Mattel 2008 Annual Report Download - page 98

On March 31, 2008, plaintiffs filed a Consolidated Amended Class Action Complaint in the MDL
proceeding, which was followed with a Second Consolidated Amended Complaint (the “Consolidated
Complaint”), filed on May 16, 2008. Plaintiffs seek certification of a class of all persons who, from May 2003
through the present, purchased and/or acquired certain allegedly hazardous toys. The Consolidated Complaint
defines hazardous toys as those toys recalled between August 2, 2007 and October 25, 2007, due to the presence
of lead in excess of applicable standards in the paint on some parts of some of the toys; those toys recalled on
November 21, 2006 and August 14, 2007, related to magnets; and the red and green toy blood pressure cuffs
voluntarily withdrawn from retail stores or replaced at the request of consumers. Defendants named in the
Consolidated Complaint are Mattel, Fisher-Price, Target Corporation, Toys “R” Us, Inc., Wal-Mart Stores, Inc.,
KB Toys, Inc., and Kmart Corporation. Mattel has assumed the defense of Target Corporation, Toys “R” Us,
Inc., KB Toys, Inc., and Kmart Corporation, and agreed to indemnify all of the retailer defendants, for the
specific claims raised in the Consolidated Complaint, which claims relate to the sale of Mattel and Fisher-Price
toys.
In the Consolidated Complaint, plaintiffs assert claims for breach of implied and express warranties,
negligence, strict liability, violation of the United States Consumer Product Safety Act (“CPSA”) and related
Consumer Product Safety Rules, various California consumer protection statutes, and unjust enrichment.
Plaintiffs seek (i) declaratory and injunctive relief enjoining defendants from continuing the allegedly unlawful
practices raised in the Consolidated Complaint; (ii) restitution and disgorgement of monies acquired by
defendants from the allegedly unlawful practices; (iii) costs of initial diagnostic blood lead level testing to detect
possible injury to plaintiffs and members of the class; (iv) costs of treatment for those who test positive to the
initial diagnostic blood lead level testing; (v) reimbursement of the purchase price for the allegedly hazardous
toys; and (vi) costs and attorneys’ fees. On June 24, 2008, defendants filed motions to dismiss the Consolidated
Complaint. On November 24, 2008, the Court granted defendants’ motion with respect to plaintiffs’ claims under
the CPSA related to the magnet toys and the toy blood pressure cuffs and denied defendants’ motions in all other
respects. Discovery has commenced and is ongoing, but is in the very early stages.
California Proposition 65 Claims and State Attorneys General Inquiries
On September 24 and September 26, 2007, respectively, the Environmental Law Foundation and the Center
for Environmental Health, each of which is a non-profit environmental group, issued pre-litigation notices of
intent to sue (the “Notices”) against Mattel for allegedly failing to issue clear and reasonable warnings in
accordance with California Health and Safety Code Section 25249.6 (“Proposition 65”) with regard to potential
exposures to lead and lead compounds from certain toys distributed for sale in California. Pursuant to Proposition
65, the pre-litigation Notices had to be served on the California Attorney General, the district attorneys in
California, and certain city attorneys, at least sixty days before the Noticing Parties could proceed with a formal
lawsuit.
On November 19, 2007, the California Attorney General, joined by the Los Angeles City Attorney, brought
suit against Mattel and Fisher-Price, along with a number of other entities alleged to have manufactured and/or
sold children’s products that exposed children to lead, in Alameda County Superior Court in California. The
complaint asserted claims for violation of Proposition 65 (California Health & Safety Code § 25249.6 et seq.)
and the California Unfair Competition Act (California Business & Professions Code § 17200 et seq.) and sought
civil penalties up to $2,500 per day for each violation of each statute, restitution pursuant to Business &
Professions Code § 17203, and injunctive relief. The filing of this action by the Attorney General precluded
several environmental non-profit groups that had issued pre-suit notices of intent to bring Proposition 65 claims
from proceeding with such claims of their own. The California Attorney General’s lawsuit was served on Mattel
and Fisher-Price on January 23, 2008. The Alameda County Superior Court designated the case as complex. On
November 12, 2008, Mattel reached a settlement of the lawsuit in which it did not admit liability, but agreed to
make certain payments totaling $1 million, to implement certain quality assurance measures, and to comply as of
the effective date of the settlement with certain federal lead standards scheduled to become effective at various
times in the future. On December 31, 2008, the Court approved a consent judgment among Mattel, Fisher-Price
and Plaintiffs reflecting the terms of the settlement.
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