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United States Court of Appeals for the Seventh Circuit
November 5, 2004, Decided
Nos. 03-2867, 03-2868, 03-3550
[*1071] POSNER, Circuit Judge. Taco Bell has sued two insurance companies, Zurich and Continental, each of which had issued it a liability-insurance policy. The basis of federal jurisdiction is diversity of citizenship, and the substantive issues are governed, the parties tacitly agree, by Illinois law. The suit seeks [**2] a declaration that the insurance companies have a duty to pay for Taco Bell's defense against a diversity lawsuit that has been brought against it in a federal district court in Michigan by a design agency named Wrench. (That suit has already given rise to nine judicial opinions, beginning with Wrench LLC v. Taco Bell Corp., 36 F. Supp. 2d 787, 1998 WL 480871 (W.D. Mich. 1998), and is still going strong.) Taco Bell settled with Continental. The district court, on summary judgment, awarded the declaratory relief sought by Taco Bell--and despite the settlement awarded it against Continental as well as Zurich. The court also ordered Zurich to pay Taco Bell $ 142,000 for defense costs already incurred by the latter in the Wrench litigation and an additional $ 45,000 for the cost to Taco Bell of litigating this declaratory-judgment suit against Zurich. Finally, the court ordered Zurich to pay Continental $ 1.8 million, representing one-half the Taco Bell defense costs that Continental had paid. (We have rounded off the dollar figures.) Zurich appeals, as does Continental, which would [*1072] like the judgment against it vacated and also would like Zurich to be ordered to pay a larger share of Taco [**3] Bell's defense costs.
The amended complaint in Wrench's suit (now on appeal to the Sixth Circuit after the award of substantial damages to Wrench) alleges the following: In 1995 Wrench developed a marketing gimmick that it called "Psycho Chihuahua," which "involved the image of a clever, feisty Chihuahua dog with an attitude," the idea being "to use the humor of seeing a small dog character with a big dog's attitude." At a trade show the following year, Taco Bell expressed interest in using the design to promote its restaurants. Wrench proposed to Taco Bell "an advertising campaign based on a Chihuahua with an attitude obsessed with Taco Bell food, describing the Chihuahua to be used in the campaign as edgy and feisty, with a spicy Mexican personality and an insatiable craving for Taco Bell food." Beginning in the summer of 1997, Taco Bell, without obtaining permission from Wrench, began running television commercials on the theme of "a Chihuahua obsessed with the thought of Taco Bell food to the exclusion of anything else, including a female Chihuahua." What is more, the next year Taco Bell based its entire national advertising campaign on "the same basic idea of a Chihuahua with [**4] an attitude that is obsessed with Taco Bell food. Taco Bell has also used several of the specific commercial ideas provided by [Wrench] in its campaign, including the idea of using a live dog manipulated by computer graphic imaging, the idea of having a boy Chihuahua passing up a girl Chihuahua for Taco Bell food, the idea of using a bobbing head doll in a commercial, the idea of having a Chihuahua sneaking into the rear window of a car to obtain Taco Bell food, the idea of a Chihuahua popping his head out through a hole at the end of a commercial, and the idea of using a consistent tag line at the end of every commercial to keep the Chihuahua as a consistent icon for Taco Bell." These alleged appropriations of Wrench's design ideas are, so far as bears on our case, charged as misappropriation in violation of the common law of Michigan.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
388 F.3d 1069 *; 2004 U.S. App. LEXIS 23281 **
TACO BELL CORPORATION, Plaintiff-Appellee/Cross-Appellee, v. CONTINENTAL CASUALTY COMPANY, Defendant-Third Party Plaintiff-Appellee/Cross-Appellant, v. ZURICH AMERICAN INSURANCE COMPANY, Defendant-Third Party Defendant-Appellant.
Prior History: [**1] Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 01 C 0438. Harry D. Leinenweber, Judge.
Taco Bell Corp. v. Cont'l Cas. Co., 2003 U.S. Dist. LEXIS 4289 (N.D. Ill., Mar. 12, 2003)
Disposition: AFFIRMED IN PART, REVERSED IN PART.
insured, defense costs, misappropriation, reimburse, district court, costs, notice, cases, advertising campaign, duty to defend, advertising, diversity, policies, argues, food, insurance company, insurance policy, basic idea, infringement, retention, coverage, lawyers
Insurance Law, Business Insurance, Commercial General Liability Insurance, Duty to Defend, Contracts Law, Breach, General Overview, Liability & Performance Standards, Good Faith & Fair Dealing, Notice to Insurers, Prejudice to Insurers, Reasonableness, Civil Procedure, Costs & Attorney Fees, Attorney Fees & Expenses, Reasonable Fees, Preliminary Considerations, Federal & State Interrelationships, Erie Doctrine, Real Property Law, Common Interest Communities, Condominiums, Purchase & Sale, Remedies, Declaratory Judgments, Declaratory Judgments, Multiple Insurers, Claim, Contract & Practice Issues, Relationship Between Clauses