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The Flush Pile – An Author’s Perspective

30 September 2014

From author Carolyn Jewel at Writer’s Diary:

I am an author who was with a publishing company that was heading toward bankruptcy. (Dorchester Publishing) This post is about what the experience was like for me. My situation ended up with a silver lining, but the outcome I had was never certain, just as it is not certain for any of the EC authors who are wondering if they’ll ever get paid or if they are going to lose their books.

If you have books with a publisher in the Flush Pile, here’s what’s quite likely:
1. No, you are never going to be paid money owed to you.
2. Yes, you could well lose your books. Gone.

Every publishing contract I’ve ever signed has had a bankruptcy clause. The clause means nothing. Zero. Zlich. It might as well not be there. If your publisher declares bankruptcy, your book is an asset of the company to be liquidated and turned into cash to pay to creditors. Authors are dead last on the list of creditors.

At Dorchester, authors talked amongst themselves. Advances and royalties due to authors were paid slowly. Some of use waited months for advances to be paid. More and more often, authors just weren’t paid. Foreign rights got sold and authors were never told. Those monies never appeared on royalty statements. I was surprised, for example, to find that one of my books had a Dutch translation. Toward the end, I also learned about other translations I was never told about and never paid for. One of them did not even have a signed contract despite being on sale. As royalties continued to be paid in haphazard fashion, there were consolidations and reductions in books, imprints and staff, and sales of rights to backlist titles of prominent authors to other publishers.

. . . .

Dorchester had not filed for bankruptcy, but there was wide speculation that they could not recover from their difficulties and a filing was felt by some to be inevitable. I was advised that it was possible that rights reversions made within the year prior to a bankruptcy filing could be deemed fraudulent and any reversions negated. I was horrified to learn there was case law to that effect.

Even before the non-payment issue was a severe problem, it was clear to me that at long last, there was a good reason (ie, self-publishing) for an author to vigorously pursue reversions for all books that met the criteria of the out of print clauses. I’d read all those clauses and had begun that process with all my titles well before this. And by the way, I was roundly ignored everywhere except for Harper-Collins, who noted the request and put it on their schedule for a decision 6 months later. Literally. The meeting was in 6 months. Let that sink in.

My reversions from Dorchester came through at the end of 2010. Other publishers were an even harder nut to crack. St. Martin’s Press was spectacularly uncooperative. Hachette — I don’t even have words. And I have loads of hind-sight advice about what reversion clauses should say.

. . . .

My advice is going to sound harsh. But, assume you will never be paid. The risk of waiting to see if your publisher rights their ship is the complete loss of your rights in your books. This is your career and you must not fail to take steps to protect your back list and front list.

Link to the rest at Writer’s Diary and thanks to C.R. for the tip.

Here’s a link to Carolyn Jewel’s books

Contracts, Legal Stuff

39 Comments to “The Flush Pile – An Author’s Perspective”

  1. Sad theme, but great article, something that should be shared around. Thank you for sharing.

  2. The last time I had rights reverted was a breeze. I called the publisher, one of the big ones, and made the request. That same day they sent me an email telling me the rights were reverted, then they followed that up with a letter I received a few days later. In the past, and I’m talking years ago, the same publisher reverted rights in a process that took about a month. I wonder if the stalling/non-cooperative problems are mostly with smaller publishers.

    • Well, demonstrably not just small publishers.

      Other than Dorchester, my trad contracts have been with St. Martin’s, Harper-Collins, Hachette, and Penguin. As I noted in my post, my experience has been varied. St. Martin’s ignored me for a year. My agent had to step in and make a pest of herself for months. Berkley reverted two of my books (which had been mistakenly taken off sale everywhere) but I had to wait 18 months for those title to meet the reversion terms. 18 months of 0 sales. They reverted very quickly once the books met the terms. The other two don’t yet meet the terms. My other trad publisher is Hachette and I think my post was pretty clear I am not particularly pleased with my experience with Hachette and reversions.

      The issue is two-fold: My reversion clauses have terms like thresholds that must be met over consecutive accounting periods. That can mean having to wait more than a year once a title looks to have sales that may dip below the threshold. So, there’s the time it can take to met the terms of a reversion clause and then the time it takes to get a reversion.

      At the time I was making my request to Harper-Collins, they met only twice a year on reversion requests. They promptly replied to my request and once they had their meeting, they promptly sent my reversion. But I had to wait for their internal schedule.

      So, here is the take away again: In the case of publishers who failed to timely reply to a reversion, during the “unreasonable delay” period, I suffered economic harm in that the books should have been making me money and weren’t.

      In the case of Berkley and the not-on-sale titles, after three requests to put them back on sale — to no avail — it was my decision to say nothing more and wait out the period of 0 sales and get reversions. But that was 18 months of no sales in the US and Canada. In the current environment, the terms of those two contacts cost me a lot of money. I had to forgo ANY income from those titles for 18 months. One of those books was a RITA finalist. The other won an award, so it’s not like they were terrible books. I am now in the position of having to reestablish their presence in my backlist.

      And THAT is exactly why authors need to fight for tightly limited reversion clauses both in what makes a title eligible for reversion and how long you must wait. A writer’s ability to make a living depends on it.

      • Thanks so much for sharing this. New writers need to read this and be wiser when approaching traditional publishing. I’m so glad I chose the indie route. Stories like this confirm I made the right choice.
        Thank you.

      • Yes, you did make your experience clear in your post — the failure was mine and I apologize (I read the first part about Dorchester, but not the rest of the post till now). I’d never heard of Dorchester, and assumed that it was a small publisher. I was drawing a comparison between how a BPH handled the request versus what I thought was a small publisher.

    • Sounds more like it’s just random luck. Some revert quickly and others are a real pain in the a**.

  3. “I was advised that it was possible that rights reversions made within the year prior to a bankruptcy filing could be deemed fraudulent and any reversions negated. I was horrified to learn there was case law to that effect.”

    This is true and, for the writers’ purposes, there is an even more important law that controls this, which says:

    (c) The trustee may not avoid [overturn rights reversions] under this section a transfer—
    (1) to the extent that such transfer was—
    (A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor; and
    (B) in fact a substantially contemporaneous exchange;
    ===================
    What this means, for writers, is that there is a way to get your rights back and see that reversion survive bankruptcy, but there are certain, formulaic steps to be taken to ensure that survival.

    Respectfully suggest the writer seeking reversion in all cases use PG or someone like him (a contracts lawyer) to ensure that agreement with the publisher survives bankruptcy.

    This is only one more Gotcha in dealing with publishers where long-term property rights are involved.

    • I’ve run a public company bankruptcy (as a private individual without a legal background — very long story). The trustees CAN call back monies laid out within the last 12 months prior to the bankruptcy event, but they aren’t OBLIGED to do so. It depends on circumstances.

      In my case, reimbursing employee travel expenses fell within that context, and the bankruptcy committee was persuadable that it was the right thing to do to reimburse the innocent employees as the company had promised, considering the scale of the entire bankruptcy vs that particular obligation.

  4. I’m guessing rights reversions are going to get a lot more difficult as the industry contracts. For publishers outside of the big 5 a list of “owned” books represent their main material assets.

  5. Better future contracts would lease the rights to the publisher for a period of time. The lease remains an asset to the publisher that could be transferred to creditors, but would still revert back to the author once the lease has ended even after bankruptcy.

  6. Great info. Thanks for sharing. Many years ago, my very first novel was stuck in a bankruptcy situation. Luckily, it was a very new, very small publisher and my book was not affected for long. I self-published it years later. However, to this day I will not sign a contract with a publisher in business fewer than three years. I watched from the sidelines as 21 such publishers disappeared. I’m happy you’ve done well since the Dorchester collapse.

  7. That’s where you need your agent. My agent got my rights back both from St. Martin’s Press and Severn House. If you sign with a publisher, you need an agent. Possibly a lawyer can work on a contract, but will he still be with you years later when you want your rights back?

    • You’re making the assumption that the same agent will still be with you, too. Another attorney can pick up the reversion request for a writer if he/she chooses to hire that attorney.

      • Dumb question time. If you ask for rights reversion on books and don’t use the agents of record to handle any of that (because you terminated your contracts with them some years ago, and even if you hadn’t, turkeys can be reluctant to help you vote for Christmas) then the reversion ends any claim they have on the titles because the contracts they negotiated are no longer in force, yes? I was always told that the agents’ rights ended when the publisher’s contract did, but it was an agent who told me, not a lawyer…

        • That is how it should work, but it depends on your agency agreement. I can totally see an agency putting in language that if they sell a given work, or a given work sells during the agency relationship, they get their cut forever even for later sales in contexts unrelated to the representation.

        • Yes. Their responsibility ends with the reversion, but presumably the book wasn’t selling by that time and they may not want to find another publisher for it.

      • Agents remain responsible for the books they have sold! Even years later. But one assumes that you are with a solid agency and not someone agenting part-time.

        • I was, but I’ve used a lawyer instead of an agent for some years. With the best will in the world, even if I had the smartest, most saintly agent who ever lived, I would still consult a lawyer and/or get them to handle it.

    • By the time I was ready to have my rights reverted for my HarperCollins (London) books, I no longer had an agent. Still, for the first book it was straightforward. When the book went out of print, I had to request a reprint. If there was no reprint within six months, the rights reverted automatically. This worked without a hitch for the first book. For the other two book, a few years later, there were problems as HC had produced PoD editions and claimed they were still “in print”. Since PoD had not been mentioned in the contracts (year 2000) I fought this with the help of the Society of Authors and eventually got the rights reverted.
      I would not have wanted a reprint anyway, as I had other plans for all three of these books.
      I’m now with a small publisher e-publisher which grants automatic rights reversion after 5 or 6 years, or when sales fall below a certain threshold, and I am very happy with this route.

    • Unless your agent has pictures of a senior person at your publisher’s holiday party doing something divorce- and/or newsworthy, if you’re arguing about a contract – and particularly a breach of contract, or the interpretation of a termination clause – you want a lawyer, not an agent. Period, full stop.

  8. This reminds me of the recent blog featured by PV by “Natalie M. Lakosil”
    http://www.thepassivevoice.com/09/2014/lovehate/
    where she rants against ‘non-industry lawyers’.

    The truth is that what is desperately needed is MORE and MORE non-industry lawyers. I have spent quite a few years in business and dealt with quite a few contracts and it never ceases to appal me when I read the utter C.R.A.P that publishers demand, and get away with, in their contracts that I read about.

    I doubt if anyone will come knocking on my door asking if I am interested in a paper publishing contract for my Kindle book, but if they did I would immediately reject any form of default contract and if that doesn’t drive them off, immediately engage a non-industry lawyer to deal with.

  9. As a small publisher I have agreements that cease annually with the people whose books I publish. They have to re-confirm each year that they want to continue publishing with this company. If bankruptcy occurs all rights revert to the author right away. Not a great way to make a business profitable – but the purpose is for us to publish books under a publisher LTD company umbrella and make money for the authors, not for the company to make money per se.

    • Christine, federal law (such as bankruptcy) trumps state law (such as contracts or probate) nearly every time unless you go through the dance John Ellsworth mentions above. Too many writers find themselves screwed because they depend on those contract clauses to protect them, when in fact, they are meaningless, and the writers don’t find out until it’s too late.

    • Christine, please, please, please believe Suzan when she says the fed law trumps state law. There was an amusing incident when the city of Detroit first entered bankruptcy, and the city union’s lawyers kept insisting the city couldn’t go into bankruptcy because Michigan’s state constitution forbid it. The federal bankruptcy judge was not impressed by this argument. I like that you’re not rights-grabbing your writers, just make sure that your arrangements hold up in federal court, too.

    • Christine can confirm but it looks like she is in New Zealand. Her way may work just fine there.

      • Anne, I wasn’t trying to get into a P***ing contest with Christine, but she didn’t specify NZ law, and I’ve seen way to many friends end up in a lot of trouble in American courts because they trusted that bankruptcy clause.

        • Wouldn’t a 1-year license in IP expire at the end of that year regardless of the holder (as in a bankruptcy situation)? So worst case it’s 364 days.

          • I don’t know. That’s one of those things I’d call an attorney who specializes in bankruptcy and ask. I only know it from the probate side. The writer passed and the executor was trying to get the rights back.

          • I am an attorney: this is not legal advice.

            Generally speaking, the debtor can’t give the creditors more than they had before they filed for bankruptcy. If the lease is up at the end of a year, be it for a building or a book, the lease is up.

  10. I was advised that it was possible that rights reversions made within the year prior to a bankruptcy filing could be deemed fraudulent and any reversions negated.

    http://www.youtube.com/watch?v=G2y8Sx4B2Sk

    Wanted to say that the word fraudulent in the context of bankruptcy has a different meaning than what you likely expect. You need a bankruptcy lawyer to tell you if a transfer is fraudulent. This is one area of bankruptcy law where state law comes into play. Yes, there are others.

    For example — and a bad one, in Texas, for the purpose of bankruptcy a transfer is fraudulent if it may be reversed by a bankruptcy trustee. That circular definition is worthless, but case law has defined the limits of fraudulent transfers in Texas. You won’t be able to find those limits in time. You need a bankruptcy lawyer.

    As an example of words in legal context having a meaning different from what laymen expect, what does the word necessary mean?

    It means convenient. –McCulloch v Maryland, 17 US 316 (1819)

    • Each area of law seems to have its own little weird vocabulary gotchas.

    • “for the purpose of bankruptcy a transfer is fraudulent if it may be reversed by a bankruptcy trustee”

      But this is the case, literally, everywhere in the US. It’s defined in the Bankruptcy Code exactly so. And the transfer isn’t void, it’s merely voidable.

      11 U.S.C. 548(a)
      http://www.law.cornell.edu/uscode/text/11/548

      • I’m sorry. I was not clear.

        You are correct. Such transfers are not void but are voidable at the discretion of the trustee. What I saw was that the trustee would void such transfers if they preferred one creditor or group of creditors to the detriment of another.

        My point was — and I did not present it well — not to take a literal interpretation of the word fraudulent. When told they have to return the money because it was a fraudulent transfer, most creditors say, “But I did not commit a fraud.” The point is there need not be any fraud to make a transfer fraudulent.

        The problem lies with the terminology Congress chose. If I could, I would reword the statute to say voidable transfer. I think that would cause less confusion. But I may be wrong. It’s been known to happen.

        PS Yeah, that’s what the Code says, and Texas law echoes that. (Or at least it did when I practiced.) Useful, huh?

        • Oh, I’m sure there’s no telling how that language has been bowdlerized, poked, pinched and pecked by bankruptcy lawyers.

          When I was in law school and told my father I was interviewing with a bankruptcy firm, he had three words of advice for me.

          “Count your fingers.”

    • On the other hand, the word “required” means “necessary.” 😉

  11. Wow. This was a real eye-opener. It was a risk I honestly had no idea about. Given the extent to which all dead tree media companies are now in real trouble, I’d say it’s a pretty powerful argument in favor of going indie.

  12. I’m so glad that Carolyn was brave enough to publish this. There’s still a huge number of new authors who think: “If only I can get a publisher…”

    They expect a publisher to take care of them. The publisher won’t, and if bankruptcy is on the horizon, the authors go down with the publisher.

    It’s brutally unfair, but authors are unsecured creditors, so they’re at the very bottom of the heap, and the last to be paid. If there are any funds to pay them, of course.

  13. “They expect a publisher to take care of them.”

    LOL. Oh, yeah. The publisher will “take care of them” all right. Just not in the way the author anticipates! 🙂

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