New York, January 30, 2009 - On January 23, a unanimous three-judge federal appeals panel ruled that Taco Bell could not pass off $42 million in damages to TBWA, its former advertising agency, adopting the arguments made by Paul F. Corcoran, a partner with Davis & Gilbert LLP. The U.S. Court of Appeals for the Ninth Circuit held in Taco Bell v. TBWA that Taco Bell, and not its ad agency, was responsible for paying the $42 million in damages and accumulated interest to Wrench Corporation, a Michigan marketing company, that claimed the fast-food chain ripped-off its Chihuahua mascot for a Taco Bell television ad campaign that aired between 1997 and 2000.
Mr. Corcoran defended TBWA against claims made by Taco Bell that the ad agency was at fault and should be bound by the judgment Wrench obtained against Taco Bell for using its Chihuahua character in violation of an implied contract. In 2003, Wrench won its suit against Taco Bell, and was awarded $42 million in damages on accusations that the restaurant chain took their "psycho Chihuahua" marketing platform to TBWA. Subsequently, Taco Bell turned the tables on TBWA, filing claims that the agency was at fault for the breach of contract judgment.
The Appellate Court held that the undisputed facts presented on the summary judgment motions established Taco Bell to be solely at fault for the liability to Wrench, as TBWA had independently created its own Chihuahua character and had run the advertising campaign with Taco Bell's approval. The Court concluded that as a result, "no indemnification obligation from TBWA to Taco Bell arose."
"In defeating Taco Bell's claims, this case reaffirms TBWA's reputation for integrity as an independent creative advertising agency," said Paul Corcoran.
This case was followed closely by the legal community and main stream media, as the TBWA's advertising campaign featuring the Spanish-speaking Chihuahua had garnered more than $500 million in ad revenues and remains iconic to this day.
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