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Comment by koolba | Hacker News Reader

> The larger problem has the potential to affect every writer. Disney’s argument is that they have purchased the rights but not the obligations of the contract. In other words, they believe they have the right to publish work, but are not obligated to pay the writer no matter what the contract says. If we let this stand, it could set precedent to fundamentally alter the way copyright and contracts operate in the United States. All a publisher would have to do to break a contract would be to sell it to a sibling company.

That’s insane. If this were to hold up then any royalty obligation could be shuffled off to a shell entity?!

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Not just royalty obligations, you could apply this principle to any corporate acquisition and say that you're merely acquiring the assets and have no interest in acquiring the liabilities.

This is by no means a novel idea; the concept of fraudulent conveyance is frequently litigated: https://en.wikipedia.org/wiki/Fraudulent_conveyance

If corporations are entitled to some of the rights of persons, then I'd like some of the rights of corporations.

I'll take the asset of my house, without the liability of the outstanding mortgage balance.

You probably also want to be able to deduct all of your expenses from your taxes.

you declare your daughter a consultant and deduct all the money you pay to her as consulting fees. She uses the money to get haircut, lunch, dresses, etc. and deducts it from her consulting income as business expenses.

And her mom is a hair stylist, cook, and seamstress.

In the UK, had an accountant who did something similar for us. Want to avoid a bunch of taxes on large landscaped property? Get a few cows and goats and classify it as a "farm" property. Transportation charges and date-night dinners? Business expense.

Western tax laws were a joke to me as an outsider, heavily geared towards the haves. But hey, I was contributing to the economy too.

fakedang, that won't survive an HMRC audit.

Don't know about the UK, but at least in Canada setting up a fake farm is easy and popular https://www.bclocalnews.com/news/too-easy-for-fake-farmers-t...

Easily did for 4 years. A lot of it was perfectly legal as long as it wasn't overboard (funding grocery shopping as business expenses for example), wasn't recurring and wasn't too high without reason (funding your wedding as a business expense for instance).

The UK tax laws are a joke. As told to me by multiple HMRC auditors, and my accountant (who is funnily a former HMRC auditor). The US' laws are an even bigger joke. After incorporating on the mainland, I've found that Swiss/Liechtensteiner/Luxembourgian tax laws are actually pretty decent and exacting, in spite of them being criticized as a tax haven and all.

Also, was neighbours with a ton of Arab guys in Knightsbridge who used to offset the risk of being caught (since they were into active money laundering), by donating to the Tories. Disgusting, but it is what it is.

Gotta be careful with that sort of thing these days, HMRC has pretty strict rules on stuff like dinners and entertainment expenses. One of the rare positives of a decade of Tory rule is that they know all the tricks their chums are using, so they know how to close a few loopholes whenever they need more pennies in their coffers. But yes, some dodging is still fairly trivial.

From what I know of the Tories (since I've attended quite a few B&Ws) and even Labour (whose conventions are such a mind-numbing affair in comparison), they never touch donors. I found it quite funny that I could buy access to UK ministers for a pittance, while if I had to do the same in India, I would have had to consistently fork over a lot more and sell my kidney along with it. It's funny how you could get access to the PM for just 50k GBP a year, even less if it's a Labour PM, or how you can get access to Rishi for 25k GBP a year. It's also the reason why a lot of donors are Russian or Arab.

> It's funny how you could get access to the PM for just 50k GBP a year, even less if it's a Labour PM, or how you can get access to Rishi for 25k GBP a year. It's also the reason why a lot of donors are Russian or Arab.

If you could actually buy anything but an ear for your complaints access would be a great deal more expensive. That’s not to say this petty corruption of the democratic process is right but it’s like how a Russian would burst out laughing at the idea of a politician with bricks of cash in the freezer. In Russia the Chief of Police lives in a palace he obviously can’t afford on his salary and it’s very public, not something he tries to hide. In the US or UK if you have a freezer full of cash the police are going to get you eventually.

Take no small or secret bribes.

I wasn't talking of bribes, but Leader's Group and Treasury Group. Donations to parties are more than enough to move mountains.

Does move mountains mean something illegal or does it mean you can get a minister to get a civil servant to look at something? Because £50K a year will pay for a journalist/PR person who can also eventually get a civil servant to look at a thing. Access isn’t corruption, even if it is unfair.

If you mean form a cohort with other like-minded donors to influence policy, yes. Does it mean tiny favors here and there from time to time? Yes. Does it mean you can expedite yourself into a citizenship? No.

My dogs featured in a viral YouTube video and generated some income. I asked my CPA if I could deduct my dog food expenses. He said no. But I mean, if those dogs don't eat, they don't keep generating viral content!

huh! i'm in no way a CPA, yet my understanding from just occasional reading of the 1040 instructions is that in US you can deduct hobby expenses from that hobby income, it is just that the expenses can't be more than that income (for the expenses to be more than income it should be a "business", not a hobby. I personally find it pretty funny, something like a joke Q:"guess what is the difference between hobby and business?" A:"if you lose money than it is a business, if you make the money - it is a hobby!")

Just going to set up a double Irish with a Caiman sandwich to avoid paying any taxes.

No imagination.

I'm going to be a film company, get paid millions to work in different places, then have exactly zero profit when all is said and done.

Anne McCaffery lives in Ireland because royalties are taxed at a preferential rate.

Artistic output is exempt from income tax (https://www.citizensinformation.ie/en/money_and_tax/tax/inco....)

Only up to a small amount yearly now. It used to be everything but they changed it a decade ago.

Worth nothing that this 'small amount' is 50,000 euro. Which is almost double the total income of the median fine artist or writer.

Sources:

Exemption - https://www.citizensinformation.ie/en/money_and_tax/tax/inco...

Writers salary - https://www.irishtimes.com/culture/books/the-500-a-year-care...

Artist salary - https://www.glassdoor.ie/Salaries/artist-salary-SRCH_KO0,6.h...

Sure, but for Anne McCaffrey/many famous authors who moved to Ireland it's a really small amount.

I agree with the cap, as people earning more than 50k p.a. from their arts don't need it.

As a writer I do too. There are many issues with the scheme, primarily around the elements of 'writing' which are technically essential to making a living (teaching, talks etc), but not covered in the requirement that income be primarily from writing. That said, it shouldn't be an excuse for very wealthy people to use Ireland as a tax haven. We already get enough of that with the corporate tax rate.

I'm honestly quite surprised that someone hasn't already set up to offer "Tax Havens As A Service" long ago. Click a button, pay $100, and you're incorporated in what's commonly known among the .01% as a "tax-proof structure". Why hasn't this been done yet?

Like most "exploits as a service", this only works if your volume is small enough to not make it worth shutting you down. The 0.1% get their privileges by being small in number and well-connected enough to deal with legislative retaliation. Once everyone starts bending the rules the rules bend back.

This happened in the UK: it was very common for IT contractors to set up companies to get preferential tax rates, until the "IR35" reforms targeted that. Lots of the Crown Dependencies and Overseas Territories make their livings from tax avoidance; the Paradise Papers caught out a lot of celebrities using their services. https://www.theguardian.com/news/2017/nov/14/after-successiv...

Look down https://thebanks.eu/compare-countries-by-banking-sector and do a rough division of size of assets by size of country, and you can estimate which countries have the biggest tax avoidance industries.

Nearly a trillion Euro sitting in the Cayman Islands? Bank soundness "n/a"? Seems legit.

Jersey (pop 97,000) and Guernsey (pop 67,000) more assets than Romania (pop 19,000,000)? Seems legit.

I don't think it's solely/mainly a question of volumes/numbers and being sufficiently well connected, though no doubt it is a factor. In my experience the 0.01% are privileged to play by the book, but have an advantage over the rest of us in having access to a whole library of books to choose from, and the money to hire experts in book-selection and lackeys to manage the whole affair on a day-to-day basis. That's the stuff a Tax-Haven-As-Service outfit would have to solve behind the scenes.

Most of these tricks involve entities-in-cahoots across multiple (usually at least three) jurisdictions, so I imagine it might take quite a LONG time before the various legal authorities in all relevant jurisdictions get sufficiently coordinated to have effective regulations in place. The evidence that this is the status-quo is that it exists, and has not, to date, been "solved" by any one government. Unfortunately it's just too expensive a solution to justify itself for us proles.

eta: Also Alderney (pop. 2000-ish)

I have looked into what it might take to pull off some of these tax avoidence strategies for an average, upper middle income person. And the issue isn't just the knowledge, it's that you need a certain size before things actually start to meet the threshold of what the IRS and other foreign tax agencies consider legitimate.

One specific issue I remember running into was the strategy of offloading intellectual property to an offshore entity.

That entity needs to have staff and be at least doing something in regards to the business. I don't think you could get by just having an employee less or even shared entity holding the intellectual property. Because just an empty shell company is going to be seen purely as a tax avoidance play with no other purpose.

Yes! I remember that being suggested in the Panama Papers discussion and adding that it’s an ideal startup idea.

https://news.ycombinator.com/item?id=11418909

Question still remains: why hasn't it been done yet? ;)

Yeah I'd love to know the experiences of anyone who has explored this.

Edit: Ah, one thing I didn't think of in my praise of the idea, is that this services doesn't give you a moat -- anyone can copy your forms, structures, etc. for getting the scheme set up.

A guy here in Aus does pretty much that.

https://inqld.com.au/insights/2020/09/22/how-a-gold-coast-je...

You jest, but as an unincorporated sole proprietorship (aka if you do random freelance work on the internet without making a company) you can deduct all your business expenses (including the part of your apt rent that you used for doing the profit making activity) just as a normal individual.

Sadly (or not), the deductable changed and it's not as worthwhile unless you really go for the gold. I heard maybe it changed with recent laws?

This is obviously not tax advice, but I think the earlier poster is referring to reductions to AGI that are on "schedule C" titled "profit or loss from business". Some tax language seems to refer to these as "deductions", but they are distinct from the "itemized" or "standard" deduction. Schedule C goes to Schedule 1 goes to 1040 line 7a. The standard or itemized deduction is on line 9. The Qualified Business Income Deduction on line 10 is another AGI-reducing gimme for people who get 1099-income distinct from the standard or itemized deduction. And don't forget, your eligibility for Marketplace plans including subsidies is based on your (Modified)AGI, not your gross income, which can be a costly mistake (Based on what I understand now, in 2020 my household would have been able to get a marketplace plan with subsidy but we didn't due to not understanding the income guidelines).

(note: I may have mixed referring to 2019 and 2020 tax forms here, particularly wher I cited line numbers)

Not tax advice, iana accountant, etc.

I think in canada (where i live), you can just deduct all the business expenses (things that are part personal like rent have to be the reasonable porportion related to the business). You can't deduct more than the income from the business in a year, but you can carry over your expenses to the next year if you have more expenses than income.

Ah yes. Good old "Your Name Inc." that also charitably houses and feeds its only employee in their office space.

I'm only half joking because I'd like to see that tested in court.

It's already been tested in court - in several jurisdictions. It's fine for your (or any) corporation to house you, but you can't get a material impact from it. Either you have to pay market rent, or claim the taxable benefit.

In a similar vein, private equity firms seem to be able to execute leveraged buyouts of companies (such as Toys R Us) saddling the company with huge debt payable to the private equity firm, which sucks money out of the company until it files for bankruptcy.

It sounds like a scam but apparently it is legal somehow.

That's not a scam; it's no different from buying a house on a mortgage. Paying down the debt sucks away your income, and maybe if you're not as successful as you'd hoped then you default and walk away. Generally companies only put themselves in that position if they're near-bankrupt already (certainly that's the case with Toys R Us - if it hadn't been for the private equity deal they'd have been bankrupt 5 years earlier).

And they're not the only retailer to collapse after a private equity buyout:

https://slate.com/business/2020/01/private-equity-retail-fai...

The first theory is interesting: "sometimes, private equity firms really are just looters."

The high bankruptcy rate is not encouraging.

https://www.washingtonpost.com/business/2019/07/24/private-e...

etc.

And some of Toys R Us' creditors aren't happy either:

https://www.bloomberg.com/news/articles/2020-03-13/toys-r-us...

Is it really a surprise that retail is in trouble? Private equity is a scapegoat for outdated business models. Covering up a non-viable business with the appreciation of your buildings is an accounting trick (and was a big factor in the 2010 crisis: a lot of companies went bankrupt not because their businesses suddenly became unviable, but because their businesses had been unviable for years but they made a profit on the value of their buildings); selling off the building while it's still worth something and letting the actual business stand or fall on its merits is a better approach.

This is all true.

The question, however, is: given that all these companies are already on the brink of bankruptcy, how is it legal (and acceptable) that a 3rd party comes in, extracts hundreds of millions from the already bankrupt company, and when the bankruptcy does arrive, it is bigger and worse than what would have happened without the PE involvement? Basically everyone except the PE gets screwed.

I have not been following this closely, but if the 5-10 PE deals I’ve looked at over the years, it was clear from day 1 whether it was structured to have a chance at recovery, (some of which succeed, and some fail) or just to enrich the PE buyer.

I wonder why this isn’t clear to the creditors - my guess would be that an early legitimate creditor only uses “other peoples money”, which legitimizes it for others.

Often a PE buyout is a bankruptcy, or a last-ditch alternative to one. Breaking the company down for parts is often what the creditors want, explicitly or otherwise, and the PE firm is just being paid to execute it. (There are definitely cases where one creditor arranges things to screw over another - but again I think blaming the PE firm for that is misplaced.)

They have their share of failures like any other industry, but IME Hanlon's Razor - or just legitimate risk-taking that doesn't pan out - applies to most PE bankruptcies.

> The first theory is interesting: "sometimes, private equity firms really are just looters."

Looting implies that the objects didn't belong to you. If I buy a cheap crappy old car to sell of the spare parts, is that "looting"

> The high bankruptcy rate is not encouraging.

That doesn't have much to do with private equity, the entire sector is in deep shit. It's not like Toys'R'Us was a model of health...

> And some of Toys R Us' creditors aren't happy either:

That's a more serious question, and will need to be resolved. Keep in mind that if the creditors aren't happy, they won't lend money again to companies owned by those PE firms. So it's not like there are no consequences

It is possible to do legitimately but it is also frequently done as a profitable game for the investor, who pays for the company with a loan that they pay back out of the company once they own it, sells off assets to his friends or a shell company and then declares the company bankrupt before selling it too.

It is a well known phenomenon - the book Glass House covers the destruction of Anchor Glass this way in surprising detail.

More background: https://prospect.org/economy/last-legislation-stop-private-e...

> who pays for the company with a loan that they pay back out of the company once they own it, sells off assets to his friends or a shell company and then declares the company bankrupt before selling it too.

None of this makes sense. if the company is profitable enough to be able to pay back its entire market capitalisation, why would they sell the assets off? If the cow is making that much milk, they'll keep milking it, or float it back and make a fortune

The company is not profitable, but accounting somehow makes it possible to pay dividends to new owner.

the money has to come from somewhere... either the money was in the company, in which case it was drastically undervalued, or it comes from creditors, in which case if they want to lose their money it's their problem

Or, a loan was taken - repayment of which is supposed to take precedence over dividend distribution and dealing with related entity. And some apparently legal accounting tricks allow the loan repayment to lose its precedence, and when time comes to repay, suddenly there is no money.

It is indeed the creditors money that is lost. And AFAIK it is legal. I just wonder why it’s legal.

Much like in the subprime crisis, the original creditor knows quite well the likelihood of recovering the loan is low, but they sell it to a dumber creditor (often pension funds) who does not.

Unlike toysrus and hostess, the subprime thing included a huge mount of illegal things by many of the parties, but still hardly any enforcement - so I guess it doesn’t matter all that much if it’s legal or not.

> it's no different from buying a house on a mortgage.

It's very different.

The mortgage equivalent would be an investor taking out a loan to buy out the mortgage, transferring the deeds of the house to themselves. And then transferring the loan into the mortgage-payer's name and making him responsible for paying it off.

They've really done nothing except use their superior credit status as abritage to obtain a tangible asset.

That's not a scam; it's no different from buying a house on a mortgage.

It's very different. A PE firm borrows money, buys a company, transfers the debt to the company, strips the assets and then lets it go bankrupt, leaving them with all the assets and no debts. Rinse and repeat.

You can’t “transfer debt”. Otherwise I’d borrow a ton of money and transfer the debt to Bill Gates. A PE firm borrows to buy a company, attempts to make it a better money making machine by making process improvements and having it borrow to fund expansion and then sells it. The people who lend to the company know what they’re doing. They’re making a bet that the PE firm was right and they’ve made a better money making machine. Sometimes they’re wrong and they lose this money. That’s capitalism. If you make a bad investment you can lose all your money.

If you followed toys r us or hostess (or many other such cases), the playbook is that the “money making machine” takes on new debt pays dividends to the PE, and then fails to pay that debt. This is apparently legal, the question is mostly how this loophole still exists despite being (ab)used by PE so many times.

It’s not a loophole. It’s people lending money to people who can’t pay it back. That’s capitalism. You make a mistake and lose money. It’s the exact same kind of mistake as lending to a wannabe restaurateur whose restaurant fails. You lent money to someone who couldn’t abide by the terms of the loan. As the lender that is your problem.

Sorry if I am being obtuse but I don't think that Toys R Us lent the PE firm money to buy Toys R Us. But somehow Toys R Us was responsible for paying back the debt that the PE firm took on to buy Toys R Us.

The PE firm should have more skin in the game, if they take out a loan to buy Toys R Us, they should be responsible if the company fails.

> That's not a scam; it's no different from buying a house on a mortgage.

When I buy a house on a mortgage, I (not the house) end up with the debt, and I don't get to transfer any of the assets associated with the house to myself in a way which makes them not subject to repossession if the mortgage isn't paid.

So, yeah, the deals we're talking about are very different.

Personal mortgages are non-recourse in most states. You can get whatever value you can out of the house, then walk away, and the lender gets to keep the house but they can't come after you.

> Personal mortgages are non-recourse in most states.

12 out of 50 is not "most".

https://www.forbes.com/advisor/loans/recourse-loans-vs-non-r... ["In all but 12 states, home mortgages are also considered recourse loans. If a borrower is underwater on their mortgage—meaning the outstanding debt is greater than the value of the home—the bank may not be able to recoup all of its money from a foreclosure sale. In this case, the bank can get a deficiency judgment for the difference between the debt and the foreclosure sale price and then garnish the borrower’s wages or file a lien against other assets."]

> it's no different from buying a house on a mortgage

If you find a bank that lets me pay myself a "tenant fee" for living in a house I bought on a mortgage, please let me know, I'm all ears...

What I don't understand is why a bank would loan money to a leveraged buyout when it so often ends in bankruptcy.

PE can lend to its owned assets. Accumulation of capital is powerful in that way.

I think we have to be careful of sampling bias - nobody ever hears of the leveraged buyouts that work smoothly

Acquiring the assets without the liabilities makes no sense. Does it legally?

It's the same for warranties. I was lucky when I replaced my HVAC system in that I got a manufacturer's warranty. A coworker who did the same six months later got a vendor warranty. Then my company and his company sold out to a third one and suddenly nothing was covered because the third only bought the assets of the first two companies.

I was able to get my heat-exchanger covered but not the labor because, oddly enough, their labor cost for me suddenly increased by the amount Goodman specified as usual and customary and that's saying nothing about scheduling fees and truck-roll fees (and convenience fees for paying with a card, and a "collection" fee while I argued with them about all the insane fees).

His heat-exchanger (also a Goodman) wasn't covered and he ended up just straight up eating a 3.5k repair bill.

He and I both submitted paperwork to the state attorney general's office but the company "changed management" to the dude's wife and that restructuring meant we were SOL.

> He and I both submitted paperwork to the state attorney general's office but the company "changed management" to the dude's wife and that restructuring meant we were SOL.

Is the "dude" here the state attorney general, or someone else?

Dude is the owner of HVAC company #3.

Note: ADF is not being paid royalties. The books at issue were written under a work for hire agreement, so his original employer owns the copyrights. He was paid for his work.

That employer also agreed to pay him out of the books revenues, and that is the obligation Disney claims it did not acquire when it acquired the assets of the company.

If the royalty-like payments were part of a separate agreement from the work for hire agreement, Disney would be correct about not owing ADF any money. However, if the payments were part of the WFH agreement then Disney could be wrong, but it depends on how the WFH agreement was written.

WFH needs to die. You couldn’t do this in Europe, I think.

> WFH needs to die

That would be a bit extreme wouldn't it? So no more freelance developers?

If that meant redistributing some of the massive profits that developers generate only to be amassed by companies and execs, I wouldn’t see it as a bad thing.

But to be honest I was thinking more about relatively simple works of art. Books, comics, and songs, are typically made by a handful of people, often a single one; these processes should be completely excluded from WFH, since the final product is evidently and inextricably linked to the authors’ own skills and names. (Movies are more complicated, but credits in that area are strictly defined by unions and vigorously enforced.)

If these companies and execs are surplus, why don't the devs just create their work and run the business and assume all the risk themselves? In fact some already do. Nobody is making them take employment, earning a guaranteed salary regardless of the success of the business as a whole. They can take the work or not, its a straight forward tradeoff.

This is the problem I have with this anti-capitalism rhetoric. There's nothing to stop people forming worker owned cooperatives, creator owned companies, etc if they want. In fact some people do exactly that and can be very successful, so clearly the regulatory framework isn't inimical to that sort of organisation. It's a perfectly legal ownership structure. So go and do it, and let the rest of us exercise our freedoms to do otherwise if we choose.

Why are you so hellbent on dragging this on a completely off-topic discussion...? Nothing in my comments was anti-capitalist, I just said too much surplus is being accrued by certain elements and this might not be the just and ideal balance. Please point to where in my comments I asked for the abolition of capitalism.

The real point remains: WFH in certain fields of endeavour is patently ripe for abuse. Or are you sincerely happy with the way DC Comics treated Simon and Schuster? Or the way Marvel treated Jack Kirby? Or, to get back on the issue of the day, what Disney is now doing to Mr. Foster?

That annihilates all knowledge work. If I can’t sell the products of my intellectual labour companies can’t have employees produce patented or copyrighted work for them.

If you cannot have work without abusing one's IP rights maybe it's a symptom that the current setup is fundamentally unfair and exploitative towards developers.

Regardless, see my other reply [0] in this thread for the actual scenario that I had in mind, which can likely be accomplished without any economic armageddon.

[0] https://news.ycombinator.com/item?id=25147379

I used to run a nice website that paid $50 per (short) article to hobbyists under a work for hire contract. The amount of hassle involved in trying to deal with royalties would have meant we’d simply not bother publishing them at all.

Any chance you can provide a source for this? It would be informative to know a few more details about the situation...

This is a good resource about WFH in general. https://www.upcounsel.com/work-for-hire

Generally, a novelization of a preexisting script (such as all of the novels that ADF is complaining about) is a "commissioned" work, meaning that it is a WFH under American law. As a WFH, the commissioning employer would own the copyrights, and an author would not be entitled to royalties because they aren't licensing a copyright from them. To the extent the author might receive any ongoing payments, those would generally be "performance bonuses" for reaching milestone sales. It is extremely rare for commissioned works to be subject to royalties, and that generally involves novelizations.

Interestingly, ADF is claiming that the payments are royalties. (https://www.theverge.com/2020/11/19/21578621/disney-alan-dea...) Given Fox's history of non-standard/talent-friendly legal practices during the era in question (see, e.g., letting Lucas keep the rights to Star Wars), that sounds like something that 80's era Fox would have done...with respect to the Aliens novelizations.

Something is off with how both sides are characterizing the agreements. Disney claims it didn't acquire any liabilites--but both the Fox and Lucasfilm acquisitions were stock acquisitions, meaning that acquired companies inclusive of all assets and liabilities. And ADF is claiming that WFH agreements included royalties, which is extremely rare.

Ultimately, unless someone coughs up a contract, there's no way to be sure who's right here.

That's exactly the info I was looking for thanks!

Yes.

Which has already been attempted, not least in romantic fiction where a certain well known publisher did exactly that - channeled sales through a shell company which allowed it to pay a hugely reduced royalty rate based on the publisher's net income.

That didn't end well, and I doubt this will end well either. It would be very surprising if there aren't multiple writers involved, and this will most likely go through an expensive class action or at the very least an expensive out of court settlement.

Whatever Disney's bean counters and lawyers believe they are saving is going to be wiped out in a few weeks of bad PR when core fans hear about this.

> when core fans hear about this.

They might be banking on news not reaching core fans because of all the noise in the news. It feels like it's not the first time they are treating their creators like trash. Here's Don - the best Donald Duck comic writer of all - Rosa's story about that: https://career-end.donrosa.de/

Incredible. Thanks for posting this.

I doubt a bunch of kids will be inclined to take action against Disney for this. They wouldn't even know what's happening, nor will their parents. Guessing Disney is counting on this for the case to be a non-issue.

> Disney’s argument is that they have purchased the rights but not the obligations of the contract.

Unless it says that's allowed in the original contract, that's absurd...can't see that holding up in court. Disney is probably banking on using their legal teams to drag it through court and hoping he gives up. Wouldn't be surprised if they're doing this to dozens/hundreds of individuals.

In this case, as a "debt holder" of sorts, wouldn't the class of writers also need to sign off on the M&A?

Even if Alan Dean Foster gives up, his estate will still be owed. Or he could possibly sell the debt owned to a debt collector brave enough to tackle Disney. The issue isn't going to disappear over time.

Neither are the teams of lawyers that Disney keeps on payroll. They’d rather you litigate with them and get a settlement than start honoring their obligations.

Ah, the mustache-twirling villain theory of corporate law.

They are likely doing that to tons of people.

I wonder if it’s just a case of corporate laziness. Lucasfilm produced tons of Star Wars “extended universe” material from different authors. Maybe some middlemanager just went “eh, paying them all would take too much time. Let’s just pretend they don’t exist. If they complain, we’ll fob them off.” Could also be a reason for chucking out the extended universe at a narrative level.

I wouldn't attribute laziness or even negligence to what could be purposeful malfeasance in the case of any corporate entity. From my experience it's usually the latter over the former.

Reminds me of how Paramount claimed Forrest Gump lost money because they owed Winston Groom 3% of the profits. So they found a way to make it not profitable.

https://konvexity.wordpress.com/2013/01/12/what-accounting-l...

> He went to their office to have a look at the accounting books and found out that they were making $80 million loss. So he looked down at the expense items and he noticed a big expense item of $140 million.

This is how every major film works. Sometimes that offset will be for future films, sometimes it will be a charge for "marketing and promotion" paid to a child company of the studio, but no matter what you call it you don't make a blockbuster film without this kind of funny bookkeeping.

Warner Brothers claimed a $167 million dollar loss on Harry Potter: Order of the Phoenix, a film that made nearly a billion dollars in theaters.

https://www.slashfilm.com/insane-studio-accounting-warner-br...

See the incredible profit/loss sheet there.

Top talent – A-list stars – negotiate for gross points. Daniel Radcliffe likely made a percentage of 600 million. Secondary stars might've got a percentage of gross after the "distribution fee" (paid to the same studio making the movie). Everybody else got a percentage of negative one hundred sixty seven million.

There's a similar story about Star Wars not making a profit, and how that screwed over various actors on the project. Hollywood does this all the time. It's their standard dirty accounting practice.

From: https://en.wikipedia.org/wiki/Hollywood_accounting

> According to Lucasfilm, Return of the Jedi, despite having earned $475 million at the box office against a budget of $32.5 million, "has never gone into profit".

> The judge said: “The case dismissed. You got what you deserved.”

this story really bums me out - I thought judges were supposed to interpret the essence of situations like this and say something like "nice try Paramount but I say you owe this man $10M" gavel slam.

RIP Winston Groom

I'm sure if they played the same shenanigan's with government's money (i.e. their taxes) instead of authors' money, the outcome would have been different.

I rather like the idea, actually. I'll set up two LLCs. One will buy a copy of every Disney movie. It will sell the RIGHTS to use those movies to the other, but not the obligations. That second LLC can then make infinite copies of those movies and sell them for profit, legally, under Disney's interpretation.

They will, of course, argue that your LLC never bought any right to make and sell copies, so that right could not be passed on in a resale.

I think there was a case in the WTO the US lost that gave Trinidad and Tobago the legal authority to violate US copyright up to a certain amount...

That's their interpretation of the contract. In the sale I have chosen to interpret it differently, much as they have.

I guess I don't have to feel bad about republishing Disney's IP now. After all, I purchased it from a retailer intermediary and have no contractual relationship with the original publisher.

Nahhh, it's just good business(tm).

"I have altered the deal. Pray I don't alter it any further." - DV

Ironically enough, that too is now owned by Disney.

I am guessing that Disney is concerned about setting a precedent for their negotiations with other entities, hence the attempt at getting an NDA. That said, I think they've taken an untenable position.

Book publishing rights are usually sold as a contingent right, kind of like an option, where the publisher is allowed to print the book so long as they pay out royalties. It would be very convenient for Disney to be able to separate the right and the obligation, but that would be similar to purchasing the right to a subscription service from a bankrupt company, and deciding that one did not have to pay for it, because that obligation was left to the defunct organization.

The books in question are novelizations; the contracts for those may be different.

Not all the books are - Splinter of the Mind's Eye, for example, is not

Cool... so Disney's stance is "we think we don't have to pay you for your work, if you disagree, you can sue us, but mind you, we have lots of lawyers and very deep pockets"?

Probably this wouldn't work as well for smaller publishers, who have less deep pockets and who authors could boycott for such shenanigans, but still very worrying...

This is the direction most of America is going. A surgeon and his colleagues I used to work with brought up the point how they often had to approach litigation of insurance companies regarding claims to pay for services rendered. I mean, their time is expensive, I get it, but this whole idea of forcing everyone to litigate transactions essentially puts the onus on the one with lower capital resources to pursue legal recourse.

Corporate structures are aware of this and play the statistics as to if they'll pursue the proper action or simply take the infraction to court. This creates a new barrier to entry for people at large wishing to be fairly compensated: resources to litigate.

To me, this shows just how misaligned modern corporate entities interests are with society and it's only going to get worse. These are, IMHO, some of the greatest threats to our society because they are legal, have a long history of legal precedent and are threats that come from within our own society.

It's just insane enough that I want to wait and hear "the other side" before passing judgement. Are there any other details that might have been left out for example that make it a less clear cut case of theft than what is depicted in the letter?

Agree this sounds so beyond believable - will be interesting to hear Disney’s response

To clarify - I'm saying this is a terrible situation and it will be interesting to hear Disney's side because it is so unbelievable to me that a company would just literally argue this line of logic without there being something we are missing.

If there is nothing missing, then shame shame shame

SFFWA is a well known professional organization, that has been around a long time, why would one not accept the gravity and import of this news conference and announcement? I mean, the details are plainly presented! Is any institution to be trusted or taken at face value? Are we all to be completely bereft of common sense and decency in face of such rampant equivocating and hand waiving!

Splinter of the minds eye may not have been the best novel, have mercy please!

I loved that book actually.

> I loved that book actually.

I liked it too, Alan Dean Foster did some nice worldbuilding there (that ended up very non-canon) that you don't usually see in franchise novels.

Another good example of this that comes to mind is 'Spock's World' by Diane Duane (though I think most of the worldbuilding there did become canon).

The other ADF movie novelization I recall fondly is 'The Last Starfighter'.

The other side is the question "is this news?"

Everyone thinks their circumstance is "precedent setting" and something to pay more attention to than other things, but the question here being is it?

You can buy assets without liabilities. There isn't something to find out... or is there? Yes, you and them just noticed that this could undermine all royalties by just shuffling them off to a shell company that has no ability to pay. But are you sure it hasn't always been like that?

For example, many jurisdictions require a tax when a car is sold. But you can always buy the LLC that happens to own a car and no tax event occurred. The only point of this example - not as an analogy to this case - is that the feature was always present and it avoids a transaction. Could this deprive the state of revenue? Yes, yes it could, astute observation, moving on.

This article and complaint makes it seem like it is groundshaking, but did the earthquake really come decades ago and nobody used their platform to notice?

I am reserving judgement on the legal side for that purpose. Can we shame Disney for taking that approach, sure. But attempting to get a reputable legal advocacy foundation involved for a reality that already has existed for an unknown amount of time seems like misdirection.

The asset in this case is a license agreement. By choosing to publish the licensed material, they're agreeing to pay royalties. Otherwise it's theft.

Otherwise what's stopping me from selling my Disney BluRays to someone but not the liabilities of adhering to the copyright agreement?

So it might not be quite that cut and dried. A little digging shows that Alan Dean Foster was contracted to write two novels. Despite writing them, he never held the copyright on those novels.

That being said, it’s still quite likely Disney is in breach of contract. But it’s not quite as simple.

It is if the contract says he’s owed royalties on those works, as it is presented. I can’t imagine he’d have done the work pro Bono for Lucasfilm out of the kindness of his heart, do you?

The reasonable interpretation is that someone at Disney is attempting to shore up their revenue this year and is using Mr. Foster’s due proceeds as a way to attempt to make their balance sheet look better.

I imagine that 100x Alan Dean Foster’s back royalties wouldn’t even be noticeable on Disney’s balance sheet.

The only reason I can really think of them doing this is that they don’t actually believe they owe him the money.

It’s reasonably clear that he never held the copyright to the works and it’s not public what his actual contract was.

> I imagine that 100x Alan Dean Foster’s back royalties wouldn’t even be noticeable on Disney’s balance sheet.

Disney could be doing this at scale to many authors, this announcement by SFWA may bring a bunch of other complainants out of the woodwork.

The other aspect is that while what you say is certainly true of Disney as a whole, the amounts may be more meaningful for some subsidiary or division, (like, you know, their publishing arm) and the exec(s) that head it.

That was my understanding. This is work for hire meaning the copyright holder was the prior company and was the only one with an asset that would require a usage license. They chose to pay Alan, which is not a statutory agreement.

The copyright holder (the company) is the only one that can levy usage licenses aka royalties that other people need to pay it.

Disney became the copyright holder and so Disney is owed royalties from whomever has a usage license that the previous company negotiated.

Anything else is a liability that was shed or simply stayed in the now defunct company. If the contract was irreconcilably tied to the company then Disney would opt not to buy the shares and instead by all the assets and network and trademark.

What's stopping you is your lack of access to white-shoe law firms vs Disney's excellent access to same

Please provide some precedents for shedding liabilities while retaining assets.

There are some tricks. "Spin off" a new company with all your pension liabilities and your unprofitable assets, whaddaya know, the new company goes bankrupt. Then the courts can give the pensioners a haircut since the debt they're owed isn't secured.

https://www.reuters.com/article/us-patriot-bankruptcy/bankru...

Peabody may have spun off unprofitable operations and let them crash but how did it sepate assets and liabilities for the same operation?

In the US pension system, are the pension payments somehow delayed from the actual date that liability is accrued, i.e. the day the employee gets paid the first time? Is it legal for a company to pay a salary to their employees without having the financial assets to back all other liabilities? I can somehow see the twisted reasoning behind this, but it still feels wrong.

Asking this as a foreigner and because such a system sounds so ripe for abuse that it would have already been fixed if it really was flawed and affected those pensioners' lives.

> That’s insane. If this were to hold up then any royalty obligation could be shuffled off to a shell entity?!

Why would this be surprising? If that was hired work (instead of licence for IP) for company A, then IP owner is company A and obligations to author are just contractural payments unrelated to IP ownership. Company A then may sell IP ownership to company B, while keeping contractual obligations to pay for contracted work to author.

It seems not much different to a case when you buy a house from a developer, while the developer is still owing money to contract workers / builders.

> Company A then may sell IP ownership to company B, while keeping contractual obligations to pay for contracted work to author.

As has been noted elsewhere in this discussion, Disney didn't just buy LucasFilm's assets, they bought LucasFilm, in a straightforward stock swap.

That simply doesn't provide the opportunity you're describing. LucasFilm wasn't left behind as an obligation riddled shell.

I'm pretty sure that if Disney could point to some legal entity other than themselves that was left saddled with the obligations, they would do so.

Perhaps they just haven't done so yet, so we'll see.

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