Judge Orders $10 Million Set Aside in Fifty Shades Litigation

Grey TieA state court judge in Texas order an Australian woman who helped publish Fifty Shades of Grey to set aside $10 million to satisfy claims by a Texas woman who said she was cheated out of her share of the book’s royalties.

As reported by Business Insider, in February a Fort Worth jury found in favor of Jennifer Pedroza on her claim against her former business partner, Amanda Hayward of Australia.

Pedroza was a member of The Writers Coffee Shop, a small publisher of e-books. Hayward founded the company in Australia but ran it from Texas.

Fan Fiction

Hayward, Pedroza, and two others founded the publishing collective after meeting online through “fan fiction” groups.

“Fan fiction” writers imagine literary and media characters owned by third parties in new – often erotic – stories. For example, Kirk-Spock erotica was once especially popular.

Pedroza and Hayward never signed a formal partnership agreement, according to the Star-Telegram. However, the publisher filed a partnership income tax return in 2011, naming Pedroza as a general partner.

The company fist published the “Fifty Shades” trilogy in 2011, as an e-book and print-on-demand book. They found “Fifty Shades” author E.L. James via fan fiction message boards.

According to Business Insider, James started on her path to writing fame by posting fan fiction based on the Twilight vampire romance series on Fanfiction.net. Some of her stories were considered too “provocative” and she was forced to remove them from the site.

James went on to create Christian Grey and Anastasia Steele of “Fifty Shades,” based on Edward Cullen and Bella Swan of Twilight. 

The Coffee Shop sold about 30,000 copies of the first of James’s books within the first year.

Random House

The rights to the books were later sold to Random House, an established publisher. Hayward signed the contract on behalf of Coffee Shop.

The jury found that a legal partnership existed and that Hayward fraudulently restructured the partnership – claiming that it was for tax reasons – so that royalty payments would go to her personally rather than to the partnership.

Pedroza did receive a $100,000 one-time payment after the Random House deal was signed.

Pedroza claimed that Hayward talked her into signing a services agreement that included a “termination without cause” clause. She claimed this was an underhanded attempt to turn the partnership into a sole proprietorship.

Hayward allegedly directed Random House to send royalty payments to her own bank account in Australia, and claimed to be suffering from financial problems in the US while at the same time buying herself a $5 million mansion in Sydney, according to the Daily Mail.

Random sold more than 100 million copies of the books and James reportedly earned $95 million in royalties in just a one-year period. The resulting movie earned $81.7 million in North America alone during its Valentine’s Day opening weekend earlier this year.

Pedroza claims that she should be entitled to 25% of the Coffee Shop profits, estimated to total about $40 million.

Pedroza was fired in November, 2013 -- allegedly because the publishing company lacked money.

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