Preliminary Approval Given for $98M Settlement To Resolve Claims Mattel Misled Investors About Its Income Tax Expenses

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Mattel Income Tax Expenses Class Action Settlement Overview: 

• Who: A federal judge has given preliminary approval to a $98 million settlement between Mattel, PwC, and a Class of investors.
• Why: Investors claimed Mattel and PwC worked together to mislead them about their income tax expenses.
• Where: The class action lawsuit was filed in California federal court.

A federal judge in California has preliminarily approved a $98 million settlement between Mattel, accounting firm PwC, and a Class of investors who claimed the companies worked together to mislead them about Mattel’s income tax expenses. 

“The Court concludes that the proposed settlement as a whole appears fair,” the judge said in a motion for preliminary approval.

Mattel, PwC, and the Class of investors reached the settlement agreement in November, at which time investors claimed they could be owed a maximum of $550 million in damages. 

Investors would acknowledge the damages could be far lower based on “significant arguments” by Mattel and PwC, however.

The $98 million will be distributed by Mattel into an “interest-bearing escrow account,” according to the motion, with proceeds going to Class Members who submit valid claims.

Companies Worked Together To Hide Error, Investors Argued in Class Action Lawsuit

Investors — led by the DeKalb County and New Orleans retirement systems — argued in a class action lawsuit that Mattel and PwC worked together to understate the former’s income tax expenses and then to hide the error, the lawsuit claims. 

In an amended complaint filed in May 2020, investors claimed Mattel and PwC colluded to cover up a tax misstatement totaling $109 million during the third quarter of 2017, with the former attempting to hide the error by overstating its losses.

Mattel’s stock price dropped once the truth was exposed, leading to financial losses for investors, they claimed. 

This isn’t the first time Mattel has faced class action litigation. In 2015, a pair of mothers filed a class action lawsuit against Mattel that argued the company’s interactive Hello Barbie dolls illegally recorded children’s conversations.

Were you financially injured after Mattel’s stock price dropped once it was revealed they allegedly misled investors? Let us know in the comments! 

The plaintiffs are represented by John Rizio-Hamilton, Jonathan D. Uslaner, Richard D. Gluck and Lauren M. Cruz of Bernstein Litowitz Berger & Grossmann LLP, and Jacob A. Walker of Block & Leviton LLP.

The Class Action Lawsuit is In re: Mattel Inc. Securities Litigation, Case No. 2:19-cv-10860, in the U.S. District Court for the Central District of California.

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