February 26, 1999


Judge Makes Literary Agency Reimburse Angry Clients

Several years ago, a business called the Woodside Literary Agency began posting messages in Internet newsgroups soliciting manuscripts from promising writers.

Instead of spawning a band of merry authors, however, Woodside left behind a troupe of dissatisfied customers. And that led to a lawsuit from the New York State Attorney General's office and, last week, a judge's order requiring the Queens-based company to reimburse clients and post a $100,000 bond to cover any future complaints.

Related Article
Queens Company Bilked Writers on Internet, State Suit Says
(November 27,1997)
Woodside promoted its business only in cyberspace, according to Eric A. Wenger, an assistant attorney general who helped handle the case. But in bilking trusting consumers, it was doing something as old as the hills.

"I think it shows that in a lot of ways the scams we see online are fairly typical of the scams we see in the real world," Wenger said.

The Woodside case is hardly unusual. Increasingly, as consumers and commerce migrate to the Internet, so do client-business misunderstandings, consumer grievances and outright frauds, according to business watchdog groups.

Earlier this week, the National Consumers League, a Washington-based nonprofit group, reported that complaints to its Internet Fraud Watch project about online ripoffs have jumped six-fold to 7,752 in the past year.

Part of the increase can be attributed to increased awareness of the gripe outlet, which has been operating since 1996, said Susan Grant, the project's director. But there is another reason, too. "All the news reports we see are that more and more people are going online, so they are also being exposed to fraudulent offers that abound in cyberspace," she said.

A majority of the complaints last year stemmed from consumer dealings with online auction sites, a business with little parallel in the off-line world, Grant said. In addition, the group received a variety of other strictly virtual complaints, such as those from small businesses charging that they did not receive online advertising they had paid for.

But many of the complaints grew out of online versions of tried-and-true scams. In the Consumer League's list of last year's 10 biggest complaint targets were work-at-home plans, dubious franchise offerings and pyramid schemes, she said.

And the most common complaints would sound familiar even to those who have never typed "www" on a keyboard: Consumers said that they either never received what they paid for or believed that the seller had misrepresented the delivered goods.

As the number of online consumer complaints has grown, so has action by a variety of law enforcement offices. The Federal Trade Commission, for example, has handled 58 Internet fraud cases since 1994, most of them within the last two years.


Internet links of interest to Cyber Law Journal readers

In the Woodside case, the New York State Attorney General's office filed a lawsuit about two years ago against the company and three people it identified as its principals, after fielding complaints from about 25 consumers. Half were Internet users merely annoyed by the company's frequent newsgroup advertisements. But about a dozen were writers who had paid Woodside up to $400, including a "reading fee" of as much as $150, in the expectation that the company would try to get their work published.

Typically, literary agencies do not charge the writer up front, but are paid a percentage of the writer's earnings after a contract is signed with a publisher. "Woodside made it sound like they were industry insiders and had the professional skills and experience to represent the consumers," Wenger said. "But if there was any evidence they did anything, it was blind submissions of manuscripts en masse to publishers."

Attempts to reach those named by the attorney general's office as company principals were unsuccessful. A lawyer who used to represent two of them declined to comment, and it was unknown if they have a new lawyer. But one person who was close to the case said Woodside had argued in court papers that it had not violated any laws and had provided a service to its customers.

Wenger said that in some ways consumers may be more likely to be duped by online schemes, because they think that what appears on a computer screen has automatic credibility. Indeed, he believes that for every one person who lost money to Woodside, there may be another 10 his office does not know about.

But in another way, Wenger said, consumers may be better protected in the Internet age, because of the widespread availability of instant information. He noted that a number of writers shied away from Woodside after reading complaints about the group posted by other writers.

"There was a significant number of consumers who avoided being scammed by availing themselves of the greater amount of information online," he said.

CYBER LAW JOURNAL is published weekly, on Fridays. Click here for a list of links to other columns in the series.

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