Friday, June 12, 2020

TGI Fridays Potato Skins Snacks may deceive as to potato skin presence, but TGIF isn't liable

Troncoso v. TGI Friday’s Inc., 2020 WL 3051020 (S.D.N.Y. Jun. 8, 2020) 

Troncoso purchased a bag of snack chips labeled “TGI Fridays Potato Skins Snacks,” mistakenly believing the chips to contain real potato skins given that the restaurant chain TGI Fridays sells a Potato Skins appetizer that includes the flesh and peel of the potato.


After holding that Troncoso lacked standing to pursue injunctive relief, the court accepted as plausible one theory of falsity under  GBL §§ 349 and 350: that the product falsely represented that it included actual potato skins. 

Troncoso did not plausibly plead that a reasonable consumer could believe that the snack chips would taste identical to or would actually be identical to the TGIF Potato Skins appetizer. “No reasonable consumer would believe that the snack chips, shelf-stable and sold at room temperature in gas stations, would be identical in taste or substance to an appetizer, prepared with perishable dairy products and served hot in a restaurant.” Nor did she plausibly allege that the taste didn’t “resemble” that of the appetizer, or that only a product containing potato peels could in any way replicate the taste of the appetizer.  

Nor did she plausibly plead that a reasonable consumer could believe that the snack chips would contain thick slices of potato skins, given the picture on the front of the snack chips’ packaging. 

However, it was plausible that a reasonable consumer could be deceived about whether the products included potato peels. Troncoso also alleged falsity, in that she alleged that the only potato-based ingredients in the snack chips are potato starch and potato flakes, and that those ingredients are made from peeled potatoes (citing outside sources, including a video with an interview with the plant manager about how the chips were made that didn’t mention potato peels; while there was no explicit statement of “no potato peels,” it helped make falsity plausible and not just possible). 

Defendants argued that Troncoso couldn’t plausibly plead that she was misled into believing that the snack chips were nutritious because they contained potato peels. But that wasn’t her argument; she did allege that potato peels have extra nutrients, but that was her argument for materiality/the existence of a price premium, which defendants didn’t dispute on this motion. And the nutritional panel didn’t dispel any confusion because she alleged that potato peels have certain minerals not present in potato flesh, such as niacin, and niacin levels are not reported on the nutritional panel. 

More generally, the ingredients list wouldn’t dispel any misimpression based on the label. “A reasonable consumer would not understand that potato starch and potato flakes could not contain potato peels, and thus would not believe that the list of ingredients reversed the label’s representation that the product contains potato peels.” This is an implementation of the general principle that consumers aren’t required to be experts on the components or characteristics of every product they buy. 

However, defendants Utz and TGIF left the case. Utz got out because it was just the corporate parent and Troncoso didn’t sufficiently justify piercing the corporate veil. 

TGIF got out because of the solicitude the law has for trademark licensors. “TGIF may be liable for that misleading labeling under GBL §§ 349 and 350 and principles of common-law fraud only if it engaged in making the misleading labeling.” Troncoso alleged that TGIF had “control over the marketing of the” snack chips. But the allegation of licensing “does not suggest that TGIF was involved in any aspects of the labeling beyond its own trademark, which Plaintiff does not allege is misleading,” and Troncoso’s allegations of control were conclusory. 

Question for the audience: Suppose the plaintiff alleges the following: (1) Sophisticated trademark licensors are aware of the risks of naked licensing, and thus they both provide for control over the quality of the goods and their marketing and actually exercise that control so as not to risk losing control of the trademark, following standard industry practices. (2) Defendant is a sophisticated licensor (perhaps with statements from corporate reports or something like “ ‘Our approach to licensing is as important and strategic as any other aspect of our marketing efforts,’ said Trey Hall, senior vice president and chief marketing officer for T.G.I. Friday’s.”). Should this suffice to make sufficient control plausible?


1 comment:

Anonymous said...

Assuming the truth of the two points you lay out in your question for the audience, it seems like there wouldn't be any question about control over product quality. But I wonder whether control over product quality as a licensor necessarily includes control over claims made on the packaging. I haven't read the opinion, but based on your description, it seems the court thought not (the allegation of licensing “does not suggest that TGIF was involved in any aspects of the labeling beyond its own trademark, which Plaintiff does not allege is misleading").

Maybe there's a conceptual disconnect here. The quality-control requirements for naked licensing essentially create a duty for the trademark owner to ensure consistency in its goods/services so consumer expectations will be met. Perhaps the question is whether that duty extends to exercising control over misleading claims made on the packaging.

Even assuming that's a useful framework to think about the problem, though, I don't have a firm sense of the correct answer. My instinct is that, as a general matter, a trademark owner's duties related to naked licensing are distinct and separate from its obligations under the Lanham Act to avoid false advertising.

But perhaps the question is muddier here. The trademark owner obviously exercises control over the quality of the in-restaurant product that contains actual potato skins. Given its control over that product (which, to reiterate, ensures consistency so consumer expectations will be met), maybe the trademark owner has a duty to avoid misleading claims on its packaging that would upset consumer expectations.

Interesting puzzle.