I’ve banged on agents pretty hard during the past few days. I believe the current trend for agents to sign their clients to long-term publishing contracts with an in-house agency publisher is not a good idea for several reasons.
As I’ve discussed previously, there is an absolute, definite, can’t-get-away-from-it conflict of interest between acting as an agent for an author and signing that author to a publishing contract with your agency.
Literary agents are not the only group that experiences conflict of interests issues. In other professions, methods and procedures for dealing with COI have been developed which provide some ideas agents could and should consider.
If an agent wanted to handle a transaction with a client in a way that would avoid legitimate complaints about conflict of interest, what might she do?
- Tell the client that the agency has created an in-house agency publisher you would like the client to consider.
- At the same time, tell the client that discussing the agency publisher puts you in a conflict of interest position because, as an agent, you are obligated to act in the author’s best interest while as someone who profits from the agency publisher directly or indirectly, you have financial interests that may be adverse to the author’s best interests.
- Tell the author that signing or not signing with the agency publisher will have no effect whatsoever on your commitment to continue to act as the author’s agent for so long as the author wants you to do so.
- Tell the author you will discuss the agency publisher’s plan with her and share written information about it, including a draft contract, but you will not enter into any publishing contract with the author until she has had ample time to consider this decision and consult with anyone she likes to discuss her decision.
- Tell the author you will not enter into any publishing contract with her until she has reviewed the contract with an attorney who has no relationship with the agency.
- Inform the author that the agency publishing contract includes a signature line where her attorney will sign, confirming that the attorney represents the author in the contract matter and has reviewed the contract and discussed the terms of the contract privately with the author prior to the author signing the contract.
- Tell the author that, while the author will need to pay this attorney herself, if the author so requests, whether the author signs the contract or not, the agency will reimburse the author for her reasonable attorney’s fees. If you put a ceiling on the reimbursement, ensure that it is high enough to cover the costs expected for such consultation. Check the cost ceiling with your own attorney.
- Tell the author she may use any attorney she prefers to review the contract. If the author does not know an attorney who can help her, the agent will provide a list of twenty qualified IP attorneys who have never represented the agency or any of its agents. The author may or may not consult the list when she chooses her attorney.
- Tell the author that, after she has consulted with an attorney, if the author wishes to retain another agent to represent her in negotiations concerning your agency publishing contract, you will release the author from any agency agreements with your agency necessary for this to take place.
- Tell the author that, if she decides she wants to sign the agency publishing contract, but wishes to retain another agent to handle the work your agency currently performs, you will release the author from any agency agreements with your agency and work with her new agent to ensure a smooth transition of work.
- Put all of the things you have told the author into a letter to the author.
- In the publishing agreement with your agency, include a clause that gives the author the right to terminate the publishing agreement for any reason within one year after the agreement is signed.
Are all of these components absolutely necessary to resolve the conflict of interest issue? Perhaps not.
However, where a conflict of interest arises in a fiduciary relationship, the burden invariably falls upon the agent to show that the principal was treated fairly, made her decision independently and the agent made no improper use of the relationship of trust between the agent and principal to pressure or unduly influence the principal to make a decision that was in the agent’s financial interest.
I believe doing all of the things on my list would satisfy any judge that the conflict of interest was handled properly.
I didn’t do any special research for this and relied primarily upon my understanding of how attorneys resolve conflicts of interest with their clients. There may be state statutes of which I am not aware that govern what must be done to resolve a fiduciary’s conflict of interest which statutes conflict with my informal list.
I’m interested in comments, suggestions, reactions, etc.
As usual, this isn’t legal advice, just discussion. Hire a practicing lawyer if you would like legal advice.