Tolkien estate sues New Line

Claims studio failed to provide cut of profits

The Tolkien Trust (a British charity that manages the estate of J.R.R. Tolkien) and publisher HarperCollins brought a $150 million lawsuit against New Line Cinema on Monday, claiming the trust has not received any of its gross profit participation payments for the three films based on the “Lord of the Rings” trilogy. The suit was filed Monday in Los Angeles Superior Court.

In addition to the $150 million in compensatory damages, the suit seeks punitive damages, and most important, a declaration from the court that the plaintiffs can terminate any further rights New Line may have to the Tolkien works under the agreements — including “The Hobbit,” a feature adaptation of which is due to be produced by Peter Jackson, director of the “Rings” trilogy, for New Line and MGM.

According to the suit, although the “Lord of the Rings” films produced by New Line are among the most financially successful films ever created, with worldwide gross receipts of nearly $6 billion, New Line has failed to pay the plaintiffs any portion of the gross profit participation to which they are entitled under their deal.

Bonnie Eskenazi, who represents the trust, said, “New Line has brought new meaning to the phrase ‘creative accounting.’ I cannot imagine how on earth New Line will argue to a jury that these films could gross literally billions of dollars, and yet the creator’s heirs, who are entitled to a share of gross receipts, don’t get a penny.”

New Line declined to comment on the suit.

As outlined in the complaint, which alleges breach of contract, breach of fiduciary duty and fraud, among several other causes of action, the Tolkien trust is entitled to 7.5% gross profit participation under a 1969 agreement originally made with United Artists. Over the years, the rights passed from UA to Saul Zaentz to Miramax and, ultimately, to New Line.

The trust, run by Tolkien’s now elderly children in the U.K., supports a wide range of charitable causes including Save the Children Fund, the Darfur Appeal, Asia Earthquake Appeal and the World Cancer Research Foundation.

While the main thrust of the complaint is that the trust has been paid nothing, the suit enumerates several areas of contention: underreporting homevideo revenue; $100 million payments to Zaentz and Miramax are treated as costs of the film; destruction of documents; and a refusal to allow any audit on the second and third films of the trilogy.

The “Rings” trilogy has been a magnet for litigation. Jackson settled his 2005 suit with New Line in December. He’d claimed he was shortchanged on profit participation, and during the war of words, New Line topper Bob Shaye said he would never work with Jackson again. With the settlement of the lawsuit, New Line announced that Jackson would produce, but not direct, “The Hobbit.”

Producer Saul Zaentz, who at one time owned the film rights to the Tolkien properties, has sued New Line over profit participation twice, most recently in December. The suit alleges New Line has refused to make records available to Zaentz’s auditors to allow them to conduct an audit, making it impossible to verify whether his profit participation statements are accurate.