The Lord of the Rings bling is a lot like the One Ring. Everybody wants it.
The estate of Rings mastermind J.R.R. Tolkien is the latest to launch a legal salvo against New Line Cinema, suing the studio for using "creative accounting" to cheat the family trust out of royalties from the Academy Award-winning trilogy.
The suit was filed in Los Angeles Superior Court on Monday by the Tolkien Trust, a British charity run by the trustees of the late author, and HarperCollins Publishers. The complaint accuses New Line of violating an agreement to pay "required gross profit participation" generated from the $6 billion in box office earned by Peter Jackson's epic film versions of the books.
"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," said Steven Maier, the trustees' U.K.-based lawyer.
"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."
The studio declined to comment on the lawsuit.
The estate claims that the Time Warner-owned company has also repeatedly refused to allow the Tolkien Trust to audit the books from the last two movies in the series, 2002's The Two Towers and 2003's The Return of the King.
"The trustees are very aggrieved by New Line's arrogance," said Maier, describing behavior befitting Sauron.
The trust's suit says New Line was contractually bound to fork over 7.5 percent of gross receipts from 2001's The Fellowship of the Rings and its two sequels, but has only received an upfront payment of $62,500.
"New Line has brought new meaning to the phrase 'creative accounting,' " said the trust's U.S. counsel, Bonnie Eskenazi. "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."
The estate is demanding $150 million in compensatory damages, as well as unspecified punitive damages. It's also asking the court to terminate all further rights the studio has acquired to Tolkien's works under the agreements, including those controlling the film rights to The Hobbit, which New Line is planning to adapt into two films slated for 2010 and 2011.
New Line's bookkeeping has come under intense scrutiny since The Return of the King's 2004 Oscar coronation.
Jackson and partner Fran Walsh sued the studio in 2005, alleging New Line cooked the books to seriously shortchange the couple on their cut of the profits.
The open hostility between the Kiwi filmmaker and New Line head Bob Shaye almost derailed The Hobbit. A truce was eventually brokered by MGM honcho Harry Sloan, whose studio controls the distribution rights to The Hobbit. Jackson and New Line eventually settled for an undisclosed amount and Jackson agreed to produce the prequels. Mexican director Guillermo del Toro is reportedly in talks to direct.
Two days after resolving its differences with Jackson, New Line was hit by another suit, this one from movie mogul Saul Zaentz, who accused the studio of failing to pay up $20 million he said he was owed for his share of the profits and denying him his right to audit the books.
Zaentz originally owned the film rights to Tolkien's trilogy but licensed them to Miramax, which in turn passed the project onto New Line.
New Line refused to say whether the Trust's legal action would have an immediate impact on the development of The Hobbit features. But if successful, the lawsuit has the potential to toss the films into the fires of Mt. Doom.