2. Targeting Alcohol Beverage Labeling
There is a trend in litigation surrounding accusations of
false or misleading advertising in the labeling and
promotion of alcohol beverage products.
There are three basic types of claims – competitor
claims, consumer claims and those brought by the
Government.
3. Competitor v. Competitor:
Principal Avenues of Attack
Competitor challenges to labeling and
advertising in the civil court system generally
focus on allegations of "false advertising" under
the Lanham Act.
Competitor claims may be pursued before the
National Advertising Division of the Council of
Better Business Bureau (NAD).
4. POM Wonderful v. Coca Cola
POM Wonderful brought suit against Coca Cola based
on a Minute Maid product labeled as “Pomegranate
Blueberry” juice.
POM alleged that the labeling misled consumers into
believing the juice consisted predominately of
pomegranate and blueberry
juices.
5. POM Wonderful v. Coca Cola
Coca-Cola asserted that the false advertising
claim was precluded by its label’s approval by
the FDA.
The Supreme Court ruled otherwise, holding
that the FDCA does not preclude Lanham Act
claims:
̶ Approval from the FDA is not enough to protect producers
from claims if label is “nonetheless misleading.”
6. Lesson for the Alcohol Beverage
industry?
The Pom Wonderful decision stands for the
proposition that highly regulated goods, perhaps
like alcohol beverages, are not safe-guarded by
their label and advertising approvals from
governmental agencies.
In short, TTB label or advertising "approval" will
not likely save a label from suit.
7. Green Light for Deceptive Labeling
Class Actions Under State Law
The Pom case also served as a green light for a
number of class action lawsuits in the alcohol
and beverage industry.
State consumer laws
allow similarly structured
claims on behalf of
consumers.
8. Consumer Claims: Class Actions
The Lanham Act does not provide standing for
consumer-based claims of False Advertising.
Consumers may, however, pursue "misleading"
labeling and advertising claims under state
deceptive trade practice acts as well as state
false advertising and unfair competition laws.
9. Consumer Fraud and Deceptive
Trade Practices Acts
Adopted in some form by all 50 States.
Regulatory and remedial statutes intended to protect
consumers, borrowers and business persons against
fraud, unfair methods of competition, and other unfair
and deceptive business practices.
Require plaintiffs to plead and prove that the “deceptive
act” proximately caused the alleged damages.
“…In some manner deceived by the misrepresentation.”
10. Example: The War Over “Handmade”
Beam Suntory was accused of false and misleading
advertising based on the assertion that Maker’s Mark®
bourbon is “handmade.”
̶ “close attention by a human being, not a high-volume,
unattended process.”
Fifth Generation, Inc. (Tito’s) was similarly accused of
deceptive trade practices in using the term “handmade”
on the labeling of its vodka.
̶ made by means of a “highly mechanized process devoid of
human hands” from neutral grain spirits.
11. What is "Handmade"?
Florida federal judge Robert Hinkle tossed the
case for failure to state a claim:
“The term [“handmade”] obviously
cannot be used literally to describe
bourbon. One can knit a sweater by
hand, but one cannot make bourbon
by hand…no reasonable consumer
could believe otherwise.”
12. The Flip Side of the Coin:
Judge Miller in the Southern
District of California denied a
similar motion to dismiss.
The court did not find "safe-harbor" in the TTB COLA for
the product:
“TTB review is peripheral and informal at most, especially
given that TTB does not have standards or rules for the term
'handmade.’”
13. Mo' Troubles for Jim Beam
The Jim Beam brand is also under attack in the same
court as Tito’s but for using the term “handcrafted.”
Plaintiffs claim the process is actually heavily mechanized,
“resembling a modern day assembly line and involving little to
no human supervision, assistance or involvement…”
Beam has moved to dismiss alleging "safe harbor" of
TTB COLA.
Will the same court that squashed Tito’s motion allow
Beam to succeed under safe harbor exclusion?
14. It is Not Just Limited to the Label
WhistlePig Rye Whiskey
̶ Plaintiffs are attacking web-based advertising suggesting
that product is "artisanal, craft whiskey produced on a farm
in Vermont from certified organic rye grown on site."
̶ Product is actually distilled and aged in a "massive" factory
in Alberta, Canada.
̶ "Consumers are willing to pay more for craft because they
believe the quality would be higher."
15. Terms and Themes Like “Hand
Crafted” or “Artisanal” Under Fire
Angel’s Envy
̶ Plaintiffs are attacking “handcrafted”-themes
̶ Angel’s Envy claims to be a “small batch” whiskey
In fact, Angel’s Envy is distilled and aged by MGP Ingredients,
Inc. in a “massive complex that produces and distills
industrial-sized quantities of beverage-grade alcohol.”
̶ Again, plaintiffs claim they were willing to pay more for the
small-batch whiskey and were misled by the advertising.
16. What is “Craft”?
MillerCoors attacked for claiming Blue Moon beer is
“Artfully Crafted®,” representing product as a craft beer
from "Blue Moon Brewing Co."
Plaintiffs are relying on the
American Brewers Association
definition of “craft.”
Deceptive because label should
specifically advise product is
a MillerCoors product.
17. Is It "All Natural"?
Skinny Girl Margarita
Jim Beam sued for advertising that its Skinny Girl
Margarita product is "all natural” with no preservatives.
̶ In fact, the product contains sodium benzoate, which
combined with an acid – like lime juice – produces
carcinogenic compounds.
Beam has successfully blocked class certification by
showing that plaintiffs were unable to prove that the
class was ascertainable.
18. Geographic Claims: Where In The
World Did It Come From?
Templeton rye
̶ Plaintiffs claim that “produced and bottled in Iowa” is
deceptive, when product is actually distilled in Indiana.
Bullet bourbon
̶ Plaintiffs allege that the label erroneously advertises the
product as distilled by "Bulleit Distilling Co." in
Lawrenceburg, Kentucky.
̶ In reality, Bulleit is actually sourced from
Kiren Distilling, maker of Four Roses® brands.
19. How to Avoid Deceptive Trade
Claims: Be Crystal Clear
Avoid "trigger" terms in labels and in advertising.
̶ "All Natural"
̶ Handmade or Handcrafted
̶ "Small Batch" or Artisanal
̶ Craft
Be transparent and "scrupulously forthright" about your
product’s origins.
̶ Claims of Geographic Origin
20. In the Early Stages:
Motion to Dismiss and Block Certification
Early Motion to Dismiss
Failure to state a claim ("safe-harbor" exception)
Rule 9 pleadings standard for fraud usually applies
(Twombley/Iqbal pleading standards)
Block any of the four requirements for class certification
̶ Numerosity of class members
̶ Commonality questions of law or fact
̶ Typicality of claims or defenses
̶ Adequacy of class representation by named plaintiff
.
21. Post Certification Busters
Even if Class is certified, you can attack on the
back end with decertification:
̶ Unascertainable class
̶ Inability to define a reasonable method of identifying a class
can block class certification, as in Skinny Girl.
̶ Injuries/damages are not typical or common amongst
the putative class members.
22. Federal Trade Commission Claims
The FTC may also bring regulatory challenges under
Section 5 of the FTC Act to challenge unfair and
deceptive acts and practices.
Remedies include legally binding cease-and-desist
orders, monetary penalties, consumer refunds,
corrective advertising and modification
of future advertising.
