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Bratz doll manufacturer MGA Entertainment Inc. could still face discovery sanctions in a $10.2 million billing dispute with its former law firm, O’Melveny & Myers, despite having dropped its malpractice claims. During a contentious hearing on Aug. 31, Los Angeles County, Calif., Superior Court Judge Elizabeth White acknowledged that MGA’s decision to drop its malpractice claims rendered much of O’Melveny’s sanctions request moot. But MGA’s continued assertions that O’Melveny’s bills were excessive could raise arguments “where the line is going to get very much blurred,” she said. White ordered briefing on the issue and scheduled a hearing for Sept. 21. At one point, White expressed frustration with the lawyers on both sides for dragging the case along for so long. While admitting that dispute had been “significantly pared down” since MGA dropped its malpractice claims, she questioned how meritorious those allegations had been in the first place. “You didn’t respond to document production,” she told MGA’s lawyer, James Rosen of Rosen Saba in Beverly Hills, Calif. “You had over a year to produce documents. If you were that serious about the cross complaint and affirmative defenses, you would have produced those documents.” To O’Melveny’s lawyer, Kevin Rosen, chairman of the legal malpractice defense practice group at Gibson, Dunn & Crutcher, who continued to push for sanctions during the hearing, she reiterated that issuing O’Melveny’s proposed sanctions order against MGA “would eviscerate their answer so they couldn’t put on a defense.” O’Melveny, which represented MGA from 2004 to 2007 in its high profile copyright infringement case against Mattel Inc., maker of Barbie, sued its former client last year for unpaid legal bills. In response, MGA brought cross-claims alleging that O’Melveny botched the transition to Skadden, Arps, Slate, Meagher & Flom just before the first trial against Mattel began. In 2008, a federal jury awarded Mattel $100 million in damages. O’Melveny moved for sanctions, asserting that MGA had failed to provide the discovery it needed to defend against the malpractice claims. On Aug. 26, MGA agreed to drop those claims but continue to pursue allegations that O’Melveny had overbilled its former client by $10 million in its demands for $23 million in total fees and costs. MGA paid $13 million. The 2008 verdict in the Mattel case was overturned by the U.S. Court of Appeals for the 9th Circuit. On April 21, in a retrial, a federal jury awarded MGA $88.5 million after finding that Mattel had stolen trade secrets by planting spies at industry trade shows. The jury rejected Mattel’s claim that it owned the copyright to the 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 the Bratz doll 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 that included the verdict — which was reduced to $85 million due to a mathematical error — plus $85 million in exemplary damages, $109 million in attorney fees and $32 million in costs. Mattel has said it plans to appeal the judgment. During the sanctions hearing, White at first appeared willing to consider that in dropping it malpractice claims, MGA had rendered O’Melveny’s entire sanctions request moot. “I know that’s clearly MGA’s intent,” O’Melveny’s Rosen replied. He called the dismissal a “charade” and continued “gamesmanship” on the part of MGA. Under the defenses MGA intends to raise in the fee dispute, professional negligence and breach of contract are still on the table, he said. “He’s going to defend against our claim, making precisely the same arguments that were in his cross-complaint,” he said of MGA’s Rosen. Furthermore, he said, O’Melveny still needs documents related to MGA’s insurers and the Mattel action that could assist the firm in establishing that its fees were reasonable. Such documents could prove that MGA defended O’Melveny’s bills as appropriate in an attempt to get reimbursed. MGA’s Rosen reiterated that his client does not intend to seek damages for malpractice. He called the argument by O’Melveny’s Rosen that MGA intends to bring up professional negligence as a reason for not paying O’Melveny’s bills “totally inept and beyond the pale.” “We gave up a multimillion-dollar claim,” he said. “What we’re going to contend is O’Melveny overbilled MGA ruthlessly at times, even without necessity.” Amanda Bronstad can be contacted at [email protected].

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