Do the bankruptcy laws abuse authors’ rights?

Q. The bankruptcy of Triskelion Enterprises, LLC, to which I had sold a romance, has brought to light an outrageous abuse of authors’ rights by federal bankruptcy judges. Many publishing contracts—I’ve sold eighty novels, so I’m very familiar with these– include a clause stating that, in the event of the publisher’s bankruptcy, all rights in the contracted work revert to the author. I discovered that bankruptcy judges routinely void this clause and allow the trustee to sell our contracts, en masse, to the highest bidder. Their rationale is that bankruptcies are adjudicated under federal law, whereas contracts are governed by state law, and federal bankruptcy law takes precedence. Thus, in addition to losing the money due us from royalties, authors are stripped of creative control over our books. This could happen to any author, with any publisher, as well as to composers, lyricists and illustrators. We get no say over who buys these contracts, and there is no guarantee this will even be a legitimate publisher. One can easily imagine situations in which our work would be distorted and our reputations harmed. This is a situation that can only be rectified by an act of Congress, and I urge everyone to write his or her senators and congressperson urging that they sponsor a bill barring bankruptcy judges from voiding these contract clauses.

A. Although I understand your annoyance and share your dismay that the termination clause is unenforceable as a matter of law, I disagree with several of the underlying assumptions of your letter.

  1. Judges are not negating the provision of their own accord but are applying basic constitutional principles. Bankruptcy, like the First Amendment, is a right that is guaranteed by the United States Constitution (Article 1, Section 8). There are many examples where federal law trumps state law (civil rights, New Deal legislation, gun control, abortion, auto gas emission limits). To argue against this requires an argument based on some other constitutional principle rather than a dislike of the result. I don’t see that other constitutional principle here.
  2. Courts are not discriminating against authors or other creative individuals when they rule that the typical termination clause in publishing agreements is unenforceable in a bankruptcy proceeding. Similar clauses exist in many contracts that do not involve publishing companies or creative individuals and, with limited exceptions, those contracts are not permitted to automatically terminate either. Lacking this discrimination or another appropriate reason (see point 5 below), I see no valid reason why we as authors should seek special treatment.
  3. Your concern that authors have no say over who buys their contracts ignores the fact that authors do have the right to present their views to the bankruptcy court in the same manner as others who have contracts with the bankrupt company, even though it is a right that few avail themselves of. Your concern that authors’ works could be distorted by the acquiring company overlooks the fact that it is legally bound by your contract’s provisions in the same way that the original publisher was; thus you have the same rights against the new company as you had against the old in the event it distorts your work or otherwise breaches your contract.
  4. I fail to understand how you lose creative control over your books. Your book has either been published already or not. If it has been, there is no creative control left to be had. And if it hasn’t been, you have two options: you can return your advance and not deliver the final manuscript (if you don’t like the new publisher) or you can hold the new publisher to the provisions all authors should have in their contracts that prohibit the publisher from making changes in your manuscript (with certain limited, specified exceptions) without your consent.
  5. I’m not unsympathetic to the difficulty that the ordinary author has in obtaining proper legal representation in a legal proceeding and being able to afford top-notch (or any other) counsel. But these are problems that most citizens have every day in legal proceedings of virtually every type and is not peculiar to our situation as authors. For us to argue for a special privilege simply because we are writers is without doubt appropriate in certain situations (such as censorship, journalist “shield” laws and the like), but I don’t consider our losing money or property because we entered into a business transaction with a company that ended up in financial difficulty to be among them.

Thanks to Gayle Ehrlich of Sullivan & Worcester LLP, Boston, Massachusetts, for her advice concerning federal bankruptcy law. Please note the more detailed discussion of bankruptcy law and author-publisher contracts in my column in the Summer 2006 issue of the Bulletin.

(Originally published in the Fall 2007 issue of the Authors Guild Bulletin. © Mark L. Levine)

Answers to questions on this site are general in nature only. You should consult a lawyer for information about a particular situation. For more information about book publishing contracts and issues, see Levine’s book.

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