Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal.: Claims against Tito’s Handmade Vodka sail past safe harbor defense, (Nov 23, 2015)

By Greg Hammond, J.D.

Consumers could move forward with claims that a vodka manufacturer violated California’s consumer protection laws by falsely claiming its vodka is “Handmade,” when it is created by a “highly mechanized process that is devoid of human hands.” In denying the manufacturer’s motion for summary judgment, the federal district court in San Diego concluded that the safe harbor exception to California’s consumer protection laws has not been triggered in this case (Hofmann v. Fifth Generation, Inc., November 20, 2015, Miller, J.).

A consumer in San Diego allegedly purchased Fifth Generation, Inc.’s Tito’s Handmade Vodka. The consumer alleges, however, that Fifth Generation violated California’s Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act, because the Tito’s labeling is false and misleading. Despite being labeled as “Handmade,” the consumer claims that “the vodka is mass-produced in large quantities from commercially manufactured neutral grain spirits that are trucked and pumped into the Tito’s facility and distilled in modern, technologically advanced stills,” according to the court. Fifth Generation moved for summary judgment.

Formality requirements. In support of its motion for summary judgment, Fifth Generation argued that the safe harbor doctrine does not have the same formality requirement as the federal preemption doctrine by attempting to make distinctions between the two doctrines. The court rejected this argument, finding that Fifth Generation failed to provide any meaningful explanation concerning why the differing origins of the doctrines affects whether the formality requirements of the preemption doctrine should or should not be applied to the safe harbor doctrine.

TTB authorization. Fifth Generation also argued that the Alcohol and Tobacco Tax and Trade Bureau’s (TTB) authorization of Tito’s label bars the consumer’s claims under the safe harbor doctrine because: (1) a certificate of label authorization (COLA) is a regulatory approval of a label’s compliance with federal law; and (2) the COLA for Tito’s “Handmade” Vodka label triggers the safe harbor doctrine as to any claims based on allegations that the label is misleading.

The court first determined that the TTB’s action concerning its examination and approval of the term “Handmade” on Tito’s label, including the COLA it issued, is insufficient to trigger the safe harbor doctrine at the current stage of litigation because: (1) the Secretary of Treasury’s delegation of authority to TTB is not dispositive of whether TTB’s COLAs have the force of federal law; and (2) the COLA procedures remain less formal than those required “of a formal, deliberative process akin to notice and comment rulemaking or an adjudicative enforcement action.”

Lastly, the court concluded that Fifth Generation did not establish that any TTB approval of the term “Handmade” should be given the force of federal law, thereby triggering the California safe harbor doctrine. In reaching this conclusion, the court determined that a genuine issue exists as to whether TTB determined “Handmade” not to be misleading.

Related action. The court also denied Fifth Generation’s motion for summary judgment in a related case, reaching substantially similar conclusions (Cabrera v. Fifth Generation, Inc., November 20, 2015, Miller, J.)

The case numbers are 13cv2569 JM (JLB) and 14cv2990 JM (JLB).

Attorneys: Marcy Hogan Greer (Alexander Dubose Jefferson & Townsend, LLP), Matthew Ryan Gershman (Greenberg Traurig, LLP) and Michelle C. Doolin (Cooley LLP) for Fifth Generation, Inc. John H. Donboli (Del Mar Law Group, LLP) for Gary Hofmann. Abbas Kazerounian (Kazerounian Law Group, APC) for Marc Cabrera.

Companies: Fifth Generation, Inc.

Cases: Advertising CaliforniaNews