Maker’s Mark prevails in “handmade” false advertising suit

Originally published by Saul Perloff (US).

For the second time this year, Maker’s Mark Distillery, Inc., manufacturer of the popular bourbon, has successfully fended off a would-be class action alleging that the brand’s claim to be “handmade” is false and misleading.

On July 27, the United States District Court for the Southern District of California, threw out claims that Maker’s Mark violated California’s Unfair Competition Law (UCL) and False Advertising Law (FAL), ruling that the plaintiffs did not plausibly allege a likelihood of deception.  Order, Nowrouzi v. Maker’s Mark Distillery, Inc., Case No. 3:14-cv-02885 (S.D. Cal. July 27, 2015).  The decision in Nowrouzi followed a May ruling by the Northern District of Florida dismissing false advertising claims against Maker’s Mark under various Florida statutes.  Order, Salters v. Beam Suntory, Inc., Case No. 4:14-cv-659 (N.D. Fla. May 1, 2015).

In both Nowrouzi and Salters, the putative class plaintiffs were consumers who claimed they purchased Maker’s Mark bourbon because its label contained the statement that it was “handmade.”  This allegedly led the plaintiffs to believe the product was superior in quality to other whiskeys.  The plaintiffs claimed the label was false or misleading insofar as the process Maker’s Mark uses in producing its bourbon allegedly involves little or no human supervision or involvement.

Salters v. Beam Suntory, Inc.

In Salters, the court recognized that whether a statement is false or misleading is ordinarily a question of fact and cannot be decided on a Motion to Dismiss.  Salters Order at 4 (May 1, 2015).  However, if a “reasonable juror” could not find a statement false or misleading – that is, if the factual allegations of the complaint do not “render plaintiffs’ entitlement to relief plausible” – then a motion to dismiss should be granted.  Id. at 4-5 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 569 (2007)).

The court then discussed the various meanings the plaintiffs ascribed to the word “handmade” and found each of them implausible.  The court held:

In sum, no reasonable person would understand ‘handmade’ in this context to mean literally by hand.  No reasonable person would understand ‘handmade’ in this context to mean substantial equipment was not used.  If ‘handmade’ means only made from scratch, or in small units, or in a carefully monitored process, then the plaintiffs have alleged no facts plausibly suggesting the statement is untrue.  If ‘handmade’ is understood to mean something else – some ill-defined effort to glom onto a trend toward products like craft beer – the statement is the kind of puffery that cannot support claims of this kind.  In all events, the plaintiffs have not stated a claim on which relief can be granted.

Id. at 7.

Nowrouzi v. Maker’s Mark Distillery, Inc.

In Nowrouzi, the court followed – in fact quoted – Salters’ reasoning in dismissing the plaintiffs’ UCL and FAL claims.  Nowrouzi Order at 11 (July 27, 2015).  After discussing the proffered definitions of “handmade” in that case, the court found that “handmade” cannot reasonably be interpreted as meaning literally by hand nor that a reasonable consumer would understand the term to mean no equipment or automated process was used to manufacture the whisky.”  Id.

Hofman v. Fifth Generation

While Maker’s Mark has been successful in avoiding false advertising claims focusing on its “handmade” bourbon, the manufacturer of Tito’s Handmade Vodka has not fared so well.  In March, a different judge in the Southern District of California refused to dismiss a class action lawsuit against Fifth Generation, Inc., manufacturer of Tito’s.  Order, Hofman v. Fifth Generation, Inc., Case No. 3:14-cv-02569 (S.D. Cal. Mar. 18, 2015).

Tito’s, like Maker’s Mark, is labeled as “handmade” – in fact, it is part of the Tito’s brand name.  Furthermore, Tito’s is labeled as being “Crafted in an Old Fashioned Pot Still by America’s Original Microdistillery.”  The plaintiff in Hofman claimed Tito’s labeling is false and misleading because the vodka is allegedly “mass-produced in large quantities from commercially manufactured neutral grain spirit that is trucked and pumped into the Tito’s facility and distilled in modern, technologically advanced stills.” Hofman Order at 2 (Mar. 18, 2015).

Like Maker’s Mark, Fifth Generation argued that no reasonable consumer could be deceived “because vodka, by definition, is created by heating neutral spirits and distilling the vapors, which any reasonable person knows must be done using some sort of equipment.”  Id. at 13.  In fact, the defendant pointed out, Tito’s labeling “clearly explains to consumers that ‘Handmade’ means that it is crafted in an old fashioned pot still.”  Id.

The court was not persuaded by the defense.  It held:

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.

Id. at 14.[1]

Commentary

In recent years, beer and liquor producers have sought to capitalize on the positive association consumers have – and the higher prices they are willing to pay – for artisanal products by labeling them as “small batch,” “craft brewed,” “handmade,” etc.  As the popularity and sales of “boutique booze” have increased, the plaintiffs’ class action bar has taken notice.  In the past year alone, more than a dozen lawsuits have been filed against an almost equally large number of beer and spirit producers alleging that these descriptors are false and misleading.  We recently wrote about a suit brought against MillerCoors concerning its Blue Moon brand.  May 13, 2015 article.

Few rulings have yet been handed down in these cases, and those that have come, are inconsistent on whether a “reasonable consumer” could ever be deceived by a distilled spirit being described as “handmade.”  While the ruling in Hofman can arguably be distinguished from the two Maker’s Mark rulings on the basis that the Tito’s label provided some specific meaning for the term “handmade” (i.e. crafted in “old-fashioned pot stills”), that was not the reasoning followed by the courts.

Therefore, until the apparent split is resolved, liquor producers – especially those with popular brands – can expect to face additional suits if their products are described as “handmade.”

 

[1] The Hofman court did dismiss the UCL and FAL claims against Fifth Generation on a technicality.  Specifically, the court held in order to state a claim, the plaintiff had to allege that he would not have bought Tito’s but for the “Handmade” representation.  The court found that while the plaintiff had made that allegation in connection with his negligent misrepresentation claim, he had not incorporated it in his statutory claims.  The court granted plaintiff leave to amend.

 

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