10

Bourbon Drives Truth in Labeling

False labeling—in which fabricated health claims such as those made for Duffy’s Malt Whiskey are not at issue—does not always evoke the same disdain or rally enough support for passage of landmark federal laws. While this lack of legal pressure allowed many bourbon brands to push the envelope (which itself is another American tradition), bourbon lawsuits still reined in the worst offenders, setting the foundation for today’s truth-in-labeling laws. Bourbon law drove American expectations for truth in labeling by forbidding a fake distillery from using a name and images to imitate a famous distillery but showing restraint and faith in consumer intelligence by allowing other imitation where labels made clear that the brands were different. Many bourbon producers learned their lesson to maintain technical accuracy on their labels, which is a much-needed skill because today labels are almost entirely dictated by ever-increasing federal labeling regulations.

The earliest bourbon labeling case involved the Mellwood Distillery, which was founded just after the Civil War on what was then the outskirts of Louisville. The distillery is long gone, but historically it is significant because it filed one of the first lawsuits against a competitor who lied on its label about having a distillery (and who also tried to imitate the Mellwood brand). As described in Mellwood Distilling Co. v. Harper,1 the name Mellwood was actually an accident. It was founded by George W. Swearingen (ca. 1837–1901), a Bullitt County, Kentucky, farmer who in 1857, after graduating from Centre College in Danville, ran a small still on his family farm, which he called “Millwood.”2 After the Civil War, Swearingen moved to Louisville and opened a distillery, intending to name it Millwood after his old farm, on the border of what are now the Clifton and Butchertown neighborhoods.3 But when he ordered his barrelhead brand, its name was misspelled as Mellwood.4 Swearingen decided to keep it anyway, and in 1895 this brand mistake found permanency when Reservoir Avenue was renamed Mellwood Avenue in honor of the Mellwood Distillery, which had grown to occupy both sides of the street for nearly an entire block.

Swearingen sold his distillery in the late 1800s, and after that it became part of the infamous Kentucky Whiskey Trust (Kentucky Distilleries and Warehouse Co.) in 1899. Having made his fortune, Swearingen stayed out of the distilling business, focusing instead on real estate, as president of the Kentucky Title Company, and banking, as founder of the Union National Bank.

As the Mellwood Distillery continued to experience great success, it attracted an imposter and led to one of the earliest court rulings on false labeling and fake distilleries. The imposter was the Harper-Reynolds Liquor Company, a distributor in Fort Smith, Arkansas. Harper bought blended whiskey and bottled and labeled it as “Mill Wood,” used the name Mill Wood Distilling Company, used a picture of an extensive distillery on the label, used Kentucky on the label, and included this description on its label: “This celebrated whiskey is made exclusively by the sour mash fire copper process, employed only in the distillation of the finest whiskeys, from carefully selected grain, and bottled only after being matured in barrels for 8 years.”5

The evidence, however, showed that there was no Mill Wood Distilling Company in Kentucky or elsewhere; that the whiskey was a blend; that it was not handmade, sour mash, or made by the fire copper process; that it was not made from the carefully selected grain; that it was not aged for eight years; and that no such distillery existed as shown in the picture on the label.6 The court ruled that Harper had used this false label “to mislead the public into the belief that in purchasing the ‘Mill Wood’ brand of whisky they were purchasing [Mellwood] whisky,” and it issued an injunction against Harper.7

A different result was reached in 1960, when Brown-Forman’s Jack Daniel’s Distillery sued upstart Ezra Brooks for copying its bottle and label design and feel. Due to Brown-Forman’s influx of capital and deft marketing of Jack Daniel’s in the late 1950s, demand had surged, and Brown-Forman could not keep up with demand. As described in Jack Daniel Distillery, Inc. v. Hoffman Distilling Co., Frank Silverman—another in a long line of bourbon entrepreneurs—created a brand without a distillery in 1957, which he called the “Ezra Brooks Distilling Company.”8 Silverman sourced bourbon from the Hoffman Distilling Company in Lawrenceburg, Kentucky, and other unknown distilleries, and within months he was selling his copycat whiskey to take advantage of the shortage of Jack Daniel’s.9

It was clear to the court that Silverman “intentionally copied and imitated the appearance of the well-established and attractive Jack Daniel’s Black Label package and advertising techniques for its new and unknown brand Ezra Brooks.”10 But Silverman did not stop at trying to make his new brand look similar to Jack Daniel’s; he went for all-out imitation.11 The court described the ways in which Silverman copied Jack Daniel’s:12

Jack versus Ezra

Jack Daniel’s Ezra Brooks

Square bottle

Square bottle

Black-and-white wraparound label

Black-and-white wraparound label

“90 Proof by Choice”

“90 Proof for Character”

Pictures a small old-time distillery

Pictures a small old-time distillery

“Rare Old Sippin’ Whiskey”

“Real Sippin’ Whiskey”

“Charcoal Mellowed Drop by Drop”

“Every Sip Is Mellowed ’Cause Every Drop Is Charcoal Filtered”

Small black and white cardboard neckpiece

Small black-and-white cardboard neckpiece

Advertised that it was in short supply (which was true in 1957): “There isn’t quite enough to go around.”

Advertised that it was in short supply (which was false in 1957): “There just ain’t enuf to go around.”

Silverman’s lack of originality and misrepresentation to the public about the availability of his new brand were not enough to win the lawsuit for Jack Daniel’s, however. The court ruled that because Silverman used a completely different name for his brand and because the source—Tennessee versus Kentucky—was clearly marked on the labels, Jack Daniel’s could not prove that Silverman was unfairly competing or attempting to pass off Ezra Brooks as Jack Daniel’s.13 Hot off this victory, Silverman continued to pretend that Ezra Brooks was in limited supply through advertising campaigns, and that comparison continued for decades, proving that consumers still cannot always trust everything they read on a label.

Even if not all labels can be trusted, reading them closely is important. Bottles today list fictitious distilleries by using assumed names, which might be fine in many circumstances. But some brands pretend that they distilled the contents. One recent example might be Duke bourbon, which claimed on its label to be “Distilled by Duke Spirits, Lawrenceburg, Kentucky.” Duke Spirits claimed on its Twitter profile to be “an artisan distiller crafting small batches of superior bourbon.” However, Duke Spirits is not located in Kentucky, it is not an assumed name of any Kentucky distillery, and the entity was not registered to do business in Kentucky with the secretary of state.

While claims of being a distiller or having “seven generations” of distilling history are difficult to catch unless a consumer does the research, other label claims can be very informative about what is—or isn’t—in the bottle. Does the label use the phrase distilled by or bottled by? Does it use the vague claim of having been produced by? Does it use the name of a distillery that exists on more than paper?

These are not questions only for merchant bottlers or smaller brands; labels from the major distilleries must be scrutinized too. One recent bourbon lawsuit, Brown-Forman Corp. v. Barton Inc., shed light on the source of Woodford Reserve bourbon and taught the owners of the Barton Distillery, in Bardstown, Kentucky, to read Woodford Reserve labels a little more closely.14 Barton alleged that Woodford Reserve had been touting its three copper pot stills, its cypress vats, its local limestone spring water, and its historic location but that those marketing efforts were false, in violation of the Lanham Act (a federal law that prohibits any “false or misleading description of fact, or false or misleading representations of fact which . . . in commercial advertising or promotion, misrepresent the nature, characteristic, [or] qualities . . . of goods, services, or commercial activities”).15

Barton based its allegations on testimony from a Brown-Forman executive that bourbon sold as “Woodford Reserve” was actually a blend containing some bourbon distilled in pot stills at the historic Woodford Reserve Distillery but mostly bourbon distilled in a column still at Brown-Forman’s distillery in Louisville, using Louisville water, and also aged in Louisville before being relocated to Woodford County for additional aging.16 Moreover, Barton alleged that until May 2003 every single drop of Woodford Reserve actually originated from Brown-Forman’s distillery in Louisville.17 Basically, Barton alleged that the premium Woodford Reserve brand was really Brown-Forman’s entry-level brand, Old Forester, in disguise.

It was true then—and is still true today—that Woodford Reserve and Old Forester share the same mash bill (72% corn, 18% rye, and 10% malted barley) and that Woodford Reserve Distiller’s Select contains bourbon distilled both in Versailles and Louisville. Master Distiller Chris Morris has acknowledged this many times.

Fig. 24. Woodford Reserve advertisement. Brown-Forman Corp. v. Barton Inc.

Even though Barton alleged that regular consumers were misled about “the true facts regarding the making of Woodford Reserve,”18 Brown-Forman had been careful enough to not make any misrepresentations. For instance, the side label on Woodford Reserve at the time disclosed that Woodford Reserve is “distilled for, aged and bottled by Labrot & Graham Distillers Co., Versailles, Kentucky.”19 The “distilled for” disclosure is key. Similarly, advertisements at the time touted not that Woodford Reserve was distilled at Labrot & Graham but that it was matured at Labrot & Graham (fig. 24).20 “Matured in the heart of Kentucky’s horse county” does not mean that it was distilled there.

Labeling inaccuracies—when they go far enough—can also negate a producer’s right to enforce trademark or unfair competition claims. James E. Pepper learned this the hard way after he touted the purity and provenance of his bourbon but was really selling a blend from several different sources.21 The early juggernaut W. A. Gaines & Company learned this lesson the hard way, too, when it lost a trademark lawsuit despite the obvious deception by the producers of Golden Heritage, because Gaines had been using misleading labels regarding its own bourbon.22

Outside of the context of trademark disputes and truth-in-labeling regulations, producers still need to comply with a dizzying array of label regulations. The Federal Alcohol Administration Act vests to the secretary of the Treasury the power to regulate bourbon labels to ensure that labels are not deceptive.23 Federal law also requires a preapproval process for bourbon labels (and all other alcoholic beverages).24 This label approval process has been delegated to the Alcohol and Tobacco Tax and Trade Bureau, established in 2002.25 Without preapproval of a label by a TTB officer—called a “certificate of label approval,” or COLA—bourbon cannot be bottled.26

To help producers navigate the sheer number and complex web of classification and labeling regulations for all alcoholic beverages, in 2012 the TTB issued The Beverage Alcohol Manual (BAM); A Practical Guide, Basic Mandatory Labeling Information for DISTILLED SPIRITS, vol. 2. BAM covers substantive issues such as “misleading brand names”:

Note, however, that BAM does not address any additional state law requirements and regulations, such as Kentucky’s law restricting the use of Kentucky to bourbon produced in Kentucky and aged at least one year.28

BAM also covers technical specifications, such as type size, legibility, and label placement for required content, such as the specific class identification of the distilled spirit, the alcohol content, and the standard health warning statement.29 The name of the actual distillery, however, is not expressly required. BAM explains that for domestic distilled spirits, the label must include the name(s) and address(es) of the:

The name can be any trade name used by the distiller, so long as it is identical to the name used on the basic permit.31 The state of distillation of bourbon and other specified whiskies must be identified only if the whiskey was not distilled in the state already identified on the label under the “name and address” section or if the label is “in any way misleading or deceptive as to the actual State of distillation.”32

Chapter 7 of BAM covers harmless coloring/flavoring/blending materials, using a classically bureaucratic abbreviation of “HCFBM.” BAM identifies permissible types of these blending materials, including approved coloring materials such as Yellow #5, and provides a very helpful “Use Chart” that covers all classifications of spirits and specifies whether HCFBM may be used and, if so, whether they are limited to a 2.5 percent by volume restriction. The Use Chart shows that any HCFBM is prohibited in bourbon whiskey—straight or not—arguably expanding the regulations, which can be interpreted to only prohibit additives to straight bourbon.33

This interpretation has real implications in contemporary litigation. Part of Templeton Spirits LLC’s defense to the class actions discussed in chapter 9 was that Templeton Rye was not “stock whiskey” because the company added additional flavorings, which caused nearly as much of an uproar as the original claims of misrepresentation. Templeton may have relied on the regulations by adding less than 2.5 percent by volume of flavoring materials in order to avoid having to disclose it, but Templeton seems to have interpreted the regulations to permit the addition of flavoring materials if its whiskey was not labeled “straight rye whiskey.” Or the takeaway is that bourbon whiskey and rye whiskey are treated differently, with only bourbon customarily and historically barring additives. Whichever the case, it is an area ripe for more lawsuits.

Age statements are a current hot topic and one that evokes passion among bourbon enthusiasts. During the recent bourbon renaissance, the demand for bourbon has depleted aging stock and has forced producers to abandon age statements as younger whiskies are blended in to keep up with demand. Some distillers were upfront about removing age statements, like Heaven Hill with its popular Elijah Craig 12 Year, which has become Elijah Craig Small Batch, complete with a bottle and label redesign. Other brands, like Very Old Barton, took another route. Whereas Very Old Barton had been a six-year age-stated bourbon, with a neck label proclaiming “aged 6 years,” in 2014 Barton removed the words aged and years, while the numeral 6 remained. Enthusiasts criticized Sazerac for leaving the numeral 6 but to no avail until 2017, when the neck label was revised to replace the numeral 6 with the proof of the bourbon.

With the importance placed upon age statements by consumers, BAM dedicated an entire chapter to it.34 The regulators clarify that “age is the period during which, after distillation and before bottling, distilled spirits have been stored in oak containers,” and that for “bourbon, rye, wheat, malt or rye malt whiskies and straight whiskies, other than corn whiskey (which must be stored in used or uncharred new oak containers), the oak container must be a charred new oak container.”35 In other words, any time spent in a secondary type of barred for “finishing” cannot be included in the age statement.

Many producers seem to protect blending percentages as trade secrets, and therefore brands that are blended from different ages of bourbon tend to not identify percentages and specific ages of the components. Instead, it is more common for producers to disclose only the age of the youngest component on a label (which is in perfect compliance with the regulation), although marketing materials often still tout the ages of older components. Still, other producers push the envelope or violate BAM’s guidance by disclosing ages of components without also identifying respective percentages.

BAM also seemingly recognizes that the use of the word old is puffery and provides that if the word old (or other word denoting age) is used in a brand name, it is not considered an age reference.37 Thus, Ancient Age, Very Old Barton, and Old Ezra, while each younger than its name implies, do not run afoul of the age statement regulations.

Overall, federal and state labeling laws not only aim to inform consumers, but they also guard against misleading the public. For instance, 27 C.F.R. § 5.42 provides that spirits labels shall not contain various types of misleading information, such as:

  1. 1. False or misleading statements;
  2. 2. Disparaging statements about competitors;
  3. 3. Obscene or indecent statements (TTB is the arbiter of decency);
  4. 4. Misleading statements regarding tests, analyses, or standards—even if the statements are true—if the TTB believes that the statements appear likely to mislead a consumer;
  5. 5. Misleading statements regarding guarantees (although money-back guarantees are not prohibited);
  6. 6. A false connection with any living person of public prominence or organization; or
  7. 7. Misleading health-related statements.38

Similarly, images that can appear on labels are controlled almost as closely as the words that must or may be used. Producers cannot use governmental flags, seals, or crests or any symbols of the United States armed forces, in order to avoid any implication of governmental endorsement and to avoid any flag desecration disputes.39 Labels cannot contain bonded or bottled in bond unless that statement is truthful, and they cannot use pure unless that is part of the bona fide name of the bottler or it is a truthful reference to a particular ingredient used.40 Double distilled or triple distilled cannot be used unless it is truthful,41 carrying through the TTB theme that requires truth in labeling.

Like consumer protection laws, labeling laws have their roots in bourbon lawsuits. And like many other American products, bourbon labeling is now governed by a dizzying array of regulations and bureaucratic minefields. Yet despite an overabundance of regulations and official guidance, there is plausible confusion around the edges, so bourbon brands can find inventive ways to avoid being overly constrained by transparency. Throughout history bourbon producers have been known to test the limits.

In the end, though, that is part of bourbon’s charm. Bourbon’s legends, folklore, and marketing have come to dominate bourbon culture, which is certainly one reason why consumers have fallen back in love with bourbon. On the other hand, tall tales can create a disconnect because another part of bourbon’s allure is that it is pure and genuine. These ten chapters have focused on legal stories of historic bourbon distillers fighting for their craft and their very livelihood against rectifiers and charlatans and against each other to protect their own names and intellectual property rights but also uniting for the greater good of consumer protection. Puffery, deception, and infringement seem irreconcilable with this legal history and the authenticity that is guaranteed in every bottle of straight bourbon whiskey.

This contradiction, however, proves the point of Bourbon Justice. Just as the American experience is complex and just as the flavors of bourbon are complex, bourbon history embraces that complexity. Bourbon and history are more than just complementary—bourbon law tells the history of America, making it all the more fitting to be honored as “America’s Native Spirit.”

There is plenty more history that bourbon law can tell, with stories that could resonate with consumers simultaneously thirsty for mavericks and authenticity while they sip their corn. If distillers and consumers realize that lawsuits hold the key—and that those stories can be more fascinating than the myths—then bourbon justice will have proven its case.