Mattel 2014 Annual Report Download - page 107

December 26, 2013, the District Court entered an order exonerating and discharging the appeal bond posted by
Mattel, and on December 27, 2013, MGA filed an acknowledgment of satisfaction of judgment. On
December 30, 2013, Evanston Insurance Company’s appeal in its action against Mattel was dismissed.
On January 13, 2014, MGA filed a new, but virtually identical, trade secrets claim against Mattel in Los
Angeles County Superior Court. In its complaint, MGA purports to seek damages in excess of $1 billion. Mattel
believes that MGA’s claim should be barred as a matter of law, and intends to vigorously defend against it. On
December 3, 2014, the Court overruled Mattel’s request to dismiss MGA’s case as barred as a result of prior
litigation between the parties. In light of that ruling, Mattel believes that it is reasonably possible that damages in
this matter could range from $0 to approximately $12.5 million. In addition, Mattel believes that if such damages
are awarded, it is reasonably possible that pre-judgment interest, ranging from $0 to approximately $10 million,
could be awarded. Mattel may be entitled to an offset against any damages awarded to MGA. Mattel has not
quantified the amount of any such offset as it is not currently estimable. As Mattel believes a loss in this matter is
reasonably possible but not probable, no liability has been accrued to date.
Litigation Related to Yellowstone do Brasil Ltda.
Yellowstone do Brasil Ltda. (formerly known as Trebbor Informática Ltda.) was a customer of Mattel’s
subsidiary Mattel do Brasil Ltda. when a commercial dispute arose between Yellowstone and Mattel do Brasil
regarding the supply of product and related payment terms. As a consequence of the dispute, in April 1999,
Yellowstone filed a declarative action against Mattel do Brasil before the 15th Civil Court of Curitiba – State of
Parana (the “Trial Court”), requesting the annulment of its security bonds and promissory notes given to Mattel
as well as requesting the Trial Court to find Mattel do Brasil liable for damages incurred as a result of Mattel do
Brasil’s alleged abrupt and unreasonable breach of an oral exclusive distribution agreement between the parties
relating to the supply and sale of toys in Brazil. Yellowstone’s complaint sought alleged loss of profits of
approximately $1 million, plus an unspecified amount of damages consisting of: (i) compensation for all
investments made by Yellowstone to develop Mattel do Brasil’s business; (ii) reimbursement of the amounts paid
by Yellowstone to terminate labor and civil contracts in connection with the business; (iii) compensation for
alleged unfair competition and for the goodwill of trade; and (iv) compensation for non-pecuniary damages.
Mattel do Brasil filed its defenses to these claims and simultaneously presented a counterclaim for unpaid
accounts receivable for goods supplied to Yellowstone in the approximate amount of $4 million.
During the evidentiary phase a first accounting report was submitted by a court-appointed expert. Such
report stated that Yellowstone had invested approximately $3 million in its business. Additionally, the court-
appointed expert calculated a loss of profits compensation of approximately $1 million. Mattel do Brasil
challenged the report since it was not made based on the official accounting documents of Yellowstone and since
the report calculated damages based only on documents unilaterally submitted by Yellowstone.
The Trial Court accepted the challenge and ruled that a second accounting examination should take place in
the lawsuit. Yellowstone appealed the decision to the Court of Appeals of the State of Parana (the “Appeals
Court”), but it was upheld by the Appeals Court.
The second court-appointed expert’s report submitted at trial did not assign a value to any of Yellowstone’s
claims and found no evidence of causation between Mattel do Brasil’s actions and such claims.
In January 2010, the Trial Court ruled in favor of Mattel do Brasil and denied all of Yellowstone’s claims
based primarily on the lack of any causal connection between the acts of Mattel do Brasil and Yellowstone’s
alleged damages. Additionally, the Trial Court upheld Mattel do Brasil’s counterclaim and ordered Yellowstone
to pay Mattel do Brasil approximately $4 million. The likelihood of Mattel do Brasil recovering this amount was
uncertain due to the fact that Yellowstone was declared insolvent and filed for bankruptcy protection. In February
2010, Yellowstone filed a motion seeking clarification of the decision which was denied.
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