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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?

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Another Judge Chimes in on Tito’s

On Tuesday, January 12, 2016, a federal district court in New York granted in part and denied in part Tito’s “Handmade” Vodka’s motion to dismiss several claims brought against it by a class of consumers in the case Singleton v. Fifth Generation, Inc.

Judge Brenda K. Sannes of the U.S. District Court for the Northern District of New York issued the opinion, holding that federal approval of Tito’s labels does not provide Tito’s with a “safe harbor” from litigation, and that Tito’s use of the term “handmade” and the phrase “crafted in an old fashioned pot still” “could plausibly mislead a reasonable consumer to believe that [Tito’s] vodka is made in a hands-on, small-batch process.”

Judge Sannes’ decision to allow Singleton to move forward marks yet another instance of a federal judge finding merit in false labeling claims against Tito’s. Singleton joins Hoffman v. Fifth Generation, Inc. and Cabrera v. Fifth Generation, Inc. (both federal cases in California) as well as Pye v. Fifth Generation, Inc. (a federal case in Florida) and Terlesky v. Fifth Generation, Inc. (a federal case in Ohio), which have all survived motions by Tito’s to cut the cases short.

Singleton is more akin to the two California cases, as the judges in all three refused to apply the safe harbor and held that the term “handmade” is not puffery, and therefore actionable. The judges in Pye and Terlesky, on the other hand, both applied the safe harbor, but held that consumers did state a valid claim for breach of warranty based on Tito’s statement that its vodka is “crafted in an old-fashioned pot still.” Judge Sannes, however, dismissed the breach of warranty claims in Singleton.

 With at least ten distinct cases brought by classes of consumers against Tito’s over the past year and a half, it can be difficult to keep track of how each side is faring. What is clear is that Tito’s has won two cases—Aliano v. Fifth Generation, Inc. in Illinois, and Wilson v. Fifth Generation, Inc. in Alabama—as both cases have been dismissed and the time to appeal has expired. It also seems relatively safe to say that Tito’s has the high ground in Pye and Terlesky, as the false labeling claims have been dismissed, and only the breach of warranty claims remain. What is less clear, however, is how Tito’s will fare in Singleton, Cabrera, and Hofmann, all of which are all moving forward on the plaintiffs’ mightiest claim—that they were deceived by Tito’s use of the term “handmade.”

Because Singleton survived (in part) Tito’s motion to dismiss, Tito’s will have to answer the consumer-plaintiffs’ claims. Tito’s will, however, have another chance to dismantle the plaintiffs’ case before it goes to trial, by filing a motion for summary judgment. Tito’s tried this in both Cabrera and Hofmann, but was unsuccessful. As for the three other cases against Tito’s (not listed here), the relevant courts have yet to rule on Tito’s motions to dismiss.

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Tito Case Moves Forward, Not in Tito’s Favor

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3/23/2015 Update. Caution. The above headline seems fairly skewed. See below for what we think really happened last week. The case is not halted at all.

Tito had another bad day yesterday, this time in federal court in San Diego. This further makes it obvious that the world of labeling has changed markedly since the Supreme Court’s Pom decision of June 12, 2014. On March 18, 2015, Judge Jeffrey Miller (of the U.S. District Court for the Southern District of California) ruled that the Tito’s vodka case, relating to deception and the term “handmade,” should move forward. Since the case was filed on September 19, 2014, Tito has argued that the case should be dismissed.

The judge did agree with Tito on a few points, but agreed with the complainants on the larger points. Tito had argued that the case should not move forward because there was no real damage to anyone. In response, the court’s Order Granting in Part and Denying in Part Tito’s Motion to Dismiss, noted some consumers care a lot about “processes and places of origin” when deciding what to buy. By way of example, the court pointed to past controversies about kosher, halal, diamonds from conflict zones, and wine appellations.

Background about the case is here (the main complaints) and here (the main defense). This posting is a short version, and more commentary will be available at Wine & Spirits Daily, later today (or upon request). The nub of the matter is, the label and indeed the main selling proposition for Tito’s vodka, all the way back to its inception, center on its “handmade” aspects. This claim (the biggest word on the label) is now the subject of at least five lawsuits all over the U.S. They are 1) Hofmann (as here), 2) Pye (filed in federal court in Florida), 3) Aliano (filed in Cook County and removed to federal court), 4) McBrearty (filed in New Jersey state court and removed to federal court), 5) Cabrera (filed in San Diego, federal court), and 6) Grayson (filed in Las Vegas, federal court).

The Hofmann court said the class action claimants need not show that the vodka was defective or that the vodka was worth the price paid. Instead, the relevant inquiry is whether consumers were deceived about the “handmade” claim, and persuaded to buy on the basis of that deception. In essence, the judge is saying the plaintiffs made a mistake by arguing that class member would pay less – instead of arguing that they would not buy the product at all – but for the label claim at issue.

The Order has a funny typo on page 11 (stemming from the plaintiff’s brief), referring to the label term as “homemade,” when in reality the label shows the term “handmade.” A pillar of Tito’s defense, so far, is that TTB has approved the label on many occasions and after careful review. The court was not impressed by this point: “the court concludes that [Tito] has not shown that the safe harbor bars Plaintiff’s claims.” The court said TTB’s review was peripheral and informal at most, especially in view of the fact that TTB does not even have standards or rules for the term at issue.

The order seems careful and even-handed, but then seems to lean against Tito more, by saying:

In the court’s view, the representation that vodka that is (allegedly) mass-produced in automated modern stills from commercially manufactured neutral grain spirit is nonetheless “Handmade” in old-fashioned pot stills arguably could mislead a reasonable consumer. This is not, therefore, an issue that can be resolved at this stage.

Judge Miller further ruled that the 2013 Forbes article, that largely raised the questions about the Tito claim, is reliable enough, to form a basis for the allegations. Relatedly, the court was not too impressed with Tito’s argument that this article sufficiently alerted consumers that the claim might be dubious.

Finally, the court asserted that the complaint is not too vague for Tito to prepare an adequate response. The court said Tito’s “cogent” responses prove it. The court sided with the plaintiffs in most areas, but went against the plaintiffs in dismissing three major claims, on the basis that they were not pled properly. The court also, however, provided the plaintiffs with 14 days to fix those deficiencies and so this order is overwhelmingly helpful to the plaintiff side.

Simon Fleischmann (a top class action litigator at Locke Lord in Chicago) explained:

While this is a disappointing ruling from a defense standpoint, it is important to remember that this is just one trial court decision on the pleadings in what will likely be a broader war waged in several courts across the country on similar issues. And perhaps most importantly, the opinion emphasizes the highly individualized nature of that particular plaintiff’s purchasing decisions in a way that will make it difficult to certify a class of similarly situated consumers later on in the litigation.

Simon knows the context well. He is litigating very similar issues on behalf of Templeton Whiskey.

The court’s order is here.

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Tito Responds

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Over the years many have suggested that Tito’s vodka is not really made in small batches or by hand. I tried to keep an open mind, as the brand grew, and even in the face of the lawsuits summarized here.

So I have been particularly looking forward to a response, on the merits, at long last, from the source. Tito finally responded, on November 17, 2014, in the form of a motion to dismiss the Florida case. (The defendants also filed a similar motion, a month later, in the California case. The California motion is 28 pages and substantially similar to the one filed in Florida, right down to mangling the name of the agency that issued the so-crucial approvals. It does add a dash of spice here:  “Plaintiff himself knows nothing, and he filed a lawsuit that ignores what the Tito’s label actually says and instead bases his claim on hearsay statements in a magazine article, hoping he can later commit discovery to get the facts he admittedly lacks.”)

With the aid of more than one big law firm, and a superior command of the facts, I was eager to sit back and see how deftly Tito could shut down its many detractors. The motion weighs in at 20 or so pages and it does not seem an exaggeration to say that the entire brand, the company, and just about everything on the front label hang in the balance. Also, Tito had the immense benefit that he knew or certainly should have known this day would come around sooner or later. This should have been clear since the first references to “handmade.” This should have been further clear upon the various inquiries about the term over the years, as described in the motion.

The motion starts pretty strong, asserting that plaintiff’s complaint is so vague:  “We do not know how many bottles they bought or how much they paid, because they do not tell us those facts. They do not claim there was anything wrong with the vodka they allegedly purchased, or that they did not like it for some reason. They do not claim they complained about it, tried to return it, or even notified anyone of their dissatisfaction … .” Then, “With so many details missing, Fifth Generation is not in a position to make a meaningful response to the Complaint (other than simply to deny the allegations). Nor is the Court in any position to assess whether all or any of the claims pass the plausibility standard. … Measured by those standards, the Complaint is woefully deficient and must be dismissed.”

This may be a good start, but by page 3, the motion seems to go off the rails. It tries to say that the plaintiffs could not have been deceived, because a 2013 Forbes article had already suggested Tito was playing fast and loose with the truth. Tito’s motion says:

In light of what Plaintiffs have pled – and in particular their reliance upon a widely-circulated 2013 Forbes magazine article – it is hard to see how they could plausibly claim they were misled by the label on Tito’s Handmade Vodka for any purchases made after the article was published. Similarly, the number of times they purchased may raise plausibility concerns: If they enjoyed the taste of the product and thought it was a good value, did the label truly influence any but their first purchase? And, if the first time they ever tasted Tito’s Handmade Vodka was at a party, at a restaurant, or in some other setting in which they decided they liked the taste before they ever saw the label, could the label plausibly be said to have influenced even their first purchase? Plaintiffs’ skeletal allegations raise all of these questions and more, but answer none of them.

The defendants seem impressed with this point, breaking out the bolded italics.

Maybe I am missing something fundamental, but this seems absurd as any kind of defense, let alone a cornerstone of a defense. Does it really make sense to assume the plaintiffs would, should, or did get key information about the product from a magazine article — instead of the big, federally mandated, reviewed and approved label plastered on the front of the bottle? The Forbes article is interesting, relevant, and important — but is it really so epochal that everyone interested in vodka should be intimately familiar with it, from the moment of its publication? On the very same page, the motion makes clear in any event that “Plaintiffs never claim that they saw or read the article.” The motion seems to be saying that even though the article is wrong, and low-quality, every yahoo from Texas to California to Florida should know all about it, from the moment of its publication. Perhaps Tito seeks to argue that the lead plaintiffs knew about the article before the purchases at issue, and that this should have caused them not to buy the vodka, or, at the very least, that it would make them not good representatives for the class.

Next, the motion veers over into shaking the pompoms, declaring Tito’s to be “great tasting” and with a value proposition “true to its Austin, Texas roots.” By page five, the motion tees it up beautifully, saying “Plaintiffs contend that Tito’s Handmade Vodka cannot be ‘handmade’ because it is ‘made from commercially manufactured neutral grain spirit that is trucked and pumped into Defendants’ industrial facility.'” This would seem to be the heart of the matter. And so I move to the edge of my seat, waiting for Tito to hit this duly teed-up softball out of the park. And then I wait some more, as the softball seems to sit on the tee, without the benefit of even a swing or a miss, let alone a base hit. Immediately after raising this tantalizing question, the motion changes the subject toward an unilluminating primer on how vodka is normally made.

The defense is a bit too romantic when it explains how the “secret,” “pre-Civil War” pot still methods somehow make the product handmade. And it moves in the other direction when it describes how Tito grasped a pen with his own hands to design the label:  “The label on Tito’s Handmade Vodka is also ‘handmade’ in its origins. The graphic of the old fashioned pot still was drawn by Tito Beveridge himself. He chose the fonts, the colors and the other elements of the label that communicate the consumers the essence of the brand.”

Tito makes a stronger point by explaining that TTB inspected Tito’s labels, plant and methods on many occasions, and still allowed the “handmade” claim. The defendants make quite a few other technical arguments and on some of those it’s hard to know who is right. And yet I find myself still waiting for the defendants to simply assert, at long last, that they do not bring in tankers of commodity spirits mass produced with continuous stills, far from Texas or the hands of anyone in Austin. Looks like we will need to keep waiting.

Finally, for all those who wrote in and said the label claims don’t matter and are only for nerds, please take another look at the label and web page depicted above. This is a screenshot of www.titosvodka.com as of January 4, 2015. I did not add any words or images but I did add a yellow tag near each of the most relevant spots; I emphasized the relevant portions and discarded a lot of the less relevant matter.

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Maker’s Mark Bourbon Got Tito’d

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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):

  1. “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.”
  2. “[T]he matter in controversy, exclusive of interest and costs, exceeds the sum or value of $5,000,000.”
  3. “Defendant has shipped approximately 1.4 million cases of whisky in 2013.”
  4. “’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.”
  5. “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.”
  6. “[C]ontrary to Defendant’s misleading labeling, its whisky is predominately or entirely made by mechanized and automated processes.”
  7. “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.”
  8. “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.”
  9. “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.

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