Judge tosses Mattel lawsuit related to Bratz case

[April 16, 2011]  LOS ANGELES (AP) -- A state court judge has tossed a lawsuit by toy giant Mattel Inc. that accuses its rival MGA Entertainment Inc. of fraudulently transferring millions in funds to avoid paying anticipated judgments in litigation over ownership of the popular, pouty-lipped Bratz doll.

Los Angeles Superior Court Judge Mel Red Recana filed the order Thursday in the case.

The El Segundo-based Mattel filed its complaint last September in the run-up to a federal copyright infringement and trade secrets trial pitting Mattel against MGA over who owns the billion-dollar Bratz brand.

Mattel alleges in that related case that the designer of the Bratz doll line, Carter Bryant, was working for the toy giant when he designed the hip-hop-inspired dolls and that MGA and its CEO, Isaac Larian, conspired to steal the idea and then cover up their actions.

In addition to Mattel's claims, jurors in the federal case are also considering a countersuit by MGA that accuses Mattel of hiring corporate spies who used fake IDs to get secret information about MGA's upcoming toy lines at trade shows. MGA is seeking damages in that case of up to $200 million.

A federal jury awarded Mattel $100 million in a first trial, but the verdict was later overturned. In the first trial jurors did not consider MGA's claim.

Jurors are currently deliberating on claims from both sides in a retrial that lasted three months.

On Friday, Larian said he would sue Mattel for MGA's legal fees in the state case, as well as for malicious prosecution and defamation.

An attorney for Mattel, however, said the company had filed the state case to protect its ability to collect on any judgment.

"The court dismissed the filing as premature and has left open Mattel's right to refile the case at an appropriate time in the future," said Michael Zeller, a Mattel attorney.

Mattel's lawsuit in state court alleged that MGA transferred $430 million in dividends and other assets to Larian, his family members and various trusts between 2004 and 2008 to make the company appear insolvent and prevent MGA's creditors, including Mattel, from cashing in.

The lawsuit also alleges that Larian got his friends and family members to pool their money to buy MGA's debt from a syndicate of banks, which was collecting all revenue MGA received to secure an earlier credit agreement.

The resulting entity, Omni 808, subsequently lent money to MGA and was intended to further prevent Mattel from collecting any judgments against the Los Angeles-based company, the lawsuit alleges.

Mattel reported higher than expected returns Friday during the first quarter, with sales of Barbie boosting revenue 8 percent.

But the costs of its lawsuit over the Bratz dolls and other expenses sent net income down 33 percent.

The company said it has had $18.2 million in costs related to the latest litigation with MGA.

[Associated Press; By GILLIAN FLACCUS]

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