From Publishers Weekly:
Medallion Press filed for Chapter 7 bankruptcy October 18, in the U.S. Bankruptcy Court of Northern District of Illinois. In its filing, the publisher listed assets of $100,001 to $500,000 and liabilities in the same range. It cited between 200 to 999 creditors.
Under a Chapter 7 filing, a trustee will liquidate a company’s assets in order to earn as much money as it can to pay creditors.
. . . .
Medallion was founded in 2003 by Helen Rosburg, a published romance author and great-granddaughter of Wrigley Co. founder William Wrigley. The house initially focused on publishing mass market paperbacks in the categories of general fiction, romance, fantasy, paranormal, science fiction, mystery and thrillers.
After growing steadily from its launch to 2010, Medallion formed with Medallion Media Group and put an eye towards entering the movie and music business.
. . . .
Since word of the bankruptcy started to spread, agents have been working to retrieve the publishing rights of their authors from the company.
Link to the rest at Publishers Weekly
Several lifetimes ago, as a volunteer lawyer working with Legal Aid (an organization that provides legal assistance to poor people in the US), PG filed a lot of Chapter 7 bankruptcy petitions. That said, he has not remained current on bankruptcy law and does not provide any legal advice for those involved in bankruptcy proceedings. He especially doesn’t provide legal advice via blog posts on TPV.
For business organizations, a typical bankruptcy will be filed under Chapter 7 (the business can’t pay its debts and its assets will be liquidated and the proceeds divided among its creditors) or Chapter 11 (if the bankruptcy court will hold the creditors at bay, the business can reorganize itself, stretch out some payments, get out of some contracts and once again become a viable business entity).
The OP says Medallion has filed for a Chapter 7 bankruptcy. If the legal process is carried through to conclusion, Medallion will cease to exist after a period of time during which its assets are sold and, under the supervision of a court-appointed bankruptcy trustee, the proceeds divided among its creditors according to priorities set in the bankruptcy laws. Any current or future lawsuits against the company get rolled into the bankruptcy process along with the claims of all creditors, including authors who haven’t been paid their royalties.
The OP says literary agents have been working to retrieve the publishing rights of their authors from Medallion. Unless the agents have retained competent bankruptcy counsel, that isn’t going to happen. Medallion no longer controls the publishing rights. Upon the filing of the Chapter 7 petition, which has already occurred, the bankruptcy court controls the publishing rights and all other assets owned by Medallion. Whoever may answer the phone at Medallion can’t do anything with publishing rights, regardless of how persuasive a literary agent may be.
PG is not aware of any special provisions of the bankruptcy laws that place authors in a privileged position in a Chapter 7 bankruptcy of a publisher (although he would be very happy to learn such provisions exist).
Absent such provisions, the publishing agreements between Medallion and its authors are assets that the bankruptcy trustee will try to sell for the best price possible to whoever will pay that price. Any claims for unpaid royalties owed to authors will likely be rolled into the pile of unpaid debts of Medallion and cash resulting from sales of assets will be divided among the printer, the utility companies, UPS, the bookstores that have returned Medallion books for a refund and not been paid, etc., etc., etc., and the authors.
Absent unusually valuable assets, PG suspects the authors will receive a small fraction of their unpaid royalties.
But what about the publishing rights the agents are apparently attempting to retrieve?
In a variety of different business contracts, somewhere back in the boilerplate provisions, there is a bankruptcy clause that is worded something like the following:
In the event that either Party files for protection under bankruptcy laws, makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over its property, files a petition under any bankruptcy or insolvency act or has any such petition filed against it which is not discharged within sixty (60) days of the filing thereof, then the other Party may terminate this Agreement effective immediately upon written notice to such Party.
Unfortunately, upon the filing of a bankruptcy petition, this contract provision becomes unenforceable.
The bankruptcy court determines what happens under the contracts that are held by the individual or company filing for relief under US bankruptcy law. As stated above, generally speaking, under Chapter 7, the bankruptcy trustee tries to sell the assets owned by the person or company filing for bankruptcy relief to whoever offers to pay the highest price.
As an uninvolved observer (and not as an attorney), PG expects the publishing contracts between Medallion and its authors will be sold to an individual or company and (voilà!) – all the Medallion authors will have a new publisher!
The new publisher might be Random House or it might be Kevin the Krusher, New Jersey junkyard magnate, who buys the publishing contracts as a gift for his spoiled son, Digby, who has always wanted to be a member of the literary set.
If the Medallion publishing agreements include the most unfortunate, but quite common provision by which the author granted Medallion the right to publish his/her books for the full term of the copyright the author owns for the book (typically, the rest of the author’s life plus 70 years in the US), each of the Medallion authors can look forward to receiving royalty statements (or not) from Digby every once in awhile accompanied by royalty checks (or not).
After Digby retires, Digby, Jr., may become the publisher followed by Digby III (or not).
Or, if the circle of life applies to publishing contracts, perhaps Digby will burn through all his father’s money and file a petition for relief under Chapter 7 of the Bankruptcy Code.