A top executive at New Line Cinema just informed Jackson he would no longer be needed on the prequel to the ‘Lord of the Rings’ trilogy, ‘The Hobbit’.

Here is the full story courtesy of CNN.com.

In a letter posted on a Lord of the Rings Web site, Theonering.com., Jackson and partner Fran Walsh said a top executive from Los Angeles-based New Line Cinema had called to tell them the studio was moving ahead with “The Hobbit” movie without Jackson.

“Last week, Mark Ordesky called Ken (Kamins, Jackson’s manager) and told him that New Line would no longer be requiring our services on The Hobbit and the LOTR ‘prequel,”‘ Jackson wrote.

“This was a courtesy call to let us know that the studio was now actively looking to hire another filmmaker for both projects,” he added. New Line Cinema holds the rights to produce “The Hobbit,” and Metro-Goldwyn-Meyer the rights to distribute it.

A spokesman from Wingnut Films, Jackson’s production company in the New Zealand capital, confirmed to local media Wednesday that the letter was genuine. He spoke on his standard condition he not be named.

The announcement comes amid an ongoing dispute between Jackson’s Wingnut Films and New Line Cinema over the amount Jackson was paid for “The Fellowship of the Ring,” including DVD payments.

While Jackson has not said how much he believes he was underpaid, The New York Times last year quoted his lawyers as saying it was as much as US$100 million. He is suing New Line Cinema over the shortfall.

The Dominion Post newspaper in the New Zealand capital Wellington quoted Jackson as saying that because he and Walsh would not discuss the movies “until the lawsuit is resolved, the studio is going to have to hire another director.”

“We are very sorry our involvement with ‘The Hobbit’ has ended this way,” the pair added.

Plans for Jackson to make a US$128 million movie version of the sci-fi video game Halo were also scuppered this month after backers 20th Century Fox and Universal Pictures pulled out.

Jackson’s ‘Lord of the Rings’ trilogy grossed nearly US$3 billion at box offices worldwide.