Legal Stuff

What Should We Do with an Artist’s Music After They Die?

22 February 2017

From Noisey:

We continue to pry open, quite literally in Prince’s case, the private works of artists to feast on their off-cuts, but is this fair?

. . . .

No one wants to think about their own death. If they do, they’re probably artists, and they tend to do so in an abstract, poetic kind of way, rather than an “I should probably file paperwork confirming the administrator of my estate and intellectual property” way. Which is perhaps why, when Prince died suddenly at the age of 57 last year, he didn’t have even the semblance of a will.
With his death, then, came months of legal complications and hearings over who should manage his estate. And because the stakes were so unusually high, the eyes of the world looked on eagerly as the mess was slowly picked apart like a ball of tangled iPhone headphone cords. Would the silver lining of Prince’s untimely end, his fans wondered, be the unveiling of the contents of his infamous vaults? The answer, it emerged last week, is yes.

After his estate was placed in the hands of bank Bremer Trust, and an extensive search for a will proved fruitless, the announcement everyone was waiting for—either hopefully or with trepidation—finally came: Prince’s vaults were to be opened, and at least some of the contents, including outtakes, demos and live recordings, were to be released to the public.

. . . .

As it turns out, the law is designed to make such a thing as easy as possible. “Celebrities’ right of privacy is extremely limited,” says James Sammataro, an entertainment lawyer and managing partner at Stroock & Stroock & Lavan. “This is the ‘price’ for being a celebrity. With the possible exception of a diary – or some comparable item in which there’s a universally recognised reasonable expectation of privacy – the rights to artists’ creations are alienable, and human nature is to attempt to monetise these creations.” The primary purpose of copyright law, Sammataro explains, is not really to protect the individual musician, but to “stimulate the progress of the arts for the intellectual enrichment of the public”.

“While it seems harsh,” Sammataro continues, “if Prince or other artists truly don’t want their works disseminated, they need to memorialise this intention in a binding document, or either not fix the work in a tangible medium or destroy the work.” In other words, if you’re a musician, and you’ve got a tape lying around of the three-chord song you wrote at 15 after getting dumped for the first time, you should probably just burn it now. It’s the only safe option.

Link to the rest at Noisey and thanks to Michael for the tip.

PG says unless you decide what you want to happen with your property, including your books, manuscripts, etc., after you die and include your decisions in something a probate court will recognize, like a will or trust, somebody else will decide what happens to your property.

While PG doesn’t do estate planning any more, there are lots and lots of lawyers who do. Call one and make an appointment.

Amazon’s Antitrust Paradox

3 February 2017

From The Yale Law Journal:

Abstract: Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny.

This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.

This Note maps out facets of Amazon’s dominance. Doing so enables us to make sense of its business strategy, illuminates anticompetitive aspects of Amazon’s structure and conduct, and underscores deficiencies in current doctrine. The Note closes by considering two potential regimes for addressing Amazon’s power: restoring traditional antitrust and competition policy principles or applying common carrier obligations and duties.

Link to the rest at The Yale Law Journal and thanks to RM for the tip.

Oculus lawsuit ends with half billion dollar judgment awarded to ZeniMax

1 February 2017
Comments Off on Oculus lawsuit ends with half billion dollar judgment awarded to ZeniMax

From Polygon:

A Dallas, Texas jury today awarded half a billion dollars to ZeniMax after finding that Oculus co-founder Palmer Luckey, and by extension Oculus [a company now owned by Facebook], failed to comply with a non-disclosure agreement he signed.

In awarding ZeniMax $500 million, the jury also said that Oculus did not misappropriate trade secrets as contended by ZeniMax.

. . . .

It remains unclear what sort of impact this will have on the daily retail sale of the Oculus Rift headsets. Facebook is expected to announced its fourth-quarter earnings after the market closes today.

. . . .

The Zenimax versus Facebook trial kicked off in January with testimony from a number of experts and those involved directly in the case including id Software co-founder John Carmack, Facebook CEO Mark Zuckerberg and Oculus co-founders Iribe and Palmer Luckey.

. . . .

During his day in court, Zuckerberg was grilled about his company’s seemingly rushed acquisition of Oculus for $2 billion. And during the first week of the trial, Carmack was questioned about his decision to copy some code from id Software computers before leaving the company to work at Facebook with Luckey.

. . . .

According to ZeniMax’s complaint, Oculus co-founder and Rift inventor Palmer Luckey — along with a half a dozen ex-ZeniMax employees who are now working at Oculus — are building the Rift based on years and millions of dollars’ worth of ZeniMax’s research and copyrighted code.

Link to the rest at Polygon

College Accused of Monopolizing Textbook Market

30 January 2017

From Courthouse News:

The local, off-campus competitor of an Illinois community college bookstore claims in court that the school is trying to put it out of business by selling textbooks below cost and withholding course book information.

Joliet Textbooks, which owns a store selling textbooks and related items across from the entrance of Joliet Junior College’s campus in Joliet, Ill., filed a lawsuit Tuesday in Will County accusing JJC of violating the Illinois Antitrust Act.

The off-campus store claims that JJC “engaged in a concerted scheme to thwart competition in the market for the sale of used and new textbooks and to destroy competition in the marketplace by undermining plaintiff’s business through anti-competitive pricing strategies.”

The school’s official bookstore, a half-mile from Joliet Textbooks, “enjoys certain institutional advantages over a private sector competitor like plaintiff,” such as not paying rent and not needing to generate a profit to stay open, the complaint states.

Both stores purchase their new and used textbooks from the same sources, says Joliet Textbooks, and the standard practice is to charge 20 to 30 percent above cost.

However, JJC has allegedly been selling textbooks to its students below cost and is giving out rebates and calculating sales taxes on the artificially lower price.

Link to the rest at Courthouse News and thanks to Nate for the tip.

PG is not familiar with the Illinois Antitrust Act, so he can’t opine about the plaintiff’s chances in court.

He was, however, reminded, of an antitrust suit by the American Booksellers Association and a number of independent bookstores against Barnes & Noble and Borders in 2001. The principal claim was that the big bookstores received secret discounts from big publishers and distributors. The case was ultimately settled before a final verdict.

Controversial e-book sales tactic banned in Canada

21 January 2017

From The Globe and Mail:

Apple Inc.’s long legal struggle over alleged anti-competitive e-book pricing took another turn on Friday as the company joined a consent agreement with Canada’s Competition Bureau that will ban a controversial sales tactic for three years.

Three of Canada’s four major book publishers – Hachette Book Group Inc., Macmillan (a subsidiary of Verlagsgruppe Georg Von Holtzbrinck GmbH) and Simon & Schuster Inc. – also agreed to halt a system known as most-favoured nation (MFN) pricing, which prevented competing retailers from selling e-books at a discount compared to Apple’s minimum price. A Competition Bureau investigation had found that the MFN arrangement between Apple and the publishers led to higher prices for consumers.

There was no financial component to any of the agreements.

But a fourth major publisher – HarperCollins Publishers LLC – failed to reach an agreement, prompting the watchdog to refer the case to the Competition Tribunal, a separate body that adjudicates matters of business, economics and law.

Link to the rest at The Globe and Mail and thanks to Tudor for the tip.

Techdirt’s First Amendment Fight For Its Life

12 January 2017

From TechDirt:

As you may have heard, last week we were sued for $15 million by Shiva Ayyadurai, who claims to have invented email. We have written, at great length, about his claims and our opinion — backed up by detailed and thorough evidence — that email existed long before Ayyadurai created any software. We believe the legal claims in the lawsuit are meritless, and we intend to fight them and to win.

There is a larger point here. Defamation claims like this can force independent media companies to capitulate and shut down due to mounting legal costs. Ayyadurai’s attorney, Charles Harder, has already shown that this model can lead to exactly that result. His efforts helped put a much larger and much more well-resourced company than Techdirt completely out of business.

So, in our view, this is not a fight about who invented email. This is a fight about whether or not our legal system will silence independent publications for publishing opinions that public figures do not like.

And here’s the thing: this fight could very well be the end of Techdirt, even if we are completely on the right side of the law.

Whether or not you agree with us on our opinions about various things, I hope that you can recognize the importance of what’s at stake here. Our First Amendment is designed to enable a free and open press — a press that can investigate and dig, a press that can challenge and expose. And if prominent individuals can make use of a crippling legal process to silence that effort, or even to create chilling effects among others, we become a weaker nation and a weaker people because of it.

We are a truly small and independent media company. We do not have many resources. We intend to fight this baseless lawsuit because of the principles at stake, but we have no illusions about the costs. It will take a toll on us, even if we win. It will be a distraction, no matter what happens. It already has been — which may well have been part of Ayyadurai’s intent.

Link to the rest at TechDirt and thanks to Scott for the tip.

Case of ‘fattened’ Jorge Luis Borges story heads to court in Argentina

11 January 2017

From The Guardian:

One of the best-known stories by the Argentinian author Jorge Luis Borges takes the form of a fake literary essay about a Frenchman who rewrites a section of Don Quixote word for word and is showered with praise for his daring.

It is probably safe to say that Borges’s 79-year-old widow, María Kodama – sole heir and literary custodian of his oeuvre – takes a dimmer view of such rewrites.

The novelist and poet Pablo Katchadjian is facing trial for “intellectual property fraud” after publishing a reworking of Borges’s 1945 story The Aleph. The Fattened Aleph – originally published by a small press in 2009 – extended Borges’s work from its original 4,000 words to 9,600.

Most of the alterations consist of the addition of adjectives and descriptive passages and do not change the original plot, which revolves around a “a small iridescent sphere” in a Buenos Aires basement, through which a person can see the entirety of creation.

. . . .

After five years, a court hearing has finally been set for 14 February, and the judge in the case appears to be leaning in Kodama’s favour. “The alteration of the text of the work by Borges is evident,” Judge Guillermo Carvajal stated in his ruling for a trial.

Kodama’s lawyer Fernando Soto dismissed Katchadjian’s claims that the work was a literary experiment. “Only Katchadjian’s name appears on the cover. It doesn’t say ‘The Aleph by Borges, altered by Katchadjian’. Borges is not mentioned in the index or the copyright page either. The only place Borges appears is in a brief postscript at the end of the text,” Soto said.

. . . .

Katchadjian has rarely spoken in public about the case (and did not respond to an interview request), but he did discuss it at at an event last year at the National Library in Buenos Aires.

“The Fattened Aleph is not plagiarism because no plagiarism is open about its source,” Katchadjian said. “Neither is it a joke that went wrong, or one that went right. It is a book I wrote based on a previous text.”

. . . .

Katchadjian’s laywer, Ricardo Strafacce, said he was confident the lawsuit would not prosper. “Legal forensic experts have already established that The Fattened Aleph is a new work of art. Secondly, the court will also take into account that there was no intent by Katchadjian to deceive the reader as to Borges’s authorship of the original The Aleph, which is clearly stated in Katchadjian’s book.”

Link to the rest at The Guardian

All Romance Ebooks & Visions of The Future: Part One

1 January 2017

From Kristine Kathryn Rusch:

All Romance Ebooks and its sister website Omnilit did something incredibly awful on December 28, 2016. It sent out a handful of emails, letting writers, publishers, readers, and others know that it was shutting its doors four days later.

The letter WMG Publishing got said this,

On midnight, December 31, our sites will go dark and your content will cease to be available for sale through our platforms. This includes any content you are having us distribute to Apple.

We will be unable to remit Q4 2016 commissions in full and are proposing a settlement of 10 cents on the dollar (USD) for payments received through 27 December 2016.  We also request the following conditions:

1.     That you consider this negotiated settlement to be “paid in full.”

2.     That no further legal action be taken with regards to the above referenced commissions owed….

It is my sincere hope that we will be able to settle this account and avoid filing for bankruptcy[KKR: all bold mine]

I have no books on that site. Hadn’t for a long time. If any of my work is there, it’s there through other publishers or as part of an anthology. WMG pulled its books off All Romance Ebooks (ARe) almost a year ago, because of problems dealing with the site, the people behind the site, and just some really unsettling business practices.

How unsettling? Nothing concrete. It looked (from the outside) like their interface was breaking down. We knew of sales on our account that never were credited to our account. I believe WMG even tested the site by buying (or having someone buy) a book, and seeing if we got credited.

We didn’t. Then we tried to track down what was owed, what payments had been made, and communications issues. We had a handful of truly incompetent employees (nice people; terrible workers) in 2014, and at first, we attributed our ARe problems to them. But after some dealings, we realized that, nope, the problem wasn’t ours. It was ARe’s problem, and that was a very, very, very bad sign.

We pulled all our titles off ARe, deactivated our account, and moved on to other sites.

So when we got this ridiculous letter, we knew it would have no effect on us. But as Allyson Longueira at WMG noted, ARe (a major Apple portal) made its announcement while Apple is shut down for annual maintenance, and writers who have to switch from ARe to Apple direct can’t do so.

Not only that, authors will lose any algorithm from Apple, and probably any revenue from them.

. . . .

ARe is a distributor, mostly, and so it is dealing with its writers as suppliers and unsecured creditors. I’ve been through a bunch of distributor closings, many in the late 1990s, with paper books, and they all happen like this.

One day, everything works, and the next, the distributor is closed for good. In some ways, ARe is unusual in that it gave its suppliers and creditors four days notice. Most places just close their doors, period.

I’m not defending ARe. I’m saying they’re no different than any other company that has gone out of business like this. Traditional publishers have had to deal with this kind of crap for decades. Some comic book companies went out of business as comic book distributors collapsed over the past 25 years. Such closures have incredible (bad) ripple effects. In the past, writers have lost entire careers because of these closures, but haven’t known why, because the publishing house had to cope with the direct losses when the distributor went down.

The difference here is that ARe wasn’t dealing with a dozen other companies. It was dealing with hundreds, maybe thousands, of writers individually, as well as publishers. So, writers are seeing this distribution collapse firsthand instead of secondhand.

To further complicate matters, ARe acted as a publisher for some authors, and is offering them no compensation whatsoever, not even that horrid 10 cents on the dollar (which, I have to say, I’ll be surprised if they pay even that).

. . . .

Now, let me give you all some advice.

Lawsuits cost time as well as money. I know a whole bunch of angry writers are banding together to go to war with ARe. Which is good, on the one hand, because these kinds of things should not ever happen.

But on the other hand, it’s not good, because a whole bunch of writers are going to lose a year or more of precious and irreplaceable writing time to go after this company.

Some writers have that time; others do not.

Frankly, if the writers’ organizations put together some kind of lawsuit, sign on to that, because it will be more effective. They can afford good lawyers and they will have a huge number of writers that they represent.

I know you’re angry. I know you may have serious financial problems because of this shut-down.

You need to take a deep breath, and look at the impact ARe’s shutdown and the loss of fourth quarter earnings will have on you. Then you need to understand that any lawsuit will take a year or more (courts are slow). ARe might settle; they might not.

. . . .

Guessing now, purely guessing.

ARe had run ahead of their money since they started. They used today’s money to pay yesterday’s bills. They had no profit. So they were floating money—payments to authors, payments to creditors, payments like website and rent.

That’s why ARe’s technology grew antiquated, why they weren’t keeping up with the times, why payments in some cases were late or impossible to get. They probably got a line of credit too late or they didn’t have one or they were borrowing off credit cards.

This fall, book sales went down. I discussed some of that after the election, but I’ll be discussing it more and in a different way later in January. Like its authors, ARe was counting on a certain level of revenue. That revenue went down, starting in July (maybe sooner), and continued downward all fall.

ARe paid writers and publishers 45 days after the close of the quarter. So they had to have made the Q3 payments by early November. That probably used most of their capital. They figured the holiday season would save them, along with holiday ad buys.

I’ll wager those were below what ARe expected—significantly below. So, they tried the 2017 ad buy the week before Christmas, hoping that would save them.

Link to the rest at Kristine Kathryn Rusch on Patreon and thanks to C.G. for the tip.

Here’s a link to Kris Rusch’s books. If you like the thoughts Kris shares, you can show your appreciation by checking out her books.

As usual, Kris’s advice is sound. If you’re involved in the ARe matter, you’ll want to read her entire post.

In a past life, PG represented lots of people in lots of civil litigation. He spent a great deal of time in court.

In some cases, litigation is a necessary part of solving a dispute. The parties are unable to agree, so a judge or jury must decide the matter.

On the other hand, litigation takes a financial and emotional toll on the parties. In some cases, the tangible and/or intangible rewards of litigation outweigh the financial/emotional costs and in other cases they do not.

PG was once involved in finally settling a lawsuit over the validity of a will that had lasted 13 years. He’s comfortable in saying that the costs outweighed the rewards for the litigants in that case.

PG says it is almost always a bad idea to entrust your business or personal welfare to the outcome of litigation.

You can move on with your life without a lawsuit or sue and move on with your life. The moving on with your life part is always the most important.

Court Documents Regarding All Romance E-Books’ Disturbing Business Practices Surface

1 January 2017

From Blog Critics:

In a previous article about the sudden closing of All Romance E-Books, LLC and the owner’s announcement that she was not going to pay any royalties for the 4th quarter sales of books from the over 5000 publishers and authors with books on the site.

. . . .

In order to see the whole story, you need to go back to 2014 when a dramatic conflict began between Lori James and her business partner, Barbara Perfetti Ulmer. In fact, Ulmer sued James and All Romance E-Books, LLC in the Sixth Judicial Circuit Court of Pinellas County, Florida – where ARe was established as a legal business entity – on March 2, 2015. Ulmer filed a complaint alleging that James had been “denying access to contemporaneous and current financial information related to All Romance, breach of duties (fiduciary, care, and loyalty) unjust enrichment, inequitable distribution, and judicial dissolution of All Romance.”

The information regarding this lawsuit is easily found thanks to the open court records in the state of Florida, and can be viewed online here.

. . . .

Ulmer and James established All Romance E-Books, LLC together as full partners in 2006. Ulmer was the Chief Financial Officer, and as she was resident in Florida that’s where the physical address of ARe was established. (Remember the three addresses in Florida? One was in Ulmer’s town, Safety Harbor, and appears to be a post office box, which would be understandable as she was the CFO.) James was the Chief Operating Officer, and under the terms of their original operating agreement (Exhibit A) both partners owned 50% of the company and all decisions were to be made by “unanimous agreement” while all financial considerations –  both contribution and distribution – were to be equally shared.

. . . .

According to Ulmer’s complaint, in October of 2014, Dominick Addario, MD – a forensic psychiatrist affiliated with the University of California-San Diego – examined Ulmer to determine whether she was “disabled” and unable to perform her duties under the terms of their operating agreement, which stipulated that if a condition was “permanent or expected to be of an indefinite duration” and prohibited one of the partners from performing their duties, the other partner could assume full responsibility for the company, including all financial and operational decisions.

On November 26, 2014 Dr. Addario sent an email (Exhibit B) to both partners stating that: “…I recommended certain treatment and testing for her and suggest reevaluation in 3 to 6 months at which time she may once again be fit to carry out her duties…”

. . . .

When Ulmer asked to be included in meetings, James told her no and to “stop being a distraction.” When Ulmer asked to return to work, James said no. When Ulmer protested, James told her that “if she did not like what James was doing, that Perfetti(Ulmer) should go get a lawyer.”

Link to the rest at Blog Critics and thanks to A. for the tip.

PG will remind all that the contentions in a court filing are not proven facts.

A quick review of the case summary of Ulmer vs. James reveals that Ulmer’s filing was dismissed “because of lack of prosecution.” This generally means that the plaintiff didn’t do what he/she was required to do in order to move the case forward. There was never a trial or other disposition of the case on its merits.

Publisher All Romance Ebooks: Closing Hits New Low In Stealing From Authors

30 December 2016

From BlogCritics:

The ebook industry has undergone several transitions in the past few years, where authors have become increasingly victimized by e-pirates, vanity presses, and scams designed to keep writers from making money on their intellectual property. Earlier today, December 28, 2016, the industry hit a new low when longtime e-tailer All Romance E-Books (Are), LLC (with its non-romance genre partner Omni Lit) released a surprise notice to its authors and publishers. ARe’s CEO and owner, Lori James, announced that the retailer was closing its doors in three days’ time.

What makes this so terrible is not the fact that they’re closing. What makes this so terrible is how they’re doing it:

We will be unable to remit Q4 2016 commissions in full and are proposing a settlement of 10 cents on the dollar (USD) for payments received through 27 December 2016. We also request the following conditions:
1. That you consider this negotiated settlement to be “paid in full”.
2. That no further legal action be taken with regards to the above referenced commissions owed.

Wait…what?

Let’s break this down. An online retailer is closing down and cannot remit the royalties owed to authors and publishers for the entire fourth quarter of 2016. In lieu of the agreed-upon percentage of 60% of the cover price for each book sold, ARe is proposing that they pay authors TEN CENTS on the dollar of those owed royalties–for books that have already been sold and the money already collected and presumably deposited in the bank account of ARe.

. . . .

The big publishing houses will almost certainly get their money. But the small presses and self-published authors are facing a terrible decision. Do writers allow ARe to steal their royalties? Do they submit for convenience’s sake because the owners of ARe aren’t planning to pay those royalties as they are contractually and legally required to do? Or, are writers willing to stand up to this theft and pursue legal recourse, knowing full well they won’t even see that ten cents on the dollar after all is said and done?

Because let’s be for real here. It’s not like ARe’s owners aren’t paying authors because they don’t have the money for the sales. They do have it. They banked all that cash and are now trying to keep it. And by hanging the threat of filing for bankruptcy out there, the company is attempting to threaten authors into agreeing legally to let them retain that money without future legal responsibility.

And here’s the million dollar question – what did ARe and its owners actually do with all the money they collected from fourth quarter sales? They haven’t paid the authors, obviously. So where is it?

And what about the authors who prepaid for advertising in 2017? What happened to their money? Just last week, ARe sent out notices soliciting ads for 2017. As you can see from their website, advertising cost anywhere from $50 to $2000 per month.

. . . .

There is an underlying lack of legal protections for authors, their intellectual property, and their income in this country. Publishers, false agents, and retailers continue to run these long-term scams, sucking the unwary into their webs and milking them for every dime. But what makes this case stand out is the egregious bullying tone of its owner’s statement to the authors she stole from, and the utter lack of concern James and ARe display for anyone outside of their own personal interests. And sure, most of the authors whose money just vanished into the ether surrounding those multi-million dollar properties in a Big Bear Lake vacation community may be out ten bucks at most.

But that’s not the point.The point is that a retailer announced today that it was stealing the money it’s received for three months’ worth of book sales and has no intention of fulfilling its fiduciary responsibility to the authors whose intellectual property they sold. A retailer has basically committed fraud and has no evident fear of being challenged or behind held responsible legally, either on a criminal or civil level. And unfortunately, that’s probably true. They’ll get away with it, and Lori James will continue to spend part of her time at Big Bear Lake, where she will enjoy the benefits of running a company who blatantly stole from the authors whose books she sold.

Link to the rest at BlogCritics and thanks to Matthew for the tip.

PG believes this whole matter is likely to end up in bankruptcy court where they deal with this sort of situation all the time.

PG hasn’t appeared in bankruptcy court in many years and hasn’t kept up on bankruptcy law, but, generally speaking, bankruptcy judges are experienced in sorting out the kinds of problems mentioned in the OP.

Failing businesses almost always stiff or try to stiff most or all of their creditors. If the owners have diverted significant sums of money from the businesses for their personal use, bankruptcy courts can claw back money and/or assets purchased with that money for distribution to creditors.

To the best of PG’s dated bankruptcy knowledge, booksellers, distributors or publishers would not owe any special fiduciary duty to authors for royalty payments and authors would not receive priority for payments over other unsecured creditors.

The difference between secured and unsecured creditors is important in a bankruptcy. If a bankrupt entity had borrowed money to purchase real estate, the lender (a bank, for example) would have almost certainly required that the borrower grant it a security interest (mortgage) in the real estate. In a bankruptcy, with permission of the court, the bank would be entitled to foreclose on the real estate for repayment of its mortgage loan. If such a foreclosure failed to generate enough cash to pay off the loan, the bank would likely be an unsecured creditor with respect to the remaining balance of the loan, just like other unsecured creditors.

If a failing business attempts to pay one creditor or group of creditors to the detriment of others similarly situated, a bankruptcy judge can require the favored creditors to refund part or all of the money they have received. In the case of a failing publisher, if the publisher attempts to pay some authors 100% of royalties due and other authors 10% of royalties due, the authors who have received 100% can be made to repay most or all of the money they’ve received into the bankruptcy court.

In the case of ARe, if a bankruptcy proceeding is commenced, authors are unlikely to be the only unsecured creditors who are not paid. If a group of authors are paid 10% of royalties due and other unsecured creditors are paid nothing, those other unsecured creditors may ask the bankruptcy court to require the 10% authors to repay some or all of the money they’ve received. Creditor priority can raise complex issues and PG is just skimming over the top of this topic.

Usually the owners of a failing business will file a bankruptcy petition for the business. If a business is, in fact, unable to pay its creditors, the creditors may petition the bankruptcy court to place the business into bankruptcy and bring its assets under court supervision. An involuntary bankruptcy proceeding is sometimes used if creditors suspect the owners of the business have improperly siphoned money or assets out of the business.

These are general bankruptcy principles and PG is neither current on bankruptcy law or privy to any inside information regarding ARe’s collapse.

Given the way authors often support one another, PG wouldn’t be surprised if a group of authors have not already banded together to consult with competent bankruptcy counsel about ways to protect their rights and maximize their return from their books which ARe has sold or licensed. Generally speaking, unless things have changed since the last time PG walked out of bankruptcy court, counsel can often represent a group of creditors who are similarly situated in a bankruptcy proceeding.

If he has not already made himself clear, PG is not currently able to represent anyone in a bankruptcy proceeding. He likes to help mistreated authors and regrets not being able to do so in this instance.

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