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In January, On Reserve reported that Vignerons de la Méditerranée (“VM”) filed a complaint in the Supreme Court of the State of New York County of Westchester against Harrison-based importer Pasternak Wine Imports. See Vignerons de la Méditerranée sues Westchester County Importer Pasternak. The complaint named Domaines Barons de Rothschild (“DBR”) as a co-defendant to the complaint. Pasternak was the U.S. importer of the French wine company and in its complaint, VM claimed breach of contract with damages of over $600,000. The complaint also alleged several other causes of action including implied covenant of good faith and fair dealing, unjust enrichment, tortious interference, and unfair competition.Pasternak Wine Imports 1 300x199 Importer Pasternak Answers and Counterclaims Against Vignerons de la Méditerranée

On Friday, defendants filed an answer, along with affirmative defenses and counterclaims, to plaintiff’s original complaint. See Pasternak Wine Imports, LLC Answer, Affirmative Defenses, and Counterclaims. Defendants denied the majority of plaintiff’s original allegations, and provided some affirmative defenses, of most relevance:

  • Defendants affirmatively stated that Pasternak Wine Imports was the name of a general partnership (now inactive) organized under the laws of Connecticut. The current company is organized under the laws of New York and is an LLC.See id. at 2.
  • DBR formerly owned a 35% partnership interest in Pasternak Wine Imports and, since 2012, has acquired 100% of the LLC membership of Pasternak LLC (the active LLC organized under the laws of New York). Id. at 4.
  • Without objection of Pasternak, and with its full knowledge, the inactive general partnership and the currently active LLC purchased from a then-affiliated company wines from the Pays d’Oc region of France and marketed and sold such wines within a “territory” as per the distribution agreement between plaintiff and Martin Sinkoff Wines, Inc. See id. at 5.
  •  The now-inactive general partnership reorganized its business into an LLC under the laws of New York, and Pasternak acceded to, and ratified, the reorganization, among other things such as continuing to do business with Pasternak LLC. Id.

The defendants raised several affirmative defenses, including ineffective service of process (on each defendant other than Pasternak LLC); defective summons; acquiescence, waiver, and estoppel; account stated and Pasternak LLC’s right to setoff; plaintiff’s repudiation and breach; plaintiff’s unclean hands; and failure to state a cognizable claims. Particularly noteworthy were the following:

  • Defendants raised the affirmative defense that plaintiff acquiesced in conduct originally complained of in its complaint by: (1) Signing a distribution agreement with the original general partnership, which did not prohibit the now-inactive company or its successor from issuing ownership interest, and with full knowledge that DBR owned 35% interest; (2) Acceding to and ratifying the reorganization of the prior general partnership and by continuing to do business with Pasternak LLC through actions like accepting and fulfilling purchase orders, invoicing the LLC, and accepting payment from the LLC; and (3) By allowing the GP and LLP to both purchase the Pays d’Oc wines and to market and sell such wines in the previously agreed upon territory. Id. at 11–14.
  • In or around August 2013, Pasternak LLC and VM agreed upon a statement of account liquidating amounts owed to and by VM. Id. at 14.

In its counterclaim, Pasternak named several additional counterclaim defendants, including but not limited to Vintage Epicure LLC (an LLC organized under the laws of New York, engaged in the sale of wines distributed by VM) and Beverage Group International, LLC (an LLC organized under the law of New York, engaged in the sale of wines distributed by VM). Pasternak counterclaimed on three main grounds: (1) Against VM for breach and repudiation of contract and implied covenant of good faith and fair dealing; (2) Against VM for for account stated and Pasternak’s right to setoff; and (3) Against additional counterclaim defendants for tortious interference with contractual and business relations. Id. at 26–29.

Val Dorbieu 300x276 Importer Pasternak Answers and Counterclaims Against Vignerons de la Méditerranée  Pasternak argues that, on or about February 12, 2013 (and during the term of its distribution agreement), and prior to any attempts by VM to address any perceived inadequacies of Pasternak’s representation with Pasternak, Beverage Group International, LLC filed a certificate of assumed name in the Office of the Clerk in the County of Rockland asserting the additional counterclaim defendant would be doing business under the name of, “Val d’Orbieu Americas, USA” and VM registered its “brands” to additional counterclaim defendant. Id. at 23–24. Previously, under the distribution agreement and according the Pasternak’s answer, the Val d’Orbieu wines were among the VM “brands” that were to be exclusively sold to Pasternak. As noted by Pasternak in its answer, Groupe Val d’Orbieu is the entity owning “all or a substantial” part of VM. Id. According to Pasternak, VM neither informed Pasternak nor sought consent from Pasternak in regard to the filing or registration of Val d’Orbieu. Additionally, Pasternak alleges that VM and Pasternak continued to operate under the distribution agreement, until Pasternak received a letter from VM in June 2013 purporting termination. Id. It is to the belief and knowledge of Pasternak that VM was urged by additional counterclaim defendants and/or their employees, members, or managers to register its brands with another entity, as well as to terminate the original distribution agreement. Id. at 24–26.

Pasternak requests a judgment dismissing VM’s claims and attorney’s fees, along with other relief as deemed just and proper. Id. at 28.

What is interesting about this particular case is how easily much of this information can be traced. For example, to confirm Pasternak’s allegations that Beverage Group International, LLC was importing Val d’Orbieu or Vignerons de la Méditerranée wines, for which Pasternak was to remain the exclusive importer, we can easily check the TTB public COLA database or even LabelVision. Using either of those sources, we can see that Beverage Group International, LLC filed several wine label applications on and after March 13, 2014 with the TTB using the DBA Val d’Orbieu Americas, USA. This also means that Beverage Group International, LLC needed to amend its TTB-issued federal basic importer’s permit to include the DBA. Generally, this entails filing an amendment with the TTB and, likely, this occurred well before March 13, 2014. Of course, some issues are still outstanding, such as whether the distribution agreement was still in effect, and these are matters that cannot be solved through a public portal. 

To view a copy of the original complaint, please see Vignerons de la Mediteranee vs. Pasternak and Domaines Barons de Rothschild (Index Number 50102/2015). To view a copy of the answer with counterclaims, see Affirmative Answer, Defense, and Counterclaims.

For more information on wine or alcohol law, direct shipping, licensing, or other legal matters please contact Lindsey Zahn.

Images property of VIBE Conference and Vitisphere, respectively.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

 

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Are AUREA and FINCA AUREA Confusingly Similar for Wine?

Finca Aurea Wine Trademark TTAB 300x300 Are AUREA and FINCA AUREA Confusingly Similar for Wine?Applicant Roberto Oreste Antonio Busnelli sought to register the mark FINCA AUREA on the Principal Register in standard characters, with FINCA disclaimed in International Class Type 33.  See In re Roberto Oreste Antonio Busnelli, Serial No. 85830131 (February 20, 2015) [not precedential]. The application included a translation that indicated the the mark means, “GOLDEN VINEYARD” in English. Originally, the Trademark Examining Attorney refused the registration under Section 2(d) Trademark Act, 15 U.S.C. § 1052(d), asserting that Applicant’s mark, as applied to the goods in the application, resembled a registered standard character mark “AUREA” in International Class 33 for ““Grape wine; Red wine; White wine; Wine; Wines.” Id. at 2. The Attorney reasoned applicant’s mark was likely to cause confusion, to cause mistake, or to deceive with regard to the registered mark. Applicant appealed after the Attorney made the refusal final.

When the matter reached the Board, the Board first examined the similarity of the goods and the channels of trade (the second and third du Pont factors). In doing so, the Board established the following:

  • Applicant’s goods are identical to those of registrant;
  • The registrant’s goods move in all channels of trade characteristic for such goods and are available to all potential classes of ordinary customers; and
  • Since the wines outlined in the application and the cited registration were legally identical, there was a presumption that the channels of trade and classes of purchasers would be the same.

Id. at 3. Thus, with respect to the second and third du Pont factors, the Board found in favor of likelihood of confusion.

In its analysis, the Board turned the to remaining du Pont factors to determine if a likelihood of confusion existed based on the similarity or dissimilarity of the marks in their entireties with respect to appearance, sound, connotation, and commercial impression. Id. at 4. As noted by the Board in many prior opinions, the test never includes a side-by-side comparison of the marks, but instead examines whether the marks are “sufficiently similar” in their commercial impression to allow a person who encounters both marks to conclude there is a connection between the two parties. Further, the Board noted that its decision is made on the basis of the mark as a whole, not on the basis of specific dissections of the mark, but also explained that it would be rational to weigh some factors more than others provided the conclusion still rests on the mark as a whole. Id. 

The Board noted that the registered mark, “AUREA,” translates to “GOLDEN” in English. The Applicant’s mark, “FINCA AUREA,” translates to “GOLDEN VINEYARD” in English but discounted the term “FINCA.” It went on to reason that the Applicant’s mark begins with a term that somewhat distinguishes it from the registered mark, but the Applicant disclaimed the exclusive right to use the term “FINCA.” Id. at 5. Further, the Board noted that “FINCA,” which translates to “VINEYARD,” is highly descriptive in its association with wine and “[i]t is well-settled that disclaimed, descriptive matter may have less significance in likelihood of confusion determinations.” Id. at 5–6. Further:

  • Applicant’s mark incorporated registrant’s entire mark, which “heightened similarity” between the two marks; and
  • Even though Applicant produced arguments based on the file history of registrant’s mark, the Board reasoned that it was “well-established” it did not take judicial notice of records located in the Patent and Trade Office and each case must be decided on its own facts.

Id. at 6.

Alas, the Board found the Applicant’s mark similar to that of the registered mark and thus found in support of a likelihood to cause confusion.

Image property of Finca Aurea.

For more information on wine or alcohol law, labeling, or trademark, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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A Sight To See: Somerston Estate in Napa Valley

Somerston Estate 685x1024 A Sight To See: Somerston Estate in Napa Valley

Last week I had the long overdue pleasure of spending some time in Napa Valley.  It was a short trip but a special one.  And well-timed too, with much of the North East covered in snow and slush.

Special thanks to Somerston Estate in St. Helena and brand Ambassador Ben Brenner for an amazing afternoon of ATV tours and tastings. With its majestic sloping hills, natural springs, olive trees, and roaming sheep, the property is as gorgeous as it is fruitful.  Its vineyards are located on an elevation between 850 and 2400 feet and feature a wide range of grapes, the most predominant being Cabernet Sauvignon and Sauvignon Blanc.  Their estate grown and bottled wines are fantastic, as are those of their co-brand, Priest Ranch.  I’ve ordered a few for friends and family already, any am looking forward to reviewing the shipment in On Reserve’s Wine Review series.

If you’re in the Napa area, I recommend a visit to Somerston for the tour as well as their Priest Ranch tasting room in Yountville. 

Here’s hoping I make it back out to Napa and Somerston Estate in the not too distant future. 

 

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As reported by The Albany Times Union and Capitol Confidential, a bill was introduced this week to the New York State Assembly by Assemblyman Phil Steck that proposes to amend New York State’s alcohol beverage laws. See Bill Supports Empire Wine SalesBill Would Curb SLA’s Power Over Out-Of-State Wine Shipments. The bill will reportedly stop the NYSLA from revoking licenses of an in-state alcohol business if the business violated the law of another state. Id. It is alleged that the bill is a response to the Authority’s pursuit of Empire Wine, a Colonie-based retailer to whom the Authority issued a Notice of Pleading several months ago. In its Pleading, the agency alleged that Empire engaged in “improper conduct” by shipping wine directly to consumers in other states in violation of laws of several other states. For more information, see Retailer Empire Wine Sues New York State Liquor Authority: Direct Shipping. The ongoing situation between Empire and the NYSLA has attracted the attention of many industry professionals, and some have called into question the authority of the state agency with respect to regulating beyonds it borders. See, e.g., NY Liquor Regulators Slapped Down For Shady Enforcement Tactic.

This bill arrives just several weeks after an extremely strong letter written by State Director Michael P. Durant, on behalf of the National Federation of Independent Business, expressed concern of overregulation and pleaded with the agency to take a “sensible and fair approach to regulation of small retailers like Empire Wine & Spirits.” Mr. Durant specifically highlighted the relentless efforts of Governor Cuomo and his team to foster the growth of the state’s wine, beer, and spirits industry—especially with respect to smaller producers. In particular, Mr. Durant noted:

Overregulation and agency overreach threaten not only the wine and spirits industry but also many other industries across the state . . . . Small business owners in New York spend countless hours on compliance, including the administration and implementation of rules and regulations, which easily computes to billions of dollars in lost productivity annually. If agencies make it a regular practice to interpret and enforce vague laws, small business owners will face an even greater burden, and such course of action will threaten to dampen business growth in our state. NFIB is also concerned that discouraging internet sales conflicts with Governor Cuomo’s initiative to promote the wine, beer, and spirits industry in New York. The state recently has taken positive steps to promote growing facets of our economy and the modernize the Alcohol Beverage Control Law, which suggest a promising future for the industry.

See NFIB Letter Dated February 19, 2015

Late last year, Governor Cuomo signed the New York Craft Act into law. See Governor Cuomo Signs Craft New York Act, Promoting Craft Beverage Industry. A number of state beverage producers dedicated a significant amount of time to modernizing the state’s law, and most of the producers to whom I’ve spoken had positive reactions to the new law and are optimistic that the changes will have a strong impact on local industry. While the Craft Law focuses predominantly on small in-state producers, it sends a strong message that New York State is working to cut regulatory hurdles to foster growth of local businesses. It is quite possible that the alteration of New York’s ABC laws is just the beginning—i.e., it is certainly conceivable that additional provisions of the state’s alcohol beverage law affecting other tiers of industry may undergo changes in the future.

Assemblyman Steck’s bill is listed as bill number A05920 in the New York State Assembly and serves to “[l]imit the authority of the state liquor authority to penalize licensees based on perceived violations of the laws of other states, unless the conduct in question amounts to an independent violation of the alcoholic beverage control law or has resulted in a criminal conviction in another state.” Specifically, the bill adds language to the state’s current law that indicates the NYSLA does not have the power to revoke, cancel, or suspend any license or establish a civil penalty on a licensee based on conduct which the Authority deems to be in violation of another state’s law “unless such conduct independently violates a specific provision of this chapter, or unless due process of law has been provided by authorities of competent jurisdiction in such other state and the licensee or permittee has exhausted its due process rights and have been determined to have violated the laws of such other state.” While this may be good news for those in support Empire’s side, if this bill is signed into law, it will be rather interesting to see it in effect. Given the extreme and unprecedented reliance on the term “improper conduct,” future arguments may be even more inventive.

In its justification, the bill states the following:

It is concerning that the State Liquor Authority (SLA) is conducting enforcement activity on behalf of other states, when these states have not requested their enforcement or intervention, nor has the New York merchant been found to have violated the law of those states. The area of law the SLA is attempting to enforce is vague considering that 9 NYCRR 53.1 (n) does not specifically list out-of-state shipments as constituting “improper conduct”. While the SLA has used its authority under 9 NYCRR 53.1 (n) in the past to appropriately sanction licensees for “improper conduct” involving the committing of felonies or serious misdemeanors, the notable difference in this case being that the New York merchant has not violated any provision of the New York State Alcoholic Beverage Law, or any SLA rule or regulation, nor has it been found to have violated such other state’s law or regulation.

Emphasis added.

What is perhaps important to think about is why these laws have been drafted. Yes, the ABC laws of New York were written to prevent criminals and felons, who plagued the industry in or around the Prohibition era, from gaining industry interest or influence. This is true for many state laws, as well as for those of the federal government, and most of the laws are written with this concern in mind. It is certainly within the state’s interest to regulate the industry from undue influence, and from corruption and misconduct—but there is an extent. Is Empire’s conduct really apace with a felony or serious misdemeanor? From commentary I’ve read, many would zealously say “no.” Is the law in application functioning far beyond the intention or foresight of its drafters? Perhaps this is the point where the law needs to change.

For more information on New York State wine or alcohol law, direct shipping, or establishing a New York beverage business, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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South Dakota Opens Doors to Direct Shipping of Wine

Last week, the South Dakota Governor Dennis Daugaard signed a bill (HB 1001) into law allowing the direct shipment of wine and making South Dakota the 43rd state to allow direct-to-consumer shipping of wine. See South Dakota Governor Signs Direct-to-Consumer Wine Shipping Bill into Law. According to The Financial, the law’s provisions go into effect on January 1, 2016, which means wineries have almost one year before they can legally ship to consumers in the state.

Like most states, a winery will be required to obtain a separate license through the state of South Dakota in order to directly ship wine. At minimum, the winery will need to be licensed on the federal level with the TTB (i.e., have a federal basic permit), and pay an annual fee of $100 to obtain a direct shipping license. Id. With this license, a winery may directly ship up to 12 cases of wine per year—produced under the winery’s federal basic permit—to any adult consumer aged 21 years or older within the State during a calendar year. The winery must still perform due diligence, such as verifying the age of the consumer placing the order by obtaining a copy of the consumer’s government-issued photo ID or through an online age verification service.

In addition to the license, a winery seeking to ship directly into the state of South Dakota will have to comply with additional requirements of the state, such as registering labels, as well as pay excise and sales taxes and file quarterly reports. (Not an exhaustive list; for more information, please contact your legal counsel.)

For more information on the bill’s progression, see 2015 Session — Bill History: HB 1001

For more information on direct shipping, licensing, or TTB matters, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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Wine Law Program University of Reims On Reserve Author to Teach at University of Reims Wine & Law ProgramIt is with great honor that I share the following: This summer, I will be teaching a course on U.S. Wine Law at the Wine & Law Program at the University of Reims. 

Four years ago, I had to absolute pleasure of attending the Program and exploring my burgeoning interest in this very intersection of wine and law. At the time, I was still a student in law school, but my passion and natural curiosity for wine law was eminent. I attended the program as an attempt to learn more not only about the topic, but to also probe at my own wonder. The Program was by far one of the highlights of my law school career because it helped animate topics and issues I had only read about in books or researched on Westlaw. Today, I am fortunate to practice wine, beer, spirits, and food law in my every day practice as a lawyer—and the Wine & Law Program certainly played an integral role in my decision to pursue this rather niche area of law.

This year, the Program is in its fifth session and will discuss topics related to wine law and wine marketing. The course will focus on questions like alcohol advertisement, health limits on the promotion of wine, ethics in wine marketing (prohibited wine names and trademarks) in the context of EU, U.S., and Australian law. The faculty includes Steven Charters, Vicki Waye, and Theodore Georgopoulos. Participants are mostly professionals but law (or wine-related discipline) students are also welcome.

Mr. Georgopoulos runs the Wine & Law Program at the University of Reims in the Champagne region of France. The Program includes the summer school session, hosted each year in English, as well as a one-year, full-time program, taught in French (DU vitivinicole et des spiritueux).

You can read more about my time at the 2011 Wine & Law Program in the article Life After Champagne: Synopsis of the 2011 Wine & Law Summer Program.

Photograph property of Lindsey A. Zahn.

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This week, TTB issued a new guidance on the annual filing requirements for wineries. The guidance announced that, for wineries meeting certain requirements, excise tax returns and reporting requirements may be filed annually. Specifically, this refers to the Excise Tax Return (TTB Form 5000.24) and the Report on Wine Premises Operations (TTB Form 5120.7). The guidance provides, in more detail, how a winery can be eligible to file each return or report on an annual basis.

What types of wineries are eligible to file Excise Tax Return annually?

Some wineries are eligible to file the Excise Tax Return annually, as opposed to semi-monthly or quarterly (as required by 27 CFR 24.271), provided they meet the following requirements (from 27 CFR 24.273):

  • The winery’s proprietor has not given a bond for deferred payment of wine excise taxes and the proprietor:
    • Paid excise taxes in an amount less than $1,000 during the prior calendar year; OR
    • Is a proprietor of a newly established bonded winery and reasonably expects to pay less than $1,000 in wine excise taxes before the end of the calendar year.

More information on deferred payment of wine excise taxes can be found in TTB’s guidance here. Winery proprietors who meet the above eligibility requirements may file the Excise Tax Return (TTB Form 5000.24) and remittance within 30 days after the end of the calendar year.

What types of wineries are eligible to file Report on Wine Premises Operations annually?

Generally speaking, proprietors of wineries are required to file the Report of Wine Premises Operation either monthly, quarterly or annually. 27 CFR 24.300(g). To be eligible to file the Report annually, a proprietor must:

  • File the Excise Tax Return (TTB Form 5000.24) annually, as outlined above; AND
  • Not expect the total of all bulk and bottled wine to exceed 20,000 gallons for any one month during the calendar year.

As TTB summarized in its guidance, if a proprietor is not eligible to file the Excise Tax Return (TTB Form 5000.25) annually, then they are preempted from eligibility to file the Report on Wine Premises Operations (TTB Form 5120.7) annually. If a winery proprietor is eligible to file the Report annually, the Report is due on January 15th of every year following the year for which the Report summarizes.

For more information on wine or wine law, licensing, or winery reporting and excise taxes, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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In June of last year, the Supreme Court decided a rather revolutionary case for the food industry: Pom Wonderful LLC v. The Coca-Cola Company. The case, which was commenced by Pom Wonderful, questioned the label of a competitor’s product, Coca-Cola’s Minute Maid Blueberry Pomegranate juice. The Minute Maid label contained the words “blueberry pomegranate” in greater predominance than other text on the label that indicated the juice was a blend of five fruit juices. In actuality, the Minute Maid Pomegranate Blueberry juice contained 0.3% pomegranate juice and 0.2% blueberry juice, whereas 99.4% of the blend contained apple and grape juice (the remaining 0.1% was raspberry juice). See Pom Wonderful LLC v. The Coca-Cola Company, 573 U.S. ___ (2014), 134 S. Ct. 2228. While this label may seem misleading on its face, Coca-Cola argued its labeling was actually in compliance with FDA rules and regulations. Id. Pom Wonderful, on the other hand, alleged that the use of the label by Coca-Cola was misleading and deceptive under § 43 of the Lanham Act, which allows a competitor to sue another provided it asserts unfair competition from false or misleading product descriptions.

Because the Federal Food Drug and Cosmetic Act (“FD&C Act”), which authorizes the FDA to oversee food safety, does not provide an express or implied private right of action to enforce the Act’s provisions, Pom Wonderful brought a claim under the Lanham Act. The Lanham Act, which prohibits a number of activities, does allow a competitor to bring a private right of action against its competitor for unfair competition arising from false or misleading advertising. 15 U.S.C. § 1051 et seq. Because advertising and labeling are generally not mutually exclusive, the regulation of certain products can present interesting questions, especially in the context of the food and beverages. For example, how do the Lanham Act and FD&C Act interact when a label is in compliance with the FD&C Act and enacting agency regulations, yet may present grounds for unfair competition claims? Such was an issue presented to the Supreme Court last year. In an 8-0 decision, the Supreme Court ruled that competitors may bring Lanham Act claims challenging food and beverage labels regulated by the FD&C Act. 

What does this mean for alcohol beverages?

With respect to labeling (and generally speaking), the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) has primary jurisdiction over alcohol beverages. The TTB’s enacting statute is the Federal Alcohol Administration Act (“FAA”). Neither the FAA nor the TTB were mentioned by the Supreme Court in Pom Wonderful, so many ponder how the Supreme Court’s ruling may apply to alcohol beverages. Presumably, the Supreme Court would have to analyze the issue with respect to the FAA. Others suggest that, because Pom Wonderful contains dicta regarding how the FDA treats food differently from drugs (whose labels generally require pre-approval from the FDA), this may mean the Court’s holding would not apply to pre-approved drug labels and the holding may extend to other pre-approved labels like alcohol beverages. See, e.g.POM Wonderful LLC. v. Coca-Cola Co. Sound Preclusion Jurisprudence or Pandora’s Juice Box? However, until this issue is actually examined by the Court—directly or indirectly—it is likely we will see some interesting lower court jurisprudence involving similar issues and implications. For example, as beverage attorney Robert Lehrman explained in one of his prior blog posts, “This case could have enormous implications far beyond FDA labels, and could extend all the way over to TTB labels, TTB formulas, excise taxes, TTB permits, to almost every area that alcohol beverage regulators have firmly controlled in the past.” See Pom v. Coke, Battle of the Misleading Fruits

Another interesting consideration is that, upon submitting a label application to TTB, an applicant must certify that the representations on the label truly and accurately represent the contents of the beverage product. Specifically:

Under the penalties of perjury, I declare; that all statements appearing on this application are true and correct to the best of my knowledge and belief; and, that the representations on the labels attached to this form, including supplemental documents, truly and correctly represent the content of the containers to which these labels will be applied. I also certify that I have read, understood and complied with the conditions and instructions which are attached to an original TTB F 5100.31, Certificate/Exemption of Label/Bottle Approval.

[Emphasis added.]  A bolder question may be whether the TTB perjury statement is strong enough to combat a Lanham Act claim, and how an agency’s pre-approval of a label may impact such claims. This is also yet to be seen.

In recent news, we’ve actually seen a lot of similar claims arise against alcohol beverage companies. While not exactly the same types of suits (i.e., not filed on behalf of competitors), the subsequent lawsuits have presented similar concerns about the labeling of alcohol beverages. For example:

  • A group of consumers sued Anheuser-Busch for “deliberately” overstating the alcohol content of its beers. See Anheuser-Busch Accused of Watering Down Several Brands. In December, Law360 reported that the plaintiffs bringing the lawsuit urged the Sixth Circuit to revive the suit and contended that the Pom Wonderful decision invalidated Anheuser-Busch’s defenses (which mostly relied on the Federal Alcohol Administration Act’s tolerance of 0.3% of the stated ABV on the label). See Anheuser-Busch Suit Buoyed By Pom Ruling, 6th Circ. Told.
  • In December, two consumers accused Maker’s Mark of false advertising and overcharging customers with respect to the brand promoting its bourbon as handmade on the product’s label when, as alleged by plaintiffs, the product is mass produced through a mechanized process. See Maker’s Mark ‘Handmade’ Claims Are False, Class Says. Case # 3:14-cv-2885-JAH-NLS.
  • Similar claims were brought against Tito’s Handmade Vodka with respect to the term “handmade” and against Templeton Rye with respect to the claims “Small Batch” and “Made in Iowa.” (For Templeton, the plaintiffs claim the product is not actually produced in Iowa but is instead distilled and aged in an Indiana-based factory that distilled and ages whiskey for countless other brands.) See Lawsuit: Tito’s Vodka Isn’t Actually ‘Handmade’see also Al Capone Liked It, But …
  • Finally, just last week, it was reported that a class action lawsuit was brought against Angel’s Envy Rye in Cook County, Ill, Circuit Court with respect to “small batch.” Lawsuit: Angel’s Envy Rye is No Small Batch Whiskey.

A quick search of the TTB label database using LabelVision indicates there are well over 700 labels approved since 1998 that have some reference to “handmade”; over 6,000 labels that have a reference to “handcrafted”; and near 1,000 labels that use the term “small batch.” A curious consideration about these terms is that neither “handmade,” handcrafted,” nor “small batch” are actually defined by the TTB or its regulations. Contrast this to fruit juice labels, which have specific rules and regulations on how a juice product can be labeled depending on its contents. The absence of a formal definition could, potentially, weigh in favor of a false advertising claim—especially if one considers how the Court in Pom Wonderful asserted that the Lanham Act and the FD&C Act were designed to be read together, and not one substituting the other. Still, it remains to be seen how the Court would rule with respect to TTB-regulated products.

While the above matters are still pending, it will certainly be interesting to see how different courts interpret and apply the Pom Wonderful ruling in the context of alcohol beverages as well as with respect to class actions. Further, it may be of even greater interest to beverage producers to see how many other similar suits appear in the near future. 

For more information on wine or alcohol law, labeling, or food law, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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Hillside Select: Napa Vintner Sues Angwin Winery Over Name

Napa Valley vintner Shafer Vineyards recently filed suit against Angwin, California winery owner, Mike Beatty (doing business as Howell Mountains Vineyards) for use of the term Hillside Select on its wine. Shafer Vineyards—who according to the USPTO database registered the mark Hillside Select in January 1990—alleges Mr. Beatty used the Napa Valley vintner’s registered mark Hillside Select on wines produced by the Angwin winery. The complaint was filed in Napa County Superior Court in December and alleges federal and state trademark competition and likelihood to cause confusion, as well as unfair competition.

Shafer Vineyards’ signature wine is a cabernet sauvignon (dubbed Hillside Select) and its 2010 vintage sells for about $250. See Shafer Vineyards 2010 Hillside Select® Cabernet Sauvignon. According to the complaint, defendant was selling a red wine called Hillside Select; plaintiff demands that defendant stop using the name Hillside Select on its wines, as well as pay triple damages suffered by Shafer in addition to attorney fees, interest, and other costs. See Shafer Vineyards Sues Angwin Vintner Over Wine Name.

After searching ShipCompliant’s LabelVision, I found at least two other label approvals with the term “Hillside Select” within the class of wine. While one of those approvals does not currently seem to be used in commerce (if ever), the remaining approval seems to have been used on a previous cabernet sauvignon vintage several years ago. (It is not clear if this latter approval is still being used by the particular COLA owner.)

In this case Howell Mountains Vineyards was not attempting to register “Hillside Select” as a word mark, however the above still illustrates the importance of running a trademark clearance search before attempting to register a mark on the USPTO or state databases. If Howell Mountains Vineyards were seeking to register the mark “Hillside Select,” a trademark clearance search on the federal level would have returned results indicating that such mark was already registered to Shafer Vineyards on the USPTO database. The term “Hillside Select” seems to have been used by Howell Mountains Vineyards more as a fanciful name for the wine, and not necessarily as a brand or vineyard name, however the laws governing trademark still hold strong here. Perhaps it is worth noting that, in the case of wines, a proprietor should consider registering or conducting a clearance search for fanciful names.

For more information on wine or alcohol law, labeling, or trademark, please contact Lindsey Zahn.

Note: On Wednesday, January 21st, Decanter reported that Shafer “reached an amicable settlement” with Howell Mountains Vineyard with respect to “Hillside Select.” See more here

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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On January 5, 2015, plaintiff Vignerons de la Méditerranée (“VM”) filed a complaint in the Supreme Court of the State of New York County of Westchester against Harrison-based importer Pasternak Wine Imports (defendant). The complaint names Domaines Barons de Rothschild (“DBR”) as a co-defendant to the complaint. Pasternak was the U.S. importer of the French wine company and in its complaint, VM claims breach of contract with damages of over $600,000. The complaint also alleges several other causes of action including implied covenant of good faith and fair dealing, unjust enrichment, tortious interference, and unfair competition.

VM argues that Pasternak conspired to limit the sales of its Pays d’Oc wines in the U.S. A wine boasting Pays d’Oc IGP is one that is produced completely within the Languedoc-Roussillon region of France and has been approved by the Pays d’Oc Wine Producers Union and meets strict quality criteria. According to the complaint, Pasternak agreed by contract not to market, represent, or sell any French Vin Pays d’Oc in the U.S. that was not supplied by the plaintiff, unless defendant obtained written consent from VM. At some point in time during this relationship—the exact date of which is not made clear by the complaint—the winemaker alleges that Pasternak created a subsidiary, Pasternak Wine Imports, LLC, and transferred all benefits, interests, liabilities, and obligations (including distribution rights) under the original Agreement between the parties to the new sub without the consent of VM. Further, interest was purchased by a competing French wine company, DBR (a direct competitor of the French winemaker). The defendant made the subsidiary the exclusive distributor of the plaintiff’s wines without the consent of the plaintiff (in or around March 2007). 

The complaint sets forth that VM sales in the U.S. decreased significantly and the importer failed to remit payment on invoices from the plaintiff. Further, as alleged by the plaintiff, the subsidiary marketed, represented, and sold competing wines from the Pays d’Oc region in the U.S. wines without the consent of the plaintiff. Alas, VM contends Pasternak and DBR conspired to limit the sales of VM’s Pays d’Oc wine while promoting the sale and distribution of DBR wines. In particular:

DBR conspired with [Pasternak Wine Imports, LLC] to preserve and expand its market for foreclosing access to VM products, business and distribution channels in the United States, Puerto Rico and the U.S. Virgin Islands, and by forcing, enticing and/or compelling [Pasternak Wine Imports, LLC] to market and advertise DBR’s competing wines rather than Plaintiff’s wines. As a result, [Pasternak Wine Imports, LLC] failed to comply with its contractual obligations to Plaintiff by failing to properly promote and market Plaintiff’s wines.

See  Vignerons de la Mediteranee vs. Pasternak and Domaines Barons de Rothschild (Index Number 50102/2015), Page 5.

The Commercial Division of New York Supreme Court, where the complaint was filed, handles complicated commercial cases, so should the case proceed, it is quite possible it may be removed (if diversity jurisdiction is found) and even sent to the court’s Alternative Dispute Resolution Program (“ADR”) if the court thinks the case is resolvable under the ADR process and wants it off of the court’s docket. Additionally, much of the outcome of this particular case may depend on how the contract between the two parties was originally drafted (a copy of the contract was not accessible via the public copy of the summons and complaint). 

See more information at Languedoc Wine Group sues US Importer.

To view a copy of the complaint, please see Vignerons de la Mediteranee vs. Pasternak and Domaines Barons de Rothschild (Index Number 50102/2015).

For more information on wine or alcohol law, direct shipping, licensing, or other legal matters please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

 

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