The Taco Bell Chihuahua litigation has had an ugly history, littered with defeats for the fast-food giant, disqualified law firms, and tens of millions in damages payments. It perhaps reached its final chapter Friday, when a unanimous three-judge federal appeals panel ruled that Taco Bell couldn’t pawn off $42 million in damages on its former advertising agency, TBWA Chiat/Day.
The ruling from the 9th U.S. Circuit Court of Appeals marked a defeat for Arent Fox and the Chicago boutique Stein, Ray & Harris, two firms that have been on Chihuahua duty almost since the litigation began more than a decade ago. Back then, two Michigan men accused Taco Bell of stealing their “Psycho Chihuahua” image after consulting with them about a possible advertising deal in 1996. Taco Bell eventually used a similar Chihuahua theme developed by TBWA for a 1997 pitch, despite internal concerns from at least one Taco Bell exec that the campaigns were so similar Taco Bell would be exposing itself to lawsuits. The two Michigan men indeed sued, and in 2003, a jury in U.S. District Court in Michigan awarded them $30 million in damages; a judge then tacked on $12 million more in interest.
