In November 2007 I blogged about a wacky lawsuit involving the movie/book/TV phenomena called "The Secret" and an SEO, Dan Hollings. Several months have gone by and both parties have been busy.
Background Summary
The Secret (and all the international conglomerations and people that have a finger in ownership of The Secret) sued Hollings for trademark infringement and violations of his alleged duty of loyalty. The Secret's Complaint accuses him of profiting off The Secret's trademarks by selling his own merchandise under the brand, cutting unauthorized side-deals with vendors of authentic merchandise, and generally using his SEO knowledge for personal gain.
Hollings denies all the allegations against him in his answer to the complaint.
It is worth noting that Hollings and The Secret had been engaged in a dispute about money before The Secret filed suit. Hollings had informally accused The Secret of withholding compensation that he was owed. It is possible, although unprovable, that The Secret proactively filed a suit against Hollings to pressure him to drop his informal complaints about unpaid compensation.
If that was its intention, it didn't work. Hollings filed a lawsuit against The Secret in May 2007.
Hollings denies all the allegations against him in his answer to the complaint.
It is worth noting that Hollings and The Secret had been engaged in a dispute about money before The Secret filed suit. Hollings had informally accused The Secret of withholding compensation that he was owed. It is possible, although unprovable, that The Secret proactively filed a suit against Hollings to pressure him to drop his informal complaints about unpaid compensation.
If that was its intention, it didn't work. Hollings filed a lawsuit against The Secret in May 2007.
Hollings' Allegations Against The Secret
Hollings filed a lawsuit against The Secret in May 2007 alleging that he was supposed to be paid 10% of gross margins from the web-based marketing campaign. The parties did not have a signed contract. However, Hollings claims to have an email written from Rhonda Byrne, one of the key people in The Secret conglomeration, promising to pay him:
US$8,000.00 per month to broadcast plus a share of 10% of gross margins of all revenues from The Secret website. The revenues you will receive from this, in fact, will exceed the Nine Network's revenues as they have 10% of Prime Time's net profits, which will come after your share.Hollings claims he never received his 10% share of "gross margins of all revenues" (whatever that means), an amount that he believes is over three million dollars. Hollings also alleges that The Secret sent "numerous communications" assuring him that his portion of the gross margin would be forthcoming and instructing him to set up an LLC to receive the large sums of money.
Concluding Thoughts: Beware Pay-Per-Performance Contracts
It goes without saying that I don't know who is telling the truth in this matter. However, I do know that both parties are spending a fortune on legal fees. There have been extensive jurisdiction and discovery disputes. Is The Secret trying to outspend Hollings? Did Hollings get greedy? I don't know. But I do know the lawyers are doing quite well.
I've written before about the dangers involved in commissions-based or pay-per-performance contracts. There is tremendous potential for gain, but also tremendous risk. If you decide to take the plunge, make certain you have a solid written and signed contract. If the SEM in this case had a signed contract, he might not be in his current unenviable situation. Remember to get it in a signed writing!
There haven't been any rulings in the case yet about whether Hollings owed a duty of loyalty to The Secret by virtue of his relationship with the company. Generally, an SEO/M probably isn't an agent or fiduciary of his or her client. However, it is possible for an SEO/M to become an agent with special duties of loyalty depending on the nature of the relationship and the agreement between the parties.
To avoid unintentionally having a duty of loyalty to a client, expressly state in your contracts that you are an independent contractor, not the client's fiduciary or agent. Clarifying your relationship with clients helps them understand that you can work with their competitors and have no legal obligation to further their interests to the exclusion of others.
I've written before about the dangers involved in commissions-based or pay-per-performance contracts. There is tremendous potential for gain, but also tremendous risk. If you decide to take the plunge, make certain you have a solid written and signed contract. If the SEM in this case had a signed contract, he might not be in his current unenviable situation. Remember to get it in a signed writing!
There haven't been any rulings in the case yet about whether Hollings owed a duty of loyalty to The Secret by virtue of his relationship with the company. Generally, an SEO/M probably isn't an agent or fiduciary of his or her client. However, it is possible for an SEO/M to become an agent with special duties of loyalty depending on the nature of the relationship and the agreement between the parties.
To avoid unintentionally having a duty of loyalty to a client, expressly state in your contracts that you are an independent contractor, not the client's fiduciary or agent. Clarifying your relationship with clients helps them understand that you can work with their competitors and have no legal obligation to further their interests to the exclusion of others.
Best Regards,
Sarah
"If that was its intention, it didn't work."
This is so richly ironic given the main tenet of the Secret.
Thats just too bad. I want lift a finger if I don't have my sales agreement signed.
And get a deposit also. It makes the client commited to the project.
Second client I had I didn't ask for a deposit. Trying to get things like photos and text off of him was a nightmare, and the project ended up taking 3 times longer than it should have
I would go so far as to say that not only to get it in writing, but to make sure that you have a good set of legal eyes put on the contract. I have learned from past experiences what sounds good to you and I from a common sense viewpoint, doesn't always mean the same thing in a court of law.
Also if you can get a share of the corporation ownerhips based upon target incentives being met, puts you not only in a short term gain position, but secures a longer term annuity if the venture is profitable.
Great Advice Sarah.
It really is something that you have to watch out for. You need to make sure everything is in your contract and don't start work without it.
I have a client who, when their site was new and their site didn't have a good standing in google, my site ranked above them for their own business name. To a non-internet savvy person this may seem like I am using their business for personal gain, but it was just that my site had better pr and I had their site on my portfolio page. At the same time I had a contract to protect me even though they were furious at the time.
As their link building stategy took shape they finally ranked well, and they are very happy clients, with great words to say about the way I handle my business.
Having everything in writing is an absolute necessity. We have occasionally found that even after discussing it with our client, putting it in writing and signing the agreement, there are still differing expectations.
The second point about obtaining a deposit is also vitally important. With a somewhat shaky economy, businesses can become insolvent. At least with a deposit you have a partial payment for your time.
I recently found a contract with a client (negotiated by a client services director who has long since left us) which promised a performance bonus for 'every position' we maintained for the client.
Already a major client, this, if we took all keywords we were targeting and the 4 major engines, amounted to a guaranteed £800,000/month on top of our normal rates.
Clearly I approached the client and explained that we would not be holding them to this contract, but it does show how easily someone can be lead astray.
The client services director was useless, but at least this particular mess did make the renegotiating of contracts a lot easier!
Is that meant to be "unprovable", or "improvable"?
doh! spell check auto correct.
Thanks for the correction Burgo!
This was Helpful!
What an odd situation. It almost seems unlikely that Hollings can be telling the truth. The people that are all behind the secret seem to be highly successful individuals that have done business before. It seems unlikely that they would promise those sums of money without having a paper trail to back them up. Secondly, the fact that Hollings was selling "Secret" merchandise without their permission seems pretty shady.
And the promise of "10% of gross revenue from the web-based marketing campaign" sounds like a pretty sweet and fictional deal to me (plus revenue from the merchandise he was selling). As an SEO, it seems he was far overstepping his boundaries.
Thank you for reenforcing the need to put everything in writing and have the agreement signed. While I have never had issues even close to this, I have had a number of situations where the client expectations were different than what I thought and it just causes problems. Many times putting it in writing still doesn't clarify to the client at the beginning what you are promising to deliver because they don't bother to read it in detail or don't understand it. But if there are issues later you can return to the written agreement and at that point it becomes clear.
And details. If you hate details, learn to love it. So many times have things been in writing, and there have been disputes over minor details.
If people are getting detailed contracts signed before marriages, why skip it in a true business arrangement.
Hello fellow SEO professionals and marketers.
Dan Hollings here with a bit more fuel for the fire.
Rest assured, I'm enjoying the lively conversations, assumptions and wild guesses here at SEOmoz... I can only hope that everyone can learn from my experience.
Some of your inquisitiveness may be satiated by the recent cover page story below. Wish I could say more, but until I can... keep up the posting.
https://twurl.nl/abifov
Wouldn't it be great if we could talk about "marketing" for a change :-)
Enjoy!
Dan
Great Post!Keep it upFromSEMGURU
Edited to remove link