Jackson's Wingnut Films Sues Over 'Rings' Profits

LOS ANGELES (The Hollywood Reporter) -- 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 damages, restitution and an order enjoining 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. box office and more than $556 million internationally, not counting merchandising and video revenue.

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 complaint includes claims for breach of contract, breach of good faith and fair dealing and unfair competition.

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.

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."

New Line officials said they do not comment on pending litigation.