Media Law Bulletin -- November 2012: Insurance Carrier Not Entitled to Reimbursement of Fees in Bratz Doll Dispute


[author: Lisa Henderson]

The long-running dispute between Mattel, Inc. and MGA Entertainment, Inc. over the ownership of the wildly successful Bratz doll line may be over, but the ensuing insurance coverage litigation continues.  On October 12, 2012, a federal district court judge in California issued an order ruling that MGA’s liability insurance carrier, Evanston Insurance Company, was foreclosed from seeking reimbursement from Mattel for the attorneys’ fees it had paid to MGA’s defense counsel.  Evanston Ins. Co. v. MGA Entertainment, Inc., No. CV-12-5654 (C.D. Cal. Oct. 12, 2012).

After seven years of litigation and two jury trials, Mattel lost its dispute with MGA and, in August 2011, Mattel was ordered to pay MGA almost $140,000,000.00 in attorneys’ fees and costs.  In August 2012, Evanston filed a first amended complaint (FAC) in the declaratory judgment action it filed against MGA and Mattel.  In the FAC, Evanston asserts that it is subrogated to MGA and thus entitled to a portion of the attorneys’ fees that the court ordered Mattel to pay to MGA.  In response, Mattel filed a motion to dismiss.

In considering the motion to dismiss, the judge noted that a motion for attorneys’ fees “must” be filed no later than 14 days after the entry of judgment “[u]nless a statute or a court order provides otherwise.”  The judge further noted that the jury verdict was recorded on April 21, 2011 and any motion for recovery of attorneys’ fees had to be filed on or before May 5, 2011.  Although MGA timely filed two motions for attorneys’ fees on May 5, 2011, Evanston did not.  The judge found that Evanston’s failure to timely file the motion for attorneys’ fees barred any claim for relief.

Evanston argued that its subrogation rights had not yet accrued on May 5, 2011, because it did not pay most of the attorneys’ fees owed to MGA until March 2012.  The judge responded that the argument “completely misses the point.”  The judge continued that “[a]s this Court has previously noted, Evanston deliberately refused to pay MGA until after courts twice held that Evanston owed a duty to defend MGA…[n]othing but Evanston’s own stubbornness prevented Evanston from paying MGA’s attorneys’ fees prior to May 5, 2011.”  The judge noted that he did not want to create an incentive for carriers to refuse to defend their insureds until the carrier was confident that it could recover its expenses from the opposing party.  Mattel’s motion to dismiss was granted with prejudice.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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