Potboiler Publisher Won't Share the Pot, Romance Novelists Claim in Contract Suit

(Photo credit: Wikipedia)

Expect plenty of bodice-ripping, burning eyes and flaming lips, and waves crashing against the ocean in the United States District Court for the Southern District of New York as three romance novelists have filed a putative class action breach of contract/unjust enrichment suit against Harlequin Enterprises Ltd. ("HEL") concerning E-book royalties.

The case, reported on by Courthouse News Service and the Wall St. Journal Law Blog, is Barbara Keiler, Mona Gay Thomas & Linda Barrett v. Harlequin Enterprises Ltd., Harlequin Books, S.A. & Harlequin Enterprises B.V. (Case No. 12-cv-5558). Toronto-based HEL, the subject of a copyright infringement suit earlier this year reported here (see "TUOL" post 4/23/12), reportedly cranks out 110 titles monthly in 34 languages reaching 114 international markets from its stable of 1,200 authors. As faithful readers of this blog no doubt know, lead plaintiff Keiler is the author of Right Place, Wrong Time and Blooming All Over, Thomas penned His Secret Duchess and The Heart's Desire, while the collected works of Barrett include Apple Orchard [not to be confused with Anton Chekhov's obvious knock-off Cherry Orchard] and Love Money and Amanda Shaw.

The plaintiffs are seeking class-action status that would cover Harlequin authors who penned books for the defendants overflowing with heaving bosoms during the period from 1990 to 2004. The plaintiffs allege in their complaint that they are owed royalties on E-book editions of their works because of a standard contract clause that pays authors 50 percent royalties on net receipts of the "publisher, from the exercise, sale or license of digital rights to their works."

The plaintiffs contend that defendants Switzerland-based Harlequin Books S.A. and Netherlands-based Harlequin Enterprises B.V. are HEL subsidiaries that perform no publishing functions and merely provide tax benefits to the parent company. HEL claims it had to obtain a license from its Swiss arm to publish the authors' E-books and that any royalty calculation should be based on the publisher Harlequin Switzerland license, or 6 percent to 8 percent of the E-book's cover price, which means 3 to 4 percent for the authors.

As set forth in the plaintiffs' complaint:

 "In 2011, Harlequin Enterprises sent written communications to plaintiffs and the other class members in which it took the position that royalties for e-books were covered by the AOR [All Other Rights] Clause in the Publishing Agreements and that the authors' 50% royalty was to be calculated based on the net amount received by Harlequin Switzerland, from a 'license' that Harlequin Enterprises claims Harlequin Switzerland granted to it to publish the e-books," the complaint states. "Harlequin Enterprises claimed in those communications that the net amount received by Harlequin Switzerland was 6% to 8% of the cover price of the e-books, and that the royalties owed to plaintiffs and to other class members were therefore 50% of that amount, or 3% to 4% of the cover price.

     Under the publishing agreements, defendants have been paying plaintiffs and the other class members e-book royalties of 3% to 4% of the cover price based on the net amount received by Harlequin Switzerland from the claimed 'license' granted to Harlequin Enterprises, far less than what plaintiffs and the other class members would have been paid if their royalties were based, as they should have been, on the net amount received by Harlequin Enterprises." 

The "TUOL" staff can't help but wonder whether the judge hearing the case wears an eyepatch and has a handsome scar.