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[BOLD {IAN MCKELLEN}] The actor hopes to reprise his Gandalf role in [ITALIC {The Hobbit}] under Peter Jackson's direction
Pierre Vinet

In November of 2003, Jackson and Walsh sat in their private theater in New Zealand, making last-minute tweaks to the trilogy's final film, The Return of the King. ''The ghosts are looking good, but to my eye the heroes are a little big,'' Jackson said of a sequence known as the Paths of the Dead. He drew circles on the screen with a laser pointer, then moved on to the close of the movie where Sam Gamgee returns home and embraces his family. The shot needed the slightest tweak. Jackson asked his special-effects team how long it would take. Ten days, he was told. ''No, no, no, no,'' he responded. ''Ten days would cause cardiac arrest in L.A.'' Walsh smiled. ''That's not such a bad thing,'' she said. As tittering spread throughout the theater, Jackson turned around: ''Show of hands, everybody?''

If the audit irked Shaye, the worst was still to come. In February 2005, Jackson filed his suit against New Line, claiming the studio had been dragging its feet providing documents to his auditors. The lawsuit asks for no specific dollar amount in damages, but insists that Jackson be allowed to examine the studio's books, looking into matters such as how New Line, a division of Time Warner, sold the ancillary rights to his films. (Entertainment Weekly is also owned by Time Warner.) In several instances, New Line struck deals with companies within the Time Warner family, such as Warner Bros. Records and the TBS cable network. If Jackson can show that New Line could have signed more profitable deals with outside companies, he might be able to demand some significant lost revenue.

In any case, once the lawsuit was filed, The Hobbit was roadkill. New Line did approach Jackson about making the movie at least once, in the fall of 2006, promising to settle the dispute (and pay him an appropriate amount) if he agreed to make the film. No dice. Jackson continued to insist a settlement had to come first. He'd already gone on to make King Kong. For Universal.

The low point came last November, when Shaye actually ''fired'' Jackson from The Hobbit. Jackson took the fight directly to the people. ''[We were told] that New Line would no longer be requiring our services on The Hobbit,'' Jackson wrote in a memo posted on the fansite TheOneRing.net. ''This was a courtesy call to let us know that the studio was now actively looking to hire another filmmaker.'' Shaye erupted. In January 2007, he blasted Jackson in a now-famous public tirade. ''I don't care about Peter Jackson anymore,'' he railed to the Sci Fi Wire website. ''He thinks that we owe him something after we've paid him over a quarter of a billion dollars!''

NEXT PAGE: Finally, an olive branch.


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