Mattel 2010 Annual Report Download - page 101

Multidistrict Litigation (MDL) in the United States
On September 5, 2007, Mattel and Fisher-Price filed a motion before the Judicial Panel on
Multidistrict Litigation (“JPML”) asking that all federal actions related to the recalls be coordinated and
transferred to the Central District of California (In re Mattel Inc. Toy Lead Paint Products Liability Litigation,
No. 2:07-ML-01897-DSF-AJW, MDL 1897 (C. D. Ca.) (the “MDL proceeding”)). On December 18, 2007, the
JPML issued a transfer order, transferring six actions pending outside the Central District of California (Sarjent,
Shoukry, Goldman, Monroe, Chow and Hughey) to the Central District of California for coordinated or
consolidated pretrial proceedings with five actions pending in the Central District (Mayhew, White,
Luttenberger, Puerzer and Shah). The remaining cases (Healy, Powell, Rusterholtz, Jiminez, Probst, Harrington,
DiGiacinto, Allen, Sanders, Entsminger, and White II), so-called “potential tag-along actions,” were either
already pending in the Central District of California or were transferred there pursuant to January 3 and
January 17, 2008 conditional transfer orders issued by the JPML.
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 sought 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
defined 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voluntarily withdrawn from retail stores or replaced at the request of consumers.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 were Mattel, Fisher-Price, Target Corporation, Toys “R” Us, Inc., Wal-Mart Stores,
Inc., KB Toys, Inc., and Kmart Corporation. Mattel 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 related to the sale of Mattel and
Fisher-Price toys.
In the Consolidated Complaint, plaintiffs asserted 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 sought (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.
On March 15, 2010, the Court held a hearing on the parties’ motion for final approval of the class action
settlement. On March 26, 2010, the Court entered a final judgment dismissing the MDL proceeding with
prejudice, certifying the settlement class, overruling all objections, and approving all aspects of the class action
settlement except plaintiffs’ counsel’s application to the Court for attorneys’ fees and expenses. Under the
settlement, Mattel agreed, among other things, to provide various categories of economic relief for members of
the settlement class, maintain a quality assurance system, make a charitable contribution to fund child safety
programs, and not object to plaintiffs’ counsel’s application to the Court for attorneys’ fees and expenses up to a
specified amount. On May 5, 2010, the Court entered an order awarding plaintiffs’ counsel approximately $11
million in fees and expenses, which was paid by Mattel during the three months ended June 30, 2010.
93