Viacom International, Inc. v. MGA Entertainment, Inc.

Based in part on a report by an Analysis Group expert, a federal appeals court affirmed a district court's ruling in favor of Viacom International in its dispute with MGA Entertainment over a television show based on MGA's Lalaloopsy doll. Viacom sued MGA for breach of the parties' Co-Financing Agreement (CFA) when MGA failed to make required payments to Viacom. MGA countersued, claiming, in part, that Viacom had breached an implied covenant of good faith and fair dealing when it moved the Lalaloopsy show from the Nickelodeon channel to Nick Jr. To support its case, MGA filed an expert report purporting to show damages from lost revenue, as a result of Viacom's “aging down” of the doll to a younger viewership.

An Analysis Group team that included Vice President Nathan Trujillo supported Managing Principal Jeffrey H. Kinrich, who filed a report rebutting MGA's damages findings. Mr. Kinrich used a regression analysis to argue that there was no demonstrable correlation between the show's aggregate monthly viewership and MGA's monthly doll sales during the relevant period. His report also criticized the expert's use of the wrong metrics for calculating viewership decline (ratings per broadcast vs. total viewership) and damages (lost revenue vs. lost profits). Mr. Kinrich concluded that MGA had failed to show a causal nexus between the move of the show to Nick Jr. and the decline in doll sales, which would have been required to establish that Viacom had breached its agreement with MGA.

A district judge granted summary judgment in favor of Viacom on all its claims. Mr. Kinrich's report was referred to frequently during oral argument before a panel of the US Court of Appeals for the Ninth Circuit. The Ninth Circuit subsequently affirmed the district court's judgment, holding that “nothing but speculation connects Viacom's alleged breaches of the CFA to any loss of sales of Lalaloopsy dolls.”