Lawsuit
On December 14, 2015, Viacom, owners of Nickelodeon, filed a breach of contract lawsuit against MGA in the United States District Court for the Central District of California. The action alleged that MGA had violated an October 9, 2012, co-financing agreement, where MGA had agreed to pay $9 million in funding the series over three installments from 2013 to 2015, with each payment being due on September 15; Viacom argued that it had fulfilled its part of the contract by paying the required $5.2 million of funding and airing the series on the mandatory "regularly scheduled basis." While the defendants had successfully managed to pay the first two installments by the deadlines, they had only managed to pay $500,000 for the third installment on November 23, 2015, over two months after the deadline, still owing the plaintiffs $3.5 million.[5]
In response, MGA counter-sued Viacom on February 17, 2016, alleging that Viacom had failed to properly launch the series on the Nickelodeon channel, as well as neglecting to air new episodes of the series at regular intervals. MGA further alleged that Viacom had displayed a bias against them by promoting and airing their own original programming more than Lalaloopsy, arguing that this activity constituted a violation of the implied covenant of good faith and fair dealing. Viacom would also amend its own complaint with further allegations of non-payment from MGA, including the failure to reimburse almost $7.4 million of advertising costs for 2015, as well as failing to pay for advertisements of the Bratz toy line, also owned by MGA, that had aired between July 27 and August 17, 2015.[6]
On September 22, 2016, Judge Manuel Real, who had presided over the case, ruled in favor of Viacom, ordering MGA to pay over $14.9 million in damages and legal fees while dismissing their counterclaims in their entirety, having stated in a July 18 order that MGA had failed to provide sufficient evidence in court to support them.[2] Particularly, Real disputed MGA's claims of financial losses having resulted from the sporadic airing schedule of Lalaloopsy, as well as rejecting the notion that Viacom promoting other series more than Lalaloopsy was a breach of good faith due to the activity having never been covered by the contract.[6]
