A proposed class action alleges McGraw Hill LLC has breached its contracts with authors by unilaterally reducing the royalties the writers are paid when the publisher sells their work, in particular on its textbook-focused online distribution platform Connect.
Despite its longstanding practice of paying royalties on the entirety of revenues received from textbooks sold on Connect, McGraw Hill has, in “direct contravention” of its contractual terms with authors, unilaterally decided to pay the contractually required royalties only on what the company claims to be the “textbook” portion of a book’s sale price, the 22-page lawsuit alleges.
McGraw Hill has thus chosen not to pay royalties on what it decides to be the “Connect access” portion of the sale of a textbook, the complaint says. Instead, McGraw Hill will pay only a reduced royalty on what it says is the “online course material” portion of a textbook’s sales, according to the suit.
As the lawsuit tells it, McGraw Hill’s conduct is meant to shift costs related to its Connect platform onto those who publish the works sold on that same platform.
“This maneuver amounts to a bald attempt by McGraw Hill to pass its Connect-related costs to authors, in direct contravention of its contracts, which state that McGraw Hill, founded in 1888, will publish the authors’ works ‘at its own expense,’” the plaintiffs, textbook authors from Nevada, Illinois and New Jersey, allege. “This is equivalent to reducing royalties for sales of paper textbooks based on McGraw Hill’s costs of printing those books, which would violate the explicit terms of the contracts.”
As students and educational institutions have increasingly come to prefer electronic platforms over paper, royalties on sales of electronic textbooks have become “a crucial component” of textbook authors’ overall income, the complaint begins. According to the lawsuit, the majority of authors whose textbooks are sold by McGraw Hill are academics who supplement the incomes they receive from educational institutions with royalties from their published works.
With the shift from paper to electronic textbook consumption, McGraw Hill launched in 2009 its “Connect” platform in order to distribute online textbooks, the suit says. Since Connect’s inception, McGraw Hill has, in accordance with its contracts with authors, paid royalties on the entire sale price of textbooks sold as a single unit with access to the Connect platform, the lawsuit relays. Per the case, electronic textbooks are elemental to Connect, through which teachers and students can access textbooks and course materials, complete assignments and track performance, in that they form the basis of the corresponding ancillary materials built around the texts themselves.
Around November 2020, however, McGraw Hill chose to split out how it pays authors for portions of their work the company considers to be the “textbook” and what it deems the “Connect access” portion of the product, the lawsuit says. According to the complaint, this change in how McGraw Hill calculates and pays royalties on Connect textbook sales amounts to not only a breach of the defendant’s contracts with textbook authors but a failure by the publisher to fulfill its duty of good faith and fair dealing.
“By artificially redefining the ‘price’ of authors’ work as only a fraction of the revenues McGraw Hill receives for the sale of those works, McGraw Hill has reduced the amounts on which royalty payments are due,” the complaint asserts. “In so doing, McGraw Hill has deprived authors of the benefit of their bargains with the Company.”
The plaintiffs estimate that McGraw Hill’s course reversal as far as paying contractually agreed-upon royalties will reduce payments to authors on sales of textbooks for use on Connect by 25 to 30 percent, what the suit calls a “significant blow to the academics who rely on those royalty payments to supplement their incomes.”
The lawsuit looks to cover all persons or entities who have entered into a royalty contract with McGraw Hill or any of its predecessors or successors in interest in the United States and whose books are currently sold on the Connect platform and who have been harmed by the defendant’s reduction of royalties on sales of Connect-platform textbooks.
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