Archive for the ‘whisky’ Category
Those three little words, above (CRAFTED BY HAND), are causing a ruckus for Angel’s Envy Rye, in Judge Aspen’s court in Chicago.
In the great whiskey wars commencing in 2014, Maker’s Mark had a great day, here, in May. By contrast, Angel’s Envy had a much less propitious day early this week. A federal judge in Illinois dismissed a small part of the class action fraud case against Angel’s Envy, but let big parts go forward. My friends at the Locke Lord law firm, who recently and successfully wrapped up the similar case, against Templeton, explained:
The decision to allow the Angel’s Envy case to proceed past a motion to dismiss is consistent with similar decisions in the cases against Tito’s Handmade Vodka and WhistlePig Rye Whiskey, and signals that the courts are willing to consider consumer-fraud claims against spirits companies that supposedly sell unattributed mass-distilled products while holding themselves out to the market as smaller scale, craft brands. As a result of these rulings, the case will proceed into discovery, which has the potential to be lengthy and expensive.
In my view, the most interesting parts of the 17 page opinion and order are as follows.
1. The potential damages may exceed $5 million, as the brand but not the plaintiffs contend. “Louisville has plausibly shown that more than $5,000,000 is at stake in this case.” Also, the “plaintiffs adequately allege that the whiskey they received was worth less than what they were promised.”
2. Even though Maker’s Mark recently won a fairly similar case, the court said:
the Angel’s Envy brand is much smaller than the Maker’s Mark brand. As a result, a consumer could reasonably believe the phrase “hand crafted” on the finished whiskey label meant it was not mass-produced. Additionally, Aliano alleges that the context of “hand crafted” on the label implies that Louisville controls the entire process of making the finished whiskey at its facilities in Bardstown, Kentucky, when most of the process occurs at MGP’s facilities in Indiana. … In light of the more robust facts alleged in this case, we are not persuaded by the reasoning in Salters.
3. TTB label approvals do not provide a safe harbor. The court said:
While the label itself was approved by TTB, it is not clear what statements on it were actually reviewed and approved. The relevant regulations require the phrase [bottled by, but] no regulation states whether the phrase “hand crafted” can be added before this phrase. Here Louisville [added it and the] regulations do not specifically authorize this addition. … [O]n the complaint before us, we cannot determine whether TTB actually reviewed and authorized every statement on the label.
It is not entirely clear whether consumers care what is and is not “hand crafted.” It is not clear whether TTB cares much about this particular issue. It is not even clear whether the plaintiff really cares, deep down. But now we know Judge Aspen cares, and perhaps we will someday, in the not too distant future, get a handle on what the law makes of this term.
I have focused on beverage labeling law since 1988. During that time it has been very rare for a private party to bring any action against a beer, wine or spirit supplier’s labeling or advertising — unless the basis was trademark.
Instead, most people assumed the states, TTB, and FDA would take care of this, pretty much to the exclusion of anyone else. Pom began to unravel this in a big way over the past couple of years, and this trend seems to be gaining momentum.
A San Diego law firm filed a class action lawsuit, on December 8, 2014, in federal court in California. The case is called Nowrouzi et. al. v. Maker’s Mark Distillery, Inc. A few pages of the complaint are here. If you want a copy of the whole complaint, or updates, they are available upon request and without obligation.
The complaint goes right for Beam’s jugular (Jim Beam owns Maker’s Mark). It essentially says Maker’s Mark is lying about whether the product is “handmade.” The first count is for false advertising. The second is for unfair competition and fraud. Next is negligent misrepresentation and then intentional misrepresentation. The lawsuit asks for a jury trial, punitive damages, an injunction, reimbursement to consumers, interest, and lawyer’s fees.
An example of the labeling at issue is above, and here is a recent TTB approval therefore. Maker’s Mark is way out there, on a limb. Very similar to the Tito’s vodka controversy (as regards “Handcrafted”) the whisky label has “Handmade” right out there, front and center. Maker’s Mark, though, doubles down and declares it is “America’s only handmade bourbon. …” That may be too extravagant to be maintained, and is certainly a big, provocative statement. Not least, it has indeed provoked a few lawyers in San Diego.
Here are highlights from the 33 page complaint (replete with photos and stirring allegations):
- “Defendant’s whisky is manufactured using mechanized and/or automated processes, which involves little to no human supervision, assistance or involvement, as demonstrated by photos and video footage of Defendant’s manufacturing process.”
- “[T]he matter in controversy, exclusive of interest and costs, exceeds the sum or value of $5,000,000.”
- “Defendant has shipped approximately 1.4 million cases of whisky in 2013.”
- “’Handmade’ and ‘handcrafted’ are terms that consumers have long associated with higher quality manufacturing and high-end products. This association and public perception is evident in the marketplace where manufacturers charge a premium for ‘handcrafted’ or ‘handmade’ goods.”
- “Defendant’s website also states that, ‘[w]hile most distilleries use a modern hammer mill to break up their grains, Maker’s Mark uses an old antique roller mill, which is less efficient, but reduces the chance of scorching the grain and creating a bitter taste.’ This is done in an apparent attempt to market the whisky as being of higher quality by virtue of it being made by hand. As a result, Defendant induces consumers.”
- “[C]ontrary to Defendant’s misleading labeling, its whisky is predominately or entirely made by mechanized and automated processes.”
- “Defendant has faced continual production shortages and has attempted to remedy those shortfalls by expanding and mechanizing its facility. Defendant’s supply shortages have been so severe that Defendant even proposed ‘watering down’ its whisky’s alcohol content to meet production demands.”
- “Defendant’s mill is neither old nor antique. Defendant’s mill is a modern mechanized and/or automated machine that requires little to no human supervision, assistance or involvement to grind and prepare the grain, which is the primary ingredient in Defendant’s whisky. … [T]here is virtually no human involvement in this system, other than perhaps the pressing of a button.”
- “Defendant is guilty of malice, oppression, and fraud, and each Plaintiff is therefore entitled to recover exemplary or punitive damages.”
For the most part, the complaint strikes me as careful, serious and well-written. But this part seems to go a bit too far toward the land of make believe:
Producing consumer goods by means of mechanized or automated process has long [been] touted as a cheaper way to “mass produce” consumer goods. By utilizing machines to produce goods, manufacturers are able to make more goods in a shorter period of time at a lower cost. Mechanization of course sacrifices quality, as machines cannot exercise the skill and care of a human craftsman. Every consumer would undoubtedly prefer a higher quality product, however many are not able or willing to pay for such quality. The demand for higher quality products has always existed amongst consumers and thus manufacturers market their products to those seeking higher quality goods and demand a premium price for that quality.
As a great distiller once explained to me, “artisanal” is not always a compliment. When it comes to cars, or computer chips, for example, I am pretty sure I would rather have one made by a modern robot than a genial old man.
I don’t really have a dog in this fight as of this writing. I do think this has reached a critical mass such that TTB should step in and seek to define terms of this nature, lest TTB be relegated to a role as a mere spectator in the gladiation of others. I do also think the term at issue is not quite puffery (such as “premium”) but not quite a factual statement, either (such as “aged 5 years”). The law probably needs to wake up and stop dealing with the easy cases, at one extreme or the other, only.
As one would expect: “A spokesman for Beam/Suntory, the parent company of Maker’s Mark, called the claim ‘without merit’ . … ‘We will defend this case vigorously and we are confident that we will prevail’ ….”
As mentioned above, this case has a lot in common with the Tito’s vodka case. As to that case, it probably sounds like I have lined up on the other side from Tito in recent weeks. Not really. I started out with an open mind, recognizing the plaintiff’s may be mistaken, or Tito may be a wily coot who saw this coming and planned accordingly. But it has really been the hapless responses of the Tito’s supporters, in the weeks after the lawsuits flew, that colored my view. They made laughably inane arguments like, who cares about the labeling, or TTB said it’s fine. More recently, Tito’s lawyers filed a response, and it seems good, and much more persuasive than anything said on Tito’s behalf in the interim (as should probably be expected). I look forward to assessing the responses, in both cases, soon.
A few weeks ago we wrote about moonshine and now we have occasion to write about its close relative, White Whiskey.
Products like the above have become quite popular within the past few years, for reasons well explained by Slate:
The term white whiskey is basically a marketing name for what distillers call white dog, referring to grain-based spirits that haven’t been aged in wood to improve their flavor. [Sometimes] it’s just called moonshine, but legal sales of white dog in recent years have helped upstart microdistilleries earn immediate revenue while their whiskies age. That’s because white dog can be bottled and sold immediately after being distilled without accruing any additional storage and aging expenses. The moonshine connection has been a useful marketing gimmick for hip urban bars, but there’s one considerable downside to white dog: It tastes horrible.
At first, TTB was skeptical and pushed back a bit (saying, for example, there is no such category in the regulations). But as the trickle became a deluge, TTB began to allow white whiskey products more freely. In the light of a large number of recent approvals, it becomes clearer that TTB chiefly wants WHISKEY and WHITE on two different lines — more like Beam and less like Death’s Door (as above). Less clear is whether such products need a formula approval (adding the formula step can add 4-5 weeks to what is already a 4-5 week project). Most of the recent label approvals do not refer to any formula approval, as in the following examples.
Formula not mentioned
This Bourbon label caught our eye because it makes several big claims. It says:
- FINISHED WITH AN OXYGEN ENRICHED, ACCELERATED AGING PROCESS
- Patent Pending
- “we use rapid pressure changes and oxygen infusion to control the aging process”
- “age is no longer relevant and taste is all that matters.”
That’s a lot of envelope-pushing and innovation for one label. We happen to know a person who is both an experienced patent lawyer and an experienced whiskey distiller. So, in a future post, we hope to have him review the patent claims and assess whether this is closer to an innovation or a gimmick. The Bourbon is produced and bottled by Cleveland Whiskey, LLC of Cleveland, Ohio. The approval is here. Terressentia’s closely-related patent, also for aging spirits quickly, is described here.
The Brown Family printed their Constitution on this Bourbon label, and the government ratified it late this summer.
The main point of the document seems to be keeping the publicly traded company under family control. Barron’s has estimated that “The Brown family owns about 70% of Brown-Forman’s Class A voting shares (BFA).” Six months ago The Wall Street Journal reported:
In an effort to ensure that it remains independent and under family control, liquor maker Brown-Forman Corp. is pushing to get family shareholders more involved in the company. … The effort is among the strongest in a growing number of family-controlled companies trying to better educate and unify family shareholders. … Today, there are 117 living descendants of the founder and 38 widows or spouses, the company says. … Potential suitors could include spirits giants Diageo PLC, Pernod Ricard SA or Bacardi Ltd.
The Sunday Paper explains that Old Forester Bourbon became America’s first bottled bourbon in 1870. George Garvin Brown handwrote a guarantee and his signature on every bottle. Old Forester is named after Dr. William Forrester, a leading doctor in Louisville. It is:
the only bourbon legally produced and sold before, during and after Prohibition. From 1920 to 1933, its distillers held one of only 10 government permits that allowed production of bourbon for medicinal purposes. … When Prohibition was enforced, there were more than 200 distilling operations in Kentucky alone—all put out of business in one fell swoop. … The Old Forester strain of yeast is the oldest strain of yeast in the industry.
The Barron’s article, from a few years ago, says “Brown-Forman’s fortunes hinge on Jack Daniel’s, which accounts for some two-thirds of profits. … Brown-Forman might not exist today, save for its purchase of Jack Daniel’s for $18 million in 1956.”