The flak over 'The Shack'

It was an improbable Cinderella story.

"The Shack," William Paul Young's novel about a man rediscovering lost faith after the murder of his 5-year-old daughter, started out as a manuscript no one would touch. Finally, pastors Wayne Jacobsen and Brad Cummings discovered the book and created a start-up, Windblown Media, to publish it. The novel sold a million copies for them in the first year, eventually ending up at No. 1 on the New York Times' trade paperback bestseller list.

Then Hachette Book Group got involved. In May 2008, the publishing conglomerate — one of the largest in the country — cut a deal with Windblown Media to market and distribute the book. In the two years since, "The Shack" has become a 12-million-copy-selling phenomenon and the biggest Christian publishing sensation in decades.

But unlike Cinderella — at least in the Disney version — there's no happy ending in sight for Young, or for the two men, Jacobsen and Cummings, he once called friends and business partners.

For nearly eight months, the trio have been mired in a series of lawsuits, accusations flying over improper accounting practices, millions of dollars in missing royalties, contract breaches and copyright disputes. Hachette, meanwhile, just wants to know to whom it owes money — and how much.

Last Nov. 20, Young filed suit in Ventura County State Court against Jacobsen and Cummings, Windblown Media and Hachette. The suit alleges he is owed about $8 million in lost royalties through December 2008 and that "all of Windblown's rights, including the right to publish the work and to receive any form of consideration for distribution of the work, [should be] terminated."

It wasn't until Hachette came around that Windblown Media and Young even put their publishing agreement in writing. Young was to receive a 50-cent royalty per paperback and $1 for every hardcover copy of "The Shack," along with a third of the net profits.

On May 14, 2008, Windblown Media and Hachette entered into a separate agreement, by which Young, Jacobsen and Cummings would each receive one-sixth of net profits, with Hachette taking the rest.

Young alleged that Windblown and Hachette got "more and more creative" in determining his royalties, including an attempt to exclude nearly 40% of sales by designating them "high discount sales," such as those earned from book clubs or giveaway programs.

Young also took issue with Windblown and Hachette over other matters, including a "return reserve" (which he claimed deprived him of more than $4 million in profits), a 10% distribution fee and a lack of profit share from sales generated by Hachette.

As Young's action worked its way through state court, Windblown Media countersued him for $5 million in federal court. According to the April 29 filing, Windblown alleged that since Young believed their contract was now null and void, the company could make its own claim over the authorship of the book.

Not only did Jacobsen and Cummings feel they deserved their rightful share of the proceeds but also — because of the significant work they had done to transform an unpublishable manuscript into a bestseller — that they were co-authors of "The Shack."

According to the filing, "Young announced [in February 2008] that he wanted to add Jacobsen and Cummings' names to the cover of the Book as co-authors, as should have been done from the first place. However, when Young subsequently shared this announcement with his family, Young's wife expressed extreme anguish over the change and pressured Young not to change the cover page."

On March 11, Jacobsen and Cummings asserted their claim to co-authorship with an amended copyright filing to the Library of Congress. They also accused Young of reneging on a deal to help Jacobsen and Cummings turn "The Shack" into a movie.

"In all of my 30 years of practice, Young's lawsuit is the most ridiculous I have ever seen," said Windblown Media's legal representative, Martin Singer, a partner with Lavely Singer. He claimed that Young's lawsuit was a "complete misrepresentation" of the author's financial state, with no mention of the more than $10.5 million Young had earned from "The Shack" to date.

Young's legal representative, Michael Anderson of Anderson & Loeb, scoffed at the countersuit. "They agreed in a written contract that Young was the sole author of 'The Shack,'" he said by telephone. "Back before the work was known to be a bestseller, both parties filed a copyright notice indicating that Young was the sole author. For three years Windblown has been publishing the book under Young's name. [The federal court] action is a belated attempt by [Jacobsen and Cummings] to take credit for a book they didn't write."

The dueling lawsuits have left Hachette in an awkward position. If they pay Young additional royalties, Windblown might file suit to reverse that decision. But if they continue to pay Windblown according to the terms of the original contract, Young might also press on with additional litigation.

In the first quarter of 2010 alone, "The Shack" earned nearly $1 million in royalties, with more money accruing daily. So on May 11, Hachette filed its own lawsuit in federal court, stating in its filing that "as a result of disputes that have arisen ... [Hachette has] a real and reasonable fear that distributing the funds would expose Hachette to multiple claims and liabilities."

Hachette has deposited the first-quarter royalties into the court registry, and a source close to the publishing house indicates that if litigation drags on, all additional royalties on "The Shack" will be under the court's jurisdiction.

This means that neither Young nor Windblown Media will be able to touch any money earned by "The Shack" until there's a clear ruling on who is entitled to the funds.

A court hearing has been set to determine whether Hachette's suit will go to trial, but on June 21, Young filed a motion to dismiss the case, claiming that Hachette's position is superseded by the earlier state court action.

Hachette responded with its own motion July 2, stating that federal court should have jurisdiction over the matter.

Judge John F. Walter is expected to hear substantive arguments on Hachette's filing Aug. 30, even as the lawsuits lodged by Young and Windblown Media are pending in state and federal court.

Meanwhile, "The Shack" sells thousands of copies every week as the royalties continue to pile up. But that's no cause to celebrate. Rather, it seems that, as Hachette Book Group stated in its filing, "similar suits among Young, Windblown, Jacobsen and Cummings are likely to arise in the future."

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