Class Action Complaint Against Penguin/Author Solutions – Part 2

The  class action complaint lodged with the New York court at the end of April alleges that ASI misrepresent its company and services with the intention of luring authors in with claims that its books can compete with “traditional publishers,” offering “greater speed, higher royalties, and more control for its authors.” The suit also alleges that ASI profit from “fraudulent” practices, fail to pay royalties due, and engage in activities like “delaying publication, publishing manuscripts with errors to generate fees, and selling worthless services, or services that fail to accomplish what they promise.” Giskan Solotaroff Anderson & Stewart cite that these practices are violations of the California Business and Professions Code, and also violations of New York General Business Law.
The full 33 page document detailing the complaint by the three plaintiffs can be viewed in full here via Victoria Strauss of Writer Beware. 
In the first part of this article, previously posted here, I looked at ASI and their dominate position in the paid-publishing service world and the way it was handled by some of the publishing media. ASI operate self-publishing imprints AuthorHouse, iUniverse, Trafford Publishing, Xlibris, Palibrio, and Booktango and also partners and powers a number of self-publishing imprints with traditional book publishers like Simon & Schuster (Archway Publishing), Thomas Nelson (WestBow Press), Hay House (Balboa Press), Guideposts (Inspiring Voices) and Writer’s Digest (Abbott Press).  Author Solutions reports publishing 190,000 titles written by 150,000 authors in addition to operating the Author Learning Center, the stated purpose of which is to provide authors with online education resources, access to industry expertise and an online community to connect with other writers. It also offers a suite of “book-to-screen” services intended to provide authors with Hollywood access. 
In the second part of this article I want to look at particularly at this class action complaint, the allegations made, and its chances of success and the potential implications for self-publishing and Penguin in the future. 
Just before we begin, I’ve been asked overnight via email from several parties outside of the above plaintiff parties to clarify TIPM’s position on ASI and/or my own opinions. I’ve written extensively on ASI, as well as many self-publishing services over the years, and TIPM is testament to that. I’m not going to link and rehash every comment or opinion I have formed about ASI over the past five years, simply because it covers an extensive time in the publishing industry before and after ASI expanded their global operation, acquired several other big self-publishing service providers, and began powering paid-publishing imprints for traditional publishers. A quick look at TIPM’s provider review page will provide the direct links to reviews I have carried out on many of ASI’s imprints. You can find other links and articles on ASI featured in TIPM here, here, here, here, hereand here, and these are just some of the most recent. 
As part of any review or examination of a self-publishing provider, TIPM uses the measure of these 12 points and principles to evaluate a provider, together with direct feedback from many authors who have contracted the provider’s services for one or more books. Much of this evaluation goes into the regularly updated Publishing Services Index. On a personal basis, while editor of TIPM and a publishing consultant, I try to present a balanced view through the magazine and avoid public recommendations or bad-mouthing companies. To date, only two companies ever reviewed on TIPM are classified as not recommended. My role as editor of TIPM is to deal with as many facts as possible and to help enlighten and educate authors, not to become a cheerleader for some and the voice of destruction for others. There already far too many self-ordained experts in this field who pontificate on services and providers based solely on personal prejudices, political or commercial agendas. 
For the record, privately, during more than 250 one-on-one author consultancy sessions, I’ve yet to recommend an ASI imprint as the best match for an author, because even the most green and unseasoned author looking at self-publishing services—once armed with correct and unbiased information—can usually reach a fair conclusion about ASI imprints and that it is not the option for a self-publishing author. There is no kudos for me as a publishing consultant if an author client remains confused or unsure of the path forward for him or her. Alas, that has not stopped many thousands of authors every year from reaching a different conclusion. That is one stick ASI’s lawyers will beat any opposition to their business and practices with whether we like it or not. 
And that takes us nicely to this class action law suit. 
In truth, the 12 points and principles I referred to above are perfect targets for a publishing services provider, a guide mark and barometer, not a list of must-haves and absolutes. I don’t expect even the best of publishing providers to hit all of these, but what I do know is that ASI imprints fair pretty poorly against many of them, and that is even ignoring the considerable number of negative experiences I hear from authors I speak to week on week who have dealt with an ASI imprint. 
In looking at the class action complaint against Penguin and ASI, before leaping to judgement or assumptions, I’d ask all to consider this suit in light of all paid-publishing, assisted publishing and vanity presses—whatever you want to call them—because that is the first point I would like to make after an initial reading of Giskan Solotaroff Anderson & Stewart’s submission to the US court. The plaintiffs’ allegations against the defendants reads to me more like a general test case than a specific case brought by one client. We should remember while reading and analysing the three claimants’ cases that Giskan Solotaroff Anderson & Stewart (GSAS from here on in) openly canvassed for other author clients to joint this case and make it a class action suit. My opinion—and it is based on my reading and what I understand of all parties—is that this suit specifically and purposely sets out to carve out a precedence for future suits against publishing service providers, with the added attraction that it includes a major traditional publishing house. 
The three authors involved, named as Kelvin James, Jodi Foster and Terry Hardy [page 1], are claiming damages of $5 million (ahem, don’t ask me where this figure was dreamt up!) and the case has been assigned to Judge Denise Cote who is still presiding over the e-book price-fixing case. GSAS will be happy about this, though, you can bet this is because the Southern District Court of New York already expects this to garner a fair degree of coverage. GSAS has also requested that the case be heard before a jury [page33]. 
For the record, any signed contracts I have seen from authors with ASI imprints state that authors must bring a legal action against the company in the state of Indiana. Presumably, this is the first point of legal order Judge Denise Cote will have to rule on. Plaintiffs Kelvin James is from New York, Jodi foster is from California, and Terry Hardy is from Colorado. Penguin, as direct owners of ASI, is based in New York. 

“11. Venue is proper in this district inasmuch as Defendant Penguin maintains its offices and conducts business in this District.”
[page 3] 

The second page of the suit [page 2] sets out the preliminary statement by describing the nature of ASI’s business, from revenues through to what it claims to do for contracted authors. GSAS make the first challenge that ASI fail to fulfil basic ‘task of publisher; paying its authors their earned royalties and providing its authors with accurate sales statements.’ GSAS go on to allege that ASI do not take diligent care of authors’ work by making ‘egregious publisher errors’ on covers and internal book files and attempts to profit from the author by correcting these errors for a fee. On page three [page 3] of the suit, GSAS allege that ASI wrongly describe itself as “[t]he leading indie publishing company in the world” when it is nothing more than “a printing service that fails to maintain even the most rudimentary standards of book publishing, profiting not for its authors but from them.” 
I don’t know of any publisher, no matter how reputable, that doesn’t profit in some way from its authors. I take the point GSAS is trying to argue, but it doesn’t it work that way for most publishing services—whether printer, packager, assisted publisher or outright vanity press. Most publishing services make their profits from authors rather than the sale of books. GSAS seem to be arguing the point of what a publishing provider calls itself—publisher or service provider. The irony here is that the industry as a whole is moving from publisher to content service provider. The self-publishing and writing communities might rejoice for a brief moment if any court curried favour with this notion. For me, this is a dangerous case of be careful what you wish for. Right now we also have literary agents, authors and retailers claiming to be publishers! 
The class action complaint then moves onto outlining a brief summation of each plaintiff’s individual case. Kelvin James used ASI’s iUniverse in 2009 for his first book, and then used the self-publishing imprint again for a second book. Jodi Foster also used iUniverse for a book in 2010. Terry Hardy purchased three packages from AuthorHouse for three books between 2010 and 2012. 
Under IV. STATEMENT OF FACTS on [page 4] the suit reads:

“17. In 2011, Author Solutions reports to have sold 27,500 publishing packages…”
“18. In the same year, Author Solutions estimated that over the course of its relationship with an author, a single author will generate approximately $5,000.00 in revenue, on average, for the company.” 
Jim Milliot of Publishers Weekly is cited from an article for this information. It concerns me when a team of New York lawyers is using media articles to back up statements of fact in a legal deposition. And the suit goes on to state: 

“20. Author Solutions employs several tactics to lure authors into publishing with one of their imprints. Author Solutions maintains a dizzying number of its own self-publishing imprints, or trade names, including AuthorHouse…”
[page 5] 

What kind of formal language is ‘a dizzying number’ for a legal document submitted to a court? At this point of reading this document, I was starting to wonder if I was reading a blog post or a proper legal document and much of the 33 page suit continues in this vein describing terminology and practices at ASI imprints without so much as providing any factual reference for the claim. We also have reference made to fake social media accounts and deception ‘not condoned by Author Solutions’ none of which is properly cited or referenced. 
Again, on this page of the Class Action, we get this statement to the court: 

“The sales team has a quota for how many Publishing Packages they must sell on a daily basis.” 

While this document—already lodged with the court—is by no means anywhere close to a foundation for a book of evidence, I’m staggered GSAS would include this kind of claim and information without proper citation and references. While I appreciate GSAS do not want to show their full hand to the defendants at this stage, the certainty of a trial before a jury is no slam-dunk and the book of evidence has yet to be prepared. I certainly hope this is not a rehearsal of how GSAS will prepare this case for its plaintiffs because some of the claims made in the Class Action Complaint, like the above ones, will require more than just the statements of the plaintiffs experience in dealing with ASI. It will require the back up of employee testimony, internal memos, email correspondence and ASI procedural manuals to prove such claims. 

“27. Authors also begin to experience significant delays in pushing their manuscript forward. While the delay tactic hurts authors and runs contrary to the benefit self-publishing, [sic] which Author Solutions repeatedly touts on its website and in sales calls, it benefits Author Solutions.”
[page 6/7] 

In light of the above, and the fact that two of the authors together have used ASI’s imprints for multiple books (5 if the suit is correct), one of these two plaintiffs published a book two months after submission to ASI?! All of this runs contrary to the core of the case the plaintiffs are trying to present to Judge Denise Cote, certainly at least, that ASI deliberately delays publication as a means of gaining additional profits. 

“28. Check-in coordinators and PSA’s are instructed not to correct errors in manuscripts, even the most glaring errors.”

[page 7] 

Again, none of these claims are backed up or substantiated in the document with references to how or why the allegation was made. 
The document goes on to outline misrepresentations by ASI in its contract and anomalies authors have experienced in receiving royalties and what appears on royalty statements. Point 35 on page 8 alone makes anyone wonder just how many authors ASI could have onboard if the below statement is taken at face value. 

“35. As soon as the author purchases a Publishing Package, she begins receiving aggressive sales and marketing calls from Author Solutions. This alone causes some authors to terminate their relationship with Author Solutions.”

[page 8] 

I can certainly believe this and it is borne out by what I have heard from many authors I have spoken with during consultations. These authors disclose that while they did investigate an ASI imprint and had initial ‘relations’ with them, they were quickly turned off by continuous emails and phone calls in a push by the company to offer discounts to get a contract signature. 
The document goes on to underline the ineffectiveness of ASI’s editing and marketing packages, stating that ‘authors discover that their final book contains errors that either already had been or should have been corrected’ and marketing packages authors receive as ‘nothing more than a handful of contacts for a bookstore, or a press kit with typographical errors that market Author Solutions more than the author’s book.’ 
The document then begins to outline the allegations made by each of the three authors, beginning with Kelvin James. James purchased his first package in April 2009 and had to request iUniverse send him a contract. The author was assigned numerous personal assistants and ‘[T]his caused unnecessary delays.’ But what is bizarre is that the very next line of the document states that the book was published in June 2009, two months later! It’s detail like this that can really blow a plaintiff’s allegations and legal arguments. How much quicker did James expect his book to be published? James’ book was full of formatting errors which were not in the final delivered manuscript. When James expressed his displeasure at these errors, he was informed that he would have to pay for any amendments. He chose to leave his book at it was. The following summer, with some reassurance from iUniverse, James decided to publish a second book with iUniverse (don’t ask!) since ‘he was unaware of any other self-publishing options’ and also decided to include an evaluation service. James ultimately felt that the evaluation service was nothing more than a tool for iUniverse to up-sell him more ASI services. Further delays ensued and James suspected that this was down to his reluctance to purchase any further iUniverse services. His second book was finally published in April 2011. It was also filled with errors not in the original manuscript. James also began to experience difficulties getting royalty payments from iUniverse for his first book despite knowing he had had sales. He terminated his contract with the company in March 2012. 

Jodi Foster has already recounted her experience publicly with iUniverse on Emily Suess’s blog in 2012. According to page 13 of the Class Action Complaint document: 

“Foster researched self-publishing her book with either Xlibris or iUniverse.”

[page 13] 

She decided against Xlibris as she wanted to avoid publishing with an ASI imprint, and decided to go with iUniverse. While I don’t want to be overly critical of an author carrying out research on self-publishing imprints, and I strongly advise authors to do thorough research, I do wonder just how much research Foster really did carry out. However, that is not a grounds for a publishing service not delivering on what it is contracted to do. Like James, Foster agreed to purchase a publishing package over the phone from iUniverse. Her contract was emailed to her and she accepted the terms in July 2010. She also purchased an editorial evaluation and, like author James, received an identical word-for-word result, recommending additional services, with the proviso that her book would then be awarded the Editor’s Choice and be submitted for inclusion in iUniverse’s Rising Star program. Foster went ahead with the additional editing services on the condition that her book would be already on sale before Halloween 2011. Foster then discovered that inclusion in the Rising Star program would mean she would have to purchase additional marketing services to retain this status. In August 2011 Foster was informed that while her book would be sent to print on September 1st, it would not be available for sale for eight weeks. Foster noticed grammar and formatting errors in her book which her editing services should have eliminated. 
What the document and account of Foster’s experience at this stage in the process does not explain is if the author was sent final proofs for sign off. Foster concluded soon after a six-week period that the marketing services she had purchased were worthless, ‘such as radio interviews and media coverage.’ She received a refund for the additional marketing services in March 2012. Foster also noticed anomalies in her royalty statements and questioned them. She was refunded $20 for these anomalies. Foster’s book created ‘significant local media attention’ and garnered interest from The SciFi Channel with the view to making a docudrama. She maintains this was as a result of her own marketing efforts and when she informed iUniverse of TV interest, ‘they did not act on it.’ She later demanded a full refund but this was declined. She terminated her contract in June 2012. 
The final named plaintiff is Terry Hardy. He published three books through AuthorHouse between 2010 and 2012. Unlike the other two plaintiffs, Hardy provided his books as PDF’s intending them not to be altered. He states he never received a copy of his publishing agreement for his third book, but one is available on his AuthorHouse account. Hardy also states that he ‘did not experience any major difficulties with his first two books.’ He did experience problems with collecting royalties on his third published book. His book achieved Amazon bestseller list status in 2012 and by March 2013 AuthorHouse had still not accounted correctly for sales and paid Hardy royalties. 
On page 22 of the document, listed (a-m), the allegations made against the defendants and the considerations for the court are detailed, from misleading or deceiving plaintiffs and customers through its services; how the defendants represent, sponsor and affiliate services; cause injury through deceptive conduct; whether defendants can retain money paid for those services; whether the plaintiffs have suffered damages; whether actions of defendants prevented plaintiffs benefiting; whether breach of contract has occurred if defendants failed to pay royalties; and whether defendants violated California Unfair Competition Law, California Business and Professions Code and New York General Business Law. 
Much of the rest of the Class Action Complaint covers the parameters of the class action and the counts of the action under breach of contract, unjust enrichment, and the possible infringements under California and New York laws [pages 24-32]. 
The document finally requests the court to uphold the action as a class action, order the defendants to release the publication rights to the plaintiffs and class action members, that the court award ‘compensatory damages’ in excess of $5,000,000 to plaintiffs and class action members, and that the plaintiffs recover fees for services and the costs and expenses of the suit pre- and post judgements, further relief as determined by the court, as well as attorney fees.  
While this is a substantive document, I would have actually expected it to include a lot more detail, and my early concern for the three plaintiffs is whether GSAS can provide the considerable evidence and testimony needed to prove many of the allegations. I’m also unconvinced from reading the document that GSAS has the substantial experience to deliver a case in this specific area when I look at the language used and several contradictions in statements. It also remains to be seen if Judge Cote will uphold it as a class action suit and whether the case will actually be heard in New York. The biggest challenge might actually be convincing a court that ASI and its many imprints do actually operate as a publisher. 
Significantly, but perhaps understandably, Penguin may be named as a joint defendant, but beyond the introductory notes get little mention in this suit and I suspect their real role will be bankrolling a team of lawyers whatever the outcome. This really is all about ASI and its two primary self-publishing imprints, AuthorHouse and iUniverse. 
The suit is certainly audacious and provided it does have its time and is aired fully in court, it could have implications for self-publishing providers and how they market services, certainly in the USA, whatever the outcome. I’ve long championed the need for some kind of independent body to both police, recommend and arbitrate specifically for the self-publishing service sector—authors and providers. Right now, if an author falls foul of a service provider, he/she is caught between stools. Many national and global author guilds and associations are unwilling to acknowledge service providers as ’publishers’ or books published via a self-publishing as a proper credit. The organisations prepared to advise and be supportive of self-published authors experiencing difficulties simply don’t have the resources to deal with every case. This case looks like throwing up the same arguments that have afflicted disputes between service providers and authors for years—is it an issue under publishing rights, or is it a quality of service issue under consumer rights law? On balance, I’d suggest it is the latter, simply because I believe the industry as a whole is becoming service-driven. 
While I think the cost of damages at $5,000,000 is excessive, Penguin may be ruing the real cost of $116 million when it parent Pearson took a punt on ASI as a way of moving into the author service sector and raise revenue. Many observers hoped that Pearson/Penguin would improve the practices at ASI and it might in the long term prove to be an asset. That was an opportunity missed a year ago and it might just be one of Andrew Philips’ biggest tasks over the coming months, before, and if a date is set for this case. What those same observers won’t want to hear in the coming months is Penguin stand on the sideline and decry, ‘but guv’nah, we knew nothing of all this.’ 
I’m also interested as to how much latitude will be given to all parties in this case. On more than one occasion, reading this suit, I wondered why there wasn’t more of a once bitten, twice shy view taken by the authors. But when you are up again the slick marketing machinery of ASI, out to sell dreams to authors at any cost, it is easier said than done. 
Someone in the publishing industry once remarked to me that ‘most authors are dumb about publishing.’ And he was talking about authors with traditional publishers! ‘Remember, if you hire a plumber to fix a leak, that plumber already knows you probably know shit about plumbing.’

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