4Kids Entertainment has confirmed that the US Bankruptcy Court for the Southern District of New York has ruled in its favour in the first phase of the Yu-Gi-Oh lawsuit trial.

The lawsuit was brought by the licensors of the property, Asatsu-DK and TV Tokyo Corporation (the plaintiffs).

In its 154-page decision, the court ruled that the Yu-Gi-Oh property licence agreement between the plaintiffs and 4Kids was not effectively terminated by the plantiffs prior to 4Kids' bankruptcy filing on April 6th 2011.

Rather, the Yu-Gi-Oh agreement remains in full force and effect and is property of the 4Kids' bankrupt estate.

In addition, the court's opinion carefully considered each of the plaintiff's nine audit findings totalling over $4.8 million, and concluded that audit findings totalling approx 99 per cent of the amount claimed by the plaintiffs were 'meritless'.

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The remaining two audit claims totalling $47,825.17 - which 4Kids does not dispute - were offset by the roughly $1.8 million credit balance in favour of 4Kids as of March 24th 2011, the date that the plaintiffs sent 4Kids the notice of termination.

The decision also questioned the plaintiffs "good faith" in purporting to terminate the Yu-Gi-Oh agreement on the basis of dubious audit claims and dismissed the plaintiffs' breach of trust allegation again 4Kids, commenting that "if anyone is the victim of a breach of trust in this matter it is 4Kids".

The second phase of the trial to determine the damages payable to 4Kids arising from the plaintiffs' purported termination of the Yu-Gi-Oh agreement has not been scheduled, but is expected to begin as early as the first quarter of 2012.

"We are very pleased with the court's decision which confirms that the plaintiffs' purported termination of the Yu-Gi-Oh agreement was wrongful, and that the plaintiffs' audit claims were baseless," said Michael Goldstein, interim chairman of 4Kids.

"We are hopeful that members of the Yu-Gi-Oh consortium will take note of the court's detailed findings and work with 4Kids to put this matter behind us, so that all parties can work together constructively for the continued success of the Yu-Gi-Oh brand.

"We would also like to thank our many clients and business partners for their support and understanding," Goldstein added.