Court finds TTB label approval does not preclude Lanham Act false advertising claims in dispute between two brands looking to claim status as the “First African-American Owned Distillery in Kentucky.”

Every once in a while competing alcohol brands will get involved in a dispute over advertising. You’ll all remember the Bud/Miller dust-up over corn syrup from the 2019 Super Bowl advertising that took three years to shake out. There’s also the ongoing fight over Havana Club and don’t get us started on the sheer number of nascent brand trademark fights over brand names.

The merits of a fact-based claim about which company is the first African-American owned bourbon distillery in the Commonwealth of Kentucky has resulted in an ongoing lawsuit by two African-American owned companies each making claims about their primacy as distilleries in Kentucky.

In this recent opinion from the Federal Court in the Eastern District of Kentucky, the Court refused to grant a declaratory judgment to Victory Global dba Brough Brothers in its contentions against Fresh Bourbon that Brough, not Fresh is Kentucky’s first African-American owned distillery.

The Distillery Trail website covered this dispute when it was first filed in 2021. In the initial complaint, Brough Brothers took exception to several claims it asserts that Fresh makes (See Paragraph 34 of the Compliant):

Fresh contests the assertion that these claims are false and brought a Counterclaim which you can read here asserting that Brough was guilty of false advertising. The Court paired down some of the Counterclaim, removing claims that because Brough rents from a landlord it does not “own” a Kentucky distillery and claims that Brough misleads consumers on its bottling where the bottling explicitly made reference to the fact that it was distilled in Indiana, but left alive claims that the Brough website fails to make mention of such a fact and could potentially lead consumers to believe the whiskey in the market (this was back in 2021-22 and the recent filings note that production is underway in Kentucky) was distilled in Kentucky.

One of the interesting points made in the Court’s order regarding Fresh’s counterclaims (See Pages 9-10) is that TTB label approval does not preclude or limit Lanham Act challenges regarding statements or assertions made on approved labels. The Court rejected Brough’s assertions that label approval by the TTB amounted to claim preclusion under the Lanham Act, citing to the POM Wonderful v. Coca-Cola and rejecting a distinction between that case and this one between the FDA’s non-review of labels and the TTB’s review and approval of labels.

In the more recent decision the Court refused to rule as a matter of a declaratory judgment that because Brough has federal and state permits to operate a distillery in Kentucky and Fresh does not, that the Court should declare that “Fresh Bourbon is not the first Black-owned distillery in Kentucky.” The Court declined to rule on this request noting that a proper request for declaratory judgment was not before it and also noting that “Fresh Bourbon explains in its answer that, ‘since at least as early as 2018, … Fresh Bourbon has been legally distilling its Fresh Bourbon brand of Kentucky bourbon in cooperation with an appropriately licensed Kentucky distillery.’ Fresh Bourbon explains that it pays a licensed distillery to distill the bourbon it sells under the Fresh Bourbon brand.” 

Practitioners of the advertising arts will be quick to see that a judgment on the “owned” wording based on who holds title to distilling equipment or a license would not forestall a distillery from advertising or making statements about being the first African American “made” or “crafted” Kentucky Bourbon. As someone can direct, craft, make or otherwise control the production of Kentucky Bourbon without necessarily owning a distillery or holding a license. I can see a world where a distillery claims to be the first African-American owned distillery in Kentucky and another the first African-American crafted Kentucky Bourbon and I’m not certain that either fails to provide the marketing bonus that a “first-of-a-kind” statement seeks to make. Moreover, as the BBC pointed out, citing to a 2013 Slate article, the actual draw for a market segment’s support is about the owners of the business, so one wonders if the claim to being “first” is really the wording providing the compelling information for purchasers in the disputed phrase here.

This case will likely continue to provide interesting guidance and potentially some important precedential ruling for labelling and advertising alcoholic beverages.