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Orrick, Herrington & Sutcliffe has moved to withdraw from representing MGA Entertainment Inc., citing $3.85 million in unpaid legal fees and other compensation associated with a high-profile case against Mattel Inc.

In a Sept. 23 filing, Orrick partner Thomas McConville said its client, the manufacturer of the Bratz doll, had agreed to pay a fixed monthly amount of $550,000 beginning in December 2010, in return for representation in its long-running dispute with Mattel, maker of Barbie. MGA was to turn over insurance payouts to cover legal fees, costs and expenses.

Instead, MGA has paid Orrick’s fees only twice–in January and March
and has not turned over insurance proceeds since May 2011. In addition, MGA owes at least $287,000 for outstanding costs and expenses, the motion said.

MGA spokeswoman Susan Hale, in a prepared statement, called the move "disappointing" and "unnecessary." She said both sides had been scheduled to work out their differences in mediation.

"After many years of trying to defend itself against Mattel’s claims, it should come as no surprise to anyone that MGA’s resources have been severely depleted," she wrote. "While issues remain regarding Orrick’s outstanding attorney’s fees, Orrick has been paid over $35 million for its work in the Mattel litigation."

The withdrawal, if granted, would not be the first time Orrick has fired MGA as a client. While MGA’s request for attorney fees in the Mattel action was pending, Orrick abruptly withdrew from a related copyright action in New York, citing $1.2 million in unpaid legal bills.

Orrick has been representing MGA since May 2009, soon after a federal jury awarded Mattel $100 million in damages in a dispute over who owns the copyright to the Bratz doll line. Orrick’s legal team convinced the U.S. Court of Appeals for the 9th Circuit to reverse the decision, prompting a retrial. On April 21, a federal jury awarded MGA $88.5 million in damages, finding that Mattel did not own the copyright to the Bratz doll and that its executives, instead, stole MGA’s trade secrets by planting spies at industry trade shows.

On Aug. 4, U.S. District Judge David Carter in Santa Ana, Calif., issued a $310 million judgment for MGA that includes $109 million in attorney fees and $32 million in costs. Mattel has indicated it plans to appeal.

The agreement between Orrick and MGA requires that all unpaid fees and costs become due 60 days following judgment in the Bratz case, according to the motion. Given the date of the judgment, MGA’s unpaid fees and other compensation could exceed $20 million when they come due on Oct. 3, the motion said.

Orrick is asking to withdraw from representing MGA and its chief executive officer, Isaac Larian.

"We are extremely proud of the results we achieved for MGA
first winning a stunning reversal in the 9th Circuit overturning a $100 million verdict and injunction against MGA that effectively handed the Bratz franchise to Mattel, and then securing with our co-counsel a $310 million judgment for MGA in the re-trial," said Orrick spokesman David Schaefer. "We regret that our relationship with MGA has reached this point."

According to the motion, MGA has no plans to pay the unpaid amounts to Orrick and has filed an arbitration action against its former firm seeking more than $10 million. As a result, both parties have a conflict that impedes their ability to continue working together in the Mattel case, the motion argued.

Hale said that MGA had asked Orrick to postpone withdrawal pending the outcome of the mediation and scheduled a hearing for Oct. 6, but Orrick refused.

In addition to Orrick, MGA is represented in the Mattel matter by Skadden, Arps, Slate, Meagher & Flom and Keller Rackauckas.

A hearing on the withdrawal motion was scheduled for Oct. 24.

Orrick’s lawyer in the matter is Frank Cialone of San Francisco’s Shartsis Friese, who has been negotiating with Matthew Fletcher, a partner at Connor, Fletcher & Williams.

On Sept. 14, MGA retained Fletcher and Edmond Connor, managing partner of Connor, Fletcher & Williams in Irvine, Calif., in a separate lawsuit filed by O’Melveny & Myers, which represented MGA in the Mattel action from 2004 to 2007. O’Melveny is seeking $10.2 million in unpaid legal fees from MGA, which also retained Jennifer Keller of Keller Rackauckas, also in Irvine.

Amanda Bronstad can be contacted at [email protected].

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