Does PublishAmerica Pay Royalties Upon Termination

With all the discussion about angry authors demanding that their contracts be terminated by PublishAmerica and even the numerous buy out options offered to authors. What happens at the termination? Does PublishAmerica pay the author all due royalties after they have terminated the contract? That answer is no and the law is on their side in this respect.

The folowing is an arbitrators decision in a PublishAmerica case. This is the arbitrator's decision minus the actual amount of the award.

This information was obtained from public record as the author, whose name is redacted filed a subsequent federal lawsuit after the arbitration, in which she used the arbitration documents as exhibits.


AMERICAN ARBITRATION ASSOCIATION COMMERCIAL ARBITRATION TRIBUNAL
　
In the matter of the arbitration between
Re: 16 143 E 0071406
XXXXXXX XXXXX (Claimant)
and
Publish America, LLLP (RESPONDENT)
　
AWARD OF ARBITRATION
　
I, THE UNDERSIGNED ARBITRATOR, having been designated in accordance with the arbitration agreement entered into by the above-named parties dated June 11, 2003, and having duly sworn, and having heard and considered the evidence offered by the parties, do hereby FIND and AWARD as follows:
On or about June 11, 2003, Claimant XXXXX XXXX also known as XXXXXX XXXXX and Respondent PublishAmerica, LLLP entered into an agreement wherby Claimant granted Respondent an exclusive license to publish and sell her literary work, "X XXXX XXXXXX." and Respondent agreed to publish and sell the work and pay Claimant royalties on the sales (the "Agreement").

On September 23rd, 20006, Claimant filed a Demand for Arbitration seeking an accounting under paragraphs 11 and 12 of the Agreement of the total sales of the book, the total price of each sale, and the amount of royalties due to Claimant from the sales. Claimant also requested costs attorneys’ fees, and "any further relief that the cause of justice may require," Paragraph 11 of the Agreement required Respondent "to keep and maintain true and accurate records relating to the distribution of copies of the said literary work including reports of all sales and collections therefrom." Paragraph 12 provided that Respondent would "render and forward to the Author, in the months of February and August . . . semi-annual statements of account for so long as copies of the work subject to royalty are sold." Such statements were to indicate the price of each copy sold and the total royalties payable to the author.

Respondent contents that after July 2, 2004, it was not obligated to comply with Claimant’s request for an accounting, because the contract was terminated on that date. The evidence shows that in June 2004 the Claimant requested termination of the contract for various reasons, the merits of which are immaterial to this case. The Agreement did not prescribe an applicable termination mechanism. Respondent nevertheless said it would agree to terminate the contract and send "the requisite papers" at its convenience. Respondent sent Claimant a proposed, unsigned Settlement Agreement and Release dated June 25,2004. As of June 30, 2004, Respondent informed Claimant that the publishing contract remained "fully in effect and enforceable." In a July 2, 2004, email to Respondent, Claimant refused to sign the Settlement because it contained a confidentiality and non-disparagement clause to which she would not agree. She maintained, however, that she already had an enforceable termination agreement "with no strings attached" and that she accepted that agreement.
On July 2, 2004, Respondent took steps internally to discontinue promoting and selling the book and to notify distributors to pull the book from the market. However, it does not appear that Respondent informed Claimant of that fact or that it ever sent her what it referred to as "requisite papers" to show termination of the exclusive license and reversion of her copyright.

It is not clear from the evidence that the Agreement was terminated on July,2 2004 as Respondent now contents. Before any acceptance of Claimant’s demand to terminate Respondent placed conditions on that termination in the form of the Settlement Agreement to which Claimant never agreed. If Claimant made another offer on July 2 to terminate the Agreement without conditions (which does not appear to be what she actually intended), then it does not appear that Respondent ever communicated acceptance of that offer to Claimant. It never sent her promised "requisite paper" to Claimant for her potential third parties that Respondent considered the Agreement terminated and Claimant’s copyright which she had licensed exclusively to Respondent, reverted to her.

Termination of the Agreement may be somewhat beside the point with respect to the accounting issue. Even if there were an effective contract termination as of July 2, 2004, I do not see that this relieves Respondent of the obligation to account for and pay royalties on books sold prior to the termination. The Agreement required Respondent to pay royalties on books sold in the United States and elsewhere (3) and to furnish Claimant with statements of account "for so long as copies of the work subject to royalty are sold." (12) The fact that the next statement was not due until August 2004 does not negate the underlying obligation to pay royalties on books sold prior to termination of the publishing agreement. Moreover, if Respondent continued to sell books after the license terminated, i.e. without authorization which may have occurred at least once), Claimant would certainly have a legal and equitable right to demand an accounting of those sales and the royalties due.
I conclude that whether the Agreement was terminated as of July 2, 2004, or not, the Respondent did not have the right to refuse to provide Claimant a full and accurate accounting of the number of books sold, the price of each sale, and the royalties due on those sales.

The evidence submitted at the hearing shows that Respondent sold XX books from January through July 2004 for which it had not previously accounted to Claimant. Royalties on those sales, at 8% of the retail price of $XX, amounts to $XX . Claimant produced no reliable evidence of any specific number of books sold over and above the XX total books for which Respondent has now accounted to Claimant