Warner Bros. Takes Miramax to Arbitration Over Weinstein 'Hobbit' Claims (Exclusive)

UPDATED: The studio and the indie mogul are fighting over whether a contract, obtained by The Hollywood Reporter, gives Weinstein a cut of the second and third "Hobbit" films.
Warner Bros.
"The Hobbit: The Desolation of Smaug"

The battle over The Hobbit gold is getting nastier than a fire-breathing dragon. 

Warner Bros. and its New Line division have initiated arbitration proceedings against Miramax over former owners Bob and Harvey Weinstein's claims to a percentage of revenue from The Hobbit: The Desolation of Smaug and its follow-up.

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As THR reported Wednesday, the issue is whether the Weinsteins, repped by attorney Bert Fields, are owed a piece of Smaug similar to what they reaped from last year's The Hobbit: An Unexpected Journey -- a figure that a studio source pegs at about $12.5 million, or 2.5 percent of first-dollar gross of the film's $1 billion haul (the studio typically splits box-office receipts with exhibitors).

The Weinstein cut is thanks to Bob and Harvey's previous ownership of Miramax, which once controlled film rights to the J.R.R. Tolkien fantasy and its sister property The Lord of the Rings. (A source says that Miramax even provided $10 million in early seed money for Peter Jackson's Rings trilogy.) So the Weinsteins say they and Miramax are entitled to a piece of ALL Hobbit films. But Warners' position is that a 1998 contract with Miramax that gave the studio Hobbit movie rights specifically limited the Weinsteins merely to a cut of the first Hobbit, not its two sequels.

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THR has obtained a copy of the original Hobbit contract (read it here), which contains language that arguably could support both interpretations. A private arbitrator will be asked to sort this issue out because lawyers for the studio and the indie moguls have been exchanging nasty letters in recent weeks. Warners has retained Evan Chesler at Cravath Swaine & Moore in New York and John Spiegel at Munger Tolles & Olson in Los Angeles to handle the matter.

The Jackson-directed sequel is set for release Dec. 13 from New Line and MGM. The Weinsteins also are claiming a stake in the third film, The Hobbit: There and Back Again, set for release next December.

If New Line and Warners are forced to pay the Weinsteins again, they would dole out roughly 5 percent of Smaug's first-dollar gross to Miramax, which then would split that sum with the Weinstein brothers. Other stakeholders in the property include the estate of author Tolkien and producer Saul Zaentz.

The Weinsteins are said to have been unaware that the arbitration was filed. The Weinsteins and Warner Bros. declined to comment.