Agreement reached with New Line, HarperCollins

Removing a roadblock from production of “The Hobbit” films, New Line has settled with the Tolkien Trust and HarperCollins in a suit over profit participation by Tolkien’s heirs in “The Lord of the Rings” trilogy.

Terms of the settlement, announced Tuesday, were confidential. The trust noted that the settlement allows the New Line/MGM films based on Tolkien’s “The Hobbit” to go forward without legal challenge.

“We are pleased to put this litigation behind us,” said Alan Horn, prexy of New Line parent Warner Bros. “We all look foward to a mutually productive and beneficial relationship in the future.”

The case had been set to go to trial Oct. 19 in Los Angeles Superior Court. Shooting on the two films, directed by Guillermo del Toro, is expected to begin next year with releases set for late 2011 and 2012.

The Tolkien Trust and HarperCollins filed the suit in February 2008, alleging New Line had failed to pay at least $220 million to members of the trust. The plaintiffs had asserted that under a 1969 contract, the trust and other plaintiffs were entitled to 7.5% of gross receipts from the three films — which grossed a combined $3 billion worldwide — and related products, minus certain costs.

The plaintiffs had also sought a declaration from the court that the plaintiffs could terminate any further rights New Line had to the Tolkien works under the agreement — which would have included “The Hobbit” films, which are being produced by “Lord of the Rings” producers Peter Jackson and Fran Walsh.

“The trustees regret that legal action was necessary, but are glad that this dispute has been settled on satisfactory terms that will allow the Tolkien Trust properly to pursue its charitable objectives,” said Christopher Tolkien, son of the author, in a statement. “The trustees acknowledge that New Line may now proceed with its proposed films of ‘The Hobbit.'”

Bonnie E. Eskenazi, an attorney for the Tolkien Trust, told Daily Variety that the estate had not been paid any money from its contractual share. She also said settlement talks had been ongoing in recent months as the trial date approached.

“The trustees are not litigious people,” she added. “They feel vindicated and completely satisfied with the settlement. This will enhance the trust’s ability to support more than 100 charities throughout the world.”

Those include Save the Children Fund, the Darfur Appeal, Asia Earthquake Appeal and the World Cancer Research Foundation.

MGM and New Line are co-financing “The Hobbit” films. Tolkien’s book, published in 1937, follows the adventures of Bilbo Baggins, who obtains the ring that was the centerpiece for “The Lord of the Rings.

Warner Bros. has domestic rights to “The Hobbit” films and MGM has international rights. With MGM undergoing a financial restructuring, speculation has grown in recent months that MGM might sell off the rights in order to help ease the burden from its massive debt load.

Following the success of the “Rings” trilogy, Jackson sued New Line over profits from the first film, which slowed development of “The Hobbit” films. He settled in 2007.

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