Mattel 2013 Annual Report Download - page 103

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Mattel paid the copyright fees judgment in the total sum, including interest, of approximately $138 million. On
December 26, 2013, the court entered an order exonerating and discharging the appeal bond posted by Mattel,
and on December 27, 2013, MGA filed an acknowledgment of satisfaction of judgment. On December 30, 2013,
Evanston Insurance Company’s appeal in its action against Mattel was dismissed.
On January 13, 2014, MGA filed a new, but virtually identical, trade-secrets claim against Mattel in Los
Angeles County Superior Court. Mattel was served with the complaint on January 23, 2014. In its complaint,
MGA purports to seek damages in excess of $1 billion. Mattel believes that MGA’s claim should be barred as a
matter of law, and intends to vigorously defend against it. Accordingly, Mattel does not believe a loss is probable
and, therefore, a liability has not been accrued as of December 31, 2013.
Litigation Related to Yellowstone do Brasil Ltda.
Yellowstone do Brasil Ltda. (formerly known as Trebbor Informática Ltda.) was a customer of Mattel’s
subsidiary Mattel do Brasil Ltda. when a commercial dispute arose between Yellowstone and Mattel do Brasil
regarding the supply of product and related payment terms. As a consequence of the dispute, in April 1999,
Yellowstone filed a declarative action against Mattel do Brasil requesting the annulment of its security bonds and
promissory notes given to Mattel as well as requesting the court to find Mattel do Brasil liable for damages
incurred as a result of Mattel do Brasil’s alleged abrupt and unreasonable breach of an oral exclusive distribution
agreement between the parties relating to the supply and sale of toys in Brazil. Yellowstone’s complaint sought
alleged loss of profits of approximately $0.5 million, plus an unspecified amount of damages consisting of:
(i) compensation for all investments made by Yellowstone to develop Mattel do Brasil’s business;
(ii) reimbursement of the amounts paid by Yellowstone to terminate labor and civil contracts in connection with
the business; (iii) compensation for alleged unfair competition and for the goodwill of trade; and
(iv) compensation for non-pecuniary damages.
Mattel do Brasil filed its defenses to these claims and simultaneously presented a counterclaim for unpaid
accounts receivable for goods supplied to Yellowstone in the approximate amount of $3.5 million.
During the evidentiary phase a first accounting report was submitted by a court-appointed expert. Such
report stated that Yellowstone had invested approximately $2.8 million in its business. Additionally, the court-
appointed expert calculated a loss of profits compensation of approximately $1.2 million. Mattel do Brasil
challenged the report since it was not made based on the official accounting documents of Yellowstone and since
the report calculated damages based only on documents unilaterally submitted by Yellowstone.
The trial court accepted the challenge and ruled that a second accounting examination should take place in
the lawsuit. Yellowstone appealed the decision but it was upheld by the appeals court.
The second court-appointed expert’s report submitted at trial did not assign a value to any of Yellowstone’s
claims and found no evidence of causation between Mattel do Brasil’s actions and such claims.
In January 2010, the trial court ruled in favor of Mattel do Brasil and denied all of Yellowstone’s claims
based primarily on the lack of any causal connection between the acts of Mattel do Brasil and Yellowstone’s
alleged damages. Additionally, the court upheld Mattel do Brasil’s counterclaim and ordered Yellowstone to pay
Mattel do Brasil approximately $3.8 million. The likelihood of Mattel do Brasil recovering this amount was
uncertain due to the fact that Yellowstone was declared insolvent and filed for bankruptcy protection. In February
2010, Yellowstone filed a motion seeking clarification of the decision which was denied.
In September 2010, Yellowstone filed a further appeal. Under Brazilian law, the appeal was de novo and
Yellowstone restated all of the arguments it made at the trial court level. Yellowstone did not provide any
additional information supporting its unspecified alleged damages. The appeals court held hearings on the appeal
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