It's been a bumpy ride for MGA Entertainment Inc. Chief Executive Isaac Larian.
The 55-year-old entrepreneur was hit last week with a federal judge's ruling that gives control of his company to a temporary receiver.
It's the latest blow to Larian in his long-running war with Mattel Inc. over ownership of MGA's Bratz dolls. Mattel seems to be winning at every turn.
The receiver, Beverly Hills attorney Patrick Fraioli, replaces the MGA board and has sweeping authority to sell company assets, investigate business transactions or even recommend that the company file for bankruptcy.
"He is charged with operating the business and to preserve, or enhance, the value of the assets," said Stephen Donell, an L.A.-based court-appointed receiver who is not involved in the case. "It's different than a situation where a receiver may be appointed to liquidate the company."
Larian said he would appeal the receivership ruling, according to a news report.
It remains unclear how long Fraioli will oversee the Bratz maker, and Larian could regain control May 18. That's when U.S. District Court Judge Stephen Larson is expected to decide whether to make the receivership permanent.
If the judge names Fraioli permanent receiver, the receiver could remain in that role until the legal tussle over the Bratz property concludes. After that, Larian would presumably regain control of MGA minus the Bratz doll line unless an appeal is successful.
"From the standpoint of MGA, it is very scary," said Dan Schechter, a Loyola Law School professor who is not involved in the case. "The judge shows every indication that he will put a permanent receiver in place."
At the moment, toy industry insiders said Larian, who has expressed confidence over the course of the litigation that he would prevail, is likely frustrated over losing his chief executive powers.
"This is new to Isaac, being on the losing side," said Jim Silver, an industry expert who has known Larian for 14 years. "He's not running his company anymore, and I'm sure he is looking at all avenues of what he can do."
In the meantime, Larson's order directs Fraioli to preserve and maximize the profits of MGA and its entities, including the company's international operations, and the Bratz assets that set off the dispute.
Fraioli declined Business Journal requests for comment, citing the judge's demand for discretion. However, according to people familiar with the situation, Fraioli is holding meetings with Larian and other MGA executives at the company's Van Nuys headquarters, determining the status of the company's finances, understanding how the Bratz products figure into MGA's bottom line, and developing an overall picture of the company's business structure. Fraioli is also talking to MGA's suppliers and distributors to explain his role as temporary receiver and calm any fears that the company may be shutting down.
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