Apr 24 2011
As of April 8, 2011, the three year lawsuit between Ellora’s Cave and Chris Brashear has come to an end. On April 7, 2008, Chrissy Brashear filed suit against Ellora’s Cave alleging that she was entitled to a distribution of profits from 2005 until the date at which defendants bought out her 5% shares. EC’s response to the litigation was to not participate, which you simply cannot do in a litigation.
EC refused to give up documents such as tax returns and ledgers. The failure to respond the request for documents impaired Brashear’s ability to proceed with her claim. EC blamed it on their first lawyer who they fired. EC retained new counsel but the pattern of delay and duck continued. Brashear filed a motion for sanctions (a request asking the court to punish EC for its delinquent behavior). The court granted the motion after EC and its counsel failed to show up for a hearing. EC asked the court to set aside the sanction and promised it would deliver the documents requested by Brashear. EC never did.
Ellora’s Cave was given one last chance to respond to the discovery but instead of responding, they filed for a protective order asking the court to limit what documents EC had to produce to Brashear. The Court granted the motion in part and denied the motion in part. A pretrial hearing was scheduled.
No attorney showed up for the pretrial nor did any of the representatives for EC. As the court order noted, the court placed phone calls, waited sixty-five minutes, and still there was no response. The court then ordered a judgment against EC in favor of Brashear. (PDF order here).
Fed up with Ellora’s Cave, the court set out the behavior by EC that it characterized as contumacious. (twenty seven page ruling (PDF)).
A trial would proceed but only on the damages that Brashears was claiming. Those damages were set out in a trial brief filed by Brashears. (PDF) The trial brief laid out the calculation of damages alleged by Brashear. First, it alleged Brashear was entitled to over $140,000 in unpaid distribution. The follow table represents the distributions made to Engler and Marks from 2006 to May 17, 2010.[table id=59 /]
The distributions in 2010 only include data up to May 17, 2010, as Ellora’s Cave has not divulged any post May 17, 2010 data. Interesting that in this period of great digital growth, EC’s profits (as seen through it’s distribution) is declining. In valuing Brashears’ 5% ownership in EC, EC’s expert is alleged to opine that Brashear’s interest in EC amounts to approximately $51,700 whereas Brashear’s expert values her 5% shares at $121,500.
The trial brief also asserts that Ellora’s Cave is diverting assets away from the company. First, by borrowing money through commercial lines of credit and loans in EC’s name and then transferring those loan funds to Engler, Marks, and others at substantially lower interest rates. Second, EC is paying above market rate rent to its landlord (who happens to be Tina Engler). For example, in 2009, the market rent is around $40,131, and EC was paying to Engler $97,200 in rent.
All told, Brashears claimed about $350,000 in actual economic damages as well as damages for defamation and punitive damages (designed to “punish” the wrongdoer as opposed to “compensatory” damages that are designed to make the plaintiff “whole”) and attorneys’ fees.
The settlement is confidential (PDF) and thus we won’t know what has been paid although if Ellora’s Cave did pay in authors (as I suspect that they may have given their cash flow problems), we may see some authors’ backlists appearing on the Samhain site in the future.