A lot of people worry about their contract with their literary agent, and it is very important that you read and understand your agency contract.
However, many authors are unaware that their agents also owe them fiduciary duties on top of the contractual duties. This is because agency, by its legal nature, is a fiduciary relationship. An agent generally owes fiduciary duties to the principal who appoints them (the principal in this case is the author).
We all hear the word “fiduciary” thrown around a lot in particular in the context of some aspects of financial and investment advice, in the trustee-beneficiary relationship, as well as in the lawyer-client relationship. In a number of common business situations a person acting on behalf of another is a fiduciary, usually because those duties are imposed by law. Agency is a prime example of that kind of relationship.
The scope of the fiduciary duties will vary depending on the situation. For example, trustees (who manage money on behalf of others) owe very significant duties to put the beneficiaries’ interests ahead of their own; to avoid situations where the trustee’s interests are in conflict with the beneficiaries’ interests; and to fully disclose relevant information to the beneficiaries.
A trustee or company director, for example, may breach the duty to avoid conflicts of interest if that person takes advantage of a business opportunity that should have been offered to the company or trust, particularly where the director or trustee only learned of the opportunity through acting in their capacity as director or trustee.
The conflict of interest duty is typically less problematic in an agent/author relationship if you think about it. In the usual agent/author relationship, the agent only gets paid if they make a deal for the author, and then they take a percentage of the royalties as their commission. In that situation, the author’s and agent’s financial interests are closely aligned because they both profit from the same deal and the agent does not make any money without making a deal for the client.
Likewise, the duty to put the author’s financial interests ahead of the agent’s is unlikely to be a particular concern in a standard author/agent relationship. Where the agent is simply taking a regular commission from deals brokered for the author, again the financial interests are aligned. The agent obtains a percentage of a deal brokered for the client and does not receive anything in the absence of a deal.
Of course, if the agent has a financial relationship with the publisher or a book packager entering into a deal with the client, the agent may be in a conflict situation or a situation where the agent’s financial interests in the deal come into question—because the same person should not represent both the buyer and the seller in the same transaction. In the modern publishing industry, it is not uncommon for an agent to represent a book packager, although it is unlikely that an agent will also represent a publisher as well as an author in the same deal.
Questions might also arise about the extent to which an agent shares information with a client. Fiduciaries are generally required to keep their principals informed of relevant information. A reputable agent will typically keep the client updated on attempts to make deals and their success or failure. Some agents are more transparent about other aspects of the relationship—the granular details of submission strategies, including updates as and when each individual editor responds to a submission and details of precisely what they said. However, there is no law that specifies precisely how much detail an agent must share with a client or how often. Even if it is clear that the agent has not been sufficiently communicative, a legal action for breach of fiduciary duty may not be all that useful because it may be hard to prove the client suffered any actual damage as a result.
The most significant aspect of the fiduciary relationship as applied to literary agents is likely the duty to handle their clients’ money appropriately; to timely pay royalties and provide statements of account. (The agency contract typically outlines these duties in contractual terms as well.) There have been cases where an agency or agency’s employee has embezzled funds from the agency. However, by the time you get into this situation, you have more problems than breach of fiduciary duty. There are likely criminal laws that have been breached as well.
Many fiduciary duties are expressed also as contract duties in the agency agreement, so if you ever do find yourself suing a literary agent, you may well be focusing on contractual, rather than fiduciary, claims (or a combination of both). As always, it is important to understand what your agency contract says about the duties the agent owes you as a client. Additionally, you can check out codes of conduct of organizations such as the Association of Authors’ Representatives (AAR). While these codes of conduct do not amount to legal obligations owed to the client (those come from contract and fiduciary law), they are a strong statement of the ethical duties owed by agents to authors, and agents who are members of the AAR agree to abide by those standards of conduct.