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.

Filed Under: defamation, erotica, jane little, lawsuits, opinions, publisher, romance
Companies: ellora's cave