Press Release Says Harlequin Sued over E-Royalties

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

We have received an email from Contact@harlequinlawsuit.com with a press release announcing a class-action lawsuit against Harlequin claiming underpayment of royalties to authors. If we read the document correctly it has to do with the interpretation of “royalties”: if a publisher offers, say, a 4% royalty on the list price of a book OR 50% of licenses to a retailer (like Amazon), to which is the author entitled?

We have long predicted that a suit like this was a possibility ever since a suit involving rap star Eminem established that he was entitled to the larger of those two numbers. For background read When is a Royalty Not a Royalty?

The full complaint may be seen here:

July 19, 2012

World’s #1 Romance Publisher Harlequin Subject of Class Action Suit

A class action lawsuit was filed today against Harlequin Enterprises, Ltd., the world’s leading publisher of romance fiction, as well as Harlequin Books S.A., a Swiss corporation, and Harlequin Enterprises B.V., a Dutch corporation, on behalf of authors who entered into contracts with the company.

This lawsuit results from Defendant Harlequin Enterprises Limited, the world’s leading publisher of romance fiction, depriving Plaintiffs and the other authors in the class, of e-book royalties due to them under publishing agreements entered into between 1990 and 2004. Harlequin required the authors to enter into those agreements with a Swiss entity that it created for tax purposes, and that it dominates and controls. However, Harlequin, before and after the signing of these agreements, performed all the publishing functions related to the agreements, including exercising, selling, or licensing, or the e-book rights granted by the authors. Instead of paying the authors a royalty of 50% of its net receipts as required by the agreements, an intercompany license was created by Harlequin with its Swiss entity resulting in authors receiving 3% to 4% of the e-books’ cover price as their 50% share instead of 50% of Harlequin Enterprises’ receipts.

What this means to the authors can be illustrated by an e-book with a hypothetical cover price of $8.00. The “net receipts” made by Harlequin Enterprises Limited from the exercise, sale or license of e-book rights would be at least $4.00, of which authors would be entitled to $2.00 based on their 50% royalty. Computing the “net receipts” based on the “license” between Harlequin’s Swiss entity and Harlequin Enterprises, Plaintiffs’ 50% royalty amounts to only 24 to 32 cents.

The lawsuit alleges, among other claims, that on contracts between 1990-2004:

Harlequin breached the terms of their publishing agreements with authors;
Harlequin failed to pay the Plaintiffs and members of the Class the royalties to which they are entitled under the publishing agreements;
Harlequin Enterprises, Ltd. is liable for unjust enrichment.

The Harlequin authors are represented by lead counsel, David B. Wolf, DavidWolfLaw pllc and co-counsel, Michael J. Boni, Boni & Zack LLC. For more information, including viewing a copy of the Complaint, please visit: www.HarlequinLawsuit.com.

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Richard Curtis

About Richard Curtis

Richard Curtis is a leading New York literary agent (www.curtisagency.com) who foresaw the Digital Book Revolution and launched an e-book publishing company early in 2000. E-Reads (www.ereads.com) is one of the foremost independent e-book publishers in the industry, specializing in reprints of genre fiction by leading authors in their fields. Curtis is also a well-known authors advocate, author of numerous works of fiction and nonfiction including several books about the publishing industry, and prolific blogger – see his hundreds of other blog posts here.

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