801 F. Supp. 2d 950
C.D. Cal.2011Background
- MGA sought exemplary damages, attorneys' fees, and costs after a jury found Mattel willfully and maliciously misappropriated MGA trade secrets.
- The jury determined Mattel misappropriated 26 categories of trade secrets and that the misappropriation was willful and malicious.
- CUTSA authorizes exemplary damages up to twice the compensatory award if willful and malicious misappropriation exists.
- The Court remitted MGA’s compensatory award from $88.5 million to $85 million and awarded MGA $85 million in exemplary damages.
- The Court also awarded MGA $2,172,000 in attorneys’ fees and $350,000 in costs, after allocating pre- and post-filing work.
- The Court concluded the conduct was reprehensible but not the most egregious, and deterrence is tempered by the industry’s knowledge of the case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Mattel’s conduct qualifies as willful and malicious | Mattel engaged in willful, intentional misappropriation. | Mattel disputes the extent or nature of intent and reprehensibility. | Yes; conduct found willful and malicious. |
| Appropriate amount of exemplary damages within CUTSA limits | Exemplary damages should be up to twice the compensatory award. | A smaller multiplier is appropriate given the facts. | Exemplary damages set at $85 million (2:1 ratio to compensatory award). |
| Whether the amount is constitutionally permissible given the defendant’s net worth | Higher percentage is warranted by the magnitude of harm. | Worst-case cap imposes a limit relative to net worth. | Approx. 3.6% of Mattel’s net worth; within traditional caps. |
| Award of reasonable attorneys’ fees and costs | Fees incurred are recoverable to deter misconduct by well-funded defendants. | Fees should be limited to post-filing work related to the trade secrets claim. | MGA awarded $2,172,000 in fees and $350,000 in costs. |
Key Cases Cited
- 02 Micro International Ltd. v. Monolithic Power Sys., Inc., 399 F.Supp.2d 1064 (N.D. Cal. 2005) (set forth method for calculating exemplary damages in CUTSA cases)
- Ice Corp. v. Hamilton Sundstrand Corp., 615 F.Supp.2d 1266 (D. Kan. 2009) (UTSA modeled on patent law; discusses exemplary damages)
- Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101 (9th Cir. 2001) (notes on whether clear and convincing standard is required)
- Neal v. Farmers Ins. Exchange, 21 Cal.3d 910 (Cal. 1978) (direct relationship between compensatory and exemplary damages; deterrence)
- Adams v. Murakami, 54 Cal.3d 105 (Cal. 1991) (multiplier factors for exemplary damages; conduct evaluation)
- Planned Parenthood of Columbia/Willamette Inc. v. American Coalition of Life Activists, 422 F.3d 949 (9th Cir. 2005) (acknowledges potential for high ratios in egregious cases)
- TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443 (U.S. 1993) (exemplary damages framework; comparison to economic loss cases)
- Gore v. BMW of North Am., Inc., 517 U.S. 559 (U.S. 1996) (constitutional constraints on punitive/exemplary awards)
- Cloud & Associates, Inc. v. Mikesell, 69 Cal.App.4th 1141 (Cal. App. 1999) (Cal. common-law factors for exemplary damages)
- Storage Services v. Oosterbaan, 214 Cal.App.3d 498 (Cal. App. 1989) (caps on exemplary damages relative to net worth)