The opinion of the court was delivered by: Kollar-kotelly, District Judge.
Before the Court is Plaintiff Sociedad Anonima Viña Santa
Rita's Motion for Temporary Restraining Order and Preliminary
Injunction,*fn1 in which Plaintiff challenges a final rule
issued by the Department of the Treasury's Bureau of Alcohol,
Tobacco and Firearms ("ATF" or "Bureau"). In that final rule,
issued on May 31, 2001, the ATF recognizes "Santa Rita Hills,"
an area in Santa Barbara County, California, as an American
viticultural area ("AVA"). In light of the region's status as an
AVA, wines produced predominantly from grapes grown there may,
with the ATF's approval, be sold with labels that employ the
term "Santa Rita Hills" as an appellation of origin.*fn2
Plaintiff, a Chilean winery, sells a variety of wines around
the world under the brand name "Santa Rita" and has done so for
decades. In reaction to the ATF's final rule establishing the
Santa Rita Hills AVA, Plaintiff filed suit and simultaneously
requested that the Court issue a temporary restraining order or
preliminary injunction suspending the effective date of the
final rule.*fn3 Specifically, Plaintiff asserts that the
ATF's issuance of the final rule amounts to arbitrary and
capricious conduct in violation of the Administrative Procedure
Act, that the final rule infringes on Plaintiff's trademark in
the name "Santa Rita," and that it dilutes the value of that
trademark. Upon consideration of Plaintiffs motion, the ATF's
opposition thereto, Plaintiffs reply, Plaintiffs supplemental
memorandum, the ATF's supplemental memorandum, Plaintiffs second
supplemental memorandum, and the Administrative Record, the
Court shall deny
the motion and decline to grant preliminary injunctive relief.
I. STATUTORY AND REGULATORY FRAMEWORK
Soon after the Twenty-first Amendment to the Constitution was
ratified and the country's experiment with prohibition ended,
Congress enacted the Federal Alcohol Administration Act,
27 U.S.C. § 201 et seq. ("FAA" or "Act"), which, among other
things, governs the bottling, packaging, and labeling of wine.
Specifically, the FAA prohibits interstate commerce in wine
unless the bottles are
labeled in conformity with such regulations, to be
prescribed by the Secretary of the Treasury . . . (1)
as will prohibit deception of the consumer . . . and
as will prohibit, irrespective of falsity, such
statements . . . as the Secretary of the Treasury
finds to be likely to mislead the consumer; (2) as
will provide the consumer with adequate information
as to the identity and quality of the products . . .
and the manufacturer or bottler or importer of the
product; . . . (4) as will prohibit statements on the
label that are . . . false [or] misleading; and (5)
as will prevent deception of the consumer by use of a
trade or brand name that is the name of any living
individual of public prominence, or existing private
or public organization. . . .
27 U.S.C. § 205(e); see also Wawszkiewicz v. Dep't of the
Treasury, 670 F.2d 296, 297-98 (D.C.Cir. 1981). In order to
ensure that all labels comply with this statutory mandate,
Congress prohibits wineries and other affected entities from
bottling their product or removing their product from customs
until the Department of Treasury has issued a "certificate of
label approval" ("COLA"). 27 U.S.C. § 205(e).
The Secretary of the Treasury has delegated its rule-making
authority under the FAA to the ATF, see Bronco Wine Co. v.
Dep't of Treasury, 997 F. Supp. 1309, 1311 (E.D.Cal. 1996), and
the ATF has, in turn, promulgated a series of
regulations.*fn4 In direct correlation to the prohibitions
articulated in the FAA, the ATF's regulations prohibit labels
that include statements that are, for example, false or untrue,
misleading, disparaging of competitor's products, obscene or
indecent. See 27 C.F.R. § 4.39(a). The regulations also mirror
the statute by requiring that the ATF issue a COLA before an
imported wine is released from customs or before a domestic wine
is bottled or packed. See 27 C.F.R. § 4.40(a) (imported
wines); 27 C.F.R. § 4.50(a) (domestic wines).
The regulations also require that labels on American wines
state "the name of the bottler or packer and the address . . .
of the place where the wine was bottled or packed."
27 C.F.R. § 4.35a(a). Likewise, labels on imported wines must include the
words "imported by" followed by the name of the importer.
27 C.F.R. § 4.35a(b)(1). Additionally, foreign wine labels may
indicate "the name and address of the principal place of
business of the foreign producer," 27 C.F.R. § 4.35a(b)(2), and,
under a Customs Service regulation, they must indicate the
country of origin "in a conspicuous place as legibly, indelibly,
and permanently as the nature of the article (or container) will
permit." 19 C.F.R. § 134.11; see also 27 C.F.R. § 4.38(c).
Of particular importance to this case, the ATF may establish
viticultural area" ("AVA") upon receipt of a qualifying petition
from "any interested party." 27 C.F.R. § 4.25a(e)(2). To
qualify, a petition must include a variety of "evidence"
relating to the region in question, including information
demonstrating that the name in question "is locally and/or
nationally known as referring to the area specified," that the
boundaries indicated in the petition are accurate, and that the
viticultural features of the area are distinct from those found
in surrounding regions. See 27 C.F.R. § 9.3(b). In the federal
register entry that accompanies the final rule at issue in this
case, the ATF explained why AVA approval is desirable for
wineries and others involved in interstate commerce in wine.
Specifically, the ATF noted that "[t]he regulations allow the
name of an approved AVA to be used as an appellation of origin
in the labeling and advertising of wine." Establishment of Santa
Rita Hills Viticultural Area, 66 Fed. Reg. 29,476, 29,476 (May
31, 2001) (included in Administrative Record ("AR") at Tab I)
[hereinafter "Final Rule"]; see also
27 C.F.R. § 4.25a(e)(3)(ii).
Notably, wineries and bottlers are generally barred from using
the name of an AVA as a brand name unless the wine in question
meets the appellation of origin requirements for the geographic
area in question. See 27 C.F.R. § 4.39(i)(1). Thus, for
example, a winery may not employ the phrase "Napa Valley" in one
of its wine's brands unless a specified percentage of the grapes
from which the wine was made were grown within the Napa Valley
AVA. This general rule does not apply to labels approved prior
to July 7, 1986. Such grandfathered labels may use AVA names as
brands as long as they include other information that "dispel[s]
the impression that the geographic area suggested by the brand
name is indicative of the origin of the wine."
27 C.F.R. § 4.39(i)(2)(iii).
Plaintiff winery, Viña Santa Rita, was founded in 1880.*fn5
See Administrative Record ("AR"), Tab D(24) at 1-2 (Plaintiffs
comments submitted to the ATF in opposition to the establishment
of a Santa Rita Hills AVA). Using grapes grown in several
regions of Chile, Plaintiff produces a variety of wines and
exports them to markets around the world. See id., Tab D(24)
at 2. In 1997, Plaintiff sold 255,000 cases of wine in the
United States, and, in the first half of 1998, Plaintiff ranked
as the third largest exporter of Chilean wines to this country.
See id. Plaintiff owns several trademarks in the United States
with respect to its wines, including registered trademarks for
"Santa Rita Reservado MRC D. Fernandez Concha Santiago De
Chile," "Casa Real," and "120." See id., Tab D(24), Attachment
K (printout of trademarks). Notably, Plaintiff did not file an
application for a trademark on the name "Santa Rita" until March
19, 1998. See id., Tab D(24), Attachment M (certification of
Not long before Plaintiff first sought formal statutory
trademark protection for the name "Santa Rita" in the Spring of
1998, a group of wineries and other
interested parties located in Santa Barbara County, California,
began gathering support for the formation of an AVA under the
name "Santa Rita Hills." See id., Tab B(1)-(11). The mayor of
Lompoc, California, wrote a letter of support in August 1997,
see id., Tab B(2), and, in February 1998, the Chair of the
Santa Barbara County Board of Supervisors wrote to the ATF and
stated that "[t]he Santa Rita Hills region of our County has
been recognized viticulturally and enologically for producing
world class cool-climate grapes." Id., Tab B(1).
On March 31, 1998, the supporters of the proposed Santa Rita
Hills AVA submitted a formal petition to the ATF seeking
recognition. See id., Tab A (Petition to Establish `Santa Rita
Hills' AVA). In addition to the letters of support, the
petitioners included documentation of nineteenth-century land
grants demonstrating the region was known by the name "Santa
Rita" when it was the subject of a federal grant in 1845. See
id., Tab A, Ex. 1 at 14. The petitioners also provided the ATF
with maps, book excerpts, and other historical texts in an
effort to satisfy the evidentiary requirements for AVA approval.
See id., Tab A. After receiving the petition, the ATF
published a notice in the Federal Register describing the
proposal and "request[ing] comments from all interested
parties." See id., Tab C (Notice No. 866, published at 63
Fed. Reg. 48,658 (Sept. 11, 1998)). In aggregate, the ATF
received thirty-five public comments, eleven of which supported
the petition and twenty-four of which opposed it. See id.,
Tabs B, D. Among the opposing comments was a massive submission
prepared by Plaintiff, which argued strenuously that the name of
the proposed AVA was confusingly similar to its own brand name.
See id., Tab D(24).
Many of the comments in opposition objected only to the name
of the proposed AVA, while implicitly acknowledging that the
geographic designation may be meritorious. For instance, one
distributor of Vina Santa Rita "urged" the ATF to "find another
and more suitable name for this [AVA]." AR, Tab D(12). Another
comment acknowledged that, "while a new viticultural area should
be considered, certainly a different appellation name should be
used." Id., Tab D(13). A third "suggested that you name this
entirely unfamiliar area Gallo Hills," sarcastically proposing
that the petitioners name their proposed AVA after "an even
better known winery." Id., Tab D(17). The same opponent's
comment exhorted the petitioners to "use another local
geographical landmark as their name; one that does not infringe
on the hard work and integrity with which Vina Santa Rita has
promoted Chilean wines in the United States." Id., Tab D(17).
Likewise, a South Carolinian wine wholesaler commented as
follows: "Please understand that I am not opposed to this
particular delineated A.V.A. — only the name you are considering
for it." Id., Tab D(19).
The ATF received each of these comments during the formal
comment period that the ATF established in its September 11,
1998, Notice announcing the proposed AVA. After the formal
comment period had closed, however, the ATF received a notable
comment from the one of the petitioning wineries on July 25,
2000. In pertinent part, the comment provided as follows:
Considering the challenges brought forth by the Santa
Rita Winery of Chile, and after great thought, we
feel the confusion that may occur between the Chilean
winery and our appellation would only prove to deter
our marketing efforts in this country, and abroad.
SANTA RITA HILLS of SANTA BARBARA
Id., Tab F(4) (emphasis in original). The cover sheet that
accompanied this comment indicated that "[t]he name proposed in
the letter is only an option at this time, since the meeting to
discuss the name change with the other pertinent wineries is not
scheduled until August 9th." Id. Nonetheless, the cover sheet
indicated that the petitioners "would truly appreciate [the
ATF's] guidance with this process," and the comment letter
itself requested "immediate consideration in this matter" and
stated that the petitioners "look[ed] forward to [the ATF's]
positive response" regarding the proposed name change. Id.
While the final rule and the remainder of the Administrative
Record include no reference to this proposed name change, the
ATF has explained that the proposed change was the tentative
product of only one of the petitioners who supported the
AVA.*fn7 See Defs.' Suppl. Mem. at 1-2; Decl. of Joyce
Drake ¶ 2(d); Decl. of Marge Garcia Loehr ¶ 4. After a
representative of that single winery submitted the tentative
proposal, representatives from all of the pertinent wineries met
to discuss the idea. See Defs.' Suppl. Mem. at 1-2; Drake
Decl. 2(a), (b); Loehr Decl. ¶ 5. They ultimately decided to
maintain their original application for an AVA under the name
"Santa Rita Hills." See Defs.' Suppl. Mem. at 1-2; Drake Decl.
2(e); Loehr Decl. ¶ 5. Therefore, the representative of the
original winery contacted the appropriate ATF representative to
inform her that the petitioners did not wish to alter their
application. See Defs.' Suppl. Mem. at 1-2; Drake Decl. 2(e);
Loehr Decl. ¶ 6. Thus, while one opponent cynically suggested
changing the name to "Gallo Hills" and while one of petitioner
submitted (and subsequently withdrew) a tentative proposed
change, the ATF never received any genuine and legitimate
proposals for alternative names.
On May 31, 2001, roughly ten months after receiving the
informal suggestion of a name change, the ATF issued its final
rule in which it approved the AVA under the name "Santa Rita
Hills." See Final Rule, 66 Fed. Reg. 29,476. In the Federal
Register entry accompanying the issuance of the final rule, the
ATF described the thirty-five comments it had received and
concluded that, notwithstanding the opponents' arguments, the
petitioners' request for AVA approval satisfied each of the
statutory and regulatory criteria. Id. at 29,476-77.
Specifically, the ATF determined that the "maps, land records,
reports, and various texts" attached to the application
demonstrated that "[t]he name `Santa Rita Hills' is locally
and/or nationally known as referring to the specified area."
Id. at 29,477. The Bureau also engaged in a careful analysis
of the potential for consumer confusion and concluded that the
"ATF does not foresee a likelihood of consumer confusion between
the `Santa Rita Hills' AVA and other geographic areas of the
same name." Id. In support of this conclusion, the ATF
observed that it has already approved several labels bearing the
name "Santa Rita" for wines produced outside of Chile and that
there has been "no reported consumer confusion as to the
respective products' origins." Id. at 29,478. Additionally,
the ATF noted that confusion is unlikely because the labels on
imported wines, like those produced by Plaintiff, must bear the
by," followed by the name and address of the importer, and the
words "Product of" followed by the country of origin. See id.
With regard to the numerous comments suggesting that the
proposed name would violate Plaintiffs trademark rights under
the Lanham Trademark Act, the ATF stated that "these issues are
matters of private dispute that do not restrict [the] ATF's
authority to establish a viticultural area under the [FAA]."
In response to the ATF's approval of the Santa Rita Hills AVA,
Plaintiff filed suit on July 19, 2001, and simultaneously
requested that this Court grant preliminary injunctive relief by
ordering the ATF to suspend the effective date of the final
rule. In its Amended Complaint and motion, Plaintiff asserts
that the ATF's approval of the final rule amounts to arbitrary
and capricious conduct in violation of section 706(2)(A) of the
Administrative Procedures Act, that the approval infringes on
Plaintiffs trademark in the name "Santa Rita," and that it
dilutes the value of that trademark. On July 26, 2001, the ATF
filed the Administrative Record and an opposition to Plaintiff's
motion for preliminary injunctive relief. After Plaintiff filed
its reply on August 2, 2001, the Court issued an Order
requesting additional information from the parties regarding the
scope of the ATF's consideration (or lack of consideration) of
alternative names proposed by the commenters and, more
importantly, by one of the petitioners. Each of the parties
submitted a supplemental memorandum on August 6, 2001. Plaintiff
filed a second supplemental memorandum on August 9, 2001.
A. Injunctive Relief Standard
In assessing whether to grant preliminary injunctive relief,
which is considered an extraordinary remedy in this circuit,
see Dorfmann v. Boozer, 414 F.2d 1168, 1173 (D.C.Cir. 1969);
Mylan Pharm. Inc. v. Henney, 94 F. Supp.2d 36, 58 (D.C. 2000),
a court must balance four factors: (1) whether the movant is
substantially likely to succeed on the merits; (2) whether the
movant would suffer irreparable injury if the injunction were
not granted; (3) whether an injunction would substantially
injure other interested parties; and (4) whether the public
interest would be furthered by the injunction. See Mova Pharm.
Corp. v. Shalala, 140 F.3d 1060, 1066 (D.C.Cir. 1998) (citing
CityFed Fin. Corp. v. Office of Thrift Supervision,
58 F.3d 738, 746 (D.C.Cir. 1995)).
In applying this four-factored standard, district courts
employ a sliding scale under which a particularly strong showing
in one area can compensate for weakness in another. See CityFed
Fin., 58 F.3d at 747. Thus, "[a]n injunction may be justified,
for example, where there is a particularly strong likelihood of
success on the merits even if there is a relatively slight
showing of irreparable injury." Id. Notwithstanding the fluid
nature of this familiar four-part inquiry, "it is particularly
important for the [movant] to demonstrate a substantial
likelihood of success on the merits." Barton v. Dist. of
Columbia, 131 F. Supp.2d 236, 242 (D.C. 2001) (citing Benten v.
Kessler, 505 U.S. 1084, 1085, 112 S.Ct. 2929, 120 L.Ed.2d 926
(1992)). If the movant fails to do so, "it would ...