From Legal Minimum:
[B]ack in July a group of authors went to court to get permission to bring a class action alleging that they were being underpaid for e-books under their publishing contracts with Harlequin. Under these contracts the authors claim they were supposed to receive 50% of e-books revenue received by the Publisher. But, they claim, Harlequin did some inter-company sleight of hand by licensing the e-publishing rights to a related company that paid a 6-8% royalty on e-books, and then the authors received 50% of 6-8% of the sale price (the money received by the Publisher), rather than 50% of the sale price of the e-book (the money received by the related party).
Because the authors were looking to make this a class action they need court authorization to do that, and so their first step was to file a motion asking for authorization. The motion filed on Friday by Harlequin asks the court to declare that these plaintiffs, and basically any plaintiffs, shouldn’t get to sue Harlequin on these facts.
. . . .
I’ve glossed over one thing by saying “Harlequin” and that’s important to the motion filed on Friday. The authors had their contracts not with Harlequin Enterprises (HE), the Canadian company that you think of when you think of Harlequin, but rather with either Harlequin Books S.A. (HBSA) or Harlequin Enterprises B.V. (HEBV), a Swiss or Dutch company both of which are related to HE but not the same. So the Publisher under the contracts was HEBV/HBSA, not HE.
It’s this distinction that makes the difference, as far as Harlequin is concerned. Boiling down their arguments, we end up with this:
- The authors had no contracts with HE so there can be no breach of contract by HE.
- Just because HBSA/HEBV licensed the e-book rights to HE, a related company, that doesn’t make HE the “Publisher” under the authors’ contracts.
- There’s no legal basis to say that HE was unjustly enriched by getting to keep the money that the authors think should be theirs, because the authors had a contract and that’s all that matters.
Link to the rest at Legal Minimum and thanks to Donna for the tip.
PG is not inclined to nitpick the litigation strategy of other lawyers because he hasn’t done the extensive legal research they have prior to filing suit. However, he was not alone in wondering why the authors didn’t sue Harlequin for fraud in addition to breach of contract.
As you can see below, the Complaint consists of six counts based on Breach of Contract and a seventh tag-along count based on Unjust Enrichment. The Motion to Dismiss filed by HQ is directly focused on the basis of the Breach of Contract claims.
PG has always felt that the HQ contracts were designed to mislead authors because HQ’s practice of having its European company automatically license ebooks to a related HQ company in Canada meant authors would never receive the 50% royalty rates stated in the contracts. The true royalty rate of 3-4% appears to have been intentionally concealed from the authors.
Here’s the original complaint filed against Harlequin by the authors: