This may be the single worst decision any studio has ever made about anything
Several years ago, Mark Ordesky told us that New Line have rights to make not just The Hobbit but a second "LOTR prequel", covering the events leading up to those depicted in LOTR. Since then, we've always assumed that we would be asked to make The Hobbit and possibly this second film, back to back, as we did the original movies. We assumed that our lawsuit with the studio would come to a natural conclusion and we would then be free to discuss our ideas with the studio, get excited and jump on board. We've assumed that we would possibly get started on development and design next year, whilst filming The Lovely Bones. We even had a meeting planned with MGM executives to talk through our schedule.
However last week, Mark Ordesky called Ken and told him that New Line would no longer be requiring our services on the Hobbit and the LOTR 'prequel'. This was a courtesy call to let us know that the studio was now actively looking to hire another filmmaker for both projects.
This is probably just both sides posturing to gain leverage over the other, but if it's not, it's terrible. Via AICN