Thursday, April 21, 2016

Harlequin Settles

In 2012, Ann Voss Peterson wrote a blog post about Harlequin’s contract terms.

TL;DR - Harlequin allegedly leased ebook rights to a company that it also owned, which effectively reduced author royalties from 50% to 3% for contracts signed in 1990-2004. Several months after the blog, a group of authors filed a lawsuit against Harlequin.

Since then, Harlequin has been acquired by HarperCollins. And to their credit, HC just settled this suit, to the tune of 4.1 million dollars.

Some agents and authors called Ann a whiner for taking issue with this. Their views seemed to be that authors should just shut up and be grateful for whatever crumbs their publishers wanted to toss them. Or that Ann and hundreds of other authors weren't taking responsibility for signing contracts with those terrible terms.

I've blogged at length about unconscionable contracts. Prior to the ebook revolution, writers had no choice but to eat the shitty clauses, or pound sand. But unless authors speak out and share information, and rally when things get bad, one-sided behind-closed-doors deals will remain the norm, and everyone will assume that's just the way things are and can't ever change.

According to Wikipedia: Unconscionability is a doctrine in contract law that describes terms that are so extremely unjust, or overwhelmingly one-sided in favor of the party who has the superior bargaining power, that they are contrary to good conscience. Typically, an unconscionable contract is held to be unenforceable because no reasonable or informed person would otherwise agree to it. The perpetrator of the conduct is not allowed to benefit, because the consideration offered is lacking, or is so obviously inadequate, that to enforce the contract would be unfair to the party seeking to escape the contract.

Unconscionability is determined by examining the circumstances of the parties when the contract was made, such as their bargaining power, age, and mental capacity. Other issues might include lack of choice, superior knowledge, and other obligations or circumstances surrounding the bargaining process.

As of yet, no one has taken on the whole of the publishing world, where one-sided, boilerplate clauses would be laughed off the negotiating table in any other industry. The overwhelming majority of newbie authors have no bargaining power, no choice, and very little clue. What reasonable person would take a $5k advance for a book they worked a year on, against never making another dime off of those rights, forever? That five grand is the highest interest loan, ever. And you pay for life.

I'm not a lawyer, and nothing on this blog even comes close to constituting legal advice, but I don't know why some savvy, hungry firm doesn't start looking hard at publishing contracts, because there's money in them thar hills.

This move by HarperCollins is a step in the right direction. I'm not privy to the circumstances of this settlement, but this is undoubtedly a victory for Harlequin authors, and for all authors who never thought they could budge the status quo.

Authors as a group tend to have a "don't rock the boat" attitude. And with good reason; rock the boat, and the captain kicks you out.

But if you say nothing, nothing changes.

In this business, as in life, no one is going to just hand you anything. Because none of us deserve anything. You have to work hard, and fight for whatever you can get. Fighting for something when the outcome is uncertain is a scary thing. That's the definition of bravery.

Bringing this suit was gutsy. These authors faced being blackballed by the largest romance publisher in the world, but took that chance because it was the right thing to do.

If every legacy pubbed author had that attitude, we could do away with "next option" and "non-compete" clauses, raise ebook royalties, and make boilerplate term length ten years, rather than the author’s life plus seventy.

I don't blame any author for signing any contract. This business feeds on hope, and writers are especially vulnerable to being taken advantage of. If I had to do my career over, I still would have signed the same deals I originally did, even though I had to do quite a bit to get my rights back.

Happily, self-publishing has finally given us a choice. We can walk away from deals. We finally do have bargaining power.

And if we don't like the contracts we signed a decade ago, we can hire a lawyer.

Those Harlequin writers who brought the suit found a firm to handle it on contingency. That firm is banking seven figures from this settlement.

So if you're unhappy with your contract terms, it can't hurt to email a few of your peers with similar contracts, and run it past a lawyer or two. I have a feeling this Harlequin settlement is just the beginning...

21 comments:

David Haywood Young said...

Very good news!

Thanks for doing what you do, by the way. I'll bet lots of us out here are grateful, but rarely tell you. So, this is that.

Yeah, I know. You're having fun with it, or you'd do something else. That's cool too.

F Paul said...

I hope our pal Ann gets a nice chunk of that change.

Alicia Butcher Ehrhardt said...

Great news.

The whole thing smelled - gypping authors out of their paltry royalties by using a company they controlled (as I understood it from the posts I've read) was unbelievable, and it was more unbelievable that the authors seemed to have no recourse.

I assume if HC settled, it was because they were pretty sure it would be far worse for them if they didn't. Too bad it didn't go to trial, then.

antares said...

"I'm not a lawyer, and nothing on this blog even comes close to constituting legal advice, but I don't know why some savvy, hungry firm doesn't start looking hard at publishing contracts, because there's money in them thar hills."

I was a lawyer, and I know why.

It is an uphill fight against a corporation with deep pockets that will hire the best legal skills. The suit will be buried in paper. The author's life will be exposed in ways you cannot imagine during discovery. There is a saying among lawyer -- 'You can beat the rap, but can you stand the ride?'

As for the legal doctrine of unconscionability, to my knowledge, it has never been used successfully outside the District of Columbia. I bet all the trad pub houses' contracts specify New York law. I bet they have precedent on their side, too.

Maybe someone will break a New York trad pub k (contract). But it will need the right judge and the right jury in the right venue at the right time with the right environment. My guess is the suit won't survive the MSJ in most courts, 'cause the judge's attitude will be that you didn't have to sign.

Plus, there is always the question "Did you try to bargain?"

To make matters worse, most writers don't keep records with an eye on a law suit. How many send all correspondence to their publisher CMRRR? Who keeps a telephone log? Who memorializes all phone conversions with their publisher AND sends the publisher a copy by CMRRR? Building a paper trail to support a successful lawsuit is not a small task. At some point, the publisher is going to catch wise and either drop the writer or come to Jesus (probably the former).

If the publisher refused to bargain -- 'Here's the contract. Take it or leave it' -- one might argue adhesion, but I see problems there.

The one thing I would insist on in a trad pub contract is the right of the writer to audit the publisher's books yearly in order to verify proper payment of royalties.

If I had a trad pub contract I wanted to break, I would exercise the audit clause. I lost count of the number of contracts I got my clients out of because they exercised an audit clause or an implied audit clause. If I wanted to get inventive, I would assert that the publisher had a fiduciary obligation to the writer because he is not paying monies on receipt but holding them for 6 months and was in breach of his fiduciary obligations.

But that's just me.

YMMV.

Anonymous said...

Interesting, antares. Thanks for chiming in. Question: does this successful lawsuit (precedent?) help pave the way for a class-action lawsuit against Harper Collins/Harlequin. That would really have 'em crapping their knickers.

Adrian said...

Off topic for this post, but ...

Have you read about the scams that take advantage of the limitations in how Kindle Unlimited counts page reads? Do you think Amazon will be able to (and will) fix this?

http://boingboing.net/2016/04/21/kindle-unlimited-is-being-floo.html

Randall J. Morris said...

"I'm not a lawyer, and nothing on this blog even comes close to constituting legal advice, but I don't know why some savvy, hungry firm doesn't start looking hard at publishing contracts, because there's money in them thar hills."

I think that's what PG does as a contract attorney, but I think he mostly helps people with contracts before they sign them. Let me add that I'm not a lawyer but I'll piggyback really quick on what antares said. As far as unconscionability under New York law, here's what we're looking at according to Ragone v. Atlantic Video at Manhattan Center:

"Under New York law, a contract is unconscionable when it is “so grossly unreasonable or unconscionable in the light of the mores and business practices of the time and place as to be unenforceable [sic] according to its literal terms.” Gillman v. Chase Manhattan Bank, N.A. 73 N.Y.2d 1[, 10], 537 N.Y.S.2d, 534 N.E.2d 824 (1988). Generally, there must be a showing that such a contract is both procedurally and substantially unconscionable. See id. “The procedural element of unconscionability concerns the contract formation process and *122 the alleged lack of meaningful choice; the substantive element looks to the content of the contract[, per se].” State v. Wolowitz, 96 A.D.2d 47, 468 N.Y.S.2d 131, 145 (1983); see also Desiderio v. National Ass'n of Sec. Dealers, Inc., 191 F.3d 198, 207 (2d Cir.1999) (“A contract or clause is unconscionable when there is an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (quotation marks omitted))."

So prove both elements (procedural and substantive unconscionability) or you have nothing. It's a 2010 case from the 2nd Circuit applying New York law on the unconscionability element. Here's a link: http://caselaw.findlaw.com/us-2nd-circuit/1508117.html

Joe Konrath said...

@Adrian - Cory gets the same thing wrong that nearly everyone discussing the Amazon scammers gets wrong:

The more of this there is, the less money there is in the system for writers who produce actual books

Incorrect.

Amazon adjusts the pot monthly. It isn't fixed. And it can't be called zero sum because the rate is announced after the month has ended, rather than before it ends.

Amazon is no doubt losing money to scammers. But they continue to pay all authors, so writers aren't being hurt financially by them like they're claiming.

This might seem counter-intuitive, but think it through.

Let's say April ends, and Amazon announces a payout of $0.0045 per page read. If Amazon eliminated 10 million scammer KENP reads, it could save itself $45k, but it wouldn't automatically take that $45,000 and split it among the non-scamming authors, raising their KENP rate to, say $0.005.

People just don't seem to understand why Amazon pay rates fluctuate. Perhaps I'll post more at length about it in the future.

Bottom line: scammers suck. They're hurting readers. But it remains to be proven that they are hurting other authors. Even when they take up spots on bestseller lists, I remain unconvinced I'm being harmed by that anymore than I'm being harmed by any legit author.

Adrian. said...

@Joe:

Your reasoning doesn't quite jibe with the descriptions I've read of the payout system for KDP Select. As I understand it, Amazon chooses a total pot size each month. At the end of the month, they divide that pot by the total page reads to determine the per-page rate. If there are a significant number of fraudulent page reads in the denominator, that will lower the page-read rate for all authors. Is the problem substantial enough to materially hurt authors? Only Amazon knows, and it seems unlikely they're going to share the data.

I just found the scam interesting because it claims the page counting works differently than how it was described in the various articles announcing the switch from the 10% mark to KENPs. Those articles said that each page must be viewed for some minimal amount of time before it's counted. But, if these scams actually work, then that's simply not true.

And if it's not true, then a lot of legit books could also skew the numbers and their payments: technical or academic books with links to end notes, appendices, and indices; choose-your-own-adventure style books; even a vanilla novel with 20 pages of front matter (and a link at the beginning to skip to Chapter 1). If Amazon starts cracking down on the scammer books, the lines they draw may have to be a little fuzzy. (Or they'll have to actually count pages rather than checking the "highest page number attained" value.)

Kathryn Meyer Griffith said...

I wish I could sue Leisure Books (Dorchester), Zebra/Pinnacle (Kensington), and all my publishers since for all my lousy contracts between 1984-2012. I'd probably get back a fortune.
As you Joe I am thrilled that self-publishing is now possible. I wish it would have been thirty years ago.
Joe...still waiting to hear when ebooksareforever is going to finally fully launch. No one will answer my emails. rdgriff@htc.net

Joe Konrath said...

As I understand it, Amazon chooses a total pot size each month.

Wrong. Amazon decides on the amount of the pot AFTER the month is already over.

Let’s say we have a pie, and two people share it. The larger one person’s slice is, the smaller the other’s is. That’s zero sum.

Amazon doesn’t operate that way. It sees how many people are eating pie, and makes sure they each get a piece. Not by divvying it up, but by adding more pie if necessary.

Amazon is the one losing money, not authors.

Joe Konrath said...

@Kathryn - We're at the mercy of the libraries, so it is glacially slow. They work by committee and are funded by tax dollars, so innovation can take years; which is how long this is taking us to integrate with library systems.

We're ready now. They aren't ready, and can't tell us when they'll be ready. So there's nothing to report. It's a holding pattern until something changes in the library system.

When that happens, we'll announce it. I ask for your patience and understanding.

Adrian said...

Amazon decides on the amount of the pot AFTER the month is already over.

Got a citation for that? I know they don't announce the size of the pot until the end of the month, but nowhere can I find a description of how they choose the size of the pot.

Joe Konrath said...

Adrian, they announce the pot several weeks after the month ends. How they choose it is based on Amazon's own Secret Accounting Formula.

Whatever their formula is, it isn't zero sum. If they announced the payout prior to the month starting, that would be zero sum. If I had to guess, Amazon wants to know the gross for that month before they determine the payout.

Adrian. said...

Joe, so Amazon's Secret Formula determines whether it's zero-sum. If we don't know how they come up with the size of the pot, we can't really say. And just because they announce the pot later doesn't mean they didn't decide the size in advance.

W. ADAM MANDELBAUM said...

I am a NY lawyer, and a signatory to a trad contract with a major publisher back in the day. I knew what I was doing, and made some dough, and lived the dream for a few months. As an author, you have an agent if you are playing with the big boys, to advise you as to contract terms. You have time to review the contract with a lawyer. You can refuse to sign a contract. So you can forget about unconscionability. Your agent cares more about the publisher than you, your lawyer isn't getting the terms changed if you aren't a major earner in writer world. So it sucks...yes. Is it tantamount to unconscionability... Legally? Yeah, lots of luck with that one in New York courtrooms. Don't like the rules of the game? Take your ball and go home to self-publishing, which is where you will be much better off.

Tim Tresslar said...

I doubt the work-for-hire writers like myself would be covered under this settlement, but I've messaged the lawyers to find out.

James F. Brown said...

So, HC settled for $4.1 million. I gotta wonder how much all those authors Harlequin cheated would have earned over the time period. I suspect it would be a lot more than $4.1M.

And what about interest on all those unpaid royalties?

Anonymous said...

YAY! Well done all authors who fought for their rights and WON! *fist pump*
~ AnnWrites

Uma said...

CONGRATULATIONS all authors who fought for their rights and WON!

David Nees said...

Joe, it is your blogging about self-publishing that helped me abandon over 6 months of querying agents. I've had a very successful opening month in April and am not looking back. In my previous life I was a successful retail entrepreneur. I negotiated many commercial leases and some were extremely one-sided. However, one could decide whether to play or not. No matter how attractive the building was, there were choices. Ultimately you could walk away from the table. That said, I imaging it was very hard for an author to do that when self-publishing was not seen as a viable alternative. It was; play their game or have not be in the game at all.

It's better now; we just have to wear more than the author's hat. Thank you for your interest the nuts and bolts side of things and continuing to inform of the rest of us.