Mattel, Inc. v. MGA Entertainment, Inc.

District court denies request for stay of judgment pending appeal without bond, holding that Mattel had not clearly demonstrated its ability to satisfy the judgment if its appeal was unsuccessful; holding that a bond was necessary to secure MGA from the loss resulting from the stay of execution pending the appeal; and finding that a $315 million bond adequately covered the judgment, as well as estimated interest, costs and attorneys’ fees.

Mattel appealed the entry of judgment in MGA’s favor after the second trial in this ongoing litigation, including the jury’s award of $85 million in compensatory damages and the court’s award of $85 million in exemplary damages, and $107,860,073 in attorneys’ fees and $32,027,104 in costs. The court denied Mattel’s request for a stay of the judgment pending the appeal without a bond and approved the company’s request, in the alternative, for a $315 million bond and a temporary stay to perfect that bond.

The court rejected Mattel’s argument that requiring it to post a supersedeas bond imposed unnecessary transactional costs, since the company asserted that it had ample resources to satisfy the judgment if MGA prevailed on appeal. Noting that the bond requirement may be waived if an appellant has a clearly demonstrated ability to satisfy the judgment in the event that its appeal is unsuccessful and no other concern exists that the appellee’s rights will be compromised by a failure adequately to secure the judgment, the court concluded that “Mattel’s ability to satisfy a $309,887,177 judgment after a two to three year appeal is hardly clear.” Citing to the company’s last annual report to the Securities and Exchange Commission, the court reasoned that, though Mattel had enjoyed strong sales in recent years, it sells products that can quickly become obsolete to a narrow customer base that may decrease its discretionary spending as economic conditions decline or may abandon Mattel for a new or reinvigorated alternative. These risk factors were not merely academic but particularly salient, given the unavailability of credit and the recent dynamism in the toy industry. The court concluded that Mattel had not clearly demonstrated its ability to satisfy the judgment if its appeal was unsuccessful and that a bond was necessary to secure MGA from the loss resulting from the stay of execution pending the appeal.

Rejecting MGA’s argument for a larger bond, the court found that Mattel’s requested bond of $315 million adequately covered the award of $309,887,177, as well an estimated prejudgment interest of $1,956,391.89 for an appeal lasting three years, and an estimated $1,733,853 in attorneys’ fees and $46,483 in costs, based on the costs and fees MGA incurred in the previous appeal to the Ninth Circuit.