Cengage Learning Charges Houghton Mifflin Harcourt with Breach of Contract

By Jim Milliot -- Publishers Weekly, 11/11/2009 1:32:00 PM

Cengage Learning has filed suit in New York federal court against Houghton Mifflin Harcourt charging HMH with breach of contract pertaining to Cengage’s $750 million acquisition of HMH’s college division in 2008. In the suit, Cengage alleges during the time HMH was trying to sell its college business it began to “dramatically increased its sales of college textbooks in an unprecedented manner to international resellers (particularly in India, Taiwan and South Korea)….with a spike immediately prior to signing the APA [asset purchase agreement] and another significant spike just prior to the Closing Date.”

Among the customer were resellers known to redistribute the textbooks back into the U.S through unauthorized distribution channels, the complaint states. Those actions, Cengage charges, deprived the company the opportunity to sell texts into “artificially saturated foreign markets” while also decreasing sales in the U.S. from textbooks that leaked back into the American market. The overall impact was to undermine the business acquired by Cengage, the complaint charges. Since the purchase contract indemnified Cengage for any losses it incurred from international sales made outside the normal course of business,  Cengage is seeking at least $20 million in damages.