Great balls of fire: lawsuit over malt sold looking nearly identical to whisky can continue

McKay v. Sazerac Co., 23-cv-00522-EMC (N.D. Cal. May 17,

The court rejected Sazerac’s motion to dismiss McKay’s usual
California statutory
and common law claims on behalf of a putative class
based on Sazerac’s labeling and marketing of mini bottles of Fireball malt
beverages, which look almost the same as Fireball Whisky.

image from complaint
Fireball Malt back

Did you know that Fireball Whisky has been sold since 1989
and is the fifth best-selling spirit in the United States? It’s Canadian
whisky—a distilled spirit—with added cinnamon syrup and sweeteners, and is 66
proof (33%) alcohol by volume (ABV). It’s sold in many sizes, from 1.75L
bottles to 50ML mini bottles. The label reads “Cinnamon Whisky.”

Fireball Malt debuted in 2020. It is a malt or wine-based
beverage with added cinnamon syrup, sweeteners, and whisky flavors, and results
in 33 proof (16.5%) alcohol by volume (ABV). It has no whisky and is only sold
in 50ML mini bottles. The label reads “Cinnamon” and, in smaller font, “Malt
Beverage With Natural Whisky & Other Flavors and Carmel Color.”

Because it’s not hard liquor, it can be sold in more
locations, such as gas stations and convenience stores.

The court rejected Sazerac’s argument that it was protected
by the safe harbor doctrine, which allows conduct that the legislature has
specifically considered and permitted. Here, the Alcohol and Tobacco Tax and
Trade Bureau granted a certificate of label approval (COLA) covering Fireball
Malt. The regs say that a COLA may not be issued if the label contains “any
statement or representation, irrespective of falsity, that is misleading to
consumers as to the age, origin, identity, or other characteristics of the malt
beverage” or if any label statement “directly creates a misleading impression
or if it does so indirectly through ambiguity, omission, inference, or by the addition
of irrelevant, scientific, or technical matter.” But “neither of these
provisions clearly permit the type of representations made by Sazerac in the
Fireball Malt label.” “To forestall an action under the unfair competition law,
another provision must actually ‘bar’ the action or clearly permit the

The claims here didn’t turn solely on Sazerac’s failure to
use font of the minimum size required by a regulation or disclose added
flavoring as required by another regulation. “Rather, it is the combination of
the labeling and appearance that creates confusion between the whisky and malt
bottles. Plaintiff’s claims are predicated on a comparative analysis of the two
products in question. Importantly, there is no evidence that the TTB
regulations address any sort of comparative analysis with other labels, or test
for consumer confusion.”

As another court reasoned, “COLAs are too ‘informal’ to be
considered regulations having the force of law. Compared to the ‘rigorous’
approval process for prescription-drug labels, the TTB process ‘hinges on self
reporting’ and reflects only the representations made to it by the distributor,
not an endorsement of those claims.”

The court also found fraud adequately pled, including for
the statutory claims. The complaint plausibly alleged affirmative
misleadingness given that the two products’ labels were “substantially the
same,” including the brand name “Fireball,” Sazerac’s fire- breathing dragon
logo, the words “RED HOT,” the same color scheme, burnt edge, font and labeling,
and the words “CINNAMON.” Fireball Malt bore the ambiguous descriptor “Malt
Beverage With Natural Whisky & Other Flavors and Carmel Color” and was
packaged in a 1.7-oz, shot-size bottle “common for hard liquor.” The court
rejected Sazerac’s argument that the other descriptors on the label make plain
that Fireball Malt is a malt beverage, not a whisky, citing to the language of
WHISKY WITH A FIERY KICK OF RED HOT CINNAMON” located on the back of the

Tasting “like” whisky didn’t clearly preclude a reasonable
interpretation that it was or included whisky. “It is also not clear that
consumers would carefully scrutinize the tiny print of ‘Malt Beverage’ and ‘ALC
16.5% BY VOL’ in light of the other flashier language and design of the packaging.”
Ordinary consumers don’t have “an obligation to conduct extensive linguistic
analysis on their grocery shopping runs.”

Sazerac further argued that McKay should have known that the
products he bought in a gas station were not whisky because gas stations are
not licensed to sell hard liquor. But a reasonable consumer “could well be
unaware of which establishments hold which liquor license types. He may not
know that a gas station store can sell malt but not whisky. This is especially
so if he is making a quick roadside purchase. He might also assume that the
store is not complying with the terms of its liquor license.” The complaint
even alleged that “[o]ne radio personality who saw a huge Fireball display in
front of the cash register at a gas station wondered if ‘that specific store
was doing something they’re not supposed to be doing’ by selling ‘cinnamon
flavored whiskey!!’” Nor would a reasonable consumer need to compare his
purchase with other beverages in the vicinity to assess whether the store sold
only beer/wine and malt. Sazerac argued that it has structured its distribution
such that Fireball Whisky and Fireball Malt and never both placed in the same
store. “But the reasonable consumer may not be aware of Sazerac’s distribution

McKay also successfully alleged concealment under the CLRA,
FAL, and UCL. An actionable “omission must be contrary to a representation
actually made by the defendant, or an omission of a fact the defendant was obliged
to disclose.” Such an obligation arises when (1) “the omission was material,”
(2) the omission relates to a fact that is “central to the product’s function,”
and (3) one of four special circumstances exists, including partial
representations that are misleading because some other fact has not been
disclosed. That was alleged here.  

It was too early to tell whether equitable claims had to be
dismissed because legal relief was sufficient; McKay also had standing to seek
injunctive relief.

from Blogger

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