Bellion Spirits, LLC v. United States, Civil Action No. 17-2538 (JEB)

• Decision Date: 01 August 2019
• Docket Number: Civil Action No. 17-2538 (JEB)
• Citation: 393 F.Supp.3d 5
• Parties: BELLION SPIRITS, LLC, et al., Plaintiffs, v. UNITED STATES of America, et al., Defendants.
• Court: U.S. District Court — District of Columbia

393 F.Supp.3d 5

BELLION SPIRITS, LLC, et al., Plaintiffs,

v.UNITED STATES of America, et al., Defendants.

Civil Action No. 17-2538 (JEB)

United States District Court, District of Columbia.

Signed August 1, 2019

Jonathan W. Emord, Emord & Associates, P.C., Clifton, VA, for Plaintiffs.

Michael Hendry Baer, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

Winston Churchill once said, "I have taken more out of alcohol than alcohol has taken out of me." Plaintiffs Bellion Spirits, LLC and Chigurupati Technologies Private Ltd. believe they can make such sentiment universal. They infuse their vodka with a compound called NTX, a proprietary blend of ingredients that they contend mitigates alcohol's damage to DNA. The Alcohol and Tobacco Tax and Trade Bureau (TTB), however, dashed their hopes of advertising NTX's health benefits when it found their claims to be unsubstantiated and misleading. Plaintiffs responded with this suit, and the parties have now cross-moved for summary judgment. Finding TTB's action consistent with both the Administrative Procedure Act and the Constitution, the Court will deny Plaintiffs' Motion for Summary Judgment and grant the Government's Cross-Motion.

I. Background

A. Legal Framework

While we may have come a long way since Prohibition, the Federal Alcohol Administration Act (FAAA) still regulates the production, sale, advertising, and labeling of alcoholic beverages. See 27 U.S.C. §§ 201 – 219a. Specifically, it requires that alcohol advertising and labels accord with regulations issued by the Secretary of the Treasury. Id. § 205(e), (f). Those regulations must, among other things, "prohibit deception of the consumer" and ensure that products "provide the consumer with adequate information as to [their] identity and quality." Id. The Secretary has delegated responsibility for issuing these regulations to the Administrator of the TTB.

TTB's regulations thus prohibit statements that are "false or untrue in any particular or that, irrespective of falsity, directly, or by ambiguity, omission, or inference, or by the addition of irrelevant, scientific or technical matter, tend[ ] to create a misleading impression." 27 C.F.R. § 5.42(a)(1) (labels on distilled spirits); see also 27 C.F.R. § 5.65(a)(1) (substantially identical regulation applying to advertising of distilled spirits). Although these provisions on labeling and advertising are essentially identical substantively, there is an important difference between the schemes governing the two: a regulated entity needs pre-approval from TTB to make any claims on an alcoholic-beverage label, but not for those in alcohol advertisements. See 27 U.S.C. § 205(e), (f).

In 2003, TTB also promulgated regulations dealing with statements about health in advertising or on labels. There are two types. The first is "health-related statements," which refers to — perhaps unsurprisingly — "any statement related to health," including "statements of a curative or therapeutic nature that, expressly or by implication, suggest a relationship between the consumption of alcohol, distilled spirits, or any substance found within distilled spirits, and health benefits or effects on health." 27 C.F.R. § 5.42(b)(8)(i)(A). Labels or advertisements "may not contain any health-related statement that is untrue in any particular or tends to create a misleading impression as to the effects on health of alcohol consumption." 27 C.F.R. § 5.42(b)(8)(ii)(A) (labels) ; 27 C.F.R. § 5.65(d)(2)(i) (advertisements).

The second — and narrower — category addressed by the 2003 regulations is "specific health claims." Those are "a type of health-related statement that, expressly or by implication, characterizes the relationship of the distilled spirits, alcohol, or any substance found within the distilled spirits, to a disease or health-related condition." 27 C.F.R. § 5.42(b)(8)(i)(B). Specific health claims are "a type of health-related statement," 27 C.F.R. § 5.42(b)(8)(i)(B), and must therefore also comply with the more general regulations of "health-related statements." Plus, a specific health claim — whether appearing on a label or advertisement — must meet four additional conditions: The claim must (1) be "truthful and adequately substantiated by scientific or medical evidence"; (2) be "sufficiently detailed and qualified"; (3) "adequately disclose[ ] the health risks associated with both moderate and heavier levels of alcohol consumption"; and (4) "outline[ ] the categories of individuals for whom any levels of alcohol consumption may cause health risks." 27 C.F.R. § 5.42(b)(8)(ii)(B)(2) (labels) ; 27 C.F.R. § 5.65(d)(2)(ii) (advertisements).

A regulated entity wishing to make a specific health claim can — but is not required to — ask TTB whether the claim is permitted under the regulations. See 27 C.F.R. § 70.471(a) (allowing "[a]ny person who is in doubt as to any matter arising in connection with the [FAAA]" to "request a ruling thereon by addressing a letter to the appropriate TTB officer"). There is an exception, however, for alcohol-beverage labels, which — as mentioned above — have a mandatory pre-approval process. Specifically, bottlers and importers are generally required to obtain from TTB a "certificate of label approval" (COLA) before circulating their products in interstate or foreign commerce. See 27 U.S.C. § 205(e). TTB, therefore, reviews all claims — including those related to health — on labels in determining, as it must, whether a COLA "complies with applicable laws and regulations." 27 C.F.R. § 13.21(a).

B. Facts

On April 12, 2016, Plaintiffs Bellion Spirits, LLC and Chigurupati Technologies Private Ltd. — which the Court will refer to jointly as "Bellion" — filed a petition with TTB seeking permission to make eight advertising claims about the alleged positive health effects of NTX. See AR 2, 8. Only two of those claims are at issue here — namely, that "NTX helps protect DNA from alcohol-induced damage" and "NTX reduces alcohol-induced DNA damage." AR 8. Those are claims 7 and 8 from the original list. See AR 8. Bellion also included a proposed disclaimer to accompany the claims. It provides:

NTX does not protect against all health risks associated with moderate and heavy levels of alcohol consumption, including, but not limited to, motor vehicle accidents, high blood pressure

, stroke, cancer, birth defects, psychological problems, and alcohol dependency. Do not consume alcohol if: you are younger than the legal drinking age; you are pregnant or may become pregnant; you are taking medicine that can interact with alcohol; you have a medical condition for which alcohol is contraindicated; you plan to drive; or you cannot restrict your drinking to moderate levels. If you consume alcohol, only consume it in moderation. "Moderation" means up to one drink per day for women and up to two drinks per day for men.

AR 9. Bellion itself did not file any COLAs. See AR 15 ("Petitioners are not requesting the use of specific health-related statements on a specific label."). A separate entity, Frank-Lin Distillers Products, submitted nine COLAs for Bellion vodka labels less than a week after Bellion filed its petition. (The Court will discuss any link between Frank-Lin and Bellion and its legal significance later.) Those proposed labels included the eight specific health claims relating to NTX and also a ninth iteration including all eight of the proposed claims. See AR 2080.

TTB acknowledged Bellion's petition in a letter dated May 26, 2016, and assigned the matter to its Regulations and Rulings Division. See AR 1495. It explained that it would treat the matter as a request that TTB rule on whether the use of the health claims would violate TTB regulations or, alternatively, that TTB initiate a rulemaking allowing Bellion to use the eight claims in labels and advertisements. Id. TTB also explained that it had forwarded the petition and exhibits to FDA, citing its regulatory authority to consult with that agency as to health claims on alcohol labels. Id. at 1497–98. Several months later, Bellion supplemented its petition. See AR 1375. TTB acknowledged receipt of the additional materials and notified Bellion that it would forward those to FDA for consideration as well. Id. at 1541–42.

Approximately a year after receiving the petition, TTB denied it with respect to each of the eight proposed health claims. See AR 1557–1603. It found that all of them fell both within the broader category of "health-related statements" and within the narrower category of "specific health claims." Id. at 1557. None, however, complied with the regulations governing either category. Id. at 1557–58. Summarizing its ruling, the agency explained that "the claims, including when viewed with the proposed disclaimer, do not comply with TTB regulations regarding the use of health-related statements or specific health claims" because they "are not adequately substantiated" and are "misleading ... as to the serious health consequences of both moderate and heavy levels of consumption of alcohol beverages containing NTX." Id. at 1558. In addition, the agency found that the proposed claims implied that "drinking alcohol beverages infused with NTX" would "reduc[e] the risk of damage to the liver and ... to the brain." AR 1575; see also AR 1576. It determined that such implication was — like the explicit claims concerning DNA damage — misleading. See AR 1597. The 47-page letter went on to describe the agency's legal framework, the scope and nature of its consultation with FDA, the health risks of alcohol, its process for reviewing the eight claims, and its substantive analysis of them. See AR 1563–82. The parties do not deign to apprise the Court of the fate of Frank-Lin's COLAs, but the Court assumes they were likewise denied. See ECF No. 29 (Defendants' Cross-Motion for Summary Judgment) at 51 n.9 (noting that Frank-Lin Distillers did not "avail...