Lawsuit Roundup: HOBBIT And WATCHMEN Productions In Jeopardy?

At the best of times, Hollywood can be a lawsuit-happy town, but it seems odd that within a 24 hour span two suits would be filed against the production of majorly-anticipated genre productions.

Actually, I take part of that back. It doesn’t surprise me all that much that New Line Cinema is once again being sued over their questionable accounting methods when it comes to their highly successful Lord Of The Rings trilogy.

This time, the plaintiffs are The Tolkien Trust, the British charity which manages the estate of Rings author J. R. R. Tolkien and publisher Harper Collins. The pair have brought a $150 million suit against New Line, accusing the studio of breach of contract, breach of fiduciary duty and fraud. According to the Trust’s original 1969 agreement with United Artists, they were entitled to 7.5% gross profit participation. This agreement supposedly transferred with the rest of the books’ rights over the years from United Artist to producer Saul Zantz to Miramax and then New Line. The Trust claims it has not received any of its gross profit although the film trilogy has pulled in almost $6 billion worldwide.

The suit also claims that New Line has balked at open audits for the second and third films in the trilogy, has underreported home video earnings, treated $100 million payments to both Miramax and Zantz as costs on the film and have destroyed documents.

Most troubling, is that suit also requests a declaration from the court stating that the plaintiffs can terminate any further rights New Line may have to the Tolkien works under the agreements — including the recently announced The Hobbit.

Development of a Hobbit film, which seemed like a surefire thing following the financial success of Rings, was stalled previously when Rings director Peter Jackson filed a similar suit in 2005 over profit participation on the trilogy. Producer Saul Zantz has also sued New Line twice over profit participation owed him, most recently in December. Zantz alleges that New Line has refused to make their records available to his auditors to verify whether his profit participation statements are correct.

I would look for New Line to try and resolve this as quickly as possible. Studio head Bob Shaye already took much flack for the extended ugliness that surrounded the Jackson lawsuit, before it was settled out-of-court last December. Shaye’s current contract has less than a year and a string of box office underachievers combined with the bad press from Jackson’s lawsuit have already put a question mark over his employment future. Any protraction of this new suit, especially with its possibility of having rights to the sure-fire money maker The Hobbit yanked away, will only serve to push him out the door that much faster.

Somewhat murkier is the suit Twentieth Century Fox has filed against Warner Brothers over the rights to produce and distribute a movie based on the landmark comic book miniseries Watchmen. In a suit filed on Friday, Fox contended that it holds the exclusive copyrights and contract rights to develop, produce and distribute a film based on the Watchmen comic.
Fox’s claim dates back to the time between 1986 and 1990, when the studio was developing the property first for director Tim Burton and then Terry Gilliam, acquiring all rights to the comic and screenplays written by Sam Hamm and Charles McKeown.

According to the Hollywood Reporter–

In 1991, Fox assigned some rights via a quitclaim to Largo International with the understanding that the studio held exclusive rights to distribute the first motion picture based on Watchmen, according to the lawsuit.

When Largo dismantled, the rights were transferred to producer Lawrence Gordon. Under a “turnaround agreement” between Fox and Gordon, the producer agreed to pay a buy-out price to Fox if he entered into any agreement with another studio or third party to develop or produce Watchmen, among other things.

The project apparently bounced around to Universal and Paramount before returning to Warners. Now, Fox claims that neither Gordon nor Warners has paid the buy-out price or advised the studio of any other conditions required under the agreement, including procedures necessary to acquire the rights to Watchmen from Fox.

You can read Fox’s entire 113 court filing here.

I hardly think that Fox just found out about the Watchmen film last week. Director Zak Snyder’s production has been getting plenty of bandwidth devoted to it, thanks to a profile that is high even outside the comic collecting world. It seems more likely that Fox’s suit was timed to try and give them maximum leverage over Warner Brothers. Warners has already invested tens of millions of dollars in the production, which is currently still shooting in Vancouver. Since Warners certainly isn’t going to write off that much of an investment, they’ll very likely offer to pay the amount stipulated and move on with things. That is, if Fox isn’t interested in fighting this in the courts for a while, trying to get what money they can out of Warners. If the latter happens, then the release of the movie may be delayed. However, with Watchmen not due in theaters until March 6, 2009, the lawyers have a deadline to get things worked out.

I can’t help but wonder though, at Fox’s motives. After they invested millions in development on the film, they decided that it would be too expense a proposition to make and passed. Now that someone else has invested the money and effort to get it made, it looks like they want to swoop in and try to weasel a cut of the profits.