The proposed class action settlement will resolve 22 suits filed against Mattel and Fisher-Price and major retailers on behalf of millions of families who purchased or received the defective toys as gifts before they were later recalled or withdrawn from market.
In the settlement, filed in Los Angeles on Tuesday, Mattel and Fisher-Price agreed to provide refunds or other reimbursement to those who purchased the Chinese-made toys, said John J. Stoia Jr. of plaintiff law firm Coughlin Stoia Geller Rudman & Robbins LLP.
Plaintiff law firm Whatley Drake & Kallas said Mattel will provide toy buyers who are part of the class-action lawsuit either 50 percent of the total amount of vouchers Mattel has sent out following the recalls or $10, whichever is greater.
Consumers who didn't participate in the recalls but have a recalled toy or proof of purchase of a recalled toy will receive a check or a voucher in the amount of the toy. And those who declare they bought or acquired a recalled toy but destroyed it after the recall will get a voucher for the amount of the toy for up to three toys, totaling up to $10 million for the class.
Finally, consumers who bought or acquired some recalled toys in which only one standalone piece of the toy was affected can receive up to $12.
Members of the settlement may recover all out-of-pocket expenses incurred for lead testing, up to $600,000 for the class.
Joe R. Whatley of Whatley Drake & Kallas said the settlement will total tens of millions of dollars, largely depending on how many people file claims. He said he considered $50 million a conservative estimate of the final amount.
The affected toys include popular lines including certain Sesame Street toys, Dora the Explorer and Diego toys made by Fisher-Price, and certain Mattel toys, such as Batman, Polly Pocket, Barbie accessories, and Sarge cars.
If approved by the court, the settlement will require Mattel and Fisher-Price to provide refunds to consumers and reimburse families who incurred costs for testing their children for lead exposure.
Mattel will also create a quality assurance program, overseen by the court, and will donate $275,000 to the National Association of Children's Hospitals and Related Institutions, a not-for-profit group of 150 children's hospitals and pediatric units.
Mattel said the settlement resolves "virtually all" U.S. claims related to its 2007 product recalls.
Mattel already had money set aside for the litigation and the settlement will not materially affect its operating results, it said.
The proposed settlement removes uncertainty that hung over the company related to the lawsuits, and investors sent shares up 34 cents to $19.21 during morning trading, after earlier reaching a 52-week high of $19.39.
Lead can cause irreversible brain damage. The six Mattel-related recalls in 2007 involved more than 2 million toys, and were part of a slew of recalls by several dozen companies which resulted in a total of 21 million toys being recalled.
The recalls frightened parents and drove Congress to pass a new law that sets strict limits for lead, lead paint and chemicals known as phthalates. It mandates third-party testing for companies, big and small, making products geared for children 12 and under. However, the Consumer Product Safety Commission recently granted Mattel's request to use its own labs for testing.
Last year, Mattel and Fisher-Price agreed to pay $12 million to 39 states to end a lengthy investigation into the lead-tainted toys. In June, Mattel also agreed to pay a $2.3 million civil penalty for violating the lead paint ban.
The companies have no had any lead-related toy recalls since 2007.
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