According to the docket posted on the website dated 3/25/2004, the court entered its Final Order and Judgment approving the settlement and dismissing the case on 9/30/2004. On 10/29/2004, some plaintiffs appealed the district court's order awarding attorneys' fees and reimbursements for expenses to the 9th Circuit Court of Appeals. On 3/16/2004, the Circuit Court entered its dismissal of the appeal.
In November 2002, Mattel Inc. reached a final settlement agreement of all the federal lawsuits, including this Securities Class Action, in exchange for payment of $122.0 million and Mattel's agreement to adopt certain corporate governance procedures. The settlement is conditioned upon court approval of the terms of the settlement, and entry of final judgments dismissing the federal lawsuits. In July 2003, the court entered orders granting preliminary approval of the terms of the settlement.
The original action arises out of an alleged scheme to enable Mattel to acquire The Learning Company ("The Learning Company" or "TLC") - a seller and maker of educational software including "Reader Rabbit" and "Carmen San Diego." This alleged scheme enabled defendants to get approval of the acquisition by The Learning Company's shareholders, defendants to get approval of the acquisition by Mattel shareholders and the top two officers of The Learning Company to pocket over
$11 million due to the sale of The Learning Company to Mattel. Defendants'
alleged false statements artificially inflated Mattel stock during the Class
Period to as high as $30-5/16 per share during the critical acquisition pricing
period between 4/99-5/99 by falsifying The Learning Company's and Mattel's
reported revenues, net income and EPS and by falsely representing that The
Learning Company represented an excellent strategic fit with Mattel's business
and that its acquisition would be immediately "accretive" to Mattel's 1999 and
2000 results. However, in late 9/99, rumors circulated as news leaked from
Mattel that 3rdQ 99 results would be disappointed causing Mattel's stock price
to decline from $22-9/16 to 16-7/8. Then, on 10/4/99, just a few months after
The Learning Company acquisition closed, Mattel disclosed that The Learning
Company had incurred millions in product returns and bad debt write-offs and
that The Learning Company would incur a $50 to $100 million loss rather than
the large profit forecast for 3rdQ 1999. As a result, Mattel's 1999 earnings
will be less than $1.20 rather than the forecasted $1.50, which just weeks
before this announcement Mattel's CEO had stated she was firmly committed to.
Mattel stock collapsed upon these revelations, falling to $11-7/8 on 10/4/99 on
huge volume of 29/96 million shares - the largest one-day stock trading volume
in the 39 years Mattel has been listed on the New York Stock Exchange ("NYSE").
This collapse wiped out $3 billion in Mattel shareholder value in one day.
Two additional purported class action complaints, filed in the United States
District Court for the Central District of California, were brought against
Mattel as successor to Learning Company and the former directors of Learning
Company on behalf of former stockholders of Broderbund Software, Inc.
("Broderbund") who acquired shares of Learning Company in exchange for their
Broderbund common stock in connection with the Learning Company-Broderbund
merger on August 31, 1998. The complaints in those actions generally alleged
that Learning Company misstated its financial results prior to the time it
was acquired by Mattel.