Jackson sues New Line over 'Rings' profits
'Rings' suit
March 2, 2005
Peter Jackson's production company Wingnut Films Ltd. has sued New Line Cinema for allegedly withholding profits, including home video revenue, from "The Lord of the Rings: The Fellowship of the Ring," the first film in the trilogy.
The suit filed in U.S. District Court in Los Angeles seeks unspecified damages, restitution and an order barring New Line from striking any more deals without seeking the most competitive and beneficial terms from unaffiliated third parties.
The suit against New Line and its subsidiary Katja Motion Pictures Corp. concerns only the trilogy's first film, 2001's "The Lord of the Rings: The Fellowship of the Ring," which the suit notes has grossed $314.8 million at the U.S. boxoffice and more than $556 million internationally, not counting merchandising and video revenue. The suit makes no mention of the other two films in the trilogy.
One of the principal claims of the suit is that New Line engaged in various forms of self-dealing, an issue that has been vigorously pursued by plaintiffs attorney Stanton "Larry" Stein.
Companies that have sued under this theory tend to claim that a partner cut a favorable deal with an affiliate rather than put the license or property out to bid in the free market. It is a complaint that is frequently raised with respect to the conglomerates and their production and distribution arms.
In a statement, Jackson's attorneys said they attempted to resolve the dispute with New Line through a routine audit. "That has proven unsatisfactory thus far, (and) this lawsuit is the next logical step," Jackson's representatives said.
New Line officials said they do not comment on pending litigation.
The case stems from a 1998 written agreement for Wingnut and New Line to jointly produce and distribute the three films. Among other terms, Wingnut got paid a fixed fee and shared in "first dollar" gross receipts.
The suit, which broadly claims breach of contract, breach of good faith and fair dealing and unfair competition, makes 19 allegations.
New Line is accused of improperly deducting certain home video costs that were not spelled out in the agreement, paying an incorrect royalty rate for DVD sales, delaying the reporting of certain licensing revenue and failing to audit subdistributors, including those affiliated with New Line.
The latter claim goes to the broader issue of self-dealing, in which Wingnut accuses New Line of allowing its subdistributors to charge a higher fee than would be expected from nonaffiliated companies.
"The agreements entered into by defendants with third parties, including affiliated entities, will forever deprive Wingnut of its contractual entitlement to enjoy the financial and other advantages of licensing agreements that were bargained for at arms-length and in good faith," according to the plaintiff's complaint.
New Line also is accused of failing to include revenue and other guarantees received from promotional partners in merchandising receipts. Wingnut claims it also was not compensated for the use of Fran Walsh's lyrics and Jackson/Walsh's script in video games.
It also is claimed that New Line failed to advise Wingnut that the pre-existing license agreement for U.S. pay television was based on a formula that "unfairly prejudiced films with substantial boxoffice revenues, such as (this) film, in favor of films that performed poorly at the boxoffice.
The suit filed in U.S. District Court in Los Angeles seeks unspecified damages, restitution and an order barring New Line from striking any more deals without seeking the most competitive and beneficial terms from unaffiliated third parties.
The suit against New Line and its subsidiary Katja Motion Pictures Corp. concerns only the trilogy's first film, 2001's "The Lord of the Rings: The Fellowship of the Ring," which the suit notes has grossed $314.8 million at the U.S. boxoffice and more than $556 million internationally, not counting merchandising and video revenue. The suit makes no mention of the other two films in the trilogy.
One of the principal claims of the suit is that New Line engaged in various forms of self-dealing, an issue that has been vigorously pursued by plaintiffs attorney Stanton "Larry" Stein.
Companies that have sued under this theory tend to claim that a partner cut a favorable deal with an affiliate rather than put the license or property out to bid in the free market. It is a complaint that is frequently raised with respect to the conglomerates and their production and distribution arms.
In a statement, Jackson's attorneys said they attempted to resolve the dispute with New Line through a routine audit. "That has proven unsatisfactory thus far, (and) this lawsuit is the next logical step," Jackson's representatives said.
New Line officials said they do not comment on pending litigation.
The case stems from a 1998 written agreement for Wingnut and New Line to jointly produce and distribute the three films. Among other terms, Wingnut got paid a fixed fee and shared in "first dollar" gross receipts.
The suit, which broadly claims breach of contract, breach of good faith and fair dealing and unfair competition, makes 19 allegations.
New Line is accused of improperly deducting certain home video costs that were not spelled out in the agreement, paying an incorrect royalty rate for DVD sales, delaying the reporting of certain licensing revenue and failing to audit subdistributors, including those affiliated with New Line.
The latter claim goes to the broader issue of self-dealing, in which Wingnut accuses New Line of allowing its subdistributors to charge a higher fee than would be expected from nonaffiliated companies.
"The agreements entered into by defendants with third parties, including affiliated entities, will forever deprive Wingnut of its contractual entitlement to enjoy the financial and other advantages of licensing agreements that were bargained for at arms-length and in good faith," according to the plaintiff's complaint.
New Line also is accused of failing to include revenue and other guarantees received from promotional partners in merchandising receipts. Wingnut claims it also was not compensated for the use of Fran Walsh's lyrics and Jackson/Walsh's script in video games.
It also is claimed that New Line failed to advise Wingnut that the pre-existing license agreement for U.S. pay television was based on a formula that "unfairly prejudiced films with substantial boxoffice revenues, such as (this) film, in favor of films that performed poorly at the boxoffice.
Share on LinkedIn
