Two days ago, in posting concerning the settlement of the Tolkien Trust lawsuit, I wrote “When lawsuits are settled out of court, the terms agreed upon are usually not made public, though I’m sure there will be speculation and rumors and perhaps some solid news on the subject.”

On the same day, The Hollywood Reporter has tried to oblige, posting an article with this statement: “Two independent sources with knowledge of the deal pegged the value to the Tolkiens and co-plaintiff Harper Collins at well over $100 million.”

Sorry, not good enough to count as a real rumor. When plaintiffs initially state that they are owed at least $150 million and later up the figure to at least $220 mil and eventually settle the case, we can pretty much assume that they received “well over $100 million.” No special knowledge needed for that. Let the real rumor-mongering begin.

There’s been a vast amount of online coverage of the Tolkien Trust lawsuit’s settlement, of course. A few interesting details got dropped into the Los Angles Times‘ article. I haven’t seen these elsewhere. (Although the Times is a general newspaper/newssite, it has a lot of contacts within the film industry.)

According to the Times,

In late July, Jackson was served with a deposition subpoena as he was announcing the imminent completion of the “Hobbit” script at pop-culture festival Comic-Con. It was not the first time the filmmaker had been involved in litigation surrounding the Tolkien properties.

In 2005, Jackson himself sued New Line, claiming he had been underpaid as much as $100 million. Producer Saul Zaentz also sued New Line twice. Those lawsuits were ultimately settled.

Each of the litigants criticized New Line’s refusal to let them independently audit all the movies. During the course of the Tolkien trustee litigation, the family was allowed to audit the second and third films, which it had been barred previously from doing.

I hadn’t heard about that subpoena. And the mention of Saul Zaentz’s second suit being settled is the first confirmation of that that I’ve encountered, though I’ve been presuming that it must have happened. I suspect that New Line settled that one quickly and quietly and that there was little attention paid.

The business about auditing the accounting records for the second and third films goes back to a revelation early in the case. The Tolkien Estate had been allowed to look at the books for Fellowship, but then New Line stopped showing them anything. I presume that what the Estate saw for Fellowship was probably the basis for its original estimate that NL owed them at least $150 million. Once they got a look at the rest of the accounts, the figure went up to $220 million. What the parties actually settled on has not been publicly specified.

The settlement of the Tolkien Trust’s lawsuit against New Line Cinema has been acknowledged publicly and officially! The Hollywood Reporter‘s story is here. Christopher Tolkien has offered a comment: “The Trustees regret that legal action was necessary, but are glad that this dispute has been settled on satisfactory terms that will allow the Tolkien Trust properly to pursue its charitable objectives. The Trustees acknowledge that New Line may now proceed with its proposed films of ‘The Hobbit.'”

I never doubted that The Hobbit would get made, but now any possible impediment has been removed.

When lawsuits are settled out of court, the terms agreed upon are usually not made public, though I’m sure there will be speculation and rumors and perhaps some solid news on the subject.

Variety‘s story lacks the Christopher Tolkien quotations, but Bonnie Eskenazi, one of the main attorneys for the plaintiff, says her clients are “vindicated and completely satisfied” with the outcome.

Voronwë the Faithful, a lawyer, Tolkien fan, and regular Messages Boards participant on TheOneRing.net has broken the news that the Tolkien Trust’s lawsuit against New Line over money owed for the LOTR trilogy has reached a tentative settlement. He quotes a stipulation filed with the court, which states that “the parties have entered into a binding term sheet settling this matter, which term sheet is subject to certain necessary ratifications, which may take up to several weeks to obtain.” Voronwë expresses confidence that those ratifications will come through and that the settlement will proceed successfully. He suspects that these include guarantees that when The Hobbit comes out, the percentage of New Line’s receipts specified back in the 1969 contracts will be paid on it as well. Thanks to Voronwë for sharing this news with us!

Today Bloomberg is reporting that after settlement talks between the Tolkien Trust and New Line Cinema the two sides remain far from agreement and at this point are proceeding to trial. As of now, the trial date is scheduled for October 19 of this year; the case will be tried before a jury in Los Angeles.

The Bloomberg story says that the Trust is demanding payment of over $220 million, based on the percentage of revenues stipulated in the 1969 contracts for the author’s sale of film rights to his novel. The figure originally was $150 million, but the plaintiffs had reserved the right to raise that based on bookkeeping records made available to them for audit. Presumably they’ve now seen such records and have recalculated what is owed.

The author, Brett Pulley, has given a good summary of where things stand now. The two sides seem to be digging in their heels for a tussle. Bonnie Eskenazi, one of the lawyers for the plaintiffs, is quoted as saying “Should this case go all the way through trial, we are confident that New Line will lose its right to release ‘The Hobbit.'”

On the other hand, Pierce O’Donnell, who represented Art Buchwald in his successful lawsuit against Paramount back in 1988, says, “The studios have historically played hardball in litigation. Also, these are hard times and they maybe think it’s cheaper to pay the lawyers than to pay a large claim. And maybe the lawyers think they have meritorious defenses.” O’Donnell adds that he would bet that some money is owed here. But New Line presumably does have some defenses to present, perhaps not in the hopes of coming away owing nothing but at least to reduce the total it has to pay.

Unless the two sides finally can reach agreement or the case is postponed, we should see this drama finally unfold in court in about three months.

(Thanks for both David Platt and Paolo Pereira for alerting me to this breaking news.)

Note: Voronwë the Faithful (who, as I have mentioned, is a lawyer), recently started a thread on TheOneRing.net’s message boards that is relevant here. He suggests reasons why he doubts that the Tolkien Trust could gain the right to have New Line’s contract to produce The Hobbit taken away.

Voronwë the Faithful has posted some information on a development in the Tolkien Trust’s lawsuit against New Line Cinema, as well as his opinions concerning it. As a lawyer, he has been posting regularly on the subject on TheOne Ring.net, and his comments in this new post are definitely worth reading.

Today Variety announced that Judge Ann I. Jones, who is handling the Tolkien Trust vs. New Line lawsuit, has issued a ruling against two motions by the film studio:

In a ruling Tuesday, Los Angeles Superior Court Judge Ann I. Jones turned down a defense motion that she, instead of a jury, should consider the lawsuit’s claims. She also denied a defense motion asking that she hear and decide some of the claims before letting the rest go before a jury, noting that said she did not want witnesses to be called twice.

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MSNBC’s website has just reported on two rulings that were given yesterday in the Tolkien Trust’s lawsuit against New Line Cinema over money allegedly owed from the LOTR film trilogy revenues.

One ruling by Judge Ann I. Jones sets a March 3 deadline for both sides to exchange documents. According to the report, “The papers will be reviewed by both sides in preparation for their appearance before a mediator in mid-March or April to try and settle the case.”

The Trust also was given the right to “wait until an expert they hire has finished documenting their claims for a 7.5 [percent] royalty from the [sic] ‘The Two Towers’ film before presenting that information to New Line.”

Another passage reads, “Lawyers for the trust are seeking hundreds of thousands of documents and say they have received less than half of what they need.” Apparently New Line plans to turn over most of what remains by the end of this month. The studio’s lawyer claims that the defense has turned over 60 percent of requested documents so far. “But he said some of the documents are harder to find than others.”

This exchange of documents is part of the “discovery” phase, where both sides gather evidence, often requested from the opposing side, to bolster their cases.

The case has seen some other developments over the past few months, and once I get a look at these new rulings, I plan to post another of my long summaries of what has been happening.

In the meantime, this is the first I have heard that there may be a meeting of the two parties before a mediator within the next two months or so. If the case can be settled in that way, we won’t have to wait until the October 19 trial date–which could always be delayed. If some major piece of evidence has turned up, it might make one side or the other more interested in a settlement.

(Thanks to TheOneRing.net for posting this link!)

The promised September 22 meeting concerning the lawsuit the Tolkien Trust brought against New Line Cinema on February of this year has taken place. The purpose of the meeting was for the judge to announce a ruling on the amended Trust complaint. The ruling was filed on September 24. The Judge’s decision was mixed, with benefits for both sides in the case.

There are three major decisions involved. First, the Tolkien Trust had requested a rewording of the original 1969 contract, alleging that it misstated an arrangement concerning the percentage of payments due for one of the films. The judge ruled against that “on the ground that it is time-barred.” Under New York law (which holds in this case since the contract was originally filed in the state of New York), the amendment would have had to be made within six years of the original contract’s date.

Second, the judge overruled New Line’s revised Demurrer requesting that the Trust’s charge of fraud be dropped. In her first ruling, in June, the judge had deemed that the Tolkien Trust had not sufficiently argued for fraud in its original complaint. Their amended complaint has satisfied her, and she states that “This cause of action are [sic] well stated.”

Third, the judge sustains New Line’s “motion to strike the request for punitive damages.” Among the punitive damages could have been the Trust’s request that the court confirm its right to terminate New Line’s rights to produce The Hobbit.

Both the first and the third judgments were made “without leave to amend.” Thus the Trust cannot file an amended complaint concerning the contract rewording or the punitive damages. Of most immediate interest to fans is that fact that that means production of The Hobbit cannot possibly happen under the terms of this particular lawsuit.

New Line is given ten days after the meeting to respond. Given that it won the first and third points and that the judge has ruled that the Tolkien Trust has now made a sufficient case for fraud charges to be retained in its complaint, there seems little reason for New Line to file yet another Demurrer. The ruling has clarified the terms of the lawsuit. Possibly now that that has happened, the two sides will be motivated to settle out of court. If not, they will proceed in their gathering of evidence for the trial itself, scheduled for just over a year from now, in October, 2009.

(For the Associated Press’s summary of the case, see TheOneRing.net. For my earlier entries on the lawsuit, see here.)

In my various discussions of the lawsuit brought by the Tolkien Trust against New Line over payments from LOTR revenues, I have stressed that lawsuits over payments are not uncommon in Hollywood. Case in point: The Associated Press (as posted by Variety) today reports that Tommy Lee Jones is suing Paramount over money he says he is owed for No Country for Old Men.

Jones “claims he was not paid promised bonuses and had expenses wrongly deducted. The suit says Jones was paid a reduced upfront fee in joining the film, and that his contract had known errors not corrected before the movie was made.

Jones, 61, is asking that an auditor be named to review financial records to determine how much he should be paid.

The specific circumstances are quite different from the LOTR case, and yet on a very general level some of the claims are somewhat parallel. They involve expenses alleged to have been wrongly deducted from the revenues from which the actor was to be paid and a reduced up-front payment in exchange for a percentage later on. As I wrote based on the 1969 contract turning over the LOTR and Hobbit film rights to United Artists, Tolkien was paid a relatively low amount as an initial fee, but the 7.5% of revenues after expenses was an unusually high one for a literary property.

Jones is suing for a minimum sum of $10 million, with the full amount to be determined through an audit. The Tolkien Trust has done something similar, demanding at least $150 million and more if an audit determines that they are owed more. (It also requests that an apparent mistake in the 1969 contract be corrected.)

My point is that the suit against New Line isn’t all that strange and unusual. It gets a lot more attention than most because of the much larger sums involved, the popularity of LOTR, both novel and film, and the apparently possible threat to the making of The Hobbit. Contracts involving percentages of income usually allow studios to deduct at least some expenses, and disagreements about what counts as a legitimate deduction are likely to arise when large amounts of money are involved.