18 September 2006

Corroded Boilerplate

Professor Wayne Schiess teaches legal writing at the University of Texas School of Law. This morning, he commented on a serious legal problem: Boilerplate language that is not understood by the drafter. Unfortunately, publishing contracts present paradigmatics examples. In an unscientific survey1 performed by your (un)faithful correspondent over the past five years, one hundred percent of lawyers for US-based publishers—whether in-house or outside counsel—did not understand the following language, which appeared in each of the contracts at issue with only minor and immaterial variations:

If a petition in bankruptcy shall be filed by or against the Publisher, or if it shall be adjudged insolvent by any court, or if a Trustee or a Receiver of any property of the Publisher shall be appointed in any suit or proceeding by or against the Publisher, or if the Publisher shall make an assignment for the benefit of creditors or shall take the benefit of any bankruptcy or insolvency Act, or if the Publisher shall liquidate its business for any cause whatsoever, this agreement shall terminate automatically without notice, and such termination shall be effective as of date of the filing of such petition, adjudication, appointment, assignment or declaration or commencement of reorganization or liquidation proceedings, and all rights granted hereunder shall thereupon revert to the Author. The Author shall have the right, upon such termination, to purchase at his option the plates, remaining copies, and sheets.

Leaving aside the unenforceability of this clause under 11 U.S.C. § 362—meaning that it provides the author a false sense of security founded upon deception—note the convoluted prose and obsolete vocabulary. With very rare exceptions, trade books are no longer printed from plates that have any meaningful value (or, for that matter, are even owned by the publisher, since most book publishers now outsource their printing!). Similarly, modern practice frowns on the publisher retaining unbound sheets, for rather simple reasons relating to taxes and the demise of the manufacturing clause. In 1978.

Bankruptcy isn't exactly unheard of in publishing; consider the messes involving Carol, iBooks, and Lingua Franca. What makes this worse is the potential that an ipso facto clause of this nature creates for truly snarled litigation in bankruptcy, especially if an author ever attempted to invoke the rights at issue (or the publisher tried to follow this clause). Under those circumstances, the language in the contract itself indicates a mutual intent to evade the requirements of the Bankruptcy Code and favor one creditor or class of creditors over another inconsistent with the Code's requirements. This has more than a little flavor of bankruptcy fraud—and at least enough to make the proceedings needlessly complicated.

And if the lawyers didn't understand it, what makes you think that the editors and nonlawyer "contract specialists" most involved in author-publisher contract negotiations did?

  1. Because data-gathering was in an adversarial (or, at least, potentially adversarial) context, the data is not reliable enough for a statistically reliable conclusion (n=19).