Last week, Federal Judge Denise Cote approved a class action settlement agreement in which Apple may begin paying $400 million dollars to as many as 23 million consumers. The suit regarded antitrust law violations that it committed when it conspired to raise e-book prices with book publishers.

According to Publishers Weekly, the settlement terms are as follows:

Apple will pay $400 million to consumers only if the liability finding survives the appeal process; it will pay $50 million if the liability question is vacated or remanded for further proceedings. If the liability finding is reversed on appeal, Apple will pay nothing.

The actions that precipitated the lawsuit started a few years ago. Before 2010, the big-6 publishers (now the big-5 publishers since the Penguin-Random House merger) used the wholesale model to sell e-books. Under the wholesale model, publishers recommended a retail price to a wholesaler and sold the book to the wholesaler for a certain percentage off the publisher’s recommended retail price. The wholesaler then sold the book to the retailer, who set its own e-book prices. For example, a publisher could set a recommended retail price for a book of $15.99, sell the book to the wholesaler for a fifty percent discount of $7.99, and the retailer could then sell the book at $10.99.

Amazon then began selling e-books at $9.99, and publishers initially had trouble competing. In 2010, Apple convinced the big-6 publishers to change business models, and the publishers entered into the agency model. Under the agency model, publishers set the retail price  of an e-book and use retailers as agents to sell the e-book. The retailer then receives thirty percent of the sales price of the e-book, and the publisher receives the remaining seventy percent. For example, a publisher can set a retail e-book price at $15.99, and the retailer must sell the e-book at $15.99; however, the retailer receives thirty percent of the sales price, and the publisher receives the remaining seventy percent.

The Department of Justice soon accused five of the big-6 publishers and Apple of fixing e-book prices to thwart Amazon’s $9.99 e-book price, and the publishers and Apple were later found guilty of violating the Sherman Act. Penguin, Hachette Book Group, Macmillan, HarperCollins, and Simon and Schuster paid $75 million, $31 million, $25 million, $19 million, and $17 million in damages respectively to e-book consumers, for a grand total of roughly $167 million in damages.

The potential $400 million class action settlement with Apple is in addition to the $167 million paid in damages by the publishers, so all eyes in the publishing industry will be focused on the Second Circuit on when it hears Apple’s appeal on December 15..

This class action settlement comes at an interesting time in the book publishing industry.  As part of the original DOJ antitrust settlement, Hachette, HarperCollins, and Simon Schuster ended their contracts with e-book retailers like Amazon and allowed retailers to renegotiate the contracts. Moreover, the settlement allowed retailers to return to the wholesale model, and the three publishers also agreed to not interfere with price discounts for two years. Now, Hachette and Simon and Schuster have entered into separate agreements with Amazon concerning e-book prices.

Apple and the publishers are undoubtedly hoping for a reversal, but I don’t think that is likely.  We will just have to see what happens.

Joseph Perry

Joseph Perry is a graduate of St. John’s University School of Law whose goal is to become a publishing and media law attorney. He has interned at William Morris Endeavor, Rodale, Inc., Columbia University Press, and is currently interning at Hachette Book Group and volunteering at the Media Law Resource Center, which has given him insight into the legal aspects of the publishing and media industries. Contact Joe at staff@LawStreetMedia.com.

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This summer has been filled with celebrity defamation lawsuits, particularly against video game makers.  Early last month, Lindsay Lohan filed suit against the makers of Grand Theft Auto 5, Take-Two Interactive Software, Inc. and its subsidiary Rockstar Games, claiming that they used Lohan’s likeness without her permission.  Two weeks later, Panama dictator Manuel Noriega filed a legal action against Activision, the maker of Call of Duty: Black Opps II, also claiming that it used Noriega’s image without his permission.

Courtesy of [Chris Alcoran via Flickr]

The book publishing world also felt the sting of defamation lawsuits this summer brought by Hollywood starlet Scarlett Johansson and former Minnesota Governor Jesse Ventura.

In May 2013, Scarlett Johansson filed a libel lawsuit against French novelist Gregoire Delacourt for using Johansson’s name and image without her permission and for making false statements about her personal life in his best-selling French novel, The First Thing We Look At. The novel contains a scene in which the female protagonist, a French model who looks identical to Johansson, seeks the help of the lead male protagonist, a mechanic who mistakes the French model for Johansson. The character then has two affairs as Johansson, but her name is later revealed to be Jeanine Foucaprez. Johansson’s lawyer claimed that the two affairs that Jeanine had were untrue, and that the novel depicts Johansson as a sex object. Delacourte argued, however, that Jeanine was meant as a “tribute” to Johansson.

Courtesy of [pop torrent via Flickr]

Last month, a French court ruled in favor of Johansson and ordered Delacourt to pay damages in the amount of 2,500 euros (approximately $3,400) for his demeaning portrayal of Johansson.  Although Delacourte had to pay damages to Johansson, it seems that Delacourte’s publisher, J-C Lattes, won at the end of the day because the court denied Johansson’s attempt at an injunction to stop translations and film adaptations of the novel.  According to the Guardian, Emmanuelle Allibert of J-C Lattes said, “The book has already been translated into German and Italian and there has been interest in translating it into English, but publishers were waiting for the outcome of the case. Now we are open to offers.”

Across the pond in the United States, another defamation case unfolded this summer in federal district court in Minnesota, which book publishers took note of nationwide. Former Navy SEAL, pro wrestler, and Minnesota governor, Jesse Ventura, sued the estate of Chris Kyle for libel in Kyle’s book American Sniper: The Autobiography of the Most Lethal Sniper in U.S. Military History¸ published by HarperCollins. Kyle’s book contains a chapter entitled, “Punching Out Scuff Face,” which detailed a California bar fight that Kyle had with a celebrity in 2006. Ventura was not mentioned in the book, but Kyle said in interviews after HarperCollins published his book that Ventura was “Scruff Face.”  Ventura acknowledged that he was in the bar with Kyle but did not say that the Navy SEALS “deserved to lose a few,” nor did Kyle punch him in the face as Kyle alleged in his book. The district court in Minnesota favored Ventura and awarded him $1.8 million consisting of $500,000 for damages and $1.3 million for unjust enrichment.

Courtesy of Pesky Librarians via Flickr

Ventura’s award may be surprising due to the higher “actual malice” standard that public figures face in prevailing in libel actions throughout the United States. In libel lawsuits, public figures are placed in two categories: public figures and limited-purpose public figures. Public figures are people who are of great public interest (e.g., President Obama, Michael Jordan, Julia Roberts, etc.). Limited-purpose public figures are people who thrust themselves into a public issue or controversy to try to influence the resolution of that issue (e.g., guests brought on national news networks like MSNBC and Fox News to argue about ways to resolve various issues). In this case, being an ex-governor of Minnesota categorized Ventura as the former. Since Ventura was deemed a public figure, he had to prove that Kyle wrote false statements of fact about him that were made with “actual malice” (i.e.,  Kyle knew the statements he wrote were false, and Kyle deliberately or recklessly disregarded the false statements and published them anyway). Ultimately, the court believed that Ventura overcame the difficult “actual malice” burden of proof and awarded him damages.

The case isn’t quite over, however, as  on August 19, 2014, Kyle’s widow, Taya Kyle, filed a lawsuit in Dallas County Court against her attorney, Christopher Kirkpatrick, for malpractice. She claims that Kirkpatrick was negligent in his legal services and did not explain or disclose to the Kyles the various conflicts of interest that he had.

Ventura’s verdict is disconcerting to U.S. book publishers not only because of Ventura’s million dollar verdict, but because the lawsuit against Kyle’s estate could possibly have been avoided.   Publishers routinely tell authors to edit their respective manuscripts in order to avoid potential libel lawsuits (e.g., referring to Ventura by a different name, “Scruff,” and not mentioning Ventura’s name in the book). Kyle’s publisher, HarperCollins, likely did not bet on Kyle’s admission in an interview that “Scruff” was Ventura. Kyle’s confession serves as a warning to publishers that they cannot be too careful in fact checking and advising authors during the pre- and post-publication processes.

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Joseph Perry (@jperry325) is a 3L at St. John’s University whose goal is to become a publishing media law attorney. He has interned at William Morris Endeavor, Rodale, Inc., Columbia University Press, and is currently interning at Hachette Book Group and the Media Law Resource Center, which has given him insight into the legal aspects of the publishing and media industries.

Featured image courtesy of [Clyde Robinson via Flickr]

Joseph Perry

Joseph Perry is a graduate of St. John’s University School of Law whose goal is to become a publishing and media law attorney. He has interned at William Morris Endeavor, Rodale, Inc., Columbia University Press, and is currently interning at Hachette Book Group and volunteering at the Media Law Resource Center, which has given him insight into the legal aspects of the publishing and media industries. Contact Joe at staff@LawStreetMedia.com.

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