Tito’s vodka was doing great for the past 15 years, then hit a gigantic speedbump this week in the form of a class action lawsuit.
Tito’s therefore provides a good example of when an approval is not really an approval. Tito Beveridge has more than 30 TTB label approvals for his vodka from 1997 to 2013 (as in the above image, from LabelVision). They may not do him much good in this lawsuit, even though, in years past, most would assume the federal approval would be dispositive. It’s a good thing most TTB approvals are not paper anymore because these would “not be worth the paper they are printed on.”
Summary: in Hoffman v. Fifth Dimension, Inc., Gary Hoffman (a consumer) sued Tito’s vodka on behalf of all Tito’s customers in California, claiming that the company misleads people about whether the product is “handmade.” The lawsuit was filed September 15, 2014 in San Diego county court. The federal government reviewed and approved the Tito’s labels, but has no definition for the term at issue.
The classic case of an approval that is not really an approval would be your garden variety Napa Valley Chardonnay, Vintage 2010. TTB will take almost every one of those italicized words at face value. To the extent any one of those words is not true, your approval is not going to help you too much, in the event of an inquiry. Like an IRS tax return, the COLA (and any formula approval) is, to a surprisingly large degree, something of an honor system, stapled together with the penalty of perjury on every such document.
9/16/2014: Judge Eddie C. Sturgeon is assigned to handle the case.
9/23/2014: Tito’s apparently put out a press release, sketching out a defense. I sure hope they have more. They took a jab at the plaintiff for botching the defendant’s proper name, Fifth Generation, Inc. Shanken points out that the brand is at 1.3 million cases per year (that’s a lot of hands!). Tito says “he will vigorously contest the lawsuit.” Tito largely hangs his hat on the fact that TTB approved the labels.
9/25/2014: the plaintiff amended the defendant’s name, from Fifth Dimension, Inc. to Fifth Generation, Inc. In so doing the plaintiff declared being ignorant of the company’s true name, when filing the complaint on 9/15/2024. This is odd because the plaintiff used the correct name on the Affidavit of Venue filed the same day. Plaintiff did a good job covering this point, though, in the original complaint, by saying: “Plaintiff is ignorant of the true names and capacities of the defendants sued herein as DOES 1-100, inclusive; therefore, Plaintiff sues these defendants by such fictitious names. … Plaintiff will amend the complaint to allege their true names and capacities when ascertained.”
9/30/2014: things just got much more serious for Tito, as the case ballooned into a nationwide class action suit. The amended complaint states: “This is a nationwide class action case brought on behalf of all purchasers of vodka (“Vodka”) manufactured, distributed, marketed, and/or sold by FIFTH GENERATION, INC. dba Tito’s Handmade Vodka (hereinafter “TITO’S”).” Also boding ill, the original and amended complaints refer to Sidley Austin (suggesting that the small San Diego firm on the plaintiff side, may be working with a much bigger firm.) The same small law firm, in San Diego, just recently won hundreds of thousands of dollars in another labeling suit as described here in The Wall Street Journal.
10/3/2014: a copycat lawsuit filed in Florida on 10/25/2014, in federal court this time, under Florida law.
10/14/2014: and now another lawsuit, this time in Illinois.
10/21/2014: finally I was able to find a copy of Tito’s response. I looked around but was not able to find the press release earlier.
10/27/2014: Tito has a full-throated defense of his vodka today. I think he is saying it is in fact substantially made in a pot still in Austin. In Wine & Spirits Daily he says, “I, Tito Beveridge, believe the pot still distillation process, like that of single malt scotches and French cognacs, is the cornerstone of craft spirits production, period.” There are lots of other words in Tito’s statement but I can’t find much in it to suggest the degree or extent of this much-vaunted pot-/hand-/craft-production. Is it a fig-leaf kind of thing, or the main way the product is made? I see lots of other jazz about foreign companies, etc. but precious little new information about how this product is made, or anything important that makes it any more “handmade” than the next 500 vodkas.
11/10/2014: another lawsuit, this time New Jersey.
The Forbes article explains: “Tito’s has exploded from a 16-gallon pot still in 1997 to a 26-acre operation that produced 850,000 cases last year, up 46% from 2011, pulling in an estimated $85 million in revenue.” The article strongly suggests Tito is about to be a victim of his own success. You can say this post is a prime example of a lawyer taking something clear, like an affirmative, direct approval, and blurring it up to say it’s not really an approval. That would not change the messy, complicated reality, that TTB is not the only sheriff in town. We have a “system” and though it may be cumbersome, it actually does work pretty well. TTB approves Palcohol. Fine. That’s only one level. Then the private sector jumps in (i.e., us). This triggers the states, legislators, media, trade associations, on and on, to take action. TTB can’t and probably does not need to “do it all.” Customs jumps in on imports, states jump in on Santa and bitch issues, and now there is a clear right of private action in all such disputes. The floodgates are well open. A few weeks ago, in light of the Pom v. Coke decision, we predicted a flood of lawsuits around label claims. Some said “the sky is not falling.” Well, the water is starting to rise pretty high. Tito is up to his waist. Templeton is up to its knees. Bass and Becks are up to their ankles. All from private action with no trace of governmental intervention. Skinny Girl got dunked a few years back and we will need to go back and look to see how much water she swallowed.
This is a class action case brought on behalf of all purchasers of all vodka (“Vodka”) manufactured, distributed, marketed, and/or sold by FIFTH DIMENSION, INC. dba Tito’s Handmade Vodka (hereinafter “TITO’S”). Through a fraudulent, unlawful, deceptive and unfair course of conduct, TITO’S, and DOES 1 through 100 (collectively “Defendants”), manufactured, marketed, and/or sold their “TITO’S HANDMADE” Vodka to the California general public with the false representation that the Vodka was “handmade” when, in actuality, the Vodka is made via a highly-mechanized process that is devoid of human hands. There is simply nothing “handmade” about the Vodka, under any definition of the term,1 because the Vodka is: (1) made from commercially manufactured “neutral grain spirit” (“NGS”) that is trucked and pumped into TITO’s industrial facility; (2) distilled in a large industrial complex with modern, technologically advanced stills; and (3) produced and bottled in extremely large quantities (i.e., it is “mass produced”).
The plaintiffs are asking for all the money, plus attorney fees, punitive damages, interest, costs, and taxes: “all monies acquired by means of Defendants’ unfair competition.”
Right about now, every beer, wine and spirits company should be re-examining their labels, new and old, approved and prospective, and making sure every part is on firm ground. If you lack TTB approval it may hurt you a lot, but if you have it, it may not be sufficient to save you.
* A small disclaimer is, I have no idea about the underlying facts here. I am evaluating this from my couch, based on TTB approvals, public records, the plaintiff’s allegations, and the press. We look forward to presenting Tito’s side of the story, when it comes out.
I read about TTB funding a few days ago in Wine & Spirits Daily. It is good but I still don’t understand why they don’t use more links. I had to look elsewhere for the letter, to the Senate, about TTB funding. The letter is here.
Here are some highlights and observations:
- The letter seems to cover the powers that be, in the beer, wine and spirits industries (BI, WI, DISCUS, etc.).
- They, and TTB, seem to set TTB’s funding needs at $101 million, for 2015.
- The letter says “Since 2007, TTB has had to shrink its workforce by 10% ‐ more than 50 full‐time positions – and this has had a direct, negative impact on the businesses that depend on it to operate and grow.”
- The letter reads like a big wet kiss: “The Business Insider claimed in 2012, that ‘the TTB is the government’s third‐biggest revenue collector, after the IRS and Customs and Border Protection.’ It may also be its best: In fiscal year 2013, it took in $23 billion. That amounts to $457 for every dollar the agency spent collecting taxes ‐ more than twice the IRS’ ratio. No other federal agency does so much for so little, while also having a huge impact on the industry it regulates.”
- With a further embrace, the letter says: “We need a well‐funded TTB to be able to process label requests quickly in order to get new products to market in this highly competitive global market place. We also need a wellfunded TTB to prevent and guard against unscrupulous actors from entering our marketplace who otherwise could harm the public with dangerous products, which has occurred outside of the United States with counterfeit alcohol.”
- “In recent years, the alcohol beverage industry has seen explosive growth across the United States and the number of businesses that the TTB regulates has skyrocketed.” Since 2007, “the number of wineries, breweries
and distilleries in the country has grown by an astounding 53.1%.”
- While heaping praise upon TTB, the letter also takes a small jab at other agencies: “In short, now is not the time to cut funding to one of the few federal agencies that is performing well and actually helping a significant US industry grow.”
From my perspective, it does look plain expensive to run something like TTB. I would imagine that not handling paper and not mailing out tons of labels and formulas has saved TTB a lot of money in the past decade. It would seem that most of the costs for systems like FONL and PONL and COLAs Online are one-time only costs. While those systems seem to work reasonably well, it is very difficult to have a dialogue by phone, in-person, or email, and though this is unfortunate, I suspect it saves a lot of money (at least in the short-term). On the other hand, in TTB’s quest for some internet-based efficiencies, they may have succeeded too much in making it easy to submit all manner of stuff. This forces TTB to deliberate upon every hare-brained scheme with about the same exertion as the next big thing.
Latrobe did a “brilliant” job here, picking up on a lot of important trends.
Let’s see how many instructive legal issues this one label raises. Extra points for anyone who can raise additional issues. No more ALS challenges, please.
- It is beer but it more or less screams spirits.
- In a variety of ways. (For example, the brand name refers to moonshine paraphernalia, as Tickle’s sidekick helpfully explains.*)
- Within the rules, probably.
- Even though spirits terms are not allowed on beer labels.
- Even though this product contains and purports to contain absolutely no whiskey of any sort.
- It mentions George Dickel at least three times.
- It mentions Rye but not Rye Whiskey. This is very smart in that, though they mean about the same thing to most people, rye is just a grain, and it’s not necessarily whiskey without the second word attached. Like Bourbon is not sufficient on even a Bourbon Whiskey label, without the second word.
- Latrobe used a formula, notwithstanding that TTB has eased way up on formula requirements.
- The label raises a lot of good trademark issues, tied up with Latrobe’s use of another company’s highly protected brand name.
- TTB seems to be allowing the term “refreshing” these days, on a pretty liberal basis, even though this policy has wavered a bit over the years.
This Tequila-themed beer shows that the above Whiskey-themed beer label is not just a fluke.
What did we miss?
* John’s parents will be proud that we have done some work for Tim Smith, Junior Johnson, The Hatfields & McCoys, Jesse Jane, Popcorn Sutton, Jesse James and other rapscallions. And this guy just looks guilty — I am not sure of what — but moonshining at least.
It took me a long time (perhaps too long) to realize that — craft is (largely) about MADE IN USA. With an emphasis on made. And less emphasis on USA.
This dawned on me when looking at gleaming copper, at Vendome in Louisville, with welders crawling around on the concrete floor — making stuff. It has become rare to have any real connection to people making stuff nearby, and quite apparently, we have a craving to get back to our roots, much as we flock to the beach every summer. If you have any doubt, take a look at the copper porn, arrayed here.
In trying to get to the essence of what is craft — and distill it down — so far I have the above concepts. I added MADE IN USA to this list just today. Please comment away to let me know what the concept really means or should mean.
I would like to know if the above beer qualifies as Non GMO. I would also like to know, without a big hassle. I am sitting here with blazing fast internet and a big screen, and yet I remain in the dark as to whether this beer can be considered Non GMO. It would only be more confusing at the point of purchase, with less time and a smaller screen.
On the one hand, a recent press release claims Peak beers are the first to qualify to use the logo depicted at upper right on the image above. On the other hand, I can’t find any approved labels with the same seal (and the above is of course not the actual label). The actual label, as approved, is here. As of 2011, TTB said:
TTB has received several Certificates of Label Approval (COLA) applications proposing to display bioengineered-related information on alcohol beverage labels. Terms frequently mentioned in discussions about labeling alcohol beverages with respect to bioengineering include “GMO free” and “GM free.” “GMO” is an acronym for “genetically modified organism” and “GM” means “genetically modified.” The terms “genetically modified organism” and “genetically modified” are not synonymous with the term “bioengineered foods.” Plants can be genetically modified using any number of techniques, new or traditional.
TTB believes it is not necessary to mandate any bioengineered food labeling requirements at this time. We also find that it is misleading to refer voluntarily to those bioengineered food labeling terms or any similar references on alcohol beverage labels. This is consistent with the U.S. Food and Drug Administration’s position.
And yet FDA does seem to allow the Non GMO seal. Here is but one example (Silk almond milk). A Kashi cereal example is here. The seal and certifications are sponsored by the Non-GMO Project, “a non-profit organization committed to preserving and building sources of non-GMO products, educating consumers, and providing verified non-GMO choices.”
As of a few weeks ago, this suggests TTB was looking into it further.