Deception

Recently, I was asked by the good folks at The Whiskey Reviewer to provide a few thoughts on the ongoing lawsuit involving Old Charter Bourbon.  Essentially, the case boils down to the question of whether Old Charter engaged in deceptive advertising practices when it went from selling Old Charter with an age statement (8 years) to selling Old Charter without an age statement.  Of course, the devil is – as they say – in the details.  And in this case the relevant details are pretty interesting.  Here is the original label:

And here is the new one:

Notice anything different?  Look closely.  It is pretty subtle.  The sum total of the differences between the labels is the removal of the words “AGED” and “YEARS” from either side of the two “8”s on the label.  Apart from that, nothing has changed.

As I mentioned to The Whiskey Reviewer, this is a case where a producer did something fairly sneaky (and perhaps a bit deceptive) but nevertheless in compliance with TTB requirements. So how is this likely to end?  Is the plaintiff going to win this case?

First, I think it is important to remember that the vast majority of lawsuits do not go to trial.  Instead, they result in a settlement between the parties.  I expect that this case is no different and anticipate that it will likely settle before trial.

Nevertheless, I think the Plaintiff in this case would probably have a difficult time winning the case.  The lawsuit alleges several different types of bad acts (deceptive business acts or practices, false advertising, unjust enrichment, breach of express warranty, violation of a federal statute relating to warranties, fraud and negligent misrepresentation – to be exact).  In my opinion, most of these claims are about as bad as the Plaintiff claims the new formulation of Old Charter to be.  The claims that appear to have the best chance of success are the first two: deceptive business practices and false advertising.  Both of these claims allege violation of specific provisions of New York law.

But with respect to both of these claims there is still a pretty significant problem.  New York law (like the laws of many states) contains a safe harbor that says – in essence – if your advertising is in compliance with (or specifically authorized by) a federal law or regulation, or a federal agency approved the language, then you can’t be sued for false advertising or deceptive practices on the basis of that advertising.  Put another way, the law of New York seems to suggest that if your label was approved by the TTB, then you’re protected against a lawsuit alleging false advertising or deceptive practices.  The Defendants lean heavily on this proposition in their pleadings in the case.

Of course, the somewhat curious thing about this defense is that the TTB itself would likely assert that successfully navigating the COLA process should not be viewed as a complete defense against claims brought by parties other than the TTB, or at least with respect to statutes that the TTB doesn’t enforce.  But since one of the primary purposes of the COLA process is to ensure that consumers aren’t fooled by what’s on the label – and since age statements are specifically regulated in the context of those labels – I can envision a court deciding that the TTB approval of the label is enough to bring the defendants within the New York safe harbor.

All that having been said, Old Charter has obviously suffered some reputational damage as a result of the suit (and the negative reviews following the changes to the label).  That damage will likely be increased a bit by whatever payment is ultimately made to the Plaintiffs when the suit is settled – as again I suspect it will be.

So who is the winner?  I suppose that depends on how you measure success.  But if the case settles then the Plaintiff’s lawyers will demand that their fees are paid as part of the settlement.  That fee will outstrip the amount recovered by the Plaintiff himself – so maybe they’re the most likely winners.

The key item of learning from the case is to remember that even if you get COLA with respect to your product, you still need to make sure that your label isn’t going to get you in hot water in some other way.  That hot water could come through claims that your label is deceptive – like the Old Charter suit – or from another business that believes you’re ripping off their intellectual property – like the fight over the use of a Yeti in marketing beer.  Just because you got your COLA doesn’t mean you’re off the hook.  More diligence is needed.