Doesn't New Line know that it was Peter Jackson who made them all those billions on the first place, and not their lawyers? It seems like a proven track record wasn't good enough for them any more.
Anybody who sees a non-Jackson "Hobbit" will go only once, and bring sharpened axes and knives with them.
It's amazing how Hollywood can screw up a no-brainer.
It was a smart move by PJ to make this public, and though it does seem unrealistic, there is a chance that PJ is still playing mindgames with New Line, and by going public like this and stating that the dream is over, he is hoping that out of desperation in the face of overwhelming negative reaction, the studio will come back and offer an agreement on the lawsuit. There's still time I think, but it's a really slim chance.