Wednesday, November 03, 2010

The Peter Lampack Agency Loses Suit Against Former Client

Posted by Victoria Strauss for Writer Beware

Publishers Weekly reports that a New York Supreme Court judge has dismissed most claims in The Peter Lampack Agency's suit against a former client, best selling mystery author Martha Grimes.

At the heart of the suit is the question of what commission rights an agency retains after a client leaves. Most author-agent agreements include language ensuring that the agency will continue to receive commissions on any contracts it brokers, for as long as those contracts are in force--even if the client leaves the agency before the contracts terminate--and on any sales resulting from its efforts prior to the client's departure, even if those sales post-date that departure. (So, for instance, if the agency pitches the client's manuscript to a publisher, and the publisher makes an offer after the client has left the agency, the agency is entitled to commissions if the client accepts the offer.)

So far, so standard. But some agencies go farther, claiming the right to commissions on any sale deriving from the original sale, whether or not the agency is responsible for the sale--for example, if the publisher retains and licenses book club rights or foreign rights. The agency may also claim commission rights on the sale of successor works--sequels, spinoffs, and the like. And some agencies claim perpetual representation rights--and therefore commissions--on any works they sell for the first time. This kind of provision, known as an interminable agency clause, in effect makes the agency the work's representative for the duration of copyright, and is strongly advised against by authors' groups.

In the case of the Lampack suit, the claim involves future works covered by a publishing contract's option clause. Says PW (with numerous typos that I've corrected),
The crux of the case revolves around the interpretation of the “option clause,” which is the de facto option agents often give to publishers who buy an author’s work—they grant the house the option to get first crack at the author’s next work. In this case, Penguin exercised its option from a 2005 contract in 2009...when Grimes’s next manuscript was ready—at that point Grimes had a new agent who sent the work, The Black Cat, to Penguin, which acquired the novel.

Lampack claimed that, since he was Grimes’s agent in 2005 when the option clause was initially issued on the work that was to become The Black Cat, he retained financial rights to proceeds from that book. As the court document notes: “PLA alleges the agreement for The Black Cat arose out of the Option on Next Work clause and that Grimes violated the terms of the 2005 Penguin/Viking-Penguin Agreement by refusing...to pay PLA the sums due for The Black Cat.”
The court didn't agree, holding that Lampack was entitled
only to proceeds from the sale of [Grimes's] literary works, and didn't have an interest in the literary works themselves, making it possible for Grimes to revoke Lampack's "agency" which she did in May 2007, thereby removing any obligation for Grimes to pay Lampack for future works. In addition, the court...[noted] that claims made by Lampack that the contract placed a fiduciary duty on Grimes "{are} unsupported by case law and the general principles of agency law that the obligations that a principal owes an agent are not fiduciary."
Now, I'm not a lawyer, and hopefully one will come along to correct me if I'm mistaken, but it seems pretty clear to me that this decision (if it stands--Lampack has made a motion to re-argue) has the potential to be precedent-setting. By ruling that Lampack had an interest only in the proceeds from sales of literary works, and not in those works themselves, the decision would seem not just to weaken agencies' claim to commission rights on successor sales (where those sales occur after the client leaves the agency), but to invalidate interminable agency clauses. There would also seem to be implications for the language of the agency clauses inserted into publishing contracts, where many agents claim an agency coupled with an interest (which presumes that the agent has some legal right to the property covered by the contract, rather than just to the income from the sale of that property).

It'll be interesting to see what impact this may have going forward. In the meantime, read your agency agreements carefully, be sure you understand exactly what commission rights your agent is claiming and how that affects you if you leave the agency, and beware interminable agency clauses.

Remember, also, that agency agreements are usually negotiable. If there's language that troubles you, your agent may be willing to soften or remove it.

6 comments:

S.M. Carrière said...

Some useful advice here. Thanks!

Jess Mowry said...

I'm still paying an agent 15% commission on the royalties from two novels I sold myself over ten years ago -- novels that she judged were "unsaleable" -- because she she was my agent at the time.

MarlaMiller said...

Interesting--don't know if you've heard of this one but my agent agreed to let me shop a project not suitable for her agency---when i asked about rights et al, she wasn't sure. Fortunately, I had a lawyer (hubby) so we made sure that the agency was out of the money loop should another agent sell my stuff--
What I learned from him was this: Lit contracts are well crafted to pay the 'house' first, (agent/publisher). Most writers can't navigate through the fine print...so writers should definitely beware...:)
Thanks for posting more good info.
marla

Laura Resnick said...

This is a very encouraging ruling! Quite a few writers have experienced an agent trying to claim a right to commission on a sale made after the client has left the agency. So the decision of this court needs to be well-publicized in the profession. I am also very eager to see what the broader ramifications may be, in terms of agents who try to claim a fidiuciary interest in a writer's work which goes beyond the life of the deal with and also beyond the life of the agent-author association.

Jaws said...

This is both less and more meaningful than it seems.

It is less meaningful than it seems because it does not, and cannot, invalidate perpetual agency clauses. It is, instead, limited to this particular transaction. It is persuasive authority, but it does not bind any other judge on the New York Supreme Court (ironically enough, the lowest court in the New York state court system), let alone a federal court or a court outside of New York. Further, since there has been a motion for reconsideration, one cannot even be sure that the same judge will not change his mind — let alone that this decision would withstand an appeal. (I believe that it should, both as a matter of general principle and of agency law, but I have not seen either the underlying contract or the briefs.)

It is more meaningful because it represents a willingness by the judge to consider the context of literary contracts, outside of their literal wording. Under a literal-wording-of-the-contract (also called "four corners") interpretation, I doubt that the judge could have found for Ms Grimes; the wording is probably not ambiguous enough to allow him to bring in the notion of "prohibited transactions" that seems to be at the root of his interpretation. New York state-court judges have been notoriously resistant to recognizing that contracts do not exist in a vacuum, so this marks some progress that can only be to authors' advantage.

J. T. Shea said...

There does not appear to have been any interminable agency clause, nor indeed any written author/agent agreement. Lampack appears to be simply claiming ANY option clause is effectively an interminable agency clause for any agent. Incidentally, he sued Penguin as well as Martha Grimes.

If this bizarre claim succeeded, its ironic effect would be to discourage any author from agreeing to the exercise of any option where the author had changed agents, hence defeating the whole purpose of options from the publisher's perspective.

Lampack does not appear to have sued Grimes' current agent. It would be interesting to speculate how many of Lampack's clients could be sued by previous agents, using Lampack's arguments!