Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Consumer demonstrated potential confusion about beer brewing location, (Jan 18, 2018)

By Nicole D. Prysby, J.D.

A consumer who purchased beer that he believed to have been brewed in California but was actually brewed in Minnesota adequately alleged false advertising claims where the map on the beer carton would be likely to deceive, held a California federal district court. The map with an "x" in the Bay Area could lead a reasonable consumer to believe the beer was brewed in that location. Although some of the consumer’s claims were dismissed, including his claim under the California Consumers Legal Remedies Act, he was allowed to proceed with some of his California Unfair Competition Law claims and his claim for equitable relief due to unjust enrichment (Peacock v. The 21st Amendment Brewery Cafe, LLC, January 17, 2018, Tigar, J.).

False advertising allegations. A consumer purchased two different types of the brewery’s beer from local stores in Sacramento. He believed both were brewed in California but they were actually brewed in Minnesota. The beer cartons contained a map with an "x" designating the Bay Area. The label on the cans stated "Brewed & Canned by 21st Amendment Brewery, San Leandro, CA." The brewery website contained an origin statement, describing the brewery’s beginnings in San Francisco. The consumer claimed that he purchased the beer in reliance on the representations made by the brewery and that he would not have purchased the beer had he known it was not brewed in California.

Misrepresentation under UCL and CLRA. The brewery argued that all of the UCL and CLRA claims should be dismissed because the brewery had made no misrepresentations. Neither the website nor the packaging stated that the beer is brewed exclusively in California. The court found that the website was not likely to deceive a reasonable consumer, because it did not state that the beer is brewed exclusively in California and it does state that the brewery brews beer in Minnesota. The can label also would not be likely to deceive; a reasonable consumer might assume that the brewery’s headquarters were in San Leandro, without assuming every beer is brewed in California.

The packaging with the Bay Area map with an "x" marking, however, was likely to deceive a reasonable consumer. Although the packaging did not specify a street address, or extend an invitation to visit the brewery, a consumer looking at the carton map would reasonably believe the beer was brewed in California.

UCL claim under California Sherman Food, Drug, and Cosmetic Law. The brewery argued that the consumer’s UCL claim based on a violation of the Sherman Law should be dismissed because the consumer failed to meet the heightened pleading standard for fraud, the claim is predicated upon regulations that do not apply to beer, and because common-law safe harbor qualifies. The consumer had claimed that the brewery label violated Food and Drug Administration (FDA) regulations adopted under the laws of California, but did not state which FDA regulation was violated. The court agreed that the UCL claim based on the Sherman Act should be dismissed and also noted that the claim could be dismissed because the FDA does not have the power to regulate beer.

With respect to the consumer’s other UCL claims, the court discussed the safe harbor under the UCL for conduct that is specifically permitted by legislation. The brewery argued that its label and packaging fell under the safe harbor, because both were in compliance with federal labeling laws under the Alcohol and Tobacco Tax and Trade Bureau. But the court found that, although the packaging might be in compliance with TTB regulations, there is nothing in the TTB that bars a claim under the UCL. The regulations do not show an intent to occupy the entire field, and the TTB regulations are not inconsistent with the UCL. Therefore, the safe harbor was not met and the consumer’s UCL claims not based on the Sherman Law could go forward.

Notice under CLRA. The brewery argued that the consumer’s CLRA claims should be dismissed because his notice to the brewery was deficient, in that it did not identify particular violations of California law. The consumer did not mention which aspects of the advertising he believed should be changed and because he did not identify specific violations, the notice was inadequate and the CLRA claims were dismissed.

Injunctive and equitable relief. Because the consumer did not allege that he had an intent or desire to purchase the brewery’s products in the future, he had not adequately alleged an imminent or actual threat of future harm caused by the false advertising. Therefore, the claim for injunctive relief was dismissed.

His claim for equitable relief in the form of restitution for unjust enrichment was not dismissed, however. The court reasoned that his CLRA claim was dismissed which left him with no remedy at law, because the UCL claims only provide equitable remedies. Therefore his equitable relief claim should remain.

The case is No. 3:17-cv-01918-JST.

Attorneys: Elizabeth Lee Beck (Beck & Lee PA) for Brendan Peacock. Eugene Moon Pak (Wendel Rosen Black & Dean LLP) for The 21st Amendment Brewery Cafe LLC.

Companies: The 21st Amendment Brewery Cafe LLC

Cases: Advertising CaliforniaNews