Cengage Learning Holding II, Inc. and Cengage Learning, Inc., the defendants in this case, are publishing companies; the plaintiff, Fred Kleiner, is an author. The complaint alleges that Cengage underpays Kleiner’s royalties by ten to thirty percent and thus calculates that Cengage owes authors $12 million to $18 million in underpaid royalties each year.
The class for this action is authors and successors-in-interest who have entered into publishing agreements with Cengage (or its predecessors-in-interest), contracted for the payment of royalties based on sales of their works, and received twice-a-year royalty statements from Cengage for the applicable time periods.
Kleiner had agreements with Cengage’s predecessor in interest, Wadsworth Publishing Company, including for the textbook Gardner’s Art Through the Ages: A Global History. Authors typically receive a percentage of 8-12% of net sales. The percentage can increase as the total number of books sold rises.
Because of new technology, Cengage’s model for sales has changed. It now offers Cengage Unlimited, in which students no longer buy single textbooks but pay a subscription fee per semester to have access to all of Cengage’s electronic offerings.
It has therefore devised a new model for calculating royalties. The complaint claims this involves assigning income to different revenue pools—for example, supplements, e-books, or print rentals related to the textbooks.
According to the complaint, the royalties paid to the author are calculated based on the author’s royalty rate, the number of uses of the book, and “the net price as a percentage of the total for each title and product type.”
The complaint alleges that Cengage does not tell authors how it allocates its fees among the Revenue Pools and does not tell them about other authors or specific works in each revenue pool. Cengage has also created courseware supplements, like the platform MindTap, which may provide homework, quizzes, tests, and other materials. The complaint alleges, “The supplemental materials are typically derivative of the author’s work.”
Cengage determines royalties based on its own subjective allocation of value to various materials, the complaint alleges, “thereby reducing the basis upon which the royalty percentage is paid.” The complaint claims, “Cengage does not pay any royalty on the balance of the MindTap sales revenue, which it has determined to be associated with its own contribution to the digital packaging and supplement.”
The statements given to authors, the complaint alleges, “are incomplete, confusing, and conceal from authors the information they need to reasonably determine whether their royalties have been paid based on fair and accurate calculations.”
Kleiner’s July to December 2020 statement is around 320 pages long, the complaint says, and is “largely incomprehensible without unique expertise in the publishing industry, and is at times completely illogical…” The complaint concludes it is impossible for Kleiner to know whether his royalty payments are accurate, and points to what seem to be obvious errors.
While some authors have engaged accounting and legal services to evaluate the statements, the complaint claims that Cengage is now refusing to give them adequate information.
Article Type: LawsuitTopic: Royalties
Most Recent Case Event
Cengage Learning Calculation of Textbook Author Royalties Complaint
February 14, 2022
Cengage Learning Holding II, Inc. and Cengage Learning, Inc., the defendants in this case, are publishing companies; the plaintiff, Fred Kleiner, is an author. The complaint alleges that Cengage underpays Kleiner’s royalties by ten to thirty percent and thus calculates that Cengage owes authors $12 million to $18 million in underpaid royalties each year.
Cengage Learning Calculation of Textbook Author Royalties ComplaintCase Event History
Cengage Learning Calculation of Textbook Author Royalties Complaint
February 14, 2022
Cengage Learning Holding II, Inc. and Cengage Learning, Inc., the defendants in this case, are publishing companies; the plaintiff, Fred Kleiner, is an author. The complaint alleges that Cengage underpays Kleiner’s royalties by ten to thirty percent and thus calculates that Cengage owes authors $12 million to $18 million in underpaid royalties each year.
Cengage Learning Calculation of Textbook Author Royalties Complaint