Apr 4 2013
Thursday News: Author Royalty Suit Against Harlequin Dismissed; Petition to change return rules on Amazon
Whether Harlequin Authors will win is another question. Piercing claims are notoriously difficult. I’ve only handled a couple of them and the winning claims largely rested on proving that the corporations shared the same board members, the same employees, did not keep regular minutes and intermingled assets. I don’t see those allegations here. Instead, the allegations are that HQE did all the work of a Publisher and thus should be deemed the Publisher. That’s not the traditional evidence of a piercing claim. This is not to say that there aren’t cases out there like it, only that I am not familiar with them.
Amended claims were brought including an explicit piercing claim but the District Court disagreed. The opinion is very brief (and indeed the brevity can be soul crushing to the losing side).
1) The district court felt that the contract language was clearly defined. HBSA was the publisher and not Harlequin Enterprise Limited (HEL). This distinction was important because it allowed Harlequin to pay its authors only 50% on the amount received by the Publisher (HBSA) and not the amount received by HEL, which presumably is a greater sum.
2) The court felt that the breach of contract claim wasn’t adequately pled.
3) Authors argued the amount received by HBSA from HEL for the sale of the author’s books was unreasonably low. Court said that this was speculative (although this is at the motion to dismiss stage where everything is supposed to viewed in a light most favorable to the authors as the non moving party).
4) On the unjust enrichment clause, the authors could only win on that claim if there was an unenforceable agreement. Judge said the All Other Rights clauses covers the publication of ebooks.
The authors could appeal this decision but my guess is that they’d have to find another set of attorneys to do so or pay increased fees. The setup between HBSA and HEL is one devised to benefit the company primarily for tax purposes as far as I can tell. It’s fairly common to have headquarters overseas where it is more tax friendly like Switzerland so ruling that the HBSA/HEL relationship was invalid might be opening a can of worms for the court. This is probably the end of the road for this suit. Yahoo! Finance
Unfortunately some authors do not agree. Authors in support of the petition accuse the readers of stealing and fraud and that reading and returning is tantamount to piracy. But returns are not unchecked. There have been more than one complaint on Consumerist by a reader whose account has been cut off because of too many returns.