50-Shades-of-Grey-2According to a report in the Fort Worth, TX, Star-Telegram, a Texas judge has awarded an Arlington woman up to $11.5 million in unpaid royalties for the international hit Fifty Shades of Grey, plus a potential additional $1.7 million in legal fees. The award – and the twisted process which brought it to law in the first place – is a warning of just how much partners in indie publishing houses, or authors published by them, could lose out on if they lose track of the progression from blog and writers’ cafe work-in-progress to full publication.

The damages award was made by State District Judge Susan McCoy to Jennifer Lynn Pedroza, according to Courthouse News, following a verdict last year which found that Amanda M. Hayward and TWCS Operations Pty. Ltd., an Australian company, had diverted the royalties due to her through The Writers Coffee Shop, originally a writers’ community site. E.L. James first released Fifty Shades there in May 2011 as an extensively reworked piece of Twilight fan fiction.

“Pedroza and Hayward, along with two others, were partners in The Writers Coffee Shop, which was the original publisher of, and owner of the publishing rights to, the Fifty Shades trilogy,” the original complaint read. “Without consulting her partner Pedroza, and without complying with Texas law, Hayward tried to convert Coffee Shop into TWCS, an Australian sole proprietorship that she, alone, owned. She signed a contract with Random House for the rights to the Fifty Shades trilogy, in exchange for millions in advances and future royalties but, because of her chicanery, all payments flowed to her and not to the partnership.”

According to Courthouse News archives, Hayward persuaded her partners that the platform needed to be restructured into a solely owned entity for tax reasons, and induced them to sign service agreements which she later terminated. Pedroza launched her case against Hayward in May 2014, and a jury found in her favor but declined to set a figure for damages. Judge McCoy’s decision now rectifies that, following forensic accounting which determined that Pedroza’s 25 percent share of the book’s earings was worth at least $10 million. Hayward and her lawyers are now reportedly preparing an appeal.

It goes without saying that any partners in indie publishers or writers’ groups who find they have an unexpected hit on their hands should seek impartial outside advice, and be very careful about recommendations or new proposals from any one of their number. Lucky authors who pen such hits in such circumstances should be just as careful. The Association of American Publishers, or the Publishers Association in the UK, might be able to help publisher partners, and the Authors Guild and the Society of Authors likewise for US and UK authors respectively. But the gray (to coin a phrase) area between collectives and writers’ groups and real publishing, and between online file sharing and real publication, is exactly where such problems may arise and where protection from professional groups may be least. The Fifty Shades of Grey case should serve as a warning: get it all down in black and white.