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You Win Some, You Lose Some: Beer Manufacturers and False Labeling in 2017

Author: Alva C. Mather

You Win Some, You Lose Some: Beer Manufacturers and False Labeling in 2017

Following a trend for food and beverage manufacturers generally, beer manufacturers have seen an increasing number of class action lawsuits filed against them under state false labeling and consumer fraud statutes.

Reprinted with permission from the November 21, 2017 issue of The Legal Intelligencer. © 2017 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

Following a trend for food and beverage manufacturers generally, beer manufacturers have seen an increasing number of class action lawsuits filed against them under state false labeling and consumer fraud statutes. 2017 has been no exception to this trend with plaintiffs in multiple lawsuits narrowing in on claims of deception advertising by beer manufacturers related to the perceived disconnect between where their advertising statements and related packaging suggest their beer is produced as opposed to its actual place of production. In a series of judicial decisions on defendant brewers’ motions to dismiss it is clear that the legal landscape is a mixed case for both plaintiffs pursuing false labeling claims as well as brewers ability to defend their product advertising.

Early Victories

In early 2017, the U.S. District Court for the Eastern District of New York tackled and granted motions to dismiss false labeling claims related to the sale of “Australian” and “Japanese” beer. In the first case, Bowring v. Sappora, U.S.A., 234 F. Supp. 3d 386, 388 (E.D.N.Y. 2017), the plaintiff alleged that the defendant “created a misleading impression that Sapporo beer is a Japanese import, when in fact, it is produced in the United States and Canada.” Reviewing the history of Sapporo beer, the court noted that “Sapporo beer was originally brewed in Japan in 1877, and first imported to the United States in 1964. In 1984, defendant Sapporo Inc. was established in the United States … All Sapporo now sold in the United States is brewed in La Cross, Wisconsin, or Guelph, Ontario, Canada.” According to the complaint, the following advertisements and slogans caused the plaintiff to purchase and pay a premium for Sapporo beer based on the misleading impression that the beer was brewed in Japan and imported into the United States: “a television commercial with imagery of a ‘Japanese landscape being traveled into American landscape,’ ending with the slogan ‘The Original Japanese Beer;’” “Slogans ‘Sapporo–the Original Japanese Beer’ and ‘Japan’s Oldest Brand;’” “Statements on the defendant’s website that ‘Sapporo is the original Japanese beer;’” and an “Image of the North Star, a ‘symbol of pioneers in the area of Sapporo’ on labels.” Despite these slogans and statements, the beer labels themselves provided on each beer label either the statement “Imported by Sapporo U.S.A., Inc., New York, N.Y.” followed by “Brewed and canned [or bottled] by Sapporo Brewing Company, Guelph, Ontario, Canada” if manufactured in Canada, or “Brewed and Bottled [or Canned] by Sapporo Brewing Company, La Cross, Wisconsin for Sapporo U.S.A., New York, N.Y.” In considering whether plaintiffs adequately pleaded claims for false advertising under Illinois and New York state law, the court specifically considered whether these disclaimers as well as their font size, placement and emphasis were sufficient to alert a reasonable consumer that such products were not, in fact, brewed in Japan. After reviewing these factors, the court determined that Sapporo’s conduct would not mislead a reasonable consumer. In particular, “the disclosure statement on Sapporo appears in contrasting, visible font, and states in clear language where the product is produced.” Indeed, “the use of a trademarked start symbol and allusion to the company’s historic roots in Japan are eclipsed by the accurate disclosure statement.”

Several months later, another judge in the same district, considered and granted defendant MillerCoors’ motion to dismiss a similar lawsuit brought by the same plaintiffs’ counsel related to the advertising of Foster’s Beer. In Nelson v. MillerCoors, 246 F. Supp. 3d 666, 671 (E.D.N.Y. 2017), the plaintiff alleged that he purchased and paid a premium for Foster’s Beer based on the misleading campaign and advertisements that Foster’s was produced in Australia, rather than Fort Worth, Texas. In support, the plaintiff pointed to “the brand slogan ‘Foster’s–Australian for Beer,” the ‘How to Speak Australian’ television ads ‘depicting Foster’s as being a product from Australia by using Australian accents and scenery’ and the official website for Foster’s Beer” which references the use of Australian hops and Australian imagery. In assessing the plaintiff’s claims, the court again looked to the effectiveness and impact of MillerCoors disclaimers on an objectively reasonable consumer. Here, the court found that “Foster’s Beer labels contain an explicit disclaimer as to the place of production–’Brewed and packaged under the supervision of Foster’s Australia LTD, Melbourne, Australia by oil can breweries, Albany, Georgia and Fort Worth, Texas.” Of particular significance to the court was the fact that these disclaimers were displayed on every bottle and can of Foster’s and that MillerCoors used no exterior packaging that would obstruct the disclaimer. In the end, the court granted MillerCoors’ motion finding that “every single representation the plaintiff pleaded reliance on, across every medium, is accompanied by language indicating the beer is brewed in the United States” and that “the images of a kangaroo and a constellation and allusion to the company’s historic roots in [Australia] are eclipsed by the accurate disclosure statement.”

Recent Defeats

After successfully defeating proposed class action claims in the Eastern District of New York, beer manufacturers sought similar results in two cases filed in the U.S. District Court for the Northern District and Central District of California. Unfortunately for these defendants, in both instances the plaintiffs were able to overcome similarly styled motions to dismiss to continue to pursue their claims.

The first case, Broomfield v. Craft Brew Alliance, No. 17-cv-01027-BLF, 2017 BL 310562 (N.D. Cal. Sept. 01, 2017), relates to allegations that Craft Brew Alliance (or CBA) misled consumers into believing that its Kona Brewing Company beer was exclusively brewed in Hawaii. In support of its claims, the plaintiff point to several factors including the fact that while Kona has a Hawaiian brewery that makes draft beer sold in Hawaii, all of the beer sold outside of Hawaii is produced in the states of Oregon, Washington, New Hampshire and Tennessee. Further, the plaintiff alleged that Kona beer was packaged and marketed with various images depicting Hawaiian-related images as well as an image of a map of Hawaii which marks the location of the Kona Brewing Co., statements that consumers are invited to visit the brewery and pubs in Hawaii, as well as including the specific Hawaiian address for the brewery. As with Sapporo and Foster’s beer, CBA provided a disclaimer on its label that listed the five locations Kona beer is produced including “Kona, Hawaii, Portland, Oregon, Woodinville, Washington, Portsmouth, New Hampshire and Memphis, Tennessee.” However, in the end, this disclaimer did not overcome the plaintiff’s allegations in the court’s mind. Specifically, in denying CBA’s motion to dismiss, the court found that if there were only “alleged pictures of surfboards and the vague phrase ‘Liquid Aloha’ on the beer packaging, the case would end there.” Here, in contrast, the “Hawaiian address, the amp of Hawaii identifying Kona’s brewery on the Big Island, and the statement ‘visit our brewery and pubs whenever you are in Hawaii’ are … specific and measurable representations of fact that could deceive a reasonable consumer into believing that … Kona beer was brewed in Hawaii.” In distinguishing the New York cases, the court also noted that while the disclaimer was on beer label, the plaintiffs alleged that the packaging was deceptive which both did not include the disclaimer and obstructed the disclaimer language on the label. Given these findings the court denied CBA’s motion to dismiss allowing the plaintiff’s claims to go forward.

Finally, in a decision last month in Shalikar v. Asahi Beer U.S.A., No. 17-cv-02713 (C.D. Cal. Oct. 16, 2017), Asahi Beer lost its motion to dismiss claims that it falsely led consumers into believing its beer was brewed in Japan rather than the United States and Canada. In support of its claims, the plaintiff pointed to the inclusion of Japanese script and related English translations on the label and packaging of Asahi beer. The plaintiff also alleged that in a recent survey of 1,000 representative adults, 86 to 87 percent of respondents believed that the beer was brewed in Japan based on the labels and packaging. As with the other brewers, Asahi Beer provided a disclaimer on its label and packaging that stated: “Brewed and bottled under Asahi’s supervision by Molson Canada, Toronto, Canada, imported by Asahi Beer U.S.A., Inc., Torrance, California product of Canada. However, this disclaimer was not sufficient to defeat the plaintiff’s claims. In deciding to deny Asahi’s motion to dismiss, the court held that a motion “may be granted if a disclosure on the product concerning the challenged language does not contradict other representations or inferences on the packaging and labels …” Given the contradictions between the Japanese script, as well as the alleged survey results, the court determined that the existence of the disclaimer in-and-of-itself was not sufficient to dismiss the plaintiff’s suit.

Lessons Learned

While it’s difficult, in part, to determine a common thread between these four cases beyond jurisdictional distinctions a few points stand out. The first, is that any disclaimer needs to specifically identify where the beer is being brewed, not just where it could be produced The second, is that the disclaimer needs to be prominent in size and contrast and be visible to the consumer on the packaging as well as the beer label. The third, and final lesson, is that brewers should be particularly sensitive to specific statements or claims that suggest a beer styled as an import is actually manufactured outside of the United States (or Canada).

Alva C. Mather is a partner in the Health Sciences Department of Pepper Hamilton, resident in the Philadelphia office. She is chair of the firm’s Alcoholic Beverage Industry practice group and co-chair of the Food and Beverage Industry practice group.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.