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Borders Moves to Dismiss Lawsuit by Ellora’s Cave; Alleges Short Shipments...

Borders has filed a motion to dismiss in the lawsuit filed by Ellora’s Cave. The motion to dismiss mentions, among other things, that the number of returns EC incurred was due to EC’s own failure to provide full shipments. Instead, EC engaged in a practice of short shipments. From the Motion to Dismiss:

It is also Borders’ policy (specifically for Waldenbooks) to hold any “short-shipped orders”-i.e., those in which the quantity shipped by the publisher is less than the amount ordered by Borders’ invoice-in its warehouses. If the seller does not supplement the order to satisfy the quantity requested by the Borders/Waldenbooks invoice, the entire order is shipped back to the seller. Throughout its commercial dealings with Borders, Plaintiff short-shipped orders. As a result, Borders was forced to warehouse the short-shipped product and, if not supplemented, to return it to Plaintiff. Plaintiff’s practice of short-shipping its orders therefore resulted in a number of returns from Borders.

In 2007, Plaintiff began to complain about the volume of returns it was receiving from Borders. As a result, a conference call was held on April 18, 2007, in which Borders and Plaintiff agreed that, to simplify the order and return process, Borders would begin to place orders with Plaintiff through Baker & Taylor, Inc., a North Carolina-based and nationally recognized wholesaler, rather than directly. Plaintiff supported this development fully.

Accordingly, on May 25,2007, Borders sent Plaintiff an e-mail confirming that it was updating its information for Plaintiff to note that Baker & Taylor was now the vendor of record and that future returns would not be made by Borders directly to Plaintiff but through Baker & Taylor, with whom Borders had a separate contract that allowed for full return rights. The parties’ commercial relationship continued with Baker & Taylor acting as wholesaler. Pursuant to its contractual rights, Borders later returned certain seller titles located at the store level to Baker & Taylor, which then returned those titles to Plaintiff.

Plaintiff soon began to complain again about returns made by Baker & Taylor. In March 2008, in another effort to accommodate Plaintiffs concerns and to continue the parties’ working relationship, Borders arranged a conference call with Plaintiff to discuss its concerns. The conference call included representatives from Borders and Patty Marks, Plaintiffs CEO. At that time, Borders made an offer pursuant to which Borders would take back returned titles that were
being held at that time by Baker & Taylor. Borders subsequently placed that proposal in writing and, in a show of good faith, took back approximately 22,000 books from Baker &Taylor. Baker & Taylor (and, thus, Plaintiff) was credited for these returns.

Borders has not placed any additional orders with Plaintiff since it reclaimed the returns from Baker & Taylor because Plaintiff never responded to Borders’ written settlement offer, despite Borders’ show of good faith in reclaiming returned titles held by Baker & Taylor.

Instead, Plaintiff filed its complaint in this lawsuit on January 6, 2009 in the Court of Common Pleas for Summit County, Ohio (Case No. 2009-01-0070).

Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty. You can reach Jane by email at jane @ dearauthor dot com

15 Comments

  1. Jessica G.
    Feb 19, 2009 @ 16:59:23

    I’m rooting for Borders on this one. If all of this is correct (and I’m sure it is), clearly they are in right.

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  2. Jen
    Feb 19, 2009 @ 17:51:42

    This one does sound pretty open and shut, but I’d like to hear Ellora’s Cave’s side of the story before rushing to judgment.

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  3. Courtney Milan
    Feb 19, 2009 @ 17:53:40

    Jane, do you have a link to the motion that’s not behind a PACER wall? That is a . . . fascinating argument to make, for lack of a better word, in a motion to dismiss, and doesn’t bode well for a short resolution to the suit.

    What’s the legal grounds for dismissing?

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  4. Sylvie Fox
    Feb 19, 2009 @ 18:33:06

    As a former Ohio attorney and now romance writer, I find this whole thing fascinating. What I wonder, though, is what did this mean for EC authors. Were their books not in stores while they assumed they had full distribution?

    The only EC books I’ve bought have been at author signings. I can’t recall seeing many in bookstores.

    I think the return model of publishing is one of the worst in retail (though the policy of some garment manufacturers sharing the loss when items don’t sell is about as bad).

    What I’d like to see come out of this are more publishers establishing a no return policy and bookstores being more prudent in ordering. The consignment model fills huge warehouse sized spaces with lots of glossy items – but how many times have any one of us left a bookstore after browsing not having found anything to our liking? I’d like more diversity or smarter ordering choices.

    Honestly, I’m not buying that new bestseller in the stores (now at our local Borders at full list price) when I can get it on Amazon at maximum discount. What I’m looking for in stores are new must-have midlist books.

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  5. Mary Winter
    Feb 19, 2009 @ 20:52:23

    @Sylvie – “What I wonder, though, is what did this mean for EC authors. Were their books not in stores while they assumed they had full distribution?”

    I went to a Waldenbooks I’d had a signing at maybe six-eight months previously to check on my titles and was told that neither of my books were in their computer as being orderable in any way, shape, or form and to contact the publisher. (this would have been March-April ish 2008). To be honest, I shrugged it off, but that was my experience.

    But then again, I’ve quit buying books pretty much at any B&M store since I have the free shipping with Amazon.com. I more than get my $79/year worth in free two-day shipping. LOL! :)

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  6. Jane
    Feb 19, 2009 @ 21:26:12

    @Courtney Milan No, I don’t have a link but I’ll email it to you. I think the short shipment argument was mostly prefatory, to frame the ultimate issue for the court (and maybe the press). I did think that the original petition was pretty shoddy. There were five main reasons for the dismissal and most of them rested on the failure to allege specific facts.

    I have always thought that the contract claim was the hardest to prove and the easiest to dispose of from a motion standpoint because if Borders was abiding by the terms of the contract (and EC hasn’t alleged any specific act of breach) then there would be no breach.

    I had not thought of the parole evidence defense though.

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  7. Jade Lee
    Feb 20, 2009 @ 08:57:16

    The Comic Book industry works on a no return basis. Unfortunately…that means comic book stores are dropping like flies. They can’t afford to order a title, display it, and NOT have it sell. It’s just too expensive.

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  8. Terri Pray
    Feb 20, 2009 @ 11:12:30

    It’s not just the comic book industry that works on no return, but the game industry. And whilst a lot of the hobby stores (gamer guy opens store for friends) have fallen by the wayside, the stores that understand there is money to be made in special orders, are continuing to survive.

    A lot of the smaller game companies deal direct with the stores. The store that is willing to special order a game from a smaller company often then gains a customer for life.

    When the company says ‘your minimum order is 1′ the store is a lot more willing to take a chance on a new product, especially when they’ve already sold X,Y and Z in the same line as special orders. *grins*

    Those publishers who are willing to deal with the comic/game stores find that the stores are often willing to let authors carry in stock for signings (If the book fits their store). They often view such an event as ‘found money’…

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  9. Jen
    Feb 20, 2009 @ 11:20:20

    Lots of interesting info about how the relationship between the stores and the publishers works.

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  10. Anion
    Feb 20, 2009 @ 12:20:06

    @Jade Lee:

    The Comic Book industry works on a no return basis. Unfortunately…that means comic book stores are dropping like flies. They can't afford to order a title, display it, and NOT have it sell. It's just too expensive.

    You also can’t return books to comic shops; I mean, you can if the copy itself was defective, but aside from that, you can’t. You can usually trade it in for store credit at a much-reduced price though.

    No returns to publishers generally means no returns for consumers, either.

    (You probably know that, Jade, I’m just using your comment as a springboard.)

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  11. DS
    Feb 20, 2009 @ 15:29:51

    Baker & Taylor’s lawyers filed notice to move the lawsuit against B&T to Federal Court based on amount in controversy (over $75,000) and diversity.

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  12. J.C. Wilder
    Feb 21, 2009 @ 06:30:15

    Sylvie Fox wrote: What I wonder, though, is what did this mean for EC authors. Were their books not in stores while they assumed they had full distribution?

    There’s a significant difference between having distribution and simply being available to be ordered through Ingrams.

    Distribution = a sales force selling the books to the chains and independents. Once the sales are made, the books are sent out etc. Almost all of the Big Publishers have their own sales force.

    Ingrams availablity = they can be ordered by individual stores but the books aren’t actually SOLD to various chains and stores. In this case the bookstore has to go looking for the books, they aren’t presented as they are with distribution.

    This publisher never had a sales force presenting the books – not even for a day. They did have in house accounts with Borders and Borders would order directly from the publisher but its not the same as proper distribution. The bookstore would order X number of copies of a book but there was no rhyme or reason as to what stores they went to.

    As for EC not filling orders properly – this part is true. For example – A store might order 100 books from 10 authors and if there were only 98 books in the warehouse, they’d send the 98 books and wait on the remaining titles. Now if the books are shipped out in a timely fashion, this isn’t an issue – but the publisher took unreasonable amounts of time to fill the orders.

    With Borders, the invoice for the order doesn’t go into their payment system until the 100th book arrives. Its very easy to see how this pub got into a bad spot financially if they didn’t fufill their orders in a reasonable amount of time. Borders is notoriously slow to pay anything so it might take a six months or longer to see any money from them.

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  13. Teddypig
    Feb 21, 2009 @ 12:39:51

    Ingrams availablity = they can be ordered by individual stores but the books aren't actually SOLD to various chains and stores. In this case the bookstore has to go looking for the books, they aren't presented as they are with distribution.

    Right, but also in the case of Ingrams, is it not also a well known ordering channel with a return policy?

    I think that is the most important thing I heard about Ingrams.

    Because several managers I talked to knew immediately they could order the books I showed them from Ingrams unlike a direct from the publisher deal which most stores I was told just will not do as policy.

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  14. Mary Winter
    Feb 21, 2009 @ 14:20:30

    @Teddypig – EC did not use Ingrams so bookstores could not order from them to buy EC books. They chose their own distribution. For example, I checked Ipage mid last year (when I got my account), which is Ingram’s book ordering system, to see which of my books showed up the only EC books listed was my oldest title from 2006 (plus other authors, of that era or earlier). All other books have to go through EC directly to be ordered. For most bookstores, if it’s not in their “computer” as available in their warehouse, they won’t do the extra legwork. Especially if it is a chain store. I figure that’s why I was told what I was told at Waldenbooks about them being unable to order it in spite of the current B&T relationship. Right hand…left hand…and all of that. *shrugs*

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  15. Teddypig
    Feb 21, 2009 @ 18:09:17

    So not only was Ellora’s Cave not really “selling” the books to the chains and independents but they are making it totally impossible for an author to then step in and get the chain bookstores to order because they are not using Ingrams.

    The more you know, the more it sucks.

    ReplyReply

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