Someone dropped in an extra zero, right? RIGHT?

Originally posted 2008-10-16 00:01:17. Republished by Blog Post Promoter

It’s a month-old story, and how it got past us here notwithstanding, it’s not getting past us now.  Per the ABA Journal, remember the Bratz litigation?  Well, you haven’t read half of it yet:

Two toy companies battling for rights to the Bratz dolls-with-attitude have racked up legal fees of at least $93 million in the case.

MGA Entertainment has spent $63 million in fees since 2004 defending a lawsuit by Mattel Inc. that contended the doll’s designer conceived of the idea before leaping from Mattel to MGA, the Daily Journal reports (sub. req.). Plaintiff Mattel has spent $30 million in just the first half of the year, the story says.

Mattel was awarded $100 million in the case, far short of the more than $2 billion in damages it had sought.

The Daily Journal got MGA’s figures in a lawsuit it filed against its insurers seeking full payment of the Bratz fees, while the publication got the Mattel figure from a stock analyst.

The ABA item quotes a Jones Day litigation partner who is flummoxed at the idea that there is any conceivable way to get to $93 million for a trademark case, even over the course of four years.  We sure are, too.  And re-read this ‘graph:

MGA Entertainment has spent $63 million in fees since 2004 defending a lawsuit by Mattel Inc.  . . . Plaintiff Mattel has spent $30 million in just the first half of the year, the story says.

That $30 million was just the first half of ’08!  That means Mattel spent WAY more than $30 million since the suit began in ’04, and that the total legal fees must have blasted way, way past $100 million since the case began.

Is there anyone out there who can even remotely do this math and explain how you can get to numbers like this — not how they can be justified, for, given the business interests involved, they are not irrational.  But how many widgets, and of what kind, does a law firm have to spit out to get to these kinds of numbers?

By Ron Coleman

I write this blog.

7 thoughts on “Someone dropped in an extra zero, right? RIGHT?”
  1. A team of 20 lawyers billing between $400 and $1,000 per hour ten hour days five days/ week works out to $36.4 million per year. I’ve average the hourly to $700/hr and have not assumed more than a five day week when these cases often require seven day weeks (in one case I tried in late ’80s, I didn’t have a single day off in a six-month period). This figure doesn’t include paralegals, staff, experts, etc. This is not uncommon in cases like this. Whether it makes economic sense is a different question. (check my arithmetic)

  2. Well, Vicky, sure, I know you can ultimately subdivide billers and hours and get to this number, but — 20 lawyers? Ten billable hours a day for a solid year?

    This is not a case involving warehouses full of documents or interviews with thousands of victims of a tort. It’s a TRADEMARK INFRINGEMENT. ‘

    When I ask “what are the widgets,” I’m asking: What sort of work product would require that much billing?

  3. I DO know something about this particular litigation and the people/firms that litigated it.

    “Settle It Now” — my ADR firm name — was reactive to a case of this magnitude — an antitrust case — that my team (2 partners; five associates; 2 paralegals) was billing the client about $300K/month for.

    The parent company “augmented” the trial team 3 months before trial. The new “trial” firm turned its entire operation upside down and charged the subsidiary (my client) $2 million every other week. Then they settled the thing (in my absence) for 50 times what it was worth. That was the end for me. I transitioned out of practice and into mediation.

    Now, I’m not suggesting that any of the firms in Bratz litigation were “churning,” especially because the defendant has to respond to whatever the Plaintiff does. In my antitrust case, that included 42, count ’em, 42 motions in limine two months before trial. Jury consultants. Experts. Marketing teams preparing exhibits. If you demand Cadillac service, you pay for it.

    These companies know what they’re doing when they launch litigation like this and hire the firms they hire, they know what it’s going to cost them.

    I had an environmental coverage case before the antitrust case described above and we spent six months deposing witnesses about HOW THE DOCUMENT PRODUCTION WAS CONDUCTED.

    When I was arbitrating a license agreement case being litigated by firms of this stature, I received two or three tabbed binders of new briefing and supporting evidence on my doorstep EVERY MORNING during a two month proceeding.

    What can you do litigate in a trademark case to justify this sort of treatment? Every minute of every day of both companies’ business and design plans, since this one is really based upon the Q: was this doll designed on the job or before Bratz-guy joined Mattel. I think they took his MOTHER’s deposition.

    It simply doesn’t surprise me that you can take a relatively straight-forward legal issue (like, does “sudden” mean “quick” or only “unexpected” in a pollution exclusion contained in a CGL policy) and turn it into a 20-year legal practice.

  4. $93 million in legal bills does seem a bit hard to justify. Still, I wonder about the fee breakdowns, including discovery costs and legal analysis of the potential infringements.

    Just for the heck of it, I looked up the Bratz toy line on Wikipedia. You’ve got more than a hundred toy sub-lines, most of these sub-lines with four or more dolls. That’s a lot of toys. Wouldn’t part of estimating damages in the case involve hiring experts to compare the dolls to whatever original drawings, concepts, or what have you the artist created when he was presumably an employee of the Plaintiff? I can’t put a number on that, but I don’t imagine that a contract to examine 400+ dolls would come cheap. And that doesn’t even count the Bratz movies.

    I can also see discovery costs adding to the legal fees. With doll collections going all the way back to 2001, you’re looking at a huge number of pages for the contract attorneys to look through.

    If that discovery team were in the DC area, the fees would mount up quickly. Here, your average contract attorney (barred in DC) is paid $35/hour for his first 40 hours of work per week, and $52.50 per hour beyond that. If you’ve got a team of, say, 50 contract attorneys plugging away 60 hours per week – which is not unrealistic in litigation this large – you’re talking about a payroll of $122,500 per week. This doesn’t even take into account the staffing agency’s overhead, or even whether the law firm tacks on its own overhead. If we assume for the sake of argument that these attorneys are billed out at $100/hour (for no other reason than its being a nice round number), you’re looking at $300,000 per week of discovery costs. And the billables for the third-year associate paid to babysit the contract attorneys is the cherry on top. I’m not entirely sure how many documents would come out of eight years, but I could easily see it topping a few million. Which is several weeks of doc review – possibly even a couple months – even if you have a squad of crack attorneys.

    I expect that these numbers wouldn’t quite get us to $93 million or more, but I can see where a lot of the expenses would start to stack up. And I wouldn’t be surprised if discovery costs are a good-sized chunk of it.

    Am I totally off-base here?

  5. Perhaps there’s more driving the litigation than just economics? While it might be more common in family law or with smaller businesses, it’s not unheard of for major corporations to take legal strategies that essentially remind us of the cliché, “cutting off your nose to spite your face.”

    Litigation motivated by principle and not money is one of the most costly types of litigation, but litigation lawyers who charge by the hour are sure to love it and there’s no shame in profiting off it, as long as the lawyers are acting ethically while litigating and accurately counseling their client on the cost of litigation.

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