UPDATE 2-Bratz trial to proceed despite juror misconduct

(Adds MGA comment, details about arguments, juror comment)

By Syantani Chatterjee

RIVERSIDE, Calif., Aug 4 (Reuters) - A federal judge on Monday ruled that the damages phase of a trial that gave Mattel Inc MAT.N ownership of drawings and models for MGA Entertainment Inc's Bratz doll can proceed despite juror misconduct.

U.S. District Judge Stephen Larson dismissed a juror on July 25 after finding that she had made racial remarks during deliberations about MGA Chief Executive Isaac Larian, an Iranian Jewish immigrant.

Larson denied MGA's motion for a mistrial, saying he did not believe that the other nine jurors had been influenced by the woman, known only as Juror No. 8.

"We cannot tolerate bigotry, racism, ethnicism or whatever it is, but the jurors in the case that stood up against Juror No. 8 did the right thing and I am convinced that the verdict that was reached was the verdict of only those jurors," Larson said in court in Riverside, California.

He also commended the jury, including the juror who brought the statements about Larian to the court's attention about 10 days ago.

"If only every jury in this country would react to racism the way this jury did we would have a better judicial system," Larson said.

The trial resumes on Tuesday.

A standing room only crowd was on hand for the hearing in the closely watched trial, which could cripple MGA and deliver to Mattel the lucrative doll franchise that has been eating into the market share of its iconic Barbie doll.

WEIGHING OPTIONS

Mattel won a near total victory over MGA in the first phase of the trial when the jury validated its claims to most of the concept drawings and models upon which the designs for the first four Bratz dolls were based.

The jury found that Bratz creator Carter Bryant made most of the drawings and models at issue while he was under contract to Mattel as a Barbie designer and that MGA obtained them illegally.

MGA sought a mistrial after learning about the ethnic slur about three days into testimony in the damages phase of trial. Mattel was seeking damages of more than $1 billion and the rights to control the dolls themselves.

Judge Larson reported after interviewing the panelists separately that Juror No. 8 had said Iranians were "stubborn, rude, stingy...thieves, and have stolen other persons' ideas".

MGA lawyers argued that the juror had hidden her "tainted views" against Middle Eastern immigrants during jury selection and that federal law stated "the tainted vote of even one juror is sufficient to nullify a verdict."

Mattel lawyers said that while the company "condemns the remark that was made...it does not justify a mistrial," because the jurors' testimony about the remarks could not be used as evidence and because MGA lawyers had failed to closely question the juror about her biases before the trial.

Mattel said in a statement that it was "pleased with the court's decision to allow the case to proceed."

"Mattel believes that to declare a mistrial based on Juror No. 8's comment, an incident that was resoundingly condemned by the remaining jurors and reported by them to the court, would be to penalize the jury for doing the right thing," the company said.

MGA lawyer Thomas Nolan said his clients were weighing their options, including the possibility of seeking a stay of the trial at the 9th U.S. Circuit Court of Appeals.

(Reporting by Syantani Chatterjee in Riverside; writing by Gina Keating in Los Angeles; editing by Phil Berlowitz, Leslie Gevirtz)