Pippin: What about breakfast?
Aragorn: You've already had it.
Pippin: We've had one, yes. What about second breakfast?

Lord of the Rings: The Fellowship of the Ring

Not since the digital erasure of The Infamous Car--a stray present-day vehicle whose windshield glinted in the background of a shot in the theatrical version of the first Lord of the Rings, but was digitally wiped out of the DVD release--has such a thorough transformation been accomplished in Middle Earth. All is well again in the Tolkien-to-cinema universe with the announcement yesterday that New Zealand director-impresario Peter Jackson has both settled his long-brewing law suit against New Line and will in fact, with partner Fran Walsh, supervise the making of two Hobbit films for them.

Jackson, who since 2005 had been using some of the industry's best legal hounds to chase after what he said were proceeds from the 2.9-billion success of the three Lord of the Ring films that New Line had hidden and/or mismanaged, showed that he has the knack of speaking press-release-ease:

I'm very pleased that we've been able to put our differences behind us, so that we may begin a new chapter with our old friends at New Line. 'The Lord of the Rings' is a legacy we proudly share with Bob and Michael, and together, we share that legacy with millions of loyal fans all over the world.

The result will be two films shot at the same time in 2009, one to emerge in 2010 as Hobbit and a sequel taking the story from there through the 60-year gap that extends ot the beginning of the Rings trilogy.

Jackson will be about $40 million to the good on the deal, Also partnered in on the deal, and not likely to let anyone in the media forget it, is MGM and its chief Harry Sloan, who in a classic 50-50 studio mixed-pot transaction will handle international distribution (through Fox) while New Line takes domestic.

Though Jackson's complaints began emerging in 2003 and broke out with the law suit in February 2005, a crucial turn in the road came this September when a U.S. Magistrate Judge sternly rebuked New Line for failing to provide documentation (notably destroyed e-mails) that was crucial to the case. Along the way there came Bob Shaye's posting on a web site saying, "He thinks we owe him something after we've paid him over a quarter of a billion dollars."

There was still more spreading of ash, to quote the phrase from Pippin in LOTR, on Jackson's tomatoes. A June, 2005 New York Times piece quoted "a litigator for New Line, speaking on the condition of anonymity" as saying, "...there's a certain piggishness involved here. New Line already gave him enough money to rebuild Baghdad, and that's still not enough for him."

Presumably Shaye and partner Michael Lynne had a similar, if unmentioned, tolerance for absurd sums of money. In any event, in a lengthy, multi-correction Editor's Note, the Times apologized for violating its own policy by granting anonymity to confidential news sources "as cover for personal or partisan attack."

Some pundits have theorized that the settlement comes suspiciously soon after New Line's Golden Compass, which has been harried by Christian groups for what they say is a heretical message, emerged to relatively disappointing box office results, leaving a planned trilogy in an uncertain state.

According to Ken Kamins, Jackson's manager who seems characteristically loath to take credit as the behind-the-scenes architect of the resolution, the climate for a settlement had steadily improving largely thanks to two events. The first was a dinner held at Sloan's house early this year, where Jackson, accompanied by Walsh and Kamins, described his vision for the story arc: "Peter laid out the two-film idea and the way to do that," recalls Kamins, "And Harry got all excited and I think it was at that moment he said to New Line, `I won't allow this to move forward unless we figure out how to involve Peter in some way.'" The second was the now legendary phone call from Cannes, some two months after: "Michael [Lynne, New Line co-chairman] had contacted me and asked whether we could create an hour or so window where we could get on the phone and hear each others' voices and talk creatyively about how one would go about making two Hobbit movies."

With the New Line bosses joined by Mark Ordesky and Toby Emmerich in Cannes, where it was 9 a.m., Jackson in New Zealand where it was 7 p.m, and Kamins in L.A. at midnight, the call went on for nearly 90 minutes. Shaye opened it cordially, and Jackson came back by wishing the group well with their scheduled screening of footage from minutes of The Golden Compass. He "fondly recalled", says Kamins, being in Cannes with the group as they unveiled 22 minutes of the debut Lord of the Rings . "Hearkening back to that happier time, with Peter hearing Bob's voice and Bob hearing Peter's", the legal squabbles were set aside temporarily and "It was easier to divide the issues and have the discussions proceed a bit more elegantly over the next few months,"

Meanwhile, in the Century City suites where the litigators stalk, robust tussling continued. The Jackson camp, having moved on from vertical rights specialist Stanton `Larry' Stein (he netted David Duchovny $20 million from Fox after they sold rights to the X-Files to one of their own divisions) to Steve Marenberg (lead counsel to Universal Music group on some major new technology spats) of Irell and Manella. On the New Line side was Bobby Schwartz, was also defending the studio against breach of contract and other claims by partial LOTR rights holder Saul Zaentz (who surfaced days ago with another, related law suit).

Even as Sloan teased the vast worldwide Tolkien fan boy and fan girl contingent with the notion that Jackson might direct the twin $150 million-each projects, Kamins was taking pains to point out his client's formidable schedule making that impossible. Having just wrapped a good part of his work with Mark Wahlberg and Rachel Weisz on The Lovely Bones in the Pennsylvania chill, the director has returned to his Weta facility in New Zealand to shoot some summer exteriors (thanks to the antipodean warm season) and create his simulation of heaven, per the book's challenging mandate.

Jackson then has his motion capture TinTin project to shoot in cooperation with Steven Spielberg (whose DreamWorks is also producing The Lovely Bones). Andy Serkis, who played Gollum in LOTR and is described with a wink by Kamins as "the Olivier of motion capture", is the only announced cast member thus far). With Walsh dedicated to producing Jackson's work, and longtime collaborator Phillippa Bowen busy with such duties as supervising looping (as she typically does on Jackson films, along with her screenwriting with the couple), the Wingnut crowd has their hands full. (Possible directors whose names have been floated include Sam Raimi, Guillermo del Toro, and Alfonso Cuaron.) Kamins didn't entirely dismiss the idea that the trio could pitch in on the Hobbit script--pending, of course, resolution of the writers strike. But the manager had words of assurance for the watching and waiting Hobbit fans: "Peter and Fran really are going to play a role on these movies for which I think the best comparison would be the role Barbara Broccoli plays on the Bond films--like the spirit guide. They'll be insuring the quality of the movies and to be the keeper of the flame."

(Bob Shaye, Peter Jackson and Michael Lynne in December, 2002, at the after party for the New York premiere of Lord of the Rings; The Two Towers)