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The Tito’s Lawsuit: When Approval is Not Approval

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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.”

summonsSummary:  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.

Updates:
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.”
amended9/30/2014: 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.

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.

The Tito’s lawsuit (Hoffman v. Fifth Dimension, Inc.) is here. Some juicy highlights are as follows (and on this page).

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.

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Flavor Flav Flavored Vodka

Who is this joker and why does he have a vodka? Flavor Flav has a flavored vodka, and it happens to be Bubba Gum flavored. It took almost three months to get the label approved, and so I am enjoying a vision of William Jonathan Drayton, Jr. calling in regular and increasingly anxious status checks to TTB, and arguing about font sizes.

Le Flav joins the swelling ranks of celebrity-endorsed vodka products, alongside Voli (Fergie, Pitbull), Ciroc (Sean Combs), Aftermath (Dr. Dre) and many others.

 

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Founding Fathers Beer

Part of the challenge and complexity is that label rules and trends change often. As recently as a few years ago, TTB would balk about pre-eminently famous people, such as these, on alcohol beverage labels. Founding Fathers Beer is bottled by CBC Latrobe in Latrobe, Pennsylvania. I tend to doubt that TTB would allow a President Obama label, even today (except maybe as a caricature), but George Bush, Bill Clinton and the prior Presidents may well be fair game now or soon.

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COLAs on the Front Page

It’s not every day that you see COLA news on the front page of the newspaper, but it does happen from time to time. On Saturday, The Wall Street Journal featured COLA news on the front page. The story explained that no less than three companies have been trying to use Buffalo Bill as part of their branding — with two of them fighting it out in court. “The two entrepreneurs are fighting in court for the exclusive right to sell beer that trades on the musky aura of adventure surrounding Army-scout-turned-bison-hunter-turned-sharpshooting-showman William F. Cody.”

Eric Bischoff got his first COLA in March of 2011 (and the second one is here). He is a “former professional wrestling icon.”

While Bischoff already has the COLAs and applied for the trademark, it looks like Mike Darby has been selling beer under the Buffalo Bill name since before Bischoff. But “Mr. Darby failed to get federal approval of his label, as required by the law. (Mr. Darby says he thought the brewer and distributor had taken care of that.)” Darby owns a hotel in Cody, Wyoming “built by Buffalo Bill in 1902.” Darby “had to pull his beer from the market” while awaiting label approval.

The third company is affiliated with Bill Owens, but is not interested in fighting over the brand name. The brewery does not even seem to claim trademark on the brand name. The story says Owens has moved on from making beer and now runs a trade group for craft distillers (“It’s much more fun to be involved with people making whiskey, vodka and absinthe, he says.”) This may allow him to avoid a roundhouse kick, a six-shooter, and the swirling lawsuits.

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Stolichnaya

Stolichnaya Vodka is pretty famous. And if it’s famous for anything, it’s famous for being Russian. For decades it has been glammed up as The Russian Vodka.

Over the past one to two years, however, Stoli has pretty much walked away from its Russian origin. The label on the right, from 2009, proudly proclaims Stoli’s Russian heritage and origin. By contrast, the label on the left, from 2010, sidesteps this issue. The more recent back label shows that the product is made in Latvia rather than Russia. Russia and Latvia are nextdoor neighbors, and were one and the same until Latvia regained its independence in 1991. Still, this is a big change and presents a tricky marketing challenge — that would seem to be tantamount to moving Jack Daniels production from Lynchburg to Los Angeles or Guadalajara. For such a big brand (with sales estimated near $2 billion per year) there has been surprisingly little press coverage of this issue. Back in 2006, Businessweek attempted to sort out this tale of international intrigue:

So what exactly is the row about this time? When the Russian government stripped S.P.I. of its right to the Stolichnaya brand in 2002, it also banned the company from exporting Stolichnaya vodka from Russia. That’s when S.P.I. responded by moving the bottling of Stolichnaya to Latvijas Balzams distillery in Latvia. Yet the Stolichnaya on sale in the U.S. continues to be labeled as “genuine Russian vodka.” S.P.I. and Allied Domecq testified in the U.S. court that the vodka continues to be produced in Russia, at distilleries in Kaliningrad and Tambov.

The 2010 approval also caught our eye because of the strange pairing of Baltic-Region flavored vodka with Hugh Hefner and his bunny.

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