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November 10, 2010 6:53 PM

O'Melveny, MGA Now Fighting Over Trial Dates in Bratz Fee Dispute

Posted by Drew Combs

O'Melveny & Myers and toymaker MGA Entertainment, Inc. couldn't agree when they were on the same team, so it's not surprising that the law firm and its former client can't agree now that they are suing each other.

In July, O'Melveny sued MGA in Los Angeles superior court for $10.2 million in unpaid legal fees related to the company's long-running litigation against rival Mattel, Inc., over MGA's Bratz doll line. MGA responded to O'Melveny's fee demand the following month with a malpractice cross-complaint. 

Now, in a spate of filings, the two sides are arguing over when the trial should take place. On October 29, O'Melveny filed its opposition to MGA's motion to stay the proceedings. The firm's move elicited a response on Thursday in which MGA describes O'Melveny's arguments as "not persuasive."

In August, MGA asked the court to stay the trial against O'Melveny citing the fact that the case with Mattel, for which O'Melveny originally had been hired, is ongoing. In opposing the request, O'Melveny argues in its motion that this case is a straightforward fee dispute--the issues at the heart of it won't change, no matter what the outcome will be in the litigation between Mattel and MGA. Also, the firm maintains, a stay would be especially prejudicial to three O'Melveny lawyers whose "professional reputations...ability to earn a living and...peace of mind" have been impacted by the allegations, the filing says. O'Melveny is being represented in the lawsuit by lawyers at Gibson, Dunn & Crutcher and Kinsella Weiztman Iser Kump & Aldisert.

The filing further states, "[The case] also casts a shadow over [the three lawyers'] and O'Melveny's E&O insurance placement and renewal negotiations." The firm alleges that MGA is seeking to delay the case until the Bratz litigation (including any appeals) ends, which, according to the filing, could push the start date of this fee dispute to 2017. "That delay...inevitably means that witness memories will fade; witnesses will move on or otherwise become unavailable; and documents may be misplaced or lost--all while this case languishes on the court docket."

MGA, in response to O'Melveny's opposition to the stay, says there is a strong nexus between the Bratz retrial, the fee dispute, and MGA's malpractice cross-complaint. In the cross-complaint, the Van Nuys, Calif.-based toy maker provides a litany of malpractice claims including that O'Melveny failed to properly develop statute of limitations and spoliation defenses to Mattel's claims, advocated a bifurcation strategy that did not allow MGA to show its most favorable evidence, overbilled, misrepresented the qualifications of its attorneys, failed to secure expert witnesses, improperly withdrew from the trial in October 2007, and failed to meaningfully assist new counsel. "O'Melveny's claimed inability to see the impact of the retrial seems myopic," MGA states in the recent filing.

MGA is represented by William Gwire at San Francisco-based Gwire Law Offices. Gwire declined to comment for this article.

In a statement previously provided to The Am Law Daily, O'Melveny said of MGA's overall allegations, "This type of filing is a predictable tactic designed to distract from MGA's obligation to pay O'Melveny for high-quality work on more than two-dozen matters over several years."

There has probably been no litigation matter more important to MGA than the lawsuit against Mattel over ownerserhip of the Bratz doll line. MGA retained O'Melveny to represent the company in a countersuit filed in 2004 against Mattel. The toy giant, maker of the Barbie line of dolls, claimed that the toy designer who created the Bratz dolls for MGA did so while still under contract with Mattel, where he worked before launching Bratz with MGA. Mattel asserted ownership of the Bratz intellectual property.

As a May 2008 trial date loomed, conflicts arose among MGA's various outside counsel. O'Melveny reportedly wanted its star litigator, Daniel Petrocelli, to assume first chair at trial, but MGA decided against this, as MGA founder and CEO Isaac Larian told The Recorder, a sibling publication, in November 2007. O'Melveny then withdrew as counsel to MGA, according to The Recorder.

At the time, the firm attributed its decision to withdraw from the case to "disagreements with us and the client that make it unreasonably difficult for us to continue serving as counsel, and our client's unwillingness to honor the fee agreement," O'Melveny told The Recorder's Kellie Schmitt. MGA turned to Skadden, Arps, Slate, Meagher & Flom and star litigator Thomas Nolan in October 2007 to take the lead on the case against Mattel.

Following a three-month trial in the late spring and early summer of 2008, a federal district court judge in Riverside, California, awarded Mattel $100 million in damages and ordered the transfer of the doll line from MGA to Mattel.

But in July, a ruling by the Ninth Circuit essentially reversed the trial court decision. A three-judge panel, including Chief Judge Alex Konzinski, issued a unanimous opinion in which it deemed the district court's remedy too broad and said the trial process had been riddled with errors.

The trial court decision hinged on the finding that the overwhelming majority of Bratz female fashion dolls were substantially similar to Mattel's copyrighted work, according to the appeals court ruling. But the appeals court found that elements of those initial Bratz sketches were unprotectable and that "Mattel can't claim a monoploy over fashion dolls with a bratty look or attitude, or dolls sporting trendy clothing."

The case is scheduled to be retried next year. MGA is being represented by lawyers at Orrick, Herrington & Sutcliffe. Mattel is represented by Quinn Emanuel Urquhart & Sullivan. (A feature story about this case will be published in the December issue of The American Lawyer magazine.)

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