The 7 golden rules for avoiding a Class Action Lawsuit regarding false advertising
A webinar conducted on June 4th with Thomas Cunningham and Simon Fleischmann, two Class Action Defense Attorneys from Locke Lord that specialize in the beverage industry along with Robert Lehman, the Principal Attorney at Lehrman Beverage Law has shed some light regarding how producers can avoid being sued.
In the last year, the beer and primarily the spirit industry has experienced two dozen Plaintiff Class Action Cases. Producers that have labelled their bottles with ambiguous wording such as “handmade” or have been unclear in regards to where the alcohol was actually distilled are getting into hot water. Plaintiffs and Class Action Attorneys have seized this opportunity for legal action. With Diageo’s Bulleit Bourbon being the latest Class Action Lawsuit to touch the industry, it is fair to say that the spirit industry is under legal fire!
If your brand gets sued, essentially, you can not win. Resolving the case via a settlement is almost always cheaper for the spirit producer. If you want to win the battle in court, you need to have deep pockets. But even if you win, your brand initially suffers from negative media publicity. Targeting large well established spirit brands provides a more lucrative opportunity for the Plaintiffs and Attorneys. However, recent cases involving smaller producers such as Templeton Rye and Whistle Pig demonstrate that all members of the spirit industry are at risk.The only way to win a Class Action Case is to not get sued in the first place. Follow these seven golden rules and significantly reduce your risk of getting sued. And remember, the fact that your label was approved by the TTB does not work as an argument for your defense in court!
The Seven Golden Rules1.) Substantiate All Claims
If you make a claim that can be misinterpreted, be ready to support it.
Most lawsuits are filed after a brand gets bad media coverage for deceiving the customer. Explaining yourself immediately reduces your chance of getting noticed and serves as evidence to better negotiate settlements
Natural, Organic, Handmade, Hand Crafted, Hand Bottled, Small Batch, Low Volume, Old Fashioned, Rare, Unique, Prohibition Era Recipe, Craft, Small and Independent Company, Claims of Geographic Origin
If you do use the trigger words, write your interpretation of the word’s meaning somewhere on the label. Maker’s Mark won in court by proving an explanation of their definition of “handmade” on the back of their label; 19 barrels per batch.
Seek craft certification from a reputable industry organization such as the ACSA or ADI to help bolster your claim in regards to your product’s identity. Advocate inside these organizations that the craft spirit industry needs to provide better wordage for key terms similar to the wine industry. As a result of the wine industry’s strict labeling rules, they have faced no current lawsuits tied to ambiguous labeling.
Claims you made about your brand when it was launched might no longer be true because the industry has progressed and your business model has changed.
In order for a Class Action to be filed, everyone that purchased the product must have been exposed to the same marketing practices. If you change labels and marketing occasionally, it will work in your defense.
6.) Focus on compliance
1. Make good regulatory compliance part of your everyday business.
7.) Know where to draw the line
Good marketing and stories are important selling points. But do not distort the truth or sway too far from it.