Asia Economic Institute et al v. Xcentric Ventures LLC et al

Filing 69

MEMORANDUM in Opposition to MOTION for Summary Judgment as to Entire Case 40 filed by Plaintiffs Asia Economic Institute, Iliana Llaneras, Raymond Mobrez. (Attachments: # 1 Exhibit 1 to Plaintiffs' Memorandum of Law)(Borodkin, Lisa)

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UNITED STATES DISTRICT COURT D IS TR IC T OF CONNECTICUT

D O C TO R 'S ASSOCIATES, INC. P la in tiff, v. Q IP HOLDER LLC and IFILM CORP., D e fe n d a n ts .

: : : : : : :

C IV IL ACTION NO. 3 :0 6 -c v-17 1 0 (V L B ) F e b ru a ry 19, 2010

M E M O R AN D U M OF DECISION DENYING DEFENDANTS' M O TIO N FOR SUMMARY JUDGMENT [Doc. #186] Th e Plaintiff, Doctor's Associates, Inc. ("Subway"), brought this case for in jun c tive relief and damages against the Defendants, QIP Holder LLC ("Quiznos") a n d iFilm Corp. (collectively, the "Defendants"), asserting claims for false and d e ce p tive advertising in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1 1 2 5 (a ), along with Connecticut state law claims for commercial disparagement and viola tio n of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110b et s e q .. This case arises out of a Quiznos advertising campaign comparing certain Q u iz n o s sandwiches to certain Subway sandwiches in two national television c o m m e rc ia ls and an internet-based contest. Presently pending before the Court is the Defendants' motion for summary judgment. See Doc. # 186. In addition, the D e fe n d a n ts have moved to bar the expert testimony and report of Subway's expert D r. Joel Howard Steckel, and to bar Dr. Steckel's affidavit submitted with Subway's res p o ns e to the Defendants' motion for summary judgment. See Doc. ## 191 and 2 2 8 . For the reasons set forth below, the Defendants' motion to bar Dr. Steckel's a ffid a vit is GRANTED. The Defendants' motion to bar the expert testimony and

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report of Dr. Steckel is DENIED, as the Court finds Dr. Steckel's testimony and rep o rt to be relevant and admissible. Finally, the Defendants' motion for summary ju d g m e n t is DENIED. I. FACTUAL AND PROCEDURAL BACKGROUND

The following facts relevant to the Defendant's motion for summary judgment are undisputed unless otherwise noted. This case arises from an advertising campaign conducted by Quiznos which highlighted the differences between its products and those of its direct competitor, Subway. Subway is the franchisor of more than 25,000 sandwich shops worldwide. Quiznos has more than 4,500 operating franchises. Quiznos' campaign centered around an initiative at Quiznos to introduce a "double meat" line of sandwiches, which had double the normal portion of meat used in Quiznos' traditional sandwich offerings. In connection with the campaign, Quiznos produced and aired a television commercial in September 2006 comparing its Prime Rib Cheesesteak sandwich to the Subway menu offering it identified as being most similar, the "Cheesesteak" sandwich (hereinafter the "Cheesesteak Commercial"). The message of the Commercial was that the Quiznos sandwich had twice the meat of the Subway sandwich. Shortly after the Cheesesteak Commercial aired, Quiznos partnered with iFilm to create a web-based contest called the "Quiznos vs. Subway TV Ad Challenge." The Contest, which was accessible by logging onto the domain

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name "meatnomeat.com," solicited entrants to create a video demonstrating "why you think Quiznos is better." The Defendants posted four sample videos on the Contest website, as well as contestant videos that complied with the Contest's Rules. In January 2007, Quiznos produced and aired a second television commercial that compared it's new double meat "Ultimate Italian" sandwich to the Subway menu offering it identified as being most similar, the "Italian BMT" (hereinafter the "Ultimate Italian Commercial"). Again, the message of this commercial was that the Quiznos sandwich had twice the meat of the Subway sandwich featured. The two television commercials and internet-based contest at issue are described in greater detail below. On October 27, 2006, Subway sued Quiznos, alleging that the Cheesesteak Commercial was false and misleading in violation of the Lanham Act as well as Connecticut law. Subway has subsequently amended it's complaint six times to incorporate identical allegations with respect to the Ultimate Italian Commercial and to allege that representations associated with the Contest were also false and misleading. The Defendants filed their motion for summary judgment on October 15, 2009, and Subway filed it's opposition thereto on November 25, 2009. A. Cheesesteak Commercial From approximately September 18, 2006 through November 3, 2006, Quiznos aired a 30-second television commercial featuring its Prime Rib Cheesesteak ("Prime Rib") sandwich. The Commercial depicted Quiznos' Prime
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Rib sandwich and Subway's Cheesesteak sandwich side-by-side on a tray, while actual consumers commented on the sandwiches and offered unscripted opinions regarding the quantity of meat on the sandwiches. For example, one
m a n , while looking at the sandwiches, states "meat, no meat." In another shot, two m e n are looking at the Subway sandwich and one says he can't see any meat and a fte r a search says "Oh, there it is I see it," while the other man says "it's hard to fin d " and "oh, there's a little." Def. Ex. 1. Another man, while comparing the two s a n d w ic h e s , refers to the meat on the Quiznos sandwich as "busting out of the s u b." Def. Ex. 1. The Commercial also contained frames consisting solely of text,

which read: "Quiznos New Prime Rib Cheesesteak vs. Subway Cheesesteak . . . Only Quiznos has real Prime Rib. And more than 2x the meat." Def. 56(a)(1) Statement ¶ 17. The Defendants assert that the "2x the meat" claim made in the Cheesesteak Commercial was accurate based upon the specifications for the Prime Rib and Cheesesteak sandwiches. According to the Defendants, the specifications for the Quiznos Prime Rib sandwich called for 5.0 ounces of meat, whereas the specifications for the Subway Cheesesteak sandwich called for less than 2.5 ounces of meat. Prior to airing of the Commercial, Quiznos commissioned an independent expert, Restaurant Marketing Group ("RMG"), to verify the accuracy of the "2x the meat" claim. RMG concluded that the amount of meat in an average small Quiznos Prime Rib sandwich was at least twice that of the meat in the standard 6-inch Subway Cheesesteak sandwich. Quiznos also

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conducted an audit of its stores in the fall of 2006, during which it claims to have found that over ninety-four percent of franchisees were making sandwiches that contained at least 4.0 ounces of meat, and thus twice the meat in the Subway Cheesesteak sandwich. Subway contends, however, that the Cheesesteak Commercial was false and misleading, citing the following facts. First, Subway states that, unlike Quiznos, it's consumer model is to make all sandwiches to order. At all times relevant to this lawsuit, every sandwich on Subway's menu board, including the 6" Cheesesteak sandwich, could be made with a double portion of meat for an extra $0.99 or $1.00. The Subway Cheesesteak sandwich was available with either a 2.5 oz. portion of a steak, onion, and pepper mixture (including between 1.67 to 1.77 oz. of meat), or a 5 oz. portion of the mixture with a double portion of meat (including between 3.34 to 3.54 oz. of meat). Nevertheless, the Subway Cheesesteak sandwich depicted in the Commercial contained a single portion of meat and was compared to the double portion of meat in the Quiznos Prime Rib sandwich. The Commercial did not disclose that Subway offered a more comparable sandwich - the Subway Cheesesteak sandwich with a double portion of meat. In addition, there was no disclosure in the Commercial of the price of the two products. Subway asserts that the recommended price of the Subway 6" Cheesesteak sandwich was $3.59, or $4.59 with double meat, while the 5" Quiznos Prime Rib sandwich sold for as much as $6.79. As to the availability of double meat, Quiznos responds that only 50 percent of Subway's customers even
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knew that double meat was an option, and that the percentage of sandwiches at Subway that were ordered with double meat was 10 percent or lower. In addition, Subway asserts that it had discontinued the Cheesesteak sandwich at the time the Cheesesteak Commercial aired, and thus the Commercial compared Quiznos' Prime Rib sandwich to a discontinued Subway sandwich. On or about August 4, 2006, Subway advised its franchisees that the Subway Cheesesteak sandwich was being discontinued in favor of a new steak sandwich, with a product rollout between August 21, 2006 and September 24, 2006. The Cheesesteak sandwich was replaced with a diced steak product called the "Steak & Cheese" sandwich. The 6" Steak & Cheese sandwich was available with 2.5 oz. of meat, or, if a customer ordered double meat, 5 oz. of meat. Subway states that it replaced the Cheesesteak sandwich with the Steak & Cheese sandwich in order to offer a more "versatile" product. Unlike the Cheesesteak sandwich, the Steak & Cheese sandwich consisted of diced steak pieces that could be tossed with various seasoning and sauce. Subway began shipping its new diced steak product for the Steak & Cheese sandwich to restaurants the week of September 11, 2006. Subway stopped shipments of the shaved steak product for the Cheesesteak sandwich no later than September 18, 2006. All Subway stores were required to sell the new Steak & Cheese sandwich no later than September 25, 2006. Franchisees were told to replace their menu boards to offer the new Steak & Cheese sandwich as soon as they began selling the new product, which was
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done by September 22, 2006 for 92% of stores and no later than September 25, 2006 for all stores. As of September 18, 2006, the day Quiznos began airing the Cheesesteak commercial, the new Steak & Cheese sandwich was the product being marketed in the vast majority of Subway stores. However, franchisees were allowed to offer customers the choice to purchase the discontinued Cheesesteak product if they had remaining inventory of shaved steak. According to Subway's survey of 917 stores conducted while the Cheesesteak Commercial was airing, approximately 65 percent of stores surveyed had inventories of shaved steak, and approximately 38 percent of stores surveyed had more than twenty pounds of shaved steak left in their inventory. Thus, the Cheesesteak sandwich was still being offered in a majority of Subway stores during at least a portion of the time that the Cheesesteak Commercial aired. Subway contends that Quiznos became aware of the fact that Subway had discontinued the Cheesesteak sandwich no later than September 21, 2006. According to Subway, Quiznos was aware that the Cheesesteak Commercial made false claims before it began airing. In August 2006, Quiznos conducted a field operations survey or "field checks" of the Prime Rib meat portion at 651 franchises. The testing showed that 27.65% of the 651 sandwiches tested contained less than 5.0 oz. of meat, with 10.29% of the 651 containing less than 4.0 oz. of meat. On September 15, 2006, Quiznos conducted an additional independent survey of 195 Prime Rib sandwiches at 39 Quiznos stores across 8 markets which found that 74% of the stores made sandwiches containing less
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than 4.5 oz. of meat. When combined, the results of the two surveys show that 21.6% of the 690 stores surveyed were serving Prime Rib sandwiches with less than 4.5 oz. of meat, which was nonetheless approximately one ounce more than the Subway Cheesesteak sandwich with double meat. Subway asserts that Quiznos did not inform the television networks airing the commercial of the results of the field surveys, despite the networks' request for substantiation of Quiznos' "2x the meat" claim. As mentioned previously, following the August and September surveys, Quiznos conducted an "audit" of 4,370 stores, which involved field checks testing the amount of meat contained in each store's Prime Rib sandwich. Subway contends that franchise owners and/or managers were informed that the field checks would be occurring "in the next few days," and in some cases knew precisely when the audits were being conducted. The instructions to the personnel conducting the field checks called for the meat to be weighed in the stores, in front of store personnel with sandwiches ordered ahead by telephone prior to them coming to the store to weigh the meat. The results of the September field operations testing showed that 44.14% of the Prime Rib sandwiches tested contained less than 5 oz. of meat, and 5.86% contained less than 4 oz. of meat. In performing the field checks, Quiznos allowed up to half ounce deviation from the standard 5.0 oz meat specification, such that sandwiches with as little as 4.5 oz. of meat were deemed acceptable. Quiznos ultimately issued termination notices to approximately 300
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franchisees that failed to comply with the meat specifications for the Prime Rib sandwich. Quiznos was sued by two such franchisees in the Colorado Second Judicial District, who alleged that there was no real compliance standard in place related to the specifications and that the enforcement process was merely a sham driven by concerns over the Prime Rib Commercial (the "Zig Zag litigation"). The court agreed with the franchisees, finding: [T]his whole charade of "terminating" and "defaulting" franchisees who failed the field test was just that - a charade - driven not by Quiznos' genuine concern about whether its franchisees were making sandwiches to spec, but rather by its overriding public relations desire to be able to proceed with its national advertising campaign targeting Subway. But the public relations monster had to serve two masters the action Quiznos took once it ferreted out non-complying franchisees had to look serious (otherwise what would Subway say?), but it couldn't actually be serious, unless Quiznos was willing to lose a potentially huge number of non-complying franchisees, which it was not. Pl. Ex. 32. On September 22, 2006, Subway issued a cease and desist letter to Quiznos advising that the Subway Cheesesteak sandwich had been discontinued and that the claims in the Prime Rib Commercial were false and misleading. Quiznos refused to remove or modify the Commercial. Quiznos' advertising agency, Ogilvy and Mather ("Ogilvy"), created the Cheesesteak Commercial. The Defendants maintain that Ogilvy filmed the Commercial according to written procedures designed to ensure that the Commercial fairly and accurately depicted the sandwiches featured. In accordance with these procedures, the sandwiches filmed in the Commercial were purchased from local Quiznos and Subway stores by members of the
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production crew posing as ordinary customers. Also in accordance with procedures, independent third-party public notaries monitored the procurement and filming of the sandwiches. The notaries signed affidavits attesting that the production crew followed the procedures and that, in the course of producing the Commercial, no one manipulated the sandwiches. Subway contends, however, that the Subway Cheesesteak sandwich depicted in the commercial did not reflect the appearance of the sandwich when purchased at a Subway store. According to Subway's deposition witnesses, the sandwich in the commercial appeared "flattened or squished." Ex. 6, Pace Tr., at 91-94; Ex. 5, Greco Tr., at 209-12. Subway also claims that Quiznos stores were warned that someone from corporate would be there on the day the commercial was filmed, that corporate personnel and not ordinary customers made the purchases of the sandwiches at Quiznos stores over the course of the day, and that Ogilvy eliminated "problem" Quiznos stores and cherry-picked the best stores from a local listing of stores for the purchases of the Prime Rib sandwiches. Finally, Subway asserts that a consumer research survey prepared by Subway employee Tricia Kingston in conjunction with Insight Express, LLC showed that the Quiznos sandwich in the Cheesesteak Commercial looked better than what customers experienced in stores, while the Subway sandwich had a worse appearance than what customers experienced in stores. B. Ultimate Italian Commercial
From approximately January 15, 2007 to March 11, 2007, Quiznos aired a 30-

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second television commercial comparing it's Ultimate Italian sandwich to Subway's Ita lia n BMT ("BMT") sandwich. As in the Cheesesteak Commercial, the Ultimate Ita lia n Commercial depicted actual consumers offering unscripted opinions on the q u a n titie s of meat in the two sandwiches, which were presented side-by-side on a tra y. For instance, in one vignette a man states, "If I ran out of gas in front of a S u b w a y I would walk ten miles to get the Quiznos sandwich." Def. Ex. 1. In another vign e tte , two men are looking at the Subway sandwich and one states, "I don't see a n y meat." Id. The commercial also includes a person saying "the Quiznos is like s ta c k e d with a bunch of meat and the Subway sandwich is like when your k in d e rga rte n and your Mom throws some stuff together real quick." Id. Also like the Cheesesteak Commercial, the Ultimate Italian Commercial c o nta in e d frames consisting solely of text, which read: "Quiznos New Ultimate Ita lia n vs. Subway's Italian BMT. The Quiznos has 2x the meat." Def. 56(a)(1) S ta te m e n t ¶ 117. In addition, the final text frame contained text that disclosed the follo w in g : "Based upon average precooked weight, in an independent national s a m p lin g of Quiznos small Ultimate Italian v. Subway regular 6-inch Italian BMT (12 /0 6 ). Sandwich prices differ." Id. ¶ 118. The national sample referenced in the text was a study conducted by G u id e lin e , Inc. ("Guideline"), a firm that Quiznos hired to survey and weigh the m e a ts on the Quiznos Ultimate Italian sandwich and the Subway BMT sandwich. Guideline found that the amount of meat on an average small (5-inch) Quiznos U ltim a te Italian sandwich was twice that of the meat on an average 6-inch Subway B M T sandwich. Further, the specifications for the Quiznos Ultimate Italian sandwich 11

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called for 5.0 ounces of meat, whereas the specifications for the Subway BMT s a n d w ic h called for 2.25 ounces of meat.

Ogilvy also created and filmed the Ultimate Italian Commercial. The Defendants maintain that Ogilvy filmed the Ultimate Italian Commercial according to the same written procedures utilized in the Cheesesteak Commercial, as described above, which the Defendants claim were designed to ensure that the Commercial fairly and accurately depicted the sandwiches featured.
According to Subway, the Ultimate Italian Commercial was also false and m isle a d in g because a double portion of meat was always available on the Subway B M T sandwich, and thus the 6-inch BMT was available with 4.5 ounces of meat. In a d ditio n , Quiznos offered a Classic Italian sandwich with a single portion of meat. Subway further contends that the Defendants misled consumers to believe that the tw o sandwiches were priced equally, but that the Quiznos sandwich was a better va lu e because it had "2x the meat" of the Subway BMT when in fact, the Ultimate Ita lia n sandwich cost significantly more than the BMT sandwich. In support of its c la im that the Ultimate Italian Commercial was misleading as to price and value, S u b w a y cites a survey conducted by it's expert, Dr. Joel Steckel. Based upon the res u lts of his survey, Dr. Steckel concluded that the Ultimate Italian Commercial m isle d consumers to believe that the Subway BMT was more expensive than it a c tu a lly is, and that the two sandwiches are closer in price than they actually are. See infra Section II, Motion to Bar Expert Testimony and Report. Subway claims that it saw a significant drop in overall sales of approximately 4 % after the running of each commercial. 12

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C. Internet-Based Contest F ro m approximately October 31, 2006 to December 8, 2006, Quiznos ran an in te rn e t-b a s e d contest entitled "Quiznos v. Subway TV Ad Challenge" (hereinafter " th e Contest"). The Contest sought entries from viewers comparing Subway to Q u iz n o s , offering the public the opportunity to "grab a camera and show us why you thin k Quiznos is better." Def. Ex. 62. iFilm, a leading on-line video network, cos p on s o re d the Contest. Q u iz n o s ' website invited customers to log onto the Contest website and enter the contest by uploading video submissions. The website was accessible by lo g g in g onto the domain names "quiznos.com," "ifilm.com," or "meatnomeat.com." Prizes for winning entries included the appearance of the winning video on VH1, c a s h , a year's supply of Quiznos, Video iPods and other merchandise. The winning vide o was aired on VH1 on December 15, 2006, and was also posted on a billboard a t Times Square in New York City on New Year's Eve. Quiznos and iFilm created four sample videos that they posted on the w e b s ite, entitled "Mr. Meat," "Disgruntled Employee," "Co-Workers," and "Barbie B re a ks, You Get What You Pay For." Quiznos created the "Barbie Breaks" video, a n d reviewed and approved the other three videos, which were created by iFilm. S u b w a y contends that the Defendants referred to the Subway sandwich in a false a n d misleading manner in each video, including by making multiple references to the amount of meat on a Subway sandwich in the "Mr. Meat" video. The Defendants also posted contestant submissions on the website. The D e fe n d a n ts contend that these videos were posted as they were submitted, and 13

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without altering the creative content, in a manner that made it clear that the content w a s created by the contestants rather than by Quiznos or iFilm. Subway, on the o th e r hand, claims that the Defendants were responsible for the content of the c o nte s ta n t videos. In support of this claim, Subway points to the Contest's Official R u le s , which provided that "all materials submitted become the property of the s p on s o rs and will not be returned. Sponsors may use any ideas, concepts, m a te rials, or expression in whole or in part, contained in a video submission." Pl. E x . 76. Subway also cites the submission requirements for an eligible entry, which req u ire d a video submission that "compares Quiznos to Subway and illustrates why Q u iz n o s is better than Subway;" the "Judging Criteria" which also required that the vide o s compare Quiznos to Subway, with Quiznos depicted as superior; and " Th o u g h t Starters" posted on the Contest website suggesting ideas for entrant c o nte n t, including "Double Meat." Pl. Ex. 77 and 78. The Contest's Official Rules expressly prohibited, among other things, "any false or misleading statement, or any libelous, slanderous or disparaging statement reg a rd in g Quiznos or Subway, or of either companies' products or services." Def. E x . 65. The Defendants undertook the responsibility to review the contest entries, a n d had the ability to exclude entries containing inappropriate content. The D e fe n d a n ts claim that they posted contestant videos that complied with the Official R u le s . Subway maintains, however, that the Defendants posted videos that did not c o m p ly with the Official Rules in that they contained false or misleading statements o r disparaging statements about Subway. For instance, Subway asserts that the " M r. Meat" sample video created by the Defendants is false and misleading because 14

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it depicts and describes the Subway sandwich as being "all bread;" uses a beauty s h ot of a Quiznos sandwich in comparison to a false or fake picture represented as a Subway sandwich; refers to the Quiznos sandwich as being named "Big Meaty," b e in g "Heavy" in weight, "Satisfying," and "Fresh" in age while calling the Subway s a n d w ic h "Lettuce Starve," and referring to it as "light" in weight, as "Hunger Pain In d u c in g ," and as "Stale" in age; depicting a cartoon sandwich purporting to be a S u b w a y sandwich with no meat showing; and depicting a sign asking "Where's the m e a t." Def. Ex. 67. With respect to contestant entries, Subway cites the following e n trie s as examples of videos that include false and misleading statements: a S u b w a y sandwich portrayed as a submarine unable to dive because it does not have e n ou g h meat; two persons trying to decide where to eat and referring to Quiznos' d o u b le meat as a deciding factor, thereby falsely implying that Subway has no d o u b le meat option; and a video depicting a sandwich "build off" that explicitly s ta te s that Subway's sandwich has little meat and much less meat than Quiznos' s a n d w ic h . Def. Ex. 67. Subway contends that the Defendants did not remove the three iFilm created s a m p le videos or the contestant entries from the ifilm.com website after the end of the Contest, and that all Contest entries remained available for viewing on iFilm's w e b s ite as of December 2007. II. MOTION TO BAR EXPERT REPORT AND TESTIMONY Th e Defendants move to bar the expert testimony and report of Subway's e x p e rt, Dr. Joel Steckel, on the basis that Dr. Steckel's opinions are irrelevant and u n re liab le under Fed. R. Evid. 403 and 702. 15

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Subway alleges in it's Seventh Amended Complaint that Quiznos' Ultimate Ita lia n Commercial was false and misleading because, inter alia: (1) the Subway Italian BMT sandwich is not offered as the same product a s that to which it is directly compared; (2) the Defendant did not disclose the difference in the two products and made no effort to compare and d is c lo s e the prices of the two products or the nutritional components of the two products being compared; . . . (4) the Defendant claimed, directly a n d indirectly, that its product is superior to Plaintiff's product when the tw o products are materially different; . . . (6) the Defendant explicitly or im plic itly claims the Defendant's product is superior to the Plaintiff's p ro d u c t although they are different in size and price. 7th Am. Compl. ¶ 30 (emphasis added). Thus, Subway alleges that the Commercial in question was misleading because, among other reasons, the sandwiches were n o t comparable in content or price and the prices of the two sandwiches were not d is c lo s e d . On December 20, 2007, Subway disclosed Dr. Steckel as its expert and served h is expert report (hereinafter the "Steckel Survey"). The Steckel Survey was p u rp o rte d ly designed and executed "to test the hypotheses that the commercial [m is le d ] customers by elevating their price perceptions of the Subway sandwich d e pic te d." Pl. Ex. A, Steckel Report ¶ 13. Dr. Steckel hypothesized that "the c o m m e rc ia l leads viewers to perceive a) that the Subway price is higher than they w o u ld otherwise believe; and b) that the Subway price is more comparable to Q u iz n o s ' than it actually is." Id. In the survey, Dr. Steckel detailed his methodology and results. The Steckel S u rve y involved 430 respondents obtained from nine shopping malls across the c o un try. Id. ¶¶ 21, 27. The sample or universe for the survey was comprised of " m a les and females over the age of 18 who plan on visiting a sub shop or fast food 16

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restaurant specializing in subs in the next month." Id. ¶ 20. Dr. Steckel divided the res p o nd e n ts into two groups: a test group, to whom he showed the Ultimate Italian C o m m e rc ia l; and a control group, to whom he showed only a "beauty shot" of the S u b w a y sandwich and a description of the sandwich taken from the "Menu" section o f Subway's website. Id. ¶¶ 22-25. After showing the respondents these stimuli, Dr. S te c k e l asked all respondents the following introductory question: "What is the m a in message, if any, of the ad you just saw?" Id. ¶ 28(d). The Steckel Survey next asked all respondents in the test group, who had view e d the Commercial, what they "would expect to pay" for Subway's BMT and Q u iz n o s ' Ultimate Italian sandwich based on "the ad you just saw and your k n ow le d g e of fast food." Id. ¶ 28(e) and (h). Dr. Steckel found that the respondents o p in e d , on average, that the price of the Subway BMT was $4.91 and the price of the Q u iz n o s Ultimate Italian was $5.81. The Steckel Survey then asked all respondents in the control group, who had view e d only a "beauty shot" of the Subway BMT, to guess the price of the Subway B M T based on "the ad you just saw and your knowledge of fast food." Id. ¶ 28(e). Dr. Steckel found that the respondents opined, on average, that the price of the S u b w a y BMT was $4.48. Id. ¶ 30. There was no similar control in place for the Q u iz n o s Ultimate Italian sandwich. Dr. Steckel then determined that the actual "average current market price" of the Subway BMT was $3.84 based on phone calls he made to nine different Subway lo c a tio n s and that the actual "average current market price" of the Quiznos Ultimate Ita lia n was $5.08. Id. ¶ n.1. He thus found that the average guesses of the test 17

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group respondents regarding the price of the Subway BMT differed by $0.43. He a ls o found that the actual price difference between the Subway BMT and the Q u iz n o s Ultimate Italian was $1.24, while the respondents who viewed the c o m m e rc ia l opined, on average, that the price difference was only $0.90. According to Dr. Steckel, the difference in prices given by the test group and the control group w a s statistically significant. Based on the survey, Dr. Steckel concluded that the Quiznos Ultimate Italian C o m m e rc ia l misled customers about the relative price of the two sandwiches. Specifically, Dr. Steckel determined, based on the statistically significant price d iffe re n c e given between the test group and the control group, that consumers were m isle d about price in that they were led to believe that the Subway BMT was more e x p e n s ive than it actually is, and that the two sandwiches are closer in price than the actually are. In Schering Corp. v. Pfizer, 189 F.3d 218 (2d Cir. 1999), the Second Circuit c la rifie d the standards governing the admissibility of survey evidence. As the S e c o n d Circuit explained, the "great majority of surveys admitted in this Circuit" fall in to the Fed. R. Evid. 803(3) hearsay exception because "they poll individuals about the ir presently-existing states of mind to establish facts about the group's mental im pre ss io n s ."1 The Second Circuit further explained:

Fed. R. Evid. 803(3) excepts from the hearsay rule "[a] statement of the d e c la r a n t's then existing state of mind, emotion, sensation, or physical condition (s u c h as intent, plan, motive, design, mental feeling, pain, and bodily health), but n o t including a statement of memory or belief to prove the fact remembered or b e lie v e d unless it relates to the execution, revocation, identification, or terms of d e c la r a n t's will." 18

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It is important for district courts to recognize surveys of this type because the ir qualification for a traditional hearsay exception obviates the need to e x a m in e methodology before overruling a hearsay objection. Regardless o f the basis cited for admitting these surveys, errors in methodology thus p ro p e rly go only to the weight of the evidence - subject of course, to Rule 4 0 3 's more general prohibition against evidence that is less probative tha n prejudicial or confusing. Id . at 227-28. In so holding, the Second Circuit expressed its agreement with the "modern view " that such surveys "should be admitted as a general rule, and their weight s h ou ld be determined by whether": (1) the "universe" was properly defined, (2) a representative sample of tha t universe was selected, (3) the questions to be asked of interviewees w e re framed in a clear, precise and non-leading manner, (4) sound in te rvie w procedures were followed by competent interviewers who had n o knowledge of the litigation or the purpose for which the survey was c o nd u c ted , (5) the data gathered was accurately reported, (6) the data was a n alyz e d in accordance with accepted statistical principles and (7) the o b je c tivity of the entire process was ensured. Id . at 224-25. The Second Circuit further recognized that surveys are particularly important in Lanham Act cases, because in such cases "the mental impressions with which an a u die n c e is left can be relevant and sometimes even necessary, to establish what a d e fe n d a n t is implying in a challenged representation. In fact, although plaintiffs s e e k in g to establish a literal falsehood must generally show the substance of what is conveyed, we have held that a district court must rely on extrinsic evidence to s u pp o rt a finding of an implicitly false message. This is because . . . plaintiffs a lle g in g an implied falsehood are claiming that a statement, whatever its literal truth, h a s left an impression on the listener that conflicts with reality. This latter claim

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invites a comparison of the impression, rather than the statement, with the truth." Id. at 229 (internal citations and quotation marks omitted). Thus, Schering makes clear that surveys polling individuals about their p re s e n tly-e x is tin g states of mind to establish facts about the group's mental im pre ss io n s , like Dr. Steckel's survey in this case, are generally admissible unless the ir probative value is substantially outweighed by the danger of unfair prejudice or c o nfu sio n of the issues. As an initial matter, the Court finds that the Steckel Survey is relevant to S u b w a y's claims. The survey purports to show that the Quiznos Ultimate Italian C o m m e rc ia l was misleading because it caused consumers to believe that the S u b w a y sandwich is more expensive than they otherwise would have believed and tha t Subway and Quiznos' prices for the sandwiches compared in the Commercial a re more comparable than they actually are. Dr. Steckel's conclusion goes to c o ns u m e r perception of value because the Quiznos sandwich depicted in the C o m m e rc ia l purportedly contained a double portion of meat and therefore, if the two p ro d u c ts were perceived as costing the same, consumers were arguably misled by the Commercial into believing that the Quiznos sandwich would be a better value for the money. Thus, the Commercial was arguably misleading to consumers because it omitted information explaining the difference in price. The Defendants' argument that the Steckel Survey does not measure value is u n p e rs u a s ive . Although the Steckel Survey did not use the term "value," it is clear tha t his findings support a conclusion that the Commercial was deceptive in regards to the respective value of the two sandwiches. Dr. Steckel determined that the 20

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Commercial misled viewers in that it a) "Creates an impression that the Subway s a n d w ic h is more expensive than it actually is. Indeed, those that do not see the c o m p a ris o n will perceive that the sandwich is closer to its actual price;" and b) " C re a tes an impression that the Subway and Quiznos' prices are more comparable tha n they actually are." Pl. Ex. A, Steckel Report ¶ 32. As noted above, Subway a lle g e s in its Seventh Amended Complaint that the Ultimate Italian Commercial was m isle a d in g because it "made no effort to compare and disclose the prices of the two p ro d u c ts " and "explicitly or implicitly claims the Defendant's product is superior to the Plaintiff's product although they are different in size and price." Dr. Steckel's c o nc lu s io n s directly support these allegations, and therefore the Steckel Survey is rele va n t to the Plaintiff's claims. Acc o rd in g ly, the Steckel Survey may be barred under Fed. R. Evid. 403 only if its probative value is substantially outweighed by the danger of unfair prejudice or c o nfu sio n of the issues. After examining the methodological flaws in the Steckel S u rve y proffered by the Defendants, the Court determines that these purported fla w s "are not so egregious or clear cut that the Court can conclude that the highly p ro b a tive value of the survey" to Subway's claims is outweighed by its prejudicial e ffe c t. Playtex Products, Inc. v. Proctor & Gamble Co., No. 02 Civ. 8046(WHP), 2003 W L 21242769, at *2 (S.D.N.Y. May 28, 2003). The Defendants argue that the Steckel S u rve y is methodologically flawed because, inter alia, it used an ineffective control, faile d to filter out respondents who did not receive a price message, impermissibly le d respondents to guess the prices of the sandwiches, used an improper universe, a n d inappropriately instructed respondents to base their answer on pre-existing 21

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knowledge. However, as demonstrated by Subway in its memorandum in support of the in s ta n t motion, Dr. Steckel was questioned regarding these purported m e th o d o lo g ic a l flaws during his deposition and was able to provide a rationale for the design of his survey in each instance. For example, Dr. Steckel explained that h e chose a photograph of the Subway Italian BMT as the control in his survey b e ca u s e he "wanted the control stimulus to be a real-world representation of the type of information consumers might receive about the Subway sub, without c o m p a ris o n being made to the Quiznos sub." Pl. Ex. A, Steckel Report ¶ 24. Dr. S te c k e l further explained that the control he selected controlled for "random or s ys te m a tic errors that may be introduced if respondents guess . . ., if there are in a d verte n t signals (despite pretests) in the interview situation or the questioning s e q u e n ce , or if the respondent has preexisting beliefs" because "it's the c o m p a ris o n with the omission of information and the noncomparable products that c re a te s the misleading perception." Id. ¶ 22; Pl. Ex. C, Steckel Tr. at 183. As to the c ritic is m that the survey encouraged guessing because it did not include a "don't k n ow " option, Dr. Steckel explained that a don't know option "is often a cop-out to p re ve nt people from doing the hard work in . . . making some logical conclusion[,]" a n d that, "in this particular design, it would also encourage guessing in the control, a n d that would minimize any difference between test and control." Ex. C, Steckel Tr. a t 65-66. Finally, Dr. Steckel asserted that the universe he used was proper because " [i]n deceptive advertising cases, the relevant universe may be defined as the p o te n tia l purchaser, the potential decision-maker, or the person to whom the 22

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advertisement is addressed." Ex. A, Steckel Report ¶ 21. Therefore, the Court finds that the purported methodological flaws in the S te c k e l Survey go to the weight to be afforded to the survey, rather than to its a d m is s ib ility. The Defendants will have an opportunity to raise their concerns about the survey's methodological flaws before the jury at trial. See Playtex, 2003 WL 2 1 2 4 279 , at *2 (admitting survey into evidence at trial in Lanham Act false a d ve rtis in g case and permitting plaintiff to raise its concerns about survey's m e th o d o lo g ic a l flaws before the jury). III. MOTION TO BAR AFFIDAVIT Th e Defendants also move to bar the Affidavit of Subway's expert, Dr. Joel S te c k e l, which was submitted as Exhibit 95 to Subway's response to the D e fe n d a n ts ' motion for summary judgment (hereinafter the "Steckel Affidavit"), on the basis that the Steckel Affidavit is comprised solely of expert opinions that were n o t disclosed in Dr. Steckel's Rule 26(a)(2) expert report. On December 21, 2006, Subway disclosed to the Defendants the expert report o f Dr. Steckel. Dr. Steckel's report contains no discussion of, or reference to, a s tu d y performed by Hal Poret or Guideline. On January 26, 2007, Quiznos filed the "Guideline Study" in connection with its memorandum in opposition to Subway's motion for a temporary restraining o rd e r. See Doc. # 57. The Guideline Study concluded that the meat on the average Q u iz n o s small "Ultimate Italian" weighs 4.82 ounces, whereas the meat on the a ve ra g e Subway six-inch "BMT" weighs only 2.35 ounces. On April 4, 2008, the D e fe n d a n ts disclosed the expert report of Hal Poret, Vice President of Guideline. 23

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Mr. Poret's expert report contained the same Guideline Study as that included in Q u iz n o s ' January 26, 2007 filing. Nevertheless, the Plaintiff never submitted an e x p e rt report rebutting the Guideline Study, nor did Dr. Steckel discuss or reference the Guideline Study during his deposition on July 7, 2008. Discovery in this case c lo s e d on September 14, 2009. See Doc. # 177. Th e Defendants filed their motion for summary judgment on October 15, 2009. On November 25, 2009, Subway filed its response in opposition thereto. Attached as E x h ib it 95 to Subway's response brief was an Affidavit from Dr. Steckel, in which he c ritic iz e s the statistical analysis performed in the Guideline Study and concludes tha t the Study is unreliable. None of the opinions contained in the Steckel Affidavit a p pe a re d in Dr. Steckel's Rule 26(a) expert report, nor did Subway make any attempt to supplement Dr. Steckel's report at any time. Fed. R. Civ. P. 26(a)(2)(B) requires expert witnesses to submit, during d is c o ve ry, a report that contains, among other things, "a complete statement of all o p in io n s the witness will express and the basis and reasons for them." Pursuant to F e d. R. Civ. P. 37(c)(1), "[i]f a party fails to provide information or identify a witness a s required by Rule 26(a) or (e), the party is not allowed to use that information or w itn e s s to supply evidence on a motion, at a hearing, or at a trial, unless the failure w a s substantially justified or is harmless." The Second Circuit has instructed d is tric t courts to consider the following factors in determining whether to preclude e vid e n c e under Rule 37(c)(1): "(1) the party's explanation for the failure to comply w ith the [disclosure requirement]; (2) the importance of the testimony of the p re c lu de d witness; (3) the prejudice suffered by the opposing party as a result of 24

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having to prepare to meet the new testimony; and (4) the possibility of a c o ntin u a n c e ." Haas v. Del. & Hudson Railway Co., No. 07-1198-cv, 2008 U.S. App. L E X IS 13417, at *5-*6 (2d Cir. June 24, 2008) (citing Patterson v. Balsamico, 440 F.3d 1 0 4 , 117 (2d Cir. 2006)). H e re , Subway has provided no explanation at all as to why it failed to comply w ith the Rule 26(a)(2) disclosure requirement. Instead, Subway argues that the C o u rt should not impose the sanction of precluding the Steckel Affidavit because p re c lu sion would cause the Plaintiff severe prejudice, and the Defendants have not s u ffic ie ntly illustrated that they will be prejudiced if the Affidavit is admitted. S u b w a y's claim as to the importance of the Steckel Affidavit to it's case is u n d e rc u t by Subway's actual use of the Affidavit in its response to the Defendants' m o tio n for summary judgment. Subway's argument regarding the lack of reliability o f the Guideline Survey appears in it's response almost as an afterthought - the e n tire argument as to the Guideline Survey comprises less than two pages of the 63 p a ge response, and is not mentioned until page 47. Subway cites a plethora of e vid e n c e other than the Steckel Affidavit to establish genuine issues of fact reg a rd in g Quiznos' assertion that it's sandwich contained double the meat of S u b w a y's comparable sandwich. In fact, Subway essentially concedes that the S te c k e l Affidavit is unnecessary to it's case in it's memorandum in opposition to the in s ta n t motion, stating: The opinions contained in the Affidavit amount to no more than a simple m a th e m atic a l observation and calculation regarding Hal Poret's e s s e n tia lly double-counting the weights taken of the sandwiches, and h o w that affects his results in The Guideline Study. Plaintiff could have e x p la ine d this information in its Memorandum in Opposition to 25

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Defendants' Motion for Summary Judgment without relying on an affidavit - it does not take an expert to know that double counting measurements is improper and would skew survey results. However, Plaintiff believed this information would be most effectively explained through an affidavit fro m its survey expert, Dr. Steckel. P l. Mem. in Opposition to Def. Motion to Bar Affidavit at 6-7. Thus, by Subway's own a d m is s io n, the Steckel Affidavit is not needed to support it's contention that the G u id e lin e Study is unreliable. Th e Defendants, on the other hand, would be prejudiced by the Court's c o ns id e ra tio n of the Steckel Affidavit on summary judgment. This case has been o n g o ing for over three years. The Court has granted numerous extensions of the d is c o ve ry deadline. Discovery has been closed since September 2009, and a trial d a te is scheduled for March 2010. Despite having had more than ample time to do s o , Subway never supplemented it's expert report to rebut the Guideline Study, but in s te a d waited until after the close of discovery to file the Steckel Affidavit in it's res p o ns e to the Defendants' motion for summary judgment. The Defendants moved for summary judgment with the belief that the full factual record of the case was d e ve lo p e d . Imposing new discovery burdens on the Defendants for the purpose of a llo w in g them to challenge the information contained in the Steckel Affidavit at this la te juncture would cause them significant prejudice. See Acas v. Conn. Dep't of C o rre c tion , Civil No. 3:06-cv-1855, 2008 U.S. Dist. LEXIS 76031, at *36 (D. Conn. Sept. 2 9 , 2008) (finding that the defendant would be prejudiced if the Court were to allow the plaintiff to introduce affidavits containing information and conclusions offered for the first time in the plaintiff's response to the defendant's motion for summary ju d g m e n t); Point Productions v. Sony Music Entertainment, Inc., 93 Civ. 4001, 2004 26

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U.S. Dist. LEXIS 2676, at *35-*37 (S.D.N.Y. Feb. 20, 2004) (precluding expert affidavits s u bm itte d after the close of discovery which raised new matters not previously d is c lo s e d in expert reports on the basis that the plaintiff's delayed submission was " in e xc us a b le " and prejudicial to the defendant because it would "thrust new d is c o ve ry burdens on [the defendant] following the setting of a trial date"); Haas, 2 0 0 8 U.S. App. LEXIS 13417, at *7 (finding that plaintiff's delay in identifying witness " u n til after the close of discovery and, moreover, after [the defendant] had prepared a n d filed its motion for summary judgment" caused prejudice to the defendant). F in a lly, Subway has not requested a continuance of the trial date and, given the age of the case and the numerous discovery extensions that have already been g ra n te d as well the nominal, if any, prejudice to Subway, the Court is disinclined to g ra n t a continuance for the purpose of allowing the Defendants to examine and c h alle n g e the information submitted in the Steckel Affidavit. Accordingly, the D e fe n d a n ts ' motion to preclude the Steckel Affidavit is granted. The Court will not c o ns id e r the Affidavit in deciding the Defendants' motion for summary judgment. IV. MOTION FOR SUMMARY JUDGMENT A. Legal Standard

Summary judgment is appropriate only when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). "The substantive law governing the case will identify those facts that are material, and `[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly
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preclude the entry of summary judgment.'" Bouboulis v. Transp. Workers Union of Am., 442 F.3d 55, 59 (2d Cir. 2006) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The moving party bears the burden of showing that no genuine issues exist as to any material facts. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). If the moving party meets its burden, "an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must - by affidavits or as otherwise provided in this rule - set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e). "If the party moving for summary judgment demonstrates the absence of any genuine issue as to all material facts, the nonmoving party must, to defeat summary judgment, come forward with evidence that would be sufficient to support a jury verdict in its favor." Burt Rigid Box, Inc. v. Travelers Prop. Cas. Corp., 302 F.3d 83, 91 (2d Cir. 2002). "The non-movant cannot escape summary judgment merely by vaguely asserting the existence of some unspecified disputed material facts, or defeat the motion through mere speculation or conjecture." Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir.1990) (internal quotations and citations omitted). A party also may not rely on conclusory statements or unsupported allegations that the evidence in support of the motion for summary judgment is not credible. Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir. 1993). The court "construe[s] the evidence in the light most favorable to the non-moving party and . . . draw[s] all reasonable inferences in its favor."
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Huminski v. Corsones, 396 F.3d 53, 69-70 (2d Cir. 2004). "[I]f there is any evidence in the record that could reasonably support a jury's verdict for the nonmoving party, summary judgment must be denied." Am. Home Assurance Co. v. Hapag Lloyd Container Linie, GmbH, 446 F.3d 313, 315 (2d Cir. 2006).
B . Television Commercials 1 . False Advertising Th e Lanham Act prohibits any "false or misleading representation of fact which . . . in commercial advertising or promotion, misrepresents the nature [or] c h ara c teris tics . . . of another person's goods, services, or commercial activities." 15 U.S.C. § 1125(a)(1)(B). "Two different theories of recovery are available to a p la in tiff who brings a false advertising action under § 43(a) of the Lanham Act. First, the plaintiff can demonstrate that the challenged advertisement is literally false, i.e., false on its face . . . Alternatively, a plaintiff can show that the advertisement, while n o t literally false, is nevertheless likely to mislead or confuse consumers." Time W a rn e r Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144, 153 (2d Cir. 2007). "When an a d ve rtis e m e n t is shown to be literally or facially false, consumer deception is p re s u m e d , and the court may grant relief without reference to the advertisement's [ac tu a l] impact on the buying public." Id. (internal quotation marks omitted). A plaintiff seeking to prove that an advertising claim is literally false "bears a d iffe re n t burden depending on whether [or not] the advertisement purports to be b a se d on test results." Proctor & Gamble Co. v. Ultreo, Inc., 574 F. Supp. 2d 339, 3 4 5 (S.D.N.Y. 2008). A claim purporting to be based on test results is known as an " e s tab lis h m e n t claim." Castrol, Inc. v. Quaker State Corp., 977 F.2d 57, 62-63 (2d 29

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Cir. 1992). "Hence, where a defendant's advertisement contends that `clinical tests' p ro ve the superiority of its product (an `establishment claim'), the plaintiff need only p ro ve that `the tests referred to . . . were not sufficiently reliable to permit one to c o nc lu d e with reasonable certainty that they established the proposition for which the y were cited.'" Proctor and Gamble, 574 F. Supp. 2d at 345 (quoting Castrol, Inc., 9 7 7 F.2d at 62-63). "On the other hand, where a superiority claim does not purport to rest on test results, the plaintiff may prove falsity `only by adducing evidence that a ffirm a tive ly show[s] [defendant's] claim . . . to be false.'" Id. (quoting Castrol, 977 F .2 d at 62-63). The Court may determine whether an advertisement is literally false "based o n its own common sense and logic in interpreting the message." Edmiston v. J o rd a n, 98 Civ. 3298(DLC), 1999 WL 1072492, at *9 (S.D.N.Y. Nov. 24, 1999). In m a k in g this determination, the Second Circuit has instructed district courts to apply the "false by necessary implication" doctrine. Time Warner, 497 F.3d at 158. "Under this doctrine, a district court evaluating whether an advertisement is literally false m u s t analyze the message conveyed in full context, i.e., it must consider the a d ve rtis e m e n t in its entirety and not . . . engage in disputatious dissection." Id. (in te rn a l citations and quotation marks omitted). "If the words or images, c o ns id e re d in context, necessarily imply a false message, the advertisement is lite ra lly false and no extrinsic evidence of customer confusion is required." Id. "However, only an unambiguous message can be literally false. Therefore, if the la n g u a g e or graphic is susceptible to more than one reasonable interpretation, the a d ve rtis e m e n t cannot be literally false." Id. (internal citations and quotation marks 30

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omitted). As an initial matter, the Cheesesteak Commercial made non-establishment c la im s because the Commercial did not purport to rely upon any tests to prove the s u pe riority of Quiznos' Prime Rib sandwich. Therefore, Subway must adduce e vid e n c e affirmatively showing the claims made in the Commercial to be false. Subway contends that the Cheesesteak Commercial implies a false message in six w a ys ; first, by claiming that the Quiznos Prime Rib sandwich contains two times the m e a t of the Subway Cheesesteak sandwich, which Quiznos' own field testing d is p ro ve d ; second, by depicting "men on the street" making statements that they c a n n o t find meat in the Subway Cheesesteak sandwich or that the Subway C h e e s este a k sandwich has "no meat"; third, by making an unfair comparison of the Q u iz n o s Prime Rib sandwich, which contained a "double portion" of meat, to the S u b w a y Cheesesteak sandwich which contained a single portion of meat when S u b w a y offered on its menu at all relevant times its own "double portion" of meat; fou rth , by presenting the Subway Cheesesteak sandwich in an altered and less a p pe a lin g state than it looked upon purchase at a restaurant; fifth, by presenting a " b e a uty shot" of the Quiznos Prime Rib sandwich which looked more appetizing tha n the sandwich looks upon purchase at a restaurant; and sixth, by comparing the Q u iz n o s Prime Rib sandwich to the Subway Cheesesteak sandwich, a product w h ic h Quiznos knew Subway had discontinued and replaced with the Steak & C h e e s e sandwich. The crux of the Defendants' argument is that the claims made in the C h e e s este a k Commercial were true because the Quiznos Prime Rib sandwich 31

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actually contained two times as much meat as the Subway Cheesesteak sandwich. In support of this argument, the Defendants state that the specifications for the Q u iz n o s Prime Rib sandwich called for 5.0 ounces of meat whereas the s p ec ific a tio n s for the Subway Cheesesteak sandwich called for less than 2.5 ounces o f meat. The Defendants also cite the RMG study commissioned by Quiznos,

which determined that the amount of meat on a "small" Quiznos Prime Rib sandwich averaged between 4.678 to 4.926 ounces while the amount of meat on a 6" Subway Cheesesteak sandwich averaged less than 2.0 ounces.2 Finally, the Defendants rely upon Quiznos' "audit" of 4,100 of its 4,500 franchises in September 2006, which found that over ninety-four percent of franchisees were making sandwiches that contained at least 4.0 ounces of meat. According to the Defendants, this evidence convincingly demonstrates the veracity of the "two times the meat" claim. With respect to Subway's unfair comparison claim, Quiznos argues that the Cheesesteak Commercial compared standard Quiznos and Subway sandwiches and therefore the availability of add-ons such as "double meat" that Subway may have had available are irrelevant.
The Court is unpersuaded by the Defendants' argument, as the voluminous e vid e n c e cited by both parties on summary judgment reveal that there are numerous is s u e s of material fact with respect to Subway's claims that the Prime Rib

The RMG study was not referenced in the Cheesesteak Commercial, and th e r e fo r e , as Subway acknowledges, Quiznos' post hoc reliance upon it does not r e n d e r the claims in the Commercial establishment claims. See Pl. Mem. in O p p o s itio n to Def. Motion for Summary Judgment at 25. 32

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Commercial was literally false. First, the "audit" of franchises that Quiznos relies u p o n raises questions as to whether the claim made in the Commercial that Q u iz n o s ' Prime Rib sandwich contains two times the meat of the Subway C h e e s este a k sandwich is false. Field testing of 651 franchises conducted by Q u iz n o s in August showed that 27.65% of franchises failed to meet Quiznos' s ta n d a rd of 5 oz. of meat, and 10.29% made sandwiches with less than 4.0 oz. of m e a t. An independent survey of 195 Prime Rib sandwiches at 39 Quiznos stores c o nd u c te d on September 15, 2006 found that 74% of the stores made sandwiches c o nta in in g less than 4.5 oz. of meat. Finally, the comprehensive survey of 4,370 Q u iz n o s franchises conducted later in September revealed that 44.14% of the Prime R ib sandwiches tested contained less than 5 oz. of meat, and 5.86% contained less tha n 4 oz. of meat. Moreover, the validity of the test results are highly questionable. In c o nn e c tio n with the testing, Quiznos issued termination notices to approximately 3 0 0 franchisees that failed to comply with the meat specifications for the Prime Rib s a n d w ic h . Two such franchisees sued Quiznos in the Colorado Second Judicial D is tric t. After hearing evidence at trial as to Quiznos' testing procedures and res u lts, the court determined that the entire process was a "charade" driven by Q u iz n o s "overriding public relations desire to be able to proceed with its national a d ve rtis in g campaign targeting Subway." Pl. Ex. 32. The court further noted that the action taken by Quiznos in response to the audit results "had to look serious" b u t "couldn't actually be serious, unless Quiznos was willing to lose a potentially h u g e number of non-complying franchisees, which it was not." Pl. Ex. 32. 33

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Therefore, Quiznos' own testing raises questions of material fact as to the veracity o f the Commercial's "two times the meat" claim. While the RMG study may be e vid e n c e of the validity of Quiznos' claims, it is far from conclusive at the summary ju d g m e n t stage given the flaws in the study identified by Subway, including that R M G surveyed only 35 Subway stores out of approximately 25,000 and failed to use a geographically diverse sample size. The weight to be accorded to the RMG study is best determined by the jury at trial, rather than by the Court as a matter of law. Furthermore, there is a question of material fact as to whether the "two times the meat" claim was false because the Subway Cheesesteak sandwich, like all of S u b w a y's sandwiches, was available with a double portion of meat for an extra $ 1 .0 0. Despite knowing that Subway offered a more comparable double portion of m e a t on it's Cheesesteak sandwich, Quiznos opted to air the Cheesesteak C o m m e rc ia l comparing a sandwich it had specifically designed to contain a double p o rtio n of meat to a Subway sandwich with a single portion of meat. The C o m m e rc ia l did not disclose that Subway offered a double portion of meat. Moreover, the Subway sandwich depicted in the Commercial had actually been d is c o n tin u e d during the time that the Commercial was airing, and replaced with the S te a k and Cheese sandwich, which the parties appear to agree contained at least 2 .5 oz. of meat and thus at least half the meat as the Quiznos' Prime Rib sandwich. In these circumstances, a reasonable jury viewing the Prime Rib Commercial in full c o nte x t may conclude that it was literally false. The Defendants attempt to escape this conclusion by arguing that the P la in tiff's claims of literal falsity must fail because the message of the Commercial 34

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is ambiguous. See Time Warner, 497 F.3d at 158 ("[O]nly an unambiguous message c a n be literally false. Therefore, if the language or graphic is susceptible to more tha n one reasonable interpretation, the advertisement cannot be literally false."). This argument is unpersuasive. The Prime Rib Commercial conveys the u n a m b ig u o u s message that the Quiznos' product contains at least twice the meat of S u b w a y's product, and by extension, that Subway's product contains little meat in c o m p a ris o n to Quiznos' product. This message is clearly conveyed by the direct s id e -b y-s id e comparison of the two sandwiches along with commentary by "men on the street" indicating that the Subway sandwich has "little meat" or "no meat," as w e ll as by the text frame reading that the Quiznos sandwich has "more than 2x the m e a t." As discussed above, there are genuine issues of material fact as to whether the s e assertions are literally false. Accordingly, summary judgment must be denied a s to Subway's claims based upon the Cheesesteak Commercial. Subway also contends that the claim in the Ultimate Italian Commercial that the Quiznos Ultimate Italian sandwich contains two times the meat of the Subway Ita lia n BMT is literally false because Subway always offered a double portion of m e a t on its Italian BMT, and because Quiznos offered a Classic Italian sandwich w ith a single portion of meat to which Quiznos could have compared the Subway Ita lia n BMT. Subway further asserts that the statements in the Commercial that the Q u iz n o s Ultimate Italian sandwich is "stacked with meat," which were made in d ire c t comparison to the Subway Italian BMT, falsely imply that the Subway Italian B M T has little meat. U n lik e the Prime Rib Commercial, the Ultimate Italian Commercial makes 35

Case 3:06-cv-01710-VLB Document 271

Filed 02/19/10 Page 36 of 51

establishment claims because it included a text frame purporting to base its "two tim e s the meat" claim on the Guideline Study. Therefore, Subway may prove that the Ultimate Italian Commercial was literally false by showing that the Guideline S tu d y was not sufficiently reliable. However, the Court has granted the Defendants' m o tio n to preclude the Steckel Affidavit, which is the only evidence offered by S u b w a y to establish the unreliability of the Guideline Study. Nevertheless, the a b se n c e of any evidence demonstrating the lack of reliability of the Guideline Study is not fatal to the Plaintiff's claims. The Second Circuit has explained that: [T]h e "`sufficiently reliable' standard of course assumes that the tests in q u e s tio n , if reliable, would prove the proposition for which they are cited. I