When it shut down just over 2 weeks ago, indie ebook retailer All Romance eBooks gave customers just 3 days to download their purchases, and more importantly, it offered publishers and indie authors ten cents on the dollar for unpaid royalties on the condition that they agree to not sue.

That did not sit well with the authors and publishers. only around 11% have stated that they accepted the offer, and now one of the holdouts has filed a class action lawsuit against ARe and its owner, Lori James.

I am still waiting for a text copy of the announcement, but here is what we know so far:

The press release was initially posted to a private FB group; while I was waiting for permission to post it publicly, Writer Beware beat me to the punch.

Individually, the money owed to authors and publishers would be regarded as unsecured debts. They would be the last to be paid in a bankruptcy and might get paid even less than ten cents on the dollar.

But as a class, they might have a better shot at getting assets.

Assuming there are any assets to go after.

As Kris Rusch pointed out last week, ARe had been failing for a couple years – at least. What looks like an abrupt closure is really the final stage in a slow downward spiral:

They are threatening bankruptcy. Since authors are unsecured creditors, most authors will see no money at all in a bankruptcy. In fact, I expect the writers who opt for the 10 cents on the dollar solution will not be paid either. Why do I expect that, besides experience with this kind of thing? Primarily because of the ad blast. The blast wasn’t ARe being venal. It was their last-ditch attempt at raising enough capital to save their business. Guessing now, purely guessing. ARe had run ahead of their money since they started. They used today’s money to pay yesterday’s bills. They had no profit. So they were floating money—payments to authors, payments to creditors, payments like website and rent. That’s why ARe’s technology grew antiquated, why they weren’t keeping up with the times, why payments in some cases were late or impossible to get. They probably got a line of credit too late or they didn’t have one or they were borrowing off credit cards.

Rusch had pulled her titles from ARe once it was clear that ARe was no longer tracking sales correctly. That was a couple years ago.

If ARe has been pinching pennies for that long, struggling to get by, then it would mean that by this point there is nothing left to the retailer but debts.

On the other hand, this lawsuit may be able to go after Lori James assets. Depending on how ARe was incorporated, the judge may be able to go through to the owners’ assets and use them to pay the plaintiffs.

Assuming, that is, that James has any assets left to fight over.

image by kenteegardin