Posted on

MindTap and Cengage Unlimited under fire from two new class action lawsuits

On August 12, 2019 the law firm of Susman Godfrey LLC filed a class action lawsuit against Cengage Learning on behalf of Douglas Bernstein and four other authors. Three days later, a similar suit was filed by Slarskey LLC on behalf of Grafton H. Hull.

Both cases reflect elements of a 2018 lawsuit against Cengage Learning by authors David Knox and Caroline Schacht, which was handled by Slarskey’s firm. At issue in all of these cases are Cengage’s emerging publishing practices and royalty calculations associated with its digital MindTap platform and the Cengage Unlimited subscription service.

Authors seem to be gaining confidence to dispute how publishers interpret contractual obligations in the context of these emerging practices. Slarskey surmises, “One of the issues in the past is that authors have been reluctant to challenge their publishers. Now authors may feel more confident because other authors are forging a path.”

When asked how the current case, Hull v Cengage Learning, differs from the 2018 Knox-Schacht case, Slarskey responded, “The Knox-Schacht case was filed before Cengage Unlimited became operational. Now we have more information, which raises additional questions about how royalty calculations are being done and how Cengage is marketing its products.”

The Knox-Schacht case was settled out of court with the authors receiving an undisclosed buyout payment, termination of the Choices in Relationships textbook contract with Cengage, and release of the authors rights to a textbook called Understanding Social Problems. Although the Knox-Schacht case was settled on an individual basis, Slarskey notes that the current Hull v Cengage case is pleaded as a class action and he believes that there is an advantage to settling it on a class basis in order to resolve some of the issues that have come to light in the past year.

The case of Bernstein et al v Cengage Learning, Inc., alleges that “Cengage is not paying authors royalties on the net receipts from the sales of works that are sold through MindTap or works that are included in the Cengage Unlimited platform.” Most Cengage contracts state that royalties are to be calculated based on net receipts from sales of the work, but in practice, Cengage has been using other metrics to calculate royalties for MindTap and Cengage Unlimited sales.

According to documents filed by the plaintiffs, Cengage has admitted that when a work is sold through the MindTap platform, the “net receipts” are reduced by some amount attributed to the publisher’s contribution to the digital platform and ancillaries. For example, suppose that a student pays $100 to access a Biology textbook on the MindTap platform. Instead of calculating the author royalty based on the $100 net receipts, Cengage reduces that amount by, say $10 to $20 because Cengage operates the digital platform and because the publisher perhaps added interactive quizzes to the work. According to the suit, “in some cases, Cengage is giving authors zero royalty on as much as 50% of the revenue it obtains from a MindTap sale.”

A second aspect of the lawsuit takes issue with the payment scheme for Cengage Unlimited subscription sales. Because those sales are an aggregate—students pay one fee to access multiple books—Cengage has not made royalty calculations based on net receipts from an individual book. Instead, Cengage uses an undisclosed formula based on usage relative to all the texts accessed by subscribers. Although some newer contracts make a provision for royalties to be calculated on a pro rata basis, many legacy contracts have no such language.

If you are a Cengage author, you may be wondering how this class action applies specifically to you. To find out, first, look at your royalty statement to discover if your works have been sold on the MindTap platform and/or as part of Cengage Unlimited. You can also go to the Cengage Website where you can see how your titles are being sold.

Next, check the wording of your contract. The class action excludes authors whose publishing contracts contain a “custom publishing” provision that allows royalties to be calculated on a pro rata basis determined by the publisher’s “reasonable judgement.” Look for the terms “pro rata”  and “judgment” in your contract.

Even if your contract wording may exclude you directly from the class action, it is likely that all authors may benefit from a settlement that provides clarity on contractual and royalty issues pertaining to digital and subscription sales.

“This is not a case where authors should sit back and do nothing,” states Chanler A. Langham, point person for the law firm handling the case. “The more data we receive from authors, including contracts and royalty statements, the better.  Before a case goes through discovery, there is always an information asymmetry with the defendant holding most of the cards, and so the more authors we speak with now, even if they are not a named plaintiff and have no intention of being one, the better our position will be.”

Langham encourages Cengage authors to contact him by phone at 713-653-7839 or by email to discuss the case, explaining that “Cengage authors do not need to actively join or participate in the lawsuit at this time. If the case is certified as a class action, authors will be provided notice about their rights to continue to participate.”

It is also possible that the two current cases, Hull and Bernstein, could be combined into a single class action. Both cases were filed in the Southern District Court of New York and before the same judge. If and when the court certifies the class action, it will also define who is included in the class and order that they be notified. Everyone in the class will be part of the case unless they choose to opt out by following the instructions in the class action notice.

When asked to comment on the Bernstein case, Cengage Vice President for Public & Media Relations Lindsay Stanley explained in a written statement that MindTap and Cengage Unlimited are an effort to “improve students’ access to affordable, quality learning materials.” She went on to write, “We have communicated clearly with our authors that the subscription service is consistent with the terms of their contracts, which we continue to honor. Since the service launched, we are in regular communication with them about the impact of the subscription on their royalties.”

June ParsonsJune Jamrich Parsons is an educator, digital book pioneer, co-author of Texty and McGuffey Award-winning textbooks, a TAA Fellow, and chair of the Publishing Practices Committee. She co-developed the first commercially successful multimedia, interactive digital textbook; one that set the bar for platforms now being developed by educational publishers.  Her career includes extensive classroom teaching, product design for eCourseware, textbook authoring for Course Technology and Cengage, Creative Strategist for MediaTechnics Corporation, and Director of Content for Veative Virtual Reality Labs. She holds a doctorate in instructional technology, CCP (Certified Computing Professional) certification, and is a member of the Association for Computing Machinery.