Erotica Publisher Sues Blogger For Exposing Its Financial Problems

from the because-suing-ALWAYS-WORKS dept

"Erotic romance" publisher Ellora's Cave doesn't like the way a certain writer has portrayed its business woes. Rather than attempt to address the theories advanced by Jane Litte at Dear Author, Ellora's Cave has decided to sue her for defamation.

Ellora's Cave has a problem with the post Jane Litte published Sept. 14th, entitled "The Curious Case of Ellora's Cave." In it, Litte questions the financial stability of EC. As she notes, EC is a powerhouse publisher in the erotic fiction world but its growth seems to have slumped at a time when it should have been expanding.

As the world began to catch on to digital books and the Kindle was launched creating a second wave ebook revolution, Ellora’s Cave seemed poised to launch itself into publishing super stardom. It had thousands of backlist titles and it had launched many of the bestselling authors today–Bella Andre, Lora Leigh, Christine Warren, Beth Kery, Lauren Dane, Jaci Burton, to name a few.

Yet something strange happened. Growth stagnated. In 2010, it was revealed that EC’s revenues were $5 million but a reported $6.7 million in 2006. How on earth was a digital publisher’s income declining in the biggest boom period of digital books?
Litte entertains a few theories.
Word of [Ellora's Cave co-founder Tine] Engler’s increasingly erratic behavior surfaced on odd places on the internet and then came the lawsuits. In 2008, former employee Christina Brashears iled suit for unpaid monies against EC. EC countersued. Brashears, Publisher and Chief Operating Officer, left and formed Samhain. Bad blood existed which culminated with EC agreeing to a settlement of undisclosed amount. The damages were alleged to be in the high six figures to low seven figures. EC’s behavior during this lawsuit was so egregious, the judge commented on it in his ruling ordering damages to be paid to Brashears...

In the Brashears lawsuit, EC was accused of inappropriately diverting funds to Tina Engler through overpayment of rent. In 2009, the prevailing market rent for the space EC was occupying in Akron Ohio was around $40K but EC was paying Engler close to $100K per month. EC was providing loans to various officers at no interest and there was no indication those loans were ever repaid.
Emails to EC authors seem to confirm the bad news. Ellora's Cave is struggling. Some authors have reported late or completely missing royalty payments. EC is now saying that no partial work will be paid for and has shut down its authors' portal where writers (but only a certain number of them) could check on royalty payments.

The most damning evidence that something's wrong at Ellora's Cave comes in the form of public records. According to Litte, these documents show that Tina Engler (the EC founder who had been receiving the allegedly diverted funds mentioned above) has had a tax lien placed against her by the state of Ohio for 5 of the last 6 years, ranging from $26,000 to $105,000 (nearly $400,000 total to this point).

The lawsuit filed against Jane Litte claims (of course) that none of Litte's allegations are true and that the post itself is libelous. [PDF link] It mainly has a problem with this paragraph, which encapsulates most of the claims it refutes.
A report from Ohio business record places Ellora’s Cave revenues at $15 million last year. So why is it that tax liens go unpaid as well as the salaries or royalties of creative individuals? It is unknown but it sounds like the money is being mismanaged at best and improperly diverted at worst.

What’s the result? Many people believe that EC will close its doors before the summer is over but at least by the end of the year. If it enters bankruptcy, author’s intellectual property rights are part of the estate and can be sold off to the highest bidder.
EC's attempt to stifle criticism (the suit asks for $25k in damages as well as a permanent injunction prohibiting Litte from publishing any further "libelous" content as well as demanding the removal of her Sept. 14th post. Litte has chosen to fight back, gaining not only the support of many authors and bloggers, but the valuable legal assistance of a name familiar to Techdirt readers.
Jane Litte, the pseudonymous editor of Dear Author, announced this morning that she had hired the big guns to defend her in this lawsuit, noting that:

"she has retained the services of Marc Randazza, and he and an Ohio colleague will provide the defense in this case. You can find out more about Randazza at his firm’s website, and in this piece at Popehat, Marc Randazza: First Amendment Badass."
That's possibly the worst news anyone filing a dubious defamation suit could hope to receive. Now EC will have to face Randazza on top of possibly having to do something it clearly doesn't want to: turn over its financial records.

As Litte noted above, a previous lawsuit filed against EC over owed monies resulted in a judicial smackdown of Tina Engler and her various legal representatives -- specifically related to their failure to produce requested information.
EC refused to give up documents such as tax returns and ledgers during the litigation.   The failure to respond the request for documents impaired Brashear’s ability to proceed with her claim.   EC blamed it on their first lawyer who they fired.   EC retained new counsel but the pattern of delay and duck continued.   Brashear filed a motion for sanctions (a request asking the court to punish EC for its delinquent behavior).   The court granted the motion after EC and its counsel failed to show up for a hearing.   EC asked the court to set aside the sanction and promised it would deliver the documents requested by Brashear.   EC never did.
The judge had this to say after both defendants and their new attorney failed to materialize for the hearing.
Defendants willfully evaded the production of discovery, resulting in unnecessary delays of this case and increased legal fees.   Defendants’ actions in this case have crossed the line from a zealous defense to malingering, malfeasance, sabotage and delay.
If Ellora's Cave wishes to demonstrate that Litte's claims are libelous (most of which appear to be delivered as opinions rather than statements of fact), it will have to present documentation of its royalty payments, as well as some detailing of Engler's discretionary spending. It wasn't interested in turning these documents over in 2009. There's no reason to believe (especially considering the ongoing tax liens against Engler) it's any more interested in doing so now.

This suit, despite being fairly articulate about what it disputes, still looks like an attempt to silence criticism. If Ellora's Cave wanted to take Litte to court over speculations about financial mismanagement, it had several opportunities to do so in the past. Litte's coverage of the 2009 lawsuit uses the same Forbes stats as her recent post and asks the same question: why is Ellora's Cave struggling at a time when it should be showing record growth? This 2010 post also speculated that EC didn't have the cash on hand to pay damages, much less pay the funds contractually obligated to the complainant. The only new wrinkles here are the questions about EC owner Tina Engler's spending habits and the (documented) tax liens against her. Given the fact that EC likes to withhold documentation, it probably the last part being made public (so to speak -- tax liens are public records) that irks Engler the most.

In asking for damages to be awarded, the lawsuit claims that this post is harming its relationship with its current writers and damaging its future earnings by warning authors away. Undoubtedly this is true, but a business owner with a half-decade of high-dollar tax liens would warn them away just as well, even without Litte's additional research and commentary. You can withhold royalties indefinitely (give or take a lawsuit) but you can't hold out on the government. If you do, your business is repo'ed and auctioned. and the slight possibility of this happening means authors' copyrights could end up in the hands of someone who feels even less obliged to pay off owed royalties, if they're even obligated to pay them at all. Those who were happy with EC may find themselves working for someone they don't like, but will be able to do very little about it.

Another troubling aspect of the lawsuit is the request to unmask anonymous commenters, delivered by this slightly ominous sentence.
Additionally, Plaintiff request that Defendants disclose the name of the anonymous commenters on the blog so that the spreading of the defamatory content can be stopped.
Not only is this request another attack on speech, but it's unlikely to do anything more than subject other people to EC's litigious efforts. The "spreading" has already begun and getting a list of commenters' names isn't going to change that. EC's decision to sue has already caused more harm to its reputation than Litte's post could have done on its own. The news that EC wants to target commenters will only generate even more negative coverage.


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  • identicon
    stryx, 8 Oct 2014 @ 10:35am

    New Law Firm

    Malingering, Malfeasance, Sabotage and Delay

    Seriously though, does Ellora's Cave want malingering, malfeasance, sabotage and delay to be the search string that get the Streisand Effect?

    Can you imagine Ellora's Cave malingering, malfeasance, sabotage and delay being the first return?

    Especially if authors want to make money writing for Ellora's Cave and malingering, malfeasance, sabotage and delay are what they learn!

    reply to this | link to this | view in chronology ]

    • identicon
      Stuart Gray, 8 Oct 2014 @ 1:26pm

      Re: New Law Firm

      Malingering, malfeasance, sabotage? In relation to Ellora's Cave? I doubt that when searching for Ellora's Cave that "malingering, malfeasance, sabotage" will ever come up.
      Long shot that is.

      reply to this | link to this | view in chronology ]

  • icon
    OldMugwump (profile), 8 Oct 2014 @ 10:37am

    Legal sanctions?

    Aren't there supposed to be some kind of penalties imposed by a court for filing meritless lawsuits obviously intended to simply harass the defendant, without making any valid claims of harm?

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 8 Oct 2014 @ 11:07am

      Re: Legal sanctions?

      That would be what are generally referred to as Anti-SLAPP laws, and they vary widely from state to state. No idea how strong they are in the state in the current suit. But you can be certain that Randazza will know. If this is happening in a state with a strong enough Anti-SLAPP law, you can expect a motion on that basis fairly quickly.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 9 Oct 2014 @ 5:55am

        Re: Re: Legal sanctions?

        We really need the Anti-SLAPP laws to be at the federal level. No venue shopping your way around them.

        reply to this | link to this | view in chronology ]

    • identicon
      Kriss, 10 Oct 2014 @ 6:48pm

      Re: Legal sanctions?

      Not in that state. It is a state by state basis.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 8 Oct 2014 @ 11:47am

    Randazza again?

    That's worrying. How many more lawsuits can he take before he gets overstretched dealing with them all?

    Have enough of them wrapped up that he can take new ones?

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 8 Oct 2014 @ 1:20pm

      Re: Randazza again?

      Depending on the suit, he may be able to handle quite a few, for several reasons. First, given the long delays between hearings in some cases, he may have down time on a given case while waiting for the other party to answer a motion or the judge to rule on a motion. Second, depending on how he does business (and likely subject to the agreement of his clients), he may not need to do all the work personally. For example, he could ask one or more paralegals to find and summarize all cases satisfying criteria that he thinks make those cases like this one. Once the paralegal delivers the summary, he can write up a brief for this case. With a good paralegal, good criteria, and a decent index of the cases, that could move much of the time consuming drudgery off him, while still fully applying his expertise (by having him identify what makes cases similar and having him decide which points to make in the brief). Clients pay for results, so most would not be too picky if he delegates drudge work to a competent assistant.

      reply to this | link to this | view in chronology ]

  • identicon
    AmalieB, 8 Oct 2014 @ 11:56am

    Anti-SLAPP

    Apparently, no Anti-SLAPP in Ohio. Alas.

    reply to this | link to this | view in chronology ]

  • identicon
    Deirdre Saoirse Moen, 8 Oct 2014 @ 11:58am

    More Analysis of the Request to Out Anonymous Commenters

    I go into deeper analysis of the request to out anonymous commenters here:

    http://deirdre.net/on-elloras-caves-request-to-out-anonymous-commenters/

    (this is pretty dense legal stuff, but there is some genuine humor in there, plus I threw in an unrelated funny ruling just to lighten the mood)

    reply to this | link to this | view in chronology ]

  • identicon
    Sarah, 8 Oct 2014 @ 3:55pm

    Ohio courts have a history of turning over commenter information when requested. The state's laws do not cover bloggers or consider them journalists.

    This lawsuit is bogus, but unfortunately Engler and co. are likely to get what they want from it--the names of the people who spoke out against them.

    reply to this | link to this | view in chronology ]

  • identicon
    Kaetrin, 8 Oct 2014 @ 5:43pm

    Do you think you might redact Jane's real name and address from your posting of the court documents? I know they are public documents but one of the purposes of the litigation (IN MY OPINION, Ms. Engler) was to doxx Jane and reposting the document in full only adds to that.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 8 Oct 2014 @ 8:03pm

    So a producer of adult content sues a blogger because they felt hurt?

    Anyone else thinks this sounds familiar?

    reply to this | link to this | view in chronology ]

  • identicon
    Deirdre Saoirse Moen, 8 Oct 2014 @ 9:03pm

    It's funnier than you think, AC.

    A producer of adult content, quite a bit of which is BDSM erotic romance, sues a blogger because they felt hurt.

    reply to this | link to this | view in chronology ]

  • identicon
    Kriss, 10 Oct 2014 @ 6:53pm

    what does content have anything to do with the suit?

    What the publisher was publishing has nothing to do with this. It is the actions of said publisher that do. EC was a launching point to so many women in the industry and now many of them are having so many financial problems it is not funny. I have five friends currently awaiting money, two were evicted as of the end of September. They are best selling romance and erotica authors who depend on their paychecks. This is NOT a hobby, this is livelihood. One is now living in her mother's basement with her two kids which she is raising on her own. EC allowed her the financial means to leave an abusive husband. So, do I find it funny? No, I find the genre being, again of absolutely no value or significance in this. We also are not talking trump change, we are talking tens of thousands these women are owed.

    reply to this | link to this | view in chronology ]

  • identicon
    BJK, 13 Oct 2014 @ 2:37pm

    I am confused. In your post there is a quote from Dear Author that says:

    "In 2010, it was revealed that EC’s revenues were $5 million but a reported $6.7 million in 2006."

    Then, later in your post it says:

    "A report from Ohio business record places Ellora’s Cave revenues at $15 million last year."

    There seems to be an inconsistency here in what is being claimed by Dear Author...if EC had revenue of $5M in 2010 and $15M in 2013, sounds like sales were improving for EC, not declining. Also, were these numbers total revenue? Or revenue after expenses? That makes a difference. Revenue after expenses could indicate in 2010 that EC perhaps spent more on advertising or expanding the business in some other way, that made a temporary hit on overall income. To rebound from $5M to $15M in only a few years tells me that might have been the case.

    I am loathe to jump on board with those who believe EC has a problem financially when I see a $10M increase in sales from 2010 to 2013. EC has hundreds of authors...how many are claiming to be unpaid? Just wondering.

    I just sit back and watch. It is an interesting case. Not sure who is in the right here...if a blogger stirs of fear of bankruptcy when none is likely, and causes financial harm to that company, what does that company do? I find it interesting that Dear Author may be causing the financial problems NOW (authors scared and jumping ship, people encouraging readers not to buy EC books, etc.) that they claimed THEN. Hmm....

    reply to this | link to this | view in chronology ]

  • identicon
    Chloe, 17 Oct 2014 @ 12:44pm

    Inform Thyself

    BJK, Jane's piece alone doesn't go into every microscopic detail but it lays out enough to answer your questions.

    EC's revenue in 2010 was its total revenue and the reason it was notable was because it was shockingly low given the new market for ebooks. There's been discussion as long as four years ago that EC grossly overprices its books and missed Amazon's market.

    Their total revenue increased over the next four years largely on the back of a few big authors (Laurann Dohner is one). They have around 800 authors and sales of ebooks have gone through the roof. It should have increased. However. As Jane pointed out and the crux of her piece is, revenue has seemingly dropped significantly. How and where did it go is in contention.

    There are no specific numbers when it comes to who has and hasn't gotten paid because authors, editors and cover artists have been afraid to speak out.

    DA has never been the lone voice reporting on EC's financial issues but Engler decided to take them on for personal punitive reasons. It would take me hours to go back and pull up links to reports about EC. The comment sections alone are a gold mine of background information.

    Passive Voice, Absolute Write, Writer Beware, Karen Knows Best, Barry Eisler and SmartB*tches (replace the * with an i) are good places to start your search.

    reply to this | link to this | view in chronology ]

    • identicon
      BJK, 20 Oct 2014 @ 10:30am

      Re: Inform Thyself

      You are only speculating that the reason 2013's sales increased were due to a 'few big authors.' We don't know the truth is, really. It is all speculation. Still, would a company be on the verge of bankruptcy if their sales increased almost 3x since 2010? I just am skeptical, and I do think it was not smart of Dear Author to go off the rails and act as if this was imminent with no real proof--I mean, they went so far as to start discussing what authors will need to look out for in case of bankruptcy and what might happen to their contracts. Seemed extreme to me when I read it.

      I saw this same exact speculation (I believe it was Dear Author) occur a few years ago about the smaller erotic publisher, Cobblestone Press. Communication was poor, authors were leaving, etc., but yet Cobblestone Press is still around and publishing books. I just don't think it was smart for Dear Author to freak people out.

      Just my opinion. Interested to see what happens at the first hearing on the 27th. It should all start to shake out from there and we can then really decide what is going on.

      reply to this | link to this | view in chronology ]

  • identicon
    tax lawyer toronto, 21 Oct 2014 @ 7:36pm

    tax lawyer toronto

    In times we need a lawyer regarding to our business to operate it called tax lawyer theyre the one to help people to process all the things needed to run a business. tax lawyer toronto

    reply to this | link to this | view in chronology ]


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