Guest Post | COLAs Provide Scant Protection from Class Action Claims

As you may have noticed, there has been a recent increase in the class action lawsuits in the beverage alcohol industry. Tito’s Vodka, in particular, has been under scrutiny for claims of false or misleading packaging. These class action suits are important to keep up with, as they can have significant implications for the industry. John Trinidad, an associate attorney at Dickenson, Peatman, and Fogarty, provided us with a brief overview of Tito’s current situation.

Over the past year, a slew of class action lawsuits have been filed claiming that certain alcohol beverage product labels are false or misleading under state consumer protection laws. Tito’s Vodka, owned by a company called Fifth Generation, Inc., faces numerous actions claiming that the company’s use of the term “handmade” deceived consumers by leading them to believe that they were buying high quality, non-massed produced products.

Fifth Generation has fought these allegations, arguing that that TTB’s approval of their label as evidenced by the issuance of a certificate of label approval (“COLA”) protects against liability under state consumer protection laws. The company’s argument relies on “safe harbor” provisions provided for under state law, which in general make certain actions authorized by laws administered by state or federal regulatory authorities immune from liability. Unfortunately for the alcohol beverage industry, this argument has had mixed success.

In September, a federal court in Illinois granted Fifth Generation’s motion to dismiss a class action lawsuit claiming that Tito’s labeling practices constituted a violation of the Illinois Consumer Fraud and Deceptive Practices Act. Aliano v. Fifth Generation, Inc., 2015 U.S. Dist. LEXIS 128104 (N.D. Il. Sept. 24, 2015). The court’s decision rested on its finding that TTB’s consistent issuance of COLA for Tito’s labels that included the term “handmade” was sufficient to trigger the state’s safe harbor provisions.

But a federal judge in California that reviewed the exact same set of facts reached a different conclusion in a separate lawsuit claiming a violation of California law. Hofmann v. Fifth Generation, Case No. 14-cv-2569 JM (S.D. Cal. Nov. 20, 2015). In that case, the court concluded that the normal review and approval process of COLA applications by TTB was not “a formal, deliberative process akin to notice and comment rulemaking or an adjudicative enforcement action,” and, therefore, was insufficient to trigger the state’s safe harbor provision. The court, therefore, denied Fifth Generation’s motion for summary judgment.

Alcohol beverage producers need to keep in mind that the issuance of a COLA in and of itself will not necessarily insulate alcohol beverage producers from litigation related to false or misleading labeling claims. In other words, don’t confuse your COLA with a shield to class action lawsuits.

John Trinidad works with the Wine Law, Alcohol Beverage, Business, Geographical Indications and Intellectual Property groups. During his time at DP&F, he has advised wine industry clijohnents on a broad range of issues related to operating vineyards and wineries, including wholesaler agreements and franchise laws; social media and tied house issues; grape purchase, custom crush, and third party marketing agreements; trademark registration and brand protection; and purchase and sale of winery brands and assets. He has also counseled clients in responding to audits from the U.S. Department of Treasury’s Alcohol Tobacco Tax and Trade Bureau and obtaining federal and state permits and licenses for alcohol beverage businesses.

1 Comment

  1. bill cooper

    The CA ruling makes sense because the TTB has no knowledge of the production practices. In the case of organic claims, for example, they defer to a third-party organic certifier to validate the organic claim: organic wine, made with organic grapes, etc.

    Reply

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