August 5, 2011

Bratz attack pins Barbie to the mat --- to the tune of $85 million in punitive damages

There’s epic litigation, and then there’s Bryant v. Mattel (aka "Mattel v. MGA"). Back in 2008, we had a post right here on this blog titled "No Punitive Damages Awarded in Bratz Trial." Well, a bit more of the dolly drama has played out since then, requiring this update. In the megalitigation pitting the House of Barbie against the Bratz pack, the parties are up to two trials before two different district judges, plus one big trip to the Ninth Circuit and several smaller trips, and more than 10,700 filings generated by the parties.

Now, as recounted in a great many media reports (e.g., from the LA Times and Bloomberg), federal district court judge David Carter yesterday handed down an order awarding MGA $85 million in punitive damages. Awards of that size can be good candidates for a constitutional excessiveness challenge, often because such awards tend to be many times greater than the 1:1 ratio (or sometimes higher single-digit ratio) recognized as appropriate in comparison to significant compensatory damages. But in this case, the award of punitive damages is equal to the award of compensatory damages, so a ratio argument may not be the focus of any excessiveness challenge that Mattel mounts in posttrial motions or on appeal.

This award is atypical of most large punitive damages awards because it was made by a judge, not a jury. MGA’s basis for seeking punitive damages arose from a claim for willful misappropriation of trade secrets. That claim was tried to the jury, but the applicable California statute authorizes the court to award punitive damages, and the statute caps any award at twice the compensatory damages. Cal. Civ. Code § 3426.3(c). MGA asked the district court to award the maximum amount of punitive damages—double its compensatory damages—but the court declined to do so.

This won’t be the last time you hear about this case. In addition to the large awards of compensatory and punitive damages, the district court's companion order saddled Mattel with paying MGA some $140 million in attorney’s fees and costs. (Yes, that's a nine-figure fee award.) With combined awards of more than $300 million, you can expect Mattel to appeal.

All in all, it’s quite a reversal of fortune for Mattel, which won the first trial and obtained millions in damages against MGA, only to see the Ninth Circuit reverse the judgment and order this new trial. According to one analyst's estimate (as quoted in the Financial Times), it has likely cost Mattel some $400 million in legal fees since 2004 to get to this point. For MGA's part, its CEO Isaac Larian reportedly said yesterday that the protracted litigation has damaged the Bratz brand by an estimated $1 billion, and that MGA intends to seek recompense in a separate antitrust proceedings against Mattel.

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