Troncoso v. TGI Fridays Inc.

Background

Solange Troncoso bought a bag of chips labeled “TGI Fridays Potato Skin Snacks” for $1.99 at a New York gas station. She alleged that the label and packaging led her to believe the chips contained potato peels as an ingredient. She later learned, according to her allegations, that the chips contained potato flakes and potato starch but no potato peels. She brought claims under New York General Business Law §§ 349 and 350, which address deceptive consumer practices and false advertising, and a claim for common-law fraud, seeking damages and an injunction.

The defendants were Inventure Foods, Inc., which manufactured the chips; Utz Quality Foods, LLC, Inventure’s parent company; and TGI Friday’s Inc., which licensed its trademark and brand name to Inventure. The defendants moved to dismiss the complaint for failure to state a claim under Rule 12(b)(6). They also asked the court to dismiss Utz and TGI Friday’s as defendants. Separately, they sought dismissal of the request for injunctive relief for lack of subject-matter jurisdiction under Rule 12(b)(1).

Injunctive relief

The court dismissed Troncoso’s claim for injunctive relief. To seek an injunction requiring future changes to the labeling, she had to show a likelihood of future injury. The court relied on Second Circuit precedent holding that a consumer who does not allege an intention to use the challenged product in the future lacks standing to seek an injunction on behalf of a proposed class.

Troncoso alleged that she had stopped buying the chips and would not rely on statements about them unless the packaging and labeling were corrected. She did not allege that she would buy the chips in the future if their labeling changed. The court therefore found that she had not shown a sufficient likelihood of future injury. It noted that the Second Circuit had left unresolved whether consumers who would buy a product in the future if it were correctly labeled might have standing, but said that issue did not need to be decided here.

Consumer-protection claims

The court granted the motion to dismiss to the extent Troncoso claimed that consumers would believe the chips tasted identical to, or were identical to, TGI Friday’s restaurant Potato Skins appetizer. It also dismissed theories that reasonable consumers would believe the chips were thick slices of potato skins or were “derived from” the restaurant appetizer. The court found those theories implausible because the chips were shelf-stable products sold at room temperature, while the appetizer was a hot restaurant food, and because the complaint did not clearly define what “derived from” meant.

The court allowed the narrower theory to proceed: that the packaging plausibly led a significant portion of reasonable consumers to believe the chips contained potato peels as an ingredient. The label “TGI Fridays Potato Skin Snacks” could reasonably create that impression, and the ingredient list did not clearly dispel it. Troncoso also alleged facts supporting her claim that the chips did not contain potato peels, including allegations about the composition of potato starch and potato flakes and information about the manufacturing process.

The court therefore denied the motion to dismiss the claims under New York General Business Law §§ 349 and 350 insofar as they were based on the alleged potato-peel misrepresentation. The court did not decide whether the labeling was ultimately misleading; it decided only that the allegations were sufficient to proceed past the pleading stage. It also did not address materiality because the defendants did not contest that element.

Common-law fraud

The court denied the motion to dismiss the common-law fraud claim to the extent it was based on the alleged representation that the chips contained potato peels. The court found that Troncoso plausibly alleged a false representation, reasonable reliance on that representation, and resulting harm. Her fraud theories based on the chips tasting like or being identical to the restaurant appetizer, or being thick slices of potato skins, were dismissed for the same reasons discussed above.

Claims against TGI Friday’s and Utz

The court dismissed the action as to TGI Friday’s. Troncoso alleged that TGI Friday’s licensed its trademark to Inventure and controlled the chips’ marketing, but the court found that the licensing allegation did not show that TGI Friday’s participated in the challenged labeling. The allegation that TGI Friday’s controlled the marketing was conclusory. Troncoso also alleged that TGI Friday’s sold the chips on an Amazon page stating that they contained “Real Potato Skins,” but she did not allege that she saw or relied on that page before buying the chips.

The court also dismissed the action as to Utz. The complaint alleged that Inventure was Utz’s wholly owned subsidiary, that Utz manufactured and distributed the chips through Inventure, that Inventure’s website redirected to Utz’s website, and that Utz sold the chips on its own website. The court found that these allegations did not plausibly show that Utz participated in creating the challenged label. Ownership of a subsidiary alone did not establish liability, and sharing a website did not support piercing the corporate veil—the legal separation between a parent company and its subsidiary. The complaint lacked specific, nonconclusory allegations supporting that theory.

Disposition

Judge Katherine Polk Failla granted the defendants’ motion to dismiss in part and denied it in part. The court dismissed Utz and TGI Friday’s from the case. It granted Inventure’s motion with respect to Troncoso’s claim for injunctive relief. The motion was otherwise denied, leaving Troncoso’s remaining consumer-protection and common-law fraud claims based on the alleged potato-peel misrepresentation to proceed against Inventure. The court did not state that any dismissal was with prejudice or without prejudice.