The sometimes murky world of royalty accounting did not stop a first-time author from investigating her suspicion that her publisher was not paying all of her royalties. Sherry Argov, author of Why Men Love Bitches, first sought to review her royalty records in 2003 and, after a tumultuous four-and-half-year process, was recently awarded a total of $209,000 by an arbitrator in her dispute with F+W Publishers (now F+W Media), parent company of Adams Media, publisher of the book. The ruling covered the time from the six-month period ending December 31, 2002, to June 30, 2005, and includes only domestic royalties due. During that time, Argov had received royalties of $269,299 reflecting the sale of 253,030 books.

According to papers submitted by Argov as part of the arbitration process, F+W allegedly undertook a series of actions to underreport sales of her book; other documents showed that the publisher did not have the systems in place to track what was owed her, particularly in the case of translation rights income. The documents include e-mail between F+W employees in which one writes that “we have no system in place for tracking inbound royalty statements from translation right deals.” Part of the problem, the e-mails show, is that F+W had not received statements from foreign publishers per their contracts—not just in Argov's case but on “lots” of other titles.

Retired judge Herbert Abrams, the arbitrator in the case, did not find that Argov had proven she was owed money, but did find that F+W had “breached the implied covenant of good faith and fair dealing” and had engaged in deceptive practices by not providing Argov with the documents she needed to conduct a full royalty audit. To support his decision, Abrams cited “numerous inter-office e-mails sent among F+W's office personnel manifesting an intense dislike of Ms. Argov in her attempt to obtain a royalty audit as well as purposeful intent by F+W to withhold from Ms. Argov's accountant the necessary information for him to complete a royalty audit to which Ms. Argov was entitled.” Those actions, Abrams ruled, were “willful violations” of Massachusetts General Law Chapter 9A, which governs business practices. While Abrams awarded Argov only $25 in statutory damages, he also awarded her a hefty $200,000 to cover legal fees plus $9,000 in arbitrator's fees. F+W president David Nussbaum noted that the arbitrator rejected all but one of Argov's claims, and said the unfair practice claim upheld by Abrams was based on the behavior of employees who have since left the company.

Paul Aiken, executive director of the Authors Guild, who has reviewed the ruling, called the award “extraordinary.” He said that while many publishers don't like royalty audits, a finding of unfair and deceptive practices is “rare, and raises questions about the fundamental practices of F+W's accounting.” Nussbaum, however, defended his company's practices. “F+W has full confidence in its royalty accounting, reporting and payment systems,” he said, adding that an independent audit by a consulting firm found the publisher's practices to be in accord with accepted royalty audit procedures.

Since the ruling only covers the period ending June 30, 2005, and includes only domestic royalties, Argov is still free to pursue royalties on domestic sales after June 2005 and all foreign royalties. At the end of his ruling, Abrams—writing that he assumed that after two and a half years F+W has a system in place to track payments due authors—“strongly” recommended that F+W get together a report about what it still owes Argov. An accounting of what foreign royalties are due Argov was supposed to have been provided by August 1, and while the author said she received some documents, she believes that more than half the statements relating to foreign rights that should have been provided are still missing. To get F+W to turn over the statements—Argov estimates there should be 115—late last week her attorney filed a claim with the Suffolk (Massachusetts) Superior Court asking the court to compel F+W to produce within 10 days a full accounting of all foreign license royalties statements and foreign royalty income. Nussbaum said F+W is completely willing to cooperate in an examination of Argov's foreign rights transactions and is confident its royalty reporting will be found accurate.

The entire experience has left Argov—who published her next book with Simon & Schuster and is self-publishing her latest one—more than a little frustrated. “If I had known seven years ago that they had 'no system in place' for tracking foreign-language royalties, or that I would have to engage in a beg-a-thon and still not have all my royalty records, I would never have given them the right to publish my book,” she said.