Wednesday, July 18, 2012

Don’t Capitulate, Litigate!

Matthew Swihart, Esq.

If you’ve been keeping up, you’ll realize our basic contract class is almost over. We’ve discussed what a contract is and when and how to revise a contract Now you’ve got your agent and publisher, you’ve got your contracts, and you’ve possibly even revised one or more of them.

But, you’re about to be screwed. Why? Because someone is going to breach their contract. Why? Well, I’m not a mind-reader, but my guess is because they are greedy, or stupid, or didn’t read the contract their attorneys drafted, or didn’t think you would mind (read: didn’t think you would catch on). Why? Because I’m the one writing this and it’s my fictional situation, so just go with it and stop asking “Why?” all the time.

So now you’re angry. Livid. And your ire is bolstered and supported by all your Facebook friends and fellow authors who know nothing about the law but are stepping on themselves to tell you all about your rights. You want to scream. You worked so hard for this, and now that greedy publisher/selfish agent/stupid co-author is messing with your dream. Your life’s work is being flushed down the toilet, and you must do something about it or lose everything in a swirl of blue water and bullshit.

But what to do? Time for another non-mathematical formula:

K + B + D + ØΔ = $/SP

The formula above represents the legal concept that in order to support a breach of contract claim, you must have: a valid contract (K), plus a breach of the contract by the other person/entity (B), plus damages to you (D), and no defenses (ØΔ). If you succeed in a breach of contract claim, you will be entitled to recover your financial damages, often including attorneys fees and costs ($), and possibly specific performance of the contract by the breaching party (SP).

But before we jump into the courtroom, there are some things you’ll want to do and consider:

First, and I know I’m beating a drum here, but it’s important: consult an attorney. An attorney will help you understand if they’ve breached the contract in an actionable way (called a “material” breach of the contract), or if they’ve breached it in a way that doesn’t give rise to a lawsuit (this will most commonly be the case if there were no legal or financial damages incurred by you resulting from the breach).

Next, you’ll want to try to resolve the matter without litigation. If you’ve consulted an attorney and he determines you have a colorable breach of contract claim, then he will draft and send out what is called a demand letter. You may have already done this on your own, if you ever called or wrote to the person who breached the contract. The letter simply states what provision(s) of the contract they breached, how they breached it, why this caused you injury, and what they can do to fix the breach without getting the courts involved. This letter is a way to attempt to preserve whatever relationship you have with the other party, and avoid the time and expense of litigation.

If you’ve already written your own demand letter, this is good, but your attorney will want to write another, to let the other party know you’ve “lawyered up”, and are serious about wanting them to correct the breach. In this case, take your letter and any responses to your attorney—and never delete or throw away anything related to your contracts or business arrangements. The thing you think unimportant may mean the difference between winning and losing your case.

For example, your demand letter may look something like this:

Dear Patty Publisher:

As you are aware, paragraph 43 of our publishing contract requires you to give me the option to review and approve the cover art and typeface of my book, “Kitten Tales: Stories of cute kittens and their cuter antics”. However, without my approval, you selected as cover art a stock photograph of kittens. I’ll have you know, my 4 year-old is deathly afraid of those demonic little puffs of fur and fangs, and will be severely emotionally traumatized if he has to go with me to book signings and be witness to marketing materials involving those furniture-destroying piss machines. This is why I insisted on this provision of the contract. Please change the cover art to something without kittens, such as a baby seal or an orangutan.


Amy Author

Post Script: While I find the typeface you selected, Blackletter686 BT, difficult to read, I’m okay with this choice, as I’m a bad writer and was hoping people would buy the book based upon the title and cover as gifts, and not actually read it. Thanks.

The letter from your attorney will be much more forceful, and have a deadline for a response.

In response to one or both of the demand letters, the other party will provide a response in writing (most likely through their attorney), and with luck, a dialogue will ensue which will hopefully result in an amicable resolution of the issue. By “amicable resolution”, I mean both parties will compromise in order to move forward with the project, not “I get everything I want because I felt offended and sent a letter.”

If no amicable resolution can be reached, then your attorney will file suit on your behalf.

Before you jump into a lawsuit, know it will be very costly. Remember contract attorneys charge by the hour, and usually somewhere between $185.00 and $500.00 per hour, depending upon the case and the attorney’s experience. Some work will be done by the paralegal or legal secretary, and their hourly rate will be significantly lower than the attorney’s, so this will save some money. They will also want a retainer of somewhere between $2,000.00 and $10,000.00, which they will retain and either work from (requiring you to refill it once depleted before they do more work on your behalf), or charge you an hourly rate on top of (using the retainer to cover time spent in the event you stop paying them). And there are other expenses involved with litigation over and above the hourly rate of the attorney, such as filing fees, process server charges, court fees, court reporter fees, and even copying and mail charges.

Litigation can take up to three years (or even more) to get to trial, and appeals can drag on for that long again. In Colorado, there is a new test program called CAPP, which seeks to reduce the time to get to trial on business related matters. It seeks to get to trial in as little as nine months. But not all jurisdictions have this program, and if your contract breach is related to federal issues (such as copyright infringement) or results in a federal diversity case (such as suing a publisher who resides in another state for more than $75,000.00), then settle in for a long, expensive journey.

Before you decide to give up on litigation as cost-prohibitive, read your contract. Most contracts provide for an award of attorneys’ fees and costs to the prevailing party. This means that, if you win (by summary judgment or at trial), you will be entitled to whatever award you get (money and/or specific performance), plus all of your litigation expenses (attorneys’ fees and costs). This provision is also a powerful tool to help settle cases early, as the side with the weaker claim will not want to have to pay their attorneys’ fees, any judgment, and the prevailing party’s attorneys’ fees. Just remember, it’s a sword which cuts both ways, because no outcome is ever guaranteed.

As with the creation of a contract, ask your attorney a lot of questions. Make sure s/he can answer your questions satisfactorily. Many people are as injured by bad attorneys as they are by whatever caused them to seek out an attorney in the first place. So, choose an attorney who knows what s/he is talking about, is aggressive, and with whom you feel comfortable.

Not coincidentally, these are the same criteria you should have used to select your agent and publisher—choosing these people wisely will do more to avoid the expenses of litigation than anything else.

Matthew Swihart is an attorney, mediator, writer, and martial arts instructor in Denver, Colorado. He is currently pitching his debut novel—an epic fantasy trilogy—to agents and publishers, and is also working on an urban fantasy with a gonzo-revisionist twist on therianthropy, as well as a sordid literary novel involving Elvis memorabilia.

If you have any questions related to this or other topics, or if you have a topic you’d like me to address in this forum, please leave them in the comments, or e-mail me at You can also find me on Facebook at One caveat: unless you sign a representation agreement with me, nothing on here or in any e-mail response constitutes an attorney-client relationship.

*** RMFW Members: E-mail me your contract (either before you sign it or before you decide whether or not litigation is proper), and I will provide a one-hour initial consultation for free. Be sure you include your full name and a good phone number so I can call you to discuss your contract. This is open to RMFW members only. The free one-hour initial consultation will not constitute an attorney-client relationship or representation, unless I am later retained to represent the individual in relation to that contract or issue. ***

1 comment:

Patricia Stoltey said...

I hope I never need to learn about breach of contract first hand, Matthew. Thanks for the information and for the offer to RMFW members for an hour of free consultation on contracts/issues.