Thomas Nelson, a division of HarperCollins Christian Publishers in the US, has been found guilty of fraud and breach of contract and ordered to pay $15m in damages to printer EPAC Technologies.
A Thomas Nelson spokesperson said the business disagrees with the court's verdict, refutes the fraud claim, and has begun a legal challenge (see below for full statement).
California-based EPAC Technologies first filed a lawsuit against Nashville-based Thomas Nelson in May 2012, when it was still owned by private equity firm Kohlberg & Company. As reported at the time, EPAC accused the company of promissory fraud, breach of contract and bad faith termination. The complaint stated that Thomas Nelson bailed on EPAC eight months into a five-year contract.
HarperCollins acquired Thomas Nelson later in 2012.
At a trial in San Leandro, California, which concluded on 18th January this year, the jury found that EPAC had proven that the HarperCollins division had concealed or suppressed a material fact it was under a duty to disclose to EPAC; that it intentionally concealed or suppressed the fact with the intent to deceive EPAC; and that EPAC sustained damage as a result, according to a statement released by EPAC.
The Court found that HarperCollins had a duty to preserve documents written up until April 2011, but failed to meet minimum standards of diligence and competence, negligently destroyed nearly 1.5 million messages, and did not stop the purging of key business records until 2015. At trial, EPAC said that HarperCollins’ claims of defects and late deliveries were fabrications designed to give HarperCollins an excuse to terminate the contract.
EPAC was awarded $12m in punitive damages on top of more than $3m in compensatory damages for fraud and breach of contract.
Senior HarperCollins US staff who testified included Mark Schoenwald, current president and c.e.o of HarperCollins Christian Publishing, who was Thomas Nelson’s president and c.o.o. during the time of the case, and Stuart Bitting, the HarperCollins Christian Publishing's c.f.o at the time.
Sasha Dobrovolsky, founder and c.e.o. of EPAC, said: “We are thankful for the jury’s service, and this case reaffirms the value of our jury system for civil cases. We believe that the jurors were able to see HarperCollins’ fabricated defenses for what they were. These same jurors also sent a loud and clear message that such egregious behavior by companies and their executives cannot be tolerated.”
A Thomas Nelson spokesperson told The Bookseller: “We disagree with the jury’s verdict and have already begun the process of challenging it in Court. Thomas Nelson believes that the so-called fraud claim (not disclosing to EPAC that it was also negotiating with a competitor) is wholly without merit, legally or factually, and that it acted properly in 2011 when it terminated the printing contract that EPAC admitted it could not fulfill.”