Author Solutions Class Action Lawsuit: Update #2
It’s been nearly a year since a group of authors filed a class-action lawsuit against Author Solutions (ASI) and its parent company, Penguin (now Random Penguin Solutions). In the past 11 months the case has been neither settled nor thrown out, but the gears of justice have been turning, albeit slowly.
The lawsuit, which was originally filed in May 2013, includes allegations of unjust enrichment, breach of contract, and violation of state statutes in California and New York. According to lawyers for the 3 authors who filed the suit, ASI had:
- failed to pay royalties
- failed to send authors accurate sales statements
- introduced numerous and egregious errors into the books produced by ASI
- sold useless and ineffective marketing and promotional services
Penguin and ASI filed a motion to dismiss in June, and in July the plaintiff’s attorneys filed an Amended Complaint (PDF) which raised new allegations. Legal wrangling over the Amended complaint, as well as the second amended complaint, proceeded over the following months while discovery continued.
Earlier this month Judge Denise Cote issued a ruling that’s good news for Penguin, but mostly a defeat for Author Solutions. (Writers Beware posted the full ruling here).
All claims against Penguin were dismissed.
Penguin is dismissed as a defendant in this action. The activities at issue here were undertaken by Author Solutions, a subsidiary of Penguin. Plaintiffs concede that they are not attempting to pierce the corporate veil in order to hold Penguin liable for Author Solutions’ actions. Accordingly, under basic corporate law principles, Penguin cannot be held liable for the alleged misconduct of Author Solutions.
ASI’s motion to dismiss plaintiffs' unjust enrichment claims is granted in part and denied in part:
Plaintiffs allege two distinct forms of unjust enrichment by defendants. First, defendants unjustly profited by failing to pay royalties at the rate set forth in the contractual arrangement. Second, in failing to provide services that members of the class purchased without entering into a contract, defendants were unjustly enriched in the amount of the revenue received for those services.
Plaintiffs’ unjust enrichment claim as to unpaid royalties is dismissed. The royalty rate is governed by written contracts, which plaintiffs seek to enforce in their breach-of-contract claim. Accordingly, these royalties cannot be recovered under an unjust enrichment theory.
Plaintiffs’ unjust enrichment claim as to the non-contractual publishing services, however, is adequately pled. Unlike the claim regarding unpaid royalties, plaintiffs allege that there was no written contract setting forth the nature of the services for which they are seeking damages in their unjust enrichment claim.
Author Solution’s motions to dismiss the claims of various state statutes were denied. The lawsuit is going to proceed to discovery, and the parties have been ordered to submit a proposed pre-trial schedule.
Author Solutions has a bad reputation that goes back for years, so this lawsuit was well-nigh inevitable. In fact, the only surprise is that the lawsuit wasn’t filed almost as soon as the Penguin-ASI deal was finalized.
Penguin bought Author Solutions in July 2012 for $116 million, in spite of ASI’s infamous reputation. ASI has been operating under a variety of logos, including AuthorHouse, iUniverse, Palibrio, Trafford, and Xlibri. ASI is also providing similar sketchy services under contract to a number of otherwise respectable companies, including Simon & Schuster (Archway), Lulu, Penguin India (Partridge), F+W Media (Writers Digest), and Harlequin (DellArte Press).