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JUN
10
6 MOS

Warner Bros. Wants to Disqualify Tolkien Lawyers in 'Hobbit' Fight

UPDATED: The two sides argue over evidence in an $80 million lawsuit over merchandise and games.

The Hobbit: The Battle of the Five Armies
Warner Bros. Pictures
"The Hobbit: The Desolation of Smaug"

The rights war over The Hobbit is treading on ground well beyond Middle-earth, exploring the ethical obligations of those funny characters known as "lawyers" and even reaching the obscure judicial authority of the Isle of Man.

The estate of J.R.R. Tolkien and book publisher HarperCollins launched the lawsuit in November 2012, claiming Warner Bros. and Saul Zaentz Co. had infringed copyright and breached contract by taking Lord of the Rings and The Hobbit into allegedly impermissible places. Specifically, the plaintiffs contend that that the decades-old Lord of the Rings agreement entitles the studios to create only "tangible" merchandise based on the books, not make digital exploitations nor license such "intangible" things as slot machines and video games.

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Faced with an $80 million lawsuit, Warner Bros. submitted counterclaims that argue the Tolkien estate had improperly revoked certain rights and harmed the studio by causing it to miss out on potential licensing revenue as well as exposure for the Hobbit films.

Since a judge allowed the counterclaims to proceed, the parties have been quietly waging an absolutely brutal battle at the discovery stage. Along the way, the Tolkien heirs have given depositions about how the Rings/Hobbit business operates, and the parties have fought regularly before the judge on matters such as confidentiality and attorney-client privilege.

On Monday, Warner Bros. took its most offensive posture to date, asking the judge to disqualify the law firm of Greenberg Glusker from representing the Tolkiens.

According to the motion, the law firm and its attorney Bonnie Eskenazi have breached professional code by impermissibly gaining access to privileged information through Alan Benjamin and William Bernstein, two former in-house lawyers for United Artists. These two are said to be the "the only living percipient witnesses" to a 1969 agreement whereby United Artists was granted rights to The Lord of the Rings trilogy and The Hobbit. Those rights were later passed to Warner Bros. and The Saul Zaentz Co. The scope of the 1969 deal -- whether rights extend beyond films to cover such things as video games -- is the key issue in the present litigation between the Tolkien estate and Warner Bros.

Benjamin and Bernstein might be able to shed light on the 1969 deal, but according to Warner Bros., these two lawyers owe loyalty and confidentiality to UA and its parent company, MGM.

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Warner Bros. is now upset that Greenberg Glusker has contacted them and even paid them $10,000 to serve as expert witnesses. As such, says the studio, "Greenberg thereby placed itself in the position of representing not only the key witnesses on both—and opposite—sides of the contracts at issue, but also its adversaries’ former counsel who worked on the very contracts at issue."

The motion (read here) filed by Daniel Petrocelli argues that disqualification is "warranted because Greenberg’s retention and use of information disclosed by Benjamin and Bernstein—in witness examination or otherwise—give the Tolkien/HC Parties an impermissible advantage and compromise the integrity of the litigation."

"There is absolutely no basis for the motion filed by WB and Zaentz," responds Eskenazi. "Greenberg Glusker acted properly in all respects at all times. The motion was filed for purely and transparently tactical and strategic reasons. We look forward to the court vindicating our position."

(UPDATE 6/24: Greenberg Glusker has filed its opposition (read here), saying that MGM isn't a party to the litigation and doesn't have standing, that the defendants delayed its motion for over a year, that Benjamin and Bernstein's roles in the 1969 agreement were limited, and that the law firm had proper communications with both of them.)

The newest motion to disqualify comes weeks after the judge in the case refused to "claw back" a potentially damaging document for the studios. At issue was a business proposal from a gaming company to Zaentz's licensing director. In the margin of the document was the notation "tangibility," and the defendant wanted the document covered by attorney-client privilege. The judge wouldn't allow it.

This is just one example of the discovery chase among the two sides. Recently, the Tolkiens requested judicial assistance under the Hague Evidence Convention to get the records of Microgaming Software Systems, Ltd., a company headquartered in the Isle of Man that is said to have reached agreement with the defendants on an online gambling game featuring characters and story elements from The Lord of the Rings. The games, say the plaintiffs, have "outraged Tolkien’s devoted fan base, causing irreparable harm to Tolkien’s legacy and reputation and the valuable goodwill generated by the Tolkien Works."

No end to the discovery battle is in sight. Before the parties lodge summary judgment motions in advance of a trial, the 9th Circuit Court of Appeals must first review whether Warner Bros.' counterclaims are permissible. Both sides have briefed the appeals court, but no oral argument date has been set.

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