Wednesday, December 12, 2007

Vodka under the bridge

Russian Standard Vodka (USA), Inc. v. Allied Domecq Spirits & Wine USA, Inc., --- F.Supp.2d ----, 2007 WL 4145277 (S.D.N.Y.)

Plaintiffs, who sell Imperia vodka, sought a declaratory judgment that their aspersions on the “Russian” nature of defendants’ vodka (Stolichnaya, aka Stoli) did not violate the Lanham Act or state law. Plaintiffs also brought affirmative false advertising/false designation of origin and related state law claims.

Imperia’s marketing emphasizes its Russian heritage: it’s distilled, filtered, bottled, labeled, and sold in Russia. “Vodka is Russian,” the campaign says. Plaintiffs allege that Stoli also claims a Russian “character,” though “essential processes” in its production take place in Riga, Latvia. (Query whether the difference is material to American consumers. Indeed, query whether American consumers can articulate the relationship between Latvia and Russia.)

At a 2005 press conference, plaintiffs stated that Imperia was “a truly authentic Russian vodka of the highest quality.” Defendants then sent a letter stating that plaintiffs’ PR campaign implied that Imperia was the only authentically Russian vodka; the letter continued that false statements about a competitor’s product constitutes false advertising. Nonetheless, after receiving the letter, plaintiffs publicly stated that Stoli “is not truly Russian” and “[i]f Stolichnaya vodka comes from Latvia rather than Russia ... they should be proud of their Latvian heritage.” Defendants then issued a press release indicating that it would explore its legal remedies “in due course.” Defendants then brought a challenge to plaintiffs’ claims with the National Advertising Division of the Better Business Bureau (NAD). The NAD investigation was in its final stages when plaintiffs sued. NAD stopped its investigation, but would resume it if the lawsuit were stayed.

The court found that, even under the relatively relaxed standard of MedImmune, there was no actual controversy over past statements about Stoli, because defendants affirmatively waived their right to sue over those statements. But the threat of legal action over future conduct was enough to create an actual controversy, because plaintiffs intend to say negative things about Stoli’s authenticity in the future.

Nonetheless, the court stayed the case for thirty days pending the outcome of NAD’s investigation, in order to encourage private dispute resolution. “[A]llowing the NAD, a highly reputable institution, to provide its expert view on Stoli’s authenticity as a Russian vodka would be extremely useful in resolving remaining claims in the complaint … [and] would allow it to set advertising standards for the industry on an important issue.”

The court did dismiss plaintiffs’ unjust unrichment claim. The argument was that, by falsely advertising Stoli’s Russian character, defendants misappropriated plaintiffs’ goodwill. As the court pointed out, this logic has a serious chronological flaw. Stoli has been sold in the US since the 1960s; Imperia arrived in 1995. Stoli’s goodwill is its own.

No comments: