A New York court has ruled that two textbook authors can proceed with a class action case against Pearson Education for failing to pay proper royalties, at least for now.
In a brief opinion and order dated August 31, District Judge George Daniels denied Pearson’s bid to strike the class action allegations against them, holding that at this point in the litigation there was nothing to suggest that a class could not be certified. But Daniels did dismiss two claims against Pearson, and severed parent companies Pearson PLC, and Pearson Inc. from the case, leaving Pearson Education to battle the claims alone.
The case was first filed last October by two plaintiff authors, Lawrence J. Gitman and Michael D. Joehnk, emeritus professors and the authors of several popular finance textbooks. The authors allege that Pearson has been “systematically shortchanging textbook authors on the royalties they are owed.”
In filings, the authors note that textbook prices have climbed 82% over the last decade, but that royalty payments for authors have risen only modestly. They claim that a recent audit revealed that the price of one their textbooks, Fundamentals of Investing, rose 140% from 2000 to 2011 (from $108 a copy to $260), yet, due to a range of alleged accounting tricks, their royalties over the same period remained “virtually stagnant.” Gitman and Joehnk claim they are owed roughly $470,000 in additional royalties in total, and that their fellow Pearson authors are likely owed millions more.
How many millions more? In their bid to sink the class action claims against them, Pearson attorneys acknowledged that the potential class could be “tens of thousands of authors.”
Still, class certification is far from a done deal. In their bid to dismiss the class action claims, attorneys for Pearson argue that, among other things the Plaintiffs cannot establish “commonality” among a class so vast because every author “has a different publishing agreement with Pearson Education with a unique bargaining history and course of performance.” And while Daniels held that he could not rule out commonality at this stage, he conceded that could change as the case progresses.
“Pearson Education may be able to demonstrate after conducting appropriate discovery that the class as it is alleged cannot be certified,” Daniels held. “Perhaps there will be issues of commonality and predominance that would preclude certification. However, at this stage, there is nothing in Plaintiffs' Complaint to suggest that a class could never be certified.”
