The Franchise Memorandum

In Doctor’s Associates, Inc. v. QIP Holder LLC, et al., 2010 U.S. Dist. LEXIS 14687 (D. Conn. Feb. 19, 2010), the franchisor of the Subway system sued Quiznos for deceptive advertising under the Lanham Act and the Connecticut Unfair Trade Practices Act and for commercial disparagement under Connecticut law. At issue were a number of ads that depicted a Quiznos sandwich next to a purportedly comparable Subway sandwich, which ads claimed that the sandwiches were not really comparable because the Quiznos sandwich had twice the amount of meat contained in the Subway sandwich. DAI alleged that the ads were false and misleading for a number of reasons, including that its business model is different from Quiznos’ in that all sandwiches at Subway are made to order, the ads did not disclose that Subway offered sandwiches that were more comparable to the Quiznos sandwiches than those that were used for comparison purposes, the Quiznos and Subway sandwiches looked respectively better and worse than what customers experienced in stores, and some of the Subway sandwiches in the ads had been discontinued. The case also involved a contest by Quiznos that invited consumers to submit online videos comparing a Quiznos sandwich to a Subway sandwich and stating why they preferred Quiznos. DAI alleged that the videos also unfairly compared its sandwiches with Quiznos’ sandwiches.

Quiznos filed a motion for summary judgment on DAI’s claims. The court denied the motion, finding that there were numerous issues of fact as to whether Quiznos had made false representations about Subway’s products. The court also found that there were genuine issues of material fact as to whether Quiznos was responsible for creating or developing the contestant videos. The court stated that a reasonable jury could conclude that Quiznos did not merely post disparaging videos, which would be a defense under Section 230(c)(1) of the Communications Decency Act, but actively solicited disparaging representations and could be held liable for them.