Worse News For New Line: Tolkien Sues

News reports say the estate of Lord of the Rings creator J.R.R. Tolkien is suing New Line Cinema, claiming the company failed to pay a cut of gross profits for the movies based on Tolkien’s books. The news comes just as the future of New Line is in real turmoil at Time Warner. The Tolkien Trust and original Lord of the Rings publisher HarperCollins (owned by News Corp which runs rival Fox Studios) filed the lawsuit against New Line today in Los Angeles Superior Court. It claims New Line was required to pay 7.5% of gross receipts from the films to Tolkien’s estate and the other plaintiffs. The lawsuit estimates the films have reaped nearly $6 billion combined. New Line already is paying a legal settlement to Lord Of The Rings trilogy director Peter Jackson who is still auditing the company about his profit participation. The lawsuit is being brought by Bonnie Eskenazi of Greenberg Glusker. Here’s the news release:

(Los Angeles, CA – Monday February 11, 2008) –The trustees of The Tolkien Trust, a British charity, have filed an action against New Line Cinema for its failure to pay a contractually required gross profit participation in the three films based on the world-famous Lord of the Rings trilogy.  The trustees of the estate of JRR Tolkien and HarperCollins Publishers are co-plaintiffs in the lawsuit.   The suit was filed today in Los Angeles Superior Court.

The Lord of the Rings films produced by New Line are among the most financially successful films ever created by Hollywood and were released in 2001, 2002 and 2003 respectively.  The cumulative worldwide gross receipts to date total nearly $6 billion.  Notwithstanding the overwhelming financial success of the films, and the fact that the plaintiffs have a gross participation in each of the films, New Line has failed to pay the plaintiffs any portion of the gross profit participation at all.

The trustees’ UK lawyer, Steven Maier, of Manches LLP, said: “The Tolkien trustees do not file lawsuits lightly, and have tried unsuccessfully to resolve their claims out of court.  But in this case, New Line has left them no option at all.  New Line has not paid the plaintiffs even one penny of its contractual share of gross receipts despite the billions of dollars of gross revenue generated by these wildly successful motion pictures.  To make matters worse, to date New Line has even prevented the plaintiffs from auditing the last two films of the series.  The trustees are very aggrieved by New Line’s arrogance.”

The complaint seeks, among other things, in excess of $150 million in compensatory damages, as well as punitive damages, and a declaration from the Court that the plaintiffs have a right to terminate any further rights New Line may have to the Tolkien works under the agreements, including The Hobbit, due to the serious and material nature of the breach of the agreements.

Bonnie Eskenazi, the trustees’ US counsel who filed the complaint, 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.”

JRR Tolkien is the world-renowned author of the “Lord of the Rings” trilogy and “The Hobbit.”  The Tolkien Trust is a UK registered charity that has made grants to charitable causes all over the world totaling over $8 million in the last five years alone.

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