Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal.: “Handmade” bourbon misrepresentation claims tossed, (Jul 29, 2015)

By Greg Hammond, J.D.

False advertising, unfair competition, and misrepresentation claims against Maker’s Mark Distillery, Inc., over the use of the term “handmade” on its bourbon whiskey product labels, were dismissed by the federal district court in San Diego. The court determined that consumers failed to allege a likelihood of deception with regard to their California Unfair Competition Law (UCL) and False Advertising Law (FAL) claims and failed to state a claim for relief for their negligent and intentional misrepresentation claims (Nowrouzi v. Maker’s Mark Distillery, Inc., July 27, 2015, Houston, J.).

Consumers Safora Nowrouzi and Travis Williams filed a putative class action complaint against Maker’s Mark, claiming that they purchased the company’s bourbon because the label contained a statement that the product was “handmade.” They claim that the term misled them to believe the product was of “superior quality” as compared to other bourbon. However, the consumers allege that Maker’s Mark’s process for producing bourbon involves little to no human supervision, assistance, or involvement, and that Maker’s Mark’s website demonstrates a mechanized and/or automated production process. Maker’s Mark moved to dismiss the UCL, FAL, and misrepresentation claims.

Safe harbor doctrine. Maker’s Mark first argued that the UCL and FAL claims should be dismissed under California’s “safe harbor doctrine,” which provides that where a defendant complies with relevant federal regulations, its conduct is not subject to UCL or FAL claims. The court rejected this argument, finding that the Tobacco Tax and Trade Bureau’s (TTB’s) decision to investigate and approve the label that included the word “handmade” was an informal agency decision that was not as stringent as the process used by the U.S. Department of Agriculture or the Food and Drug Administration. Further, there was no authority cited showing that the safe harbor doctrine extends to the TTB’s informal agency decision.

Likelihood of deception. The UCL and FAL claims were nevertheless dismissed for failure to plausibly allege a likelihood of deception. Specifically, the court found that the term “handmade” cannot reasonably be interpreted as meaning literally by hand, and a reasonable consumer would not understand the term to mean no equipment or automated process was used to manufacture the whisky. Because the court determined that the UCL and FAL claims cannot possibly be cured by the allegation of other facts, the claims were dismissed with prejudice.

Misrepresentation. The negligent and intentional misrepresentations claims were also dismissed. First, the defendants contended—and the plaintiffs did not oppose—that the “economic loss” doctrine barred the negligent misrepresentation claim. Second, the court found that the consumers could not plausibly contend that Maker’s Mark intended to deceive consumers about the nature of its processes when the label clearly described the process and pointed consumers to its website. Because the intentional misrepresentation claim could not possibly be cured by the allegation of other facts, according to the court, the claim was dismissed with prejudice.

The case number is 14cv2885 JAH(NLS).

Attorneys: Abbas Kazerounian (Kazerounian Law Group, APC) for Safora Nowrouzi. Amanda Leigh Groves (Winston & Strawn LLP) for Maker's Mark Distillery, Inc.

Companies: Maker’s Mark Distillery, Inc.

Cases: Advertising CaliforniaNews