Fox and Warner Brothers have settled the Watchmen legal case but Warner Brothers is probably examining their legal options against those who sold them the Watchmen film rights in the first place. Lawrence Gordon has been identified as one potential party but it looks like he will be joined by a less publicized defendant.

The 2006 Warner Brothers agreement to acquire the Watchmen film rights actually identifies two different parties as “seller”: Golar Inc. (Gordon’s company) and LEI Development Projects. Who in the world is LEI? Copyright records show that Largo Entertainment (Larry Gordon’s company prior to Golar) assigned rights to dozens of screenplays, including one or more Watchmen scripts, to LEI in 2002. Warner Brothers acquired rights to Watchmen screenplays by Sam Hamm, Charles McKeown and Gary Goldman in the 2006 agreement. So all three scripts were probably part of the batch acquired (bought) by LEI in 2002. There is no indication of how much money, if any, was exchanged between LEI and Golar.

Confused yet? It gets even more confusing. Warner Brothers paid exactly $1 dollar in cash (read the agreement below) for the option to make a movie based on the Watchmen materials. In addition to that single dollar, Warner Brothers agreed to pay LEI, not Golar, an amount equal to 5% of 100% of the “defined proceeds” of any movies derived from the Watchmen materials. Apparently, a separate producer agreement with Warner Brothers gave Lawrence Gordon his own cut of the proceeds.

So, at least on paper, Golar received no money from the deal for the Watchmen materials but accepted liability under the agreement’s indemnification clause. This clause states (in part) that:

Seller [Golar and LEI Development Projects] shall indemnify and otherwise hold WBP (its successors, assigns, licensees, agents and representatives) harmless from and against any and all claims, demands, liability or expense (including reasonable attorney’s fees) arising out of or resulting from any breach of its representations, warranties and agreements hereunder.

Hopefully, LEI enjoyed spending their dollar.

1. Quitclaim Agreement between Warner Brothers, Golar, Inc. and LEI Development Projects

On January 16, 2009, Fox filed a Stipulation for Dismissal With Prejudice in the Watchmen legal case. Once the order is entered by the court, the lawsuit will officially come to an end. The text of the filing is as follows:

WHEREAS, Plaintiff Twentieth Century Fox Film Corporation (“Fox”) and defendants Warner Bros. Entertainment, Inc., WB Studios Enterprises, Inc. and Warner Bros. Pictures (collectively “Warner Bros”) have entered into a confidential settlement agreement to fully settle and resolve the within action;

NOW THEREFORE, Fox and Warner Bros., by and through their respective undersigned counsel, hereby stipulate and agree and ask the Court to enter an Order, dismissing the above-captioned action, with prejudice.

Fox’s proposed order simply says: “The Court, having received the parties’ Stipulation for Dismissal with Prejudice, and good cause appearing, IT IS HEREBY ORDERED that the above–captioned action is dismissed with prejudice.”

Since the terms of the agreement are confidential, media reports will be the only source of settlement terms. That is, until a complete leak occurs.

Initial skepticism about The Hollywood Reporter’s opaque Watchmen settlement piece has been backed up by Nikki Finke. She provides the studio’s joint statement confirming that Fox and Warner Brothers have settled the Watchmen legal case, while noting that the previous reports jumped the gun. In any case, the joint statement from the studios as follows:

Warner Bros. and Twentieth Century Fox have resolved their dispute regarding the rights to the upcoming motion picture Watchmen in a confidential settlement. Warner Bros acknowledges that Fox acted in good faith in bringing its claims, which were asserted prior to the start of principal photography. Fox acknowledges that Warner Bros. acted in good faith in defending against those claims Warner Bros. and Fox, like all Watchmen fans, look forward with great anticipation to this film’s March 6 release in theatres.

I will also add that the court appearance date was apparently wrong (thanks, THR). The studios will present the settlement to the court on Friday, January 16, 2009 as opposed to Monday, January 19, 2009.

The Hollywood Reporter is now stating that Fox and Warner Brothers have come to terms on a settlement in the Watchmen legal case. Both parties will allegedly present their agreement to the court on Monday, January 19, 2009. As usual, the real story is in the court filings and there have been none since yesterday (January 14, 2009). In any case, there might be a conclusion to this case by next week. Expect more updates in the near future.

As previously noted, presiding judge Gary Feess criticized Lawrence Gordon in his summary judgment order. Additionally, Feess stated that he would hear no evidence from Gordon on the case after his order was issued. Despite the judge’s admonitions, Gordon sent a letter to the judge on January 7, 2009 that explained his side of the story. Gordon’s letter is floating around the Internet in some form or another but the letter will not be presented on this site until a version with no watermarks appears. Instead, here is the judge’s response, which is consistent with local court rules and his original position:

Today [January 7, 2009], the Court received by fax a letter from Patricia A. Millett, Kinsella Weitzman Iser Kump & Aldisert, LLP regarding the above entitled action. Insofar as this is an improper communication to the Court, and is in fact in violation of Central District Local Rule 83-2.11, the Court will not consider this letter, or review the facts presented therein, in connection with the case presently pending before this Court. The original hand-delivered letter will be returned to Attorney Millett when it is received.

For sake of completeness, Local Rule 83-2.11 is as follows:

L.R. 83-2.11 Communications With the Judge . Attorneys or parties to any action or proceeding shall refrain from writing letters to the judge, making telephone calls to chambers, or otherwise communicating with a judge in a pending matter unless opposing counsel is present. All matters shall be called to a judge’s attention by appropriate application or motion filed in compliance with these Local Rules.

Why send a letter to the court when it is certain that it will be rejected? Answers to this very leading question are welcomed in the comments to this post. I will provide my own if asked.