Mattel Sues MGA, CEO Larian Claiming Illegal Transfer after Bratz Verdict

Mattel Inc. sued MGA Entertainment Inc., claiming the rival toy company and its chief executive officer illegally transferred more than $400 million to block Mattel from collecting the money as a creditor.

The lawsuit, filed Sept. 1 in state court in Los Angeles, is the latest action in litigation between the companies over the Bratz doll.

MGA’s Bratz and spinoff products generated revenue of more than $3 billion for the company from 2001 to 2008, Mattel said in the complaint. Mattel claimed MGA transferred as much as $489 million to Isaac Larian, founder and CEO of Van Nuys, California-based MGA, his family and associated trusts to shield the money from a possible judgment against MGA in the federal court battle.

The transfers were made to “ensure that no matter the outcome” of the case, “Mattel will never be able to recover for its losses, and, to the contrary, MGA and Larian will maintain control over their ill-gotten gains,” Mattel said in its complaint.

MGA and Larian transferred the money “knowing that these were the proceeds of wrongful conduct,” Mattel said in its complaint.

In July, a federal appeals court overturned a 2008 order giving Mattel the rights to most of MGA’s Bratz products. A jury found that the designer who created the dolls was working at Mattel when he conceived of the idea and the name, awarding Mattel $100 million in damages, 5 percent of the $2 billion the toymaker sought. The appeals court decision means Mattel must retry its claims.

‘Forum Shop’

MGA said in an e-mailed statement that Mattel “decided to forum shop” after the federal judge threw out the same claims. “We will vigorously defend ourselves against these false allegations and this frivolous lawsuit,” MGA said.

The appeal case is MGA Entertainment Inc. v. Mattel Inc., 09-55673, U.S. Court of Appeals for the Ninth Circuit (San Francisco). The state court case is Mattel Inc. v. MGA Entertainment Inc., BC444819, California Superior Court (Los Angeles).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net.

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