MANHATTAN (CN) - Romance writers suing Harlequin "nudged" their case "across the line from the conceivable to the plausible," the 2nd Circuit ruled Thursday.
The 13-page opinion breathes new life into a contract dispute that flat-lined
a little more than one year ago in the Southern District of New York.
In a July 2012 class action
, three Harlequin writers claimed that the world's largest romance novel publisher improperly passed their work to Swiss subsidiaries, Harlequin Books S.A. and Harlequin Enterprises B.V., "for tax purposes," even though these companies have no publishing functions.
This contracting relationship went on between 1990 and 2004, according to the complaint led by Barbara Keiler, who wrote "Blooming All Over" and "Right Place, Wrong Time."
The writers sought damages for breach of contract - a potentially large sum if the court had certified a class of more than 1,200 writers employed at Harlequin.
U.S. District Judge Harold Baer spurned the lawsuit last year, however, finding that the writers knew exactly what they were getting into.
"Plaintiffs assert that because [Harlequin Enterprises Limited] performed most publication duties and controlled the negotiation and administration of the contracts in all respects, the 'publisher' for the purposes of these contracts is HEL," Baer wrote. "But here, each contract states expressly that [Harlequin Books S.A.] will 'hereinafter [be] called the 'publisher.'"
Though a three-judge appellate panel agreed that the contract explained the relationship between the subsidiaries, it revived one count Thursday alleging that the subsidiaries entered into an unreasonable licensing-fee arrangement depleting the writers' take.
Although the District Court called that claim factually unsupported, the panel noted simply that they "disagree."
The writers "purported to have discovered a sublicense agreement between Harlequin Enterprises and another subsidiary, Harlequin Digital Sales Corporation, that showed a license rate of 40 percent of the cover price, significantly higher than the 6 to 8 percent license fee purportedly paid to Harlequin Switzerland," Judge Barrington Parker wrote for the court.
David Wolf, a lawyer for the writers, said in an interview: "We're very happy that the case is going to be continuing in the District Court."
Harlequin's spokeswoman did not return a request for comment by press time.