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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.”

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.

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 Oxford Dictionary defines the term “handmade” as “[m]ade by hand, not by machine, and typically therefore of superior quality.”

On information and belief, the Vodka was made, manufactured and/or produced in “massive buildings containing ten floor-to-ceiling stills and bottling 500 cases an hour” 2 using automated machinery that is the antithesis of “handmade” that is in direct contradiction to both the “Handmade” representation and the “Crafted in an Old Fashioned Pot Still” representation on the product. Discovery will further reveal the specific automated manner in which the Vodka is made.

Defendants also concealed the fact that the Vodka is no longer made in old fashioned pot stills of the variety TITO’s proudly displayed in the 2013 Forbes article (i.e., in a shack containing a pot still cobbled from two Dr. Pepper kegs and a turkey-frying rig to cook bushels of corn). The disclosure of this information was necessary in order to make Defendants’ representations truthful and not misleading.

Consumers are particularly vulnerable to these kinds of false and deceptive labeling practices. Most consumers possess very limited knowledge of the likelihood that products, including the Vodka at issue herein, that are claimed to be “Handmade” are in fact: (1) made from commercially manufactured 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”). This entire process is devoid of the caring touch of human hands. This is a material factor in many individuals’ purchasing decisions, as they believe they are purchasing a product made in small amounts that is of inherently superior quality.

As a direct and legal result of their unlawful, unfair and fraudulent conduct described herein, Defendants have been and will be unjustly enriched by the receipt of ill-gotten gains from customers, including Plaintiff, who unwittingly provided their money to Defendants based on Defendants’ fraudulent “Handmade” representation.

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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Beer with Style

On this label, the Nova Scotia heritage is pretty big and prominent. Even though the beer is made in downtown St. Louis.

The look is probably saved by the equally big reference to “style,” and the not so big reference to Missouri. Shock Top provides another example of the power of “style.” The label proclaims Belgian in medium-sized letters on the front label, and this is saved by the nearby reference to “style”  — also on the front label of this other beer made in the middle of the U.S.

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Napa Vodka

It doesn’t go quite as far as Roth Vodka, which mentions something like a vintage date. But in some ways, Napa Vodka goes further — because it refers to the specific grape varietal and the vaunted Napa origin — rather than just California more generally.

Wines & Vines explains:

The vodka was made from 2008 grapes harvested from a single vineyard in Napa Valley and fermented into wine, then distilled in a Vendome copper pot still at Stillwater Spirits in Petaluma, Calif. … It takes nearly 2 tons of grapes to produce the 3,000 gallons of wine needed to make 300 gallons of high-proof spirits, which are then diluted to 500 gallons. … While there appears to be no legal requirement, [owner Arthur] Hartunian secured approval from the Napa Valley Vintners and Napa Valley Grapegrowers for his project.

It sells for about $75 per bottle, and the Napa, California distillery produced only about 2,600 bottles.

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California Rum

Most of the world’s rum is produced in the Caribbean. Not a lot has been made in the US.

But lately there are signs of incipient production in California. Here are two:  Agua Libre and Eurydice. Both are made by St. George Spirits in Alameda, California. A Swedish blog explains:

Eurydice starts with the fresh-pressed cane juice of 100% California-grown sugar cane. The cane, grown in Southern California, is harvested and crushed at St George Spirits’ Alameda facility where it is fermented with two strains of wine yeast designed to accent the fruit and floral notes of the cane.

It is good to see that TTB is not asserting that an appellation may not be indicated. On some occasions TTB has asserted that vintage-, varietal-, and appellation-type claims should not be made on distilled spirits products because these subtle characteristics are not discernible after distillation.

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Too Remote Brewery

langLang Creek Brewery bills billed itself as “America’s Most Remote Brewery” and is was 500 miles east of Seattle, in Marion, Montana.

Perhaps it was too remote. Sadly, it closed a few months ago. The above is one of the last of about 12 approvals over just five months (for the most recent owner of the brewery). It’s a tough business and I suppose it’s even tougher when things like supplies and repairs and visitors are a few hours away. New West explains why the brewery could not carry on, complete with good photos. In the article, Lang’s marketing director confirms:

“The idea was great, the location was awesome — it’s such a gorgeous piece of property. … But business-wise it’s just hard to make a living when you don’t have consumers all around you.”

Was it really America’s most remote brewery? By what measure? What’s the most remote brewery now?

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