Mattel 2004 Annual Report Download - page 92

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California Insurance Guarantee Association (“CIGA”) to recoup the full $20.0 million of the Reliance layer.
CIGA disputed that it had to pay this amount, but on June 27, 2003, agreed to pay $0.5 million to Mattel, without
prejudice to Mattel’s right to seek additional amounts. That same day, Mattel filed a lawsuit in Los Angeles
County Superior Court seeking a declaration that CIGA was obligated to pay additional amounts to Mattel. On
September 30, 2003, the parties entered into a written settlement agreement whereby CIGA agreed to pay Mattel
$7.75 million (in addition to the $0.5 million previously paid), and Mattel agreed to dismiss its lawsuit. CIGA
has since paid this sum, and the case was dismissed.
Litigation Related to Cunningham
This suit was filed in September 1999 in the Circuit Court of Madison County, Illinois. The two named
plaintiffs, who purchased “limited edition” Barbie®dolls, contend that Mattel’s use of the term “limited edition”
on Barbie®dolls was deceptive and fraudulent to consumers (and that it constituted a breach of contract and
breach of express warranty) on the grounds that the dolls were not “true” limited editions and thus are not as
valuable as they would be otherwise. Originally, the plaintiffs claimed that use of the terms “special edition,”
“collector’s edition” and “exclusive” on Barbie®dolls was also deceptive and fraudulent to consumers and
constituted a breach of contract and breach of express warranty, but these claims were dismissed during motion
practice.
In August 2003, a nationwide class of “all persons who have purchased limited edition Barbie®dolls or
Barbie®dolls which were described, promoted or packaged as available only in small, limited amounts” was
certified based on California Business and Professions Code sections 17200 and 17500 et seq. Plaintiffs’ claims
under the Illinois Consumer Fraud Act, as well as their breach of contract and breach of express warranty claims,
were not certified for class action treatment. The plaintiffs claim that the class suffered compensatory damages of
at least between $100 million and $200 million, and seek punitive damages, attorneys’ fees and injunctive relief.
In January 2005, the Court issued an order decertifying the nationwide class in its entirety, without prejudice
to plaintiffs attempting to re-certify the class at a later date. The case is continuing on behalf of the two named
plaintiffs. Discovery in the matter is ongoing. Mattel will continue to defend vigorously plaintiffs’ claims and
will resist any attempt to re-certify a class action.
Environmental
Fisher-Price
Fisher-Price has executed a consent order with the State of New York to implement a groundwater
remediation system at one of its former manufacturing facilities. The execution of the consent order was in
response to the New York State Department of Environmental Conservation (“NYSDEC”) Record of Decision
issued in March 2000. The NYSDEC approved a conceptual work plan in March 2001. One component of the
remedial program mandated by the NYSDEC involves discharging the remediation wastewater into the publicly
owned treatment works (“POTW”), which is owned and operated by the Village of Medina, New York. In
June 2003, the Village of Medina approved the discharge of wastewater from the groundwater collection system
into the POTW as part of a short-term, pilot scale pumping test to evaluate water quantity and quality necessary
to complete the remedial design. The pilot program was successfully conducted in November 2003, and plans are
underway to implement the actual groundwater remediation program. Mattel is now negotiating with the Village
of Medina regarding the rate to be charged by the Village of Medina to Mattel for groundwater discharge into the
POTW. The ultimate liability associated with this cleanup presently is estimated to be approximately
$2.1 million, approximately $1.8 million of which has been incurred through year end 2004.
Beaverton, Oregon
Mattel previously operated a manufacturing facility on a leased property in Beaverton, Oregon that was
acquired as part of the March 1997 merger with Tyco Toys, Inc. In March 1998, samples of groundwater used by
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