Judge in Mattel dispute OKs sales of Bratz by MGA

NEW YORK (Reuters) - A U.S. court will allow the company that makes the popular Bratz dolls to sell the toy line that is at the heart of a four-year legal battle with Mattel Inc through 2009.

The order, filed Wednesday in U.S. District Court in Riverside, California, was not final and cleared the way for privately held MGA Entertainment Inc to resume making and selling the dolls after it was ordered to cease doing so last year.

U.S. Judge Stephen Larson also ordered MGA to turn over any financial records requested by a court-appointed forensic auditor.

He withheld a final decision on Mattel's request to put the Bratz line into receivership to monitor what it described as irregular financial dealings by MGA and its founder and Chief Executive Isaac Larian.

Mattel, known for making the iconic Barbie doll, won the rights to the $1 billion-plus Bratz franchise last year in a lawsuit against MGA and former Mattel Barbie designer Carter Bryant, who invented the Bratz concept while under contract to Mattel.

In a recent motion, Mattel accused MGA of failing to make timely financial disclosures, of funneling "millions" of dollars to Larian's family members and of selling Bratz merchandise through a company controlled by Larian.

Judge Larson last week granted MGA's request to modify the injunction because it was discouraging retailers from ordering the Bratz merchandise for the Spring and Fall selling seasons.

MGA is appealing the injunction to the Ninth U.S. Circuit Court of Appeals and claims that it would find itself in extreme financial danger if it cannot continue selling the line during the appeal process.

Larson said last week that he wanted to preserve the status quo between Mattel and MGA.

(Additional reporting by Lisa Baertlein in LOS ANGELES)

(Reporting by Phil Wahba, Editing by Ian Geoghegan)