Welk v. Beam Suntory Import Co. et al

Filing 17

ORDER OF DISMISSAL. The Court grants Jim Beam's Motion to Dismiss 5 and this case is dismissed with prejudice. Signed by Judge Larry Alan Burns on 8/21/15. (kas)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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SCOTT WELK, INDIVIDUALLY AND ON
BEHALF OF ALL OTHERS SIMILARLY
SITUATED,

CASE NO. 15cv328-LAB (JMA)
ORDER OF DISMISSAL

Plaintiffs,
vs.
BEAM SUNTORY IMPORT CO. AND
JIM BEAM BRANDS CO.,
Defendants.

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This putative class action against Beam Suntory Import and Jim Beam Brands

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(collectively, "Jim Beam") centers on the use of the word "handcrafted" on Jim Beam

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Bourbon bottle labels. Scott Welk's complaint alleges the labels are misleading because the

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bourbon isn't handcrafted. He asserts causes of action for violation of California's false

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advertising law, Cal. Bus. & Prof. Code § 17500 et seq. ("FAL"), violation of California's unfair

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competition law, id. at § 17200 et seq. ("UCL"), intentional misrepresentation, and negligent

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misrepresentation. Jim Beam has filed a motion to dismiss, arguing (1) under California's

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safe harbor doctrine, its compliance with federal labeling law insulates it from Welk's claims,

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(2) Welk fails to state a plausible claim because he hasn't alleged facts to show that the label

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would mislead a reasonable consumer, and (3) the economic loss doctrine bars Welk's

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negligent misrepresentation claim. (Docket no. 5.)
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I.

Background

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A.

Jim Beam Bourbon Label

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Welk includes a copy of the Jim Beam Bourbon label in his complaint. (Docket no.

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1 at ¶¶ 32, 33.) The label covers the front and two sides of the bottle. (Id. at ¶ 32.) One of

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the side labels includes a depiction of a sketched barrel, with the word "HANDCRAFTED"

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above the barrel, the phrase "SINCE 1795" next to the barrel, and the phrase "FAMILY

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RECIPE" below the barrel. (Id.)

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B.

Alleged Misrepresentation

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Welk alleges that, based on the label, he believed "Jim Beam Bourbon was of superior

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quality by virtue of it being crafted by hand, rather than by a machine, and relied on said

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misrepresentation in purchasing the product." (Id. at ¶ 35.) Relying on a definition from

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Merriam-Webster's online thesaurus, Welk contends that "handcrafted" means "created by

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a hand process rather than by a machine." (Id. at ¶ 70.) Thus, according to Welk, "the

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reasonable consumer" would believe that "Jim Beam Bourbon was crafted by hand." (Id.)

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He explains, "'[h]andcrafted' and 'handmade' are terms that consumers have long associated

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with higher quality manufacturing and high-end products. This association and public

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perception is evident in the marketplace where manufacturers charge a premium for

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'handcrafted' or 'handmade' goods." (Id. at ¶ 17.) But, he alleges, "Jim Beam Bourbon is

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actually manufactured using a mechanized and/or automated process, resembling a modern

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day assembly line and requiring little to no human supervision, assistance or

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involvement . . . ." (Id. at ¶ 36.)

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II.

Judicial Notice of Label and Certificates of Label Approval

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Jim Beam seeks judicial notice of its label and certificates of label approval issued by

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the Alcohol and Tobacco Tax and Trade Bureau ("TTB"). (Docket no. 5-2.) "Although

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generally the scope of review on a motion to dismiss for failure to state a claim is limited to

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the Complaint, a court may consider evidence on which the complaint necessarily relies if:

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(1) the complaint refers to the document; (2) the document is central to the plaintiff['s] claim;

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and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion."
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Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010) (internal quotation marks

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and citations omitted). Rule 201(b) permits judicial notice of a fact when it's "not subject to

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reasonable dispute because it: (1) is generally known within the trial court's territorial

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jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy

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cannot reasonably be questioned." The records and reports of administrative bodies are

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proper subjects of judicial notice, as long as their authenticity or accuracy is not disputed.

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See Mack v. South Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986), overruled

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on other grounds by Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104 (1991).

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The Court will consider the label in ruling on Jim Beam's motion to dismiss because

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the complaint refers to it, it's central to Welk's claim, and Welk doesn't question its

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authenticity. Daniels-Hall, 629 F.3d at 998. The TTB certificates are public records and,

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while Welk opposes judicial notice of the TTB certificates, he doesn't question their

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authenticity. Thus, they're appropriate for judicial notice. See, e.g., Hofmann v. Fifth

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Generation, Inc., No. 14-cv-2569, Docket no. 15 (S.D. Cal. Mar. 18, 2015) (taking judicial

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notice of TTB certificates of label approval as "records and reports of administrative bodies").

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III.

Discussion

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A.

Legal Standard

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A 12(b)(6) motion to dismiss for failure to state a claim challenges the legal sufficiency

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of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The Court must accept

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all factual allegations as true and construe them in the light most favorable to Welk. Cedars

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Sinai Med. Ctr. v. Nat'l League of Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 2007).

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To defeat Jim Beam's motion to dismiss, Welk's factual allegations need not be detailed, but

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they must be sufficient to "raise a right to relief above the speculative level . . . ." See Bell

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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "Threadbare recitals of the elements of a

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cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal,

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556 U.S. 662, 678 (2009).

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///

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///
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B.

Analysis
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California's Safe Harbor Doctrine

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The California Supreme Court has explained:

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Although the unfair competition law's scope is sweeping, it is not unlimited . . . .
Specific legislation may limit the judiciary's power to declare conduct unfair.
If the Legislature has permitted certain conduct or considered a situation and
concluded no action should lie, courts may not override that determination.
When specific legislation provides a "safe harbor," plaintiffs may not use the
general unfair competition law to assault that harbor.

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Cel-Tech Comms. Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 182 (1999). Under the safe

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harbor doctrine, "[t]o forestall an action under the unfair competition law, another provision

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must actually 'bar' the action or clearly permit the conduct." Id. at 183. Jim Beam argues

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that California's safe harbor doctrine bars Welk's suit because the TTB reviewed and

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pre-approved its labels to ensure they comply with applicable laws and regulations, including

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determining whether the label is false and misleading. (Docket no. 5 at 4–8.) But, the TTB

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certificates don't reveal whether the TTB specifically investigated and approved the veracity

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of Jim Beam's use of the term "handcrafted." See Nowrouzi v. Maker's Mark Distillery, Inc.,

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2015 WL 4523551, at *4–5 (S.D. Cal. July 27, 2015); Hofmann, No. 14-cv-2569, Docket no.

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15. Thus, the scope of the TTB's review isn't properly before the Court at this stage of the

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case. Jim Beam's motion to dismiss under the safe harbor doctrine is DENIED.

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2.

UCL and FAL Claims

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The UCL prohibits any "unlawful, unfair or fraudulent business act or practice." Cal.

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Bus. & Prof. Code § 17200. The FAL makes it unlawful for a business to disseminate any

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statement "which is untrue or misleading, and which is known, or which by the exercise of

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reasonable care should be known, to be untrue or misleading." Id. at § 17500. UCL and FAL

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claims are governed by the "reasonable consumer" test. Williams v. Gerber Prods. Co., 552

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F.3d 934, 938 (9th Cir. 2008). Under that standard, Welk must "show that members of the

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public are likely to be deceived." Id. (internal quotation marks omitted). "A 'reasonable

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consumer' is the ordinary consumer acting reasonably under the circumstances, and is not

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versed in the art of inspecting and judging a product, in the process of its preparation or
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manufacture." Colgan v. Leatherman Tool Grp., Inc., 135 Cal. App. 4th 663, 682 (2006)

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(internal citation and quotation marks omitted). "[W]here a court can conclude as a matter

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of law that members of the public are not likely to be deceived by the product packaging,

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dismissal is appropriate." Werbel ex rel. v. Pepsico, Inc., 2010 WL 2673860, at *3 (N.D. Cal.

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July 2, 2010).

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"Although misdescriptions of specific or absolute characteristics of a product are

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actionable, generalized, vague, and unspecified assertions constitute mere puffery upon

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which a reasonable consumer could not rely." McKinney v. Google, Inc., 2011 WL 3862120,

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at *6 (N.D. Cal. Aug. 30, 2011) (internal quotation marks, citations, and brackets omitted).

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"[T]o be actionable as an affirmative misrepresentation, a statement must make a specific

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and measurable claim, capable of being proved false or of being reasonably interpreted as

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a statement of objective fact." Vitt v. Apple Computer, Inc., 469 Fed. Appx. 605, 607 (9th Cir.

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2012) (internal quotation marks omitted) (affirming finding that descriptors "mobile,"

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"durable," "portable," "rugged," "built to withstand reasonable shock," "reliable," "high

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performance," "high value," an "affordable choice," and an "ideal student laptop" were

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"generalized, non-actionable puffery because they are 'inherently vague and generalized

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terms' and 'not factual representations that a given standard has been met'").

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Jim Beam argues that Welk's claims fail under the reasonable consumer test. (Docket

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no. 5 at 9.) Courts confronted a similar question in Hofmann, No. 14-cv-2569, Docket no.

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15; Salters v. Beam Suntory, Inc., 2015 WL 2124939 (N.D. Fla. May 1, 2015); and Nowrouzi,

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2015 WL 4523551. In Hofmann, the court denied a motion to dismiss under the reasonable

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consumer standard, explaining:

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In the court's view, the representation that vodka that is (allegedly)
massproduced in automated modern stills from commercially manufactured
neutral grain spirit is nonetheless "Handmade" in old-fashioned pot stills
arguably could mislead a reasonable consumer.

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No. 14-cv-2569, Docket no. 15 at 14. In Salters, the court found the opposite and granted

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a similar motion to dismiss, explaining:

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[N]o reasonable person would understand "handmade" in this context to mean
literally made by hand. No reasonable person would understand "handmade"
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in this context to mean substantial equipment was not used. If "handmade"
means only made from scratch, or in small units, or in a carefully monitored
process, then the plaintiffs have alleged no facts plausibly suggesting the
statement is untrue. If "handmade" is understood to mean something else—
some ill-defined effort to glom onto a trend toward products like craft beer—the
statement is the kind of puffery that cannot support claims of this kind. In all
events, the plaintiffs have not stated a claim on which relief can be granted.

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2015 WL 2124939, at *3. In Nowrouzi, the court agreed with Salters, and granted a whisky

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company's motion to dismiss claims based on its use of the term "handmade." 2015 WL

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4523551, at *7.

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The Court finds Salters and Nowrouzi persuasive. Welk's proposed definition of the

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word "handcrafted" doesn't fit the process of making bourbon. To make bourbon, grains are

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ground into "mash" and cooked; then yeast is added, and the mixture ferments; then the

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mixture is distilled, i.e., heated until the alcohol turns to vapor; then the alcohol is cooled until

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it returns to liquid form, and transferred to barrels for aging. Indus. & Trade Summary,

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USITC Pub. No. 3373, 2000 WL 1876666 (Nov. 2000), *7. Fermentation, distillation, and

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aging are necessary to meet the legal definition of bourbon. See 27 C.F.R. §§ 5.11,

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5.22(b)(1)(I). Machines, including stills and other equipment, have always been necessary

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to make bourbon.

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Whiskeymaking 34, 59 (2008).

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"handcrafted" on a bourbon bottle to mean that the product is literally "created by a hand

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process rather than by a machine." Thus, it isn't "reasonably interpreted as a statement of

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objective fact." Vitt, 469 Fed. Appx. at 607. And if Jim Beam uses the term "handcrafted"

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to appeal to consumers' loose association of the term with "higher quality manufacturing and

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high-end products," as Welk suggests, then it isn't "specific and measurable." Id. Instead

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it's "generalized, vague, and unspecified" and therefore inactionable as "mere puffery."

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McKinney, 2011 WL 3862120, at *6; see also Salters, 2015 WL 2124939, at *3.

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3.

See Henry Crowgey, Kentucky Bourbon: The Early Years of
A reasonable consumer wouldn't interpret the word

Intentional Misrepresentation Claim

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To state a claim for intentional misrepresentation under California law, a plaintiff must

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plead, among other things, that "the defendant intended that the plaintiff rely on the

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representation" and "the plaintiff reasonably relied on the representation." Manderville v.
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PCG & S Group, Inc., 146 Cal. App. 4th 1486, 1498 (2007). Jim Beam seeks dismissal of

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Welk's intentional misrepresentation claim, arguing these elements aren't met because (1)

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its use of "handcrafted" wouldn't mislead a reasonable consumer and (2) Welk hasn't alleged

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fraudulent intent.

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misrepresentation claim fails for the same reason his UCL and FAL claims fail—the use of

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"handcrafted" on Jim Beam's bourbon bottle wouldn't mislead a reasonable consumer. See

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Nowrouzi, 2015 WL 4523551, at *7–8.

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(Docket no. 5 at 15.)

The Court agrees.

Welk's intentional

Negligent Misrepresentation Claim

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Jim Beam contends that the economic loss doctrine bars Welk's negligent

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misrepresentation claim (Docket no. 5 at 16–17), and Welk concedes that it does, (Docket

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no. 8 at 24.) The Court agrees. See Kalitta Air, LLC v. Cent. Texas Airborne Sys., Inc., 315

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Fed. Appx. 603, 605 (9th Cir. 2008).

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IV.

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Conclusion
The Court GRANTS Jim Beam's motion to dismiss. No amendment would cure

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Welk's allegation that Jim Beam's use of the term "handcrafted" is misleading.

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Nowrouzi, 2015 WL 4523551, at *7–8. Thus, this case is DISMISSED WITH PREJUDICE.

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See

IT IS SO ORDERED.
DATED: August 21, 2015

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HONORABLE LARRY ALAN BURNS
United States District Judge

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