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Tolerance, Intent, and Deception: Sixth Circuit Decides on A-B Labeling

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On March 22, 2016, the U.S. Court of Appeals for the Sixth Circuit affirmed a district court’s dismissal of a putative class action lawsuit against Anheuser-Busch. In In re: Anheuser-Busch Beer Labeling Marketing and Sales Practices Litigation, the Sixth Circuit held that A-B’s compliance with federal regulations governing alcohol content provided A-B with a safe harbor from state-law consumer protection claims. Notably, the court held that the safe harbor applied regardless of whether A-B intentionally overstated the alcohol content of its beer.

The consumer-plaintiffs filed several class-action lawsuits against A-B back in 2013, alleging that A-B intentionally overstated the alcohol content of many of its beers. These class-actions were consolidated into one suit in the U.S. District Court for the Northern District of Ohio. A-B moved to dismiss the consolidated action, arguing that its compliance with federal regulations provided it with a safe harbor from the plaintiffs’ claims.

The federal regulation at issue, 27 CFR § 7.71(c)(1), provides in relevant part, “[f]or malt beverages containing 0.5 percent or more alcohol by volume, a tolerance of 0.3 percent will be permitted, either above or below the stated percentage of alcohol.” The plaintiffs argued that the regulation should only apply to accidental deviations, not to intentional overstatements of alcohol content. A-B countered that the regulation does not discriminate based on intent, and that because the actual alcohol content of each of its beers was within the permitted range, it was in compliance with the regulation. The issue boiled down to a question of regulatory construction.

The district court agreed with A-B’s interpretation, noting that nothing in the regulation distinguished between intentional and unintentional deviations in alcohol content, and holding that the regulation creates a safe harbor for a brewery that does not exceed the tolerance range. The district court held that because the actual alcohol content of A-B’s beers was within the permitted tolerance range, the plaintiffs could not allege that A-B’s alcohol content statements were misleading.

On appeal, the plaintiffs reasserted their argument that the regulation’s text and purpose support an interpretation that only allows unintentional variations. The Sixth Circuit was unpersuaded, and affirmed the district court’s dismissal. The Sixth Circuit noted that nothing in the text of the regulation implies any distinction based on the motive of the manufacturer. Importantly, the Sixth Circuit noted that other TTB regulations contain explicit intent-based exceptions. For example, 27 CFR § 27.42a sets a tolerance range for carbon-dioxide levels in wine, and states, “Such tolerance will not be allowed where it is found that the limitation is…intentionally exceeded” (emphasis added). The absence of a similar exception in the malt beverage regulation, the Sixth Circuit noted, supports a conclusion that no such exception was intended.

Finally, the Sixth Circuit concluded that interpreting the regulation to allow intentional overstatements of alcohol content that are within the tolerance level neither conflicts with the general prohibition against misleading statements nor subverts the purpose of the regulatory scheme as a whole. The Sixth Circuit noted that it could reconcile any conflict by concluding that “the ATF [sic] determined that such small variances are not misleading to consumers.”

The Sixth Circuit’s decision in In re: Anheuser-Busch is yet another example of a federal court applying the safe harbor doctrine to activity that is expressly permitted by the plain language of a federal regulation. Just last October, in Parent v. MillerCoors LLC, the U.S. District Court for the Southern District of California held that the safe harbor insulated MillerCoors from consumer allegations that its use of “Blue Moon Brewing Co.” on Blue Moon labels was misleading. The regulation at issue in Parent expressly permitted a company to use its trade name on labels.

The Sixth Circuit’s decision also confirms a noticeable trend in judicial treatment of TTB approval of statements on alcohol beverage labels: Where federal regulations expressly permit such statements, TTB approval provides a safe harbor. By contrast, where federal regulations are silent regarding particular statements, TTB approval may not provide a safe harbor. This latter proposition is perhaps best demonstrated by the various “handmade” lawsuits (most notably those involving Tito’s “Handmade” Vodka), in which courts are divided on whether the safe harbor applies to TTB approval of terms like “handmade.”

Beer with a little bit of Clover and FDA

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Here is a fun little article that combines a few of my favorite things:  beer, law, The Washington Post and four-leaf clovers.

The article tends to say that Flying Dog had to skirmish with FDA a wee bit, before getting the go ahead to put the clovers in the beer. From the article, I can’t tell if the issue was clovers in general, or only the lucky ones.

The article also hints at other quirks in the law. It says Flying Dog submitted the beer to FDA for approval, but this seems unlikely. I can see this Maryland brewer submitting a formula to TTB for approval, but not to FDA. Also, I would have expected to see a TTB approval for the label, but I can’t find one, and this must signal that Flying Dog only plans to sell this beer intrastate, in the near term. Mostly, this beer probably signals a good excuse for a St. Patrick’s Day-timed press release.

Even though clover seems pretty common, not so new, and generally recognized as safe (whether in 21 CFR 182.10 or via common sense), this article does serve as a good reminder that brewers can’t just use any article that is lying around the field or the grocery store. Some things need a TTB and an FDA ok first.

Update. Hark. I got lucky. A nice person alerted me that the COLA is here.

Trump Vodka

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Trump is riding high in the polls at this very moment. So high that Mitt Romney just attempted to slow Donald’s roll, by saying “what ever happened to Trump Vodka?” Indeed. All faithful readers of this blog had to know that the 2016 contest would eventually come down to matters of spirituous liquors. Mitt said:

But wait, you say, isn’t he a huge business success that knows what he’s talking about? No he isn’t. His bankruptcies have crushed small businesses and the men and women who worked for them. He inherited his business, he didn’t create it. And what ever happened to Trump Airlines? How about Trump University? And then there’s Trump Magazine and Trump Vodka and Trump Steaks, and Trump Mortgage? A business genius he is not.

Mitt has a point. I have rarely seen a less thoughtful label concept. The label makes a hollow claim that it’s “Super Premium” and “The World’s Finest” — with — wait for it —  nothing to back it up. There is almost nothing of note on the label or the application. I see about seven approvals, between May of 2006 and September of 2007, before the brand was put out of its misery.

This article reports that the bottles were emblazoned with the slogan “Success Distilled,” but I don’t see it on the approvals, as would surely be required (to comply with things like laws). It continues:

As for the vodka itself, it was created by Wanders Distillery in Holland, distilled five times from “select European wheat,” and then rested for six months in stainless steel vats before bottling at 80 proof. … The only trouble was, nobody bought it. By the end of 2007 it barely registered among the top-selling vodkas, badly trailing the likes of Smirnoff and no threat whatsoever to Grey Goose. Go figure that customers wouldn’t line up for a product that existed for the sole purpose of one-upping Trump’s friend. Who would have guessed that drinkers wouldn’t hand their money to a teetotaler who had no idea what his own product tasted like. In 2008, less than two years after launch, the Trump Vodka trademark was abandoned.

Among the other bad ideas, is there any point to resting the stuff in stainless steel?

Trademarks All Over the Atlas

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A few months ago, big law firm Foley Hoag compiled a marvelous list of trademark scuffles, within the alcohol beverage category, during the past year. We already knew there were scores of tussles, and the list was growing ever longer, but we never quite realized how fast the casualties are stacking up. The article shows at least 50 such disputes.

Of all those, the Atlas dispute is the one that caught my eye. Because it’s local, must be crushing news for whoever lost, recent, and I had not heard about it but for the Foley article. Foley explained:

The Atlas Brewing Company of Chicago opposed Atlas Brew Works’ application to register ATLAS for beer. The Opposer alleged that “Atlas” was primarily descriptive of a geographic area within Washington D.C., which is where the Applicant is located (“Atlas” is apparently an unofficial nickname of the H Street District). The TTAB rejected this argument, finding that consumers were unlikely to make the connection. The TTAB agreed with the Opposer that there was a likelihood of confusion between the marks, but it found that the Applicant was the senior user (the TTAB did not accept the launch dates of the Opposer’s Twitter and Facebook accounts as establishing priority). The petition was dismissed. Atlas Brewing Company, LLC v. Atlas Brew Works LLC.

Upon reading the opinion, my main takeaway is that the Washington, D.C. brewer tried earnestly and in good faith to find a good brand name, but still had to contend with this expensive dispute. First, they tried VOLSTEAD but House Spirits Distillery shut that down. The Atlas tale and the Foley article further underscore the need to do no less than look around, Google it, conduct a thorough trademark search, engage a specialized lawyer, check TESS, check TTB’s Public COLA Registry, and check LabelVision, when selecting a brand name in a crowded sector. There is not much sign that either party did a particularly good job of scoping out the things that ought to be scoped out, before putting so much sweat and money into a brand, especially since it is getting so clear that disputes are common. In any event, because the Chicago brewer’s opposition was dismissed by the TTAB, it looks like the Washington brewer can shrug this off and move forward with ATLAS as their brand name.

Bourbon-Barrel-Aged Wine

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At USBevX a few days ago I heard lots of questions about various wines aged in Bourbon barrels. But I did not hear lots of answers so I thought I would take a look and see what’s going on. This Fetzer example, above, seems like a good place to start.

It tends to show that it is okay to mention Bourbon on a vintage- and varietal-designated wine. I am a little surprised I don’t see any reference to a formula approval, or to the amount of aging in said barrel. This Fetzer label is also noteworthy because it quickly drew the ire of the big Buffalo, as in Buffalo Trace; Sazerac charged at Fetzer for attempting to graze on land staked out long ago by the whiskey company. This really good article discusses the trademark dispute, about 1/3 of the way down the page.

I see about 64 wine labels with reference to Bourbon as approved by TTB during the past five years. Another representative one, from another big company, is this Robert Mondavi approval. I don’t really see any comparable labels, in the prior five year period. From these two examples, and a bit of asking around, it sounds like the reference to Bourbon should not appear on the same line as the wine’s class/type statement. Also, you are more likely to need aging details (e.g., Aged 6 Months) on the label if the age reference appears on the “brand label.”

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