Cengage authors David Knox and Caroline Schacht filed a class action lawsuit in the U.S. District Court for the Southern District of New York on May 14 against Cengage claiming the company’s emphasis on digital distribution, including its new Cengage Unlimited model and expanded digital courseware offerings, have violated their publishing agreements. The suit also claims that the company is refusing to provide information that would allow them to audit their royalty payments.

According to the complaint, Cengage’s plan to overhaul its business model after emerging from bankruptcy in 2014, “has trampled on its authors’ rights”. The suit alleges that Cengage’s new Cengage Unlimited business model has the company “dismantling its support” for individual title sales in favor of selling subscriptions to Cengage Unlimited, which plaintiffs say violates their contracts and will reduce the amount of royalties they will earn, while allowing Cengage to retain a larger share of revenue.

“Rather than compensate its authors for the sale of their work, as agreed in the publishing agreements, the Cengage Unlimited model offers each end user an ‘all-access’ pass to the Cengage catalog, and then compensates authors based onthe relative useof their works by end-users,” according to the complaint. “Under this system, which is inconsistent with the royalty-on-sale model, authors are not paid a royalty for each sale of their works, but rather a fractional percentage of Cengage’s subscription fees, based on the relative use of the work.” It also states that “Cengage has refused author efforts to renegotiate Publishing Agreements so that the royalty payment provisions conform to the Cengage Unlimited model.”

The class action suit by Knox and Schacht, coauthors of Cengage titles Marriage and Family and Social Problems, also claims that Cengage has expanded its emphasis on digital courseware supplements (e.g., MindTap), which are derived from an author’s work, without properly attributing royalties to courseware sales. According to the complaint: “As a matter of common practice, Cengage has arbitrarily reduced royalty payments to Plaintiffs on courseware sales, by improperly allocating excess value in the courseware to the digital framework, packaging, and supplements, as compared to Plaintiffs’ work that is the foundation of the specific MindTap product associated with a title.” This overvaluing of Cengage’s contributions over the Plaintiffs’, according to the complaint, “constitutes a breach of the Publishing Agreements, which provide for the royalty to be paid based on the sale of Plaintiffs’ works, in all formats.”

This undervaluation of plaintiffs’ contributions to courseware will also reduce royalties paid within the courseware Revenue Pool under Cengage Unlimited, the plaintiffs allege, since Cengage intends to utilize its current method of allocating authors’ contributions to courseware when calculating royalties paid on the courseware Revenue Pool.

The plaintiffs also claim that Cengage has provided them “confusing and incomplete royalty reports” and that the company has refused to provide authors with the information necessary “to determine the methodology and validity of the royalty calculations.” Plaintiffs claim they have experienced an “inexplicable and disproportionate” decline in royalty payments even while unit sales increase. The plaintiffs ask the court to declare that Cengage is obligated to provide this information.

In addition to the awarding of financial damages, the complaint also seeks to stop Cengage from including all class members’ works in Cengage Unlimited without the option of opting out, and the ability for class members to terminate their publishing agreements and obtain a reversion of all rights.

Cengage issued the following statement when asked for a comment:

“We have communicated clearly with our authors that the subscription service is consistent with the terms of their contracts, which we continue to honor. In addition, we have outlined for them the rationale behind the new business model: it is designed to address the decades-old problem of affordability in higher education. The reality is that students can’t access quality learning if they can’t afford to buy the materials. Our authors, like those at our competitors, have seen declining royalties as a result of high prices that lower demand. The subscription service addresses students’ concerns and enables a more sustainable business model for the company and our authors. While we are disappointed that this complaint was filed, as it seeks to perpetuate a broken model of high costs and less access, we are grateful for the support we have received from the majority of our authors, as well as students, faculty and administrators. We remain steadfast in our commitment to proceeding down the path that will ultimately save students hundreds of dollars a year.”

Read the full complaint

Authors interested in the class should email David Slarskey at dslarskey@slarskey.com, using the subject line “Cengage Litigation.”