Mar 5 2010

Ellora’s Cave Fails to Show Up, Respond to Discovery in Lawsuit

By Jane • Publishing News • • Tags: , ,

Logo of Ellora's Cave

Christine Brashears, owner of Samhain Publishing, brought suit against Ellora’s Cave on April 2008.   The details of the original suit I blogged about here.   Ellora’s Cave filed a countersuit, alleging Brashear engaged in misappropriation of trade secrets, defamation, breach of contract, tortious interference with existing and prospective contracts, among other allegations.

Discovery (the exchange of paper documents, written questions, and oral depositions) commenced but Ellora’s Cave refused to comply with repeated requests from Brashear and orders of the court. Finally, the court found Ellora’s Cave in contempt and dismissed with prejudice (meaning that they couldn’t bring these claims again) all the allegations against Brashears.   This occurred in November of 2009.   (PDF ruling here).

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.   I understand missing court appointments (I really don’t understand it but it can happen) but to not even follow up and provide even a lame excuse?   This was the third attorney that EC had in the litigation, the previous two withdrawing.

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).

All that is left for Brashear is to prove her damages or what she believes that Ellora’s Cave owes her.   According to her petition, she has estimated the profit of Ellora’s Cave each year and reported that to the IRS.   Likely, she will present this as evidence of her loss. If EC doesn’t show up (and why would anyone expect them to at this point), the court doesn’t have much option but to take the evidence provided by Brashear as verbotim.   According to the Forbes article, EC was doing $6.7 million in revenue in 2006 and a recent article points to $5 million in revenue in 2009. (Let’s not even get started about how the most well known brand in romance epublishing had declining revenues when ebook sales are quadrupling every quarter).

At this point, Ellora’s Cave can ask for a reconsideration by the judge but these are rarely granted unless there are extenuating circumstances like the attorney’s relative dying but even then you can contact the judge and ask for an extension of time.   EC can appeal the judgment but, in my opinion, it’s not likely to be overturned by an appellate court.   If EC did appeal, it would have to put up an appeal bond which is generally 10% of the overall judgment and, of course, interest would accrue. Further, they would have to pay for a law firm to do an appeal and appeals are very expensive.   If they don’t act, the judgment would be considered final and Brashear could place a lien on the EC profits.

What this means for Ellora’s Cave depends largely upon its cash reserves. If it has the money to pay the judgment, it may delay expansion but EC does not need a ready amount of cash to keep publishing given that much of the business is royalty based, from the authors to the editors. If it doesn’t have the ready cash? That’s probably not very good for EC.

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