on the deal. It is undisputed that the
expenses under the Agreement exceeded the net revenues each Period. However, as Shutterstock
points out, it never argued that it withheld the final Advance because it expected a specific profit.
Rather, Shutterstock contends that it was focused on the fact that the value of Shutterstock’s
brand continued to grow through continued access to marquis Events. Indeed, this highlights the
contrast between this case and the cases cited by PMC. For example, in A/R Retail LLC v Hugo
Boss Retail, Inc., (72 Misc 3d 627, 645 [Sup Ct, NY County 2021]), this Court noted that the
tenant acknowledged that the Hugo Boss retail location generated financial losses even before
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 24 of 26 Motion No. 002 003
24 of 26 [* 24] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
the pandemic, and the tenant’s senior executive’s statement that part of the store’s purpose was
to promote “visib[ility]” demonstrated that that purpose was “not frustrated by the dissipating
capacity restrictions.” Here, Shutterstock has a triable position that the central contractual
purpose of access to high profile events was frustrated by the Covid-19 pandemic in that all the
events envisioned by the parties’ Agreement were cancelled.
Accordingly, based on these particular facts, the Court finds that Shutterstock has raised
issues of fact as to whether further performance by Shutterstock under the parties’ Agreement
after March 2020 was excused by frustration of purpose. Therefore, both parties’ motions for
summary judgment are denied on PMC’s breach of contract claim.
For the same reasons, the Court also finds that fact issues preclude summary judgment in
PMC’s favor on Shutterstock’s counterclaims for rescission and restitution based on frustration
of purpose.
Accordingly, it is
ORDERED that Plaintiff’s motion for Summary Judgment (Mot. Seq. 002) is
GRANTED insofar as Shutterstock’s first counterclaim against PMC for breach of contract is
dismissed in part, as described above; Plaintiff’s motion is otherwise DENIED; it is further
ORDERED that Defendant’s motion for Partial Summary Judgment (Mot. Seq. 003) is
DENIED; it is further
ORDERED that the parties shall appear for a virtual initial pre-trial conference on May
29, 2025 at 10:00 AM to discuss trial scheduling and logistics; the parties are directed to meet
and confer prior to the conference to discuss the proposed length of trial and any other logistical
issues that they have identified and be prepared to discuss those at the conference.
This constitutes the Decision and Order of the Court.
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 25 of 26 Motion No. 002 003
25 of 26 [* 25] INDEX NO. 652761/2024 NYSCEF DOC. NO. 209 RECEIVED NYSCEF: 05/15/2025
5/15/2025 DATE JOEL M. COHEN, J.S.C. CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION
GRANTED DENIED X GRANTED IN PART OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
652761/2024 PENSKE MEDIA CORPORATION vs. SHUTTERSTOCK, INC. Page 26 of 26 Motion No. 002 003
26 of 26 [* 26]
Related
Cite This Page — Counsel Stack
2025 NY Slip Op 31796(U), Counsel Stack Legal Research, https://law.counselstack.com/opinion/penske-media-corp-v-shutterstock-inc-nysupctnewyork-2025.