A recent decision from the Southern District of California demonstrates the uphill battle consumer lawsuits face when challenging “handmade” or “handcrafted” labels on alcoholic beverages. On July 27, 2015, in Nowrouzi et al. v. Maker’s Mark Distillery Inc., Case No. 3:14-cv-02885, U.S. District Judge John A. Houston granted Maker’s Mark’s motion to dismiss plaintiffs’ four causes of action challenging the “handmade” label on its whisky: (1) false advertising; (2) unfair competition; (3) negligent misrepresentation; and (4) intentional misrepresentation.
Plaintiffs’ claims were premised on the argument that Maker’s Mark’s “handmade” label was deceptive because the company’s whisky-making process “involves little to no human supervision, assistance, or involvement” and because its website demonstrates that the company uses a “mechanized and/or automated production process.” In dismissing plaintiffs’ claims, the court relied on two recent decisions addressing similar claims: the “handmade” label on Maker’s Mark’s bourbon (Salters v. Beam Suntory, Inc., No. 14-cv-659, 2015 WL 2124939 (N.D. Fla. May 1, 2015); and the “handmade” label on Tito’s Vodka (Hofman v. Fifth Generation, Inc., Case No. 14-cv-2569 JM (JLB), Dkt. No. 15 (S.D. Cal. March 18, 2015).
UCL and FAL Claims
Maker’s Mark made two main arguments for dismissal of the UCL and FAL claims. First, it argued that the Tobacco Tax and Trade Bureau’s (TTB) review and pre-approval process for distilled spirit labels ensures compliance with applicable laws and regulations, thus bringing the company’s label within the safe harbor doctrine. Judge Houston, however, disagreed, and followed a recent decision in a similar case, Hofman v. Fifth Generation, Inc., Case No. 14-cv-2569 JM (JLB), Dkt. No. 15 (S.D. Cal. March 18, 2015). In Hofman, the court ruled that the safe harbor decision did not cover TTB’s decision in investigating and approving the defendant’s “handmade” label because it was an informal agency decision that was not as stringent as the USDA or FDA processes.
Second, Maker’s Mark argued that plaintiffs failed to plausibly allege the requisite likelihood of deception. Specifically, Maker’s Mark argued that the “handmade” claim could not mislead a reasonable consumer because it was not a specific or measurable claim and that plaintiffs’ proffered interpretation of “handmade” failed the Ninth Circuit’s common sense approach. Maker’s Mark noted that its label describes the actual production process and invites consumers to visit the website for more information, where consumers can view a video about the production process. The court agreed, finding 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.”
Negligent and Intentional Misrepresentation Claims
Plaintiffs abandoned their negligent misrepresentation claim. As for the intentional misrepresentation claim, Maker’s Mark moved to dismiss this claim on the grounds that a reasonable consumer would not find the challenged statements misleading and that plaintiffs failed to allege facts supporting a finding that the company had the requisite intent to deceive.
In dismissing these claims, the court was persuaded by the reasoning in Salters, where the court concluded that no reasonable person could understand the term “handmade” to mean “literally by hand” and that “substantial equipment was not used.” The Salters court also noted that if the statement was “some ill-defined effort to glom onto a trend toward products like craft beer,” it merely constituted puffery that could not support an intentional misrepresentation claim.
Judge Houston agreed with Maker’s Mark that it was not premature to decide whether a reasonable consumer would have been deceived, and concluded that the intent issue was not dependent on consumers visiting the website because “plaintiffs cannot plausibly contend defendant intends to deceive consumers about the nature of its processes when its label clearly describes the process and points consumers to its website.” Finding that this claim could not possibly be cured by pleading additional facts, Judge Houston dismissed the claim with prejudice.