Warner Bros. Prevails Over Weinsteins in 'Hobbit' Profit Fight

Harvey and Bob Weinstein demanded at least $75 million from their old agreement

Warner Bros. has scored a success in arbitration in its battle with Harvey and Bob Weinstein over money from the second and third Hobbit films.

The Weinsteins signed away motion picture rights to the J.R.R. Tolkien fantasy to WB subsidiary New Line in 1998, when the brothers ran Miramax. The deal promised the Weinsteins (via Miramax) five percent of the "first motion picture" based on the books.

Warners asserted that this meant that the Weinsteins only are due five percent of The Hobbit: An Unexpected Journey, but the brothers demanded profits as well from The Hobbit: The Desolation of Smaug and The Hobbit: The Battle of the Five Armies, out next month.

The brothers (and not The Weinstein Co.) pushed their point that Tolkien had only written one Hobbit book (unlike Lord of the Rings) in a $75 million lawsuit, but the dispute was ultimately sent to arbitration.

Arbitrator Bernard Fried, a retired judge, heard summary judgment arguments in September.

If the early court papers provides any indication about what was argued, the Weinsteins were nodding to a "most favored nation" provision of their contact that allegedly promised them payment in a manner no less favorable ways than Hobbit director Peter Jackson, who obviously got money for each of the three Hobbit films. Warners, on the other hand, was holding up the "plain and unambiguous" '98 deal, plus the fact that Miramax had already been paid more than $90 million in contingent consideration.

On Friday, Fried ruled that the the first motion picture really means first and that the Weinsteins are entitled to nothing, denying them what's estimated to be $12.5 million in contingent compensation for the Desolation of Smaug.

Sources confirm the ruling. Warner Bros. has no official comment. A representative for Bob and Harvey Weinstein says that the brothers’ lawyers “are looking into their options.”

It's possible that the parties will soon file a petition to confirm the arbitration ruling, which would further explain the basis for Fried's decision.

Warners was represented by Evan Chesler at Cravath Swaine & Moore in New York and John Spiegel at Munger Tolles & Olson in Los Angeles. The Weinsteins were represented by Boise Schiller.

Deadline Hollywood first reported the outcome of the arbitrator's ruling.

Email: Eriq.Gardner@THR.com
Twitter: @eriqgardner

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