Flower
Bevlog

Safe Harbor Defense Works, Once In a Blue Moon

Last week, a federal judge in California tentatively dismissed a class action suit against MillerCoors. Yesterday, the judge made that dismissal final.

bmooThe case, Parent v. MillerCoors LLC, began in March when plaintiffs—a class of Blue Moon purchasers—alleged that Miller misled consumers into believing that Blue Moon is a craft beer. Plaintiffs argued that Miller’s reference to “Blue Moon Brewing Co.” on the beer’s label and use of the phrase “artfully crafted” in the beer’s advertising led consumers to purchase Blue Moon believing it was craft. Miller defended that the practice of listing its assumed name, “Blue Moon Brewing Co.,” on its label instead of its full business name is specifically permitted by state and federal law, and that consumers could not reasonably rely on the phrase “artfully crafted” as a guarantee that Blue Moon is craft beer.

Judge Gonzalo P. Curiel of the United States District Court for the Southern District of California tentatively agreed with Miller on both points last week, pending a hearing on the matter last Friday. Apparently, plaintiffs’ oral argument at the hearing failed to change Judge Curiel’s mind, as he issued an order yesterday dismissing the case.

Regarding TTB’s approval, Judge Curiel noted that TTB regulations “specifically permit a beer bottle and outer packaging to show, by label or otherwise, the name or trade name of the brewer.” Because California allows the name of a manufacturer to include a duly filed fictitious business name, Judge Curiel held that Miller’s use of “Blue Moon Brewing Co.”—a name properly registered as a fictitious business name in California—is specifically authorized by federal and state regulations. Accordingly, TTB approval provided Miller with a safe harbor.

Regarding the issue of whether Blue Moon fits within the definition of “craft beer” (a point of contention between the parties), Judge Curiel sidestepped the issue, stating, “… even assuming that there is such a definition, Plaintiff cannot rely on it for their argument” since plaintiffs are not pointing to Miller’s use of the phrase “craft beer,” but instead to their use of the different phrase “artfully crafted.” Regarding Miller’s “artfully crafted” claim, Judge Curiel held that the phrase is mere puffery, as it is not capable of being reasonably interpreted as a statement of objective fact. Unlike objective statements of fact, puffery refers to generalized, vague terms that cannot serve as the basis of a lawsuit.

Plaintiffs did secure one small victory, mentioned in the final order but absent from the tentative ruling: Judge Curiel found that their complaint met the heightened pleading requirements required of complaints that allege fraud. Unfortunately for the plaintiffs, this point is moot, as their allegations (well-pled though they may be) still fail to state a valid claim for relief.

Importantly, Judge Curiel distinguishes TTB approval in this case from TTB approval in Hofmann v. Fifth Generation, Inc., a case involving Tito’s “Handmade” Vodka. In Hofmann, the court found that there is no federal regulation that specifically authorizes the use of “handmade” on the label, and so the safe harbor did not apply. Regarding Blue Moon, Judge Curiel says, “Here, the conduct challenged by plaintiff is the same as the conduct authorized by law: Miller’s listing of ‘Blue Moon Brewing Co.,’ rather than MillerCoors, as the manufacturer on Blue Moon’s bottle and packaging.” Judge Curiel’s opinion suggests that in cases where TTB has duly applied specific regulations, courts will defer to TTB approval and will apply the safe harbor. On the contrary, where TTB does not have specific regulations in place, courts will be skeptical of TTB approval and may require the defendants to show that TTB actually reviewed and approved the statements at issue. The forthcoming decision in Hofmann should shed more light on this particular issue.

Parent was dismissed without prejudice, which means that plaintiffs have 30 days to submit an amended complaint against Miller. The judge directed the plaintiffs not allege claims regarding Miller’s use of “Blue Moon Brewing Co.” or the “artfully crafted” trademark.

Blue Moon Takes Refuge in Safe Harbor. Will Tito’s Be Able to Dock Alongside?

b22A federal judge in California tentatively dismissed a class action suit against MillerCoors on Wednesday. Plaintiffs in the suit—a class of Blue Moon purchasers—alleged that MillerCoors misled consumers into believing that Blue Moon is a “craft beer” by stating on the label that it is brewed by the “Blue Moon Brewing Co.” and by advertising it as “Artfully Crafted.” This ruling could become final as soon as today’s hearing.

Judge Gonzalo P. Curiel of the U.S. District Court for the Southern District of California framed the issue narrowly: The question is whether MillerCoors is “specifically authorized” to list “Blue Moon Brewing Co.” as the manufacturer of Blue Moon on the beer’s labels. Judge Curiel answered that question in the affirmative, finding that Alcohol and Tobacco Tax and Trade Bureau (“TTB”) regulations “specifically permit a beer bottle and outer packaging to show, by label or otherwise, the name or trade name of the brewer.” Noting that California allows the “true name of a manufacturer” to include a “duly filed fictitious business name,” Judge Curiel held that MillerCoors’ use of “Blue Moon Brewing Co.”—a name properly registered as a fictitious business name in California—is specifically authorized by federal and state regulations. Accordingly, TTB’s approval of the Blue Moon label provides MillerCoors with a “safe harbor” from this type of litigation.

Importantly, Judge Curiel took the opportunity to distinguish Blue Moon’s claims from the “handmade” and “handcrafted” claims at issue in the cases involving Tito’s “Handmade” Vodka and Maker’s Mark. Judge Curiel noted that the conclusion that the safe harbor applies “is reinforced when the facts in the instant case are compared to those in other cases where courts found that the manufacturer’s labeling practices were not authorized by law.” He continues:

In Hofmann v. Fifth Generation, Inc. [involving Tito’s “Handmade” Vodka] the district court found the safe harbor doctrine did not apply where a vodka product was labeled as “[hand]made.” The [Hofmann] court found that no TTB regulation specifically authorized the use of “[hand]made” on the vodka’s label, and that it was “not clear that such representations are necessarily within the TTB’s regulatory purview.” [The court in Nowrouzi v. Maker’s Mark Distillery, Inc. reached the same conclusion.] By contrast, here, federal regulations specifically address which brewer name is permitted to appear on a beer’s label bottle and case or shipping containers.

Judge Curiel’s decision suggests that in cases where TTB has duly applied specific regulations, courts will defer to TTB pre-approval and will apply the safe harbor. On the contrary, where TTB does not have specific regulations in place, courts will be skeptical of TTB pre-approval and may require the defendants to show that TTB actually reviewed and approved the statements at issue. The forthcoming decision in Hofmann should shed more light on this particular issue.

Judge Curiel also found that the term “Artfully Crafted” is mere puffery, and thus non-actionable. Plaintiffs are allowed to submit an amended complaint, so long as it is not based on MillerCoors’ use of the terms “Blue Moon Brewing Co.” or “Artfully Crafted.”

* Not really Judge Curiel, in photo above.

Unsafe Harbor

becksThere are something like 25 pending lawsuits, about whether various alcohol beverage labels are misleading.

Right there, that should tell you there is not much safe harbor, even though every one of those labels was federally approved, pre-market. Most of the labels were approved many times over many years.

Of course, the first refuge of every defendant is to argue that heavens no, the label can’t possibly be misleading, because the mighty TTB examined and approved it, after all.

The very recent Beck’s settlement should put this trite notion to rest. Over and over TTB said yeah the Beck’s label is fine, even though it has a bunch of references to Germany and the brand’s history, and even though the beer has been made in the U.S. for many years now. The court approved the settlement on October 20, 2015.

shIn my opinion, the harbor should not be any safer than the review is rigorous. To the extent TTB carefully focused on the specific issue in controversy, and ruled on it, according to rigorous standards, that would be a different story. But, by contrast, a quick review and a shot from the hip should not a safe harbor make. I don’t mean to be too critical of TTB or A-B. The same parties can also provide a good example of the very opposite phenomenon, where the review is more probing, and the harbor stood up as safe. The Lime-A-Rita case shows this other side of the coin. In the Lime-A-Rita case, the plaintiffs said the label is deceptive because it refers to (Bud) Light, when in fact the product is loaded with sweeteners and is no paragon of lightness. But A-B beat back this challenge, and rightly so, because in this instance TTB did have good, solid, narrow, relevant, rigorous standards, duly applied by TTB and duly complied with by A-B, and so eureka the many TTB approvals did in fact provide a warm and cozy safe harbor.

TTB has narrow, careful rules around many terms such as “straight,” “estate bottled,” chardonnay, Napa Valley, “Late Harvest.” Thus, these are the types of terms that should provide a safe harbor (when properly used and approved, according to the same rules). But, by contrast, TTB nor anyone else has good, solid, rigorous rules around terms such as craft, handmade, handcrafted, small batch, reserve, etc. — and so it is much less clear that a safe harbor should apply. It is true that the terms could be puff, in the absence of such rules, but who ever said it is either black or white, puff or not, all or nothing? Surely there are some terms somewhere in the middle, neither pure opinion nor hard fact. I do agree that many label terms do gravitate toward one pole or the other, and I do agree that such terms should be protected, as either puff or within a safe harbor. But we still need a good plan for the terms somewhere in the middle. Maybe TTB should develop and apply some rigorous rules on such. Or maybe the companies that want to use them should explain what they mean by them, to put them in a comprehensible context.

One more example should make the point. Templeton Rye, like Beck’s, Bass, Kirin and many others, also of course had TTB-approved labels. This did not stop the lawsuits or provide any safe harbor. If there were a safe harbor to be found, anywhere near these controversies, the defense lawyers certainly would have found it.

The Beck’s case underscores one other quandary. It is hard for me to understand how it can be a good, long-term business plan, to take the Beck’s brand, known for being German if nothing else, and blur the life out of it by making it elsewhere. The penalty within the lawsuit is something like $28 million, but the obliteration of the Beck’s identity seems far more expensive in the long term. A-B paid a couple billion dollars for the brand in 2012.  I can only assume it is short-term, quarter-to-quarter, propping up the numbers, Wall Street thinking, designed to enrich the near-term stakeholders, at the expense of those who arrive at the punch bowl later.

Damages

top

There are something like two dozen class action lawsuits floating around, against beer and spirits companies. Many are in the early stages. But information is starting to accumulate about the damages and fees at issue. For example, the Templeton Rye case is already settled, with about $750,000 in attorney fees going to the plaintiffs. The Maker’s Mark and Jim Beam cases are done, with nothing going to the plaintiffs. The Kirin beer case is wrapped up with $1 million in attorney fees going to the plaintiffs.

To get more visibility, about where all this may be headed, I looked beyond the alcohol beverage cases, to food labeling cases more generally. There are a lot of them. It turns out, there are so many, that they have provoked not only a blog, but also a study from The Brookings Institution, about a serious problem with a proliferation of suits about “natural,” “nutritious,” and “wholesome.” The Brookings study is of particular interest to me, not just due to the timely subject, but because I worked there briefly after college as a low level researcher. While researching for Stephen Hess, I sat with such (now) luminaries as Gary Mucciaroni and Robert Katzmann (when they were probably in their twenties).

Nicole Negowetti, a professor at Valparaiso University Law School, surveyed the situation in “Food Labeling Litigation: Exposing Gaps in the FDA’s Resources and Regulatory Authority,” published in 2014. She tracked down the damages as shown in the table below.

chart2

The Activia case in 2010 really got things going, with big damages. Between then and 2014, something like 150 or more similar cases got filed. She explains:

The majority of these cases have been filed in the U.S. District Court for the Northern District of California, now referred to as the “Food Court.” This surge in lawsuit filings has led some legal commentators to suggest that “food is replacing tobacco as the new regulatory and class action target.” This “unprecedented surge”of deceptive labeling and advertising lawsuits against the makers of products such as Naked Juice, Fruit Roll-Ups, Bear Naked Granola, and Wesson Oil, reveals a trend of regulation by litigation—that is, a turning over of food labeling issues to the courts in light of a lax regulatory system.

The government has been defanged so much that FDA has all but quit policing food labels. She points out that FDA can’t even or won’t even define “natural,” let alone enforce against most abuses. She also points out that, if you think rulemaking is expensive, wait until you see the cost of all these suits, passed along to you, dear consumer.

512 Posts

Vote here, y'all

A few weeks ago, with little to no fanfare, we passed the 500 posts milestone. It has been a wild and fun ride since late 2008. This blog is now up to 512 posts as of yesterday. Google tells me Bevlog has had 555,404 visitors and 832,024 pageviews so far, with an average of 44 seconds per session.

The most popular posts are Tito, Blue Moon and Palcohol (with 37,587, 36,183 and 17,022 views respectively in the past two years). I am not sure whether the blog has led directly to any particular revenue, but it has put me on e.g., The Today Show and CBS News, and I don’t imagine any other (legal) way to accomplish that.

Some of the posts are fun and easy, and take no more than a few moments (examples). Others, somehow, take hours and hours — even if they seem so simple beforehand. I am pleased to report that we’ve heard of no substantial inaccuracies so far, and we’ve had very few complaints. One big company oh so smoothly asked for a clarification. One multi-billion dollar organization demanded a change but settled for something approximating a change in punctuation. Along the way I met Tito, the Hatfields (and McCoys), and E-40. And now we are pleased to report we have been selected (from more than 2,000 nominations and tens of thousands of law blogs) as one of the best law blogs for 2015, by The Expert Institute. Please vote if you have not already.

Vote here, y'allWe don’t charge anything for this information. We don’t accept any advertising and we routinely turn it down. We do ask you to enjoy, comment, pass the word along — and if you think it’s really good, please consider voting for it here. We only have 27 scrawny votes as of this writing — and we are getting beat by “The Wedding Lawyer” of all people (at least we are beating the horse lawyer). My mom will be proud (if I don’t get beat by the Wedding Lawyer).

Finally, thanks for reading and please let us know any great topics or ideas to make the blog better in the coming years.

Search Bevlog


Subscribe to the RSS feed

Get bevlog via email.
Delivered by FeedBurner