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Into the Legalese Thicket

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by Lawrence Jordan, Attorney, Seeligson & Jordan

In the January 1996 issue of the PMA Newsletter (currently IBPA Independent magazine), you’ll find my introduction to the topic of standard contracts (See “When and How to Use Your ‘Standard’ Contracts,” page 1). Now it’s time to flesh out some the suggestions made in that earlier article. In this piece, I’ll consider one of the most valuable (and hard to pronounce) clauses to include in your standard contracts: The “Indemnification and Hold Harmless” clause.

In this type of clause, one party to a contract (the author) agrees to pay for any harm which the other party (the publisher) suffers because of a breach of the contact by the first party (the author). For example, if an author “indemnifies” you against copyright infringement claims, and you are later sued by a stranger who claims the authors’ book infringed that stranger’s copyright, then you (the publisher) have the right to ask the author to pay the costs of the suit.

If properly drafted, your Indemnification Clause can cover the press against a number of potential costs:

  1. Lost profits suffered because of the alleged violation or breach. For example, if you pull a book from store shelves because of a court order, you can seek reimbursement of lost profit from the author.
  2. Costs of defending any lawsuit brought or threatened because of the alleged violation. These can include “reasonable” attorneys’ fees, court costs, and expenses such as court reporter’s fees. These fees can be substantial, even if you prevail on the merits of the suit.Keep in mind that courts are generally reluctant to award attorneys’ fees for breaches of contract. This is a venerable rule in American law, which sprung from the founders’ hostility to the English system. However, a number of courts have said that they will award reasonable attorneys’ fees if the contract expressly and properly states that the parties agree to such fees.
  3. The amount of any settlement paid by the press. The vast majority of lawsuits are settled. Most of these settlements involve the defendant paying something to the plaintiff. Defendants often agree to pay a settlement sum rather than incur the uncertainty of a jury verdict (ask Marcia Clark about juries). Even if your press is confronted with a totally frivolous suit, the economically wise resolution of that suit may be to ante up a token payment to the plaintiff. If you do so, wouldn’t it be nice to have the author reimburse you for the settlement amount?

A publisher’s “Indemnification and Hold Harmless” clause might look like this:

The Author represents and warrants to Publisher that he/she will be the sole author and the owner of all the rights granted to Publisher, that the Work will contain no defamatory and/or unlawful matter, and that the work will not infringe upon the copyright or violate any other right of any person. The Author further agrees to indemnify and hold harmless Publisher, its heirs, agents, officers, principals, successors, and assigns, against and from any claim, demand, or suit brought by reason of any alleged violation of Law or Equity, including, but not limited to, any alleged violation of intellectual property rights, moral rights, rights of publicity, rights of privacy, or because of any alleged defamatory or unlawful material contained in the work. If the Author learns of any claim, demand, or suit which may affect the Publisher, its heirs, agents, officers, principals, successors, or assigns, the Author shall immediately notify the Publisher in writing. The Author shall take no action, including answering or settling any such claim, demand, or suit, without Publisher’s express written permission. After receiving actual written notice of a claim, demand, or suit from the Author, Publisher may, in its sole discretion, elect to negotiate, settle, litigate, counterclaim, or take other action (including but not limited to requiring the Author to obtain legal counsel at Author’s sole expense and defend any suit). If Publisher incurs any expenses, reasonable legal fees, damages, or other costs, as a result of any nonfeasance, malfeasance, breach of contract, breach of warranty, or other wrongdoing of the Author, then the Author shall immediately pay to Publisher all such expenses, reasonable legal fees, court costs, damages, lost profits, and other costs. Moreover, the Author shall, without cost to Publisher, cooperate fully in the defense against such claim, demand, or suit. The Author shall also, without cost to Publisher, cooperate fully in any claim, demand, or suit which Publisher may make against any third party relative to any work covered by this present agreement.

Once you decide to use an indemnification clause, you may be confronted with negative reactions from your authors. Indeed, there is no reason that an author should like such a clause. How should you deal with these reactions? One approach is to explain that you, as the publisher, are almost certain to be sued for any transgression of the author. This is because plaintiffs often
perceive that publishers are more solvent than authors. In addition, you can make the argument that “it’s a standard clause” or “everyone’s doing it.” A knowledgeable author will know that the vast majority of publishers do use indemnification clauses, and that such clauses are a part of the risk that most authors regularly undertake. My bottom line advice: hang tough on this clause.

Once you have successfully obtained the author’s agreement to indemnification, you still have to collect the sums due under the clause. The easiest way to do this, of course, is to have a wealthy and willing author. Since some of your authors will not fit this profile, I suggest you consider a clause like the following:

Publisher may, in publisher’s sole discretion, deduct from any royalties or other amounts owed to Author, any amounts due to the Publisher under the’Indemnification and Hold Harmless’ Clause, Section X, above.

A word of caution: contracts in general and indemnification clauses in particular are governed by state law. Therefore you should not use any clauses in this article before checking with an attorney familiar with the applicable state law. Under no circumstances should this article, or anything in it, be considered a substitute for the advice of and drafting by an attorney familiar with your press and its particular needs. This caution notwithstanding, most state courts will enforce a properly-drafted indemnification clause.

Armed with this knowledge, I hope that all of you are able to successfully protect yourselves with appropriate “hold harmless and indemnification” clauses.

Lawrence Jordan is a attorney in the firm of Seeligson & Jordan. He can be reached at 313-994-1295.

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