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Amazon to pay $51 million to settle Toys 'R' Us suit

Retailer said it will pay "unexpected" sum in third quarter to settle 2004 suit over partnerships terms.

Amazon.com must pay Toys "R" Us $51 million to settle a lawsuit filed by the toy retailer in May 2004.

Back then, Toys "R" Us sued Amazon for violating the terms of the 10-year partnership the companies forged in 2000. Toys "R" Us claimed Amazon violated the agreement by allowing other vendors to market toys and baby products on its site.

On Friday, Amazon said in a document filed with the Securities and Exchange Commission that the money must be paid in the third quarter of 2009 and that the sum was "unanticipated."

The Web's largest retailer said that Toys "R" Us has agreed to dismiss all claims and counterclaims.

Not long after Toys "R" Us filed its original claim, Amazon filed a counterclaim as well as an official request to terminate the partnership.

The retailer asked for $750 million in damages and claimed the toy retailer failed to meet its end of their bargain. Toys "R" Us, according to Amazon, was unable to meet demand for top-selling toys, games, and baby products, especially during the holidays.

In 2006, the court entered a decision favoring Toys "R" Us that terminated the contract.

The two companies joined forces during the dot-com era, after Toys "R" Us stumbled badly trying to build an online franchise. The toy giant turned to Amazon, agreeing to pay the retailer a $200 million premium for exclusive rights to sell toys and baby items through its site.

A spokeswoman for Toys "R" Us declined to comment.

Imran Khan, a J.P. Morgan analyst, lowered his second quarter forecast for Amazon but said "We do not see the settlement as representing anything other than a one-time item," Khan wrote in a note sent Friday afternoon. "We believe Amazon's continued market share gains justify the stock's premium valuation."