I’m not sure what cause of action a publisher (Harlequin or any other publisher) could have against RWA for the way RWA interprets its own policies & practices. Not a contract action, I wouldn’t think, as the benefits conferred on a qualified publisher are by permission, not by contractual obligation. Tort claims? I don’t think the term “vanity publisher” is so pejorative that is constitutes defamation. Fraud in the inducement? Doesn’t look likely.

I agree that if RWA hadn’t treated Thomas Nelson the same way because of the WestBow venture, that would have been a breach of the implied covenant of fair dealing. But that still only arises in the context of a contractual relationship. I’m sure there are contracts between RWA and Harlequin (advertising, etc.) but the privileges of being a “qualified publisher” wouldn’t seem to meet the conditions of a contract.

But okay, let’s say there’s a case filed against RWA. You and Jane have identified the two arguments that could be posited: 1) RWA has treated Harlequin differently than other publishers (hoping to find evidence of malice, bad faith, and impure motive in discovery), or 2) RWA has been egregious in its misinterpretation and misapplication of their own policy & practices to Harlequin Horizons, stretching the plain meaning of their policies & practices beyond credibility or fairness (and again looking for evidence of bad faith, etc., in discovery).

I guess my reaction would be that any such suit would be kicked out, either on the grounds that it failed to state a claim upon which relief can be granted or at summary judgment. There’s got to be tons of case law that says that a private organization is allowed to establish its own P&Ps and interpret and enforce them as it sees fit, provided it doesn’t discriminate, etc. Even though a corporation is an individual under the law (a legal fiction I’ve always thought was silly, but then I’m not a corporations lawyer), it’s not the sort of individual that can be discriminated against.

I think the best cause of action I can think of is bad faith in the business relationship between RWA and Harlequin. Interesting question: what’s the measure of damages? The odds are there will be no drop in sales as a result of this, particularly as RWA’s actions occurred in the middle of a lot of other bad publicity, so causation is going to be tough. Can the privileges of being deemed a qualified publisher actually result in direct profits? Supposedly, RWA’s decision has an effect on Harlequin’s role at the annual conference, but given that Harlequin spends a lot of money at that conference in promotional efforts, etc., RWA’s decision may save them money!

*sigh* All a bit far afield from the original question of corporate structure. Sorry — I just like thinking about the law.

In terms of a claim against RWA for unequal/inconsistent application of the rules, isn’t the issue how RWA’s bylaws and P&P’s define “vanity publisher” and then how the RWA has interpreted and applied that definition so as to include/exclude publishers? I agree with you that the corporate structure of publishers is relevant (and it’s relevant in a more general way in the casual conversation we are having about how each of us perceives the similarities/differences among publishers), but wouldn’t the core legal analysis in any case filed against the RWA begin with and focus on the RWA and the way they have defined a vanity/subsidy press (which may or may not be directly correlative of the actual corporate structuring)?

The point is, you can set up separate corporate subsidiaries (not that this is what Harlequin has done, as Harlequin Horizons is a division and not a subsidiary) and as long as they meet the list of indicia for a corporate entity in that jurisdiction, it is a separate corporation and the veil is not a sham. But where there are no employees, no assets, and the profits pass through, it’s likely there is no corporate veil.

@Robin: Okay, so you pierce the corporate veil in litigation, when you need to prove liability by the corporate parent or individual shareholder and because otherwise you’ll never recover any damages. The concept of piercing the corporate veil can also be used more generally in more complex corporate families, for example preventing a corporate parent from piercing its own corporate veil and treating sibling corporations as a single employer when it’s economically advantageous in a workers’ comp. case. (Do you want a case cite for that?)

And discussing the corporate veil doesn’t confuse the legal analysis regarding RWA having to decide if Harlequin is a vanity press, because among the things that a competent lawyer would want to know is if the corporate veil between Harlequin and Harlequin Horizons is a sham. I will agree my use of the verb “to pierce” may have been sloppy; what I mean to suggest is that there may be no corporate veil at all, or one that is more form than substance and thus no support for the claim that while Harlequin Horizons may be a vanity press, no other part of Harlequin Enterprises is.

@Jane:

Even before Bertelsman sold Xlibris to Author Solutions, Xlibris was a corporate sibling to Random House. Additional evidence showing that there was a greater involvement by Random House in Xlibris would have been needed to make Random House a vanity press — basically the equivalent of piercing the corporate veil between two corporate siblings. (E.g., if you call the telephone number for Xlibris and a Random House receptionist answers…. that sort of thing.)

I believe that CreateSpace is an entirely separate corporate entity from Harper Collins. Authonomy may not be incorporated separately, and may, in fact, be a group/division/department of Harper Collins. But Authonomy doesn’t publish anything, in any meaning of the word publish. So far, the evidence proffered to suggest that Harper Collins is as much of a vanity press as Harlequin is the fact that Harper Collins supports (owns? runs?) Authonomy, and if you are a registered member of Authonomy, you will almost certainly be informed of the opportunity to use CreateSpace for paid-by-the-writer publication. The suggestion has been made (in this comment thread, even) that this is a sufficiently close business relationship that Harper Collins is as much a vanity publisher as Harlequin under the RWA bylaws.

Now, to argue that Harlequin Enterprises is not a vanity press under the RWA bylaws is to go in the other direction, and suggest that the bright line test is “all or nothing.” Meaning, unless all of your business is vanity publishing, then you are not a vanity publisher. That’s clearly an absurd position. If Author Solutions bought a small, independent commercial press or imprint, would that acquisition be sufficient to inoculate it from the “vanity press” exclusion in the RWA bylaws? Of course not.

The question then becomes twofold: How much of the business has to be vanity publishing before that business is a vanity publisher under the RWA bylaws, and how close does the corporate relationship with the vanity publisher have to be.

Looking at the second question first: If Torstar, the corporate owner of Harlequin Enterprises, had entered into the vanity venture with Author Solutions directly but still called it Harlequin Horizons and offered the same services, etc., the question would be very intriguing: Harlequin Horizons would then have been a corporate sibling to Harlequin Enterprises, but there would have been corporate intermingling sufficient, perhaps, to suggest that there was no real corporate separation. (For example, if Harlequin Horizons was incorporated as a holding of Torstar but it had no staff, offices, assets, etc. other than those already employed, leased, owned, etc. by Harlequin Enterprises.)

But that’s not what Torstar & Harlequin Enterprises chose to do. Harlequin Horizons is a division of Harlequin Enterprises, and that must certainly be enough of corporate relationship to overcome any corporate veil defense to the RWA bylaws.

Back to the first question. How much of Harlequin Enterprises has to be involved in a vanity press for it to violate the RWA bylaws? Well, clearly RWA (presumably in consultation with their legal counsel) has determined that owning a division that is a joint venture with the sole purpose of publishing romance novels for money and consistent with the business model of a vanity press is sufficient to violate the RWA bylaws. Perhaps RWA, in making that decision, considered certain key facts:

– Harlequin would be touting Harlequin Horizons to writers of rejected manuscripts (i.e., Harlequin’s various slush piles).

– The services of editors employed by Harlequin would be available for a fee.

– The services of marketing personnel employed by Harlequin would be available for a fee.

– Harlequin had its name on the venture and had designed a logo referencing Harlequin as part of the venture’s name. (This was true at the time that RWA made its announcement.)

– Harlequin Horizons would keep 50% of the net profits on the sales of any books published by Harlequin Horizons, and that share of profits would be split, so that 25% of the net profits would go to Author Solutions and 25% to Harlequin. (This is significant, legally, because it suggests that Harlequin Horizons, qua separate division of Harlequin, is just a pass-through for the money made by the venture.)

I have never been a corporate lawyer, so there may be additional considerations I’m not thinking of, but my analysis vis a vis whether Harlequin qualifies as a vanity publisher is that they do, even though only a small portion of their profits may stem from Harlequin Horizons. (You can’t go on the number of books published because as a fee-based service, there’s no telling how many people will use the service.) If they had established the division and staffed it with new editors and marketing specialists, they’d have had a stronger argument. But given the publicity and promotion by Harlequin, the corporate willingness to be associated with the new venture, and the acknowledgment that Harlequin Horizons’ profits flow directly to Harlequin, it would appear that all of Harlequin in involved, in some way, with Harlequin Horizons.

Therefore, in my opinion, Harlequin is now a vanity publisher under the meaning of the RWA bylaws, nothwithstanding that so much of Harlequin’s business is as a commercial publisher. In effect, Harlequin is now both a commercial publisher and a vanity publisher.

Under the bylaws, surely the fact that CreateSpace and HC are separate publishers is what’s keeping HC above the mud? HC [em]promotes[/em] Createspace via Authonomy, and probably gets money for that promotion, but they are two distinct businesses, with separate staff, offices, contracts etc.

xLibris and RandomHouse were different again. Though owned by the same business conglomerate, there was little cross-promotion between the two. Whether resources were shared between the companies I don’t know. As someone said on AW, if RandomHouse owned a 49% share in Disneyland, it wouldn’t make them a rollarcoaster. However, I think it’s a good thing RH has diversted itself of xLibris before this blew up, because the line is definitely more blurred than HC, and depending on how the bylaws were enforced, they may have had to be disqualified too.

AuthorSolutions and HQE are separate publishers, but they’ve entered a join business venture, in which they share the proceeds (and presumably share some of the costs – at the very least, someone who isn’t an author has to be paying to host that website). As RWA seems to have interpreted it, this makes HQE as responsible for publishing the books as ASI, though the business plan is clearly ASI’s.

Basically, RWA (and the others) need to clarify their by-laws. I think, even as currently defined, that they could justify exclusion of HQE and not HC, but the fact you can interpret them otherwise shows what a complex mess this whole thing is.

I ask these questions because as an outsider I don’t know what kind of power these writers organizations have. Nor do I understand exactly what NOT being recognized by RWA will mean for Harlequin. I’ve noticed that many publishers, particularly epubs, want to be recognized and I can somewhat understand that. To a degree. But I just don’t get what being unrecognized will do to Harlequin. Is it just symbolic?

I know the damage to authors but what will be the damage to Harlequin?

1. Bylaws are legally binding on non profit organizations.
2. A term that is defined in the bylaws provides the definition for legal purposes. The board can interpret the rules if there is ambiguity but their application of the rules can also be deemed as interpretation of the rules.
3. Vanity Publisher is a defined term in the bylaws. Vanity Publisher is, according to the RWA bylaws, “any publisher whose authors exclusively promote and/or sell their own books and publishers whose business model and methods of publishing and distribution are primarily directed toward sales to the author, his/her relatives and/or associates.”
4. Harlequin, as a publisher, doesn’t meet the face of the definition so RWA must be interpreting it different. (Harlequin Horizons does, but the entire publisher was deemed a VP, right?) Harlequin’s relationship with ASI is a partnership wherein Harlequin lends its name and in return ASI does all the work and has some kind of profit sharing agreement with Harlequin which is at least 50% of every book sold and possibly some profit sharing in the packages purchased.
5. If the definition that is applied to Harlequin’s case is “any publisher who has any authors who exclusively promote and/or sell their own books and publishers who have any arm wherein the author is the customer (which is how I essentially read the second part of the definition”, then it seems that Authonomy could apply and (before I found out that Random House Investments had sold its interest) Xlibris could apply.

As I said early, the lack of a definition for Publisher (and for Author for that matter) is really problematic. What is a publisher? Is it just an imprint? The entire house? The corporate entity? I just don’t know. I don’t know that anyone knows.

The specious claims being made are, if anything, even more damaging to the genuine self-publishing author such as Moriah than to the genuine author going the more usual route, because they are being tarred with the same brush as the suckers prepared to pay $19,999 to hHo for a

“HOLLYWOOD BOOK TRAILER”

to pimp a story which has already been turned down as unpublishable by Harlequin.

(Not picking on you, Stevie, but you sparked a thought.)

I don’t feel threatened, and I’ll tell you why.

1. Nobody’s going to pay that, not in this economy, even if they have the money. I mean, if I had $20K lying around, I’d build a swimming pool. If they do pay it, well, more power to ‘em.

2. They probably don’t have the money to pay what HHz is asking for most of their packages, either.

3. If they DO, nobody’s ever going to see those books. DO they get put in HHz’s supply chain, sitting on Wal-Mart shelves next to the Presents and Desires and Blazes and Superromances, etc.? Are they going to be on the Hqn website/storefront? Are they going to be at Fictionwise and All Romance eBooks et al? Are they promising this? (I’m asking cuz I don’t know, but if Wal-Mart has a say in it, I can guarantee the answer’s no.)

4. Do they get listed in Ingram’s catalog? (Again, asking cuz I really don’t know.) And an ISBN number doesn’t mean you automatically get listed. I mean, I don’t get much in the way of distribution, but because I’m in the Ingram’s catalog, you WILL find me on all the major bookstores’ sites and you CAN order me from the chain bookstores, as long as they don’t lie to you and tell you it’s not available. (Which they will do and have done, because I have made the books nonreturnable.)

5. It takes a lot of work to get the word out about one’s book, and I really doubt regular readers (including faithful Harlequin readers) will ever encounter these books. Sure, there will be people who say, “I’m a Harlequin author!” to their friends and neighbors, but the friends and neighbors won’t get it and they’ll have to buy the book out of that person’s trunk because it won’t be available anywhere else. And they probably won’t read it.

6. The vast majority of readers aren’t here, aren’t online, aren’t in the middle of romancelandia watching this all go down. They will never know about any of this, and they will, in all likelihood, never see one of those books. The downside of that FOR ME is that they won’t see mine, either. C’est la vie.

That’s my nuts’n'bolts take on it, FWIW.

I think I just hurt something laughing. But, you want to know my heroine’s first name: Norah.

No relation.

Ok. Maybe a little. In my head at least.

The specious claims being made are, if anything, even more damaging to the genuine self-publishing author such as Moriah than to the genuine author going the more usual route, because they are being tarred with the same brush as the suckers prepared to pay $19,999 to hHo for a

“HOLLYWOOD BOOK TRAILER”

to pimp a story which has already been turned down as unpublishable by Harlequin.

http://www.harlequinhorizons.com/Servicestore/ServiceDetail.aspx?ServiceId=BS-6224

Incidently, the latest fallback position of ‘there’s nothing wrong with vanity publishing’ is self-evidently nonsense; Stevie’s Law asserts that if there is nothing wrong with vanity publishing, a vanity publisher would not pretend not to be a vanity publisher…