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Bratz doll manufacturer MGA Entertainment Inc., facing potential discovery sanctions in a claim for $10.2 million in unpaid legal fees, has agreed to drop malpractice claims against its former law firm, O’Melveny & Myers, and three of its lawyers. O’Melveny, which represented MGA from 2004 to 2007 in a high profile copyright infringement case against Barbie manufacturer Mattel Inc., had sued its former client over the fees. MGA fired back with a cross-complaint alleging that O’Melveny had overbilled it and had botched the legal preparations for a 2008 trial in which a federal jury awarded $100 million in damages to Mattel. O’Melveny has moved for sanctions against MGA for allegedly failing to provide documents and other discovery. A hearing on those sanctions was scheduled for Aug. 31. In an Aug. 25 written statement, MGA said it would drop the malpractice claims to focus “more on business, and less on litigation.” O’Melveny’s attorney Kevin Rosen, chairman of the legal malpractice defense practice group at Gibson, Dunn & Crutcher, said the move was prompted by the sanctions request. “Forced by court order to produce evidence of its malpractice claims, MGA has elected instead to walk away from those claims, confirming their lack of merit,” he said in a prepared statement. “The claims were an obvious pretext to avoid paying O’Melveny $10 million in fees, which MGA admitted in federal court were ‘necessarily and reasonably incurred’ and which were a fraction of the more than $200 million MGA has paid to other law firms.” The 2008 verdict, which came months after O’Melveny withdrew from representing MGA, later was overturned by the U.S. Court of Appeals for the 9th Circuit. MGA’s counsel during the trial was Thomas Nolan, a partner in the Los Angeles office of Skadden, Arps, Slate, Meagher & Flom. For the retrial this year, MGA hired Orrick, Herrington & Sutcliffe and Jennifer Keller of Keller Rackauckas. On April 21, a federal jury awarded MGA $88.5 million after finding that Mattel had stolen trade secrets from MGA by planting spies at industry trade shows. The jury rejected Mattel’s claim that it owned the copyright to MGA’s Bratz dolls but awarded the company $10,000 in damages after finding that MGA and its chief executive officer, Isaac Larian, had interfered with Mattel’s contract with Bratz designer Carter Bryant, who had left Mattel for MGA. On Aug. 4, U.S. District Judge David Carter in Santa Ana, Calif., issued a $310 million judgment for MGA. The judgment included the verdict, which was lowered to $85 million to correct a mathematical error, $85 million in exemplary damages, $109 million in attorney fees and $32 million in costs. Mattel has said it plans to appeal the judgment. On Aug. 16, Carter ordered Mattel to post a $315 million bond. In its cross-complaint, MGA had accused O’Melveny of botching the transition to Skadden just before the first trial against Mattel began and had pursued ineffective legal strategies, costing MGA millions of dollars in unnecessary fees and costs. The cross-complaint named O’Melveny and three Los Angeles lawyers: partners Diana Torres and Marc Feinstein and Scott Dunham, of counsel. Torres left O’Melveny in 2009 for Kirkland & Ellis. O’Melveny continues to seek terminating and other sanctions against MGA for failure to turn over documents that could be used in defending against the cross-claims, including internal communications related to the Mattel case and Skadden’s bills and invoices. During an Aug. 16 hearing, Los Angeles County, Calif., Superior Court Judge Elizabeth White stopped short of granting sanctions, but ordered both sides to produce charts outlining what MGA has, or has not, produced. If it appears that MGA has not complied with court orders, “I will not hesitate to issue terminating sanctions,” she said. MGA continues to assert that O’Melveny overbilled by $10 million in its demands for $23 million in total fees and costs. MGA paid $13 million. “MGA still has some very serious questions concerning overbilling and staffing decisions by O’Melveny,” MGA said in its Aug. 25 statement. “If O’Melveny persists in prosecuting its claims, MGA will instead focus on O’Melveny’s billing practices and staffing decisions, the fact that O’Melveny had no letter of engagement with the company nor with Isaac Larian who was personally named in the Mattel lawsuit, and that the $13 million MGA already paid to O’Melveny is fair compensation for the services rendered.” Amanda Bronstad can be contacted at [email protected].

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