Can Water Win a Lawsuit?

Two plaintiffs recently filed a complaint in federal court in the Northern District of California against the Craft Brew Alliance (“Craft Brew”) alleging the company engaged in deceptive advertising to mislead consumers into purchasing Kona Brewing Company beer based on the false belief that the products are brewed in Hawaii.  According to the Complaint, Plaintiffs and other similarly situated consumers suffered economic injury because Craft Brew was able to (1) overcharge for its beer products; and (2) induce purchases that would otherwise not have occurred.

As is expected in a false advertising complaint, the majority of Plaintiffs’ allegations center on consumer sentiment, here, for Hawaiian-made goods. Plaintiffs argue that consumers are willing to pay a premium for items made in Hawaii because—quoting a 2016 Hawaii Business Magazine article—“Hawaii, [ ], brings an emotive feeling of relaxation, enjoyment, well-being and being on Island time.”  Compl. at ¶ 84.  To support this position, Plaintiffs point to other large retailers like Whole Food Markets that have increased their purchases of products made in Hawaii in recent years.

The Complaint seeks class certification for “[a]ll persons who purchased any Kona Brewing Co. beer in the United States at any time beginning four (4) years prior to the filing of this action and ending at the time this action settles of proceeds to final judgment” and a California subclass limited to California consumers.

Based on a review of similar past actions, it is unclear whether this case will gain any traction in federal court.  Some reports argue that recent lawsuits may have emboldened Plaintiffs to file the action.   For example, in 2015, Anheuser-Busch settled a lawsuit for $20 million after Plaintiffs alleged it misled consumers to believe its Beck’s beer was brewed in Germany.  Other reports covering the newly filed case against Craft Brew have instead pointed to the failed 2016 case against Diageo-Guinness. There, a district judge in the Southern District of California dismissed the proposed class action holding, in part, that the word “Jamaican” on the packaging modified the word “Style” and not “Lager.” See Order at 9.  The Court found no other support for Plaintiffs position that consumers would be misled by the packaging to believe the product was made in Jamaica with Jamaican ingredients, especially considering the label also contained the disclosure “Brewed & Bottled by Red Stripe Beer Company Latrobe, PA.”  Id. at 12-13.

One thing is clear: Plaintiffs here did their homework.  A key argument in the case against Anheuser-Busch was that the water in Missouri where the beer was actually brewed differed materially from water in German rivers.  Here, in addition to allegations focused on consumer sentiment for Hawaiian-made goods, Plaintiffs point to similar water-based arguments regarding quality and pricing of the challenged product.  According to the Complaint, using mainland water “materially impacts the taste and quality of the beer” because “Hawaii County water is hard and high in calcium chloride,” which are apparently “great for making beer and can help showcase the malt and hop flavor.”  See Compl. at ¶¶ 78-80.  Moreover, water accounts for more than 90% of beer.  Id.  However, it is possible this argument may fall flat based on facts also included in Plaintiffs’ own Complaint.  Notably, Plaintiffs acknowledge Craft Brew’s statements on its website and in publications that explain its efforts to mimic adequately the taste of Hawaii water through water treatment systems at mainland breweries and weekly sampling to ensure consistency across production facilities.  Id.  Craft Brew’s acknowledgment and potentially successful efforts to correct for any water-based differences in its product may moot the entire argument for Plaintiffs.

We will continue to monitor this developing case and whether the water-based argument wins the day for Plaintiffs.