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Entertainment Grey Area: Arlington woman and the Fifty Shades of legal battles

Grey Area: Arlington woman and the Fifty Shades of legal battles

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Fifty Shades of Black and White

Anatomy of the Lawsuit behind a Publishing Phenomenon

by Mike Farris and Jennifer Pedroza

2018, Stairway Press, $15.95

Jennifer Pedroza has come full circle.

A veteran schoolteacher, she left her Mansfield classroom in 2011 to pursue an opportunity in book publishing that seemed to akin to winning a lottery jackpot.

But the Arlington woman soon realized that something too good to be true probably is. She was ready to walk away from the golden opportunity and chalk up the business experience to lessons learned.

But then, like any good tale, fate intervened. At a particularly low point, Pedroza met a lawyer who believed she had been wronged and was willing to take on a legal battle to settle the sordid dealings behind the publishing of the Fifty Shades of Grey trilogy, one most of the most lucrative deals in the industry’s history.

Pedroza won her case before a Tarrant County jury and obtained a $13.2 million judgment. The judgment was appealed but was finally settled “amicably” for an undisclosed amount, said her attorney, Mike Farris.

Now, multiple times richer, Pedroza is working as an instructional specialist at Sam Rosen Elementary School in Fort Worth.

“I love it very much,” said Pedroza, 48. “It’s grounding. I love working with kids.”

A wife and mother, she has also just completed the work for a second master’s degree to become a reading master specialist.

And she’s found time to co-write a book with Farris about her involvement in publication of the Fifty Shades trilogy and the lawsuit that drew international attention. Fifty Shades of Black and White: Anatomy of the Lawsuit Behind the Publishing Phenomenon will be released on May 15 by Stairway Press.

The book is being described as “the true insider story of scandal, treachery and betrayal behind the publishing of one of the most lucrative juggernauts in publishing history,” according to the publisher’s news release.

Pedroza sums up the experience as a cautionary tale about being too trusting.

In one of her first media interviews prior to the book’s publication, Pedroza told the Fort Worth Business Press that she never imagined creating a business to publish an international best-selling series.

It all began innocently enough around 2009.

“One of my friends I was working with gave me the book Twilight and I started reading it … Every time the next one came out, I went and got it. I loved it.”

Her interest in the Twilight series eventually led her into the world of fan fiction, where budding and wannabe authors recreate story lines using characters from popular published books, with Twilight being a top pick for fan writers.

It was through this medium that Pedroza met Amanda Hayward of Australia. Both women were dabbling in writing Twilight-related stories and would communicate on the fan websites and forums, offering suggestions to one another on their work.

“We became really good friends through that,” Pedroza said.

At first this was just a hobby, but it turned more serious as the two women began discussing starting their own fan fiction site, as others were doing. Their plan was to be able to connect authors with their stories on the same site.

“That’s what it really became about, is making those connections and friendships,” she said. “It was just fun. It was entertaining.”

By 2010, Pedroza, Hayward and two others parlayed the site into a business called the Writer’s Coffee Shop. They quickly developed a following of fan fiction devotees, especially for Twilight-based stories.

Eventually, Hayward struck up a friendship with British author Erika Leonard Mitchell, pen name is E.L. James, who ran her own site, where she finished an immensely popular story called “Master of the Universe” based on Twilight.

Since the Writer’s Coffee House was already moving into e-book and print-on-demand publishing, Hayward approached James about publishing her story. James was being courted by others but agreed to go with Writer’s Coffee Shop.

“I’m sure there were indie publishers before this, but it was the big huge boom of indie publishing,” Pedroza said.

By 2013, Writer’s Coffee House had published at least 60 books by authors around the world. But none compared with the popularity of James’ trilogy, which had been renamed Fifty Shades.

The erotic trilogy, often dubbed “mommy porn,” led the women to hire professional editors and Pedroza’s parents to handle the shipping of copies from their Tarrant County home. “It was fun but it was crazy times,” she recalled.

By the time the third book, Fifty Shades Freed, was released in January 2012, the series was so popular that Pedroza planned to quit teaching to devote all her time to publishing. A few months later, the big publishers approached James as talk of movies based on the books began to evolve. The book also made The New York Times Top 10 best-seller list that spring, with the series eventually selling over 100 million copies.

Two months after the final book was released, Hayward signed a multi-million contract with Random House to sell the publishing rights to the books and a percentage of royalties for future e-book sales.

This was also the time when the friendly partnership began to unravel.

“Amanda started talking with her accountants in Australia about trying to restructure the company,” Farris said. The rationale for this move was to receive better tax treatment in Australia if Hayward was the sole proprietor.

Farris said the result was the creation of new companies but nothing was ever done with the Writer’s Coffee Shop. By this point, only Pedroza and Jennifer McGuire of Waxahachie signed the Writer’s Coffee Shop contract. Hayward and Lea Dimovski, also of Australia, never did.

Pedroza said she never knew exactly how much the Writer’s Coffee House earned in the Random House sale.

The agreement with Random House was a three-year contract with the Writer’s Coffee Shop for the Fifty Shades books, Farris said. During those three years, the royalties were to be split with 50 percent going the Writer’s Coffee Shop and 50 percent to James. After that, the author was to receive 100 percent, Farris said.

But what followed next was a series of maneuvers by Hayward designed to dupe the others out of their fair share of the Random House money, Farris said. She convinced Pedroza and her long-time teacher friend, Christa Beebe, who became a publishing house employee, to sign an agreement that would channel some Random House money as salary.

Farris said Hayward told the two women, “If you don’t do this, I don’t know if Writer’s Coffee House will stay afloat.

“She had already gotten $16.5 million from Random House on the first royalty,” Farris said. “So she was sitting on $16.5 million and trying to convince Jenny that the company was broke, [that] if she didn’t sign this service agreement and agree to these new terms, they would have to shut it down and she would be out of work.”

Even worse, Pedroza paid $14,000 of the Writer’s Coffee Shop debt out of her own pocket.

SOAP

In 2013, Pedroza and Beebe were fired by Hayward as part of an alleged downsizing. Since the job loss came during the middle of the school year, the two were unable to find teaching positions. So they began making and selling soap.

But when the soap venture caught the attention of a writer for Fort Worth Weekly, the women agreed to an interview to tell the story of the publishing debacle that led to the soap business.

The article became serendipitous for the pair because it caught the attention of one of Hayward’s associates. The two received a cease-and-desist letter from an attorney of Hayward’s.

Terrified of what might happen, Pedroza sought out a publishing industry friend for advice. The friend handed her Farris’ card.

“My concern at that point was she may get sued over something,” Farris said. “You’ve got rights in the partnership, better to sue here first and force them to come here and counterclaim than to have them sue you in Australia.”

At issue was a confidentiality provision embedded in the agreement Pedroza had signed. The Weekly article violated the rules.

Pedroza sued in May 2014, claiming she was defrauded out of millions of dollars in royalties from the three Fifty Shades books. She said she received a total of about $200,000 in payouts and salary before she was terminated.

During a trial in State District Judge Susan’s McCoy courtroom, Farris, who is also an author and storyteller, convinced the jury that the four women involved in the publishing venture had a legitimate partnership. Through that partnership, they published the books and the business had a tax ID number – even if no formal contract was signed.

“Our job presenting it to the jury was not to let them get bogged down in the complicated details,” he said. “If they could understand the big-picture story, that basically this is a partnership and one of the partners ran off with all of the money.”

The jury agreed that the agreement Pedroza was coerced to sign was induced by fraud.

What may have sealed the decision was a pie chart shown to the jury that graphically depicted the amount Pedroza should have received and what she actually got.

“And there was a noticeable gasp in the courtroom when the jury saw that,” Farris said.

Hayward’s attorneys wasted no time appealing the ruling but McCoy ordered that $10 million be placed in the court registry until the case was settled.

“She had gotten $43 million from Random House yet was basically pleading to the judge that she can’t do that unless she liquidates assets, [she] doesn’t have $10 million,” Farris said.

In January 2016, McCoy signed an order awarding Pedroza $10.6 million based on forensic accounting. McGuire and Dimovski testified there was never an actual partnership and never made claims, Farris said.

The order was again appealed, resulting in the undisclosed settlement.

For Pedroza life is good again. She and her family moved to a new house, which they were planning to do all along. But she still drives the same car.

“I did learn who my friends were, so that was awesome,” she said. “I have some really good friends.”

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