Because of a label, Gary Hoffman has declared war. Hoffman filed a lawsuit in California against Tito’s Vodka, saying that the label on the bottle, which bears prominently the word “handmade,” caused him financial injury. It’s a class action suit, which means that a whole lot of other people might say that they, too, were hurt in their wallets by reading Tito’s label and buying the product.

At the time of this writing, little had been published about the suit – beyond speculation about how a ruling against Tito’s might cripple the beverage alcohol business. Hoffman, said to be a San Diego real estate broker, read an article in Forbes magazine last year hinting that the vodka is no longer produced using the little still that Bert “Tito” Beveridge made to launch his product 17 years ago in Austin, TX, USA.

In the June 2013 Forbes piece, Meghan Casserly wrote, “Tito’s has exploded from a 16-gallon pot still in 1997 to a 26-acre operation that produced 850,000 cases last year, up 46 percent from 2011, pulling in an estimated $85 million in revenue.” Hoffman quotes Casserly in his suit – “On information and belief, the vodka was made, manufactured and/or produced in ‘massive buildings containing 10 floor-to-ceiling stills and bottling 500 cases an hour’ ” – and contrasts her words with the claim that appears beneath the word
“Handmade” on Tito’s labels: “Crafted in an Old Fashioned Pot Still by America’s Original Microdistillery.”

“Through a fraudulent, unlawful, deceptive and unfair course of conduct, Tito’s … manufactured, marketed, and/or sold their ‘Tito’s Handmade’ vodka to the California general public with the false representation that the Vodka was ‘handmade’ when, in actuality, the vodka is made via a highly mechanized process that is devoid of human hands,” declares the lawsuit. “There is simply nothing ‘handmade’ about the vodka, under any definition of the term, because the vodka is (1) made from commercially manufactured ‘neutral grain spirit’ that is trucked and pumped into Tito’s industrial facility; (2) distilled in a large industrial complex with modern, technologically advanced stills; and (3) produced and bottled in extremely large quantities.”

Gary Hoffman claims that he and each class member “suffered an ‘injury in fact’ because Plaintiff’s money was taken by Defendants as a result of Defendants’ false ‘handmade’ claims set forth on its vodka. Furthermore, he suffered an ‘injury in fact’ by paying for a vodka product that he believed was genuinely ‘handmade,’ when it was not.”

The label converter is not involved in lawsuits of this nature, having had no part in the label’s design. “But we follow these issues closely,” says Dave McDowell, chairman of McDowell Label & Screen Printing in Plano, TX, which has printed labels for Tito’s in the past. The printer wants to make sure that the customer has all of its legal approvals in place before a job is run, he adds.

All beverage alcohol labels in the US must be reviewed and approved by the TTB, the federal Alcohol and Tobacco Tax and Trade Bureau. The TTB reviews more than 100,000 applications for beverage labels each year – including wine, beer and spirits – and among its responsibilities is to “ensure that labeling and advertising of alcohol beverages provide adequate information to the consumer concerning the identity and quality of the product,” and “prevent misleading labeling or advertising that may result in potential consumer deception regarding the product.”

In an informal response to the lawsuit, Tito Beveridge indicated that TTB’s approval of his use of “handmade” will be part of his defense. “All of our labels have gone through the approval process of the TTB. After sending a field agent to Austin to review our processes, the TTB has approved our use of ‘handmade’ on our label. We think our pot still batch distillation process is one of the key things that differentiates us from a great majority of other vodkas. We disagree with the claims made against us, and plan to defend ourselves against this misguided attack.”

One might think that TTB approval of Tito’s labels could make the federal agency culpable should the court find in favor of Hoffman. After all, the bold “handmade” on each label has been viewed by the TTB many times, considering that the vodka maker has received more than 30 label approvals over the past 17 years. But this is “a good example of when an approval is not really an approval,” according to Robert C. Lehrman, founder and principal attorney of Lehrman Beverage Law PLLC, Washington, DC, USA. The firm concentrates on the federal regulation of alcohol beverages.

In a blog post a few days after Hoffman filed suit, Lehrman wrote that “the federal government has no definition for the term at issue,” referring to “handmade.” He writes, “The classic case of an approval that is not really an approval would be your garden variety Napa Valley Chardonnay, Vintage 2010. TTB will take almost every one of those italicized words at face value. To the extent any one of those words is not true, your approval is not going to help you too much, in the event of an inquiry. Like an IRS tax return, the Certificate of Label Approval is, to a surprisingly large degree, something of an honor system, stapled together with the penalty of perjury on every such document.”

Claims made against label content are facing challenges from the private sector today, particularly in the beverage sector, and more might be coming. The decision in June of this year by the US Supreme Court in Pom Wonderful v. Coca-Cola is being studied carefully by every competitive marketer across the land.

Pom v. Coke, Lehrman says, “has massive implications for small brewers, big distillers and all other alcohol beverage marketers. It shows that TTB rules and other agency rules set a floor, not a ceiling, on how companies need to market their products. It shows that the government is only a part of the web of review, in concert with competitors. Just as we predicted that Pom would win this case, we now predict that some alcohol beverage companies will soon take legal action against others, even though such cases, other than trademark cases, were very rare in the past 50 years.

“It was bad enough for Coke when Pom called out Coke for going quite a bit too far in posing its apple juice as pomegranate juice. It got even worse when various Supreme Court Justices suggested, orally, that Coke was trying to trick people. And on June 12, 2014 it got even worse, when the Supreme Court unanimously disagreed with Coke’s position. In Pom v. Coca-Cola, the Court said, if there is trickery on food labels, and it hurts a competitor, of course they can do something about it, even if FDA (for whatever reason) does not.”

The ball is rolling already, albeit slowly. Templeton Rye Whiskey is in court in Chicago, thanks to a class action suit claiming that its product is distilled in Indiana, not in Templeton, Iowa, as declared in its marketing materials. The whiskey marketer now plans to include the words “Distilled in Indiana” on its label. Beck’s Beer, owned by Anheuser-Busch InBev (ABI), is in US District Court in Florida, brought there by consumers around the nation who claim that ABI used “deceptive conduct” in leading them to believe that the beer is brewed in Bremen, Germany. Beck’s sold in the US is now brewed in St. Louis, MO, the home of Budweiser. (Author’s note: Bass Ale, said to have the world’s oldest registered trademark, is also owned by ABI and is brewed in the US in Baldwinsville, NY.)

Social media sites are lighting up with commentary from beverage industry players and observers. These lawsuits, they speculate, will change the nature of the craft distilling and brewing industries for the worse or for the better. Government agencies will come down harder on producers and marketers, or they will not. Prices will rise. Lawyers will make more money.

Maybe we will finally learn the definition of “handmade.”



The author is president of Jack Kenny Media, a communications firm specializing in the packaging industry, and is the former editor of L&NW magazine. He can be reached at [email protected].