A federal court in Ohio recently dismissed claims alleging that a brewer deliberately overstated the alcohol content of its beers.  See In Re: Anheuser-Busch Beer Labeling Marketing and Sales Practices Litigation, MDL No. 2448 (N.D. Ohio 6/2/14).

Plaintiffs alleged that the defendant routinely and intentionally added extra water to its finished product to produce malt beverages that “consistently have significantly lower alcohol content than the percentages displayed on its labels.” (Amended Complaint ¶ 17) This practice allegedly results in consumers receiving “watered down beer containing less alcohol than is stated on the labels of Anheuser-Busch’s products.” Readers are probably very familiar with this company and may know that it employs five separate quality control checks to give its consumers the taste and consistent quality they expect. (Your humble blogger is a huge fan of their holiday commercials.) Speaking of water, Anheuser-Busch reduced total water use at its breweries by 37 percent in the last four years.

The Federal Alcohol Administration Act (“FAAA”), 27 U.S.C. §§ 201, et seq., enacted in 1935, governs the manufacture and sale of alcohol nationwide. The FAAA empowers the federal government to adopt regulations that ensure manufacturers “provide the consumer with adequate information as to the identity and quality of the products, [and] the alcoholic content thereof.” 27 U.S.C. § 205(f). In pursuit of this goal, several regulations have been promulgated that specifically address the labeling of malt beverage products. In particular, 27 C.F.R. § 7.71(c)(1) provides that for malt beverages containing 0.5 percent or more alcohol by volume, a tolerance of 0.3 percent (.003) will be permitted, either above or below the stated percentage of alcohol. In addition to the federal statutes and regulations, some state and local governments have enacted laws addressing the manufacturing and sale of alcoholic products, including malt beverages. Often the state and local governments adopt or refer to the federal regulations established under the FAAA in their own statutes and regulations, and it was undisputed that each state at issue in this litigation had adopted the federal regulation.

It was crucial that there was no allegation in the Complaint that the alleged mislabeling of alcohol content in Anheuser-Busch’s products has ever exceeded the tolerance amount of 0.3%. Further, Plaintiffs made very clear in their arguments and statements to the court that they had not alleged, and they had no reason to believe, that Anheuser-Busch has ever included a statement of alcohol content on its labels that varied by more than 0.3 percent from the actual alcohol content of the products in question.

Defendants moved to dismiss.  In order to survive a motion to dismiss, a complaint must provide the grounds of the entitlement to relief, which requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action. See Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1964-65 (2007). That is, factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if
doubtful in fact). Accordingly, the claims set forth in a complaint must be plausible, rather than just conceivable. See Twombly, 127 S. Ct. at 1974. Conclusory allegations, or legal conclusions asserted in lieu of factual allegations are not sufficient. Bishop v. Lucent Tech, Inc., 520 F.3d 516, 519 (6th Cir. 2008).

The court here noted that there may be circumstances in which vagueness or ambiguity in the legislative language compels a court to look beyond the words employed to discern the meaning of a statute or regulation. However, neither vagueness nor ambiguity exists in the present case. On its face, 27 C.F.R. § 7.71(c)(1) is clear, specific, and unambiguous: “For malt beverages containing 0.5 percent or more alcohol by volume, a tolerance of 0.3 percent will be permitted, either above or
below the stated percentage of alcohol.” 27 C.F.R. § 7.71(c)(1). There was no dispute that the products at issue were malt beverages containing 0.5 percent or more alcohol by volume and that the stated percentage of alcohol on the labels of these products is within 0.3 percent of the actual percentage of alcohol in the product.

Despite this seemingly straightforward match between the regulation and the agreed upon facts in this case, Plaintiffs presented an argument in an attempt to modify or, in their words, “clarify” the plain and unambiguous language set forth in the regulation.  For example, the meaning of “tolerance.”  The court reasoned that the words of a statute or regulation are to be taken in their natural and ordinary significance and import; and if technical words are used, they are to be taken in a technical sense. The word “tolerance” is undefined in the regulation. When terms are undefined, the everyday understanding and regular usage of the term should instruct the court’s interpretation. Common sense, non-technical interpretations are the default. Cty. of Oakland v. Fed. Housing Finance Authority, 2013 WL 2149964, *3-4 (6th Cir 2013). The ordinary meaning of the word “tolerance” is the allowable amount of variation in any specified quantity.  In its ordinary usage, a “tolerance” is not limited or nullified by the alleged intent, motivation, or cause behind a variation or deviation. Thus, if given its ordinary meaning, there could be no dispute that the tolerance established was to be afforded without regard to the alleged cause or hypothetical intent behind any deviation of 0.3 percent or less between the alcohol content listed on the labels and the actual alcohol content within the regulated products.

The court thus rejected plaintiffs unsupportable view that the word “tolerance” should not be afforded its ordinary meaning, but should be considered to be a term of art that allows only “unintentional deviations” from the goal of absolute accuracy. Plaintiffs offered no legal or industry specific authority for this proposition. None of their cited sources had any connection to the regulation of alcoholic beverages, or other food and beverage labeling; none are sanctioned by the FAAA.   Thus, there was no legal or other relevant authority that would support giving the word
“tolerance” anything other than its ordinary meaning.

Since the leeway afforded by the CFR section is provided without regard to the supposed cause of any deviation or variation, and without regard to the alleged intention behind any statement of alcohol content within the defined tolerance range, the motion to dismiss was granted, with prejudice.