Tolkien Estate Sues New Line, The Hobbit Not Yet Threatened

[Voronwë the Faithful]

The silver lining in this (for some of us, at least, certainly not for you, soli) is that this may cause enough of a delay in The Hobbit that Jackson will be able to direct it after all. (Particularly when combined with the likelihood that New Line is likely to be folded or scaled back by Warner, and that The Hobbit is likely to then become a Warner film.

[solicitr]

Vor: There's nothing particularly unusual or 'shaky' in petitioning a court to set aside a contract in the event of material breach in bad faith, especially when compounded by fraud. "Your Honor, if these defendants make new movies they'll just rip us off again." Of course, I don't for a minute think the plaintiffs really expect to win that point, but it postions them tactically to 'settle' for judicial or 3rd-party oversight of the Hobbit movies' accounting.

Mind you, this only applies to NLC: as far as I can tell, Zaentz would be free to licence TH to any other studio, such as MGM/UA.

If the Estate REALLY wanted to play hardball, they could move in 2012 (1937 + 75 years) for copyright reclamation, voiding every single license or copyright assignment in TH JRRT ever made in his lifetime. The same could apply to the LR in 2010-11 (1954-55 + 56 years).

[Alatar]

Personally I prefer that the Movie go ahead as soon as possible, while people like Ian McKellan and Christopher Lee are still fit and well. Neither are getting any younger.

[solicitr]

Christopher Reuel Tolkien v. New Line Cinema Corp., Civ. No. BC385294

[River]

Apparently they did notice, Prim: the story reports that the Estate's lawyers have been negotiating for years, with no success.

Let's see:
Jackson had to sue New Line for his cut
Saul Zaentz had to sue New Line for his cut
The actors had to sue New Line for their cut
..anyone see a pattern?

What drives a company to behave like that? Did they really think they could get away with such BS?

[Voronwë the Faithful]

Very interesting (yes, I have read the Complaint).

[Primula Baggins]

And can you review it for lesser mortals?

[solicitr]

Can you link to the Complaint, Vor? Or did you get it on Lexis?

What drives a company to behave like that? Did they really think they could get away with such BS?

Because Hollywood studios have been getting away with this sort of thing for years. "Hollywood accounting" is legendary- cooking the books so that no movie ever shows a profit, and nobody with a contractual share in the profits sees a penny. One classic which turned up in the Art Buchwald case: buying airtime for a commercial in a given market- and then counting the cost of the ad buy as 'advertising costs' for every single screen the film was shown on in that market.

On the Mythsoc forum, John Rateliff posted a bit from Rayner Unwin's memoir, which described the eventual UA contract as running some fifty pages and being maddeningly unclear even to the lawyers- a source of uncertainty for forty years. I would really, really like to see the language governing the author's revenue participation.

[Voronwë the Faithful]

soli, I'll email you a copy (and anyone else who asks). I will comment further about it here as well, at some point.

[Primula Baggins]

I'm sure it would be Greek to me, Voronwë, so I'll wait for your comments (and those of others who understand it, too, of course).

[kams]

In one way, it is pretty good timing. NewLine is under pressure to get the Hobbit out before literary fantasy films run their course with the general movie-going public (not counting geeks like us).


I'm with Alatar, McKellan and Lee aren't getting younger. It would be horrible if that continuity were lost.

Would PJ (or his lawyers) be sought out by the Tolkien Estate to help or do plaintiffs tend to stay out of each others' way???

[Primula Baggins]

I can't imagine the Estate making any kind of overture to PJ; part of the family hates the films. Anyway, they are different disputes entirely, and PJ's has been officially settled.

[The Watcher]

Unless Christopher Tolkien can be placated, along with all of the lawyers that stand on the plaintiffs' side, I think "The Hobbit" movie project is effectively stuffed back into the box until a settlement with NLC or Time-Warner can be reached. I will be honest, I think this might be what breaks NLC's back - the lawsuit is NOT going to go away, not with such a phenomenal success of the three LOTR movies. Any attempt to move ahead on "The Hobbit" will certainly bring all the parties into the courts and some sort of injunction would be requested.

I certainly am seeing CT's and the Tolkien Estate's side here. They seemingly are entitled to their share of profits, and for NLC to dither and back themselves into a corner by being so uncooperative certainly is not anything in their favor over the dispute. Should NLC lose the rights to keep going with "The Hobbit" film project? I would tend to agree yes.

[solicitr]

OK, couple of interesting points:

1) JRRT's original 1969 contract with UA awarded him 7.5% of gross revenues, after such revenues exceeded 2.6 times production costs, and after certain specified cost deductions.

2) the $150M figure is a minimum, as in "At least $150M and probably a whole lot more;" the actual sum isn't known because New Line won't let the plaintiffs see the books. (The contract entitled JRRT to *monthly* financial reports!)

3) The plaintiffs are only seeking a court declaration that they have the *right* to terminate the Hobbit licence, not necessarily actually to terminate it (the Complaint alleges that the original contract gave JRRT the right to void it in the event of nonperformance).

4) There isn't complete detail on the creative accounting techniques, but some of those specified look familiar: especially New Line allegedly contracting services to its own subsidiaries at obscenely inflated rates. Another dodge, if New Line did it as alleged, is dead meat: subtracting out Zaentz', Miramax' and Jackson's cuts and trying to claim that what's left is 'gross.'



Given that NLC has already been sanctioned for concealing and destroying documents in the Peter Jackson suit, I expect Shaye & co are in for some very, very rough litigation. Basic Fact No. 1- these movies have generated billions of dollars, yet according to NLC 7.5% of billions somehow = zero. They don't dare let a California jury get hold of that.

Frankly they would be smart to consider selling the Hobbit rights to somebody else right now, since I don't see any way NLC or Warners could possibly proceed with it while this is pending.

[Voronwë the Faithful]

soli, while I don't disagree with your analysis of the Complaint, it is important to keep in mind that we are talking about a very brief, very biased summary of a very complicated 50-page long contract. What about the odd thing about the percentage only being 2.5% with regards to The Two Towers, as opposed to 7.5% with regards to FOTR, ROTK and TH?

I don't think that anyone else would purchased those rights now, with this litigation pending. The legal status is too uncertain. The Hobbit ain't gonna happen any time soon. I suspect that this litigation is going to be long and nasty.

[solicitr]

But Vor, there is no suggestion that *Zaentz'* rights are in jeopardy. In other words some other studio not connected to NL/TW wouldn't have to worry about this suit.

[Voronwë the Faithful]

Let's think about this for a second (which is very difficult to do without seeing the actual contracts involved). Zaentz actually holds the rights, which he has essentially "leased" to New Line for a certain period. Those rights revert to him at a certain point in the near future, if New Line does not make the film, right?

Okay, so now presumably as part of that "lease agreement" New Line agreed to take on the responsiblity of paying the Tolkien Estate et al. the 7.5% of the gross receipts, after such revenues exceeded 2.6 times production costs, and after certain specified cost deductions. So here is my issue. It seems to me that while New Line has a contractual obligation to the Tolkien estate regarding the payment of the gross recipts percentage, New Line's holding of the rights to make The Hobbit are a result of its contractual relationship with Zaentz, not its contractual relationship with New Line. It seems to me that the Tolkien Estate does not have standing to seek declaratory relief revoking that contractual relationship (or if they did, it would only be as a third party beneficiary, which they don't seem to be alleging). Or if they did have the right to seek such declaratory relief, it would be as to anyone holding the rights, and that in the unlikely event that they were successful at making that argument, the rights would revert to them, not to Zaentz.

So what am I missing?

[solicitr]

At least as the Complaint lays it out, there seems to be a direct chain of successors-in-interest from UA to Zaentz to Miramax to New Line, each stepping into its predecessor's shoes: thus privity of contract was maintained. Little different than when your original lender sells your mortgage or car loan to someone else.

What appears to be an alternate theory is asking for injunctive relief as part of a claim for the tort of fraud, on the basis (I surmise) that if New Line, specifically, were to proceed it would cause further injury to the plaintiffs.

When I have time I'll read it more closely (but in ignorance of specific CA law).

[Primula Baggins]

May I just say how great it is to have a rich supply of Tolkien-loving attorneys around at a time like this.

[Voronwë the Faithful]

At least as the Complaint lays it out, there seems to be a direct chain of successors-in-interest from UA to Zaentz to Miramax to New Line, each stepping into its predecessor's shoes: thus privity of contract was maintained. Little different than when your original lender sells your mortgage or car loan to someone else.

That's how I read it too. But wouldn't that then mean that if they were successful in getting declaratory relief that the rights would revert to them, not to Zaentz?