On January 22, 2021, class claims were filed in federal court in the Southern District of New York, against textbook giant McGraw Hill LLC, by a group of McGraw Hill authors who allege that the company breached its contract with contributing authors by reducing royalties when it sells their textbooks in an electronic format.
In the complaint, plaintiffs Sean Flynn, Dean Karlan and Jonathan Morduch, all contributing academic authors for McGraw Hill textbooks, assert that the defendant’s business model involves publishing agreements under which the authors agree to produce academic textbooks and transfer the related copyrights to McGraw Hill. McGraw Hill subsequently agrees to publish and sell the textbook, paying the authors a per-sale percentage royalty. These contracts are referred to as royalty contracts.
The complaint describes that, beginning in 2009, the defendant noted that more students and teachers began to show a preference for electronic platforms over traditional paper books. Therefore, McGraw Hill launched an online platform called Connect, which it used to distribute textbooks online.
Until recently, the defendant continued to abide by the terms of its royalty contracts and paid author royalties on the entire sale price of textbooks sold as a single unit, with access to the Connect platform. However, the plaintiffs allege, the defendant unilaterally decided that it would only pay the contractually required royalties on what it now claims is the “textbook” portion of sale prices and not on what it asserts is the “Connect access” portion of textbook costs.
Further, the complaint argued, the defendant has stated it will pay a reduced royalty on what it deems the “online course material” portion of the sale. Plaintiffs claim that the defendant’s actions are a transparent attempt to pass its Connect related costs to authors, in direct contravention of its author contracts which state that McGraw Hill will publish authors’ works at its own expense. The complaint speculates that the defendant’s actions have resulted in an estimated 25% to 35% reduction in royalties paid to authors, which many contributing authors rely upon to supplement their income.
The plaintiffs are seeking to represent a class made up of all persons or entities who have entered into a royalty contract with McGraw Hill in the U.S., whose books are currently sold on the Connect platform and who have been harmed by McGraw Hill’s reduction of royalties on sales of Connect-platform textbooks. The suit brings causes of action for breach of contract and breach of the duty of good faith and fair dealing.
The case is: Flynn et al. v McGraw Hill LLC, Case No.: 1:21-cv-00614, in the U.S. District Court for the Southern District of New York.
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