In my contracts class, I use the One Ring as a explanatory prop in several doctrinal areas, such as the availability of specific performance. It is convenient, then, that Tolkien’s stories may be moving from one Red Book to another, as the dispute between Peter Jackson and New Line over the fantasy franchise’s profits has just heated up. According to the director:
Wingnut Films has bought a lawsuit against New Line, which resulted from an audit we undertook on part of the income of The Fellowship of the Ring. Our attitude with the lawsuit has always been that since it’s largely based on differences of opinion about certain accounting practices, we would like an independent body – whether it be a judge, a jury, or a mediator, to look at the issues and make an unbiased ruling. We are happy to accept whatever that ruling is. In our minds, it’s not much more complex than that and that’s exactly why film contracts include right-to-audit clauses. [DH Notes: What a Holmesian view of contract law!]
However, we have always said that we do not want to discuss The Hobbit [the long-anticipated prequel to the Lord of the Rings] with New Line until the lawsuit over New Line’s accounting practices is resolved. This is simple common sense – you cannot be in a relationship with a film studio, making a complex, expensive movie and dealing with all the pressures and responsibilities that come with the job, while an unresolved lawsuit exists.
We have also said that we do not want to tie settlement of the lawsuit to making a film of The Hobbit . . .
[O]ur Manager Ken Kamins got a call from the co-president of New Line Cinema, Michael Lynne, who in essence told Ken that the way to settle the lawsuit was to get a commitment from us to make the Hobbit, because “that’s how these things are done”. Michael Lynne said we would stand to make much more money if we tied the lawsuit and the movie deal together and this may well be true, but it’s still the worst reason in the world to agree to make a film.
Several years ago, Mark Ordesky [of New Line] told us that [the studio had] rights to make not just The Hobbit but a second “LOTR prequel”, covering the events leading up to those depicted in LOTR. Since then, we’ve always assumed that we would be asked to make The Hobbit and possibly this second film, back to back, as we did the original movies . . .
However last week, Mark Ordesky called Ken and told him that New Line would no longer be requiring our services on the Hobbit and the LOTR ‘prequel’. This was a courtesy call to let us know that the studio was now actively looking to hire another filmmaker for both projects.
Ordesky said that New Line has a limited time option on the film rights they have obtained from Saul Zaentz (this has never been conveyed to us before), and because we won’t discuss making the movies until the lawsuit is resolved, the studio is going to have to hire another director.
There are some interesting legal issues arising out of this fact pattern. But one has to suspect that both parties here are calculating: Jackson that he stands to make more in the lawsuit that he would in a prequel (therefore, his decision to take issues off the table); New Line, that it is better to delay the lawsuit’s settlement and accept the risk of a mildly less successful movie. The hypothetical I wonder about is whether Jackson could sign the settlement agreement and then assert a defense of economic duress, claiming that he had no choice but to settle to obtain the new movies (sort of like Austin v. Loral). The only problem: his (presumably less than rosy) financial circumstances would have been the fault of King Kong’s disappointing earnings, not New Line’s breach.