Wednesday, September 22, 2021

adjectival order matters (some) in finding literal falsity

Suzie's Brewery Company v. Anheuser-Busch Companies, LLC, --- F.Supp.3d ----2021 WL 472915, No. 3:21-cv-178-SI (D. Ore. Feb. 9, 2021)

Alleged ambiguity didn’t save AB from this false advertising claim.

AB makes Michelob ULTRA Hard Seltzer, which has earned USDA organic certification, and sells it in all states except Utah. Suzie’s Brewery also makes and sells hard seltzer that earned USDA organic certification before AB’s did, but only sells it in 6 states.

Based on these facts, it was deceptive for AB to advertise Michelob ULTRA Hard Seltzer as “the only” or “the first” “national USDA certified organic hard seltzer.” Suzie’s got a TRO (assisted by the TMA). AB could, however, advertise that Michelob ULTRA Hard Seltzer is “the only” or “the first” USDA certified organic hard seltzers that are distributed nationally, as long as that remained true.

Crucially, federal regulation of “organic” labels makes heavy use of the term “national.” The USDA National Organic Program (NOP) sets national standards for the production, handling, and processing of organically grown agricultural products. The National Organic Standards Board (NOSB) advises the Secretary of Agriculture in setting the standards upon which the NOP is based. “National” appears prominently throughout the regulatory scheme and “is consistently associated with the federal program that governs any mention, use, or display of the official USDA organic seal or label. Further, the word ‘national’ always immediately precedes the word ‘organic’ in all official references to the USDA’s National Organic Program.”

AB issued a press release: Michelob ULTRA Introduces First National USDA Certified Organic Hard Seltzer That’s ‘As Real As It Tastes’ With The Launch Of Michelob ULTRA Organic Seltzer. The body claimed that it was “the first-ever national USDA certified organic hard seltzer” and called it “an innovative, first-of its-kind organic option” for the hard-seltzer category. Likewise, one TV ad claimed that it was the "only national USDA Certified Organic Hard Seltzer,” while another said it was “the only national hard seltzer that is USDA Certified Organic. Don’t fall for anything else.”

AB also apparently was partnering with influencers to promote the same message, e.g. “It is the first National USDA Organic Seltzer” and “the first ever USDA National Organic Certified Seltzer with realass fruit flavors.” So “first national organic” was a big part of the message.

Suzie’s contended that this caused consumers to question whether Suzie’s Organic Hard Seltzer really is organic. Suzie’s was ok with “only national hard seltzer that is USDA certified organic” or “the first-nationally distributed USDA certified organic hard seltzer.”

AB argued that there was no harm to Suzie’s in 44 states of the union, so it lacked national Lanham Act standing. Suzie’s “correctly replies that the concept of standing asks who has a right to sue, which is different from the scope of an appropriate remedy.”

Under the circumstances, the court found literal falsity in: (1) “only national USDA certified organic hard seltzer”; (2) the “first-ever national USDA certified organic hard seltzer”; and (3) “bringing an innovative, first-of its-kind organic option to the hard seltzer category.” In the alternative, even if these statements weren’t literally false, they were still likely to mislead consumers. AB’s alternative reading of the phrase as “the only (or the first) USDA certified organic seltzer that is nationally distributed” was not a reasonable reading and thus the phrase was not ambiguous. This was because “national” is also integral to the organic certification program, a main purpose of which was “to create a national, unified standard for organic labelling, designation, and advertising.”

Grammar explanation: Most adjectives come before the thing they modify. Multiple adjectives that all modify a single noun generally are separated by commas or “and.” AB didn’t use commas, and “national” made no sense as a modifier of “seltzer.” “There is no such thing as a ‘national seltzer.’” While plain seltzer can’t be organic or USDA certified, seltzer can be hard/alcoholic, and hard seltzer can be certified organic. So the adjectives were not all modifying the noun “seltzer.” Even viewing “national” as a cumulative modifier, it would modify “USDA certified” and not “seltzer” based on its placement, supporting Suzie’s. The only reasonable interpretation was that the entire phrase “national USDA certified organic” constituted a phrasal adjective, aka a compound modifier, which “functions as a unit to modify a noun.”  The court also commented that, given the expense of the launch, “[i]t is highly unlikely that the word “national” was placed where it was as the result of careless copywriting.”

There was a presumption of deception from literal falsity, and Suzie’s also submitted evidence that three consumers and a distributor contacted it after AB’s false TV ad aired, questioning the veracity of Suzie’s organic certification. “The fact that a presumably knowledgeable beverage distributor could be misled by Anheuser-Busch’s commercial is additional circumstantial evidence that less sophisticated consumers were and can be deceived.” And a news story reported that AB was “tout[ing] its recent release as the first USDA-certified organic hard seltzer: Michelob Ultra Organic Seltzer.” “Similarly, the fact that a presumably knowledgeable journalist could be misled by Anheuser-Busch’s representations is additional circumstantial evidence that less sophisticated consumers were and can be deceived.”

This evidence also showed materiality, as did the significant resources required to get USDA certification as organic. Also, “[p]resumably, Anheuser-Busch would not highlight this feature of its product in its advertising unless it believed that doing so would promote sales.”

The court noted that the TMA covered §43(a) in its entirety, thus providing a presumption of irreparable harm upon a finding of likely success on the merits. AB didn’t rebut that presumption, and even without it the evidence above would have been enough.

AB asked for a big bond because it would cost “at least $37,900 to produce and distribute replacement advertising necessary to appropriately support the nationwide launch of a new product on the scale that the ULTRA Seltzers are being released.” But it didn’t explain how it got those numbers, and the court didn’t think that moving “national” to “distributed nationally” or deleting “only”/ “first” would be expensive. Bond of $5,000.

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