Mattel 2010 Annual Report Download - page 103

products with non-approved paint containing lead exceeding the limits established by applicable regulations and
Mattel standards. The cases generally state claims in four categories: (i) production of a defective product;
(ii) misrepresentations; (iii) negligence; and (iv) violations of consumer protection statutes. Plaintiffs generally
seek general and special damages; restitution of monies paid by consumers to replace recalled toys; disgorgement
of benefits resulting from recalled toys; aggravated and punitive damages; pre-judgment and post-judgment
interest; injunctive relief; and litigation costs and attorneys’ fees. The amount of damages sought by plaintiffs is
not generally specified, except that in the Public Treasury Court in the State of Santa Catarina action, ACC/SC
demands general damages of approximately $1 million, in addition to other remedies. In the Sixth Civil Court of
the Federal District action, IBEDEC demands damages of approximately $21 million, which amount will be used
as a basis for calculating court fees, in addition to requesting other remedies.
On June 18, 2008, the court held that the action brought by IBEDEC was without merit, and on July 1, 2008,
IBEDEC filed an appeal. On July 23, 2008, Mattel do Brasil submitted its appellate brief. On
September 15, 2008, the Public Prosecutor’s Office submitted its opinion to the court, which supported
upholding the original decision, given that no reason had been cited for ordering the company to pay pain and
suffering damages. Moreover, just as the judge had done, the Public Prosecutor’s Office determined that the mere
recall of products does not trigger any obligation to indemnify any party. On November 4, 2008, the panel of
three appellate judges unanimously upheld the lower court’s decision. On November 18, 2008, IBEDEC filed a
special appeal and on January 5, 2009 Mattel do Brasil filed its response. On February 2, 2009, the special appeal
lodged by IBEDEC was rejected. In February, 2009, IBEDEC filed a new interlocutory appeal, and on
March 16, 2009, Mattel do Brasil presented its counter arguments to the IBEDEC interlocutory appeal.
On December 7, 2009, the Federal Superior Court (STJ) published a decision denying IBEDEC’s appeal.
IBEDEC did not file any other appeal thereby confirming the decision rendered by the lower court judge. As a
procedural matter, the court must file its records of the case. Mattel do Brasil will continue monitoring the case
until the final filing has been completed. There is no longer any risk exposure to Mattel do Brasil.
On July 9, 2008, the court also rendered a decision concerning the action brought by CPLeg/RJ. The judge
rejected the claim for general damages, but Mattel do Brasil was ordered to provide product-exchange outlets in
certain locations for replacement of the recalled products, to publish in newspapers the provisions of the court
decision, and to make available on its website the addresses of the outlets for replacement of recalled products
and the provisions of the court’s decision. The decision also allowed the consumers who were affected by the
recall to submit information to the court, so that the applicability of pecuniary damages can be analyzed later, on
a case by case basis. It finally ordered Mattel do Brasil to pay attorneys’ fees in an amount equal to 10% of the
value placed on the claim (with a value placed on the claim of approximately $12,500). Mattel do Brasil filed a
motion seeking to resolve apparent discrepancies in the court’s decision, but the judge sustained the decision, as
rendered, and Mattel do Brasil filed its appeal of such decision. On September 19, 2008, the appeals court
accepted Mattel’s appeal for purposes of remand, only, and not to stay the proceedings. Seeking to prevent
execution on the judgment, Mattel do Brasil filed an interlocutory appeal and requested the court grant a
preliminary injunction. On October 14, 2008 the injunction was granted. On February 5, 2009, the court heard
the interlocutory appeal and confirmed the injunction. On September 1, 2009, the appeals court in Rio de Janeiro
unanimously reversed the judgment issued by the lower court. Therefore, Mattel do Brasil is not required to
establish outlets in each city of the State of Rio de Janeiro for purposes of further conducting the magnet and lead
recalls. CODECON did not file the special appeal thereby confirming the decision rendered by the originating
court in favor of Mattel do Brasil. In October 2010, the court filed its records of the case and the matter is now
closed.
Since August 20, 2007, the Department of Consumer Protection and Defense (“DPDC”), the Consumer
Protection Office (“PROCON”) of São Paulo, Mato Grosso and Rio de Janeiro, and public prosecutors from the
States of Pernambuco, Rio Grande do Norte, and Rio de Janeiro have brought eight administrative proceedings
against Mattel do Brasil, alleging that the company offered products whose risks to consumers’ health and safety
should have been known by Mattel. The proceedings have been filed with the following administrative courts:
(a) DPDC (DPDC v. Mattel do Brasil Ltda., filed on August 20, 2007, and DPDC v. Mattel do Brasil Ltda., filed
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