An Arlington woman says in a lawsuit filed in Fort Worth that she was duped out of millions in royalties from the erotic romance novel Fifty Shades of Grey, asserting that her Australian partner cut her out of the e-publishing business that originally released the bestseller.
Jennifer Pedroza of Arlington asserts that in 2010, she co-founded The Writer’s Coffee Shop, which sold 250,000 e-book and print-on-demand paperback versions of Fifty Shades, but was fraudulently deprived of most of the proceeds from its sale to Random House in March 2012 by Amanda Hayward of Dural, a Sydney suburb. Reports put the deal at $1 million.
Afterward, British author E.L. James and a business set up by Hayward evenly split royalties of $95 million paid by Random House over 12 months ending in June 2013, the lawsuit says, quoting an article in Forbes magazine. The suit says Hayward was likely paid millions more before and after.
The suit, filed May 29 in Fort Worth’s 153rd District Court, alleges that Hayward set up an Australian firm, TWCS, to sign the Random House deal, telling her partners it was for “tax purposes.”
Also suing Hayward is another Arlington resident, Christa Beebe, a Writer’s Coffee Shop employee who asserts that Hayward personally “guaranteed” a year’s employment in an email when Beebe was offered a teaching job in March 2012. Beebe was terminated five months later after she and Pedroza were forced to sign “service agreements” with TWCS, it says. Pedroza received a one-time payment of $100,000 after the Random House deal was signed.
Pedroza, who handled marketing for Fifty Shades, is seeking her share of the royalties, which could easily amount to $10 million or perhaps more than $20 million, said her attorney, Mike Farris of Dallas. Beebe is requesting around $45,000 in lost wages in addition to punitive damages, Farris said.
James, the author, is not named in the suit. Similarly, two Writer’s Coffee Shop partners, a North Texan and an Australian, were not named as defendants.
Judge Ken Curry granted a temporary restraining order May 29 barring Hayward from collecting additional proceeds from the trilogy and from spending any funds already collected.
On June 12, Curry expected to rule on an injunction requested by Pedroza to direct Random House to send future payments to the court until the case is resolved, Farris said.
Farris said he is arranging to have Hayward served with a copy of the suit in Australia. He said he had informed her Sydney lawyer, Gaurav de Fontgalland, of the litigation by email. Hayward has declined to comment, said The Sydney Morning Herald, which reported that she acquired a sprawling $4.6 million home with some of the proceeds.
De Fontgalland threatened Pedroza and Beebe with legal action in February after Fort Worth Weekly published a lengthy article about the Fifty Shades dispute. The Australian lawyer’s cease-and-desist letter said the Arlington women leaked confidential information to the Weekly and further violated their TWCS agreement by contacting a client about creating a limited-edition soap in connection with her upcoming novel.
Pedroza and Beebe started The Soap Barista after their firing.
De Fontgalland did not respond to an email seeking comment on the Fort Worth lawsuit.
The Writer’s Coffee Shop was launched as a blog site in 2009 by Pedroza, Hayward and Waxahachie resident Jennifer McGuire. The three women had formed online friendships though a fan fiction website. McGuire did the design for the blog, Pedroza uploaded contributors’ writing, and Hayward worked with authors, the suit says.
In May 2011, it published Fifty Shades, followed by two sequels in 2011 and 2012.
Pedroza not only handled marketing for the runaway bestseller but also packed the print-on-demand copies in her home for shipment. Beebe joined in January 2012 to help with marketing and distribution, first as an unpaid volunteer then as a salaried employee, according to the lawsuit.
In August 2011, an Australian named Lea Dimovski became a partner when the venture had money problems.
The lawsuit acknowledges that the two Texans, Pedroza and McGuire, and the two Australians, Hayward and Dimovski, never signed a prepared partnership agreement. But in 2011, The Writer’s Coffee Shop filed a partnership income tax return, naming Pedroza as a general partner, it says.
In February, Random House’s Vintage imprint said the series had sold 100 million copies — 45 million in the United States alone.
In a 2012 interview with the Herald, Hayward said she bankrolled The Writer’s Coffee Shop and spent a year wooing James to publish with the obscure outfit. Responding to widespread criticism of Fifty Shades’ writing, she conceded that the editing was “horrendous.” But once it caught on with the public, it was too late to pull it back, said Hayward, described as a former construction risk manager who had no publishing experience.
The Writer’s Coffee Shop went from “subsistence income to royalty heaven,” the Herald reported.
Making money wasn’t the original intent, she told the Herald’s Linda Morris. Casting a hand over a pile of Fifty Shades copies, she said: “This was just to keep me busy.”