Mattel 2009 Annual Report Download - page 105

(a) DPDC (DPDC v. Mattel do Brasil Ltda., filed on August 20, 2007, and DPDC v. Mattel do Brasil Ltda., filed
on September 14, 2007); (b) PROCON (PROCON/MT v. Mattel do Brasil, filed on August 29, 2007, PROCON/
SP v. Mattel do Brasil, filed on September 4, 2007, and PROCON/RJ v. Mattel do Brasil, filed on
August 27, 2007); and (c) the Public Prosecutor’s Office (MP/RJ v. Mattel do Brasil, filed on
September 27, 2007, MP/PE v. Mattel do Brasil, filed on September 28, 2007, and MP/RN v. Mattel do Brasil,
filed on October 10, 2007). The administrative proceedings generally state claims based on the alleged
negligence of Mattel do Brasil regarding recalled products. In the PROCON/SP proceeding, plaintiff estimated a
fine equivalent to approximately $400,000. None of the other administrative proceedings listed above specify the
amount of the penalties that could be applied if the claims against Mattel do Brasil are successful. On
December 21, 2007, PROCON/SP rendered a decision and decided to impose a fine on Mattel do Brasil in the
approximate amount of $200,000. On January 9, 2008, Mattel do Brasil filed an administrative appeal regarding
the decision of December 21, 2007. On January 29, 2009, the administrative appeal was not granted and as a
consequence Mattel do Brasil decided to pursue further adjudication of this matter in the Brazilian courts.
All of the actions in Brazil are progressing and are at various stages of adjudication as described above.
Licensee Drop-Side Crib Litigation in Canada
In late November 2009, five proposed class actions were filed in provincial superior courts in five different
Canadian provinces against Fisher-Price, Inc. and Fisher-Price Canada Inc. alleging claims based on alleged
manufacturing defects in drop-side cribs manufactured by Stork Craft Manufacturing Inc. (“Stork Craft”)
between 1993 and 2009, including Fisher-Price branded drop-side cribs manufactured and sold by Stork Craft
pursuant to a License Agreement with Fisher-Price, Inc. These claims follow product recalls of Stork Craft-
manufactured drop-side cribs in the United States and Canada. Stork Craft and the corporate entities of a number
of retailers, including Wal-Mart, Sears, The Bay and Toys R’ Us, also have been named as defendants in the
proposed class actions. The five proposed class actions are: Cedar Dodd v. Stork Craft Manufacturing Inc. et al.,
filed in the Supreme Court of British Columbia on November 24, 2009, Victoria Registry, Action No. 09 5327;
Amy St. Pierre et al. v. Fisher-Price Canada Inc., et al., filed in the Court of Queen’s Bench of Alberta on
November 24, 2009, Judicial District of Calgary, Action No. 0901-17700; Kim Riel v. Stork Craft Manufacturing
Inc. et al., filed in the Court of Queen’s Bench of Saskatchewan, on November 25, 2009, Judicial Centre of
Regina, Q.B. No. 1794 of 2009; Tara Russell v. Stork Craft Manufacturing Inc. et al., filed in the Court of
Queen’s Bench of Manitoba, on November 25, 2009, Winnipeg Centre, File No. C1 09-01-63980; and David
Duong et al. v. Stork Craft Manufacturing Inc. et al., filed in the Ontario Superior Court of Justice on
November 25, 2009, in Ottawa, Court File No. 09-46962.
The five proposed class actions are all brought by the same plaintiff’s law firm and the allegations are
essentially the same. Each of the proposed class actions is based on allegation that the drop-side mechanisms
used in the Stork Craft cribs are dangerously defective in that they create a risk that infants will be injured as
result falling from or becoming entrapped in the crib. The claims are based in negligence, waiver of tort and
breach of provincial sale of goods and consumer protection legislation. The claims seek damages for personal
injury and economic loss, including recovery of the purchase price paid for the cribs, as well as an accounting,
disgorgement or restitution of revenue earned by the defendants from selling the cribs. The claims further seek
exemplary, aggravated and punitive damages. No amount of damages is specified in any of the claims, except the
Ontario claim which seeks Canadian dollar $1 million in general damages and Canadian dollar $1 million in
special damages. Each of the proposed class actions seeks certification on behalf of a class consisting of all
persons (except defendants) that owned or purchased the drop-side cribs in question. No motion for certification
has yet been filed in any of the actions.
The License Agreement between Fisher-Price and Stork Craft includes an indemnity clause whereby Stork
Craft agreed to indemnify Fisher-Price in respect of claims against Fisher-Price relating to Stork Craft
manufactured products. While Mattel intends for Fisher-Price to seek indemnity from Stork Craft to cover all
costs related to these claims, there can be no assurance that Fisher-Price ultimately would be successful in
obtaining full indemnity from Stork Craft.
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